Tesla Motors has hit another speed bump in its route to accessing the Chinese market, which is key to growing their business worldwide. The Chinese automobile market is the world's largest.
A dispute over ownership of the Tesla trademark in China had taken place between the company and a Chinese businessman, Zhan Baosheng. In January of this year, though, Tesla announced that the issue had been resolved to the satisfaction of all.
However, Zhan is presently taking Tesla to court and asking for approximately $3.85 million in compensation. Until then, Zhan is insisting that Tesla cease all sales and marketing activities in China, and close its showrooms and supercharging facilities.
Zhan had registered the Tesla name in English and Chinese back in 2006. Previous attempts to sell the mark to Tesla Motors were not successful.
Back in January, when it was thought that the issue was resolved, Veronica Wu, in charge of Tesla China, said that the company had resolved the dispute that had prevented it from using "Te Si La", the Chinese name for the Tesla company.
The lawsuit will be adjudicated a Beijing courtroom in early August. Until the lawsuit is concluded, Tesla will have to cool its heels.
This is not the first time a foreign corporation has met with legal challenges upon entering the Chinese marketplace. Trademark disputes have hindered companies like Apple, which encountered a long dispute over the iPad name in China. In that case, a Chinese maker of computer monitors registered the iPad trademark in 2001. Lower courts in China ruled against Apple, but in July 2012, a mediated settlement saw Apple pay $60 million to clear the way to launch its third-generation iPad into China.
Part of the problem for foreign firms that face opportunistic "trademark squatters" in China is that there never seems to be a clear path to resolution. Agencies in China register trademarks by the hundreds in an attempt to extract ransom fees from Western companies. As a result, foreign companies may encounter several litigants and their lawyers all claiming to own trademarks on the same name. Registering trademarks on speculation is a lucrative and growing business in China, according to New Jersey businessman Ben Walters.
"These are people who are out there snatching up intellectual property with no related interest, strictly from the standpoint of owning IP as an investment," Walters said.