Protecting Your IP In China

Alicia Beverly, Chief IP (intellectual property) strategist with IP Wealth, an Australian company, that “specializes in identifying, protecting, managing and monitoring intellectual property assets for clients around Australia and overseas,” wrote a helpful article entitled, Protecting and Enforcing Your IP Rights In China [link no longer exists].

The article begins with a couple of fairly typical China IP horror stories involving Australian companies. The first is of a manufacturer of pub equipment that went to China to investigate manufacturing one of its product there, only to discover its product was already being produced “in the thousands, with the IP rights applied for by the rogue manufacturer.”  The second is of another manufacturer who discovered his ex-manager had set up his own rival operation that sold the same product right down to the trademark.

Forgive me for yawning, but both of these stories more likely reflect carelessness on the part of the Australian company than any shortcomings in Chinese law. In the first story, the Australian company could have prevented the problem simply by filing its trademark in China.  In the second story, the Australian company should have had its manager sign non-compete and trade secret agreements.

The article then goes through a strange history of improving Chinese IP protection and wrongfully predicts the 2008 Olympics in China “will have the most impact on routing out IP thieves and dramatically improving intellectual property enforcement.”  Though I wish it were otherwise, I do not see the 2008 Olympics having anything more than the most marginal impact on improving Chinese IP enforcement.
But when it comes to explaining what to do to protect IP in China, Ms. Beverly’s recommendations are all right on. She prescribes the following:

  • China is not a DYI [Do It Yourself] country – Get Professional Help.
  • Contracts must also be translated into Chinese, cannot be common law centric [The United States, England, Canada, and Australia are all common law countries], and must cover everything because anything omitted is fair game.
  • China is a “first to file” trademark registration country with no recognition given to use or ownership by other parties. It is therefore essential that you file for your IP rights — trademarks, patents and designs —  before you enter China. Failure to do so is an invitation to the manufacturer or distributor you are working with to do it themselves.
  • Investigate whether your current trademark is useful for the Chinese market, conduct searches, and then protect several versions of your trademark — the English version, the Chinese translation, and even a phonetic version of the English.
  • Design products that are hard to imitate and commit to continuous innovation to keep one step ahead.
  • Consider splitting up elements of your production in different locations.

Nothing new here, but all very solid advice. In discussing the need to have contracts in Chinese, because we are talking about protecting IP, I assume she is talking about contracts that aid in IP protection. On that score, it often makes sense to require those with whom you are dealing in China to sign a trade secret contract, requiring them not to divulge your trade secrets and/or non-compete agreement, whereby they agree not to compete with you within certain geographic and temporal limits. NNN Agreements (a sort of premium NDA) are also usually critically important. NNN stands for non-compete, non-circumvent, and non-disclosure. Note that a Western-style NDA agreement simply does not work in China and — for various reasons — is usually worse than having no agreement at all.

If Ms. Beverly is advocating for companies always securing a China trademark in English, Chinese, and even “a phonetic version of the English,” I disagree. In many instances, just the English is enough and I am of the view that these determinations should be made on a case by case basis. Registering additional trademarks is not terribly expensive, yet it still makes economic sense to register only those necessary for your business.

If you take away nothing from this article, take away that China’s IP laws are different and difficult, but if done right they can provide you with protection and you ignore them at your peril.

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