Tesla Motors, the world’s leading manufacturer of fully electric vehicles, has encountered serious disruption to its entry in to the China market this year due to a dispute over various trade marks secured by Chinese businessman Zhan Baosheng.
This case provides a timely reminder to foreign companies of the strategic benefits in pursuing trade mark protection in China as early as possible where substantial commercial operations may be based in China. Such precautionary steps may alleviate risk of exposure to bad faith “hijacking” of trade mark rights in China by third parties which may then be utilised as a barrier to entry to the foreign company in China, unless substantial compensation is paid.
Whilst it may be possible to challenge and ultimately succeed in invalidating such “hijacked” trade mark rights in China via administrative and judicial mechanisms, the threshold requirements for doing so under Chinese trade mark practice are relatively strict. Moreover, even if a bad faith trade mark registration in China is successfully challenged, the disruption caused to manufacturing and other commercial operations in the meantime may result in irreparable harm to the business.
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