When China joined the World Trade Organization in 2001, there were hopes that its title as the counterfeit capital of the world would be no more. However, if you have ever visited Nanjing Lu in Shanghai and purchased three “Rolex” watches for under $20, you know counterfeit products are still a big problem in China.
In the West, respect for intellectual property like trademarks and patents is well ingrained in our culture. Most of us would never think about taking some blue M&Ms and selling them as Viagra for $20 a bottle. In China, this would be seen as a good business opportunity!
Related Podcast: E174: Avoid Being Scammed When Importing Products from China
- Trademarks vs Patents (vs Copyright)
- Trademarks When Importing from China
- Trying to Dodge Trademarks
- Patents When Importing from China
- How to Know if a Product is Patented
- The Golden Rush Period Right After a Patent Expires
- What Happens is you Infringe Someone’s IP?
- Selling Copy Cats/Knock-Offs
Trademarks vs Patents (vs Copyright)
Before we talk about the implications of trademarks and patents when importing from China, it's important to know what a trademark and patent are.
A Trademark is a unique trade name associated with your brand in your industry. Viagra and M&Ms, like mentioned above, are examples of popular trademarks along with the ever-popular counterfeited clothing items like Gucci, Rolex, Calvin Klein, etc. Most of us commonly associate trademarks with the ® and ™ symbols. The ® symbol is reserved for brands that have formally registered their trademarks with government groups such as the USPTO while the ™ is used by those brands that haven't yet registered their brand. Trademarks essentially last forever.
A patent is a piece of intellectual property that grants an inventor exclusive rights to their useful and non-obvious invention, normally for 20 years. The medicinal formula for Viagra was actually patented at one point, so Pfizer held both a trademark for the name Viagra and a patent on the formula. Note, trademarks are often used for patented products but they are more or less unrelated.
Trademarks When Importing from China
For most of us, trademark law is a lot easier to understand than patent law. We just know that you can't sell any small blender as a “The Magic Bullet”, which is a trademarked. Trademarks are simple to identify by the ® or ™ symbol beside the name/logo, such as below for the “Magic Bullet”.
Most Chinese Suppliers understand Trademarks well enough to not advertise their products under a Trademarked name, however, blatant trademark infringement does occur, both by importers and Suppliers. This is mostly done in the case of high fashion items, like Gucci, Calvin Klein, etc. I can't emphasize enough to avoid blatant infringement like this. You might get away with it for a short period of time, but it will eventually catch up to you.
Trying to Dodge Trademarks
Often businesses will try to dodge trademark law by marketing their product with a name similar to a well-known brand, such as MacDonalds or, as shown below, Calvem Klain. Or they'll market it as “Calvin Klein style“. Capitalizing on another company's brand name and/or causing consumer confusion is also a no-no and against the law.
Patents when Importing from China
Patents, rather than trademarks, are the much trickier legality you'll run into when importing products from China.
What makes patents so tricky is that:
- Your Supplier doesn't know whether a product is patented in your country, or doesn't care, and will happily sell it to you.
- What a patent covers is not always cut and dry and it may be ambiguous whether a product is patented.
Plain and simple, if a Supplier thinks that they can sell a product for a profit, even if it is patented, they will produce it and happily sell it to you. It is buyer beware. Your supplier does not view it as their responsibility to warn every potential customer about any potential legal issues surrounding Intellectual Property. Even if they wanted to, patents might exist in Country A but not in Country B. Your Supplier can't be expected to know the patent laws of every single country they sell to.
Compounding the trickiness of the situation, what is and isn't covered by a patent isn't always clear and is often more the responsibility of a patent attorney to determine than anything else. Take for example the case of the Magic Bullet which advertises over 20 patents. For the non-lawyer, we might think that the Magic Bullet has patented any device that cuts food! In reality, many of these patents cover very subtle functions of its blender.
How to Know if a Product is Patented
Most companies will proudly advertise that they are patented products. Take, for example, the Magic Bullet. They have a page on their website displaying all of the patents they hold.
By simply Googling the Registration Number, Google's patent database will bring up a full description of the patent, such as the example here with the Magic Bullet's patent on its blender and juicer system.
Sometimes finding the actual registration number can be tricky, but often Googling “patent + company + general description”, i.e. “patent Xyz Company ladder” will yield the patent (thank you Google for being so powerful at reading our minds!).
The Golden Rush Period Right After a Patent Expires
A patent normally only lasts for 20 years, which is a relatively short amount of time.
When a product's patent expires, there's often a flood of knockoffs to the market, especially if it's a popular product. (Did you notice a lot more products advertising for umm, “E.D.”, in 2013 when the Viagra patent expired?) For a short amount of time, there will be limited competition which means you can profit very nicely.
Chinese Suppliers unfortunately are more apt to simply copy their Chinese competitors' popular selling products, rather than diligently wait for patents to expire and be first to market with these copies. This means it can take months or years before products with recently expired patents start to show up in traditional marketplaces like Alibaba and Trade Shows. However, if you have an existing relationship with a supplier, they'll often be eager to know about an expired patent and may be willing to manufacture this product at no additional tooling and OEM costs, in the hopes they can sell these products to you and other customers.
What Happens if you Infringe Someone's IP?
One of my suppliers emailed me for help recently regarding one of the products they were selling. The Supplier sold a particular style of ladder to their customer in Italy and a patent holder contacted this company demanding a royalty from them for patent infringement. I knew the product fairly well and I was shocked that it was patented just as much as my Supplier.
We actually determined the alleged patent holder had had their patent expire due to non-payment of their filing dues in Italy, but it didn't stop them from trying to demand a royalty!
Patent and Trademark infringement generally is a civil case, meaning if you accidentally infringe on someone's IP, it'll be dealt with privately and/or through lawyers, not through the police. More often than not, if you're not exceptionally rich, you'll be given a cease and desist or similar warning from the patent/trademark holder. The main consequence is that you may potentially end up with a bunch of unsold inventory. However, if you are exceptionally profitable, the patent/trademark holder may find it worthwhile to sue you for any profits you have made and/or damages.
Selling Copy Cats/Knock-Offs
A product can be trademarked and not patented. In fact, the vast majority of trademarked products are not patented. The brand name M&Ms is patented, but there's nothing to keep you from selling identical chocolate candy and calling it Dave's Delicious Bits. The supermarket is full of such examples, often called generic or private label brands.
Chinese Suppliers are masters of copying every aspect of a product and manufacturing it cheaper. We might say this lacks creativity or ingenuity, but it is perfectly legal and moral. Every now and then I'll get a customer who comes across one of our products and says with a snide tone “So your product is just a knock off of xyz brand?” to which I often respond “Well xyz brand is just a rip off of abc brand which was a knock off of def brand.”
Legal ramifications aside, respecting others' intellectual property that they have spent vast amounts of time and money into developing is the right thing to do. Many first-time importers will eventually start to develop their own brands and create their own patented products, so it can be a case where Karma can come back to haunt you.
To summarize everything:
- Trademarks last more or less forever and patents last for 20 years
- Never sell your product under a trademarked name
- It can be difficult to tell if a product is patented so look for marketing and packaging that advertises that the product is patented (and Google those patents to see the extent of them)
- Selling copy cat products is fair game