Like many other companies, electric car manufacturer Tesla Motors is looking to expand into China. It may have to put its plans on hold though due to trademark registration problems. In 2009, an opportunistic Chinese businessman, Zhan Baosheng, filed a trademark application with the Chinese trademark office covering the mark TESLA in 12 different classes, including cars and auto parts. The trademark application was ultimately granted giving Baosheng a trademark registration for the mark TESLA. So when Tesla filed its Chinese trademark application, the application was rejected, with the Chinese trademark office citing Baosheng’s earlier trademark registration. So, for the time being, Tesla has no legal right to commercially use its TESLA mark in China, which is a big problem for the car company looking to take advantage of the exploding Chinese demand for automobiles.
While it appears that Tesla has reached an agreement with Baosheng for the trademark rights for the classes of goods covering rail vehicles, sleighs, airplanes and ships, Baosheng has not relented on the critical class covering automobiles. Tesla claims that it made an offer of $326,000 to purchase all the Chinese trademark rights to TESLA from Baosheng, but reportedly Baosheng is holding out for 100 times this amount. This leaves Tesla to either pay the Baosheng’s fee, create a different brand in China, or seek to disqualify Baosheng’s trademark registration. Tesla is hoping the latter option will be successful.
To invalidate Baosheng’s trademark registration, Tesla is attempting to show that there has been no actual use of the trademark over the last three years. Although Chinese trademark law is not identical to United States trademark law, both countries require that the trademark registration holder actually make commercial use of the mark in order to maintain a registration. This is to prevent someone from registering a mark just to sit on it and prevent others from actually using it. If Tesla is able to show that the mark is not being used, it may be able to disqualify Baosheng’s trademark registration and get its own trademark application granted. This would save Tesla the pricey fee Baosheng is demanding to relinquish the trademark rights.
Tesla is not alone in navigating tricky trademark waters in China. Apple recently paid out $60 million to the Chinese trademark registration owner of the iPad mark to obtain rights to use its popular brand in China. The owner was originally asking for $400 million which Apple was not willing to pay. Following a protracted legal tussle, the two parties settled on the $60 million fee.
For large, well-known companies, the cost of doing business in China can be high because of trademark squatters. For smaller businesses looking to expand, the internet has made international business a reality and appropriate branding considerations should be made. If you are thinking about beginning a business or expanding your business internationally, please contact the trademark attorneys at Trademark Access for guidance on securing the necessary trademark rights in all areas where you operate.