Facebook is aiming for $5 billion in its initial stock offering. How much do you think its brand is worth? If some Internet company were to launch a clone site called Facebooks.com, how much do you think a court would award for brand infringement?
The answer to that question is $60,000 USD, at least in China. What’s even more ironic is both the plaintiff’s (Kaixin001.com) and defendant’s (Kaixin.com, owned by Oak Pacific Interactive) sites are considered clones of Facebook.
Here is how the story goes: A former Sina Chief Technology Officer launched Kaixin001.com in May 2008, and the site drew 7.5 million users within the first five months. The founder, Cheng BinHao, didn’t think owning the kaixin.com domain was necessary; therefore never attempted to acquire the domain for branding purpose. Kaixin001.com found early success due to its focus on business professionals and white-collar office workers. Kaixin001.com directly threatened another social network service (SNS) site, xiaonei.com (the predecessor of the top Chinese SNS site now, renren.com). To respond to the severe competition, Oak Pacific Interactive (who owns xiaonei.com) purchased the “kaixin.com” domain and launched the site, copying almost everything on Kaixin001.com from layout to games such as “Friends for Sale,” and “Where I have been.”
Such brand/trademark infringement can easily cost up to $775,000 USD in the States, according to the 2011 Report of the Economic Survey from the American Intellectual Property Law Association. Kaixin001 (plaintiff) originally asked for an estimated amount of $158,000 but Supreme People’s Court only ordered Oak Pacific Interactive (defendant) to pay $60,000. The idea of branding in China versus in the States is like night and day.
The lack of appreciation for branding in China can be disheartening for those of us who are passionate about helping businesses to grow there. But while building a brand might seem difficult in China, I still like to think it’s not impossible.
Consistency, Legitimacy, and a Relationship with the Consumer.
Rarely do we see companies in the States change their brand names. In China, though, companies are known to change their names in response to competition. To build a stronger brand, Chinese companies should stay consistent with their names and the imagery related to their brands.
Chinese companies also don’t seem to pay enough attention to official certification. In the U.S., companies invest in testing their products through certification entities such as Underwriters Laboratories (UL), while in China most of investment goes to operations, or — I hate to say this — copying from competitors. The most fundamental key to a successful brand is the quality of products and services, and perhaps the easiest way to recognize quality is through legal or industrial benchmarks.
There are successful brands in China regardless of fierce competition and copycats. Tencent Holding is known for its QQ instant messages; Li Ning is a leader in sports products; and Lenovo thrives with its computer-related products. These brands rise above their competitors because their brand messages speak to consumers, thus creating an unique and lasting identity in the marketplace. Look for more related case studies in upcoming posts from my “China’s No Panda Express” series.
What are your thoughts about building a brand in China?
- “The cost of trademark litigation is always a key consideration. For an average trademark infringement suit that does not settle early (where <$25 million is at stake), the median litigation cost can run up to $775,000 inclusive of all costs. (See the 2011 Report of the Economic Survey from the American Intellectual Property Law Association (AIPLA).) It is important to note that this does not include the cost to change brands or pay a monetary judgment for damages. The overall cost of a trademark challenge/infringement suit can be millions of dollars in a worst-case scenario, especially in a case where an organization/executive is indifferent to, or disregards, another’s trademark rights.” http://www.venable.com/the-bet-the-company-moment-think-trademarks-09-07-2011/
- American Intellectual Property Law Association http://www.aipla.org/learningcenter/library/books/econsurvey/2011/Pages/default.aspx
- Kaixin001: China’s Apple of Social Networks http://techcrunch.com/2008/10/16/kaixin001-chinas-apple-of-social-networks/
- Kaixin001 v. Kaixin: Social Networking Goes to Court http://blogs.wsj.com/chinarealtime/2009/05/21/kaixin001-v-kaixin-social-networking-goes-to-court/
- The chaotic universe of Chinese SNS’s http://charliewang.me/the-chaotic-univerise-of-chinese-sns
- Kaixin001 seeks more compensation http://business.globaltimes.cn/industries/2011-04/649453.html