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Testarossa, And How Ferrari Lost Its Most Famous Car Through Non-Use

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Use Your Trade Mark/ There’s nothing more iconic than a red 1984 Testarossa Ferrari roaring on a winding Italian county road. However, a German court ruled last week that Ferrari no longer has any right to use the Testarossa brand due to non-use of the trade mark.

Testarossa, meaning “red head” in Italian, began production in 1984. The model was named after the car used by Ferrari to win the World Sportscar Championship in 1957.

Autec AG, a toy company, challenged Ferrari to prove it had still been using the Testarossa brand since the model ceased production in 1996. After a lengthy trial, it was determined that, aside from providing spare parts and repairs for old Testarossa models, there had been no cars, no merchandise or any products sold by Ferrari using the Testarossa name for over a decade and therefore non-use of the mark was determined.

Despite the historical significance of the car and its strong links to Ferrari, a spokesperson of the court stated:

“A brand needs to be used to protect it, which the company has not done here.”

Autec AG now has exclusive rights to use the Testarossa brand. They plan to use it for the sale of electric shavers and bicycles. They also have the right to licence use of the Testarossa name to other companies and seek compensation for any breaches of their exclusive rights to its use.

This decision is not restricted to Germany in which courts the legal battle was fought. It effects all member countries of the European Union and will likely affect the brand internationally. While it is unknown whether an Italian court may have had a different approach to a case concerning such an iconic Italian car brand, the only recourse for Ferrari now is to appeal the decision.

The loss of such a significant and long-standing trade mark demonstrates that it does not matter how old or how successful a company or brand is. It is not enough that a brand is well known or was used frequently at one time. With 135,000 new EU trade mark applications each year, the need to actively maintain existing trade marks has never been more important.

GLOBAL PROTECTION OF INTELLECTUAL PROPERTY It is all about the right IP Strategy!

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As the leader in your industry, you need to ensure that you are unstoppable in any way. On the one hand, this requires certainty, that your approach to market your company or business is unique and no third party, having obtained monopoly rights in relation to a brand name, a logo, a product design or product functionality, is able to stop you from selling, either in your home country or in any other of your markets globally. This confidence can be obtained immediately by undertaking identity and similarity searches for existing intellectual property rights in all relevant countries. The search result also gives you a good indication about the International markets in your trade and reveals the players in the game. Now that you know the status, where no respective IP right is registered for a competitor, it means you are free to go ahead and a decision is to be made, whether to enter the competition or to remain on the sideline observing. Ideally, the decision to entering the respective markets in your International destinations was made long before the search had been carried out.

On the other hand, you would you like your customers to continue asking for your goods and services and spread the word about your excellent products, whereas you at the same time are in control of competitors’ attempts to copy your success and prevent them from doing so by exploiting your ideas and hard work. This is achieved by registering intellectual property rights that protect your goodwill in form of your brand or logo, namely a trade mark, or by registering intellectual property rights that product your unique product shape or appearance, such as registered designs or the way, your product solves a particular technical problem, so it can be protected by a patent. One has to bear in mind, that time is of the essence, once IP searches have been conducted, as the “first come first served” principle applies in intellectual property matters.

Now that it is clear what your markets are and what can be monopolised for you (name, logo, product design, invention) the question arises, how do you achieve the most solid protection in the majority of countries with the least effort, both financially and in relation to actions required in the quickest way possible. As always in life, there is no free lunch as much as a unified range of IP rights would be convenient, the reality is, that every country has its own intellectual property laws in place. However, there are various International Treaties for the respective IP rights, that make International protection more affordable and can contribute to an effect to streamline decisions and achieve effectiveness. Knowing the systems well and knowing how to use them within the right protection strategy is key. This is where expert advice is of most value. By not knowing the right filing strategy it will eventually get you there, but most likely with three to five times more financial efforts in double or triple the amount of time, which may cost the company a fortune, that could have been saved and invested in the company’s productivity. Doing it right from the beginning is important.

