CHINA - IP Issues Silas Brown Briffa East Midlands International Trade Association Wednesday 12 July 2006

Introduction Brief overview of doing business in China Commercial arrangements in China: –Manufacturing in China –Registering IPR in China –Trade secrets IPR Infringement in China –counterfeiting and infringement of IPR –IPR enforcement routes

China China joined WTO November 2001 IPR enforcement improvements - pledges. Massive growth: –2004 GDP growth 9.5% –2005 GDP growth 9.1% Trade between China 2005: –UK exported £2.3bn, up 17% –UK imported £10.5bn, up 23%

Guanxi “Guanxi” - literally means “doing business through value laden relationships.” Main reasons for building business relationships in China: –export –license and manufacture Foreign invested manufacture enterprise (FIE)

Manufacturing: The Basics Licence: legal permission to do or own a specified thing (i.e. manufacture goods) Authorising third parties to do something that they would not otherwise be entitled to do and exercising control over how they do it Contract law: Manufacturing Agreement

Manufacturing in China Know your manufacturer Heads of Agreement Lead costs? Full Manufacturing Agreement Communication

Manufacturing in China Points of particular importance to China Timetable: –when will tooling be completed –when will sample/prototype be completed –what do you expect and when –approval procedure for samples before mass production Brand/designs: –need to ensure and control quality –register rights preferably in advance –translation

Manufacturing: Key Terms Parties to the agreement Purpose Exclusivity? Financial - minimums, royalties, licence fees Quality control, approvals and insurances Use of trade marks Warranties Termination

Registered Protection in China Trade Marks –International classification of goods –Protection Designs –System of registration of “design patents” –Protection Patents

Trade Secrets Protection Non-registrable IP rights “Technical and management information not in the public domain”, which: –can bring economic benefit; and –the rightful party has adopted measures to maintain in confidence Agree and enforce a Confidentiality Policy

“Counterfeit” –product which imitates another –unauthorised reproduction of a trade mark Also includes: –original product, produced beyond the scope of the commercial agreement –look-alike products “Unfair Competition” in the PRC –look and feel of a product –not reproducing the trade mark Counterfeiting

Examples

Practical Steps –Carry out regular investigations –Identify scale of problems –Identify the source –Gather evidence – photographs, film, investigator’s statements etc. Keeping Track of IP Infringements

China - IPR Enforcement Routes Enforce where appropriate and cost effective Means of enforcement: –Administrative routes - designated authorities for patents, trade marks, copyright and unfair competition. –Civil routes - special courts designated for IP and “The People’s Court.” –Criminal routes/ Customs - “The People’s Procuratorate”

Enforcement Routes Administrative Authorities SAIC - State Administration for Industry and Commerce China Patent Office (CPO) National Copyright Administration (NCA)

SAIC Evidence File complaint (submissions) through government designated agency Raid Action - may need to conduct pre-raid investigation as goods move quickly Remedies

Raid

Enforcement Routes Civil Action Evidence Complaint filed by PRC lawyer Immediate order for preservation of evidence and property File suit - i.e. request for trial in court Hearing Remedies

Enforcement Routes Criminal Action Infringement must be an exact counterfeit Infringement must involve “very large” amounts of illegal income or “especially serious circumstances” Complaint filed by PRC lawyer Very wide powers of investigation Penalties

Summary Protect your IPR through legal agreements Register your IPR in China Enforce wisely and cost effectively

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