On April 24, 2015, Guangzhou Municipal Intermediate People’s Court in south China’s Guangdong Province stunned Xinbailun Trade (China) Co., the local sales company for the well-known U.S. sports brand New Balance, with a $16 million verdict for violating the trademark rights of a Chinese individual, Zhou Yuelun (Zhou or plaintiff). In addition to the $16 million verdict, to avoid further consumer confusion, the Court ordered the Chinese affiliate of New Balance to stop using the “Xin Bai Lun” term to market its product in China and required them to publicly apologize for the harm caused to Zhou.
How and why did this happen? The source of the issue may emanate from China’s first-to-file system and the cultural and linguistic inconsistencies between the English and Mandarin languages. The Chinese Court’s decision highlights a significant lesson about use of Chinese character marks and the importance of filing early in China, irrespective of the marks’ use in China.

Cultural and Linguistic Inconsistencies

Some cultural and linguistic explanation is necessary to understand this landmark decision. The name used by the New Balance affiliate was 新百倫 pronounced “Xin Bai Lun.” “Xin” means “New” in Chinese and “Bai Lun” is a phonetic translation of “Balance.” The plaintiff owns the trademarks 百倫 pronounced “Bai Lun” and 新百倫 pronounced “Xin Bai Lun.” “Bai Lun” was registered as a trademark in China in 1996 for certain merchandise (in International Class 25), including “clothes, footwear, and headgear.” International trademark classification and the headings of the international trademark classes are established by the Committee of Experts of the Nice Union. Thus, Class 25 is essentially the same in the United States when used by the U.S. Patent and Trademark Office.
In 2004, Zhou applied to register the trademark for “Xin (new) Bai Lun” for similar merchandise in International Class 25, the registration issued in January 2008. Zhou had an established brand of men’s shoes using the names “Bai Lun” and “Xin Bai Lun” that are sold in local Chinese department stores.
In 2004, New Balance attempted to oppose the registration of Zhou’s “Xin Bai Lun” mark on the basis that New Balance used an identical version of the mark, 新百倫 pronounced “Xin Bai Lun,” since 2003. To New Balance’s detriment, the Chinese trademark office rejected their opposition and as a result, Zhou’s “Xin Bai Lun” mark registered in Class 25 for clothing, shoes and hats. Although Zhou owned the rights to the “Bai Lun” and “Xin Bai Lun” marks, New Balance continued to use the marks to promote their brand, which led to Zhou filing the lawsuit and the Court’s significant damages award.

China’s First-to-File System and Its Effects on the Lawsuit

Unlike in the United States, where trademark rights are based on use, Chinese law does not recognize or protect a trademark unless it is registered with the Chinese Trademark Office (CTO). This Court’s decision highlights a significant lesson about use of Chinese character marks and the importance of filing early in China, irrespective of the marks’ use in China.
In the lawsuit, Zhou claimed that New Balance used “Xin Bai Lun” on shoes without authorization, and New Balance’s unauthorized use led customers to believe that all shoes so marked were New Balance shoes. The alleged unauthorized use included the use of the name “Xin Bai Lun” on New Balance’s official China website as well as printing “Thank you for buying Xin Bai Lun products” on the store receipts in the retail outlets in China. Zhou maintained that New Balance’s behavior hampered his ability to build and develop his own brands of “Bai Lun” and “Xin Bai Lun” in China.
New Balance took the position that “Xin Bai Lun” was used in good faith as part of its name and was a direct transliteration of the English “New Balance.” New Balance further argued its use of “Xin Bai Lun” as a sale label predated the plaintiff’s use of “Xin Bai Lun” in commerce. Finally, New Balance argued that its use of “Xin Bai Lun” did not produce any confusion to the consumer and therefore did not amount to infringement as alleged.

