Avoiding squatters and copycats: What foreign health food firms must know about IP rights in China

By Cheryl Tay contact

- Last updated on GMT

Foreign health food firms in China often find their trademarks being "squatted" by local distribuotrs. ©iStock
Foreign health food firms in China often find their trademarks being "squatted" by local distribuotrs. ©iStock
The failure to register intellectual property (IP) rights on time is a common problem for foreign supplement and functional food companies in China, according to global co-head of CMS Life Sciences Sector Group Nick Beckett.

Beckett, who is also managing partner at CMS Beijing, revealed that he had observed this pattern among many of his firm’s food industry clients.

Property protection

He said: “It seems overseas companies tend to pay little attention to IP protection in China until they find out products infringing their IP rights have appeared in the Chinese market, their trademark or website address has been squatted, or they are even sued for infringing a third party’s IP rights.”

He attributed this to companies possibly not expecting China to be their major market when they first entered it, and hence, neglecting to prioritise their IP rights.

“Most IP rights are under the ‘first to file’ regime in China. The internet has made it easy for anybody, let alone a professional squatter, to learn the trademark of an overseas company and register it. Sometimes, a Chinese distributor may also squat on the trademark of an overseas company it is cooperating with.”

However, even expedient IP rights registration does not provide complete protection, especially for trademarks.

In China, registering a trademark in English but not Mandarin does not guarantee its protection. The company might even find itself having to spend large amounts of money buying back the trademark from squatters.

To avoid such a situation, Beckett advised that companies register them not just in their official language but also in Mandarin.

He added: “Care should be taken to ensure the Chinese version reflects the spirit of the brand. A literal translation may sound awkward, whereas a transliteration might be more effective.”

Pay attention, or pay the price

Regarding other legal issues — such as stricter laws for food companies due to the persistent problem of questionable food safety in China — Beckett said the supplement and functional food sectors face particularly stringent regulation due to their implications for human health.

In this regard, he warned: “It is easy to be careless during such a phase as the applicable rules may scattered in different regulations, notices and local guidelines.

“It is particularly important to pay attention to labelling and advertisements, as such issues are currently the focus of the administrative authorities. Failing to meet such requirements may lead to different levels of liability for manufacturers and suppliers.”

The importance of being honest

Indeed, advertising and health claims for supplements are heavily regulated, and run a high risk of non-compliance as “it is easy to make inappropriate statements which are deemed to be false or fraudulent”​.

In July this year, nine authorities jointly launched a programme to crack down on fraudulent advertising, which will be in operation until 30 June 2018, “signalling a period of greater scrutiny from local authorities”​.

Nick Beckett will be speaking on food regulation in Asia at Vitafoods Asia 2017; interested parties can register here.

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