ipr matters in china simon cheetham and sarah turner
TRANSCRIPT
• Practical business focused advice
• Protection Strategy
• Enforcement Advice
• ‘Know before you go’
The Helpdesk Initiative
Significant EU – China Trade
• 118 million suspect goods detained at EU borders in 2009, ⅔ originated from China
• Does not include damages reported by European companies due to Chinese counterfeit goods put on the Chinese market
• Or Chinese counterfeit goods on other non-European markets
The Helpdesk Initiative
T4. Statistics of Invention Patent Applications in China 2002-2007
80,232
105,318
130,133
173,327
210,490
245,161
39,806
56,76965,786
93,485
122,318
153,060
40,42648,549
64,347
79,84288,172 92,101
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
225,000
250,000
275,000
2002 2003 2004 2005 2006 2007 Year
Number
Total
Domestic
Foreign
314,573 in 2009
229, 096 in 2009
85,477 in 2009
T2
The Helpdesk InitiativeT3. Statistics of Trademark Application of Registration in China 2002-2006
371,936
452,095
587,925
664,017
766,319
321,034
405,620
527,591
593,382
669,276
50,902 46,47560,334 70,635
97,043
16,712 15,955 20,720 24,72344,859
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2002 2003 2004 2005 2006 Year
Number
Total
Domestic
Foreign
EU
830,500 in 2009
88,714 in 2009
The Helpdesk ServicesChina IPR Advice
Research/Publication
Practical business tools
Training/Workshop
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• Ask our experts a question
• easy to use e-learning training modules
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• Learn from case studies
The Helpdesk InitiativePrevention Strategies
Plush Toys Trademark, sourcing and manufacturing contracts, record keeping re creation, advertising/packaging
Design of drainage machines IPR as part business strategy. Not just design patents but trademark and copyright
Wastewater Treatment Trademark, trade secrets, non-disclosure agreements, first to register
Enforcement Strategies
Olive Oil Opposition to local trademark application
Umbrella IP protection in China, sale in HK – steps on hiring a lawyer
Lighting Group Design patent infringement – received legal advice ‘not sufficiently the same’, business strategy
The landscape
• China – too big to ignore• IP protection relatively new concept• BUT legal system improved• Chinese companies becoming substantial
competitors• Foreign companies developing R&D presences
in China• Chinese government stressed importance of
R&D and IP
Doing business in China
• Understand the Chinese legal environment• Know to what extent patents, trade marks and trade secrets
are protectable and enforceable• Understand the rules relating to technology transfer and how
to limit the risks from such transfer• Understand the legal provisions in relation to IP created by
employees or third party suppliers (JV partners, consultants etc)
• Maintain the security of your technology and confidential information
Patent protection
• Third amendment to Patent Law (1 October 2009)• Monopoly right for a new design or invention or improvement
to product or process• National right – Chinese patent only grants rights in China• European patents have no effect in China• Chinese patent law covers
– Invention patents (20 years) – new technical solutions– Utility models (10 years) – technical but degree of invention not as
high as for invention patents– Design patents (10 years) – new designs – shape, pattern or colour
• First to file system (not first to invent)• Timescales for grant vary
Requirements for patent protection
• For invention patents and utility models• Invention must be new
– absolute novelty test– do not market or make invention publicly available
anywhere in the world before filing application– watch out for unpublished pending applications
• Inventive over prior art• Of practical application• NB inventions made in China – confidentiality
examination required before foreign application can be filed – failure →non patentability in China
Design patents
• New over the "prior design". Not new if identical to prior design
• Prior design is any design known to public in China or abroad before filing date
• Must be obviously different from prior design or combination of features of prior design i.e. creative
• No conflict with other IPR• Not available for 2D trade marks
What rights do I get?
• Once granted third parties stopped from making, using, importing or selling invention or design without permission
• For a process patent third party cannot use process or use, import or sell products directly obtained from process without permission
• Claims govern scope of protection• Application must be in Chinese so need careful
translation (especially claims)• Consider parallel filing of utility model
Employee inventions
• Chinese employees invention law• Service inventions – employer must pay employee a
"reward" and a "reasonable remuneration" on exploitation
• Can deal with remuneration in company rules• BUT recommend terms in R&D personnel
employment contracts setting out manner and amount of award and remuneration
• In R&D agreements with Chinese companies consider who will pay possible rewards and remuneration
Joint ownership
• Many agreements between foreign companies and Chinese partners state resulting inventions will be "jointly owned"
• If no agreement otherwise, law provides– each co-owner may use invention– each co-owner may grant non-exclusive licences
(but royalties shared)– all other exploitation subject to other co-owner's
consent
Assignments and licences
• Applications and patents may be assigned• Must register transfer • Assignment only takes effect on registration• Assignments from PRC company to a foreign
party subject to authority approval• May also license patents• Record licence within 3 months (but no
penalty for failure)
Confidential information
• What is protectable?• Contractual protection
– employment contracts– NDA before information disclosed to third party
• Statutory protection – must be a trade secret– not publicly known– has economic and practical value– owner taken reasonable measures to maintain secrecy
• Practical tips for protection– Carefully mark "Confidential"– Keep in secure place– Consider splitting into parts
Technology transfer
• Most technology freely transferable• Some restricted and prohibited categories• Cannot limit Chinese party from using
improvements• Ownership of new rights and improvements
– General rule – person who makes improvement owns it
– Otherwise agree (in writing) who will own any improvements
Technology transfer
• Risk of technology/information leakage is real• Enforcement of rights after leakage difficult• Put in place systems to limit disclosure• Track and monitor use of know how by
employees and partners• Have an IP filing strategy to capture R&D
generated
Trade marks
• What is a trade mark? Indication of origin• Registration foundation for protection• What can be registered?
