Trademark squatter an obstacle for Tesla Motors

The planned expansion of Tesla Motors Inc into the local market is being blocked by a Chinese person that currently holds its trademark, according to US media.

The US manufacturer of luxury electric autos is encountering the same problem Apple faced two years ago, when the tech giant was forced to pay Shenzhen Proview Technology $60 million to release control over the trademark for the iPad.

Tesla Motors CEO Elon Musk has offered 2 million yuan ($326,600) to buy the trademark from Zhan Baosheng, but Zhan is asking for 100 times that price, according to US-based automobile industry website Autoblog.com.

But Zhan denies this, explaining he never asked for the price, and he said that 200 million yuan "is the amount of money that venture capitalists are willing to invest" in his electric car project, according to a report on domestic news portal qq.com.

As early as September 2006, Zhan applied for the Tesla trademark in the category of "land, air and sea transport vehicles", which was granted in June 2009.

Zhan also filed applications for Tesla Motors in 2007 and its Chinese name in 2012, but they were not approved because another Chinese person named Qiao Weiwei applied for a similar trademark in 2006.

Although Tesla Motors acquired Qiao's trademark earlier this year, the trademark was registered in the category of "railroad vehicles, sleighs, airplanes and ships", which means the US company still cannot use it for its electric cars in China.

Domain name registration is another challenge for Tesla Motors, which is heavily reliant on online sales. Its official website teslamotors.com does not currently support Chinese-language interface.

Zhan has also registered three Tesla websites of his own - tesla.com.cn, teslamotors.com.cn and tesla.cn - which all use a car's image plus a T-shaped logo that looks like the one on Tesla models.

An executive from Tesla Motors responsible for trademark issues, Diarmuid O'Connell, came to China last month to negotiate with Zhan, but no agreement has been reached.

Musk was quoted on qq.com as saying that they planned to buy the trademark from Zhan at a reasonable price, but "unfortunately that man was dishonest".

But Zhan has a different version of the story.

He insists that he is not a "trademark troll", a term referring to an individual or organization that registers company names in anticipation of selling them when said company decides to enter the market. He told the Beijing-headquartered Auto Business News that he is "a man of dreams".

"Although we applied for the trademark in 2006, we actually decided to build the brand in 2002," he said.

"We will independently develop electric cars and related products under the name of Tesla, so we have no connection with the US company."

He claims he chose the name Tesla to honor the scientist who invented the alternating current, he explained.

The two sides have employed lawyers to provide legal support in the event that the dispute should go to court, qq.com reported.

Possible solutions

At the beginning of this year, Tesla Motors announced that it would open an outlet in Beijing in May, but this has so far not come to pass. Industry insiders said the trademark ownership dispute is one of the key barriers.

On the other hand, it is not easy for Zhan to build his own "Tesla".

Over the past years his team has been producing car-related products, such as car deodorizers and car models, but the company has not assembled a real car because he does not have the certification from the government.

But he recently claimed that he has established a partnership with two domestic carmakers to develop electric cars and will unveil electric SUVs next year.

Liu Chunquan, a senior partner of Shanghai Panocean Law Firm, told qq.com there are two methods for Tesla Motors to acquire the trademark without having to buy it.

"The first one is to prove it is a well-known trademark," he noted. "But when Zhan registered the trademark in 2006, the Tesla brand was not well known in China, so this way will not be successful."

The second solution, which is "much more practical", is to prove that Zhan has not used the trademark for cars in the past three years because according to the Trademark Law, the industry and commerce authority can revoke a trademark that has been idle for three consecutive years.