3 Sep
2020

Strategies to establish trademark fame in China

Rouse

Aligned marketing and legal strategy to build, defend and strengthen brand reputation

We live in a world surrounded by brands. A strong, reputable and well-recognised brand is one of the best tools that a company can have in order to secure marketing and advertising goals. The purchase decision of consumers is based on their perception of a brand.

Your brand is your reputation

What is a brand? The founder of Amazon, Jeff Bezos, said, “Your brand is what other people say about you when you’re not in the room.” Once consumers associate a company brand with reliability and trustworthiness, they become loyal to the company. This helps a business to stand out and maintain its competitive advantage. Your brand is a valuable intangible asset encapsulating the culture and the philosophy of your company.

Brand reputation that contributes to brand equity and defines brand value, is determined by consumers’ perceptions of and experiences with the brand. Consumers interact with billion-dollar brands in their day-to-day lives – APPLE, GOOGLE, WALMART, COCA-COLA – and choose to stay with them either consciously or inadvertently as a result of their consistently pleasing and satisfying consumer experiences. This phenomenon is part of what a brand is aiming to establish with its customers – brand reputation and brand loyalty.

Building a reputable brand with loyal consumers takes time and requires strategic planning over the course of brand development. Other than influencing purchase decisions in the marketplace, brand reputation plays a vital role in legal actions for preventing unsolicited brand interference and protecting the intended brand space. It reinforces the company’s competitive advantage, which in turn enhances the brand performance translating into more sales.

Significance of brand reputation in legal actions for preventing brand interference

As China rose to become one of the top markets globally, it has also become the place where brand owners’ legal and IP departments invest approximately half of their annual budget on brands for building, defending and strengthening them. Building a brand portfolio requires the application of more marks with broader coverage and more types of IP right for the creation of brand space. Defending a brand involves the undertaking of more oppositions, invalidations and civil actions for the prevention of brand interference. Strengthening brand recognition and reputation is associated with relentless and targeted communications with consumers to raise brand awareness and uphold brand space.

With increased public awareness of IP rights and an improved legal IP protection environment, the brand owners’ capability in proving brand reputation is paramount in prevailing brand and trademark-related infringement cases, particularly when it comes to non-straightforward and pushing-the-boundary cases.

It can be frustrating to deal with whack-a-mole situations where a large fortune has been invested in the application of the necessary marks for all brand elements to be well covered. Although sufficient coverage is a must-have for a mature brand portfolio, a practical and efficient enforcement matrix that is aligned with the business strategy and is fully leveraged on the brand reputation is also a necessity. To simplify it, for a well-known brand or a brand with a high reputation, the brand owner probably does not need to file applications for the brand in all 45 classes in order to carry out effective register enforcement. The reputation of the brand or trademark will be weighted for registry enforcement actions before the China National Intellectual Property Administration (CNIPA). Among the 10 sample cases from 2019 announced by the CNIPA, the element of bad faith exists in the majority of cases, where brand owners’ claims were supported and the adverse parties’ bad faith was assumed or proved as a result of the success in proving brand reputation.

In civil cases, the courts fully consider the reputation of a brand or trademark when determining the likelihood of confusion, the existence of bad faith, as well as the damages. The Mr Wang Jiang Gu case, which was among the 50 sample cases announced by the Supreme People’s Court for 2019, sets a classic example. The brand owner’s ability to prove the famous status of its brand played an essential role in supporting the finding of infringement.

In this case, the plaintiff operated a restaurant in Ji Lin Province in northern China. The disputed mark was recognised as a locally famous mark in 2010 and has continued to enjoy its sterling reputation locally since then. The defendant owned a restaurant in Hai Nan Province in southeast China. Despite the parties being thousands of kilometres apart geographically, the defendant was found liable for both trademark and trade name infringement, based primarily on the recognition of the reputation of the plaintiff’s brand ‘Mr Wang Jiang Gu’.

Aligned understanding of brand elements – priority and focus

Brand reputation is vital to the success of a business. Unless there are unique circumstances, brands generally do not become well-known overnight. Brand reputation develops over time and requires strategic planning. To establish brand reputation, marketing activities should not work in isolation. Instead, a commonly applied strategy is for the branding and marketing team to work side by side with the legal and IP team to build, defend and strengthen the brand value.

