Because Chinese is the official language of Taiwan, China and Hong Kong, cosmetic companies in these markets face unique considerations in managing their intellectual property portfolios and enforcement, setting them apart from other jurisdictions. In addition, Taiwan and China employ different approaches to judicial and administrative enforcement. This article will mainly focus on intellectual property portfolios for cosmetic brands and enforcement and containment of cosmetic counterfeits, providing an introduction and comparative analysis of the strategies adopted by cosmetic brands in Taiwan, China and Hong Kong. The authors present their perspectives as IP professionals in Asia and the US.

Aiming for comprehensive brand protection 

Companies should not only focus on protecting textual elements of the brand but also consider preserving legal business names, logos designed with a fixed colour scheme, product containers of best-sellers and long-term promotional slogans. Additionally, securing an invention patent for the formula of the cosmetics is also crucial. 

• Chinese-translated brand name – In Taiwan, China and Hong Kong, Chinese serves as the official language, making it common for local distributors and consumers to promote products using Chinese-translated brand names or an officially designated Chinese name. This is why brand owners should also choose and register the Chinese brand name along with the English brand name.
• Packaging and containers – Materials, colours and shapes used in cosmetic packaging and containers convey distinct characteristics to consumers. Various forms of “classic packaging” are directly associated with the brand image, underscoring the importance of protecting intellectual property regarding packaging and containers.
• Three-dimensional trademarks – According to the ‘Examination Guidelines on Non-traditional Trademarks in Taiwan’ and the ‘2021 Guidelines on Trade Mark Examination and Review’ in China, the three-dimensional shape of a product and its container are both deemed applicable for three-dimensional marks. Thus, the three-dimensional shape of a cosmetic container can be protected as a three-dimensional trademark. However, since most consumers tend to regard containers and packaging as functional or ornamental features of a product, proving the inherent distinctiveness of marks in three dimensions is more challenging than in two dimensions. In light of this, trademark holders should gather as much proof of use as possible to claim acquired distinctiveness or consider combining a distinctive brand logo and unique colour scheme with the three-dimensional trademark to enhance the chances of successful registration.
• Design patents – Package designs, container shapes, colours, patterns and any combination thereof are all eligible for design patent applications under the Taiwan and China Patent Acts. Design protection is also available in Hong Kong. Beginning on 1 June 2021, the China Patent Act permits design patent applications for partial appearances, which is the same as the regulations in Taiwan. Now, cosmetic container designs can be protected not only as a whole but also as specific parts, such as the bottle cap and body, to enhance the level of protection. Additionally, international applicants who seek design protection in multiple countries can leverage the international Hague design system, which China joined in 2022. In particular, the Hague system can be a cost-efficient solution for global filers as it can reduce the number of direct filings needed, allowing for streamlined design prosecution. Taiwan and Hong Kong are not parties to the Hague treaty for international designs, however.
• Utility (invention) patents – Utility patent protection is available for numerous aspects of cosmetic products, including, for example, the underlying compositions and formulations, methods of preparation or manufacture, delivery mechanisms, cosmetic-device combination products and all aspects of packaging, among others. Some cosmetics makers have even sought to protect software applications that may reach end users, such as for product selection. Utility patent protection is available in China, Hong Kong and Taiwan. Of note, protection can be obtained in Hong Kong directly or through a filing in China, Europe or the UK. For Taiwan, it is crucial that patent applicants understand that Taiwan is not party to the Patent Cooperation Treaty (PCT), and so an international PCT patent application cannot be “nationalised” in Taiwan by the generally applicable deadlines for most other locations, for example, 30-32 months after an initial priority application. If an applicant wants to obtain protection in Taiwan after first filing a priority application in another country, the subsequent Taiwanese application must be filed within 12 months of the priority application filing. When considering filing in Taiwan, it is important to docket the 12-month deadline properly.
• Utility models – China allows registrants to seek utility model protection, which may be unfamiliar to US applicants where no analogue exists. A utility model has a 10-year term in contrast to the more familiar 20-year term for utility patents, and does not undergo substantive examination. Utility model filings are often used to protect incremental innovations, because they have a lower inventive threshold than what is required for traditional utility (invention) patents, and are often quicker and less expensive to obtain. However, they come with significant limitations and have a number of important differences with respect to enforcement as compared to typical utility patent applications.

Comprehensive protection strategies 

When gathering proof of acquired distinctiveness becomes challenging, newly established brands or those launching new packaging or containers should prioritise design patent applications for protection. This strategy is supported by the differences in examination guidelines between design patents and three-dimensional trademarks. Careful attention should be paid to the novelty requirement when seeking a design patent to avoid potential complications arising from the publication of previously registered trademarks, which could impede the successful grant of the design patent. In addition, drawing conventions that are customary for US design practice – such as the use of different types of broken lines, shading and contour lines – may not be acceptable in China, where examination practice for partial designs is evolving.

