Social media and brand building in China

China has over 632 million internet users, of whom some 257 million are active social media users. Although popular Western social media applications such as Facebook and Twitter are blocked in China, Chinese companies have developed China-friendly versions of these applications, such as Weibo and WeChat, which are widely used in China. As of July 2014, there were around 275 million Weibo users and 438 million WeChat users. With such a huge base of young and affluent consumers, these platforms have become an essential marketing tool for brands operating in China. However, the use of social media marketing comes with the potential risks of trademark infringement and dilution by third-party participants on these platforms.

This article explores some of the benefits of using Chinese social networks from the viewpoint of brand owners, as well as some of the potential trademark risks. It also highlights some related topical issues, such as how the Chinese courts are using social media to interact with the general public. Finally, it flags the potential trademark risks associated with the widespread use of brands on social media and sets out recommendations for how such risks can be managed or mitigated.

Domestic brand owners and social media

Compared with most foreign brands, domestic Chinese brand owners are much more active and savvy in using social media in China to connect with potential customers. For example, Gucci’s official Weibo account has over 580,000 followers, while McDonald’s has around 450,000. In contrast, Tmall (an e-commerce platform) has 14 official Weibo accounts and around 23.7 million followers; Tmall’s CEO Ma Yun has over 16.2 million followers for his personal account. Similarly, Xiaomi (a domestic technology company) has 34 official Weibo accounts, separated by product type and location, with over 27.8 million followers, while CEO Lei Jun has over 10.9 million followers.

Nevertheless, foreign brands are starting to realise the value of Chinese social media platforms. For instance, Coach partnered with Weibo and WeChat to run a series of personal profiles of artists and entrepreneurs to promote its brand. Fans were encouraged to share their favourite video profiles for a chance to win Coach purses. Cartier has also used popular Chinese actors in promotional videos posted on social media as a way to resonate with the targeted Chinese consumers – the videos received over 2 million views in a month.

Xiaomi is probably one of the best examples of how to take advantage of Chinese social media platforms. It was launched only in 2010, yet already enjoys a large, loyal customer following, primarily as a result of its social media marketing. The company actively interacts with its Mi fans through Weibo and WeChat, and incorporates their feedback into its products and services. Unlike other manufacturers, Xiaomi has no physical stores, selling directly to consumers online. Despite being less than five years old, Xiaomi has already become the third-largest smartphone manufacturer in the world, behind Samsung and Apple. Industry commentators have opined that much of its success can be attributed to its savvy use of low-cost social media marketing in China.

Celebrity endorsements

The use of celebrity endorsements on social media is another effective marketing strategy in China. Surveys by local advertisers show that more than one in three brands in 2012’s Brands Index featured at least one Chinese celebrity endorsement. A peculiar feature of the active social media audience in China is that the general public is highly influenced by celebrity recommendations, since most celebrities have tens of millions of followers on their personal social channels. Many of the product endorsement posts are designed not to work as obvious advertisements, but rather to show the celebrities using the products in their daily lives.

In order to protect consumers, the government has introduced provisions on joint liability for misleading commercials, which make celebrities as responsible as owners, manufacturers and service providers. The Law on Protection of the Rights and Interests of Consumers in China states that celebrities who appear in misleading commercials and the media that broadcast the advertisements are legally liable. A member of the National People’s Congress has stated that customers can demand indemnity from either the product provider or the celebrity who endorses the product or service, and can sue both. Further, the latest draft of the Advertising Law also requires celebrities to try products before endorsing or representing them. Penalties set out in the law include confiscation of the income obtained from the false endorsement. This proposed amendment aims to put more responsibility on celebrities and to encourage them to be more cautious when asked to endorse products. It remains to be seen whether such regulations can protect consumers effectively. Brand owners which plan to use celebrity endorsements should pay close attention to legal developments in this area in order to ensure that they do not inadvertently attract negative press by breaching the advertising laws.

Gucci’s official Weibo account has over 580,000 followers. By contrast, Tmall’s CEO Ma Yun has over 16.2 million Weibo followers for his personal account

Threats to trademarks

Although social media can be used to help a business, as illustrated above, certain social media usage also comes with risks which may adversely affect a brand’s reputation. Some of the risks include:

• employees or third parties incorporating companies’ trademarks into their social media user names and content;
• bad-faith registrations of social media accounts using well-known trademarks that target revocation on grounds of non-use;
• use of social media platforms to sell counterfeit products; and
• use of social media platforms to provide an outlet for negative sentiment.

