Tesla facing legal battle with Chinese trademark trolls

Intellectual property “trolls” aren’t unique to the tech industry, or even the United States, and unfortunately Tesla Motors has the opportunity to learn that first hand. The EV car maker is facing a renewed battle in the Chinese legal system over a trademark for its name.

This legal battle began in 2006 when Zhan Baosheng filed for a trademark on the Tesla name in China. This was three years after Tesla was founded in the United States. The trademark was granted three years later. When Tesla began efforts to sell cars in China – sales began in April – Zhan brought suit claiming that Tesla was infringing on his trademark. The fact that his trademark was intended for automotive sales and included the Tesla logo, was I am sure, coincidental.

Zhan lost at trial, and I am sure that Tesla – with the possible exception of its legal team – was hoping it would end there. However, now Zhan has appealed and the whole mess is going back to court. Zhan is seeking an end to Tesla sales in China – though this is likely a ploy to get licensing fees – and compensation roughly equivalent to $3.9 million.

This suit is important not just for Tesla, but many non-Chinese brands seeking to establish themselves in the Middle Kingdom. Paul Haswell, a Hong Kong based partner of Pinsent Masons technology law firm told Bloomberg News that “We’ll be watching how China deals with this very closely. So-called trademark trolls watch Western brand development and seek to register brands in China that are relatively well known in the rest of the world before they have any brand recognition in China, then use those trademarks as the brands expand into the East.”

If Zhan wins this suit it could make the practice even more common. However, even if Tesla does lose it is unlikely to deter it from its efforts to sell cars in China. China is not only the biggest market in the world, but thanks to its ongoing and sometimes catastrophic problems with air pollution, a big market for EVs. Elon Musk has already said that he expects that Tesla will be building cars in China within four years.

So if Tesla loses its appeal, the ultimate decision in Chinese trademark cases, expect to see it bite the bullet and pay Zhan for the trouble he took to fill out all those forms.

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