Emily Ma:

I founded market-ready startups and a scaleups to access the overseas market. The learning path offers qualified startups three months of service, including assistance shaping their China market strategy, introducing to local networkers and also promote the company locally to raise the awareness in the market. We also have a small working space in downtown area of Shanghai. IP protection is always something companies should consider when they're thinking about coming to the China market. Today, I'm delighted to have our guest speaker, David Bennett, IP Australia's Counsellor to China, to give us a presentation introducing about the IP environment in China and also, share with us his insight about how to protect your IP in the Chinese market.

 

David Bennett:

Thanks very much for the intro, Emily. Thank you all for tuning in. I think time is really our most precious resource, so I'll do my best to make sure the next hour of your time is used well. We've got over 200 registrations today. There's a lot of Australian lawyers and IP attorneys, businesses and also research institutions, government and business advisors. So there's a lot of different interests and levels of understanding of IP and experience. So, I'll be doing my best to span all of that and find things for everyone. Now, I'm just going to screen share my screen. All right. I'm going to switch the video off until the end now so you can concentrate on these slides. If you've registered, you should have about an hour ago received a PDF copy of the slides which has everything I'm going to go over today.

 

Because of the amount of content today, I may have to skip over some of the slides quickly, so please review it at your leisure if it's a bit quick, and all the hyperlinks in there will be very useful particularly at the end to further resources. Now you can send any questions you have through to the host on the WebEx chat box there. Austrade are going to compile them and send them to me as we go and I'll try to address questions at the end. Try to ask questions that are relevant to everyone. If you've got some questions about your specific circumstances, you can send through me direct on email instead.

 

I work for IP Australia, we administer the IP system in Australia. The IP Counsellor position here at the Australian embassy in Beijing is our first overseas position. The purpose is to help Australians protect their IP in China and this means outreach, practical guidance to businesses and other stakeholders as well as the government-to-government engagement, and advising our China IP policy. So, I can provide guidance and support, and information on specific inquiries, what I cannot do is provide legal advice, or legal services. But I will try and give you the best information I have and steer you in the right direction. Please contact me for any specific inquiries about your own circumstances.

 

Now, I've been here three years and I've got one more year to go. In this time, I really see three root causes of China IP issues. The first is failing to register IP rights in China. After that, it's poorly drafted contracts that failed to protect IP rights. Then finally counterfeit and copycat products, which are if you have a successful product, unfortunately almost inevitable here in market. So my presentation today is going to be focused on what you can do to address these three main aspects. I'm going to quickly talk about the Chinese IP system and some intellectual property 101 fundamentals, and then talk about registering IP rights in China, going specifically through the different IP rights. I'm then going to talk about contracts for China. In general terms they are applicable to all contracts, all legal agreements in China. And then also touch on some specific conditions we get asked a lot about research collaboration, technology licensing and contract manufacturing. I'm then going to talk about the fundamentals of IP enforcement and finish with a summary of the take home messages, pointing you in the direction of some further resources and support.

 

So, China joined the World Trade Organization in 2001. This required China to meet minimum IP protection standards used internationally. China has the patent law, trade mark law, copyright law, et cetera. Similar laws too as we do in Australia to protect various IP rights. Now, in general terms, IP protection in China I think has been improving, particularly as Chinese firms are producing more IP themselves and facing the same challenges with infringement as foreign firms do.

 

Over 95% of the IP cases in China are Chinese companies against Chinese companies. When you look at how foreign companies are doing in China, in IP enforcement cases before the courts, foreign companies actually have high win rates higher than local companies. There's probably some self-selection bias here. You don't bring a case unless you think you've got a decent chance, but that's what the data shows. The question everyone always asks is, can you protect your IP in China? It's a really hard question to answer. There are certainly risks, but there are many steps you can take to manage them and that's what I'm going to be focusing on today. If you prepare appropriately, I think you have reasonable chances of protecting yourself in China.

 

Key thing about intellectual property is that it's not all protected automatically. It depends what it is. If it's a creative work like a book, or an artistic work, then copyright applies automatically. The copyright is the exception. If you developed a new brand invention, or a new design and you want it protected, you have to do that by applying to register these IP rights. Trade marks are used to protect the brand. Patents are used to predict inventions, both products and processes. Designs also, called design patents is the right to protect the visual appearance of a product. New plant varieties are protected through plant breeder's right, the plant variety rights. Then we have copyright which protects creative works, but more broadly it also includes things like software source code, user products, user manuals, et cetera. And copyright is the exception applying automatically.