In respect of the first category, it is common for people to engage in user name squatting by registering user names that incorporate trademarks. This is done mostly with the intent to sell the user name back to the original owner at a profit. Arguably no trademark infringement takes place in such cases, given that the squatters seldom do anything that leads to a likelihood of confusion in consumers’ minds. Currently, there is no dispute resolution process for user name squatting on Weibo, unlike the Uniform Domain Name Dispute Resolution Policy for domain names, so brand owners have to rely on the social platform’s complaint procedure to resolve such issues.

Regarding the second category, brand owners are unlikely to establish non-use arguments to oppose the registration of trademarks applied for by social media user name squatters. In a non-use cancellation case involving the TESLA mark, the squatter opened an official Tesla account on Weibo and actively updated the account with postings relating to the TESLA mark. This provided useful evidence for the individual to argue against revocation on the grounds of non-use and bad-faith registration.

With regard to the third category, users may use social platforms to sell infringing or counterfeit products. This is especially troublesome if the users pass themselves off as official resellers. Both Weibo and WeChat have become popular channels for e-commerce in China and it is difficult to stop such infringing activities, as these Chinese social platforms do not yet have sophisticated IP rights complaints procedures. It is important for rights holders to monitor the activities relating to their brands on Weibo and WeChat, so that any infringing use can be quickly identified and dealt with to the extent possible in accordance with the internal policies of the social media platforms.

In terms of preventing negative sentiments on Chinese social media, it is essential to have on-the-ground local Chinese PR professionals who are actively monitoring posts relating to the brand and who are sensitive to the expressed sentiments of Chinese consumers, so that any PR issues can be resolved quickly and appropriately.

Xiaomi is probably one of the best examples of how to take advantage of Chinese social media platforms. Launched only in 2010, it already enjoys a large loyal customer following, primarily as a result of its social media marketing. Hardcore fans now assist with the brand’s IP enforcement by reporting copycat products

Recommendations for mitigating potential trademark risks

Brand owners should take control of their social media marketing in China by setting up official accounts, not only to have control over the promotion of their brands, but also to interact with and build a loyal customer and fan base. In the case of Xiaomi, hardcore Mi fans assist with the brand’s IP enforcement by reporting copycat products and criticising trademark infringement of Xiaomi on social media. Mi fans also actively defend the reputation of Mi products through postings and re-postings on Weibo.

When setting up a company’s social media account, the following use-related criteria must be considered:

• Who is authorised to maintain the social media account on behalf of the company?
• How will the account be used by the company?
• What guidelines should those using the account follow to ensure that the company’s brand is protected?

For example, it has been reported that Xiaomi has a team of over 30 staff dedicated to maintaining active interaction with Mi fans on Weibo. Apparently, Xiaomi’s target response time for each message sent to Xiaomi official accounts is 15 minutes. Before releasing the first Mi1 handset in 2011, Xiaomi launched an online activity on Weibo and invited followers to post photos of their handsets. Over 1 million users participated in this and the news that Xiaomi was developing its own handset was widely publicised. Xiaomi still uses its official Weibo accounts to release new products. The posts announcing the release of Mi4 on July 22 2014 received 618,465 forwards, 147,813 comments and 24,691 likes.

In addition to the content in companies’ official social media accounts, what employees say on social media also greatly affects a company’s reputation and image. It is crucial to safeguard this by drafting clear internal social media policies which apply to all employees. Relevant social media policies should also extend to all third parties which have business dealings with the company, so that the external messaging on the company’s profile and goodwill related to its brand are consistent at all times.

For personal use of social media, a company need not go so far as to police each individual employee’s social media accounts for violations of internal policy, but it should respond to any violations that come to its attention, especially when they harm the company’s reputation. Some useful guidelines in drafting an internal policy include the following:

• Employees should be required to make clear that the views expressed are their own and not those of the company.
• Employees should be open about their position in the company when posting about the company.
• The company trademarks should not be used without specific permission.
• Even if employees are allowed to use company trademarks, the actual trademark or logo adopted by the company should be used (in compliance with strict internal protocols) without it being distorted or combined with any other marks.
• Content that employees are not allowed to post should be specified.
• Employees may be asked to remove posts that the company considers inappropriate.

The combination of appropriate internal policies for official company social media accounts and employee social media guidelines should help to minimise PR mistakes and negative effects on the brand’s image.

