A Bump In The Road: Tesla’s “Trademark Troll”

Silicon Valley’s Tesla Motors has landed 300 early orders of its Model S sedans in Hong Kong and now plans to expand sales into the Mainland.   But Quartz’s Heather Timmons reports that a man named Zhan Baosheng has already claimed rights to the Tesla brand in China:

There’s already evidence things might be more difficult, at least on the Chinese mainland. To start with, there’s Zhan Baosheng, a Chinese businessman, who said he, too, is an electric-car maker who also happens to use the name Tesla Motors for his company, and has been since 2006.

To prove it, he’s even got his own website, which features pictures of cars that look remarkably like Tesla’s, using an identical logo and the slogan “Live for power.” Zhan is referred to openly as a “trademark troll” in the Chinese media, indicating Musk has consumers’ sympathies. Still, Zhan is asking for over $30 million for the name, and the issue is in court.

Then there’s the question of whether Chinese buyers really wants the muscular electrical cars Tesla is offering, and whether it has the infrastructure to support them.[Source]

Reuters explains that the burden of proof will lie on Tesla due to its relative newness:

Legal experts familiar with trademark disputes in China said it might be difficult for Tesla to resolve the trademark issue unless it buys Zhan out. China has rules that protect globally renowned brands, but that might not apply in the case of relatively new companies such as Tesla. “In the e-vehicle market, everyone knows Tesla. But the burden is on Tesla to prove that its trademark is recognised by car customers (in general), and that it has used and promoted the trademark for sufficient time period in China in order to be eligible for well-known trademark determination,” said Vincent Wang, Shanghai-based partner at law firm Davis Wright Tremaine LLP.[Source]

However, the International Business Times adds that while Zhan benefits from China’s “first to file” trademark principle, his past history of registering the trademarks of three other companies may hurt his case:

Like most countries, excluding the U.S., Britain and former British colonies, China uses the “first to file” principle in its trademark law, which essentially means that the first person to have a trademark registration approved locally owns the rights to that trademark. That right may be challenged in court based on whether the plaintiff – in this case Tesla Motors – can prove in court that the defendant acted in bad faith by registering a trademark in order to hold it blackmail.

Another factor that will affect the outcome of this dispute is whether a court can be convinced that when Zhan first applied for the Tesla trademarks back in 2006 the brand was not well known in China at the time, an important distinction in trademark law. If Zhan can assert the Tesla brand was not widely recognized in China at the time of his filing, it would bolster his case. This particular aspect of trademark law puts so-called “mid-tier” companies at a disadvantage that brands like Ford or McDonald’s don’t have because those large multinationals have heavy global brand recognition.

According to the trademark office’s online database, Zhan applied for trademarks for three other companies, suggesting a pattern of trolling that Tesla could use to prove bad faith.[Source]