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Apple iPad posters are seen at a dealership as a customer tries out an Apple Mac in Wuhan, Hubei province Feb.16, 2012. (DARLEY SHEN/DARLEY SHEN/REUTERS)
Apple iPad posters are seen at a dealership as a customer tries out an Apple Mac in Wuhan, Hubei province Feb.16, 2012. (DARLEY SHEN/DARLEY SHEN/REUTERS)

CHRIS GRIFFITHS

How to avoid trademark trouble Add to ...

I watch the growing legal dispute and business interruption of the world’s largest company with an unwelcome feeling of familiarity.

Inc. is in a over the use of “iPad” in mainland China with a struggling company called Proview Technology. I’ll leave it to you to explore this particular situation if you are interested, but here are some thoughts on how it may apply to you and your business. I’ve seen this play out before.

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Many businesses trademark such things as brands, products and tag lines as a protective measure to prevent other companies from using the same name and benefitting. It is, after all, their asset and they want exclusivity. This allows them to sell their products in the countries where they want to do business.

What they often don’t realize though, is that trademark ownership can also influence their ability to source finished products from a particular country.

In order to have a product you own made in, sold in or exported from a particular country, you should have legal right to the brand.

For example, let’s say you manufacture luxury belts in Canada but also have lower-priced versions of them produced in China, allowing you to be competitive at a wide range of price points. You sell in Canada, the United States, Germany, France and Britain, but are only having products made in China, not sold there.

You still need to own your trademark in China as well. That’s because the absence of a trademark there could open the door for a Chinese company to trademark the same name, and then sell under that name in China. Just as important, once a company did that, it could prevent you from having products made in and exported from China under that name.

So, even if you don’t intend to sell in a country but do intend to have your product made there, a trademark is crucial protection against an interruption in your supply chain that will affect all of your markets.

I was given similar advice many years ago by a trusted friend who then went on to acquire a business that did not own its trademarks in China, in spite of the fact that it was manufacturing. and selling there. Another Chinese company did own the trademark, and held my friend ransom. It took years and a lot of money for my friend to acquire the trademark.

While I am using China as an example because of Apple’s situation, this issue is in no way specific to that country. I have a friend who sold his products through a distributor in Germany. When he decided to assign the distribution to another German party, my friend found that his original distributor had already acquired the trademark in Germany. Moreover, every sale that distributor made along the way had reinforced the legitimacy of the ownership.

Companies can’t “squat” a trademark as is often attempted with website addresses. In order for the trademark ownership to be renewed regularly, legitimate business transactions have to be proven with the trademark in use within a given time frame. In China, that’s three years. It is even less in most countries.

Furthermore, a trademark normally can only be assigned to product categories that a holder does business in or is closely tied to his or her business.

For example, I once “shared” a brand name with a fire-extinguisher company, which we both separately trademarked. Since my product had nothing remotely in common with fire extinguishers, we co-existed in peace. What trademarks try to protect is consumer confusion over offerings or brands that are too similar. The works of one company should not inadvertently benefit the other.

So businesses as small as the ones I have seen can run into trademark trouble in both producing and selling their wares.

If even a company like Apple can run into trademark issues in China – not to mention a similar situation n 2007, when Apple settled out of court with Cisco Systems Inc. for the right to use the “iPhone” trademark which Cisco owned at the time – it would be smart for you to give some thought to what you own, and where, and who you team with, so that your selling and sourcing can grow as you envision. Acquiring a trademark in a country is quite economical, especially when compared to the cost of a broken supply chain or inaccessible market.

Special to The Globe and Mail

Chris Griffiths is the Toronto-based director of a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.

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