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18.03. 2013

IPR Strategy in China: The Do’s and Don’ts

Registrable IP rights are territorial, which means they have to be claimed and asserted in each country individually. Registered IP in another country is not automatically recognised in China; therefore, it is strongly recommended that the IP assets are registered in China before entering the market.

Intellectual Property Rights are legally enforceable rights over the use of inventions or other creative works. They confer a right to exclude others from their use. Securing the IPR will prevent and enforce against infringers from profiting from an innovation or a brand by passing it off as their own. IP falls into the categories of registrable and non-registrable IPR rights.

The best way to prevent IPR-related issues is to use a layered, holistic IPR protection strategy, which includes protection both by registering the registrable rights and applying other methods such as contractual protection (confidentiality agreements, IP protection clauses in employee agreements) and internal security measures (limited access to certain work areas, etc.).

The main types of IP rights are:

Copyrights

Copyright protection is provided for written, oral, musical, dramatic, choreographic, artistic, architectural, photographic, cinematographic, audio-visual, graphic works and computer software. While it is not mandatory to register the copyright for protection, it is advisable to voluntarily register to prove ownership in China.

Trademarks

A trademark is a sign or name that serves the specific and primary purpose of identifying the goods or services of a producer, thus allowing the consumers to distinguish goods or services of one producer from those of another. A trademark can be registered either by filing an application directly at the China Trademark Office (domestic application) or by filing an application at the World Intellectual Property Organisation (international application). As to an international application, the trademark may have to be registered in one’s home country before requesting the extension of the trademark to China.

Patents

A patent is a set of exclusive rights granted to the inventor of a technical solution of a product for a limited amount of time.

There are three different types of patents in China: 1. invention patents, which are granted for innovations in the field of technology that are new and inventive over the prior art;
2. utility models, which are granted for a new shape and/or structure of an object; and 3. design patents, which are granted for the original shape, pattern, colour, or a combination thereof, of an object. Foreign companies without a registered office in China must file a patent or trademark application with the help of a local patent or trademark attorney.

Further information on copyrights, trademarks and patents is available by contacting the Helpdesk or by downloading free IP guides from the Helpdesk website www.china-iprhelpdesk.eu/.

An effective IPR strategy is essential to the development and success of businesses everywhere, including China. It is best to prevent IPR issues before they arise by carefully guarding and registering the IP assets before entering any new markets.

An example from the business world: Trademark Registered by a Competitor

A Dutch SME (Small or Medium-sized Enterprise) discovered that its trademark had been filed in China by a Chinese company and a Chinese individual. The SME contacted the Helpdesk and asked for advice on how to address this issue.

The Helpdesk suggested that the SME search through the online trademark search engine of the China Trademark Office (CTMO) to learn more details about the filing. The SME then learned that the two filings included the same name and a near identical graphic design as the Dutch company’s trademark.

The Helpdesk then informed the SME that it could file an opposition against the trademark, as the filing date was recent and therefore still within the trademark opposition window (three months after the publication of the trademark in the Trademark Gazette).

The Helpdesk recommended a strategy for trademark opposition action which the SME successfully implemented to negate the filing.

Lessons Learnt

China is a first-to-file jurisdiction. If the IP assets are not registered (i.e., trademarks, patents, design, domain names) in China, Chinese competitors can, and often will, register those rights in China first. This may lead to the possibility of needing to buy back one’s own trademark, or facing legal action or even seizure. Preventative registration is essential to any IPR strategy and strongly recommended before entering the China market.

In this particular case, the Dutch SME became aware of IPR infringements through the careful monitoring of competitor registration activities and immediately took action to protect its rights.

If the SME had discovered the infringement after the trademark opposition window had closed, it would have had to proceed with the trademark invalidation procedure or buy back the trademark from the infringer, which are longer and more expensive processes.

Monitoring and defensive action will often prove much quicker and more effective than enforcement proceedings

The China IPR SME Helpdesk is a European Commission funded project that provides European SMEs with free, practical business advice relating to China IPR. Information of intellectual property rights in China is available at www.china-iprhelpdesk.eu. Free expert advice on China IPR can be obtained by sending e-mail questions to: question@china-iprhelpdesk.eu. A reply from one of the Helpdesk experts will be delivered within seven working days. The China IPR SME Helpdesk is jointly implemented by DEVELOPMENT Solutions and the European Union Chamber of Commerce in China.

Do’s:

The key IP assets have to be identified and prioritised. It is essential to know which ones are important for the business and how to protect them effectively.

The IP has to be registered before entering the Chinese market. The infringement can be dealt with more efficiently if one already has protection in the territory.

It is advisable to consider measures to protect one’s know-how and other unregistrable and registrable rights, such as:

Signing agreements with business partners which include IPR protection, clearly defining the ownership and transferability of IP.

Signing non-disclosure agreements with business partners and employees to safeguard the IPR and business secrets.

Don’ts:

It must not be presumed that the IPR is automatically protected in China if one already has registrations in other countries.

It must not be assumed that IPR is only confined to products. Brochures, websites and other promotional materials can be infringed as well.

It must not be presumed that because it takes a very long time (24–36 months) to get a trademark granted in China, it means that there is no real use to apply for a trademark in China. China uses the first-to file system (as opposed to the first-to-use), which means that the party who files an application first is the one most likely to become the owner of the trademark. Awareness of these issues is paramount when devising an entry strategy to the China market.

Registering one’s own IPR must not be entrusted to any other party. Instead of leaving this to a sourcing partner or a manufacturer, the registration has to be carried out independently with the help of a China-experienced IPR lawyer.