Courts’ use of social media

Courts set up nationwide networks on Weibo

In addition to the marketing uses of social networks by businesses, Chinese courts have embraced Weibo and WeChat as an effective means to communicate with the public. The Supreme People’s Court opened an official account on Weibo on November 21 2013 and in the last year has posted over 2,800 messages and attracted over 8.95 million followers. The Supreme People’s Court’s Weibo account now ranks among the top 10 government Weibo accounts in China. Stemming from this success, the Supreme People’s Court has called on all courts to make good use of social media, including Weibo and WeChat, to expand their judicial influence. Following this recommendation, all 31 provincial high courts in China have opened official Weibo accounts, creating a well-connected judicial network. As of November 2014, 2,840 official Weibo accounts were operated by courts at all levels and from locations across China.

Information disclosure through Weibo

One of the reasons for courts to use social media is to improve communication with the public and promote judicial transparency. The courts post information on new laws and regulations, publish information regarding ongoing cases and, in some instances, link to live postings of selected court hearings. This significant development in the transparency of court proceedings has been publicly endorsed by the government, including in national newspapers such as People’s Daily and China Daily, which usually reflect the attitudes of senior government bodies in China. In view of this clear support, the courts in over 20 provinces now provide live broadcasts of court hearings and this number looks sets to grow.

However, not all cases are published by live broadcast and broadcasts are still available only for certain carefully selected cases. In general, cases can be categorised into three types:

• significant criminal cases;
• high-profile civil cases, such as the IPAD trademark dispute; and
• cases with educational value.

Apple has a large number of fans in China, so the IPAD case received wide attention from both domestic and foreign media. Over 70 media organisations filed applications to attend the hearing. In order to ensure transparency, the Guangdong High Court decided to broadcast the hearing live on its Weibo account. Due to the limit of 140 Chinese characters per post, the court published over 160 posts on the hearing on that day, which included trial transcripts and photos. The number of court followers increased by 12,000 in that single day alone.

Active interaction through Weibo

In addition to broadcasting hearings, the courts are increasing their direct interaction with the public. In April 2014 Shaoxing Intermediate Court in Zhejiang Province conducted an online survey on the likelihood of confusion between two marks, NV ER HONG and SHAO NV HONG. The tribunal stated that the results of this survey would be used in its final decision. This practice of seeking public opinion to support judicial findings has received positive feedback from local government, as well as from national judicial newspaper People’s Court Daily.

In addition to public opinion surveys, the courts have been posting some Trademark Review and Adjudication Board (TRAB) decisions (which are not usually made available to the public) on Weibo for public discussion. For example, on June 17 2014 a judge posted a trademark rejection decision issued by TRAB on Weibo, with comments on the merits of the applied-for mark JUE BU in Chinese and the cited English mark NEVER. Similarly, on August 26 2014 a judge posted another trademark opposition decision issued by TRAB on Weibo with commentary on the decision, which found the opposed mark to be confusingly similar to a Facebook mark. Such postings have elicited much debate and commentary from the public. There are potential risks to trademark owners, since the members of the public commenting on the decisions may not have the necessary legal background to understand the nuances of the decisions and these public discourses may have an unintended negative impact on the reputation of the related trademarks. Further, judges reading these public comments may be influenced – whether fairly or unfairly – by public sentiment, which could affect their decisions.

Going forward

Both brand owners and trademark lawyers should pay attention to this trend of courts interacting with the public and making use of social media platforms. Brand owners should embrace marketing on social media in China in order to gain wider recognition of their brands and, more importantly, to cultivate public goodwill. The opinions of these customers could potentially affect online survey results of courts and, more significantly, the court of public opinion towards the brand. Trademark lawyers should take advantage of this increasing judicial transparency by referring to published administrative decisions. They should also be able to obtain insights on the decision-making process of Chinese courts and the tendencies of judges involved in these cases.

Conclusion

Social media usage for marketing brands in China can be best described as a double-edged sword. As illustrated by Xiaomi, social media – if used properly – can be an inexpensive and extremely effective direct marketing tool. However, if brand owners fail to implement proper policies and effective monitoring, third-party users and commentators (essentially, the social media public) could cause significant damage to the reputation of the brand and its related goodwill on the same platforms. Further, the courts’ increased interaction with the public through social media accounts also plays a significant role in helping brand owners to navigate trademark law and practice with a view to successfully developing their brand management and trademark protection strategies. Accordingly, it is crucial for brand owners and trademark lawyers to pay attention to opportunities and threats presented by this information revolution and harness its powers for maximum brand-building purposes, while taking all steps to mitigate risks associated with its potential negative impact.