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Why China’s First-to-File trademark system could affect your business

The first-to-file trademark system (FtF) was first adopted in 1982 and it requires no evidence of prior use or ownership. Trade mark squatting is a common practice in China and hundreds of marks can be stockpiled inexpensively while they wait for the owner of the mark to come and claim it from them for a price.

A few months ago I was in my local area in Randwick, Sydney doing some shopping when a familiar logo caught my eye. Looking to my left was the tree logo of 169 Cafe of a client of mine but when I looked to the right the former Chinese massage business signage was now sporting the same tree logo! I immediately text some photos over to Callan the owner, who was understandably shocked and angry. Myself, well I was just bewildered to be honest as I couldn’t understand the blatant behaviour particularly as the businesses are on the same road and only a few addresses apart.

Last weekend while reading the news, I read about Australian dairy and wine brands being targeted by trade mark squatters in China. A dairy start-up business had its trademark stolen in China before they could even produce any products. They were lucky to discover this within the three month opposition stage and are in the process of challenging the trademark lodgement. An Australian winemaker almost lost one of his wine labels to the same company but he luckily got a tip off the day before they tried to lodge the claim.

Many small businesses are eyeing the Chinese export markets (as well as being encouraged by the federal government) since the Chinese-Australian Free Trade Agreement (ChAFTA) was signed. I see trademark issues becoming even more of a problem not only in the Chinese market but locally here in Australia. China is still a developing country that has a heaving middle class with many opportunities but it would be a real shame if small business or start-ups end up getting penalised or even potentially lose their livelihood for having a go.

I am at least no longer bewildered as to why a local business did this to another as the Chinese mindset in regards to trademarks is clearly very different from Western business mindsets. Upon closer inspection of the light box signage what they have done is print out the logo from 169 Cafe’s Facebook page, traced out the logo and represented it with cheap vinyl on top of the old light box. If you look closely at the logo image you will see that the tree leaves are not all the same colour as the original logo and that the trunk has no shading or definition.

I think the extra tax payers money allocated for advertising the ChAFTA and its benefits should also educate small business as to the perils that they could potentially face. Big business can get an army of lawyers together if needs be whereas small business and start-ups are handicapped yet they are extremely vital for our country and its economy.