PROTECTING YOUR iP RIGHTS iN CHINA

Businesses looking to enter and participate in the Chinese market are often concerned about how their intellectual property (IP) will be protected. Cautionary anecdotes often leave those businesses with the mistaken view that it is not worth trying to protect themselves, due to the lack of formal protection and/or inadequacies and complexities with the enforcement regime.

When trading in China, it is important to note:

• Registrable intellectual property rights (IPRs) are similar to Australian IPRs, although there are some important differences
• Some IPRs in China arise automatically without registration
• An enforcement regime is available and it's complexity should be assessed against the size of the market which it regulates

Registrable Intellectual Property

In China, a business can register the following IPRs. There are other types of registrable rights but these are the principal ones which most businesses will use.

Trade marks
The trade mark is the principal means by which a business can register and protect its brand names and the goodwill generated within them. To register a trade mark in China, businesses need to file an application with the China Trade Mark Office (CTMO), under the State Administration on Industry and Commerce (SAIC).

China adopts a first-to-file system for obtaining trade mark registrations, so unlike in Australia, prior use in China affords little or no protection. Chinese trade marks are valid for 10 years from the date of registration (not the date of application as in Australia), and it normally takes 24-36 months to obtain a trade mark registration in China. It is therefore even more important that businesses of apply for their trade marks as early as possible, since the rights are not enforceable until registration is granted.

Since Chinese consumers will refer to foreign brands by reference to their Chinese versions of the brand, businesses are advised to create a Chinese version of their trade mark and file it with the CTMO. A trade mark application may be filed directly with the CTMO, or by extending an existing application to China under the Madrid Protocol. In addition, if your business intends to license another person with your trade mark(s) in China (e.g. exclusive distributor) you must ensure that that license is also registered with the CTMO.

The procedure for filing in China is similar to Australia, except that you have to use a Chinese trade mark agency which will act on your behalf. This would be advisable in any event as the Chinese Agency will be able to assist with the drafting of the correct classes of goods and services, and with the Chinese translations. Foreign businesses have fallen foul in the past by not registering in all of the classes in which their future business would be conducted.

Patents
Patents must be seriously considered as a means of protecting your business's IP in China. In particular, foreign businesses which are not used to filing for patents may assume that it is only highly technical inventions that can be protected by a patent. In China, this is not the case and most businesses should ensure that their Chinese Agency helps them to consider patent registration to compliment their trade mark registrations. Some foreign businesses have suffered in the past for failing to consider design and utility patents in conjunction with their trade mark registrations leaving themselves vulnerable to other businesses producing identical looking products with similar brand names.

There are three different types of Chinese patents, namely, the Standard Patent, Utility Patent (similar to Australia's innovation patent), and Design Patent. Chinese patent law adopts a first-to-file system (as opposed to the first to invent), where the first applicant to file will benefit from a priority right once a patent grant is obtained from the State Intellectual Property Office (SIPO). Since China is a member of the Patent Co-operation Treaty (PCT), patent applications filed first in another country which is a PCT member (e.g. Australia), can be used as a basis for claiming priority in China. Any license granted to another person to use your patents must be registered with SIPO.

Standard Patent: In China, as with countries such as Australia, an invention must be novel and not previously disclosed to any third party. The standard patent must satisfy the requirement of "inventiveness" and lasts for 20 years. Australian IP owners should be aware of the differences in the examination process, including the time limits to complete actions, amendments and appeal mechanisms. It can take up to 6 years to obtain a standard patent. Care should also be taken over the translation of the patent application into Chinese, as the quality of the translation may have a direct influence on the success of the application.

Utility Patent: According to Chinese patent law, "utility model" means any new technical solution relating to the shape or structure of a product, which is fit for practical use. That is, utility model patents protect products, not methods, and are valid for a term of 10 years from the filing date. Utility model patents are granted more quickly (i.e. around 1 year) and are less expensive. To date, the utility model is used extensively by Chinese applicants but foreign IP owners have only filed a small number of applications.

Design Patent: China's patent law system also provides a grant for design patents (or industrial designs) which cover new designs of shape or pattern that are suitable for industrial application. The application process generally takes 8 months and results in a patent which lasts for 10 years.