 

Trade secrets, of course protect commercial secrets and things that are not registered, they are protected by keeping them secret. Well, let's look at an example of how a company protects its IP, ResMed's CPAP machine, a great Australian invention. Now it's an invention, so of course it's protected by patents and many patents, but that's not the end of it. ResMed also protects its IP through trade marks. It's registered plain word marks, logo marks, and others, designs to protect the visual appearance of their products. There are also copyright protecting software source code, product images, advertising copy, product manuals, et cetera. And then trade secrets which are protecting that commercially valuable information, which is not disclosed in the patents, or elsewhere.

 

And generally registering IP rights, an Australian patent, or trade mark attorney can help you to register IP rights in Australia, in China and other territories. Key thing about IP rights is that they're territorial, so a trade mark, or patent that's registered in Australia only provides protection in Australia. If you want to protect your IP rights in other territories such as China, you must register in those territories. So think about registering in any market you want to do business, or manufacture in at any point in the future. When we're talking about China, greater China, note that mainland China, Hong Kong, Macau and Taiwan all have separate legal systems with separate registration procedures. So register in any one of those you want to get protection in. And then more broadly, think about your global IP strategy.

 

Australia, USA, Japan, South Korea, Indonesia, et cetera, all require separate registration. There's no such thing as an international patent, or trade mark, but we have international systems that make it easier to file in multiple countries. The PCT for patents, Madrid system for trade marks. Copyright applies automatically, but China and some other countries have optional copyright registration systems, that the benefit of registering is, it makes enforcement easier. Think about a broad IP portfolio covering multiple different IP rights and think about that with the ResMed example I've just given.

 

Now for many Australian companies, a trade mark will be their most valuable IP right. A trade mark is a sign that distinguishes your goods, or services from those of others, usually a word, or a logo that can also be a shape, or colour. In order to be registered, a trade mark has to be distinctive, not purely descriptive and must not conflict with existing trade mark registrations. So Australian Milk Company, that's a purely descriptive brand. That's not the sort of thing you can register a trade mark for. Devondale, an invented word that's distinctive. Some examples here of word, logo, combination and shape marks, which are all very recognizable to you I'm sure. Your brand is only protected in China if you have a registered trade mark in China. China has a first to file trade mark system. What this means is that with very few exceptions, the person to apply for a trade mark gets it, doesn't matter if you developed the brand first in Australia, it doesn't matter if you've been using it already in the market in China, first person to apply gets it.

 

Unfortunately, this has given rise to trade marks squatters, or hijackers. These people register other company's trade marks in order to seek a payout, to sell the mark, or actually use it as cover for counterfeit products for their own products. This in my experience has been the single most frequent issue, IP issue affecting Australian companies in China. I would say that my key message for businesses listening, business advisers, if you're thinking of doing business in China, register your trade mark as early as possible. Don't do test sales to see how the market is and do it later. This is something to do before entering the market. New Balance, Jordan and iPad here, are three very successful companies who all ultimately lost their trade marks in China when other people registered them first.

 

This is a real case of a few months ago, about two months ago and I'm just using it to emphasize what can go wrong if you don't register trade marks. This Australian company who I will not name had been selling its product in China through local distributors for several years. They had not registered a trade mark in China, but everything had been going fine. Then a couple of months ago, their distributors, local Chinese distributors got a summon to appear in court for trade mark infringement. It emerged that the Chinese company registered their trade mark in China and were suing them and their distributors. The company, why would the Chinese company do this? They're probably either trying to get leverage to sell the trade mark back to the Australian company at a tidy profit, or just intending on exploiting their reputation for their own products.

 

The Australian company is facing a long legal battle in China. More likely they're probably just going to abandon the Chinese market. The key thing is to register trade marks in China as early as possible. There are two main ways to register. Two ways, two ways to register a trade mark in China. With a direct application with the Chinese Trademark Office, or extending protection of the Australian trade mark into China using the Madrid system. But the real answer to how to register your trade mark in China is consult a trade mark attorney, someone who has expertise and experience filing in China. It's very complex, it can be complex registering trade marks in China. People who try to do it themselves, self-filing without an advisor, the results are not really often good. A trade marks attorney can advise the best filing method for your situation, be that direct, using the Madrid system, or a combination of both.

