1. Simon Cheetham and Sarah Turner
IPR Matters in China
Simon Cheetham and Sarah Turner

2. The Helpdesk Initiative
Practical business focused advice
Protection Strategy
Enforcement Advice
‘Know before you go’ 2

3. 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

4. The Helpdesk Initiative

5. The Helpdesk Initiative

6. Practical business tools Research/Publication
The Helpdesk Services
China IPR Advice
Practical business tools
Website
Research/Publication
Training/Workshop

7. The Helpdesk Website Ask our experts a question
easy to use e-learning training
modules
download brochures
Learn from case studies

8. Helpdesk Enquiries

9. Helpdesk Enquiries

10. The Helpdesk Initiative
Prevention 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 10

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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)

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. Confidential information
How is confidential information misappropriated?
Industrial espionage
Taken by employees
Inadvertently disclosed
Misuse by licensees or subcontractors
Digital information harder to protect

32. Enforcing rights in confidential information
Actions available:
Administrative
Judicial
Criminal
Criminal action may be only effective remedy – difficult to prove a civil case

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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

39. 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

40. Ask a China IPR Question:
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