China IP? Better Luck Next Time.

International IP lawyer

David Dayton of the always excellent Silk Road International Blog just did a post, entitled, Show Questions, on some of the questions he was asked as a speaker at the Global Sources Buyers Show in Hong Kong.

My favorite interaction was the following:

Finally, I had a very nice conversation at the “Ask the Experts” Q&A Sessions yesterday with a rather worried new buyer. Basically he said: “I’ve made samples and placed two trial orders already with 4 different factories. I didn’t like the quality I got and I’m currently not working with any of them. But now I’m worried that they may be violating my IP.”

My response: “Don’t worry, they are. Your best case scenario now is to hope that they don’t file for trademark or patent registrations in China before you do.”

Remember China is a first to file country so you’d better be the one that files first! That means file BEFORE you give your art to the factory

So true. Every month or so, someone calls one of the international IP lawyers at my law firm (usually just long enough after returning from their first trip to China for the glitter to have worn off), worried that the design or prototype they were showing all over China might be copied by one of the factories to whom they will not be awarding their bid.

If these companies have a patentable product (and nine times out of ten they do not, either because their product is inherently not patentable or because it has been too long since they secured a patent on it outside China), we discuss with them their need to patent their product in China before someone else does. We do the same regarding China trademarks, if that is applicable.

More commonly though, I just tell them that the next time they show their product or design in China, they should first require the party to which they will be making the disclosure sign a China NNN Agreement.

Such advice is the legal industry’s equivalent of “better luck next time.”

5 responses to “China IP? Better Luck Next Time.”

  1. “If these companies have a patentable product (and nine times out of ten they do not, either because their product is inherently not patentable or because it has been too long since they secured a patent on it outside China), I discuss with them their need to patent their product in China before someone else does”
    Even if a patent cannot be obtained for the invention, you may still be able to register the design as standards for novelty are different – this is also worth remembering.
    The thing is, a good patent agent should always discuss where their client is planning to make/sell/use their product. Did these people patent their product in the US and didn’t they discuss in which juridictions they would require protection for their invention at that time?
    As for first-to-file systems allowing more scope for people to patent your invention before you do, this is somewhat dubious. First-to-invent requires an inventor to prove that they were the first person to exercise due diligence in attempting to reduce the invention to practice. This can be a lot harder (and way more expensive) to prove than the level of proof required in the interference proceedings found in most first-to-file countries, where you simply have to show that the other party stole your invention and that you are therefore entitled to the patent. It would not really make much difference if China were a first-to-invent country, as people would still be able to file applications based on products and material which you had inadvertantly shown them, but getting the patent handed over to you would be much more difficult.

  2. Dan, how enforcible or effective is Non Disclosure Agreement in China? I got the feeling that small factories are not going to care even if they sign such agreement.

  3. FOARP,
    You are 100% right to say that “a good patent agent should always discuss where their client is planning to make/sell/use their product. Did these people patent their product in the US and didn’t they discuss in which juridictions they would require protection for their invention at that time?”
    But there are still many reasons why companies fail to plan ahead for China. First off, many times, the IP discussion we are talking about occurred ten years ago, when nobody was really thinking about China. Second, let’s say it happened five years ago. How many SMEs back then were willing to spend what it would take to protect their IP in China when they perceived only a 5% chance they would ever need to worry about China IP. Third, five years ago, China IP protections were far less valuable than now.

  4. Tian,
    You have asked the key question.
    The Chinese courts generally will enforce such agreements, but that, I realize, does not really answer your question.
    My sense (and that is really all anyone can go on) is that Chinese factories generally do take these non-disclosures seriously. I base this on the fact that some refuse to sign them and many make changes to them. If they thought they were “nothing but a piece of paper,” they would just sign them without hesitating. My sense is also that once a factory has signed one of these, they generally view going against them as a much bigger problem for them than disclosing information of a company with whom they did not sign an NDA. Are they a guarantee? No. Are they a deterrent? Yes.

  5. I found your site on Google and read a few of your other entries. Nice Stuff. I’m looking forward to reading more from you.

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