 

Costs vary widely, so ask your attorney for estimates. A large part of the fee is the attorney fee. You might be looking at around a thousand to $2,000 for a registration if things go smoothly without rejections. I like to describe this as probably the cheapest China insurance policy you are able to purchase. Another key thing is to manage the registration yourself. So be very cautious if your importers, distributors, or partners offer to take care of it for you. This can lead to a forced marriage situation where you are then tied to that person because ultimately they control your rights and you don't have the freedom to go off and do as you please.

 

There are over 24 million registered trade marks in China. It's starting to become a real issue, this crowding of the register. Using a trade mark in China does not mean you... sorry, using a trade mark in Australia does not automatically mean you can use it in China, so don't assume that. Doing a search in the Chinese trade marks register can help. Firstly, avoid wasting time on trade marks that are likely to be rejected. Secondly, you can be aware of what's out there and avoid infringing others' trade marks. There's a free online English search tool available here and I've written a guide to searching which is available on our website, which walks you through the process. Doing a self search has some limitations, but it can give some useful initial information and a trade marks attorney can do a professional search.

 

So let's say I've developed a new beer company called Epic and I decide I want to export to China. What I should do is do a check of the trade marks register. Now this is the interface. Now, I've typed in searching Epic in Class 32 with the beer and other products. Generate search results. You can see there's a few results that don't look relevant and a few that do. Clicking through can find that the Epic trade mark for beer was registered in 2015 by a New Zealand company. They control the trade mark in China. If I were to send my product over here, I would be infringing that trade mark.

 

Depending on your product, or service, think about whether it could be useful to develop a Chinese language brand. There are a few approaches to this. You could do a transliteration that sounds similar to the English brand. So, kekoukele sounds very similar to Coca Cola. A translation is an option. For example, Apple uses pingguo, which is literally a Chinese word for apple here in China. You can also do some nice combinations. I particularly like Starbucks, the Xingbake, so it uses the Chinese character for star, xing and then a literal translation of bucks, bake. And this is not just translation. This is a branding and marketing exercise, so if you're really serious about it, I'd suggest getting branding consultants to help you develop an appealing Chinese language brand, appealing to Chinese consumers. Some Chinese law firms may have some capacity to do that as well. Probably not to the extent of a branding consultant. When you're developing a Chinese language brand, check the trade mark register for existing registrations and apply to register trade mark in China before you reveal the brand. If you don't, you risk someone else registering it.

 

Now here's a couple of lessons we can get from some existing marks about the Chinese language brand. And Mr Muscle. Mr Muscle initially used the literal translation that was ji rou xian sheng, which literally means… it sounds the same as Mr Chicken meat. So a very clumpy literal translation. They eventually rebranded to wei meng xian sheng here, so it means Mr Powerful. The lesson from this one is if you're going to use Chinese language brand, make sure you're using a good Chinese language brand. Penfolds have an excellent Chinese language brand, ben fu. But when the parent company tried to register the trade mark, they found that a squatter had beaten them to it. It took them about nine years of legal battles before they were able to invalidate this hijacker's trade mark. So if you're developing a Chinese language trade mark, register that trade mark in China as early as possible.

 

I still like giving Carman's as an example of best practice. They've got this Chinese language brand, kang ao mai, which means healthy Australian wheat, also sounds a little bit like Carman's. They registered their English and their Chinese trade marks in China, well ahead of entering the market, a good couple of years before entering the market. Doing very well over here now I see them in local import supermarkets.

 

Quick update for the trade mark attorneys as we have so many viewing. Note that there's not much regulation of trade mark agents in China, so you should be selecting local associates very carefully. The levels of skill and performance really do vary enormously. This year China has taken a few positive steps against bad faith trade marks. I won't go into them in detail here. These changes should make it easier to establish grounds of bad faith post 1st of December, but the impact will really depend on how the changes are interpreted and applied. So we wait, eagerly await to see if this is going to make a difference.

 

Now, patents are used to protect inventions. The key thing about patent applications is that they are only going to be valid if the material in the application is novel, which means new as of the filing date of the application. This means if you want to get a patent you have to apply before you disclose the invention to the public anywhere in the world. China has invention patents. These are equivalent to an Australian standard patent with a 20 year term of protection.

 

Now, China also has utility model patents, this second tier patent with a maximum term protection of 10 years. Utility model patents can protect physical product. The inventive threshold is lower. This makes them difficult to validate. Utility models are granted following preliminary examination, not substantive examination, so this makes them relatively cheap, easy and fast to acquire and you can enforce it just like an invention patent. The stats showed a utility models are the basis of over half the patent infringement cases heard by Chinese courts.

