Why it’s looking better for foreign IP in China

One of the more interesting stories coming from the Euro Cup was the awkward oversight from a Chinese flagship sponsor, BYD. The fast-growing EV giant made a high-profile debut into UEFA sponsorship, creating a stir by replacing Germany’s Volkswagen backing as the tournament’s “official e-mobility partner,” despite the tournament being hosted in Volkswagen’s home-country.  

For the most part, BYD’s sponsorship was well executed; a big budget campaign fitting for its global ambitions. Yet, just like foreign brands fumble in China, the company overlooked the humble website as an important marketing channel in the West – much more so than it is in China.

When potential customers tried to visit what they thought would be the German web address for the carmaker, byd.de, they instead found themselves on a sex toy website, also working under a BYD acronym.

It seems likely that the owners of the German web address have been squatting on the domain. The site has been registered since before 2018, and despite some suggestive imagery, little effort had been put into the site which brandished a ‘coming-soon’-type-banner across the page.

The owners had engineered the url’s potential sale with precision. They put up messages referring to the automakers byd.com site, implying that they had been inundated with German visitors wanting to find out more about the cars. It is likely that BYD will recognise the importance of having a German web address and buy it from the squatters for a hefty sum.

Registering a web address in the west is much like registering a trademark in China – it is on a first-in-first-served basis and low cost, meaning that there are plenty of opportunists out there squatting on urls that they think someone may be prepared to buy for a handsome amount.

It is surprising that BYD, which comes from a country where trademark squatting has been rife for some time, have overlooked squatters of their own brand abroad.

Fortunately for foreign brands who have made the same mistake in China - such as failing to register their trademarks in their native language and Chinese, things have improved in recent years. Chinese courts are increasingly recognising that there should be fewer barriers to brands owning their IP in China.

This is illustrated in the ‘non-use cancellation’ provision for trademarks – ending a squatter’s ownership of a trademark if they haven’t used it commercially for three consecutive years.

Even if a business has been using a trademark, but has clearly ripped it off, there are avenues for the rightful owner to win these back. In 2020, Michael Jordan won the rights to the Chinese translation of his name from the long-established Chinese sports brand Qiaodan after an expensive 9-year court battle. This has set a precedent allowing brands to gain a similar ruling with less time and expense. One of the notable policies at last week’s Third Plenum was the aim “to establish a “highly-effective” management system to protect intellectual property.”

Over the past couple of months there have been other rulings illustrating that Chinese courts are viewing cases through a more pragmatic and foreigner-friendly lens. Some Skinny readers may remember when a women claiming to be a Tesla customer jumped onto the roof of a Model 3 at their booth at the Shanghai Auto Show in 2021, wearing a t-shirt with the words “Brake Failure.” Her outcry went viral on Chinese social media and she undoubtedly hurt the Tesla brand in China. The company will take small comfort that she was recently ordered to apologise and pay ¥170,000 ($23,400) to Tesla.  

Similarly, a Chinese court recently ruled in favour of Apple over a Chinese consumer, judging that it had not abused its power and charged unfairly high commission fees.

Although Apple, Tesla and Michael Jordan have the means to hire the top lawyers in the business, they have blazed a trail for foreign brands in Chinese courts. They have illustrated that the courts are more likely to treat foreign brands favourably – the more level playing field that has been promised for years. Foreign brands by no means have it easy in China, but these rulings should be viewed as positive for them as a whole.