Guest Expert Davide Follador: GIs in China Today

Davide Follador is one of IP Key’s long term experts based in Beijing. He is responsible for the legal component focusing on trademarks, copyright, geographical indications and IP enforcement. He served as officer in the Italian Police and subsequently obtained a Master of Laws in International Commercial Law. He is also a qualified European Trademark and Design Attorney (OHIM) and is a member of the Milan BAR. Davide has been practicing as an  IP lawyer since 2001 and specialises in cross border EU-China Intellectual Property matters, currently working with a cross-cultural and highly specialised international team based in Europe and in China, to design and develop EU-China cooperation activities in the field of intellectual property.

In recent months Davide has worked closely with both EU and domestic Chinese entities in the study of Chinese legal policy regarding GI products. He has kindly collated a wealth of information, together with his professional analysis of the current situation in China which should be of great use to any EU producers of GI products looking to export to China.

A geographical indication (GI) is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.

As such, from the perspective of the EU Food & Beverage business in China, GIs can be competitive intangible assets.

According to the study conducted by the Office for Harmonization in the Internal Market (OHIM) and the European Patent Office (EPO) in 2013 that looked into the sectors of the EU economy characterized by an “intensive” use of IPRs (trademarks, patents, designs, copyright and geographical indications), products marketed as EU Protected Denominations of Origin (PDO) represent an average of 0.2% of jobs in the EU, with peaks far above these figures in Italy, Spain, Portugal, France and Greece.

Another recent study of the European Commission has shown that: (1) PDO reach a premium price 2 times higher than a corresponding “standard-non GI” products of same category (2) the distribution of this value sees lower margins for producers of raw materials compared to the processors and distributors.

While several factors play a key role, it has been observed that the stricter the GI production rules, the higher the margin for the supply/production chain.

EU agro-products are experiencing growing success abroad whilst their geographical indications are not always adequately protected by the legal systems of foreign markets.

Laws and regulatory systems for protection of GIs are far from being harmonised, even among the countries which have adopted common standards of protection (TRIPs).

There are still differences, for examples, between those countries which have put in place sui generis systems of protection for GIs – in some cases being given the name of Appellations of Origin, such as in France and other EU countries – and jurisdictions where GIs are typically protected as collective/certification marks.

Geographical indications and trademarks are both distinctive signs used to distinguish goods or services in the marketplace. Both convey information about the origin of a good or service, and – potentially – both enable consumers to associate a particular quality or reputation with a good or service.

So, what is the difference between a Geographical Indication and a Trademark?

In a nutshell, Trademarks help consumers associate a good or service with a specific quality or reputation, based on information about the company responsible for producing or offering it. Geographical indications identify a good as originating from a particular place.

While a Trademark can be assigned or licensed to anyone, because it is linked to a specific company and not to a particular place, a Geographical Indication could not be assigned or transferred unless the whole geographical area is moved too (!). Geographical Indications “belong” to all those resident producers who comply with the specific by-laws and regulations set to ensure that the “link” between the quality/reputation of the product and its geographical origin is consistently maintained.

Protection of foreign Geographical Indications in China

Following the ratification in 2001 of the TRIPs, the People’s Republic of China has over time put in place a system of protection of Geographical Indications which embraced both the “sui generis” and the typical trademark-related system, headed by three institutions:

  • State Administration for Industry & Commerce and Trademark Office (SAIC)
  • Administration for Quality, Supervision, Inspection and Quarantine (AQSIQ)
  • Ministry of Agriculture (MoA)

The Trademark Office under the SAIC is responsible to register collective and certification marks containing geographical indications.

Since the Chinese trademark system is construed on the “first come, first served” basis, exclusive rights will belong to the person who first obtained the registration with the Trademark Office.

AQSIQ is the administration that – between various responsibilities for food safety and quality standards also shared with the China Food & Drug Administration – since 2005 is responsible for the “sui generis” system of recognition and protection of Geographical Indications, in principle corresponding to the EU PDO / PGI products covered by the EU legislation.

Finally, agricultural products (processed and unprocessed, according to the lists provided by the Ministry) can obtain protection through the registration procedure administered by the Ministry of Agriculture (MoA).

To a certain extent, the jurisdiction of AQSIQ, MoA and SAIC can overlap.

It should be noted that under the laws of China, combination of protection is admitted and is usual especially for Chinese GI products. Therefore the same GI product can in principle be registered as a collective/certification mark with SAIC as well as GI with AQSIQ

In addition, the Chinese GI system unlike Europe, does not distinguish between wines / spirits and other food products.

