Jurisdiction - China
Reports and Analysis
China – Slowly Joining The International Community In IP Enforcement.

6 May, 2013

 

 

There are many hurdles to doing business in China but IP protection is no longer the biggest concern of companies when entering the Chinese market.

 

In a recent Conventus Law poll the majority of respondents said that they did not feel confident about enforcing their Intellectual Property (IP) rights in China.

 

65% of respondents answered negatively in the poll which ended on 31st January 2013. Respondents to the poll included partners in private practice and in-house counsel in the Asia Pacific region.

 

 

When asked how he would have responded in the poll, Matthew Laight, Partner at Bird & Bird said, “I am medium confident. We have been getting some good results for clients. We obtained a judgment last year that enabled our client to get their trademark back where a company in China had for about a decade been producing very similar products under an identical name. What is positive is that the Court grappled with a difficult issue and came to a clear decision. But it took a very long time. When it comes to patents a couple of the decisions last year were surprising, but those cases are under appeal so we shall see what happens second time around.” 

 

Douglas Clark, a Barrister at Gilt Chambers, on the whole, agreed.
 
“I feel confident that trademark rights would be enforced in China. It’s much better than it was. There is a general recognition of the value and need to protect trademarks.The extreme other end is patent rights which are sometimes enforceable sometimes, not. With regard to copyright enforcement, I am somewhere in the middle.”
 
In the past, a lot of companies would have been reluctant to enter the Chinese market and do business in China for fear of their IP rights being infringed. However, statistics show that China is moving in the right direction. In 2012, the Courts accepted 87,419 civil IP cases. That is a 514% increase since 2006.
 
However far fewer patent cases are heard compared with trademark administrative cases despite an increase in patent filings in China. It should also be borne in mind that an IP case in China is not necessarily comparable to those in other jurisdictions: China has a short statute of limitations, typically awards low damages and there are difficulties in enforcement.
 
In a report by Forbes dated 18th April 2012, it was said that “when combined with the lack of legal enforcement, the issue of protecting intellectual property rights is the single biggest hurdle for most companies to overcome when thinking about entering the China market”.
 
Both Laight and Clark believe that this is no longer the case.
 
“It's a big hurdle but not the single biggest in my view,” Laight said. “Companies entering China need to plan very carefully how to protect their IP rights. As a practitioner in the field I can say that many problems arise because clients have not put in sufficient time, effort and money to protecting their rights in the first place.  There are many hurdles to doing business in China.  I believe one of the biggest is to find, train and retain good staff. This impacts on IP rights because you get situations time and again where employee innovators do good work for a company but then move on for higher pay, and the IP walks out the door with them.”
 
Likewise, Clark agreed that there are all sorts of different hurdles. “Those companies that are trademark intensive would say things are much better.With patents it's different and remains a big problem.”
 
Clark explained that IP protection used to be the top concern about doing business in China as illustrated by the European Chamber of Commerce Business Surveys taken every year.
 
However, in the 2012 survey, 43% of responding “large companies” felt company name infringement was a significant issue for their company. 55% of companies that had been operating in China for less than 5 years declared their China revenue increase by more than 20% compared to [2011].
 
It is possible that many companies today see the benefit of increasing revenue via the China market as far outweighing the risk of their IP rights being infringed.
 
“Although many companies still do not see IP as an asset that needs protecting, many now see the importance of this and invest accordingly,” Laight said. Perhaps companies that are confident in trading and investing in China are those who have taken legal advice at the outset as to protecting their IP and have properly prepared themselves for dealing with potential infringements of their IP rights in China.

 

 

Conventus Law

 

For further information, please contact:

 

Scherzade Westwood, Conventus Law

editor@conventuslaw.com

 

 

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