Getting your business export ready
Before you think about export markets it is important that you make sure you have a solid IP foundation. Do you have valuable brands or technology that should be protected? Are you selling products with a unique shape/pattern/ornamentation? Is software your core product?
Consider taking our free Upskill online course to get yourself up to speed on all the IP basics and take stock of all your IP assets.
IP needs to be considered on a country by country basis. Each country has its own system and local practice around protecting and commercialising IP. Keep in mind that Mainland China, Hong Kong, and Macau all have separate legal systems. Protection in each territory requires separate registrations. Some key issues:
- Early IP preparation is crucial – you need to have your IP house in order before you enter a new market. This may not necessarily require major investment or even having applications or registrations in place. It does require planning and making informed choices. Consult an expert to review your portfolio and work out your IP strategy before pitching products and services and attending trade shows targeting Chinese parties.
- First to file – in China the owner of a trade mark will generally be the person who filed an application to register the trade mark first, not the person who developed or used the trade mark first. Unfortunately, the first to file system can be exploited by trade mark hijackers, who register others’ brands in China. They usually do this to seek financial gain by selling the registration back to the company that developed the brand, or to exploit the developer’s reputation. Think about your medium to long term export ambitions and get some basic trade mark protection early.
- Are you infringing someone else’s IP? – You may not have registrations for all your key brand assets that you are using in China. If a third party has registrations for trade marks that are identical or similar to your brand assets then you may be vulnerable to infringement actions. The same applies to the key technology and designs that your products or services incorporate.
Consult an expert to make sure any necessary clearances have been conducted. IP Australia’s Patent Analytics Hub can provide insights into the competitive landscape and trends in technology areas. This is not a freedom to operate search, but it will give you information on filing trends over time, origin of inventions, top markets and applicants and full technology analysis.
Investing and building equity in a brand or product without conducting basic clearance searches may create infringement risks and compromise your ability to own the return on your time and investment.
You may be seeking new rounds of funding and having discussions with many people about your business and growth plans. IP assets and portfolios are increasingly subject to investment analysis scrutiny. Before discussing sensitive details of your business, you should make sure you have confidentiality agreements in place. Our Contract Generator helps you to create your own non-disclosure agreements if they are intended for use in Australia.
A confidentiality agreement provides a remedy if there is an unauthorised disclosure, but it does not necessarily prevent the mishandling of information. Compensation and other relief may not address all the commercial consequences of an unauthorised disclosure. Even with a well-drafted confidentiality agreement, you should do due diligence on the other party, and have processes to manage confidential information very carefully.
You will likely be seeking out China based contacts and partners to work with around distribution, manufacturing, retailing, fulfilment, product development, research, and so forth. It’s important that you do some basic background research on your partners and make sure you have well drafted confidentiality agreements and other contracts in place that address your IP requirements. IP Australia’s IP Toolkit can also help you to think about the fundamentals of collaborating with other parties.
You may wonder about the enforceability of contracts in China. The World Bank Doing Business report for 2019 ranks China the 6th best economy to enforce a contract, based on the time, cost, and quality of judicial processes (Australia is ranked 5th). Our Guide to Contracts in China will take you through the elements of a well drafted agreement.
Having well drafted contracts is important if a dispute arises. However, it is better to proactively avoid potential disputes by doing some basic due diligence before you sign an agreement with a new partner. Review aspects of your partner’s background that are relevant to their ability to fulfill their obligations to you: business license, regulatory approvals, legal representative, credit record, corporate structure, and commercial reputation. You can also check whether they have a history of IP infringement, involvement in litigation, and or been issued any administrative penalties.
Depending on your industry, you may find that the regulatory environment in China is quite different to what you have encountered in other markets. Part of your preparation and partner due diligence may include a review of any licences, permits, restrictions or other requirements that are necessary to operate in your sector.
Regulatory approvals can take time and involve substantial costs. They may negatively impact your timeframes and budget if they are not factored into your business model. Some restrictions may mean your intended business model is not viable at all.
As plans progress you may need to build a team on the ground in China. Build their IP awareness by sharing this Info Pack with them. Work with your staff and external advisors to develop clear guidelines and processes for how your valuable intangible assets should be handled by staff. This may include customer information, business development and sales plans, financial plans, product formulations, and trade secrets. High levels of IP hygiene are an asset for all businesses.
Employment contracts should also address non-disclosure and confidentiality obligations as well as ownership of IP that is developed by employees. Consult an expert on your rights and obligations to China based employees in this area. For a China specific non-disclosure agreement template, please contact the IP Counsellor (ChinaIP@ipaustralia.gov.au).
Staying on top of the competitive landscape may help to pre-empt issues further down the track.
If you find yourself in a situation where you need to enforce your IP rights then our enforcement guide is a good place to start. The enforcement mechanisms in China have improved significantly over the years and today include a patchwork of civil law, administrative, and commercial solutions. The major e-commerce platforms provide notice and take-down tools to battle counterfeits.
If you find yourself the subject of infringement claims seek advice from an expert before responding. Trade mark hijackers; “professional complainers”; service providers trying to drive business by sending out unsolicited correspondence; there are different ways to deal with each of these parties and you should have an expert to help you to navigate the process.
As your business adapts to the China landscape review your IP portfolio and internal processes to ensure you own the right IP assets and have the right level of risk management in place.