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Trademark Trolls: Two Countries, One Tesla Trademark

Posted by Brandon Selinsky on Jul 31, 2014 11:12:34 PM
Brandon Selinsky

It is without a doubt that Tesla Motors Inc. has taken over the electric car market. Being the first fully electric spots car with an IPO that raised $226 million for the company when it launched its initial public offering on the NASDAQ, it is no surprise that CEO Elon Musk has set his sights on making Tesla a global brand. And what country has Musk decided to start his expansion? It would be none other than China.

However, like Apple Inc., and a list of other global companies, expanding a company into China is not as easy as it seems especially with trademark trolls lurking in the background.

What Are Trademark Trolls?

Trademark troll is defined as a “perjorative term for any entity that attempts to register a trademark without intending to use it and who then threatens to sue others who use that mark.” Ironically, a trademark troll illuminates the weak spot of trademark rights. Most believe that simply having a registration for a trademark gives you control over those rights all over the world. However, more than just a registration is needed to have a valid trademark. The mark must also be used in commerce in order for the trademark registrant to gain a complete monopoly of the trademark name.

With that background, you can probably guess what sticky situation Elon Musk has found himself in.  That’s right, he doesn’t own the Tesla trademark in China. Instead, three years after Tesla was founded in the U.S., a Chinese businessman named Zhan Baosheng decided to apply for the Tesla trademark name and was granted the trademark in June 2009 for a period of 10 years. Therefore, it was predictable that when Tesla Motors Inc. wanted to expand its business into China, it started making offers to buy the trademark name rights off of Zhan.

Zhan and Tesla met in November of 2012 and Tesla offered $50,000 to buy the trademark. However, in May of 2013, Tesla China’s General Manager asked for almost six times the amount Tesla offered. With no resolution between Tesla and Zhan in sight, Tesla decided to continue to move forward with its expansion and started to deliver Tesla vehicles to Chinese customers starting this past April.

Zhan Retaliates

With Tesla moving forward, Zhan was not about to back down. Despite a Chinese court ruling in favor with the U.S. Tesla company in a previous lawsuit, Zhan has decided to appeal that judgment while also filing a trademark dispute against Tesla Motors Inc. Zhan has stated that he wants Tesla to stop all marketing activities, shut down its showrooms, service centers and supercharging facilities and in addition, Zhan is asking for 23.9 million Yuan, or $3.9 million, from Tesla as compensation.

The hearing for this lawsuit will be heard by the Beijing City Third Intermediate Court on August 5th. You can imagine that Musk and Zhan are not the only interested parties in this case. Most of the world, as well as a variety of large companies, will be on the edge of their seats awaiting the court’s ruling in this case.  The decision could make or break other global companies looking to go up against trademark trolls in China.

If you or your company want more information on how to protect your trademark across the globe and beat out those trademark trolls, contact the attorneys at Whitcomb Law, P.C. today.

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Topics: Trademark Law

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