1. China IPR SME Helpdesk Protecting your Intellectual Property in China for the Bulgarian Cosmetics Sector Jurjen Groot 28 November 2013 1

2. Speaker 28 November 20132 Jurjen Groot CMS Law, Tax All over Europe, plus key emerging markets Most extensive presence, deep local expertise China: Shanghai and Beijing Bulgaria: Sofia jurjen.groot@cms-dsb.com

3. Agenda IPR Protection in China: Framework Types of IPR in China – Registration / Application Enforcement of IPR in China Case studies & Lessons Learned IPR China: EU SME Most Common Issues & Challenges Overview China and ASEAN IPR SME Helpdesks 328 November 2013

4. IPR Protection in China: Framework Fast changing landscape, substantial improvements Extensive laws and regulations developed First to file/register system Separate national IP systems: protected in home market(s) does not (automatically) mean protected in China! Infringement is almost inevitable, but enforcement is possible: choose your product specific IPR strategy & pick your battles! 428 November 2013

5. Types of IPR in China Patents: PRC Patent Law and Implementation Rules – Invention Patents – Utility Models – Industrial Design Trade marks: PRC Trademark Law and Implementation Rules Copyright: PRC Copyright Law Domain names: Measures Administration Internet Domain Names 528 November 2013

6. Patents Different patents in China: – Invention Patents (20 years protection, application 3 – 5 years) – Utility Models (10 years protection, application appr. 8 months) – Industrial Design (10 years protection) Costs: 3500 – 11500 euro Chinese translation needed 628 November 2013

7. Trade marks “First come first serve”, be sure to be first! Others can register your trade mark in China, can cause big trouble Registration per class of products Advisable to also register Chinese translation of trade mark Registration period: 12 to 18 months Protection period: 10 years, can be renewed Costs: appr. 250 euros 728 November 2013

8. Copyrights Originate automatically by creation of the work However: can be registered in China with Copyright Protection Center of China After registration: Copyright Registration Certificate, can be very helpful to prove that the copyright is yours But beware of software (source codes)! 828 November 2013

9. Enforcement of IPR in China Cease and desist letter Administrative proceedings Civil court proceedings Criminal proceedings Customs protection 928 November 2013

10. Cease and Desist Letter Quick and can be quite effective Strong signal that you are serious about protection your IPR If important infringers: be sure to first finish investigation/gather evidence Letters can also be sent to online shops (e.g. Taobao, Alibaba) 1028 November 2013

11. Administrative Proceedings Trademark: AIC (powerful) Patent: SIPO (less powerful) Can be very quick and effective Raids and injunctions No financial compensation possible 1128 November 2013

12. Civil Court Proceedings Specialized IP divisions in most Intermediate and High Courts Compensation of damages possible However: not always adequate compensation – 90 pct of cases below $100,000 – not seldom small % of total damages claimed Complicated invention patent infringements 1228 November 2013

13. Criminal Proceedings Local Public Security Bureau (PSB) Effectiveness varies Beware: no longer control of the case 1328 November 2013

14. Customs Protection IPR can be registered with customs On the basis of random checks Most effective for trade marks Can be combined with Customs Protection in EU Free Customs service Be sure to “educate” Customs about products and infringers 1428 November 2013

15. Case Study I: Trade Marks & Customs Foreign company A has a good reputation in western fashion industry. Has own brand for shoes and clothes. Products manufactured in China, sold in Europe. A only registered TM for shoes in China. Competitor B has registered TM for clothes in China similar to A’s TM for shoes. B has also recorded that TM with China Customs. When company A shipped its clothes from China, Chinese customs detained the goods, and confiscated because of TM infringement. 15 28 November 2013

16. Case Study I: Lessons Learned Trade mark registration must fully cover all goods of your company. Your trade mark is only protected in China if registered in China. Customs registration can be effective way of trade mark protection, also against you if you didn’t register your trade mark(!!). 1628 November 2013

17. Case Study II: Industrial Design & Exhibition Foreign company T designed a tractor, which was manufactured in China under OEM by company M. Their self-designed OEM agreement stated that IPR on this tractor remains with company T. After exhibiting the tractor on a fair in Europe, public feedback: engine too small. 17 28 November 2013

18. Case Study II: Industrial Design & Exhibition Company T and M jointly designed a bigger engine tractor. Company T then started to register industrial design in Europe and in China. But: T discovered that M had already registered in China(!). T ended relationship with manufacturer and acquired another Chinese manufacturer to produce its tractors. M then sued T in China for infringement of their registered industrial design. Also, they requested the Customs to seize the T’s products, so that it could no longer export. 1828 November 2013

19. Case Study II – Legal Actions T then came to our law firm. 1 st step: start industrial design invalidation proceedings with SIPO in Beijing, with argument: lack of novelty. We won SIPO proceedings. M appealed in court, and finally even Beijing High Court, with no success. Local court proceedings also decided in favor of our client T. Total time spent: 2 – 3 years Result: Industrial design of competitor cancelled and no more legal proceedings against client: it could manufacture and export again. However: no way to prevent competitor from also doing so: no favorable market position(!). Also, T could not claim contractual damages for breach of OEM agreement, because wording only covered first (small engine) tractor model. 1928 November 2013