Also, the term and the maintenance fee vary between trademarks and design patents. For instance, in Taiwan, a trademark lasts 10 years from the date of publication, with a renewal fee required every 10 years; while a design patent term lasts 15 years from the application date, with an annual annuity required after publication.

Besides considering customs practices for enforcement, authorities could identify counterfeits based on the protected IP rights, except for the product formula and solution inside the container. It is strongly recommended that brands adopt a comprehensive protection approach involving trademarks, three-dimensional trademarks and design patents. In fact, several renowned cosmetic brands have pursued dual protection by registering both design patents and three-dimensional trademarks, effectively strengthening their IP rights in the field. Some examples include:
 

Establish early IP protection against potential counterfeit patterns 

Names, logos and domain names that counterfeiters rely on to promote their products should be regularly monitored, and trademark applications should be filed as soon as possible to obtain defensive protection.

• Brand nicknames and homophones – In China and Taiwan, it is common for local distributors and consumers to create nicknames in Mandarin Chinese for brands. For example, ‘Chanel’ is nicknamed ‘Xiao Xiang’, which means ‘little Chanel’. Such nicknaming not only demonstrates the popularity of the brand but also overcomes the difficulty of pronouncing the original English or translated Chinese name. In addition, international brands often design their chosen names and logos using English letters, while China adopts the Hanyu Pinyin system. Therefore, the locals may convert brand names consisting of English letters to Chinese nicknames using Hanyu Pinyin, as ‘YSL’ is nicknamed ‘Yang Shu Lin’ in Hanyu Pinyin, or may be given nicknames based on their homophones. Since brand owners do not use these unofficial nicknames for marketing purposes, they often neglect the protection of related trademarks and domain names, providing an opportunity for counterfeiters to exploit. Therefore, it is necessary to obtain intellectual property protection for brand nicknames at an early stage through observing marketing trends and regularly monitoring marketing activities.
• Early trademark protection overseas – With the constant advancement of technology, various types of information circulate rapidly. Counterfeiters can also promptly receive the information of the real, genuine products. In the case of cosmetics, counterfeit products with similar brand names on their packaging containers may hit the market concurrently with genuine products. Since the trademark laws of China, Hong Kong and Taiwan all follow the ‘first-to-file principle’, unlike the US, where evidence of use is required, it is advisable to apply for trademark registration in these countries at the initial stage of brand development. Taking proactive steps early can ensure comprehensive protection of IP rights rather than waiting until the need to export to these countries or until existing counterfeit products are discovered.

In view of the availability of multiple forms of IP protection to cover cosmetic products, brand owners can time their filings to take advantage of protection in each jurisdiction. For example, a US brand owner can file a trade dress application in China, Hong Kong and Taiwan early, and file a design application in the US which has no use requirement for patent protection. Once the product has been on the market, a brand owner can file a US trade dress application.

Enforcement and containment of cosmetic counterfeit products

• Filing notices with the e-commerce platforms to take down the counterfeit products – There are no significant differences in enforcement measures for cosmetic counterfeit products adopted by e-commerce platforms in China and Taiwan. For instance, famous Chinese platforms such as Tmall and Taobao, as well as well-known Taiwanese platforms such as Yahoo, Ruten and Shopee, all accept notices reporting counterfeit products that infringe trademark rights. Based on the severity of the infringement, the platforms take action by either removing the listing of counterfeit products or suspending the accounts of the infringing sellers. It is recommended that trademark holders monitor the e-commerce platforms regularly and file notices promptly when they encounter any counterfeit products.
• Sending cease and desist letters – When it comes to counterfeit sellers with larger sales numbers, trademark holders may consider sending cease and desist letters after confirming the counterfeit nature through test purchases. These letters should request that the sellers provide lists of counterfeit products, take measures for destruction and sign an affidavit.

China

• Administrative and judicial measures – According to the China Trademark Act, trademark infringement liability includes administrative penalties, civil liability and criminal liability. While the latter two require court proceedings for conviction, handling counterfeit cases through administrative measures proves more effective in promptly curbing the infringement, with lower time and cost implications.
• Administrative investigations and actions – In China, “行政查處” refers to official investigations and subsequent actions taken by the administrative department for industry and commerce upon receiving reports. These investigations primarily target manufacturers of counterfeit products and warehousing companies, generally excluding online counterfeit cases. Therefore, if trademark holders identify potential counterfeit products online, they should not only test purchase the counterfeit products but also conduct on-site investigations to identify the locations of manufacturers and storehouses. Taking this preliminary step will facilitate the subsequent reporting procedure and effectively combat counterfeit products.

