Intellectual property in China

Intellectual property in China

China has intellectual property laws that have, from time to time, been enforced. Like all other intellectual property cases, they are never as straightforward as they may seem at first.

As an example, China has a body of law for trademarks. One can register the trademark in China relatively inexpensively. The trademark laws conform to most international standards, with a few quirks that are best explained by Chinese legal counsel.

The Chinese also have patent laws, and one can file a patent in China. This is not as easy as a trademark filing, but that is no surprise. Trademarks are more of a declaration that a governing body accepts with little fanfare or research. It is up to you to defend it. A patent is a monopoly on a significant item of technology that is considered to be so unique that its use and licensure is given solely to the patent holder by the issuing governing body. Thus, those who submit for a patent need to submit for a patent examination with a clear defensible position of its uniqueness.

The Chinese have an extensive library of what has gone before and are not as likely to grant a patent as, say, the US or Europe. Further, as is their sovereign prerogative, while patenting something in the US or EU may give you a defense in other parts of the world, it will give you none in China. If you want patent protection in China you need to file your patent in China.

Patents are public information, and Chinese entrepreneurs know this and keep a watchful eye on those patents that have been issued. Once issued in the US or Europe, a Chinese person may just copy the already issued patent and file it in China. Why? Because they can, if you have not protected yourself by filing in China. Thus, if you have filed for a patent or a trademark in the US, and later file for a patent or a trademark in China, you run the risk that an intellectual property squatter has arrived before you.

Remember, all of the Internet domain name squatters from a few years ago? It’s the same game, different ball.

Enforcement of international patents is done on a case-by-case basis. If the Chinese company violating your patents and trademarks has significant local employment, you may have great difficulty. You may be able to stop the exportation of the pirated product, but it is unlikely that domestic consumption will be halted. On the other hand, if you can show that Chinese patents and trademarks that have been filed, you may find yourself quite surprised – and pleasantly so – by the reaction of both the courts and the new Chinese enforcement mechanisms.

The essential caveat is you must also be sensitive to the differences between domestic manufacturing for export and domestic manufacturing for local consumption. If you are not concerned about local knockoffs, so be it. If you are concerned about the domestic Chinese market, then you need to be prepared to defend your property. One interesting tactic is to make the product useless without some additional work. One of our clients designed their mechanical gizmo (it was explained what it did for cars, but it was lost on us) to have a special controller part installed after it had reached Canada. Thus, while the unit was mechanically sound when it left China, it was not operable. It was not a functioning part until after the controller unit was installed. It is a simple old tactic of getting the most labor intensive parts made in one location, and a sensitive and key part made in another, with the two being married at a third destination that is under your control.

In summary, the bad news is that commercial properties and technology will be taken as you move operations overseas, whether it be to China, India, Mexico, or France. The good news is that if you are aware of the potential problems, defensive measures can be constructed in advance. Know your environment and prepare for it in advance.

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