7 Companies Caught in China’s ‘Copycat’ Trap

Brands from around the world want to sell their products in China. After all, the country is home to a 1.4 billion strong market—a population no other nation can fully match.

But there’s one problem business leaders—from Steve Jobs to Elon Musk—have to deal with in exchange for that market access: copycats.

Many major brands have gotten dragged into years-long legal disputes to protect their trademarks. And to make things worse, the Chinese court system won’t necessarily side with the established brands. Sometimes, the real brands are even forced to apologize—and pay millions of dollars in compensation to their copycats.

That’s all made possible by a practice known as “trademark squatting”—a technique often used by Chinese companies.

First, they register trademarks for famous foreign brands, and then sit on them. That way, when the real brand enters the China market, they can then sue the owner and demand money.

The practice has survived because of a policy under the country’s trademark law, which follows a “first file, first serve” principle, meaning whoever registers the trademark first, gets it. Whereas in the United States, it’s given to the first company to widely use it.

In this special report, we look at seven companies that found themselves caught in the trap.