Tesla faces suit over trademark in China

A Tesla car is on display at a Shanghai auto show in April. The company is being sued for trademark infringement.LAI XINLIN/CHINA DAILY

Tesla Motors Inc, the United States-based electric car producer, is being sued in China for trademark infringement in the latest example of the difficulties foreign firms face while doing business in the country.

Zhan Baosheng, who registered rights to the name before Tesla entered China, wants Tesla to shut its showrooms, service centers and supercharging facilities in China; stop all sales and marketing activities in the country; and pay him 23.9 million yuan ($3.9 million) in compensation, according to a lawsuit filed July 3 in Beijing.

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Zhan is the one attempting to steal the US carmaker's property, Simon Sproule, a spokesman for Tesla, said in an e-mail. The company, which has lodged complaints against Zhan to Chinese authorities and won, has not been served with or seen the lawsuit, he said.

The lawsuit would need to overcome a ruling last year in which the Chinese regulator sided with the US carmaker's claims that Zhan's trademarks were invalid, though he is appealing the regulator's decision. For Tesla, the experience puts it with Apple Inc and Burberry Group Plc among multinational companies that have clashed over branding rights in China.

"We'll be watching how China deals with this very closely," said Paul Haswell, a Hong Kong-based technology law partner at Pinsent Masons LLP. "So-called trademark trolls watch Western brand development and seek to register brands in China that are relatively well known in the rest of the world before they have any brand recognition in China, then use those trademarks as the brands expand into the East."

Zhan paid a filing fee of 161,500 yuan for the lawsuit, according to a court receipt. An official at the Beijing Third Intermediate Court, on condition of anonymity, confirmed a lawsuit had been filed against Tesla by Zhan.

Zhan applied to trademark the name in English in September 2006, three years after Tesla was founded in the US, for auto-related uses, and that request was granted by the trademark office in June 2009 for a period of 10 years, according to the website of the State Administration of Industry and Commerce. SAIC revoked his Tesla trademarks in July 2013 in response to the US carmaker's request. Zhan said he has appealed and the case is under review.