INTRODUCTION
To succeed as a licensor or a licensee, right holders should make sure that they have a robust risk-prevention plan in place before entering a trademark license agreement.
This makes it beneficial for everyone. Licensors can make money while also enhancing their brand's image. They can also lower the chances of non-use cancellation lawsuits against their trademarks. Meanwhile, utilizing a ready-made mark and its goodwill can provide licensees with a consistent revenue stream.
However, these benefits are accompanied by risks that both parties should anticipate and manage before entering a license agreement.
HOW HAS CHINA'S NEW CUSTOMS POLICY AFFECTED LICENSING?
China Customs declared that registration costs would be temporarily suspended to attract more businesses to their registration service. This made registering a trademark or other intellectual property with China customs completely free.
It is pretty simple to register your brand with China customs, but non-Chinese trademark owners must do so through a PRC agent. The registration is valid for ten years once Customs authorize it, but it can easily be renewed for another ten years.
The benefit of registering your trademark with Customs is that they will alert you if they find a shipment of potentially infringing products. If Customs determines the items to be infringing, they will either donate them to charity (if the infringing mark can be removed) or trash them completely.
QUICK TIPS FOR LICENSING IN CHINA
Legal recordation
- Under Article 43 of the Trademark Law, a licensor must submit a trademark license to the China Trademark Office (CTMO) for its records if it authorizes another party to use its registered mark. A trademark license that isn't registered with the CTMO can't be utilized in a dispute with a third party.
Verify the abilities of licensee
- The licensor is directly impacted by the quality of a licensee's products, which can result in the loss of the registered mark's reputation or value. As a result, licensors must choose their partners carefully and examine the licensee's qualifications and suitability.
Background checks
- Before signing a license agreement, the licensee should conduct due diligence on both the licensor and the licensed trademark to avoid issues that might invalidate the agreement.
Perform a proper quality check
- Licensors should specifically indicate the established quality standards in the licensing agreement to avoid controversies over the agreed-upon use of the mark. They should also refrain from using misleading terms. Furthermore, the licensing agreement should include the methods of supervision and inspection that will be utilized to guarantee that quality standards are maintained.
CONCLUSION
It is necessary for multinational companies to adequately defend their trademark rights as the Chinese market grows exponentially. If foreign companies create more robust trademark protection techniques and maintain the stability of registered brand rights, they will be in a better position in this market.
Please contact us (inquiries@ChinaLawSolutions.com) to get a recommendation on a firm which can assist your business with trademarks and trademark licensing in China. All inquiries are treated as confidential.