A Guideline on Trademark Licensing in China

Registering Trademark in China

What Is Trademark Licensing?

Trademark licensing is the process by which a registered trademark owner, called a licensor or proprietor, allows another party, called a licensee, to make and distribute specific products or services under the licensor’s trademark agreement. Trademark licensing is a type of merchandise agreement. The licensor receives a certain amount of money or royalties, a percentage of all sales, in exchange for sharing the trademark. This compensation is also called consideration. Fashion and consumer products concerned with sports and entertainment are often sold under a trademark licensing agreement.

 

The licensee usually creates a trademark licensing agreement, but a licensor can also create this document. Both parties usually agree upon the terms before creating a trademark licensing agreement.

 

Trademark licensing is regulated by the Trademark Law and the Measures for Putting on Record of Trademark License Contracts. A trademark registrant may authorize other parties to use its registered trademark by signing a trademark license agreement, and the goods that bear the registered trademark must indicate the name of the licensee and the origin of the goods. Although currently not mandatory, the license agreement should be registered with the Trademark Office within 3 months of signing the agreement. The right to sub-license a trademark or service mark does not exist statutorily, and must be granted contractually with the authorization or the consent of the licensee.

 

Quality control is the essence of trademark licensing

Trademark licensing became acceptable where the licensor (the owner of the trademark) remained in control of the nature and quality of the goods or services sold in association with the trademark.  Quality control is, therefore, the essence of trademark licensing, providing the means for ensuring that the licensee’s use is consistent with the licensor’s interest in the trademark and at the same time ensuring that the consumer will get essentially the same quality good or service no matter where the trademarked good is purchased or the service is experienced.

 

The necessity to record a license agreement at the SIPO

First of all, we should mention that it is not compulsory for a licensor, typically a patent owner, to record his license agreement under the Chinese Patent Law. The license agreement shall be concluded under the Contract Law in China, and takes effect as of the effective date of the agreement. The recordal is, by no means, the condition for the license to be valid in China. Nevertheless, the recordal is beneficial for the sake of the licensor and licensee.

The standard document is drafted in favor of the licensor but aims to be reasonable and includes provisions that are common to negotiated trademark license agreements. The document has integrated notes with important explanations and drafting and negotiating tips.

 

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A Complete Guideline on Developing Proprietary Products in China

 

China Manufacturing

Proprietary products or services allow businesses to develop customer loyalty and continuously build on their offerings. When you’re taking advice from the financial institution on the purchase of proprietary products, check if the institution promotes third-party funds. You may be limiting your chance of building your asset with the institution if it only offers proprietary products.

It is suggested to enquire what will happen to the asset if you move your account away from the institution that issued it. There are proprietary investments that are not portable. As a business owner, you might have to sell them before going to another firm. This may result in a capital gain/loss.

 

NNN agreement could prove to be a vital element if you wish to produce your proprietary products in China. NNN agreement should be written to be enforceable in a Chinese court with jurisdiction over the Chinese defendant. This means that Chinese law is the governing law, Chinese is the governing language, and exclusive jurisdiction is in a Chinese court with jurisdiction over the defendant. the China-specific Non-Disclosure, Non-Use, and Non-Circumvention Agreement (NNN) and accompanying Original Equipment/Design (OEM/ODM) Manufacturer Agreements. These agreements are used to protect your confidential information and to prevent your Chinese manufacturer from competing with you or going around you to your customers or vendors. In other words, they make sense for almost every company doing business with China.

 

Protecting the IP and Trademark of your Proprietary Products

China has become one of the world’s major IP jurisdictions. Innovation and IP protection have been encouraged by the Chinese government. Foreign companies can register IP in China for trademarks, patents, designs and copyright. However, each of these is administered by a different government body. The primary law in China pertains to copyright. This protects copyrighted works of foreigners that are either first published in China or in countries that are signatories to the World Intellectual Property Organization (WIPO) copyright protection treaty.

 

Manufacturing price that sounds too good to be true might be a trap for the scammers. Inexperienced importers fall victim of the deception and select the cheapest price. They have no idea that this move is going to cost them dearly at the latter stages. Most of the time foreign importers are lured with amazing product images and unrealistic assurances by the manufacturers and the importers went on to make the deposit without visiting the factory.

 

Dispute Settlement

Under the international trade law, there are different provisions for dispute settlement which is done with the help of WTO and GATT. It was governed by Article XXII and XXIII of the GATT, which set up a system of consultation for the settlement of disputes among the member nations. The dispute settlement system evolved over time, and there were additional documents, and legal instruments were created to incorporate changes. Even with certain changes, the dispute resolution mechanism was not considered satisfactory. International Trade laws deal with certain subjects which are inclusive to all the member nations under the WTO.

 

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