Unregistered Intellectual Property
Registration is not the only means to securing IPRs in China. Copyright and rights arising under Anti-Unfair Competition Law yield avenues for businesses that wish to assert intellectual property rights over literary works (including software) and over unregistered brand reputation.

Copyright
Copyright arises automatically after an original work is created, with neither publication nor registration required for the work to be protected. The protection generally lasts for 50 years from the death of the author. Many businesses do still seek to register their copyright in order to have the evidence which they may require later to prove that they are the owners of the copyright generated in the relevant work. A parallel regime for the registration of copyright in software exists in China but since China's accession to the Berne Convention, it is not necessary to register to obtain copyright protection in software though it may be advisable from an evidentiary point of view.

Confidentiality
As is the case in Australia, commercial trade secrets may also be protected by employing a contract or network of contractual arrangements which impose duties of confidentiality upon the parties. The effectiveness of this strategy will depend upon the proper drafting of such contracts and ensuring that they bind all of the relevant people who will obtain access to your trade secrets.

Enforcement & Customs
IP owners have an increasing set of options available to enforce their IPRs in China. Despite having a reputation as being a haven for infringers, China’s legal system provides IP owners with a variety of enforcement remedies. These remedies can be pursed by through criminal, administrative or civil proceedings. There is a complex network of enforcement agencies in China but its apparent complexity should be assessed in comparison to the size of the market which those agencies are responsible for regulating.

Criminal Proceedings
The Ministry of Public Security is responsible for enforcement of criminal sanctions. It is a criminal offence in China to infringe another person's IPRs and punishment can yield a maximum of 7 years imprisonment. In addition, the manufacturing and selling of fake or substandard goods or otherwise operating an illegal business can bring even more severe penalties. Chinese criminal law also can impose harsher sentences when a person is found guilty of a number of different crimes arising from the same circumstances.

Administrative Proceedings
SIPO is responsible for responding to complaints from IP owners that their patents are being infringed. SIPO will also investigate allegations of "passing off" under the Anti-Unfair Competition Law.

The Administration for Industry & Commerce is responsible for dealing with allegations of trade mark infringement in relation to the sale of infringing goods while the Technology and Science Bureau deals with the manufacture of infringing goods.

The National Copyright Administration can coordinate the various enforcement agencies with are responsible for dealing with cases of copyright infringement.

Customs: When the infringement occurs cross borders, Customs Administration enforcement can play a crucial role. If an IP owner knows of an infringing shipment, they may apply to customs authorities directly for customs to detain the shipment provided that the IP owner gives a guarantee equal to the value of the goods. Alternatively, for a nominal fee IP owners may apply to the Custom Administration centrally to monitor all imports and exports in which the IP owner is contacted if there is a suspicion of infringement.

Civil Proceedings
Actions in the People's Court can be brought in addition to or instead of Criminal and/or Administrative proceedings. For example, if you can demonstrate that continuing conduct of the infringing party is likely to cause irreparable harm, you may bring an action fro an injunction in the People's Court even though you may have already initiated Administrative proceedings.

IP owners seeking damages for infringement may only do so through the civil judicial system. Generally in Chinese law, damages are intended to compensate or restore the IP owner to its original position rather than to punish the infringer. Therefore, damages will be determined on the basis of loss suffered by the IP owner as a result of the infringement.

Using civil litigation in IP disputes, like in other countries, is often time consuming and expensive than other options. However, with the development of China’s legal system, the courts are becoming a more popular strategy for pursuing infringers.

Final word
Businesses who seek to actively protect their IPRs in China have a number registration and enforcement mechanisms to utilize. Entering that market without properly considering an IP strategy at the early stages is unwise and may not be best way that a business can deal with the associated legal risks. Proper consultation with an IP Lawyer or Professional and some basic IP registrations can go a long way to mitigating these associated risks.

Bruce Legorburu
Partner, Minter Ellison & Foreign Judicature Appraisal Observer - Beijing JZSC Judicature Appraisal Center for Intellectual Property

Tyrone Berger
Lawyer & Trade Marks Attorney, Minter Ellison