Findings

The Court initially determined that the plaintiff’s and the defendant’s products were substantially similar, thereby providing a basis for the trademark infringement/dilution claims. The Court then found that the “Bai Lun” trademark registered in 1996. Since the CTO makes trademark filings and registrations readily available to the public, the Court opined that the defendants should have known that the “Bai Lun” and “Xin Bai Lun” marks had previously registered in the name of the plaintiff. Furthermore, the Court found that New Balance opposed the registration of the plaintiff’s trademark application for “Xin Bai Lun” in 2007, and obviously was aware of the dispute. Finally, the Court determined that since New Balance was aware of the existence of the trademarks of “Bai Lun” and “Xin Bai Lun,” and since New Balance continued to trade on the plaintiff’s registered trademarks, they did so in bad faith. In view of these findings, the Court rejected New Balance’s argument for fair use and first use.
Significantly, the Court also rejected New Balance’s argument that “Xin Bai Lun” is a translation of the company name, finding that a proper translation for New Balance should have been “Xin (new) Ping Heng (balance) or 新平衡,” which is also the name of the New Balance affiliate, Xin Ping Heng Athletic Shoe, Inc. Finally, the Court pointed out that New Balance previously used another name “Niu Ba Lun 紐巴倫,”which is the phonetic translation of New Balance and therefore found New Balance’s argument that “Xin Bai Lun” is the company’s name in Mandarin is not supported.

Conclusion

It has been a common practice for U.S. companies to adopt a Chinese name when entering the ever-expanding Chinese market. The older convention in China was for the company to adopt a phonetic translation, such as “Suo Ni” (Sony) and “Mai Dang Lao” (McDonald’s). As the Chinese consumers have become more sophisticated, for marketing reasons a straightforward phonetic translation is sometimes foregone and in this case a mixture of translated meaning (“Xin” = “New”) and phonetic (“Bai Lun” = “Balance”) was adopted. Companies struggle to navigate between using a name that is marketable in a foreign language and yet recognizable to the consumers to connect to the original U.S. brand name. From a practical standpoint, companies should ensure that their choice of names to be used in China – the use of names (on websites or press releases) and the products associated – go through trademark clearance and due diligence procedures just as they would in the United States. As the Chinese market continues to expand and more U.S. companies sell their products in China, it is to be expected that the landscape of intellectual property claims will expand as well.
Furthermore, companies and individuals exploring opportunities in China should consider the following:

• Act early in registering your trademarks.
• File trademarks in English and in Chinese characters.
• Consider the use of Chinese language variations.
• Consult with experienced Mandarin/English speakers, so that trademark versions adopted properly reflect your brand.

http://www.natlawreview.com/article/chinese-court-stuns-new-balance-16-million-verdict-lessons-doing-business-china

Hope all is well, I am back in China following the INTA meeting in San Diego. On my long plane ride back I jotted down these random thoughts and recollections I would like to share with you based on my perspective of attending INTA over decades. There is always something to learn.
I was lucky enough to have been one of two of my four siblings to accompany my father, an intellectual property attorney, and my mother in attending the first INTA conference in 1974, then called the USTA, which took place in Florida. The event took place around the pool and as disinterested teen far more focused on jumping into the pool than walking around it, I couldn’t quite grasp what I was experiencing. My parents branded my as "incorrigable", perhaps a premonition that I would one day work in the most chalenging place to work as an intellectual property attorney on the planet: China. I have since been to my fair share of conferences as a professional and have even had the opportunity to attend more with my father and mother. Although the pool is no longer the center of the event at INTA as it was 41 years ago, my father and mother have long since passed away, the conference has expanded and I joined almost 10,000 registered attendees in San Diego.. Over my years at the conference I have created and maintained long-term sustainable relationships and learning how to be a better intellectual property profesional which is the goal… isn’t it? Without further adieu-  

1. If you can make it they can fake it. Is that the definition of a paradox? The universe is expanding and so are counterfeit markets. Rumor has it that even INTA meeting ID cards have been counterfeited; how ironic is that? Real life is indeed stranger than fiction. Some people who's profession is to protect intellectual property rights, infringe on the INTA's intellectual property to enter a conference about intellectual property to maybe discuss how to stop intellectual property infringement. In China we call that "Rule by Law" not "Rule of Law". Nice there are always some surprises at the event. 
2. Much like the American elections, this thing is starting earlier and earlier. There are so many pre-conference events that when I arrived for check in I felt like I had already missed half of it! 
3. Beware the dreaded Shadow INTA there are another 3,000 unregistered representatives lurking around the city. Just because the person staring at you from across the lobby doesn’t have a nametag doesn’t mean they don’t want your business… whatever that means.
4. They say the best things in life are free, well I say the best things at these meetings are unplanned. The word of the game is serendipity- opportunities are everywhere, so just let them happen. While you’re waiting for someone to get out of the bathroom you might end up having your most genuine conversation with someone you wouldn’t have ordinarily sought out.  
5. A feeling unique to this crazy conference is feeling lucky when the bar is closed, yes I said CLOSED. With parties going until sometimes 2am and having to wake up everyday at 7am there is no room for the “how about another beer” situation, I lucked out this time when the bar had shut down, I can only wish the same for you. 
6. When it comes to programs on sessions on Asia, its like bringing water to the dessert- there is never enough. There will assuredly be more at future conferences but the push to the east is undeniable. 
7. F. Scott Fitzgerald knew what he was talking about when he said, “I like large parties. They’re so intimate. At small parties there isn’t any privacy.” Don’t be afraid to talk to people because the best thing about these big parties is you have the freedom to walk away if you feel uncomfortable. 
8. Just because you don't have a ribbon that says mentor doesn't mean you can't be helpful, there was a man who I met who asked if I wouldn’t mind if he followed me around for the day. My family doesn’t even want to hear me talk so of course I said yes. As cheesy as it sounds these types of experiences remind me of  "the joy of why you got involved." 