When your company operates in a global market, you need to consider intellectual property protection for each country the company operates in. Should the business be in its beginnings, you would want to consider, if there is a chance that your business may operate or expand overseas.

It all starts with answers to a few simple questions. Questions and the respective answers should be put down in writing. It is important that a coherent strategy developed, is adhered to all the way through.

Do we expand Internationally and if so how quickly?

By asking if the company would generate the best returns by establishing its product in its home market Australia first or if the global markets should be approached simultaneously the fundamentals of the IP strategy will be laid. How quickly your company expands can depend on various factors. One of them is clearly if the business has the resources to successfully commercialise outside Australia? If funds are an issue, the strategy of choice is to file an IP right in Australia. This gives the applicant six months to expand this IP right to any other country be filing an application, claiming priority, based on the Australian trade mark, design or patent application. This way you literally “jump the queue” and kill to birds with one stone. You save funds for the time being and have the opportunity to obtain access to funding that allows the company to expand and your Australian filing date, that is the date when IP protection commences, is preserved for all other countries that you are going to file into within the next six months. So, wherever you go in the next half a year, you are always ahead of any other competitor.

You can use the six months time frame wisely for establishing:

·       a reputation and financial support

·       manufacturing and distribution networks to supply to countries abroad

·       where to manufacture your products

·       marketing and promotion networks to successfully exploit your products abroad

What are our key markets?

By identifying the key markets for the company’s products and services, the most cost-effective filing strategy, that achieves registrations in the fastest way possible, can be determined. Two things are important to understand. Firstly, if an IP right is available for registration, do not hesitate to file immediately. It might be unavailable tomorrow or even in a few hours. You compete against six billion other potential applicants! Secondly, at least filing an application in Australia, would give you six months time to work out a global strategy. So a national filing is of the essence to cover your company.

National IP Filings or Filings into International Treaties, such as the Madrid System of World Intellectual Property Organisation (WIPO) 

You can benefit from International Treaties, such as the Madrid Union, which consists of the Madrid Agreement and the Madrid Protocol for trade marks when all or designated countries for an IP filing are members of this Treaty. This streamlines the registration process, saves processing time and make the registration process more cost-effective. It has currently 100 members, covering 116 countries.

Part of your filing strategies might be countries in the Middle East or South East Asia, that are not a member to this Treaty, which means, your company will have to select a combined filing strategy, where the majority of designated countries can be covered by the Madrid Union and its International Treaty and the remaining countries are to be lodged individually with the respective Intellectual Property Office in each of the remaining countries.

If you run a successfully established company, it can improve performance, if the performance of your IP portfolio and the disbursements accompanied by the registrations in the various countries are carefully examined.

There is no such a thing as ONE “world trade mark” or any other intellectual property right , that covers you globally with simply ONE application. However, our team from ONE IP INTERNATIONAL can make it feel like that for you. Rather than dealing with various law firms around the globe, we are your first and only address for all global intellectual property matters.

Expert advice saves you time and money and will give you peace of mind that your Intellectual Property (trade mark, registered design, copyright, trade secrets etc.) is well protected, globally. You let us know, what is to achieve. ONE IP International a global provider of Intellectual Property services that:

• protects any IP right in any country worldwide

• breaks down any IP matter, so you understand it within minutes

• gives you immediate and 24/7 access to all your IP assets

• provides all useful tools to properly plan, create and administrate your IP portfolio

• in any language

• with all relevant information, required to make informed global business decisions.

Speak to one of our IP experts in Australia to obtain your company’s global intellectual property strategy and accomplish global protection by local access.

IP PORTFOLIO – CHINA

BLOGS / By

China is an enormous market. It is currently the second largest economy in the world and grows at an annual rate of more than 6%. China is also Australia’s biggest importing and exporting partner, with an annual increase of 6.3% over the past 5 years.

Whilst expanding into the Chinese market may have been a remote thought for small and medium-sized Australian enterprises in the past, the advent of Internet commerce has lowered the barrier of entry significantly. The uptake of online shopping has been particularly robust in China. As of 2017, online retailing constitutes 17% of total retail sales, and this is set to grow to a quarter by 2020.[1] In 2017, online sales experienced a staggering growth of 32%.

