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Tesla Secures Trademark, Gets Keys to Its Brand in China

Kegler Brown Global Business News

U.S. electric carmaker Tesla Motors, Inc. has finally gained control of its (U.S. based) trademark, “TESLA”, for use in China, further paving the way for Elon Musk’s company’s expansion into one of the world’s largest auto markets. In an undisclosed settlement between Chinese businessman Zhan Baosheng and Tesla, Zhan agreed for the Chinese government to cancel his trademarks, which he has held since 2006 at no cost to Tesla.

Although Tesla ultimately achieved a successful result, this is another example of the importance of securing your business’ trademark(s) early in countries following the “first to file” principle that rewards trademark “squatters” and “trolls.” In countries operating under this type of legal framework for trademark registration, opportunistic individuals frequently target foreign brands they perceive to be valuable and register such brands as their own – other recent examples of companies involved in such trademark “troll” disputes include Unilever, Philips and Apple.

Depending on the country, use of a trademark in connection with its intended goods and services may not be required for numerous years. Companies entering countries like China or India are then left with only a few options moving forward, none of which are inexpensive: (1) pay squatters huge sums of money to purchase the company’s trademarks; (2) fight what are often prolonged, uncertain battles in foreign court systems; or (3) rebrand their products altogether. Consequently, it may be advisable for a company—depending on the extent of its resources and the international aspirations of its leadership—to capitalize on the opportunity presented by such enabling frameworks by filing “intent-to-use” applications (or the foreign country’s equivalent) early in the process before opportunistic parties seize control and drive up the costs of attaining trademark protection for its brand(s).

Relatedly, Tesla also acquired from Zhan various preferred Chinese domain names incorporating the Tesla name (the financials of which were also not disclosed). More importantly, businesses with aspirations of expanding into foreign markets need to be aware that trademark registrations are not necessarily the only prize to be had when protecting a brand. Domain names are also critical in building brand awareness and making products and/or services easily findable on the web by the average consumer. Such a fact is not lost on foreign squatters and trolls, presenting yet another opportunity they are prepared to exploit.

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