Japanese retail chain MUJI was recently ordered to pay ¥620,000 (A$125,000) to copycat Chinese brand Natural Mill over supposed intellectual property infringement.
This extraordinary ruling in China came despite Natural Mill stores, which are operated by the Beijing Cottonfield Textile Corp, appearing to have almost identical interiors and product lines to MUJI, which operates around 850 stores in more than 25 countries worldwide including Australia and the US.
Although the English spelling of the brands on signage and on products differed, the court ruled that the infringement occurred when MUJI began using the spelling of its own name in Chinese characters (or Han characters), which had earlier been registered by the copycat company.
In a separate lawsuit, MUJI alleged that Natural Mill infringed on its intellectual property by appearing to sell towels with its name on the label in Chinese characters.
MUJI store in China Source: Muji
The claim was rejected by the court, which ruled that MUJI did not register its towel products with the Chinese characters for when it entered the Chinese market, while Natural Mill did.
The court ruled that MUJI was allowed to continue marketing its towels and bedding products using English branding.
International business expert at Sydney University Dr Wei Li said the ruling highlighted the complexities of using Chinese characters for branding in China.
“The ruling demonstrates the importance of intellectual property rights and the protection of such is a very complex process,” Dr Li told SBS Cantonese.
Intellectual property is an intangible asset, Dr Li said, but unlike tangible assets, if a company’s intellectual property is stolen or misused, it was generally difficult for the rightful owner to be aware of such violations, possibly not until the owner tries to enter into a new market and subsequently discovers that brand name or the copyright has already been registered by a third-party.
Elevating the complexity, different countries have different intellectual property protection regulations.
“In Australia, if a business or individual practically owns and uses a trademark, the business is then considered as the rightful owner of the intellectual property," Dr Li said.
"However, in China, the first trademark registration applicant is considered the legal holder of the trademark. In other words, [the intellectual property rights] are granted on a first come, first served basis.”
Therefore, she concluded, if the authentic holder of a particular trademark would like to enter the Chinese market, it might have to pay a large sum to the registered trademark holder in order to repurchase its trademark.
Dr Li urged Australian businesses or individuals who were considering to enter the Chinese market to register its trademark with the Chinese authorities first, rather than leaving it to the last moment where the parties would have to contend for trademark ownership in court.
Dr Li said foreign companies entering the Chinese market must initially register for copyright status, highlighting that this was a practice opposite to what corporations in Australia are instructed to do.
Challenges facing companies
Dr Li said there was a complementary relationship between the economies in Australia and China, highlighting that there are huge demands for Australian products, such as iron ore, agricultural products, and other service industries.
As a result, many Australian corporations are eyeing to do trade on the Chinese market.
However, due to the considerable differences in regulations, Dr Li said Australian companies should consult relevant experts and conduct market researches before entering the Chinese markets.
According to a 2018 report by the Australian Chamber of Commerce China (AustCham China), called , less than 5 per cent of Australian corporations surveyed considered intellectual property rights infringements as the major challenge for doing business in China.
Rather, over a quarter of Australian businesses consider regulatory uncertainty as the primary challenge of operating in China, as well as obtaining required licenses.
Source: AustCham
As foreign companies have become increasingly aware of the Chinese laws and regulations, Dr Li said more Australian companies have registered their trademark in China, with the numbers exceeding trademark registrations in New Zealand and the United States.
On the other hand, foreign nations such as the Australian government has established organisations, such as IP Australia, which has appointed representatives to provide support for Australian businesses in China to deal with intellectual property issues.
The report suggested that Australian companies operating in China felt optimistic about their future growth, with more than half of the surveyed companies characterising their financial performance over the past financial year as “profitable” or “very profitable”.
More than almost 20 per cent of companies surveyed said they broke even over the past financial year, while 11 per cent suffered losses.
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【無所不談】名牌大學畢業有助尋工？