20. Case Study II - Lessons Learned Registration in both Europe and China too late: big consequences! Ineffective OEM agreement: self-made agreement did not offer sufficient IP protection, T with empty hands against M. Customs protection can be very effective – also against you! Displaying product on fair before registration IP very risky. Uphill battle because competitor had certificates and client did not. 2028 November 2013

21. Case Study III: copyright, trademark, patent? French company “Cosmo”designed a perfume bottle and packaging with a distinctive shape. Chinese company C produced two types of perfume and used nearly identical bottles and packaging and marketed them in China and abroad under a different trade name. Trade dress is protected under trademark laws, patent laws, copyright laws and unfair competition laws. The French company had registered the bottles as a design patent in China. They brought legal action before the court grounded on infringement of the design, the copyright and violation of the Unfair Competition Law. 21 28 November 2013

22. Case Study III: copyright, trademark, patent? In practice, it was not possible to evaluate the actual loss of the plaintiff and since the defendant provided the legal source and information on the company manufacturing the bottles, the defendant had only to pay for the ceasing of the infringement. As the Chinese party reproduced the bottles and packaging in large quantities, without the copyright owner's permission, the court decided that the Chinese company committed copyright infringement and would bear the liabilities of ceasing the act of infringement, make an apology, and compensate the plaintiff for their loss. 22 28 November 2013

23. Case Study III - Lessons Learned Be sure of the legal grounds that you intend to base your case on. Which are the most relevant? Do they give you the strongest possible case? Be aware that although there may be several grounds for complaint, the court may or may not choose to rule on all of them Compensation by the court for incurred losses is hard to obtain. In any event such losses / damages must be very clearly substantiated and proven 2328 November 2013

24. IPR China: EU SMEs Most Common Issues Not aware of importance of registering IPR – Know Before you go. Fail to understand the territorial nature of IP rights. Not selecting the right business partner in China. Not protecting trade secrets. Wrong perception about China IPR- Protection is possible. 24 Different industry sectors face Different problems / challenges 28 November 2013

25. Take-away messages Be sure to file first (before your Chinese partner/competitor!) Register your trademark (preferably also Chinese translation) in China Protecting your IP should be part of your business model Careful with samples and exhibitions Your website is also accessible in China… 2527 November 2013

26. China and ASEAN IPR SME Helpdesks Enquiry Helplines IP Guides & Newsletters E-learning & Business Tools Training Workshops & Live Webinars Websites & Blog 28 November 201326

27. Enquiry Helpline IPR one-to-one consultations: E-mail, telephone, face-to-face First-line advice on China and ASEAN countries IPR matters Confidential Delivered by China and ASEAN IPR specialists Available for EU SMEs and SME intermediaries question@china-iprhelpdesk.eu +86 (10) 64620892 question@asean-iprhelpdesk.eu 28 November 201327

28. Information & Materials Library of publications: – IP specific guides, incl. patents & trade marks – Industry specific guides, incl. textiles, machinery, creative industries – Business guides, incl. technology transfer – ASEAN IP Country Factsheets Quarterly Helpdesk newsletters Article placement Topical blog posts 28 November 201328

29. Training Workshops & Webinars Workshops across Europe, China and ASEAN countries Addressing general IPR and industry specific IPR matters Trainings delivered in several languages Free one-to-one consultations Webinars: Save time by joining these interactive training sessions from your own office or watch recordings online 28 November 201329

30. Online Portals 28 November 201330 Practical IPR guides E-learning modules Case study catalogue FAQs Helpdesk newsletters Event information Latest blog posts Helpdesk videos www. ASEAN-iprhelpdesk.euwww.China-iprhelpdesk.eu

31. Social Media: Stay Connected Follow us on social media for latest news and developments on IP issues in China and South-East Asia, as well as project activities e.g. events, webinars, new guides. 28 November 201331 www.yourIPinsider.eu Fan page: ‘ASEAN IPR SME Helpdesk' @iprASEAN Profile: ‘ASEAN IPR SME Helpdesk’ ASEAN Helpdesk China Helpdesk Fan page: 'China IPR SME Helpdesk‘ @iprchina, @iprchina http://www.china-ipinsider.eu/

32. Thank you Both the China IPR SME Helpdesk and ASEAN IPR SME Helpdesk provide free, confidential, business-focused advice relating to China IPR to European Small and Medium Enterprises (SMEs).  Helpdesk Enquiry Service – question@china-iprhelpdesk.eu / question@asean-iprhelpdesk.euquestion@china-iprhelpdesk.euquestion@asean-iprhelpdesk.eu  Training & Events  Materials  Online Services - www.china-iprhelpdesk.eu / www.asean-iprhelpdesk.euwww.china-iprhelpdesk.euwww.asean-iprhelpdesk.eu For more information please contact the Helpdesks: Room 900, Beijing Sunflower Tower No. 37 Maizidian Street Chaoyang District Beijing 100125, P.R. China Hotline number: +86 (10) 6462 0892 28 November 201332