4 Intellectual Property Guidelines that are Crucial for Luxury Brands

November 1, 2019, was a milestone for the Chinese fashion world. Not only was the China Fashion Industry Intellectual Property Conference held in Beijing, but the fourth edition amendment of the Trademark Law was going into effect. Rule makers, business insiders, e-commerce players, and legal practitioners gathered together for the first time in the Chinese fashion industry while also sharing their experiences, difficulties, and ideas for ways to further protect intellectual property in the market. On top of that, a China Fashion Intellectual Property Protection Center was also launched to provide services for designers and brands. “Made in China” used to be synonymous with low-priced replicas, but with the rise in popularity of independent Chinese designers over recent years, the country now takes pride in that label. As Western fashion houses continue to scramble to enter China’s market and win over affluent Chinese millennials and Gen Zers, young, ambitious Chinese designers have continued to present their work on major international fashion platforms while quickly becoming legitimate contenders on the international stage. Because of this, both designers and merchants have called for a well-ordered market environment that respects originality, forcing IP issues to become a pressing topic. On the day of the meeting, both big labels and small independent designers shared their experiences protecting their intellectual property, Alibaba and JD.com introduced their advanced protection technologies, and Jing Daily interviewed a fashion-specialized intellectual property lawyer at the conference on topics such as the status quo of intellectual property protection in the Chinese marketplace and options brands have for protecting their products. From this discussion, we’re happy to offer four key IP guidelines for luxury brands as well as niche designer brands: Register the trademark as soon as possible The veteran American sneaker brand New Balance entered the Chinese market early (the 1990s), but they neglected to register their trademark, leaving them unarmed against infringement cases. In 2013, New Balance was sued by a local Chinese businessman who registered New Balance’s translated Chinese name “新百伦” before New Balance and used it on his shoes. Even though that local business was likely plagiarizing, New Balance lost their initial case because they don’t own the Chinese trademark “新百伦.” After that, New Balance was involved in several other intellectual property disputes, and all of them were originating from their trademark registration issues. Sindy Ding-Voorhees, attorney at Kilpatrick Townsend & Stockton and co-director of China’s first Fashion and Art Law Institute in China , told Jing Daily that trademark squatting is one of the biggest and most common IP issues Western brands encounter when entering the Chinese market. In China, the first party who registers a trademark gets to own the right to the mark. Therefore, well-known Western brands often find that their logo or name has already been registered by local businesses even before they enter the Chinese market, putting those brands in a difficult situation. These brands’ intellectual property was squatted, but they have limited leverage for winning it back. Western brands should remember that as long as they have a plan to enter the Chinese market, they must register their trademark as soon as possible, and not only the original house mark in English but also the translated Chinese trademark, the pinyin trademark, and their logo design mark . This is a very important way to prevent trademark squatting and establish a consistent brand image and reputation in the Chinese market. Think twice before partnering with a local factory The main source of cottage products in the Chinese market comes from Western brands’ local factories. During the production process, manufacturer will inevitably produce some flawed products and extra backup products. These products (called “尾单”) can easily flow into the market and become the template for replicas. In the early years, when counterfeit products were all over e-commerce platforms, many online stores claimed that their products came from Western brands’ authorized factories and were 100 percent genuine. Yet even though the product was produced by a local factory, it’s infringement of that brand’s intellectual property to sell their product if it isn’t an authorized product agreed in a manufacturing contract. Ding-Voorhees says that Western brands should perform due diligence before partnering with a local foundry, and she suggests developing a detailed contract that stipulates specific clauses with respect to order quantity and ways to deal with overruns. Second, brands should consider an auditing mechanism to strictly control the products’ quality and distribution channels. And lastly, they should consult an IP lawyer who understands the local market before entering a binding agreement with a Chinese foundry. Make use of e-commerce platforms’ IP enforcement technology The Intellectual Property Department staff from both Alibaba and JD.com attended the conference as representatives of their respective e-commerce platforms and introduced their IP protection solutions and tools to the audience. Xihan Li, the director of Intellectual Property Operations at Alibaba, said that her company is using blockchain technology to preserve their products’ original design and content by verifying that each item is authentic. For Alibaba’s brands, making use of the platform’s IP protection technology is an effective way to prevent their designs from being copied. All they need to do is upload their design and content to the blockchain system as evidence of originality, and the platform will automatically detect similar products to determine if they are copycats. If a product is judged to be a fake, it will be removed from the platform. Also, brands can make use of the platform's complaint system to confront counterfeit merchants. To reduce cost, small brands need to identify and protect the core design elements Although IP protection systems are maturing in China, one obstacle for small brands is the cost of protecting their original design. Compared to giant luxury houses, niche brands and independent designer brands have less access to funds or the power to win IP protection cases. Take designer Lv Yan and her brand COMME MOI, for instance. She was involved in a legal dispute earlier this year where she accused a Shenzhen-based fashion group of copying her design, but the group denied and countersued her for infringement. According to Lv Yan, designer brands are relatively small, without much of a voice, and are often in a vulnerable position when facing infringement. The long design patent application period (around eight months) and the high registration cost keep them from protecting their design effectively. Given the situation, small brands need to try and create unique elements during the design process. These unique elements can be embodied in the trademark, name, or artistic design and can be independent of the product itself. When pursuing protection for a brand’s IP assets, small brands should focus on their core design element first and expand protection strategically as their legal budget grows. The same rationale applies when preserving designs in Alibaba’s blockchain. Small brands need to stick to their ‘it’ element and register that timely and properly. There may be a long path ahead, but the Chinese fashion industry is making a collective effort to improve its growing market. Both luxury brands and independent designer brands have good reasons to expect better intellectual property protection, but in the end, the most effective means might just be self-discipline.

4 Intellectual Property Guidelines that are Crucial for Luxury Brands

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Published November 26, 2019

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4 Intellectual Property Guidelines that are Crucial for Luxury Brands