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Business> Legal-Ease
UPDATED: December 15, 2006 NO.35 AUG.31, 2006
Intellectual Property Issues in China

Intellectual property is very much an emotive issue when it comes to China, and there are many misconceptions or misunderstandings about the subject and how to cope with intellectual property when it comes to "the China issue." Let's examine some of the more common mistakes:

"I have already registered my trademark and therefore it is covered."

China is signatory to all the international protocols that the international community has drawn up concerning the registration and protection of international intellectual property. Therefore, China follows the same system as most nations follow. This means:

Registration of your mark

International recognition is only granted provided your mark has previously been registered in five other jurisdictions (thus proving its "international" status) or can be otherwise argued as an "internationally considered brand"--which is a debatable point and subject to legal interpretation. This means if you have only registered your mark in your home country--you are not covered in China. For practical purposes, however, even if you have international protection, we still recommend registering in China as courts may have difficulty in recognizing international protocols if they are not used to them, and this will mean more time and expense in legal fees to educate the courts and provide evidence of the significance of such protocols and China's adherence to them. Trademark registration is in any event inexpensive and should be undertaken as a matter of good business sense.

Going through the legal system in China

Actually, China's courts are improving in upholding claims of plagiarism. It is also worth noting that the vast majority of infringements in China are between Chinese firms themselves, and it is not only international firms that are targeted. Most of the valuable brands in China are of course Chinese. Courts can and do, in the main, uphold claims by foreign companies where the evidence is properly introduced and in order. The problem is not with the judiciary, although they are not perfect either. The main issue is that of enforcement--actually stopping the infringement once a judgment in your favor has been awarded.

As mentioned, this can be difficult. You need to defend yourself from the outset against the likelihood of such behavior. Getting your brand registered in China is the first line of defense.

Other issues to note

Is it worth it?

It is important to assess the actual damage against the emotional and litigation costs. Lawyers are expensive, and emotions can mean you concentrate more on the litigation than the case actually warrants. It is wise not to overstate the damage caused to your firm if you do get ripped off and be somewhat pragmatic about it if you are.

Is your intellectual property vital to your China or international business?

If it is, you may need to seriously assess whether or not you wish to introduce your technology at all to the market here. Or assess the amount of time you have with your intellectual property, as part of a marketing plan to work out how long you are likely to have a free range of the market before the plagiarists get to work and start to erode market share.

Patent registrations

As mentioned, China is signatory to various international protocols when it comes to registrations of patents and trademarks. There is, however, a hole in the registration procedure for patents, which require they be registered and placed on public file for assessment prior to the patent being recognized as your own intellectual property. This means some entrepreneurial types scan such registrations specifically to steal designs and then immediately get into production even while your patent pending process is still ongoing. This is not a China issue-it is a weakness in the international protocol of registrations and needs to be addressed in the fullest sense to protect expensive R&D and inventions from being used on the cheap by unscrupulous businesses.

Chris Devonshire-Ellis chris@dezshira.com is a senior partner of Dezan Shira & Associates, Business Consultants www.dezshira.com

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