While many foreign companies believe that China represents an exceptional business opportunity, concerns over the level of protection they can expect for their IP, trademarks, and copyrights have long been a barrier to their moving forward. Indeed, while knock-off and copy-cat products originate in many countries, for years China was and still is considered the most flagrant offender.
It bears mentioning, however, that for many products, a factory needs just a handful of genuine articles sourced abroad in order to re-engineer or copy them. Thus, simply choosing to stay out of China does little to mitigate your IP risks there.
Granted, having an active presence in China may theoretically increase the risk of piracy, knock-offs, unauthorized surplus production and the like, but this theoretical risk of IP loss is in most cases illusionary, and is not a valid reason to stay out of China. With proper counsel from firms like IPO Pang companies that wish to capitalize on the final economic frontier known as China – whether as importers or manufacturers – a number of regulatory and operational strategies can be adopted that will minimize their risk.
Companies that are contemplating a presence in China need to carefully consider their IP strategy and use experienced agents who can not only register, but also defend, their intellectual property if need be.
One of the first things that companies should do is determine exactly what their trademark status is in China, whether they are actively working in China or not. Hundreds of products with well-known brand names that have historically only been sold outside of China may already be registered inside China by other parties. Thus, it is conceivable that an unsuspecting foreign manufacturer doesn’t even know that similar products, often of inferior quality, are sold under its brand in China. So the case is made that aggressive tactics should be adopted to protect one’s brand regardless of whether or not products are manufactured or even sold in China. As mentioned before, staying out of China simply because of IP concerns will not only mean missing out on the world’s largest market for products and services, but will also probably mean inadequate vigilance and enforcement of one’s own brand, with the risk that “brand equity” will be damaged.
For obvious historical reasons, Chinese laws on IPR protection developed late in comparison to most countries. However, the Chinese government has determined that this historical failure to adequately protect IP was having a deleterious impact on its drive for ever-increasing employment and foreign investment. Moreover, even famous Chinese brands were falling prey to knock-off manufacturers. Accordingly, and in concert with its entry to the WTO, it has placed an ever-growing emphasis on IPR protection for foreign and domestic companies alike.
In 2005, in order to protect China’s own intellectual achievements as well as those of foreign companies, China began to implement a national IP strategy, and by June 2008, the strategy entered the implementation stage. Well-known companies such as Philips, Louis Vuitton, Chanel, Burberry, Prada, Gucci, Microsoft, and The North Face have all enjoyed successful IP defenses in recent years, and while the damages awarded have not been high by Western standards, the key victory can be found in the precedent-setting cease and desist orders issued to infringers.
As in most countries, IPR protection in China begins with local registrations. As China is a “first to register” country, having your key IP rights properly registered early on – even before you enter the market – is an important component of your protection strategy. Foreign companies and individuals need to have an IP agent help them navigate all the steps of the registration process according to the relevant IP laws.
To register for a patent, the agent acting on behalf of foreign companies and individuals will go to the State Intellectual Property Office of the People’s Republic of China (SIPO). SIPO receives both domestic and foreign patent applications. After examination, SIPO grants patents if deemed patentable.
To register a trademark, the agent acting on behalf of foreign companies and individuals will go to the State Administration for Industry & Commerce (SAIC & TMO). The Trademark Office under the administration of SAIC (TMO) receives and examines trademark registration applications, including domestic trademark registration applications (inclusive of Madrid international registration) and foreign trademark registration applications. TMO only approves trademark applications after careful examination of the requisite qualifications for trademarks.
To register for a copyright, the agent acting on behalf of foreign companies and individuals will go to the National Copyright Administration of the People’s Republic of China (NCAC) or the Press and Publication Administration. The registrations of copyrights are administered by NCAC. In recent years, NCAC has actively promoted registrations of copyrights, computer software, voluntary registrations of works, and so forth.
Website Domain Names
All domains ending in dot cn (.cn) should be registered in such a way as to parallel the dot com registration as quickly as possible. As in the West, some unscrupulous companies in China register a domain that is identical to the foreign domain – such as dot com, dot de, dot it, dot tv, etc. – but in the form of dot cn. The prefix to the domain string is the same as the client’s, but the suffix – dot cn – is strictly China. When the foreign company in question decides to enter the Chinese market, they may find that these companies will try to sell the domain for a handsome price or, if they are truly entrepreneurial, create a whole ecosystem of business identical to the dot com foreign company, but strictly in the Chinese language, thus leveraging the dot com company’s worldwide fame and notoriety.
Selecting the proper agent to manage your registrations is critical. Certainly, there are numerous companies that will push the paperwork through the appropriate channels for modest fees, but unfortunately many of them do so without regard to how those applications should be optimized, let alone defended and enforced. It makes a lot of sense, therefore, to select an IP agent that will do more than simply go through a mechanical process on your behalf, but rather, to select one that will optimize, and if need be defend your IPR.
Whether or not you are planning to market in China, you should investigate the status of your brand and domain names there in order to safeguard your company’s hard-earned reputation.
Like so many other facets of doing business in China, there are some unique aspects of IP protection that companies need to be aware of. Notwithstanding the historical problems associated with IP infringement in China, IP legislation and enforcement is indeed changing for the better. Companies should understand that their IP risk in China is quite manageable provided it is professionally and diligently administered.
IPO Pang has been helping foreign companies develop their IP strategy to maximize their IP protection in China for many years, working in conjunction with enforcement partners and associates that have the client’s interest at heart. IPO Pang is ready to work on behalf of the aggrieved by leveraging its relationship and experience in working with the relevant authorities to enforce those rights through litigation as well as through factory raids and product confiscation.