How your brand can lawfully benefit from ‘Swissness’

Swiss products and services enjoy an excellent reputation, both domestically and abroad. Exclusivity, high quality, precision, reliability, efficiency, luxury, high-tech and innovation are some of the distinctive features associated with products made in Switzerland. In the late 1990s, “Swissness”, a pseudo-Anglicism, started to emerge as a term to refer to the combination of positive values immanent in Swiss products and services.

The Swiss mark-up

Worldwide, such values ultimately influence the affluent buyer’s decision, so “Swissness” is gaining economic value continuously, according to St Gallen University’s traditional Swissness study. Today, products with a Swiss label can generally justify a mark-up of about 20% and, in the case of luxury goods, up to 50%.

But the success of the Swiss brand also has its downside. The marketing concept of Swissness equally appeals to free riders or copycats, which has resulted in an increase in the “Swiss made” designation being abused both at home and abroad.

Illegal exploitation

Recently in our practice, we encountered a few cases in which Chinese companies tried to exploit Swissness in an illegal or dishonest way. One entrepreneur had successfully registered a trademark with the Swiss cross in China, and wanted us to help register that trademark in Switzerland – but her product is produced entirely in China.

A few other cases involved the establishment of a company in Switzerland, in the name of which a trademark at the Swiss Federal Institute of Intellectual Property must be registered.

However, the trademark will solely be used in China for the marketing of China-made products to Chinese consumers, who are supposed to believe in some link between what they are buying and Switzerland.

Swissness legislation

The illegal exploitation of Swissness is damaging the credibility of the geographical origin of Switzerland and will potentially dilute the value of Swissness. To fight abuse, the Swiss parliament adopted on 21 June 2013 the so-called Swissness Bill, which is expected to enter into force on 1 January 2017.

Reform package

The reform package encompasses a partial revision of the Trade Mark Protection Act, the complete revision of the Federal Act on the Protection of Coats of Arms and Other Public Insignia, and the promulgation of four related regulations, including a new ordinance on the use of Swiss designations for foodstuffs. In addition, sector-specific ordinances such as the Swiss Made Ordinance for watches may concretise the requirements for specific products and industries.

The core of the Swissness Bill establishes precise rules concerning the conditions under which a product or service may be labelled as being Swiss, i.e. how much “Switzerland” must be in a product to this end.

Rewards of compliance

If these rules are complied with, not only can services be endorsed with the Swiss cross – but not the Swiss coat of arms – as is already the case today, but goods as well in future. Trademark registrations of signs including a Swiss cross will in principle be possible for services and goods of Swiss origin. Generally speaking:

• For natural products, the determining criteria depend on the type of the product in question. With crops, for example, the place of harvest must be in Switzerland;
• For processed natural products, at least 80% of the weight of the raw materials available in Switzerland that compose the product must come from Switzerland. In addition, the step that gives a product its unique characteristics must take place in Switzerland (e.g. the processing of milk into cheese);
• For industrial goods, at least 60% of the manufacturing costs must occur in Switzerland, whereby research and development costs may also be included in the calculation, but not costs associated with marketing a finished product or related to packaging the goods and customer services. In addition, the activity that gives a product its unique characteristics – e.g. the assembly of a watch, the manufacture of a fibre fabric, the underlying technological research or product development – and at least one essential manufacturing step must have taken place in Switzerland;
• Last but not least, a company can offer Swiss services as long as its headquarters and an actual administrative centre is located in Switzerland. Even company subsidiaries and foreign branches of the parent company may use the indication of source as “Swiss” under certain conditions.

Chinese companies can benefit

We also have clients that seek to benefit from Swissness lawfully. A Chinese supplier of the Swiss watch industry is considering setting up manufacturing facilities in Switzerland, since after the Swissness Bill takes effect, many watch manufacturers will have to meet the 60% rule by sourcing in Switzerland.

We also have a client that has set up manufacturing for a patented product in Switzerland and sell back to China, originally merely intended to keep away from IP thefts. Thanks to the Sino-Swiss free trade agreement, he now enjoys zero tariffs and his product can be designated as “Swiss made” and sold at a higher price.

Building a Swiss image

Another client set up an R&D centre in Switzerland but kept the production base in China. Since R&D costs are included in the 60% calculation, he is now considering moving an essential manufacturing step to Switzerland in order to benefit from the marketing effects of Swissness and the network of Swiss free trade agreements with approximately 70 countries.

There are therefore plenty of ways for Chinese companies to build the image of themselves and their products upon the idea of Swissness.

Delia Fehr-Bosshard is an associate in the IP department at Vischer; Fiona Gao Yue is an associate on Vischer’s China Desk