 

Now, China protects designs as designed patents in the patent system. The Chinese design patent protects the visual appearance of a product. It's equivalent to an Australia registered design. Designs must be new and they must be substantially different from prior designs, or combinations of prior designs. Like utility models, design patents are granted after passing preliminary examination, same in Australia. This makes them relatively cheap, easy and fast to acquire. Design patents are versatile. You can protect all kinds of products, visual appearance of these. I picked out a few examples here from the Australian designs register. This is the Cooper Homebrew fermenter. Another ResMed device, Breville stick mixer and this is a Didi share bicycle, which we should see around the place in Beijing a lot. Perhaps they're going to be coming to Australia next.

 

This graph shows patent applications in China from 2000 to 2018. The key thing to note here is just how many utility models and design patents are filed compared with invention patents. There's a huge stock of granted invention patents, utility model patents and design patents. With these unexamined rights on the register, this can make it difficult to determine freedom to operate, be aware of that. But the key point I want to make here is people file utility models and design patents in addition to invention patents because they see the value of them in China. These are not much utilized by foreign applicants. I think there's a lot of scope for that to increase. So, I do consider whether utility models and design payments could be a useful addition to an IP portfolio in China.

 

Quick update for patent attorneys. Note about a couple of months ago we did a webinar on patent protection in China. Do have a watch of that if you haven't already, some great material on there. We're expecting amendments to the Chinese patent law by the end of 2019, but they're still not announced. There was a draft earlier in the year that gave some clues of what might be coming.

 

Plant variety rights. This tends to be the forgotten IP right. But people are filing huge numbers of PVR applications in China. I think again, there could be more scope for Australians to protect plant variety rights in China. Plant variety rights, the plant has to be new, distinctive, uniform and stable. It has to have not been exploited, or only recently exploited. So if you develop a new plant variety and start exploiting it in Australia, you've got a limited time to apply for that protection in China before it will be too late.

 

Just like the other IP rights you need to register in China in order to be protected in China. Enforcement is improving. We've got lots more information about PVR in China that I'm happy to share. So do contact me directly on this email address if you want to learn more. So copyrights applies automatically to creative works, but also some more practical things you might want to use like photographs and images, software source code and various written materials. China has an optional copyright registration system. The benefit of registering is it simplifies enforcement. For example, if webpages, or listings on Chinese e-commerce platforms have simply copied your product images, you can use copyright to enforce against those webpages and take down those infringing listings based on the copyright of your product images.

 

If you have a logo mark for your product, if it's sufficiently creative. I'm getting a fire alarm thing here. I'm just going to press on, so apologies for the sound. So if you have a sufficiently creative logo mark, you can protect it by copyright and enforce it against infringers. You can also use that copyright to challenge a rival trade mark registration that's copied the logo with respect to any goods, or services. So copyright for a logo mark, very useful. It's quite difficult to register without professional help. So, I suggest you seek the assistance of a local advisor on registering copyright in China. Process takes a couple of months. You can register at any time, but if you're trying to register copyright after an alleged infringement, you may have to put in a bit more evidence.

 

Now, I've been talking so far about registering IP rights in China. The next key thing is contracts in China. It's been my observation that Australian companies doing business in China often use poorly drafted contracts that don't protect their IP rights, or just in general, their interests in China. Chinese civil law is very different to Australian common law and for that reason, an Australian style contract doesn't work well for China. You can't just pick up an Australian contract, cross out Australia, put in China and expect it to work. Critical to have an experienced Chinese legal advisor draft and review all contracts, legal agreements you will be using in China. Your Australian legal counsel can work with Chinese lawyers or you can go directly to a Chinese, or international firm with people on the ground here.

 

Okay. Here's some quick tips for China contracts. Firstly, due diligence. Due diligence should be done on the other party as early as possible in the process to avoid wasting time and money on transactions that ultimately were not going to be viable. Most relevant information is only available in Chinese, can be difficult to access outside of China, so local lawyers and other service providers can help you with that. Using a bilingual contract will help make sure that both parties clearly understand the agreement. If you do this, specify which contract will take precedent in the event of a dispute and make sure a bilingual lawyer reviews the contract.

