A Trademark Win in China

Intellectual property piracy is a familiar worry for com- panies that do business in China. After all, China has only had intellectual property laws on the books for about 20 years, says Michael Ouyang, chief intellectual property counsel for ADC Telecommunications, Inc., a communications-network equipment company in Eden Prairie.

It’s all the more surprising then that in the fall of 2008, ADC won a long-fought trademark infringement case against one of its former Chinese distributors. The ruling, made by China’s highest court, may signal that it’s getting easier for foreign companies to enforce intellectual property rights in this important Asian market.

About 11 years ago, ADC employees noticed that a distributor was advertising counterfeit ADC equipment and using brochures featuring the ADC logo—even though ADC had severed its relationship with the distributor. At ADC’s request, the Chinese agency that enforces trademarks raided the distributor, but an outdated letter indicating the company was a legitimate distributor satisfied the authorities.

The distributor then moved to trademark the ADC logo in China. “We learned of this and opposed it,” says Scott Johnston, a partner and chair of the trademark group at Minneapolis-based law firm Merchant & Gould, PC, where ADC is a client. “We weren’t too worried about the case, because we thought it was so obvious.”

ADC won the case, but the distributor appealed to the Chinese Trademark and Adjudication Board (TRAB) and the ruling was reversed. TRAB found that the other company was allowed to register the ADC logo for a number of goods, including telephone wire. Chinese law requires a trademark applicant to list all the goods to which the trademark will apply. Those goods fit into pre-established classes and subclasses. “TRAB said that the distributor can register the trademark for the subclasses in which ADC was not registered,” Johnston says, which came as a shock to his client.

ADC appealed again and lost; Chinese law firms thought the case could not be won under present Chinese law. “They said there’s really nothing we can do under the subclass system as they have it set up,” Johnston says.

Ultimately, ADC appealed to the highest court in China, with help from Lovells, a large European and Asian law firm. They added evidence to support their case, despite rules suggesting that they could not.

This time, ADC won, with the court denying the distributor’s bid to register the ADC logo—a ruling that wasn’t strictly in keeping with Chinese law. “I think they bent the rule to achieve a just result,” Johnston says. “My hunch is that the people on the court saw this as creating an injustice and maybe some bad public relations. China is always trying to counteract its terrible reputation for piracy, counterfeiting, and trademark infringement.”