A dilemma for brand owners is to balance and prioritise the many important matters that exist, especially where there is a limited budget for intellectual property and branding. To bring out the best value from a limited budget, careful planning is required and the branding and marketing and the legal and IP teams should align their understanding to the focused elements of the brand. Among all the brand elements – word marks, designs, slogans, colours and sounds, among others – brand owners first need to establish a clear brand triage and then allocate market efforts and legal resources to those elements, depending on the stage that the company is at in terms of brand and business building.

For a new brand portfolio, the focus often starts with brand elements falling into the traditional mark category, such as the main product brand or mark and the short brand statement. For a more mature portfolio, for which the main brand has, to some extent, been well protected and recognised, more effort can be steered into elements such as sub-brand, device part used, together with the word mark, sound, 3D design, and other elements that are more in the category of the non-traditional mark.

On the spectrum of traditional to non-traditional marks, it is generally easier to invest and build a reputation for traditional brand elements (eg, word marks and 2D devices). It requires more investment and strategic planning for non-traditional elements (eg, colour, sound and 3D design). The inherent distinctiveness of selected brand elements should also be considered. In the world of trademarks, based on the level of inherent distinctiveness, marks are divided into the following groups:

  • generic – the mark says what the product is;
  • descriptive – the mark directly describes the product features;
  • suggestive – the mark requires a mental leap for the consumer to understand the said mark when used on the product or service;
  • arbitrary – the mark has a dictionary meaning and is used in connection with a product or service unrelated to the dictionary meaning; and
  • fanciful – the mark is a coined term.

Marketing specialists prefer brands that are descriptive or suggestive because consumers can easily understand the brand and the features of the products. While employing brands of this type saves investment in marketing, from a legal perspective it is much more difficult to build up reputation and strengthen the exclusive relationship between the brand and the brand owner because competitors also use similar brand elements and it takes much more effort to stand out and stay ahead of the competition. Further, non-traditional marks are, in general, considered inherently non-distinctive, making efforts to build up and strengthen brand reputation further down the road much more challenging.

All these whys and wherefores make the first step of collaboration between the branding and marketing and the legal and IP teams critical. When the focus is on brand elements that are weak or inherently non-distinctive, extra budget must be set aside to support marketing and legal activities to gradually establish reputation around the chosen brand elements.

Communicate brand elements internally and externally

When the focus on brand elements is agreed and aligned, in parallel with securing IP rights around the brand elements, consistent communication of those brand elements with customers during the course of marketing and promotion is important. The legal and IP team must collect and preserve materials alongside marketing and promotional activities.

Brand elements should always be conveyed clearly and consistently, and be integrated into every aspect of the business – from business cards and product packaging, to WeChat posts and videos and blogs on digital platforms and the official website. The brand should be visible and reflected in everything that the customers can see, read, hear and feel. Maintaining consistency helps the brand elements become recognisable on multiple channels in the same way.

Brand style guide

Inconsistency will confuse the customers and make long-term brand building more difficult. It is advisable to use a brand style guide to help create consistency with visuals such as colours and logo use, fonts and layouts, among other things, and to ensure that all departments within the company strictly follow the guide.

However, this is easier said than done. The above process is dynamic and requires seamless collaboration between the branding and marketing and the legal and IP teams. During the process of prioritising brand elements by the branding and marketing team, the legal and IP team should be engaged to advise on the strategies of securing IP rights, a brand-using guide and the enforcement strengths of brand elements.

If the business does not consistently use the desired brand elements when communicating internally and externally, it will prevent it from being in a strong position to take legal action to protect against potential infringers. This particularly affects the enforcement capability of the business when the brand elements are weak in terms of inherent distinctiveness.

Joint effort to preserve evidence proving reputation

Important branding and marketing activities and materials should be archived and preserved in a timely and proper manner in preparation for legal action when working to prove the reputation of brand elements. Even for factually well-known marks, brand owners must present evidence proving reputation in legal proceedings, not to mention brands with a lower level of reputation.

The current challenge is that branding and marketing activities happen fast and are diverse in their range. Social media marketing adds an extra layer of difficulty for the legal and IP team to track marketing activities and to perform efficient archiving. The legal and IP team should align its work with the branding and marketing team to understand the changes of consumer habits resulting from the use of social media and the rapid development of e-commerce.

