Doing Business in China: Protect Intellectual Property

Companies are rushing to trade with China, the world’s second largest economy.

Use All Available Resources Your business should consider using Canada’s trade resources. For example, register your trademarks and copyrights with the Canadian Border Services Agency. Customs will screen select shipments to verify that they comply with the Customs Act. Intellectual property can also be registered with Chinese Customs. Registration is not foolproof, however. In both countries, the screening process keeps only a small portion of infringing goods out of the marketplace. Other Canadian agencies can also help sort out intellectual property difficulties. The Canadian Intellectual Property Office has a wealth of IP information. The Canadian Embassy can help locate IP attorneys in China as well as monitor the status of an infringement case within the Chinese legal system. The Canadian Trade Commission also has extensive knowledge of Chinese intellectual property laws as well as industry-specific information regarding music, software, the automotive industry and pharmaceuticals. You might also want to consider subscribing to blogs. There are a number of highly informative websites and blogs that cover Chinese intellectually property laws in detail. These sites also routinely cover enforcement actions. In addition, consider creating Google alerts focused on Chinese intellectual property laws and enforcement.

Some organizations are expanding so rapidly into China that they dangerously postpone registering their intellectual property (IP). The importance of protecting IP cannot be overemphasized — it is often at the heart of a business’s success.

If your company plans to do business in China, or if it already is, it needs to be familiar with Chinese IP law. Beijing has strengthened those laws over the past decade, but work still needs to be done.

The Canadian Embassy recommends that every company’s plan for doing business with China include IP-protection strategies. Businesses that already operate there should review their IP policies and protections to ensure they have kept pace with corporate innovations and expansion.

Some companies mistakenly believe that Canadian intellectual property registration protects them in China. Others underestimate the risk of IP abuse. Patents and trademarks registered in Canada are not typically protected in China. To help prevent infringement, your business must register its intellectual property rights with the Chinese government.

The trademark and patent protection system in China operates on the basis of first-to-file rather than first-to-use or first-to-invent. This means that the first party to register is granted the rights. China’s intellectual property protections include:

Trademarks: Using trademarks is generally the most effective tool against infringement in China. It is easier to identify an infringing mark than a patent or copyright, which require a time-consuming administrative review.

Applications must be filed with the Trademark Office of the State Administration for Industry and Commerce (SAIC). Before beginning the process, conduct a search to confirm that no one else has registered your company’s trademarks. To ensure the maximum protection under the law, register your trademark in English and in Chinese characters. Despite different spoken Chinese dialects, a Chinese character trademark is understood by all Chinese consumers. Removing the language barrier with a character improves brand recognition and enables the products to reach a wider market. While you are at it, register your company’s Internet domains.

If your business has a physical presence in China it can file a trademark protection application directly. If it does not have offices there, it must use an authorized trademark agent. Warning: A registered trademark that is not used for three consecutive years in China is subject to cancellation.

Once a trademark license contract is signed, your organization must submit a copy to the Trademark Office within three months. The licensee must submit another copy to the local county SAIC. The contracts must include provisions showing your company agrees to supervise the quality of the goods the licensee manufactures and include a requirement that the licensee will put its name and address on the items.

Patents: Chinese patent law recognizes three kinds of patents: invention, utility model, and design. Applications are made to the State Intellectual Property Office. If your business doesn’t have an office in China it must apply through an authorized patent agent. The protection lasts for 20 years.

When your company applies for a patent in Canada, it can also submit an application for a Chinese patent. If your business already has a patent in Canada, you should apply in within one year for inventions and utility models and within six months for industrial designs. Any later than that and China may decide not grant a patent because authorities there won’t consider the invention to be “new and innovative.”

Copyright: As in other countries, there is no need to register a copyright to receive protection under Chinese law. Foreigners have copyright protection of their works if they were the first to publish the work in China. However, as is the case in Canada, registering a copyright with the Chinese authorities eases the process of copyright enforcement. Authorities can confiscate and destroy infringing products, but criminal prosecution is infrequent.

Trade Secrets: These also do not require registration. However, your business must be able to show that it has set up policies and procedures to safeguard its trade secrets. Your company’s treatment of the trade secret will dictate whether or not the courts grant protection. The theft of trade secrets is punishable under civil and criminal law.

To help further safeguard your IP rights in China, consider these steps:

• Conduct due diligence on partners, agents and distributors. Associates or former employees are frequent sources of intellectual property infringement
• Cover all aspects of your business’s IP with clear contracts that include clauses on your ownership rights and on limitations over the use of IP by partners, distributors, and licensees. Contractual problems are a frequent source of infringements. Have your legal advisers review all agreements and consult with you during negotiations.
• Require employees to sign confidentiality and non-disclosure agreements as well as accords dealing with the use and ownership of intellectual property.
• Engage a qualified intellectual property attorney if you plan to pursue an enforcement action. The Chinese agency to notify will depend on the type of intellectual property involved as well as the region of the country where the dispute has arisen.

If your organization does not register its intellectual property it risks having its inventions registered by others operating in bad faith. While there are mechanisms to pursue recourse, the legal processes can take years to wind their way through the system at considerable expense and trouble. The safest action is to register your intellectual property as soon as possible and to remember to register the Chinese character versions of their trademarks.