 

Dispute resolution is incredibly important in an area we often see issues. A contract should specify how and where any disputes will be resolved. Now, China with very few exceptions does not enforce foreign court judgements, so if you want a contract to be enforceable in China, the contract should generally either provide for dispute resolution before Chinese court, or by an arbitration process that can then be enforced in China. China does recognise foreign and other arbitration awards. Contracts should be executed properly if they're going to hold water. This means signed by the legal, listed legal representative of the company, which you can see on their business license stamps with the company seal and make sure the company name, address and registration number, which is I believe 18 digit code that all registered companies must have, make sure that's all as per the business license. You don't want to go to sign a contract and see that it's a different entity, or shell company that's signed up. We had some more details about this on a webinar back on 12th of July linked here. So if you're interested in this, particularly if you're a lawyer advising clients, I suggest you tune into this.

 

This is an example of what happens if you get dispute resolution wrong. This is unfortunately a real case of a couple of years ago, actually a few years ago, I think it's just before I arrived at the embassy. An Australian company had a dispute with its Chinese partner and they went for dispute resolution as per their contract in the Supreme Court of Victoria. They won a default judgement, the court awarded them $20 million, a default judgment means the Chinese side did not appear.

 

However, now when it comes to enforcing this $20 million reward, the Chinese company has no assets in Australia, that the Australian company can go after. And, nor will Chinese courts enforce that Australian court judgment in China. So ultimately they have no way to get this $20 million back, and I'm afraid there's very little we can do in the way of support in this case. Okay. There's no fire. Excellent. Alright, so the lesson here is choose the appropriate dispute resolution forum for your contract and make sure that the contracts will be able to be enforced in China. Get legal advice on how to do this, specific to your circumstances.

 

Research collaboration, something I often get asked about. Australian and Chinese researchers produce really world-leading research, we have countless bilateral research collaboration projects. The Australian government funds public research with the expectation that universities protect the IP they produce and benefit ultimately flows back to Australia.

 

Researchers who are collaborating with Chinese partners, or indeed collaborating with partners anywhere in the world need to ensure that they protect the IP outcomes. Before starting the project, work out what form of collaboration it is. Will this be a commission development where one side does the work in exchange for payment, or joint development where both sides contribute? You should be very clear before accepting external funding, especially foreign government funding, Chinese government funding, whether that comes with IP ownership requirements, funding often does. Research collaboration agreement will be the legal agreement forming the basis of the collaboration. Should set out all relevant things like the statement of work, performance milestones, with the activities, deliverables, resources and timelines all provided.

 

It should specify the IP ownership over research outcomes. This means both new IP and improvements to existing IP. Now, a lot of institutions will just say, right, okay, joint ownership of everything. That may sound fair, but if you're looking down the line to commercialize technology, to commercialize the IP produced and joint ownership actually often causes disagreements in how that will be done. So also, think about allocating IP ownership to one side with reasonable compensation to the other side. And if you don't clearly specify IP ownership in the agreement, then the party, or parties who produce the outcome will own the IP, that falls to the default rules. The agreement should also specify who owns commercialization rights in China, Australia and other markets.

 

Data handling. Data handling has to comply with local regulations. There are restrictions on the use, and use and storage of personal information and this nebulous term called important data. And there are some local storage requirements for some of these, be very careful, get advice on how to meet those regulatory requirements before you're getting data in China and handling it, assembling it, sending it offshore.

 

Now, signing, or licensing of IP rights is one good option for IP owners to enjoy some commercial returns without commercialising IP themselves, without having to go into China. An IP assignment is a transfer of ownership and an IP license is simply giving the licensee the right to use the IP without transferring ownership. In 2018, China paid the world 35.7 US billion dollars in IP royalties. So that's a bit less than the US, but it's more than Japan and about 10 times more than Australia. License agreements should specify the license type, sub licensing rights, territory, liability, quality control, ownership of improvements and all other things. And be careful as well if you're putting in contract terms that might be considered overly restrictive on the licensee, that could be considered to breach the Anti-Monopoly Law, or Anti-Unfair Competition Law. Restrictions like ownership of improvements, or to grant back of IP rights. China regulate all cross border technology transfers. And that includes technology licenses. So a license from an Australian company to a Chinese licensee is a technology import and vice versa, a license from a Chinese license to an Australian licensee is a technology export.

 

China has these technology import and export catalogues, which classify technologies into three categories: prohibited, restricted, or unrestricted. So make sure to check what category your technology falls into. Technology licenses for prohibited technologies are totally banned while restrictive technologies, you have to apply for and receive Chinese government approval. If you want to remit funds, get money back from your royalties for licensing technology, you've got to register the license with local branches of the Ministry of Commerce, or you're going to run into problems.