The changes manifest themselves in branding and marketing undertakings, including promotional activities (eg, articles posted on blogs, videos and emails). How does one collect such materials in an effective way that does not create an extra burden for the business on a regular basis but contains all the necessary information in the right format for use in legal proceedings? The legal and IP team should start by providing the branding and marketing team with a detailed, comprehensive and easy-to-follow guide regarding the routine collection of materials in relation to marketing and promotional campaigns and other activities.

Build, defend and strengthen brand reputation via legal action

In an ideal company setting, the legal and IP team should be engaged in each key step of defining brands and setting up marketing strategies to promote and increase brand reputation. When aligned, the power of strategic legal actions will benefit the establishment and maintain brand reputation to its full strength.

Building a brand from a legal perspective involves analysing all available IP rights. It is a necessary step to ensure that the IP rights are not only secured enough to support the current core business operations, but also broad enough to create space for the natural expansion of future business. In the process of obtaining a well-established IP portfolio, legal actions are needed to clear brand space, establish brand recognition and defend brand credibility.

Creating an enforcement matrix will be of critical assistance to guide actions, maintain focus and stick to budget. Before developing a matrix, it is key to understand the level of tolerance of the business – for example, what kind of third parties’ marks and activities the business is uncomfortable with in the marketplace and how these marks may affect business performance. Admittedly, the more significant a brand is to the business, the less the brand owner is willing to tolerate and the more the brand owner will need to invest in preventing brand interference.

There are other factors that influence the creation of the enforcement matrix, including the level of brand distinctiveness, brand reputation, the industry that the brand owner is engaged in and the level of consumer sophistication. All factors interact and some may outweigh others depending on specific social settings.

For brands with a high level of distinctiveness (eg, coined words within the arbitrary group), it is relatively easy to secure IP rights and to enforce them. With sufficient marketing investment and effort, brand reputation can be defended and strengthened through legal action.

As for brands with a lower level of distinctiveness (eg, suggestive marks, especially those ‘on the fence’ between being descriptive and suggestive), an enforcement matrix with strategic short-term, medium-term and long-term objectives should be carefully planned and implemented. It is wise to start with straightforward cases for which obtaining favourable decisions and judgments is relatively easy. With a growing body of precedent-based favourable decisions and judgments accumulated, brand reputation supported by valuable materials that are properly collected from branding and marketing activities are repeatedly reinforced and recognised by authorities. This in turn eases the burden of proof for future enforcement and prevents competitors and copycat infringers from trying to interfere with the brand space by pushing them further away. Brand recognition and reputation are enhanced and reinforced when these market erosion factors are eliminated.

Public education for consumers regarding successful enforcement facilitates the strengthening of consumer connection and brand value. It is part of the brand’s consistent external communication strategy. One of the best strategies to improve brand reputation is communicating directly to consumers. It could take the form of a programme explaining how to determine genuine products from counterfeits and lookalikes, where to find genuine products, and what consumers can do when they spot counterfeits and lookalikes when shopping. The programme will strengthen trust and loyalty between the brand and the consumers. What follows is enhanced brand reputation.

Brand reputation is the lifeline to the business. The strategy to establish brand reputation requires short and long-term planning. It is a collaborative and dynamic process involving identifying the brand, promoting the brand in a consistent way to generate consumer awareness and aligning legal efforts with branding and marketing efforts and business ambition. The business will have focused marketing activities and legal actions to defend and strengthen brand recognition and reputation, along with consistent communication internally and externally to reinforce brand reputation and brand loyalty.

It takes time to improve brand reputation, but it is worth doing. Make this a strategic priority for your company and you will soon start to notice differences and see results.

Rouse

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Hatty Cui

Principal

[email protected]

Hatty Cui manages the Rouse China trademarks group. With a solid 19 years’ experience and a thorough understanding of the local and international IP and legal environment, she has served many top multinational companies entering the Chinese market, as well as assisting fast-growing Chinese enterprises to expand globally. She has vast experience representing and advising clients in IP consultancy, trademark portfolio management, commercial review, non-traditional trademark practice and registry enforcement.

Before joining Rouse, Ms Cui was an associate for an IP boutique law firm in Silicon Valley and at a global food and beverage company in Chicago focusing on trademark prosecution and enforcement. She also served as in-house legal counsel at China Central Television. Ms Cui has received a silver band ranking from the WTR 1000.