Protecting your online IPR in China
China has a population of over 1.3 billion people and as of June 2020, 940 million ‘netizens’ – people actively involved in online communities.
With Alibaba Group and JD leading the way, e-commerce is now well developed in China. According to the World Economic Forum, from January to November 2020 it accounted for 25% of the total retail sales of social consumer goods. Furthermore, more than 40% of the world’s e-commerce transactions currently take place in China.
As wealth, internet penetration, brand awareness and loyalty spread, online retail in China is also set to further expand, with many future opportunities in cross-border e-commerce.
What does this mean for your business?
There are undoubtedly many reasons to be cheerful at the prospect of rising e-commerce trends in China. Not only will this provide European SMEs with opportunities to expand in a region with rising consumer demands, but it also offers the chance to do this relatively cheaply, without the start-up costs associated with opening a physical office.
However, there are several challenges that European SMEs should be aware of when establishing their virtual gateway into the China market.
Domain name infringement
Domain name infringement exists in many forms.
The most common ways that third parties tend to infringe domain name/s are:
Cybersquatting: Registering domain names that are identical to your company’s product or trademark names, with the purpose of selling the domain names back to you (the rightful owner) at a premium price.
False affiliation: Criminals presenting themselves as authorised resellers.
Phishing: Attempting to acquire credit information and usernames via electronic communication (fraudulent e-mails containing fake links).
Slamming: Fraud whereby resellers of domain name registrars contact European companies, claiming that another client of theirs has requested the registration of domain names identical to your trademark or company name. Their objective is to encourage you to place a domain name registration using their company.
Traffic diversion: Using a typosquarred domain name to redirect traffic intended for your website.
Typosquatting: Registering domain names that are either visually similar to your domain name or are mistyped (one key off on the keyboard). If www.Europe.eu is the domain name, www.europ.eu could be the typosquatted domain (visually similar); or if www.Europe.eu is the domain name, www.Euripe.eu could be the variant (the letter ‘i’ is close to ‘o’ on the keyboard and might thus be a common misspelling). Omitting or doubling characters also counts as typosquatting.
Case Study: IKEA’s domain name dispute in China
The first foreign domain name dispute in China took place in June 2000, when Beijing CINET Information Co., Ltd. (CINET) registered the domain name www.ikea.com.cn with the CNNIC. Inter Ikea Systems B.V. (IKEA), a world-renowned Dutch home accessories company, already owned several trademark registrations under the name IKEA in China, and had been using these trademarks commercially in China for several years.
IKEA filed a suit against CINET as soon as the company found out that CINET had been using a domain name incorporating its company name. IKEA requested that CINET’s domain name should be suspended.
The Beijing Second Intermediate People’s Court decided that since domain names were increasingly related to trademarks with the rise of e-commerce, CINET had acted illegally – knowingly using a well-known trademark to conduct commercial activity. The use of IKEA’s name was also held to constitute unfair competition and trademark infringement.
Furthermore, the panel discovered that CINET also held several other domain names, many of which used other famous commercial names, including Cartier, Tiffany and Hertz. As a result, CINET was accused of having registered www.ikea.com.cn in bad faith.
This decision has been hailed as a valuable case providing important guidelines in dealing with cyber-squatting in China. It also demonstrates that foreign parties are able to enforce their IP rights in Chinese courts.
Take-away messages for EU SMEs
Register domain names in potential future markets in China and Asia before establishing your business there. This can save considerable time and money later on, and can also act as a value-adding business strategy;
Domain names in China generally operate under a first-to-file (F2F) system, which grants the right to a domain name to the person who files it first – regardless of the date of its invention);
To save time and money it is advisable to do some research on domain name arbitration before entering China;
A domain name registration typically costs 50-100 euros per year; the price of one domain name dispute typically equals the price of 10 domain name registrations.
The China IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to China, Hong Kong, Macao and Taiwan, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (question [at] china-iprhelpdesk.eu) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days.
The China IPR SME Helpdesk is an initiative by the European Union
To learn more about the China IPR SME Helpdesk and any aspect of intellectual property rights in China, please visit our online portal at http://www.ipr-hub.eu/.