 

Now, a quick note on remitting funds, not my area of expertise, but be aware that China does have foreign exchange controls that require certain conditions are met in order to remit funds. If it's royalty payments, you've got to register the license agreement. Also, be very clear on who's covering the tax. Some requirements here as well for profits from local entities and payments for foreign service providers.

 

Another area I'm often asked about, how to protect IP rights while contracting manufacturing in China. I think the fundamentals are really these that we've discussed so far. Firstly, it's registering IP rights in China, making sure you have those trade mark, design patent, utility model patent, invention patent all applicable IP rights registered in China before you start this. Secondly, protect yourself using strong contracts through due diligence on the potential manufacturers. The manufacturing agreement will be the contract, the legal agreement between you and the manufacturer. It's different from just a purchase order where the purchase order can be attached as an appendix in the agreement.

 

The agreement should cover all the practical issues such as quality requirements, inspection of goods, delivery, payment, grounds for termination. Should also specify the limitations on any IP licenses that are granted to the manufacturer for the purpose of manufacturing. Also, consider clauses that prevent the manufacturer from applying for IP rights relating to the licensed IP rights. That can be a useful thing to include and specify what happens to moulds and tooling.

 

As one IP lawyer I know here that works in enforcement a lot, likes to say, your intellectual property is only as good as your enforcement. When it comes to enforcement, IP rights are private property rights. This means that IP owners are responsible for enforcing their own IP rights. This is not something the government does for you. China's laws give IP rights owners the tools they need to tackle infringement both online and offline. You can enforce IP rights in China without requiring any assistance from the Australian government. IP enforcement in China can actually be quite effective. There are multiple different levels and options for enforcement. At the local level, you have administrative enforcement by local authorities. Quite useful in straightforward cases of infringement. The courts handle civil IP cases and if cases crossover a certain value, a certain criminal threshold value, then they become crimes and the police, local police get involved in enforcement. Customs also play an important role. They can seize IP infringing goods that are entering, or leaving China's borders.

 

If you want to get customs... give customers authorization to do this, you need to record the IP right with Chinese customs. It's not something that happens automatically. So if that's relevant to you, take that extra step. Local lawyers and investigators, and firms that specialize in this can assist you in gathering evidence of the infringement. Essentially the process is to gather some evidence and then bring the case to local Chinese authorities to take further action.

 

E-commerce platform. China is the world's largest e-commerce market and a great way for Australian companies to access the Chinese market. Unfortunately there can sometimes be IP infringing products on e-commerce platforms, but all e-commerce platforms now these days really have IP platforms that have been set up to handle IP complaints.

 

If you have an IP complaint, use these platforms. That's the way to engage with it. Don't write a letter to the IP platform, use these systems that they have built for users. Typically, you need to register an account on the platform, then upload evidence of your IP right in order to file an IP complaint. If you're wanting to take action against a product listing in China, you're generally going to need a registered Chinese IP right such as a registered Chinese trade mark, patent, or copyright. Again, a useful area for copyright registration. If it's an offer for sale in Australia, for example, eBay, or AliExpress in Australia, you may be able to use an Australian IP right. Going through, finding infringing listings, filing complaints and following up can be very resource consuming for rights owners to do themselves.

 

If this is starting to become resource draining, a more efficient way can be to engage a specialist online brand protection service to do this. They can then work with external... you can work with them and external lawyers, or IP attorneys who can advise you on how to then pursue high value targets further. I think that's really the most efficient use of resources. So companies, you can either go directly to online brand protection services, or go through your lawyer, or IP attorney have them manage the process. Now I've shown, Alibaba's IP protection platform here. We've also shown Amazon's account just to point out that it's not just Chinese platforms that can have IP infringing goods. A lot of IP infringing goods produced in China, in the factories of China ends up on Amazon the way you pay other providers. So don't limit yourself to just Chinese e-commerce platforms.

 

If you're sending a product to China and it attains some degree of success, it's almost inevitable that you're going to have copycats, or counterfeits generated. Unfortunately, that's still the reality. There are a lot of people who are trying to make a buck doing this. What you want to be able to do is if I present you with two identical, let's say two identical bottles of wine, what you want to be able to do is distinguish whether this is a real version of your product, or a fake version. So think about how you're going to do that. If you have these systems to distinguish, you're going to both reassure consumers and also local partners, importers, distributors, that you are serious about IP protection.

