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Sunday, February 15, 2015

Georgian wine’s uphill battle for its rights in China

15.02.2015. Sakpatenti, National Intellectual Property Center of Georgia, won the case over the famous Georgian wine brand Khvanchkara in China [read also: Dispute over “Khvanchkara” is successfully settled in China] and expects that appeals concerning other controversial brands will be satisfied as well. However, the case unveils blemishes in Georgia’s wine marketing strategy.

Integration Marketing Communication specialist Eldar Pirmisashvili believes that Georgian wine companies just do not understand the role marketing plays in business.

On May 23, 2013, Sakpatenti filed six applications for appellations of origin of Georgian wines Tvishi, Khvanchkara, Tsinandali, Kindzmarauli, Mukuzani and Georgian chacha for registration at the Chinese Trademark Office. Examination of Mukuzani and Tvishi applications proceeded without delay and in January of 2015 both were registered. But the remaining four applications were rejected due to the similarity to the already registered marks. According to Sakpatenti, two Chinese companies and one private person held the ownership right over brands in question. Sakpatenti filed a lawsuit against the swindlers and won the case by February 6. It does not expect Khvanchkara to be disputed and after the expiration of the three-month opposition period, Khvanchkara will automatically be registered to the name of Georgia.

Disputes over Tsinandali, Kindzmarauli and chacha are still under discussion [since February 2014]. Sakpatenti appears hopeful that this case will be also settled in favor of Georgia.

Illegal registration of famous Georgian wine brands at export markets is no novelty and indicates defects in the marketing policy, sector pundits say. Any serious company that cares for its product quality and reputation will not step into a new market unless its trademark is registered and protected in accordance with rules and laws of the target market.

However, Georgian companies continue to neglect proper registration of their trademarks and wine companies are no exception, said Eldar Pirmisashvili, an Integration Marketing Communication specialist in the interview with Georgian Journal.

His point is that Georgian wine companies entered the Chinese market at least seven years ago but have failed at legally protecting the brands they deal in so far.

Several shrewd Chinese entrepreneurs took advantage of their negligence, registered Georgian wine brands for themselves and enjoyed exclusive rights to their distribution until the state unveiled the case through Sakpatenti.

Brand registration is not compulsory, explains Giorgi Samanishvili, temporary head of the Georgian National Wine Agency.

“In fact, lack of Georgian wine brands’ registration in China has never hampered the sales of the product itself. Registration is a show of goodwill as well as a measure of insurance against counterfeiting,” he said. “Selling unregistered products is a norm in marketing. But now, with Khvanchkara brand becoming fully registered in China, it will ensure better regulation of sales.”

Pirmisashvili counters that registration of trademarks, brands, appellations of origin or geographic indications is a matter of reputation and is closely tied to market competition. The fact that Georgian wine companies did not care about this is a sign of two things: either their plans for that market being exclusively short-term or complete disregard for their own reputation.

Georgian wine companies have been operating in the Chinese market for almost a decade now, which hardly qualifies as a short-term existence. Such lasting commitments imply registration, Pirmisashvili maintains. He believes Georgian wine companies just do not understand the role marketing plays in business.

As a result, several shrewd Chinese entrepreneurs took advantage of their negligence, registered Georgian wine brands for themselves and enjoyed exclusive rights to their distribution until the state unveiled the case through Sakpatenti.

“Those illegal Chinese owners having exclusive rights to the questioned products’ distribution might prove to be a considerable thorn in the side of Georgian suppliers’ pricing policy. You cannot diversify distribution and play your price game if you are confined to a very limited number of distributors,” Pirmisashvili said.

Nikoloz Gogilidze, Chairman of Sakpatenti, agrees that theoretically Chinese companies might have blocked other distributors from selling Georgian national brands they owned, but nobody had ever complained about such a practice.

“I think there was no need to block anyone because very likely these illegal owners had permanent Georgian suppliers. But such a case reveals gaps in Georgian companies’ legal culture. No company enters a new market before registering its trademark there. For instance, there are 50 thousand products registered in Georgia at the moment, but the amount actually on offer and present in the market is far smaller,” Gogilidze elaborated. He believes that Georgian companies must be more involved in their trademark quality control and protection issues.


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