Burberry Shouldn't Panic About Losing Its Trademark In China

Burberry's signature tan, black, and red check pattern runs the risk of losing its trademark in China, but the news may not be a catastrophe for the company.

Emblazoned across the company's scarves, coat linings, and bags, the pattern known as the "Haymarket Check" has become for Burberry what signature logos like the "LV" has become for Louis Vuitton and the interlocking C's have become for Chanel. Needless to say, all of these companies take painstaking efforts to protect their brand globally from copyright infringement.

However, it's not always so easy to do that in China, as was demonstrated last week when China's State Administration for Industry & Commerce announced online that Burberry's trademark for the pattern in China had become invalid on November 13. The ruling was based on a February 2012 application challenging Burberry's rights to the trademark, and although the site didn't state who had filed the challenge, it is speculated that it came from Chinese retailer Polo Santa Roberta, which has been embroiled in legal battles with Burberry over the pattern for nine years. Since the announcement, Burberry has released a statement that it is appealing the decision and is "confident" it will be successful, and in the meantime retains the legal rights to the trademark while it does so.

However, even if it loses the appeal, the situation likely won't be the crisis that the media is making it out to be.

There's no doubt that this decision presents several challenges for the company. Firstly, part of the reason for its strong China growth is the fact that it has only been in the China market since 2010. This means the brand is more novel amongst consumers and has not become overexposed, as many experts state has happened to Louis Vuitton, which has seen lackluster China sales in recent quarters. Being new to the market is generally an advantage, but it also means that it is imperative that the company must work to establish a sense of its brand DNA amongst consumers, especially those with rising incomes in lower-tier cities who are new to the luxury market.

A flood of legal Haymarket Check products may confuse customers, dilute the brand's image, and lead to overexposure before it can even become fully established. The effect of fakes on brand image is clearly being felt by Louis Vuitton, which just signed an agreement with Taobao to cut down on the proliferation of fakes. If Burberry loses the right to its signature tartan, it could take no such measure.

This may sound like a grave situation for Burberry if it isn't able to win in its upcoming battle. However, the challenges are likely not insurmountable for several reasons. First of all, the trademark only relates to leather goods, not the brand's signature checked scarves and trench linings. In addition, fake products are already ubiquitous in China, including those bearing Burberry's pattern. The Chinese government hasn't been doing much to cut down on them even with the rights to the trademark, yet Burberry's sales have still been growing at a significant rate in the country.

More importantly, this challenge comes at a time when Chinese consumers continue to become more focused on quality and heritage, and less on outward displays of wealth like logos, or in the case of Burberry, patterns. From Burberry's recent marketing efforts, it looks like the company has already taken note of this, focusing on promoting its "Art of the Trench" campaign to highlight the craftsmanship and design of its classic coat. In addition, losing its rights in China doesn't affect its goods outside the mainland, where Chinese luxury consumers do 60 percent of their luxury shopping. Buying guaranteed authentic Burberry products in London is likely to still hold a certain cachet that brands in China won't be able to take away for the near future just from using the checked pattern.

With issues like rampant fakes being sold both online and off, trademark trolls, and China's confusing intellectual property laws, the foreign luxury market certainly faces challenges in the country. However, copyright issues have not stopped the likes of Apple, 3.1 Phillip Lim, and Tesla from entering the market, and are highly unlikely to deter Burberry to continue to pursue growth potential in the country.