Additionally, China has long been a destination for manufacturing jobs. Good infrastructure, affordable labour and relative stability have prompted many companies to move their manufacturing base to China.

Why Register Your Trade Mark in China?

Like all other countries, the courts in China would not enforce an overseas Trade Mark. Hence, for your Trade Mark to be protected in China, it must be registered there.

There are good reasons to apply for a Trade Mark in China as soon as you intend to use your Trade Mark there, however minor the initial uses may be. Unlike Australia and other common law countries, China has a first-to-file Trade Mark rule, as opposed to a first-to-use system. This means that in most cases, any person can become the owner of a Trade Mark, even if another person has already been using that Trade Mark.

Narrow protections are provided for certain unregistered Trade Marks. Firstly, prior rights could be established for unregistered Trade Marks that are well-known or has acquired “a certain influence”. Secondly, a registered Trade Mark would be invalidated if its registration was obtained by “fraudulent or other illegitimate means”. Finally, a pre-existing business relationship between the foreign Trade Mark holder and the applicant could also prevent the new Trade Mark from being registered.

These narrow grounds, however, has not provided foreign companies with much comfort. Britney Spears, for example, could not establish that her Trade Mark was well-known, and hence lost her case against a Chinese clothing company. Apple also found itself in the same situation when it tried to take legal actions against a Chinese company with the Trade Mark “iPhone”.

This Trade Mark regime has led to many Trade Mark squatters, which have troubled many foreign companies greatly. Apple, for example, was forced to pay a Chinese company US$60 million to use the name “iPad”. Likewise, Michael Jordan could not prevent a Chinese sports equipment manufacturer from using the name “Qiaodan”, which is the transliteration of Jordan’s name in Chinese, since the Chinese company has registered the Trade Mark first.

To prevent any risks of that happening, our advice is that you should register your Trade Mark in China as soon as you intend to use the Trade Mark there. Moreover, to turn these Trade Mark squatters on their heads, it may be wise to apply the Trade Mark in relation to more classes of goods and services than is otherwise needed at the initial stages. Nevertheless, if you do not start using your registered Trade Mark in China within the first three years, it risks being cancelled.

Doing Business with Original Equipment Manufacturers (OEMs) in China

The cost of labour, coupled with adequate infrastructure and relative political stability, has long attracted many foreign companies to outsource their manufacturing jobs to China. Many of these businesses choose to engage with local OEMs, which are able to manufacture goods at a fraction of the cost compared with developed countries.

Recent judgments from the highest court in China have cleared up the legal position on whether manufacturing goods in China solely for export could constitute infringement if a similar Trade Mark has been registered in China. The Court held that there would be no infringement, provided that the goods do not enter into the Chinese market, and that the foreign company commissioning the job holds a valid Trade Mark in the destination country of the products.

For businesses seeking to stop these OEMs from manufacturing counterfeit goods, this means that they can only enforce their rights in China if they have registered their Trade Mark in the countries where the goods are to be exported to. As an upshot, however, foreign businesses that find themselves locked out of the Chinese Trade Mark Office because of Trade Mark squatters may nonetheless welcome the fact that they can still engage with local OEMs to produce their goods for export.

In light of this, if your business is only using China as a manufacturing base, there may be no legal reasons to apply for a Trade Mark in China. Nevertheless, there are strong reasons to register your Trade Mark if you ever intend to enter into the enormous Chinese market. Your business’ presence in China would likely alert potential Trade Mark squatters, who may decide to pre-empt your rights and cause you a lot of trouble if you later decide to sell your products in China. As the experience of Muji shows, OEM activities in China are insufficient to elevate your Trade Mark to one that has “a certain influence”, meaning that third-parties are free to register your Trade Mark with the Chinese authorities.

