Thursday, June 05, 2008

How to Prevent and Act Upon Intellectual Property Rights Infringements in China

I wrote an article for Duncan Bucknell Company, the Australian company specialised in Global IP Strategy about how to protect and enforce your IPR in China. Read it on the site of Duncan Bucknell Company or below:

By Danny Friedmann

Intellectual property infringements in China are prevalent and a challenge for every company in every industry. If companies that do business in China take adequate precautionary measures, and at the same time anticipate infringements and be prepared to aggressively enforce their rights, they can substantially minimise their risks and damages. Below you will find an overview of the ways to protect and enforce intellectual property rights infringements.

Be prepared

Be aware that your intellectual property is a high risk factor in China.
Be committed in the protection and enforcement of your most valuable property: your intellectual property rights.
Budget enough financial means to protect and enforce your intellectual property rights.
Raise the awareness in your whole organisation about the risks of intellectual property infringements in China.

Do your homework

One of the clichés about doing business in China is the importance of guanxi (relationships). Indeed, guanxi are very important in China, however, one should by no means overlook the phase before one enters into a relationship.
Do a due diligence research of your potential business partners. Were they in any way involved in an intellectual property infringement before?
Demand that potential business partners sign an confidentiality agreement before you hand over any sensitive business information.
Set up a contract that includes all aspects of intellectual property rights. Who owns what intellectual property right? In what way can the business partner use the intellectual property rights? What is the time frame he can use these? Spell out that you can visit the plant unexpectedly to control how your intellectual property is used. If a potential business partner refuses to sign the contract, find another business partner.

No registration equals no right

If you do not register your intellectual property rights (with the exception of copyrights) in China, you are unprotected and it makes it near impossible to stop counterfeiters.
Although with copyright there is no registration needed, according to the 'no formalities provision' of the Berne Convention to which China is a signatory, it can be very helpful to establish prima face evidence, for example ownership. So do register your copyright at the
National Copyright Authority of China. Register your trade marks in Chinese characters too. If you want to register the phonetic equivalence of your Western name, it is possible you need different sets of Chinese characters, because Chinese characters are pronounced differently in different Chinese dialects, such as Cantonese. Make sure the Chinese characters have a laudatory meaning appropriate for your brand.
Register your patents, utility models and design rights. In China designs are, together with inventions and utility models, part of the so called inventions-creations, which are protected by the Patent Law of China..

To trust is nice, to control better

Monitor the use of your intellectual property in the plant frequently.
Know who has access to your plant, to your intellectual property rights.
Use and combine several anti-counterfeit technologies.
Monitor whether there are intellectual property infringements in your market.
If there are counterfeit products, track the origin, gather the evidence.

Be ready to enforce

In case of an intellectual property infringement act in an optimal way. Different situations ask for different enforcement routes. Timing is important too. Strike the infringers at a moment when they have added maximum value to their infringed products, because of packaging and transport, in order to hit them hardest financially.

Administrative enforcement route

In China the administrative enforcement route is the most commonly used. The Administration for Industry and Commerce (AIC) enforces trade marks, the State Intellectual property Organisation (SIPO) enforces patents, utility models and design rights and the National Copyright Administration of China (NCAC) enforces copyrights. Apart from the enforcement of patents, SIPO is responsible for the patent work throughout the country. At the national level SIPO is also responsible for the examination of foreign and domestic patents (Patent Re-examination Board). The Trademark Office (TMO) is responsible for the registration of trade marks and the Trademark Review and Adjudication Board (TRAB), which deals with trade mark disputes, are both under the control of AIC.
The advantage of the administrative enforcement route is that it is an easy and a cost efficient way. The disadvantage is that no damages are awarded and that the punishment is often limited to the confiscation of the infringing goods and/or a fine for the infringers. And often the infringers use another company as vehicle to continue their infringements.
Customs is one of the underestimated routes of enforcement. The Chinese customs authorities are willing and able to cooperate with intellectual property right holders. So instruct them on how to recognise genuine from infringing goods and how to track down infringing cargo.
A lesser known way for trade mark and design rights holders is to base their case on infringements of the Product Quality Law at the Administration of Quality Supervision Inspection and Quarantine.

Civil enforcement route

If the complexity of the infringement is high and the scale serious, then going to the People’s courts is the preferred route of enforcement.
The advantage is that the People’s courts can award damages. Disadvantage is that this route is often time-consuming and costly.
Legal protectionism can be a problem outside the big cities, such as Beijing, Shanghai and Shenzhen, which makes forum shopping of crucial importance.

Criminal enforcement route

Alot is expected from the criminal enforcement route in China, because of the alleged deterrent effect. The advantage is that you can harm infringers by locking them up or punish them with serious fines. However, the disadvantage is that there are relatively high evidentiary thresholds before alleged criminal infringers are prosecuted.

Institutions that regularly give information about IPR in China

Quality Brands Protection Committee (QBPC), lobby group of 180 multinational companies that want to improve the protection and enforcement of intellectual property in China.
Business Action to Stop Counterfeiting and Piracy (BASCP) address intellectual property rights issues and petition for greater commitments by local, national and international officials in the enforcement and protection of intellectual property rights.
Intellectual Property Owners Association trade association for owners of patents, trademarks, copyrights and trade secrets.
International Trademark Association association of more than 5,500 trade mark owners.
American Chamber of Commerce in China
European Union Chamber of Commerce in China
British Chamber of Commerce in China
Australian Chamber of Commerce in China
Websites about IPR in China
Intellectual Property Protection in China, official website about the activities of the Chinese government to improve protection and enforcement of intellectual property in China.
IP Dragon, weblog by Danny Friedmann. Gathering, commenting on and sharing information about intellectual property to make it more transparent, since 2005.
China Law Blog weblog by Daniel Harris has often interesting articles about IPR in China.
China Hearsay weblog by Stan Abrams, has often interesting posts about IPR in China.


Prevent as much infringement as possible, protect your intellectual property rights assertive, anticipate that infringements will still happen, enforce your rights aggressively. In other words build a fierce reputation that no one can infringe the intellectual property rights of your company without feeling the consequences.

Danny Friedmann

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