Something to wine about….

China’s taste for Western wine has taken-off dramatically in the last decade, with EU wine exports to China worth over 700 million Euros in 2012 – more than ten times the export value of 2006. Unfortunately, with the rise in demand for foreign wine there has also been an unprecedented surge in counterfeits.

The famous Chateau Lafite is no stranger to others free-riding on its reputation – alleged counterfeits have been reported at numerous locations in China, as well as suspicious variations upon the well-known label (such as ‘Prince Lafite’!). These ‘similarities’ show how defining an infringement is not always so clear cut – potentially infringing brand names depend upon a court or administrative body’s decision as to whether it confuses consumers. Needless to say, the producer Lafite Rothschild has not taken these developments lightly: they have already initiated legal action against several Chinese companies and won 6 lawsuits.

Pouring_a_glass_of_red_wine.tiffThe fake wine issue is no longer a quiet one. Earlier this year CCTV (China’s main TV network) reported that 50% of wine sold in China is fake (not of the origin the label states). A little worrying? – Some regard this as a conservative estimate. According to investigative attorney and counterfeits expert Nick Bartman, over 70% of all the wine he examined (from a range of retailers and in various Mainland locations) was counterfeit. Interestingly, Bartman also reported that the fake products were almost always for domestic sale, not export.

That this is a domestic problem in terms of sales perhaps says something about why the situation has become so severe. Many have pointed the finger at Chinese enforcement agencies for neglecting the growth in counterfeits, but it is also up to the customer in the shop to decide to buy or not, and their willingness and ability to identify fakes counts for a great deal. At the moment it appears that many are unconcerned or unaware, or at least resigned to buying and hoping for the best given the difficulty in identifying fakes.

Famous wine producers have developed many secret identification techniques that allow them to easily and quickly spot counterfeits by eye, but of course they can only work if they remain secret to the public, so it is bridging this informational divide that is crucial in winning the battle. In this area, the Australian wine industry may be on to something: an Australian wine group and a Chinese technology firm have jointly developed a mobile app that can confirm the stated origin of the wine. It uses search engine technology to trace every stage of production, distribution and retail, and will apparently only add a marginal premium to each bottle.

The Chinese government has also initiated consumer-inclusive actions targeting the problem. For example, the Protected Eco–Origin Product (PEOP) initiative launched in May, allows producers to sign up to an authenticated label system which includes a “Quick Response Code” that customs officials and consumers can use to confirm the products stated origin. The scheme was launched with the cooperation of French wine producers, following on from a China-France Joint Declaration of Intent to combat the sale of fake wine and spirits, signed in April.

That the French are concerned is no surprise: they hold by far the largest stake in foreign wine sales in China. Furthermore, many French producers are SMEs that do not have the resources to tackle counterfeits like their spirit-producing big business counterparts do. But does this mean that there is little that can be done for wine (or other beverage) producing SMEs? No. Not least because sales in China are often only half the problem – infringing exports can be damaging to a company of any size. Fortunately Chinese customs can be very effective in stopping counterfeits from leaving the country, as long as the relevant IPR is registered with them (i.e. trade marks).

Another problem often overlooked is not the issue of companies illegally copying trade marked label names, rather trade marks being taken before they can be registered by the rightful owner. The Australian company Treasury Wine Estates, producer of the Penfolds label, is facing a potential legal headache following the discovery of a Chinese wine company that has registered three variations of their Mandarin-language trade mark. This effectively means the Chinese company can free ride the reputation of Penfolds, with little choice but for Treasury Wine Estates to buy the marks or abandon the Penfolds label, unless they can prove the mark has not been used for three years.

Counterfeit wine is big business in China for sure and is likely to be for some time before this phenomenon is brought under control. However, this doesn’t mean that it is a lost cause for European SME producers: timely and comprehensive protection can do much to prevent or lessen infringements.

To read more about trade mark protection and enforcement see the Helpdesk Guide to Trade Mark Protection in China.

The Helpdesk will also soon be releasing a new guide to IPR for the food and beverage industry in China. Watch this space!

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