Getting the big stick ready for Chinese pirates — Exporter Magazine

It may take up to 30 months to protect your patent in China but having a stick to wield against Chinese copycats and IP thieves is a necessity.

Christopher Withers’ company Aquatite Enterprises has a certificate from the Chinese patent office for his Wetwall Caddy™ invention. The pity is Withers will never be able to read a word of what it says unless he learns Mandarin.The Chinese won’t supply him with an English version.  That’s life in China.  Concessions are not often made unless it is convenient.  Withers has, however, chosen to take the safe road – by getting a patent for his invention, he will at least have recourse if copycats decide to steal his design. China, Withers says, will be an important market for Aquatite Enterprise which makes devices to prevent leaks resulting from plumbing fittings and water intruding into wall cavities.  Although the company does not have the resources to tackle the Chinese market yet, it already has patents in place. GETTING READY FOR CHINA Aquatite Enterprises has filed patents in four countries – New Zealand, Australia, the US and China.  “This was based on advice from our patent attorneys,” he says, adding that the exercise cost over $200,000.  It is expensive, but necessary, he reckons.China is still a haven for counterfeit goods and copies of every famous brand can be found in tourist areas, either in the open or under the counter.   After its ascension to the World Trade Organisation, China has been more active in shutting down copycat operations but the size of the country makes enforcement an issue.

In the lead up to President Barrack Obama’s visit to China late last year, counterfeit goods and cheap imitations of US brands were cleaned out of noted pirated goods building in the middle of Shanghai, according to one Kiwi at China that time. TEDIOUS BUT NECESSARY Anton Blijlevens, a partner at patent specialist AJ Park, says enforcement of patent violations varies from territory to territory in China.  The process of gaining a patent also varies, with some regions easier than others.

A common mistake Kiwi exporters make is not bothering to put up with the process because of the initial time and financial resources involved.“For smaller companies, they may realise when they have the money [to pursue patents], they don’t have the stick they need to wield against infringements,” Blijlevens says.

The patenting process can take up to 30 months and covers the entire country (other than Hong Kong).  For a typical consumer product, the cost for seeking a patent may be up to $15,000.  A New Zealand patent attorney still needs to use a local Chinese counterpart to handle the process, unless the company has a China office. PROTECTING NOT JUST WIDGETS BUT KNOW-HOW Philip Thoreau, a partner and patent attorney at Baldwins, says Kiwi exporters need to think beyond inventions or gadgets when they think intellectual property (IP).

 “For instance, there are many education institutions going to China.  They have huge IP in they way they do things – how you organise the business to produce on time, at a certain cost, how to bring the service to the market.  Often this is donated to the other person you’re dealing with as they are not recognised as IP,” Thoreau says.Working out an IP strategy requires a company to actively document its business processes and to work with a specialist on identifying parts of a business’ knowledge that can be classified as valuable IP.Protection of IP should be done before an exporter hits the actual market.  “Working out a strategy – that’s the elementary part, it is one of the most fundamental things.” Thoreau says.

Typically a small exporter goes to China and spots an opportunity.  He then discusses potential breaks, potential products with Chinese parties, not knowing there is a huge risk of losing IP.

Even while discussing potential distributors, Kiwi exporters should be mindful that an unscrupulous party may register a company’s brand and hence have ownership of the brand.

“This creates an immense problem for you – them tying down your brand to their system, tying the source of supply to your brand,” Thoreau says.

He advises Kiwi exporters to register their brands ahead of discussions with potential distributors.

In China, the first party to register a brand gains ownership of the brand.  So a Kiwi creator or owner of a brand late in registering it will lose ownership.Think you have found a trusted manufacturer?  In one Kiwi manufacturer’s case, even a close relationship with a contract manufacturer had its flaws.This Kiwi company discovered similar products cropping up elsewhere.  The licensed contract manufacturer had been running night shifts without the principal Kiwi company’s knowledge, and collecting the extra profits.The Kiwi company had to send a trusted Kiwi employee to live on the factory grounds to keep an eye on the manufacturing activities.Lawyers say China copycats will still prevail but having patent, trademark and copyright protection means having a stick to wield against copycats.“If you have good protection, there is less likelihood of infringement,” Thoreau says, adding that global brands that have been aggressive in protecting their brands have been more successful at stamping out counterfeiters.A Kiwi company can seek judicial recourse for patent infringements. On another level, local authorities also have the power to shut down operations of copycats, but do not award compensation to IP holders, says Blijlevens.

China has a national strategy to deal with IP infringement.  Local news agency Xinhua reported in February the arrest of a general manager at Beijing’s famous Silk Street Market, who was selling counterfeit Louis Vuitton bags.