A critical and long-standing concern for companies in China is the protection of their intellectual property (IP).
The copycat country is notorious for stealing intellectual property from numerous businesses, leaving several Western companies hesitant to bring in their technology due to valid concerns about loss of intellectual property.
However, there is proof of growing instances of firms that have successfully taken legal action against intellectual property theft.
As a result, the Chinese government has begun to pay more attention to this issue and has made several moves towards a better environment for intellectual property protection – such as increasing the number of IP courts.
Nevertheless, it is still especially important that companies make every effort to apply preventative measures to ensure the protection of their intellectual property.
Patents, Trademarks, and Copyrights
Without patents, trademarks, and copyrights, a company in China has no formal intellectual property protection there. Therefore, companies working in China should record or register their eligible intellectual property as early as possible.
Applications for patents should be filed with the State Intellectual Property Office (SIPO) for intellectual property that the business views as essential to their core and fringe technologies.
Prior to filing, companies should also ensure that the patents are properly translated to prevent error and potential loss of intellectual property.
Core trademarks should be broadly registered with the China Trademark Office. These trademarks should include the Chinese character name, Chinese pinyin name for core brands with the China Trademark Office, and the English name.
When filing, it is highly important that a company carefully select the categories and sub-categories of the product in which to file – and be sure to include marks filed in categories even outside of the company’s core products.
Several companies have run into issues where a local competitor will register a very similar trademark but list it under a different product category – a legal practice under the Trademark Law.
Registration is not required; however, it could be used as evidence of a public record in copyright disputes. Therefore, entities should consider registering with the National Copyright Administration.
4 Must-Knows for IP Protection in China
In addition to setting up the proper registration needed to protect your intellectual property, a company must also continue to take a few preventative measures:
- Design the manufacturing process in a way that protects IP.
By compartmentalizing the critical steps in the design and production processes for IP-intensive products, companies can limit the likelihood that a single employee will have access to the information needed to copy IP in its entirety.
Also, consider incorporating techniques and production process technologies into the process that are difficult to copy such as stamps, threads, labels, and inks.
According to Shanti Rubens of Legal Zebra Australia:
“It’s well known that pursuing legal cases in Asia can take years and be fraught with corruption, so don’t count on the law to protect your IP. Try to find smarter ways such as splitting up your manufacturing among different suppliers so any one of them can’t replicate your product. You should try to forge strong relationships with your business counterparts and quickly scale up your orders so you have enough clout to stop them offering competitors your designs.”
- Focus on human resources.
Several threats to IP protection can be noted up front just by the simple investigative work of human resources (HR).
Start by running background checks on key hires to make note of any “red- flags.” Also, include noncompete and nondisclosure agreements in all employee contracts.
A few other key HR aspects to focus on include precisely noting which employees have access to what information based on job title and function, control and monitor employee access to important information and facilities, conduct exit interviews and attempt to recover any sensitive materials.
- Ensure careful selection and monitoring of business partners.
As part of your comprehensive due diligence, investigate how business partners view intellectual property – including their own intellectual property and that which they access through business partnerships.
Focus on regularly engaging with business partners to reiterate the importance of IP protection and also manage vendors, distributors, and supplier’s relationships through multiple personnel to limit readily available local staff abusing business networks.
- Actively monitor for any sign of IP infringement.
Regularly review distribution networks and send trustworthy representatives to industry trade fairs and shows to look for counterfeiters. In addition, continue to monitor the internet for possible infringement.
Wrapping It Up
In conclusion, the protection of intellectual property in China appears to be making efforts toward improvements. As the government takes note of the many instances in which the theft of intellectual property has occurred, they have begun to take the issue more seriously.
However, IP protection begins with preventative measures such as the proper registration of trademarks and patents, followed by continuous monitoring of the industry and employees.
The issue of IP protection in China still poses a major threat to entrepreneurs and is not one that should be taken lightly – it can happen to anyone.
Michael Michelini is host of the GlobalFromAsia.com podcast, an online radio show to help business owners grow their companies in Asia and around the world.
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