 

There are verification and traceability solutions including things like QR codes, RFID, or NFC tags. And new technologies such as smart fingerprints and things like that where essentially generates a unique profile which can then be verified to be authentic, or inauthentic. There are what we call overt features, features that consumers and distributors can see such as holograms, watermarks, microprinting. Couple of them are shown here. There are also covert features such as UV fluorescent prints, or other secret markings on the packaging or product. These are kept secret so that the brand owner, or a trusted representative can verify whether a product is genuine or not, but what these measures are will be unknown to consumers.

 

Now, a couple of quick other notes on things. If you are thinking of visiting China, or exhibiting at a trade show, just be very cautious. If you're doing either of these things, simply contacting a Chinese manufacturer, or a Chinese potential business partner, what you're doing is advertising your product, your brand, and your interest in China. Now, unfortunately, this can place you at risk, particularly of trade marks squatters, who may seek to register your trade marks before you get to market. I've seen this too many times. A company comes over to a trade show here in China, or has some business discussions, or indeed just contacts with a Chinese company and discovers that a week, or two later, all their trade marks had been filed by another party in China. So if you're going to be doing any of these things, apply to register the IP rights in China, especially the trade marks before you visit China, make business inquiries for exhibit at trade shows.

 

Domain names are not actually IP rights, but it's worth talking about them. There are domain name squatters, or counterfeiters, hijackers who register domain names comprising a company name, or a trade mark in order to seek a pay out, or to try and set up a fake website that misleads customers into buying their products, their counterfeit or copycat products. It can be useful to identify and register any domain names you want to protect as early as possible. Let's think about of course .com, other top level relevant domain names like .cn. If someone registers a domain name that's important to you, you've essentially got three options. You can forget about it, just ignore it, let it go. You can try to buy it from the owner, or you can pursue domain name dispute resolution and there are processes around these. More information on our China page.

 

Lastly, don't get scammed. Unfortunately, because IP registers like trade marks registers, publish information about the applicants that means we often get a lot of scams around the IP rights. This can include third party invoices for IP rights renewals, offers to list your trade mark on a database for a fee, emails about domain names or Chinese trade marks. Essentially people contact you saying, we've noticed someone is trying to register your trade mark, or domain name. Have you authorised this? Let us know, please urgent and then the scam continues from there. Be sceptical and be cautious, some of these scams are very sophisticated, particularly the ones on domain names. So, if you got any doubt just get in touch, we'll have a look.

 

All right. So, I've whizzed through a lot of content here. So, I'm going to bring it back to some take home messages. Firstly, register IP rights in China. Register at the earliest opportunity. So if you are thinking of going to China at some point in the future, or maybe your business wants to have that option in future, I would say that that is the time to apply. It is the cheapest insurance policy you will get for China, simply registering a trade mark. But, register patents, register utility models, copyright as applicable and think about how you can build a broad IP portfolio that spans various IP rights. So think about that, the lawyers and IP attorneys who are listening as well, someone might come to you to register, apply for national phase entry of their invention patent, but think about what else you can be doing to add to the portfolio.

 

All right. Where do you go... where do you go next to register IP rights. Best option, consult an Australian trade marks attorney, or an Australian patents attorney and they can guide you on registering IP rights in China and other overseas territories. Second main message. Get your contracts for China right. Start the due diligence on potential partners early. If there's any alarm bells, you want to find out early, you don't want to do due diligence at the conclusion of a contract because then people tend to ignore what that actually finds out. They're just looking for confirmation at that stage. Start due diligence early, get the dispute resolution clause right. This is the difference between a contract that is enforceable in China and a contract that is not enforceable in China.

 

So, to get the advice on contracts you want to consult a China qualified lawyer. You can either go directly to them to a Chinese, or international firm with boots on the ground here, or you can go through your local Australian IP attorney, or Australian firms. Lastly, enforce IP rights. Your IP is only as good as your enforcement. China has the systems in place to enforce IP rights. It does cost a bit of money, particularly on the lawyer fees, but that's what you have to do if you are serious about enforcement. Chinese lawyers again, and investigators and firms can advise you on enforcement. You can either go to them directly, or go through Australian IP attorneys, or law firms, they have experience in that.