– words– devices– 3D shapes– colours– must be "seen"
• First to file system• Translation or transliteration of foreign brands• Over 2 million trade marks registered• Developing and clearing a new Chinese trade mark can be
time consuming
Requirements for TM registration
• National (only in Chinese) or international procedure (may cover more than one country)
• List products or services for which trade mark protected
• Formal requirements• Substantive requirements
– Legality– Non- functionality– Distinctiveness– No conflict with prior rights
Maintenance and exploitation of trade marks
• If registered, due for renewal every 10 years• Can be invalidated after registration• Use it, don't lose it!• Can license to third parties
– exclusive– sole– non exclusive
• Licensors should impose controls on quality in licences• File licence with CTMO • Can assign registration or application. Assignment must be
recorded at CTMO
Copyright
• What is protectable?– ORIGINAL creative works, software, drawings etc
• Arises as soon as an original work is created• No registration required but recordal can be
used as evidence of ownership• Creator or employer of creator first owner • Author will own commissioned works unless
contract states otherwise
Enforcement Options
• Total 30,626 new IPR cases in 2009
• New Foreign Related IPR Cases = 4.5% of total
• Rapid growth in IP civil litigation
Patent
Trdmk
Copy
TechCons
UnfairComp
Other IP
Navigating the legal system
• Mixture of laws• Civil proceedings
– People's Courts– Supreme People's Court (Beijing)– Specialist IP panels (within courts in major municipalities)
• Usually 3 judge panel – rely on judicial interpretations• No rule of binding precedent• Inquisitional system (but in practice rely on evidence
submitted)• Hear cases which have a connection with the Court's
geographical jurisdiction• Strong burden of proof on party asserting a fact
Patent enforcement options
• 3 main options– Administrative by local IPO (for all types but generally for
designs)• Order to stop acts• No damages
– Judicial• Usually Intermediate People's Courts• Damages – 4 methods for calculation:
– Loss suffered– Profits earned– Multiple of licence fee– Lump sum
– Customs• For complex technical questions → judicial
Strategies for enforcing patents
• Statute of limitations – 2 years• Before starting proceedings – be prepared
– Fact finding– ”Test" purchases (supported by documentary evidence)– Procedural formalities/requirements
• Obtaining "sufficient and admissible" evidence– Oral evidence rarely used– Use of private investigators/notaries– Orders to preserve evidence/documents and inspect premises
• Consider taking action in Hong Kong or overseas to obtain evidence
Confidential information
• How is confidential information misappropriated?– Industrial espionage– Taken by employees– Inadvertently disclosed– Misuse by licensees or subcontractors
• Digital information harder to protect
Enforcing rights in confidential information
• Actions available:– Administrative – Judicial – Criminal
• Criminal action may be only effective remedy – difficult to prove a civil case
Practical tips
• Build in protection and supervisory measures– Physical access controls– Terms in contracts acknowledging confidentiality– Remove copy functions– Deliver to named individuals who have signed
NDAs– Limit and track disclosure of technology
• Find the right partner – due diligence before agreement/disclosure
Enforcing trade mark rights
• Exclusive right to use identical or similar trade mark on same or similar goods or services
• Lodging a complaint – Administration of Industry and Commerce - where infringement occurred
• Include:– Letter of complaint– Registration certificate– Certificate of identity of trade mark owner– Evidence of infringement
• Successful AIC raid – order to stop, destruction and/or fine• Administrative action common as simple procedure• BUT Court action also available – useful for injunction and
damages and for small quantities
Copyright infringement
• Reproduction of substantial part of work or distributing copies without permission
• Unauthorised use of software• Unauthorised translation• Judicial or administrative (NCAC) enforcement• Court action has the advantages of:
– injunctions– preservation of evidence– damages
Customs enforcement
• Border protection of rights• Registration with customs optional• If IPR registered with GACC customs can temporarily suspend
release of suspected infringing shipment and notify rights holder
• Rights holder makes bond payment and applies for detention of goods
• For patents shipper can pay counterbond for release of goods• Customs investigates
– if determined to infringe →penalty and formal confiscation– if unable to determine – rights holder has 50 days to apply for
injunction. If injunction granted shipment transferred to court
Recent trends
• Move away from strong enforcement of IP driven by desire to balance enforcement and economic development
• Reflected in new legislation or proposed legislation
• Rise in counterfeiting• Automatic licence for technology incorporated
in a standard – draft rules
Practical measures
• Have an IP strategy• Pre-emptive action best• Consistent control over confidential information• Educate staff and partners on value of IP• Restrict access to information/technology• Police rights and partners – remember to include rights of
inspection and controls in contracts• Consider Customs registrations to detect counterfeits
In Summary:
• You don’t have to be an expert – there are plenty out there
• Register rights – if you don’t own it you can’t protect it
• You need to be the first to file IPR in China• Use a layered defence – don’t rely on one IPR• Use contracts & good business practices• Prevention better than cure• Be proactive
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