The China syndrome
It is a fact of business that if a product sells, there's every chance someone will imitate it. Intellectual Property Rights (IPRs) are available in law to prevent the exploitation of technology, brands and designs without permission of the proprietor. But what if imitation is happening abroad?
And, specifically, what if it is happening in China, where a substantial amount of manufacturing takes place?
China has developed at an incredible rate and while in the early days IPRs were either non-existent or completely ignored, things are now very different. So, what do you need to know about intellectual property and China?
Fundamentally the protection available to a foreign company is the same as it is in the UK and other industrial countries. You can protect technical features (with patents), aesthetics (with designs) and brands (with trademarks).
The legal requirements for patents, trademarks and designs are also largely the same or similar. For example, to get a granted patent in China your invention must be new (novel) and not be obvious to a person skilled in the field of the invention (inventive). Chinese patent law is in fact based on the law of the European Patent Office and, although over time there has been some divergence, the laws remain largely the same.
The legal profession has de-centralised in China and there is now an abundance of law firms of varying size but also quality. Selecting a prominent firm in a major city is a good start. Good English skills are essential since this minimises the chances of technical issues and arguments being 'lost in translation' and costs increasing. Costs can often be minimised by recycling amendments and arguments which have been used in other countries. As mentioned above, the basics are the same and similar objections frequently arise at different patent offices. A way to control costs is to be realistic about the scope of protection you actually commercially need. If you try to secure very broad protection, you can expect more objections. This applies in any jurisdiction.
Typical Patent Strategies
Typically, companies first file a UK patent to protect their domestic market. Then, 12 months later an international application (stemming from the UK) is filed designating most industrial countries. This keeps all options open. The common misconception that there is an international patent – there isn't; an international application is a means to select countries at a later date. At 30 months from the UK filing you select your countries for national rights, in our case China. You then commence your dialogue with the Chinese patent office and eventually a patent is granted.
There was a time when obtaining an injunction or damages against a Chinese company, in China, was almost impossible. Again, things have changed substantially. A good tactic is to select a court away from the infringer to a more 'neutral' court. This is a good way to ensure your case is dealt with without any possible bias of local officials, a common complaint of litigants in China.
Remember China is a commercial market and your IPRs are a commercial tool. You can licence and sell your IP even if you don't operate there yourself. It may well be better to do a sound deal on a licence than enforcing your rights or perhaps allowing infringement to continue un-checked. With a population in excess of 1 billion, even a small royalty can generate a considerable income.
The future of manufacturing in China
Labour costs in China are increasing as standards of living rise and that removes the edge that China has enjoyed for many years. Manufacturing in the UK may well become more appealing, particularly if products can be designed to minimise labour costs. This keeps technology, 'know-how' and jobs in the UK and reduces transport costs. A richer China will also consume more. China might thus convert from an exporter to an importer of your products. Irrespective of where you manufacture, if China is a mass market for your products, maintaining IPRs there becomes very important.
Intellectual property protection should be an important aspect of any company's strategy. You might decide IPRsy are not commercially needed, but they should at the very least be reviewed. It is important to recognise that IPRs are not just an insurance policy to protect your company's brand and innovation; IPRs also offer you a commercial opportunity. It is a global market for UK companies and IPRs offer innovative companies the chance to secure income in different jurisdictions either by using them to protect your own sales or by licensing others to use your brand, design or technology.
More information is available at D Young & Co's Knowledgebank at www.dyoung.com. Alternatively, please contact Doug Ealey at email@example.com or Anthony Albutt at firstname.lastname@example.org.
D Young & Co LLP
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