Choosing a business name is typically one of the most frustrating parts of registering a company in China, due to the large number of good sounding names that will be rejected. In other cases, competitors have easily registered names belonging to major international companies like Volkswagen in order to launch copycat operations. This article will help you avoid these frustrations by providing you with an understanding of China business name registration law and how their system works overall.
Chinese policy states a company’s name stands for its image, trustworthiness, and values, a representation of its quality and standards. Therefore, the China Companies Act §6 provides that companies must each have their own name that is protected by law. The Act is an expansion of China Civil Code §1013-14, providing strong protection for company naming rights upon formation. Below, we’ll look at the specific administrative rules, and then the procedures governing how business name registration is done.
Business Names in China use the First to File Approach
Review of China’s Business Name Filing Administrative Procedures
Obtaining and Using Business Name in China
Types of Name Rights in China
Under the Business Entity Name Filing Administrative Rules (2020), a company can use any combination of Chinese characters for its business name. §6 provides that a name comprises four elements, being the jurisdiction, distinctive element, industry designation description, and the entity type. The owner of a name has the exclusive right to use it within the specified jurisdiction. §17 provides no other name within the jurisdiction may use the same or similar name within that jurisdiction.
You are allowed to change your name to a new one by making a filing with the appropriate agency; legal actions taken under the previous name are binding. (see China Civil Code §1016) Business names in China are a property right that can be sold or licensed pursuant to §19, by disclosing the change on the National Business Credit Lookup System.
Business Names in China use the First to File Approach
China uses a first to file principle when two different businesses have requested the same business name, but if the applications were filed on the same day, the business registrar will provide an opportunity for them to privately reach an agreement or else will decide on which business will get that name. The same applies if competitors apply for the same name at different registrars.
But if the parties successfully registered the same name in different jurisdictions and this results in a dispute, the first to file has priority. If there is a conflict between a local Chinese company’s name and a foreign business, the market oversight ministry will apply the applicable treaty agreement to resolve the dispute.
Conflicts between Business Names and other IP Rights
When you register a business name, the Chinese government’s software will check to see if your name is confusingly similar to an existing registration within the same industry in that jurisdiction.
If that happens, the business registrar will reject the application and ask you to change it or show that you have a license to use that name. Therefore, name conflicts usually occur when there is a similar name in a different jurisdiction or of a type governed by a different government agency.
In Chinese law, both business names and trademarks are used to identify a company, but the distinctive element of the name often conflicts with a registered trademark. Conflicts can arise whether the trademark is filed before, or after, the business name. The business name can also conflict with other kinds of legal rights.
For example, a copyright infringement claim may be raised in China if your business name bears a similarity to another company’s creative work, or has resemblance to an existing Internet domain name can result in a conflict. Aside from the legal rights implicated by the civil code, competition law, and IP, branding has a substantial effect on consumer perceptions within China; the naming right will affect business valuation and drive investor interest. The value of a business name grows proportionally with the business and is a reflection of their competitiveness.
Make sure to protect business name rights by deploying active monitoring techniques such as using Internet screening and alert software, so that you can enforce your legal rights in China.
Review of China’s Business Name Filing Administrative Procedures
Here, we will provide an overview of the administrative procedures governing business name registrations, with a focus on business name regulation, declarations, oversight, dispute resolution, and registration. These are an additional layer of regulation that determines your right to obtain a business name in China.
The Procedures require business names requested respect prior right holders to avoid confusing the public in China, and these prior rights include intellectual property rights such as trademark and copyright, thus ensuring that business name registrations are coordinated with trademark registrations.
The naming rules regulate the several elements of a business name. The distinctive element must have distinctiveness, and be easily differentiated by the public, which mirrors the China Competition Act requirements that prohibit misappropriating famous business names in a way that could mislead the consuming public. Next, the rules require a business name clearly state its entity type (e.g., LLC, Corp., LP, LLP). Local government registrations of your local business divisions must include their full business organizations name followed by a designation such as division, factory, or store.
The Procedures restrict what may be in a business name; specifically, it may not reference China, government agencies, prior rights holders, or have non-profit indicators. Only an entity with control over three or more other corporate entities may have the word “group” in its name. A company registered in China must include the name of its jurisdiction in its business name unless it has operations in at least three provinces or home rule cities. A company must include the name of its industry in its name unless it is a conglomerate diversified in several industries doing business in the same name. Notwithstanding these requirements, the name may not conflict with other local businesses in the same industry.
Obtaining and Using Business Name in China
The Procedures require applicants to provide basic business information and documentation signed off by all investors at either the government office’s service counters or online. The software will then check the requested name and return names that comply with the Procedures and other law. Explicitly prohibited practices include hoarding names, false declarations, or using another business’s name. If the distinctive elements of two names are the same, the Procedures deem them identical even if the business names have differences in word order, jurisdiction, organizational form, or industry.
The Procedures require business names to be used in a legally compliant manner and without infringing on other parties’ prior rights by confusing the public, even if you have received approval to use the name. The most relevant law here is China Competition Act §6, which prohibits unauthorized use of a famous trade name owned by another party in a way that could confuse the consuming public about the product’s origin or affiliation. Therefore, make sure to choose a business name for China that is distinctive enough to avoid confusion. Of secondary relevance here is the China Trademark Act §32, which protects prior rights, which may have been established before your business name was registered.
Any individual or organization has the right to request a non-compliant business name used in China be changed be changed. The Procedures empower the government agency to correct non-compliant business name registrations by requiring a name change, and their parent agency is also empowered to do the same. The business registrar must report illegal activity involving business name declaration or use, to the national office of the Market Oversight Administration, which applies to names that impair national or public interest, social order, mislead the public, or are otherwise unlawful.
Conclusion
In this article, we’ve learned that business names in China are a legal property right that is one of many different types of name protections regimes. In the event of conflict between business name applications, the first party to file an application gets the name. China also has very detailed rules about what kinds of names can be registered, with several public policy exclusions and detailed requirements about business operations having to match what goes in the name.