I often counsel clients who want to have their goods manufactured in China that they use caution, know who their manufacturer is, and make sure that their manufacturer is made aware that any branded product that it makes for them is distributed only through trade channels that the client has previously authorized. If a trademark owner loses control over the nature and quality of the goods sold under a particular trademark, a court may find that it has abandoned its mark. A trademark owner should take care to register its mark in China prior to doing business there and have a written agreement with its Chinese manufacturer ensuring that that manufacturer makes its product in accordance with its instructions and acknowledging that that product is the subject of trademark and/or patent protection as the case may be. That agreement should identify those trademarks and patents by number and country of issue and list specific measures that the trademark owner must take to ensure that the manufactured goods meet its quality standards. These standards should not only apply to the product itself but should apply to its labeling and packaging if that labeling and packaging is being sourced abroad as well. That agreement should also ensure that the product meets applicable U.S. regulatory standards if it is intended to be imported into the United States, e.g., FDA standards, if a cosmetic, or FCC standards, if it emits electromagnetic radiation. Finally, the agreement should leave no room for ambiguity and if necessary, therefore, both an English and Chinese version should be provided, carefully translated to ensure that the language in both versions has the same meaning.
Two examples of what can go wrong with Chinese suppliers follow. The BBC reported that Jaffa oranges, named after the city of Jaffa in Israel and famous for their sweetness, began showing up in Iranian warehouses. The problem with this is that Iran has no commercial relations with Israel and its President, Mahmoud Ahmadinejad, is alleged to have, on October 26, 2005, called for wiping Israel off of the map. (Ahmadinejad later said that that comment had been exaggerated and misinterpreted.) In any case, how did Israeli oranges end up in Iran? Because they weren’t Israeli oranges. They were Chinese oranges infringing the Israeli’s source’s trademark. And going from oranges to apples, the New York Times has reported that hundreds of small Chinese companies are counterfeiting Apple, Nokia and Samsung cell phones, evading taxes, fees and safety regulations. New technology has made this easier, making it possible to have a single chip perform a multitude of cell phone functions. The result is Sumsung and Nokia cell phones sold for dollars less than their Samsung and Nokia originals. As quoted in the New York Times article, “It’s really common for factories to do a night shift for other companies.”
For an engaging read about how Chinese companies counterfeit tennis shoes with depictions of both real and fake items, see http://www.nytimes.com/2010/08/22/magazine/22fake-t.html?pagewanted=1&hp
