Reference no: EM133233131
Case: Multinational companies should utilize intellectual property (IP) protections available in China to avoid intellectual property rights (IPR) violations and supply chain disruptions.
BestToyTex, Inc. (hereafter "BTT" or "Company") is a US-based company selling toys and children's accessories. BTT's products are manufactured in China by a network of suppliers and manufacturers. BTT toys are exclusively sold in the United States under the brand ToyTex®, while a line of BTT's children's accessories (mainly backpacks and lunch boxes) is being sold in stores throughout China under the brand CrookedEye Dragon®, through an exclusive, trusted distributor. The relationship with the distributor has been going great for the last five years. The invoices have been paid on time so BTT determined that no formal agreement was necessary.
BTT did not think that it needed to register any trademarks or copyrights in China since it is not directly selling its ToyTex toys there and the CrookedEye Dragon accessories are being distributed through a long-time, trusted distributor who is always cordial during visits and dinners. In addition, BTT already has a trademark registration for both brands, CrookedEye Dragon and ToyTex, in the United States. BTT has never filed any patents as the designs and technology to manufacture the toys and accessories are well known in the industry and widely available on the Internet.
Recently, BTT's Chief Operating Officer (COO) was notified by one of the suppliers that the last shipment of toys for the upcoming Christmas season has been detained by China Customs due to some "trademark issues." Upon further investigation, it turned out that GreatWall, Ltd. (GreatWall), a Chinese trading company not affiliated with BTT, obtained a trademark registration for "ToyTex" in China. As a righteous trademark owner, GreatWall has recorded the trademark with China Customs and requested China Customs to stop any/all goods bearing the ToyTex mark. GreatWall has approached BTT with an offer to sell BTT the rights to the trademark for $500,000. The goods have been sitting at the Shanghai port for several weeks pending resolution, while the Christmas season is fast approaching.
Coincidently, one of the Chinese partners noticed products very similar to BTT's lunch boxes available on Alibaba.com, a large e-commerce platform in China. Although the logo was comprised of Chinese characters, the dragon's eye was not crooked, and the packaging looked slightly different, the product turned out to be BTT' best-selling CrookedEye Dragon lunch box. Upon further review, BTT learned that the trusted distributor has registered a Chinese version of the CrookedEye Dragon as its trademark and has been selling the accessories on Alibaba, TMall, and other platforms, circumventing the Company.
The COO has invited you to be part of a companywide task force that will design an intellectual property (IP) protection and enforcement strategy in China. BTT is looking to the task force to propose solutions to the above issues as well as steps that BTT can take to protect its IP in China and avoid similar problems in the future. He wants you to consider the following questions.
Question: Should BTT purchase the trademark rights to CrookedEye from GreatWall? What are the alternatives?
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