Taiwan

In Taiwan, trademark infringement results in both civil and criminal liabilities. Therefore, once trademark holders have identified counterfeit products, they can either file a complaint with the police or seek damages through civil lawsuits.

• Trademark criminal liability and voluntary investigation conducted by the police authority – Under the Taiwan Trademark Act, trademark offences can be prosecuted even without a formal complaint from the trademark holder. The police retain the authority to initiate investigations into counterfeit cases independently. Following the investigation, the prosecutor will decide whether to proceed with a public prosecution based on the findings. Consequently, it is essential to ensure that the police possess sufficient knowledge in discerning counterfeit products to enhance their effectiveness in combating trademark infringement.
• Border protection measures – Based on the fact that import and export activities between countries have become more frequent, and the flow of commodities into the markets of countries has become more rapid, taking border protection measures is the key to prevent counterfeits from entering into the market as well. Furthermore, if regions where the source of counterfeit locations have been known, tracking and preventing the goods exported from the regions can also enhance efficiency.

Customs consideration

China – A trademark holder may record his registered trademark with the China Customs. If a trademark holder has clues about the import and export of counterfeits, he can also apply to the customs for investigation and actions directly. Besides, in practice, China Customs also cooperates with e-commerce platforms and local lawyers actively. When detecting suspected goods, they would ask the local lawyers appointed by the trademark holder to confirm whether the suspected goods are counterfeits. In addition, a random inspection is carried out by the China Customs, and the popularity of a brand affects the chance of spot checks. Therefore, it is also suggested to connect China Customs regularly to request China Customs to pay additional attention to import and export of counterfeits of specific brands.

Taiwan – The border protection measures in Taiwan are similar with those in China. A trademark holder may record his registered trademark with the Taiwan Customs, and if he receives intelligence about the import and export of counterfeits, he can also notify the Taiwan Customs by presenting evidences. To improve the ability to identify counterfeits, Taiwan Customs also encourages trademark holders to provide handouts on how to identify counterfeits from genuine products or to organise relevant identification courses. In practice, Taiwan Customs also cooperates with e-commerce platforms and local lawyers actively. When suspect goods are found, Customs would suspend the clearance of the goods and notify the local lawyers appointed by the trademark holder.

Hong Kong – Unlike China and Taiwan, Hong Kong Customs and Excise Department (C&ED) does not accept the recordation of registered trademarks, and only accepts reports from trademark holders relating to a specific case of trademark infringement that has occurred in Hong Kong. At the same time, trademark holders must provide samples of genuine products and counterfeits, and assign a competent examiner to conduct subsequent seizure identification and undertake to give evidence and testify in court in Hong Kong. In general, it takes about two weeks for C&ED to identify and verify the owner of the infringed IP right once a report is received. It is hard to deal with short-term exhibitions or other cases which need to be dealt with in the short term. Therefore, it is suggested to utilise the ‘Fast Action Scheme’, which was launched jointly by Hong Kong Brands Protection Alliance (HKBPA) and C&ED, wherein trademark holders may register in advance to accelerate the following proceedings.

Brand owners can use customs enforcement procedures as part of their global strategy against counterfeiting. In the US for example, an owner of a federally registered trademark or copyright can record their registration with the US Customs & Border Protection agency, which has the authority to detain, seize and even destroy infringing merchandise. US brand owners familiar with their domestic procedures should leverage available enforcement mechanisms in China, Taiwan and Hong Kong as part of a comprehensive plan to reduce counterfeits.

Final guidance

When formulating an IP portfolio in Taiwan and China, it is crucial for cosmetic brands to consider language issues as a top priority, securing and protecting the official Chinese-translated brand name at the earliest opportunity. Also, it is equally important to regularly monitor the use of the brand by consumers and counterfeiters, value unofficial marketing forms such as brand nicknames, and apply for relevant trademarks and domain names if necessary.

Regarding online and offline enforcement, in China, a robust approach involves conducting on-site investigations and adopting administrative investigations and actions to eradicate counterfeiters with a significant sales volume. In Taiwan, trademark holders and patent owners can deepen the understanding of the police in distinguishing counterfeits through speeches or handouts, thereby improving the efficiency of judicial authorities. Regular monitoring and timely notices can also effectively reduce the number of counterfeits on the market.

George J. H. Huang is the founder of Wisdom International Patent & Law Office. With nearly 30 years of experience in the intellectual property field, he is skilled at handling patent, trademark and design matters, from drafting and prosecution to cancellation, opposition and other contentious work. George can be reached at [email protected].

A partner in Foley & Lardner’s mechanical and electromechanical technologies and electronics practices and patent office trials group, Kiri Lee Sharon counsels clients on intellectual property matters throughout the IP lifecycle, from pre-filing strategy through patent enforcement and licensing. She can be reached at [email protected].