There is no doubt that the trend for sustainable, eco-friendly products both in China and around the world has had a net positive effect, but it has also been responsible for a practice called “greenwashing”, which refers to a company providing false or misleading information about their products being eco-friendly to gain market share. For example, the use of words such as “green”, “eco” and “sustainable” to describe products that are not environmentally-friendly is a form of greenwashing.

A few countries, including the European Union, United States and China, accept the registration of green trademarks. Green trademarks are eligible for registration under trademark law as they can be graphically represented and have goods and services that can be distinguished from other registered brands. Green trademarks offer companies a way to advertise their promise to consumers to provide 100% organic and biodegradable products that are free from causing any harm to the environment.

However, in recent years, companies interested in registering green trademarks in China have encountered difficulties and faced rejected applications.

China’s Trademark Law prohibits the registration of deceptive trademarks. A trademark that greenwashes the underlying products can be considered fraudulent. Analysts speculate that these rejections have something to do with China’s concerns over greenwashing.

Contrary to the practice in the United States, the China National Intellectual Property Administration (CNIPA) does not publish the notices it issues regarding specific trademark applications. In any case, notices to applicants tend to be somewhat terse, often leaving them with no choice but to read between the lines. As a result, the motivations behind the rejections of specific applications to register green trademarks cannot be confirmed.

In the United States, the US Patent and Trademark Office (USPTO) has explicitly expressed concerns over greenwashing. In some applications to register green trademarks, the USPTO has required a disclaimer of the relevant terms on deceptiveness grounds. Unfortunately, disclaimers are not an option in China, where an outright refusal is the most common outcome.

The US regulates greenwashing in three ways: under the Lanham Act, which talks about unfair competition and false advertising; through the Federal Trade Commission or the public enforcement action, which is taken by the attorney general; and through the Theory of Liability for false advertising, which is claimed under the state laws. Similar to the guidance released by the EU, the Federal Trade Commission has published green guidelines to regulate greenwashing and green trademarks, encouraging traders to avoid consumer deception and give directions on the general claim of environmental benefits.

In China, brands that are definitely eco-friendly can appeal their application rejection, presenting evidence of the sustainability of their products. However, demonstrating planet-friendliness may not be feasible or sufficient because, in general, the CNIPA is not that open to substantive arguments over refusal grounds.

There are a number of possible solutions to this. Brands that have not yet committed to green trademarks could consider a different name, and those that have already committed could re-evaluate their approach. Brands looking to enter the Chinese market could consider using a different name in China or focusing on their Chinese-language branding. They can also try to register the graphic elements of their trademarks, such as logos.

Green trademarks play a significant role in environmental protection. Though some of them may not be registered as such in China due to the descriptive nature of the words used for the products, brands can try an alternative strategy that indicates the quality of the product.

Ultimately though, China’s overall efforts to regulate green trademarks are to be applauded, since consumers should be able to rely on companies that manufacture real eco-friendly goods and promote sustainable development.

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to connect with CBBC staff who can advise on trademarks and other Chinese legal requirements.

The post Could greenwashing be affecting your business in China? appeared first on Focus - China Britain Business Council.

When did you first go to China and why?

I first went to China as a tourist whilst working in Hong Kong, and became very interested in the people and the development of the country’s economy.

There have been many books written about the challenges of doing business with China. In your experience working on conflict resolution, do you think China is a unique market to work with?

China is no different than other developing countries. In many ways, China is a developed country, but that status is not standard throughout the nation. Chinese businesspeople in many regions west of Hangzhou are not fully familiar with international business, which does lead to challenging situations. In relation to dispute resolution, and indeed all other business issues, I often paraphrase Deng Xiaoping’s famous remark about adding Chinese characteristics to international standards. There are challenges for average UK businesses in understanding the Chinese way of doing things, but once you appreciate the issues you just deal with them. Of course, the Chinese feel that there are challenges in doing business in the UK too.

Have you seen a change in the way business is conducted with China? Has China become more international or has it fundamentally remained the same?

It very much depends on where you are and who you deal with. I have worked all over the country, and when I first went to Qinghai province around 1996, it was difficult to explain international trade. More recently, my experience there has been quite different. Business ethics, standards, and contractual obligations can be as one would expect in the UK, but some major Chinese SOEs still operate as they have done for decades.

Just recently we have heard of Facebook’s successful challenge over a trademark, as well as Apple’s unsuccessful challenge over an iPhone trademark. Are China’s intellectual property issues getting better or worse?

They are getting better; however, I have just dealt with a substantial listed company with major intellectual property interests where there appears to be a lack of real understanding of rights and obligations. Enforcement of international IP rights across China remains pot luck, although I do believe that the Chinese government is making inroads into the enforcement deficiencies in some inland areas.

What is the number one problem for British companies working with China that you have witnessed time and again?

British companies can simply fail to understand the Chinese market, both by vastly overestimating the potential for their business, and also by underestimating the complexity of establishing themselves in the country. It is always difficult to open a new market when complying with different laws and regulations, and where the language is difficult it becomes even more complicated. The number one problem is probably that businesses do not appreciate the amount of time it will take to establish themselves in the market.

Enforcement of international IP rights across China remains pot luck although I do believe that the Chinese government is making inroads

Chinese companies are investing heavily overseas now, with many companies going to IPO in the London stock market. Why do you think they prefer the London stock exchange?

I have listed a number of Chinese companies in London. The city’s perceived advantages are the ‘light touch’ of the UK regulatory framework, the costs in establishing and maintaining a listing in London, and the international nature of the city’s capital market.

In recent years, the UK government has made a concerted effort to woo China; do you think it has made a difference? Is it working?

It has made a difference, but there is a long way to go. I tend to act for SME companies who do not generally get the high-level government support larger companies receive. In 1996, Michael Heseltine took a Boeing 747 full of companies to China on a trade mission; this was subsidised by the UKTI predecessor and gave a considerable degree of credibility to the companies that took part. I understand that the German chancellor takes a similar trade mission to China every year, but the UK has never done it again, or certainly not in the same numbers.

What do you think is the long-term economic outlook for China?

It has to be good; any slowdown in the economy is temporary. The media loves to highlight lower trade figures and so on, but you would have thought that journalists would have learned by now that all economies are cyclical, and what is down today will be up tomorrow. How long is long-term? I would say that on any basis the prospects are good.

The post Are China’s intellectual property issues getting better or worse? appeared first on Focus - China Britain Business Council.