By Maarten Roos

The continued pervasiveness of counterfeiting in China is not only a problem of law, but also one of enforcement. While China’s laws and regulations conform to the agreement on trade-related aspects of intellectual property rights (TRIPS) and other widely accepted international principles, certain parts of China’s protection mechanism have proven ineffective. Common examples are the high standards for criminal liability of counterfeiters, the high burden of evidence to prove bad faith registrations, and the difficulty to prove damages in civil proceedings. On the other hand, it is abundantly clear that the police, administrative authorities and courts often lack the resources, the knowledge or the determination to effectively combat infringements.

China’s own continuing development, and to a lesser extent international pressure, will gradually lead to improvements on the above issues, but this is not a process individual intellectual property (IP) owners can influence. Owners can however ensure that they have the exclusive rights to their IP in China under Chinese law, and that the best decision can be made quickly on whether to take action against a perceived infringement. Such protection, usually inexpensive and rarely time-consuming, is the most basic element to an organization’s IP strategy.

Identifying the IP Manager

Every organization should appoint someone to coordinate IP interests. Whether it is an IP specialist, lawyer or manager, at least one person needs to maintain a clear perspective on the organization’s IP interests and rights, collect information on potential infringements, and be able to respond immediately in case of need.

Responding quickly and decisively to potential IP infringements is often a crucial part of the success of an IP enforcement action. Therefore the most effective IP Managers are people with authority, who are able to reach decision makers quickly. They build communication channels with sales persons and others in the organization to learn of infringements. And they ensure that a law firm is retained to support enforcement actions at short notice, with a valid Power of Attorney and relevant IP registration certificates in place.

Identifying your IP Portfolio

IP rights gain value during the course of one’s business. A regular review of an organization’s intellectual property to identify which are sufficiently valuable to protect will prevent an organization from being caught off-guard.

Logical moments to conduct such an IP audit are when a foreign company enters a new market or when it establishes a subsidiary. Thus foreign companies investing in China should make an IP review part of their due diligence. Furthermore, as China is a fast-developing market place, a yearly review is recommended. During this review, the IP manager should identify the old and new IP that the organization (and perhaps its affiliates) owns in China, and whether the corresponding rights are registered (in case of trademarks and patents). If not, then the IP manager should be able to proceed with registration at short notice.

Among the IP that should be reviewed are:

(1) Brand names, either developed by the organization or its affiliates abroad, or even those that have developed in the market – e.g. a Chinese version of an existing international mark;
(2) Domain names which correspond to the trade name and/or above brand names (especially those ending with .com, .cn and .com.cn);
(3) Patents, which are technical inventions developed by the organization or its affiliates abroad;
(4) Specific designs of industrial products which are distinctive and may be easily copied
(5) Copyrights, such as software, catalogues, webpages and articles; and
(6) Trade secrets, undisclosed technologies, confidential business information and other sensitive data to which the organization has rights through contractual obligations of employees or commercial counterparts.

All the above can be protected under Chinese law. However trademarks and domain names must be registered before another party does so, and for a patent filing to be granted the technique or design must be either novel (not publicized elsewhere before the filing date), or must be applied for within a certain period after the corresponding foreign application. This makes the timing of such applications crucial.

Registered trademarks, copyrights and designs may also be recorded with the Chinese customs authorities. As a consequence, if customs finds goods that are infringing on recorded rights, it will notify the owner immediately so that the latter can take action. If they know of a shipment of counterfeits, owners of recorded rights may also notify customs directly.

Maarten Roos, Wang Jing & Co

This is the first part of the article Protection vs. Enforcement. Next week we will publish the second part.