So far, foreign GIs have been protected in China under the SAIC regime as certification and collective marks, since neither AQSIQ nor MoA have yet issues ad hoc implementing regulations for registration of foreign GIs. These can achieve protection with AQSIQ based on bilateral agreements (currently 13 EU GIs have obtained registration following such route).

That being said, current data confirms that out of 2,790 GIs registered as collective and certification marks, by June 2015, only 83 were foreign, of which 58 European: 33 French, 18 Italian, followed by 3 UK, 2 German and 2 Spanish.

The above tells us then that most of the EU GIs are protected as trade marks tout court, in clear contradiction to the situation in Europe.

The reasons are certainly to be found in the lack of familiarity of many EU operators with the Chinese GI system, on the one hand, and with a less complex administrative process for the registration of trade-marks.

Below is a graphic visualization of the three registration systems currently in place:
Capture

The economic and social interests behind GIs. Repression of counterfeit and adulterated beverages

GI regulations ensures that corresponding GI products meet specific quality standards set by by-laws and technical files and thus deserve/achieve premium price together with better market positioning.

On the one hand, consumers should therefore be in actual position to trust GI official logos and recognize their “brand” values, although in this respect Chinese consumers’ awareness on the value of GI products is developing but is not yet fully consolidated.

On the other hand, according to data released by the Chinese administration, more than 1,700 GIs registered by AQSIQ and 2,700 by SAIC, currently worth a combined estimated value of 1.3 billion RMB.

The interests behind an efficient GI protection system therefore refer to consumers’ trust, IPR protection and rural development: the Chinese policy action has been so far led by the latter, with the clear objective to enhance the economic development of low-income rural areas with a history in traditional products.

Protection of consumers’ trust and protection and IPRs share a common feature: without sound and predictable enforcement system both are negatively affected.

According to recent surveys among EU operators in the wine & spirits sector – where geographical indications play an important role for achieving better market positioning – adulteration of alcoholic beverages and abuses on GIs still represent a major problem – also – in China. From an IPR enforcement perspective this mainly unfolds into trade mark-related infringement issues, while the level of actual recognition by Courts and administrative authorities of legal claims entirely construed on GI violations, as related to the protection of consumers, seems to be still limited in the legal enforcement practice.

The regulatory framework and protection of Geographical Indications in China has seen remarkable progress in recent years.
Abuses over GIs can be tackled by applying laws and regulations on intellectual property and unfair competition, where these involve violations of quality standards or pose a risk to public health, by requesting the intervention of the authorities’ responsible for repression of frauds and protection of consumers.

SAIC recently announced the launching of a “Special Campaign for Protecting GI Special Rights” (March 30, 2015, available at http://sbj.saic.gov.cn/sbyw/201504/t20150407_154964.html) that starting from April 1st on to September 30th of this year plans to tighten controls and enforcement actions, with particular attention to the areas considered at greatest risk of counterfeiting (collective marks and certification marks), including multi-media information campaigns to support consumers in recognize the original products from fake “GIs”.

In terms of regulatory reforms, it is expected that China will soon introduce additional tools to coordinate and harmonize at the national level the controls over strict compliance with GI specifications. The EU regulatory framework on controls and certifications as well the experience of countries such as France, Italy or Spain could serve as models for further study in view of future reforms. Reliable certification systems and effective controls – fair, strict and transparent at every level of production and marketing – are in fact the necessary condition to guarantee consumers’ trust on official GI logos.

There is an increasing interest by the Chinese public for the characteristics of superior quality’ of GI products and the EC policy in China is particularly active in the promotion of EU GIs[i].

Like Europe, China is indeed rich in products of noble tradition that have received government protection, thanks to the implementation of a policy that support local economies and the examples are numerous: Longjing tea, Jinhua ham, Maotai rice spirit, Pingu peach, Shaanxi apple, aromatic vinegar of Zhenjiang, Dongshan asparagus, just to name a few.

These common features of quality and tradition linked to inherent characteristics of the territory open further opportunities of dialogue between EU and China both in terms of promotion of their products and in terms of future alignment of their protection systems[ii].

Davide Follador

[i] See the recent “Taste of Europe” Campaign in China and EU

[ii] For more information on the regulatory framework and future insights about the system of protection of Geographical Indications in China you may want to visit on a regular basis the section “Activities” Site of IP Key http://www.ipkey.org/en/activities/upcoming-activities

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  1. Pingback: Terroir IPR: Geographical Indications and IP Protection for your Appellation of Origin

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