Misunderstandings of charities about trademarks

The first day of September 2017 marked the first anniversary of the enactment of the Charity Law. As of the end of August 2017, civil affairs authorities at various levels have recognized and registered 2,109 charities and completed filing for 37 charitable trusts involving trusted assets worth approximately RMB840 million (US$126.5 million). The ability of charities to motivate people to give improves remarkably, as evidenced by the increase of total donations from less than RMB10 billion in 2006 to more than RMB50 billion in each of the past five years. The philanthropy sector is being reshaped by the swiftly growing number of private foundations, and the significant rise in percentage of private donations.

For a giver, obviously the most efficient way to select a suitable one from among the growing number of diversified charitable organizations and projects is to rate them by brand. Organizations and projects with good brand image are more capable of attracting donations, while those with poor brand image are hardly able to get any attention or support. Despite the simple logic, charities seem to be less aware of the importance of brands and trademarks compared with enterprises and other for-profit organizations. There are even misunderstandings about brands and trademarks, some of which are summarized below.

MISUNDERSTANDINGS

Brand building and maintenance are not necessary for charities? While the brand stories of many companies have become general knowledge, we know little about charities building and maintaining their brands. As a matter of fact, philanthropy, like education and healthcare, involves the provision of a particular social service. So then, how does one select a philanthropic service provider? The most convenient way is to select by brand, as we do when shopping. Consider a cute panda beside “WWF”, reminiscent of the World Wildlife Fund, and the “Hope Project” logo leading to people’s associations with Youth Development Fund projects for helping children deprived of education due to poverty. “Brand” is not optional for a philanthropic undertaking. On the contrary, it is crucial in driving growth, fundraising and project progress of charities owing to its ability to identity and distinguish source of services, ensure quality, promote image and maintain reputation.

Charities do not need to have their trademarks registered? Given that “brand” is not a legal concept, registration entitles a trademark to legal protection. Some Chinese charities may think that use of a trademark is not affected by the mere fact of it not being registered, given that in China trademark registration is not mandatory; a trademark is registered only at voluntary request. But failure to have a trademark registered does expose the trademark user to significant legal risks, for two reasons.

First, China has ranked first in the world for years in term of the annual number of trademark registration applications. In 2017, the number of trademark registration applications is conservatively estimated to be more than five million, translating into more than 10,000 new applications per day. The number of trademark-related conflicts between market players has also been increasing so drastically that applications are very likely to be denied, and preventing infringement and the risks of being forced to rename has become the primary driver for trademark registration.

Second, given that first-to-file is one of the basic principles under the Trademark Law, charities will not be able to prevent rush registration or lodge claims unless they have their trademarks registered as quickly as possible. Searches on China Trademark website show that nearly all household charity names, such as “Hope Project”, “One Foundation” and “Mother Cellar”, have suffered from rush registrations. In general, charities should put trademark registration as a top priority. The sooner they are registered, the better.

Non-profit organizations are not eligible for trademark registration? According to the Charity Law, a charity is a non-profit organization duly formed under and complying with the provisions of the Charity Law, which is aimed at conducting philanthropic activities among the public. There is a misunderstanding that trademarks are marks for “trade” purposes and therefore not suitable for non-profit sectors. According to the Trademark Law, any mark that can be used to identify and distinguish the goods of one individual, body corporate, or any other organization from goods of any others may be registered as a trademark. The Trademark Law does not exclude non-profit organizations from the universe of eligible applicants for trademark registration, as long as they are duly incorporated or registered. Pursuant to relevant legal provisions, a charity can be a foundation, social group or public service institution, all of which, after being registered with the competent authority, are eligible to apply for trademark registration.

Elements of a trademark can be selected randomly? Unlike registration of names, the registration rules under the Trademark Law require that a trademark must be distinctive and not be identical or confusingly similar to any prior registered trademark or other prior rights or interests of any other person, in order to be eligible for registration. For example, although national social groups and public foundations are allowed to include “China”, “Chinese”, or words to that effect in their names, applications to register trademarks containing these words are more likely to be denied. They are approved by the Trademark Office of the SAIC (State Administration for Industry and Commerce) only under limited special circumstances.

Other examples include words denoting universal values, such as “love”, “beauty”, “truth”, “dream” and “hope”, that top the list of words contained in charities’ trademarks. However, the probability of these trademarks being denied for registration is substantially higher because as favourites of the public, these words are highly likely to appear in other trademarks that are already registered.

Now that the philanthropy sector has entered into an era of drastic development, charities are facing higher requirements from the public regarding their management capabilities and staffing. They can be committed to delivering more love only if they make best efforts to improve brand, trademark and other management capabilities.

Wang Yadong is a partner and Lu Lei is a senior attorney at Rui Bai Law Firm