The term BRIC to describe Brazil, Russia, India and China was first used by a Goldman Sachs economist who predicted that these countries would be among the four most dominant by 2050. While such long-term predictions always involve guesswork, the financial crisis has increased their importance. This was underlined by the inclusion of all four countries in the G20 meetings that are now held annually.
But the fact that, in the middle of an economic crisis, India and China showing merely a slowing of growth rather than actual recession, deflation or stagnation does not mean success for brand owners in these countries is guaranteed. In contrast, there is a healthy publishing market for the horror stories from the 1990s of young, naïve businessmen who went to a BRIC country to try to build fortunes and found themselves out of their depth in a system where the law means something different from what they thought and they are forced to retreat and rethink.
Some disputes dating from deals made in the 1990s are still going on today. For example, Danone’s long-running spat with Chinese food and drink group Wahaha over the ownership of the Wahaha brand dates back to a 1996 joint venture. A trademark transfer that was part of the deal failed but the problem was fudged rather than dealt with in an open manner. This often happened during the 1990s because many joint ventures were making money and people believed you don’t always have to follow the rules because “this is China.”
Not any more. The court systems in the BRIC countries are developing fast, and people who break the rules are being found out. Companies that want to succeed in the BRIC countries need to take the time and effort to understand the legal, business and cultural realities of the country they want to invest in.
Which city in India has the most Mercedes automobiles per person? What has kept Brazil from joining the Madrid Protocol? Just what is China’s National IP Strategy all about? Does use of my mark in Russia offer me any protection at all? These are the kinds of questions that will be answered in tomorrow’s session entitled BRIC—looking to the future of protection, enforcement and exploitation. Brand owners need to know how the trademark system works, how marks can be enforced, and what legal and cultural differences they need to contend with.
Battling pendency
Although the term BRIC has been a buzzword for a few years, it is misleading to group together four countries with different histories, legal systems and economies. This is also true for trademark protection. For example, pendency runs the full range from Russia’s efficient granting of trademarks within a year, to Brazil’s four- to five-year wait.
Mario Soerensen Garcia, name partner of Soerensen Garcia Advogados Associados and a speaker at today’s session, says the wait is too long at present in Brazil because “new projects cannot wait four to five years”. But he believes that it is improving and that a mark filed today may only take around two years. India has managed to reduce its backlog over the last few years, although lawyers argue that this was in part due to a mass granting of trademarks in 2005.
Both Brazil and India remain outside the Madrid Protocol despite years of speculation that they will join. India announced its intention to join in February 2007 but since then little has happened. Last year the government tabled a bill in the parliament to make the necessary changes to the country’s Trade Mark Act to enable India to join, but it has been sidelined by the build up to the general election and it is not yet clear when it will re-emerge.
In Brazil debate seems to have stalled. Soerensen Garcia thinks part of the problem is that the case for joining is not being made in the right way: “I feel that the propaganda about the Madrid Protocol should be a bit different...just saying the whole world is in doesn’t work”. This is particularly true for small- and medium-sized businesses in India as well as Brazil—where the domestic market is big enough, concerns over international registrations are not a high priority. In short, if international brand owners want India and Brazil to join China, Russia and the other 82 countries in the Madrid System they need to find a different way to make their case.
Russia and China, although in the Madrid System, also present a number of obstacles for brand owners. The most common is that they are first-to-file jurisdictions. “Using the trademark doesn’t give you any right. A lot of American clients and other companies do not understand this,” says Denis Voevodin, a partner of Salans in Moscow and a speaker at tomorrow’s session. The price of not filing your mark before or as soon as you do business in Russia and China can be high. Sotheby’s discovered this last year when it had to go through a long and complex litigation against Sichuan Sufubi Auction Company in China to strike out the trademark Su Fu Bi (a transliteration of Sotheby’s in Chinese) because the western company had no prior registration.
Whisky cases mature in China and India
Sotheby’s did succeed and all the speakers contacted by INTA Daily News stressed that civil enforcement is improving. In Russia the Supreme Arbitration Court produced an important decision in November last year in which the Supreme Arbitration Court found in favor of Japanese electronics company Akai in a trademark dispute.
In Brazil, Soerensen Garcia points to the success of Nestlé Brasil and Société des Produits Nestlé in overturning a decision of the trial judge in favor of domestic company Eleva Alimentos. The case involved looking at the trade dress of Nestlé’s milk drink Molico and comparing it to Eleva Alimentos’s rival drink called Balance.
India has also seen marked improvement. Abhishek Malhotra, partner of TMT Law Practice and the moderator of tomorrow’s session, highlighted a Supreme Court decision that ended a dispute between the Scotch Whisky Association (SWA) and Peter Scot whisky, made by the Indian company Khoday Group.
After 21 years in the court (as long as it takes to make a good whisky), this case finally matured last year. The Supreme Court reversed the earlier rulings in the matter by the registrar, a single judge and the Division Bench of the High Court and reinstated Khoday’s trademark Peter Scot in a rectification action. The SWA had argued that an ordinary consumer would think that Peter Scot is a Scotch and not an Indian whisky.
