Negotiating China’s new IP landscape — Exporter Magazine

Rachel Colley shares four key strategies that a company wishing to access the China market can implement to best protect itself, and pre-empt IP issues.

2015 has seen the influence and importance of China continue to increase, and the case for having a presence in the Chinese market grows more compelling every day. Yet entry into China still scares a number of international companies. IP theft is perceived as being rife and doubts as to fair treatment in the country’s legal systems are some of the barriers to foreign companies.
 

However, China is on track to transition from a nation of perceived IP pirates to one where IP rights are respected, valued and protected, and this can only be a good thing for export firms.
 

When China became a member of the World Trade Organisation (WTO) just over a decade ago, it had to undertake significant work to ensure its laws were compliant with the WTO’s Trade-related aspects of Intellectual Property Rights obligations (TRIPs). China developed a number of plans and strategies to achieve this: a Medium and Long Range Science and Technology Plan; a National IP Strategy; and a National Talent Strategy.  
 

Fast-forward to the present day and China is continuing to transform and improve the legal framework for IP protection. All of China’s IP legislation is undergoing review and reform. IP-related regulations have been introduced relating to antitrust enforcement, service invention regulations and those relating to criminal enforcement. Specialist IP courts have been established in Beijing, Shanghai and Guangzhou. Additionally, more general laws have been amended that have an impact on IP protection, such as in relation to the protection of trade secrets.  
 

In December 2014, the government issued the snappily titled ‘Action Plan For Deepening The Implementation of National IP Strategies’, outlining the major targets and action points for promoting China’s IP capabilities between 2015 to 2020. China aims to triple the number of patent applications it files by 2020, and the number of patent applications and patents granted has already skyrocketed with the vast majority of patent holders being Chinese nationals. 
 

As a consequence of this deliberate government strategy, China is moving from a ‘Made in China’ mentality to an ‘Invented in China’ one. As the number of Chinese patent holders grows, so does their vested interest in ensuring that IP enforcement is effective rather than merely token. Export firms can only benefit from this shifting in the local perception of IP value.

The new China IP landscape

Meantime, the reality is that the Chinese IP system is relatively young and still evolving.  

The legislative amendments and introduction of specialised IP courts are a good start but there’s still a way to go. As China is a market that few exporters can ignore, we’ve listed four key strategies a firm wishing to access the Chinese market can implement to best protect itself, and pre-empt IP issues.

#1: File first

China’s reputation as a nation of copycats is not ill founded. If a company has any intention of using its IP in China, it should file for Chinese protection. IP rights are national rights, so this is essential.  
 

China operates on a ‘first-to-file’ basis, so this is something that should be actioned BEFORE moving into the Chinese market and, we strongly recommend, before you even speak with manufacturers, distributors etc. on the ground. You’ll be amazed at how many Chinese agents of New Zealand firms have ‘helpfully’ filed for protection of the firms’ IP in their own names.  
 

Part of the quid-pro-quo of patent protection is disclosure. If your IP is patented overseas but not in China, a competitor could learn about your technology from, for example, overseas published patents, and then exploit it in the local Chinese market – thereby reducing the scale of your potential market.

#2: Consider transliterations of your brand names

Consider filing a trade mark, not just for your brand in English, but also for its Chinese transliteration.  This not only reduces the ability for a local to misappropriate the equivalent of your English-language brand and trade off any overseas goodwill, but creates an instantly understood local connection between the consumer and your goods.

#3: Use IP notices

Mark your products for export to China with ‘patented’, ‘patent pending’, ® or TM , together with the relevant registration numbers. IP notices act as a deterrent to would be copycats and can make a difference to any damages awarded in infringement proceedings, as the defendant is unable to claim ignorance of your registered rights.

Chinese law requires IP marking of the product itself, its packaging and any accompanying manuals in Chinese.

#4: Refine the smallprint

When exporting, your initial experience will likely be working alongside local agents.  Ensure that you exercise tight control over their actions with clear, contractual provisions stating what they can/cannot do/say/agree to on your behalf.  Make sure there’re clear provisions regarding ownership of the IP and restrictions on challenging your IP ownership.

Rachel Colley is a partner at CreateIP. Email rachel@creatip.co.nz or visit www.createip.co.nz