In December 2016, famed basketball star Michael Jordan was partially successful in a legal action filed in Chinese courts over the use of his name and likeness on shoes and sportswear marketed by a domestic Chinese firm. The case is further proof of a major change in the fortunes of foreign intellectual property owners in the highest courts of the world’s second-largest economy.
The Jordan trademark suit goes back to 2012 when the suit was filed against Qiaodan Sports, a sportswear manufacturer operating thousands of retail locations in China which was founded in 2000 according to business information reported by Bloomberg. According to Bloomberg coverage of the Jordan trademark suit, Qiaodan is pronounced “Chee-ow-dahn” and it is how Jordan’s name is pronounced in the country. Not only was Qiaodan utilizing the Chinese version of Michael Jordan’s name but Jordan’s counsel also took aim at the use of Jordan’s number 23 and the “Jumpman” logo used to market Air Jordan shoes produced by Nike Inc. (NYSE:NKE)
Initially, Jordan’s legal fortunes were frustrated by a couple of losses in China’s lower courts. In July 2015, Chinese news outlet People’s Daily Online reported that the Beijing Municipal High People’s Court rejected an appeal filed by Jordan on a ruling earlier that year that denied his request to cancel Qiaodan’s trademarks. According to the report, the Beijing municipal court did not find enough evidence to support the revocation of Qiaodan’s trademarks.
Facts of the trademark case published on TheRealJordan.com, an official Michael Jordan website, the use of the word “Qiaodan” to refer to Jordan has been used by Chinese media going back to the 1980s, more than a decade before Qiaodan Sports was reportedly founded. The page also notes statutes of Chinese law regarding an individual’s right to their personal name and prohibitions on a person’s name being infringed upon by other entities. Jordan argues that the use of his name and likeness on Qiaodan Sports merchandise has allowed that company to increase its revenues from $45.6 million in 2007 up to $456.3 million in 2010.
The recent decision by China’s Supreme People’s Court is not a complete victory for Jordan but it does concede to the basketball star certain rights to the use of his name in the Chinese consumer market. The ruling forces Qiaodan to give up its trademark rights to the use of Jordan’s name as represented by Chinese characters. However, the right to use the pinyin, or romanized version, of those characters written as “Qiaodan” is still a trademark held by Qiaodan Sports as a result of the recent ruling. It is not clear whether the Supreme People’s Court have issued a decision on the use of the number 23 or the Jumpman logo, although Quartz reports that a separate rights case related to Jordan’s suit is still pending at the court so we may hear more on this case in the future.
“The Michael Jordan decision is a big step for American brand owners seeking to protect their marks in China,” said Jed Ferdinand, founder and senior managing partner at Ferdinand IP. Although Ferdinand has had no personal involvement with the Jordan trademark suit, he has dealt with similar issues of trademark squatting in China on behalf of his own clients. “This practice has left American brand owners with the difficult choice of being shut out of the Chinese market, paying essentially a ransom to the counterfeiters to get their own marks back, or having the resort to the Chinese legal system, which is difficult, expensive and typically ruled for the Chinese entities,” Ferdinand said. He was hopeful that the recent decision reflected a growing understanding among officials in China’s legal system that the status quo on trademark squatting needs to change.
There are some important differences between the Jordan trademark suit and other cases involving trademark squatting, where Chinese entities will file for trademarks without any intent to use the mark in commerce. “What struck me about this case is that the defendant is a legitimate company,” Ferdinand said. “Often times you see true pirates, companies that merely exist to peddle in trademarks.” Despite the fact that Jordan’s legal team did not win trademark refusal for the pinyin version of Qiaodan, Ferdinand was very encouraged by the implications of the court’s decision in this case. “It’s a big victory for him and his licensing team,” he said. “It goes to show his commercial value.” He added that he wasn’t surprised that Jordan didn’t prevail on overturning the pinyin character trademark given the commentary he had read on the case.
In Ferdinand’s view, the tide of Chinese intellectual property law begin to tip in the favor of foreign plaintiffs in 2014 after new intellectual property laws went into effect in that country. “I would tell clients, ‘The thought that you’re going to go to Chinese court and get a victory is an expensive and long process,’” Ferdinand said. The atmosphere is much different than it was a few years ago when even a major tech firm like Apple Inc. (NASDAQ:AAPL) was forced to pay $60 million in 2012 to settle a trademark dispute with a domestic Chinese firm over the use of iPad in Apple’s electronic device marketing. Now, there’s a better defined legal standard which allows foreign plaintiffs to argue that trademarks have been registered or are being used in bad faith. “There’s a way to get a positive result now where there wasn’t before,” Ferdinand said.
Although the legal avenues to challenge illegitimate trademark registrations have improved, the problem of Chinese trademark squatting itself has increased in recent years according to Ferdinand. U.S. trademark applications are accessible to the public and Ferdinand has seen instances where Chinese companies monitor U.S. trademark applications in order to file that mark with China’s trademark office before the legitimate American firm can do so. “Unless they file a simultaneous trademark application in China, squatters can beat them to the trademark office,” Ferdinand said. “With the first-to-file rule in China, they at least start out with the presumption that they’re the winner.” Ferdinand used to encounter the issue of trademark squatting only for more well-known clients in the fashion world but now he sees squatters targeting far less recognizable brands.
A U.S. trademark applicant might be initially wary of filing an application in China given U.S. requirements surrounding intent to use the mark in commerce, but Ferdinand notes that the rules surrounding trademark in China aren’t as rigid. “It’s just a matter of getting the application on file,” he said. “The reality is that most of the time, the initial work in China may just be manufacturing and exporting, and that’s more than sufficient.” Although he sees an improving legal landscape in China for foreign entities seeking to wrest back their rights to a trademark from a Chinese squatter, Ferdinand thinks that American companies should see filing trademark applications in China as a protective measure that can save money down the road. “It’s well worth it to do that than wait and deal with the legal system after that,” he said.