Unleash the Dragon
23 Jan 2012
The 23rd of January marked the start of the Chinese Year of the Dragon. Traditionally, the Dragon is one of the luckiest signs in the Chinese Zodiac, so perhaps 2012 is the right time to consider exporting to China.
China is Australia’s largest two-way trading partner and export market. In 2010/11 the value of goods exported to China amounted to a whopping AUD $64.8 billion (DFAT, 2011), which is an increase of 39.4 per cent over the previous year. With such a significant volume of trade, it is important for Australian exporters to know how to protect their intellectual property (IP) in this vast market.
China’s counterfeit and piracy market is reportedly the biggest in the world with many manufacturers so skilled at copying items it can be difficult to distinguish fakes from genuine items. In fact, the so-called ‘fake markets’ have become major tourist attractions in large cities like Shanghai and Beijing.
How can you protect your IP in China?
If you are thinking about exporting to China, or using China as a manufacturing base for your products then you should be protecting your IP rights in China. IP Australia is responsible for administering registered IP rights in Australia only. In China, there are a number of agencies that are responsible for registering IP rights. The Chinese Trade Mark Office registers trade marks and the State Intellectual Property Office registers patents and designs.
You have two options if you wish to file a trade mark or patent application in China. You can file your application in China directly, either through a Chinese attorney or an Australian attorney who has a Chinese counterpart. Alternatively, you can file using an international agreement such as the Madrid Protocol for trade marks or the Patent Cooperation Treaty for patents. An Australian patent or trade mark attorney will be able to advise you on your best option.
Protect your trade marks (and their Chinese translations) immediately.
In Australia, we follow the ‘first-to-use’ rule, which generally gives the first person to use a trade mark the rights to that trade mark. In China, the first person to file a trade mark application will generally have priority over an earlier user of the mark (the ‘first-to-file’ rule). This means that even if you are already operating in China, you may have difficulty preventing someone else from registering your trade mark if you do not apply first.
Pharmaceutical giant Pfizer recently learned this lesson the hard way. When it released Viagra in China, Pfizer chose to market one Chinese translation but did not register a similar Chinese translation that was being widely used in the media. When an unrelated company, Guangzhou Wellman Corp, registered the popular translation, Pfizer became embroiled in an 11-year court battle to claim back the translated trade mark but ultimately lost. (Foley & Lardner 2010)
Be watchful of potential IP violators and respond swiftly.
Once you have secured your IP rights, consider developing an infringement strategy to protect yourself against the unauthorised use of your IP. It is not only important to protect yourself but also to make sure that you do not infringe on the IP rights of others.
Know what your rights are and be prepared to act if they are violated. If you find your IP has been infringed in China you have several options. The Administration Industry of Commerce has the power to investigate trade mark infringement and a decision will usually be reached quickly and relatively cheaply. This usually results in a fine for the infringer or the seizure of the counterfeit products. There are, however, disadvantages with the administrative system especially when dealing with repeat offenders.
Alternatively, you can use the judicial system and take your infringer to court. For a foreign company the court process can be lengthy, due to procedural requirements such as translation of documents. Damages awarded by Chinese courts in IP matters have been quite low in the past, although the situation is changing.
Chint Group, a Chinese manufacturer of low-voltage electronics, took action against the French company Schneider Electric for infringing its utility model patent in China. The court initially awarded Chint a record RMB 334 million in damages but the case ultimately settled for RMB 157 million (approximately AUD 24 million) (Foley & Lardner 2010). The case is an example of the greater value being placed on IP by both Chinese companies and the courts and how having a strong IP infringement strategy could minimise the risk of your IP being used without your permission.
Enforcement actions in China can be complex, as they can involve a number of different state and provincial administrative and regulatory agencies. It can be difficult to ascertain which court or other body has jurisdiction over an IP matter, so specialist legal advice before taking any steps is crucial. The Chinese government has also established numerous IP rights service centres around the country in an effort to make it easier to address enforcement issues.
Whatever action you do take, make sure any infringer knows you are serious about protecting your IP.
We have country specific information outlining issues exporters may face in different countries including China. For information about exporting to other countries visit our doing business overseas page.
Last Updated: 29/11/2012