Whilst in the past, there had been instances where foreign businesses had their Trade Marks cancelled for non-use on the basis that their manufactured goods were for export only, recent cases show that this is no longer the case. Even though it may seem irreconcilable with the legal position that there is no infringement in manufacturing goods solely for export, the courts in China have maintained a distinction, however arbitrary it may seem. In short, a Trade Mark holder conducting the same activity would be taken to have established sufficient use to resist the Trade Mark from being cancelled.

Given the law on Trade Marks in China, we strongly advise businesses who intend to contract with local OEMs to manufacture goods to apply for a Trade Mark in China. Whilst you may not have any plans to sell your goods in the Chinese market yet, it is much better to have the option left open for you. The alternative scenario may be that you would either be locked out of the Chinese market by Trade Mark squatters or have to pay an exorbitant amount to have your Trade Mark back. The good news is, as long as you continue to manufacture your goods through the local OEM, your Trade Mark would not be at risk of being cancelled for non-use.

How to Apply for a Trade Mark in China?

There are two avenues to apply for Trade Mark protection in China.

Firstly, you may file for protection in China through the World Intellectual Property Organisation (WIPO), if you already have a registered Trade Mark in any of the countries party to the organisation. WIPO covers 191 countries and the only notable exception is Taiwan (Republic of China).

This method is relatively straight-forward and allows for applications in English, French and Spanish. Registration, however, is expensive. The basic fee is 653 Swiss Francs, in addition to the individual fee for China, which is CHF 249.

Alternatively, you may apply directly to the Chinese Trade Mark Office. Compared with WIPO, the fee is substantially lower, at only RMB 300. However, individual applicants often face difficulties in filing the application in Chinese, as well as navigating through the Trade Mark laws of China.

Enforcing Your Trade Mark Rights in China

It is true that China does not have the best reputation when it comes to enforcing Trade Mark rights. Nevertheless, in recent years, China has made significant changes to improve the level of protection offered to Trade Mark holders.

The most significant step took place in 2014 when the Chinese government established three Intellectual Property Courts in Beijing, Shanghai and Guangzhou. Its rationale was to enhance IP protections as well as address concerns that intermediate courts tend to favour companies from the area.

At the same time, several issues that are endemic in Trade Mark protections in China have also been addressed in recent years. Historically, damages awarded in Trade Mark infringement cases tended to be very low by international standards. Prior to 2014, damages awarded in the majority of cases tended to be below $75,000. However, damages have steadily increased since with the introduction of a new legislation. The average amount of damages awarded for Trade Mark infringement cases is now RMB 1.7 million. In a high-profile case last year, New Balance was awarded the US $1.5 million in damages and legal costs.

This direction was also echoed in the opinion issued by the State Council earlier this year, which called for stronger protections for IP rights. It opined that damages awarded in IP infringement lawsuits should be guided by the primary principle of compensating the plaintiff and the auxiliary principle of punishing the infringer. Additionally, in cases of repeated, malicious or serious infringement, the infringer should be liable for the plaintiff’s cost in enforcing its rights.

Another common complaint is that, unlike other common law jurisdictions, China does not have a formal process of discovery. Instead, parties seeking to enforce their Trade Mark rights often had to resort to more informal measures, such as private investigators. In 2015, however, the Supreme People’s Court released an Interpretation, which provides that a party may request the Court to order the other party to provide documentary evidence that is under their control.

The aforementioned opinion by the State Council also touched on the need to alleviate this problem. It opined that the government should explore the possibility of establishing rules for discovery and exclusion of evidence obstruction. At the same time, in rather vague terms, the opinion also mentioned the possibility of shifting the burden of proof as well as giving the courts more power to investigate and collect evidence.

On the whole, Trade Mark protections in China are set to become much stronger in the future. Whilst protectionism may have contributed to weak Trade Mark protections in the past, the opinion by the State Council seems to acknowledge the importance of protecting such rights as the Chinese economy matures.

Talk to one of our IP experts in relation to Intellectual Property protection in China!

[1] Goldman Sachs, China E+Commerce, shopping re-Imagined (2017)

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