The Supreme Court ruled that all the earlier rulings in the matter had failed to notice the distinction between classes of purchasers in the case. Such purchasers are supposed to know the quality and content of Scotch whisky and the difference in the process of manufacture, the place of manufacture and the origin.
In another lesson for brand owners, the Court also rejected the explanation offered for the delay of 14 years in beginning the proceedings and ruled that the actions of the SWA were barred under the principles of acquiescence and/or waiver.
In China whisky again caught brand owners’ attention, though this time the multinational company was successful. In November last year a Shanghai court awarded Rmb1.25 million ($182,000) to Diageo in a landmark case against a Shanghai company that was copying the trade dress of its bestselling Johnnie Walker Black Label Whisky. The November 27 decision by the No 2 Intermediate People’s Court was for an anti-unfair competition passing-off action rather than trademark infringement.
Diageo argued that Blueblood (Shanghai) Wine Co Ltd was using the same square bottle as Johnnie Walker and similar labels to sell its Polonius whisky. Diageo also accused Blueblood of selling Polonius online using pictures of Johnnie Walker. “It is a remarkable decision...we argued that the defendant was copying the get-up of the bottle—that’s a pretty sophisticated argument in any jurisdiction,” said Luke Minford, China country manager for Rouse, which acted for Diageo in the case.
This decision follows a series of important rulings in China that started in June last year with Japanese motor bike maker Yamaha winning the highest damages ever awarded to a foreign company for trademark infringement in China. China’s Supreme Court upheld a decision of the Jiangsu Higher People’s Court and ordered domestic motorcycle manufacturer Zhejiang Huatian to hand over Rmb8.3 million ($1.1 million) after it was found to have infringed the Japanese company’s trademark.
This has been followed by other landmark decisions such as German bus maker Neoplan winning a design patent case against two Chinese rivals. The court awarded Rmb21.16 million ($3 million) in damages. While these individual cases have proved encouraging, the courts and government have also indicated their support for improving IP enforcement at the highest level. In June last year China’s government unveiled its National IP Strategy—a roadmap designed to ensure that China becomes one of the world’s most innovative countries by 2020.
Since then the Supreme People’s Court has issued a series of circulars to begin putting words into action. In March this year the Court issued guidelines for implementing the National IP Strategy that will lead to unified tribunals handling civil, criminal and administrative IP courts and may create a specialist IP appeal court.
These regulations were widely welcomed by lawyers worried that the financial crisis was going to lead to a slackening off of enforcement. At the beginning of this year the Guangdong provincial government issued an opinion that warns prosecutors and authorities involved in investigating crimes carried out by businesses to be “careful” about selecting cases and not too hasty to seize goods, freeze accounts or detain managers. In Zhejiang a similar announcement also caused concern that courts could become more lenient over counterfeiting during the economic crisis.
Criminal problems
Although civil enforcement is improving, criminal prosecution of counterfeiting cases remains time consuming, costly and difficult in the BRIC countries. The USTR brought a case against China at the WTO which, in part, argued that China’s system of thresholds that must be met before a criminal case can be brought allows a safe harbour for counterfeiters. It is unclear yet whether the Obama administration wants to file a new case or take a different approach, but lawyers contacted by INTA Daily News agree that criminal enforcement in China is, despite the official rhetoric, actually becoming more difficult in some areas of the country. Malhotra says that in India the criminal system also takes too long for many brand owners.
Another problem common to all four BRIC countries is corruption. “A foreign owner would not even think of playing dirty games, while for Russian companies it is the usual way of things,” says Voevodin. The effect of the global financial crisis on corruption has yet to become clear, with Soerensen Garcia saying that in Brazil corruption “has not got better or worse”. Either way, it is a reality that brand owners will have to deal with, even in the trademark office. Last year, anti-corruption officials in India arrested the deputy registrar of the Trade Mark Registry in Chennai for accepting a bribe of Rs10,000 ($200).
When enforcing in any of these countries, doing your homework on where to sue is vital to success. “Once in a while we avoid courts that are not in Rio or São Paulo,” says Soerensen Garcia. Rights owners need to ensure that they take the initiative in any cases to make sure that they do not sue in the home town of the infringer and try to ensure that the judges are as familiar with trademark work as possible. This is true for all countries, but especially so for BRIC countries. Soerensen Garcia says that Brazil has “states which are like the EU, US, and like Ethiopia or Somalia, all in the same country. Either you understand that, or you have no reason to complain.”
His point works for all four countries: understanding the dynamics of economic development in these countries is as essential as knowing the law. “In India, people are very cost-conscious. It takes a little while for people to purchase brands,” says Malhotra, who argues that brand owners must nevertheless try to enter the market quickly to make sure that demand is not taken up by grey market goods or counterfeits.
Targeting the biggest cities is not always the best tactic. In India, Malhotra says that the high living costs in New Delhi and Mumbai mean that inhabitants of these cities do not always have the most disposable cash to buy foreign luxury brands. In fact, the city in India with the highest per person ownership of Mercedes Benz cars is Ludhiana, the largest city in Punjab and an industrial hub (It has over 550 Mercedes, according to local papers). The Stuttgart-based company probably wasn’t expecting that result when it began to expand its presence in India.
Online resources
www.wipo.int/ip-development
www.imf.orgh
