The Main Risks of Manufacturing in China and How They Are Priced
China manufacturing risks are priced through registered sub-class trademarks, tight tooling bailment, explicit defect reserves, and local court enforcement.
Subclass Registration
Meaning
Intellectual property strategies involve filing for trademark protection in specific subdivisions of a class to ensure complete coverage across all relevant product or service categories. The practice of subclass registration is a unique feature of the local trademark system where each of the forty five international classes is further divided into numbered groups. It governs the specific scope of an owner’s rights and prevents others from registering a similar mark in the same class but in a different functional group.
This strategy stops applying when a mark is recognized as well known, which gives it protection across all classes regardless of specific filings.
Defensive Filing
Proactive registration in multiple groups is the primary method for preventing trademark squatting and unauthorized brand extension. Because the domestic system does not automatically protect an entire class with a single application, subclass registration requires the owner to pick and choose the specific areas they want to own. A company making shoes might register in the subclass for footwear, but they should also consider the subclass for parts of shoes or specialized athletic gear.
If they do not, a third party could register the same name in the missing subclass and cause confusion in the market. These defensive filings act as a shield for the core brand identity. The cost of filing in several subclasses is small compared to the cost of a legal battle to recover a stolen mark.
This granular approach is the only way to secure a brand’s future.
Conflict Resolution
Examination of new applications by the trademark office depends on whether the requested mark overlaps with an existing subclass registration. When two marks are similar but are in different subclasses, the examiner may allow both to be registered if the subclasses are not considered related. This is how two different companies can end up with the same name in the same industry.
If a brand owner wants to stop a new application, they must show that their existing subclass registration covers a product that is similar to the new one. This often leads to complex arguments about the nature of the goods and how they are sold. The subclass system provides a clear set of rules for these decisions, making the outcome more predictable for the parties involved.
Most disputes are won or lost based on which subclasses were originally chosen.
Scope Maintenance
Regular reviews of a trademark portfolio are necessary to ensure that the filings still match the evolving business of the company. As a company launches new products, they must check if their current subclass registration covers the new items. If the business moves into a new area, such as a clothing brand starting to sell perfumes, they must file for the new subclasses immediately.
Failing to maintain the scope of protection can leave a brand vulnerable to competitors who are looking for gaps in the registry. The system also requires that the mark be used in the registered subclasses to avoid a cancellation for non use after three years. This means that companies should only register for subclasses where they have a real plan to do business.
A well managed portfolio uses subclass registration to provide the maximum protection with the minimum risk of cancellation.