 

Now, I've linked a whole lot of further resources and support. I'll just run through briefly. We spend a lot of time putting together IP Australia's China web resources. We have a major update coming soon. I had hoped that it would be up by today, but it will be up in the next week, or so  I think. Please do check back. Our resources include some PDF guides as well, such as our Guide to searching Chinese trade marks register. Very useful starting point. And also some industry specific ones such as our China wine guide, which I wrote because frankly, almost every week I have an inquiry from a wine company about trade marks. I also like to refer you to all the good resources, not just our resources. I'm particularly fond of the topic specific guides that the EU's China IPR SME help desk. There's also some resources from the USPTO, US-China business council, Canadian Trade Commission and others that can be relevant. Disclaimer, we can't guarantee their content but a have a look.

 

IP Australia's written a guide, toolkit on engaging a patent attorney, which is useful if you're doing that. Also, a guide on IP for digital business. In terms of other forms of support, I'm a big fan of Austrade particularly in China. They've got a large presence across greater China, a lot of local staff with a lot of experience who can help you identify market opportunities and bring a product to market. The Australian state governments also have offices in China. All the state governments have offices in China. Some are better than others, they can offer support to you as well.

 

Victoria's particularly good, Queensland's good too. Check out as well business.gov.au, which has information on grants and support provided to businesses. For example, the export market development grants, this can give reimbursement of up to 50%, up to a cap for export related expenses, which includes the costs of registering IP rights overseas. So very useful there. Now, when you've looked at all this, looked at all our materials, and you want more, I'm happy to discuss your specific circumstances, give you some information and guidance, and you can contact us on this mail address here. So that's the end of my presentation today. We are now going to go to questions. We've got about nine minutes for questions and… video back.

 

So, please send through your questions on the WebEx chat box and Austrade is feeding them through to me. And I'm going to go straight through them. So first question I've got is, what's the best way to find a reputable Chinese lawyer?  I'm going to make that a bit broader. How do you find a reputable Chinese associate for trade marks, for patents or lawyers? I would say the levels of service vary enormously. You can see that for example, in win rates on trade marks cases, or things like that. The win rates between different firms in appeals can vary from 30% to 75%. It's incredibly important to pick local advisors well. There's so many firms here, it's hard for me to be across all of them. I do have knowledge though of a number of good firms here who have done good work helping Australian clients previously, and I have a list of some of those firms that I'm happy to share on request. So you can contact me to learn more about that. It would depend as well what sort of transaction it is. So depending on if you can give me that sort of information I'm happy to suggest a few possibilities.

 

All right, so please, still got a few minutes left. So please send through any more questions. In the absence of questions, I might just talk a little more about a couple of things I didn't have time to go over fully in the presentation. Perhaps I'll give another cautionary tale on trade marks. We've seen in the past... in the past year or so, a couple of large scale cases of trade mark squatting, affecting in one case almost 90 years Australian companies. Now, this trade mark squatter in this case appears to have gone through publicly available materials on this industry and identified what some of the reputable companies are in Australia and then just gone and filed for all the applications in China.

 

It's an unfortunate situation and the improvements in the trade marks law will help tackle this, but any company, you don't even have to be actively involved in a Chinese market, any company of some reputation could potentially be targeted in this way. So do think about your registrations in China at the earliest opportunity.

 

Someone's asked a question about services. If you can specify more, I'd be happy to. So go ahead and add more. Okay, another question. Afraid I don't quite understand this question. How can I protect my trade mark when China does not recognize my science in trade mark categories? I'm not quite sure if you can clarify that question, but I'm happy to have a go.

 

Trade mark categories in China. This is one of the areas where people trying to self file applications, often hit problems. China has trade mark classes like we do, same broad divisions, but then it goes further into subclasses. So it's very important if you're registering trade mark in China to ensure you have all the subclass coverage that you want. For example, if you register for your shoes in Class 25, that will be one subclass. But then there are things like belt, hats, shirts, pants are different subclasses. If you only register with regards to shoes, you're not going to be covered for all these other goods. So very important to make sure your trade marks have adequate subclass coverage. Now, two more minutes and a bit before I close it out. So, still time for another question, or two.

 

Okay. How can I protect my trade mark when China does not recognize my medical device in the trade mark categories? I'd seek advice from a local trade marks agent. People do register trade marks for medical devices here in China all the time. There are some quirks of the Chinese classification systems, so I'm not sure if there's a gap there. But yes, I get advice from a local trade mark agent who can tell you how to get that coverage. One of the things we often see is Class 35 retail services. China essentially does not provide protection for retail services in Class 25 and this is still a complex issue for businesses. All right. If there's no more questions then I might close it out. Thank you again for your time. Do have a look at the further resources, and get in touch if you'd like to discuss your specific circumstances. Thank you.

Last updated: 
Monday, December 16, 2019