If  I could conduct a conference and only have 8 lessons that I didn’t teach, I would consider it a huge success. I am continually impressed with the INTA’s remarkable planning as to the uploading of data to their portal, how did they know I would only be able to make it to only two sessions? I was glad to watch all of the material online once I got home. 

I have lived away from my siblings and the USA for 28+ consecutive years, yet here it is 46 years later and back to Florida, the Sunshine State. When I include my Father and Grandfather, who was also an intellectual property lawyer, this will make it three generations of our family proudly participating in this organization for 94 years. And so it goes. 

Most importantly, we would like to show our appreciation to the organization for the praise and accolades (whether or not we deserved it) LEHMAN, LEE & XU has received for our firm's modest contribution as the first private mainland Chinese firms to develop China for the INTA organization itself with then Executive Director Alan Drewson and then President Kim Mueller of Shell (both long time family friends). I was in a unique position in mainland China as I was the first foreign lawyer to work at a Chinese law firm. Because of that, my longstanding role in the Chinese mainland media and our law firm's unique standing in the development of intellectual property laws in China, we were tasked by Alan and Kim at the INTA to establish ties with the CTMO and Chinese regulatory authorities, recruit Chinese brand owners and foreign associates, and obtain an invitation by the Chinese government to have INTA officially open an office in Shanghai, China. 

Each year INTA staff, Brand Owners, and leadership refer to me as the first foreign trademark lawyer in China, or the "father" of the China development within INTA. Or, a person who has helped shape Chinese trademark law and practice through my work with the Chinese Government, as a fellow at the China Academy of Social Sciences, and advise to the World Bank China office, providing guidance on interpretation, implementation of IP laws, and regulations. While I am grateful for these thoughtful words, frankly, it is mostly hyperbole, simplistic, and undeserved. The Chinese are the best lawyers, and the Chinese government and judiciary has helped shape intellectual property within China. The best days and opportunities for foreign and domestic lawyers in China are in front of us. We have a good firm, I like to think a great firm, but I am proud to report China has many dynamic outstanding intellectual property firms. My role in China has been largely due to hubris, stubbornness, coupled with being simply in the right place at the right time due to my exposure to Chinese language in high school starting in the same year I attended the INTA, 1974. I am like so many of my almost 10,000 colleagues at INTA, doing a job as a passionate trademark professional as best as can be expected. I have been flattered to have been drafted by the INTA leadership as China based member to serve in higher office within the INTA and take charge of various committees within the INTA. I have respectfully declined because I think it important that other China based attorneys, brand owners, and firms have the opportunities instead. The other firms in China are not my "competition" we are own competition. Our reward as a firm, my reward, is the China work keeping clients and associates happy, pushing the envelope among courts, administrators, and regulators, and a job well done. Last year for example our firm (Grace Wang and Yolanda Li) argued three of the top ten Seminole cases before the China Supreme Court. 

It would seem that this conference has some full circle for me, I am excited to join everyone again next year in Orlando, but doubtful we would all "fit" in the same hotel that my teenage self and my father stayed in when we were there in 1974 (now maybe only the INTA staff could fit in that hotel). I am a little worried for the attire attendees might wear these days around the pool… because if there is one thing worse than seeing IP lawyers on the dance floor, it’s seeing them in casual dress (myself included).

See you all in Orlando. Please email me with any thoughts you might wish to share about the INTA San Diego or the upcoming INTA Orlando. 

Yours truly,

Edward Lehman