The 5 mistakes you’re making when trying to protect IP in China.
As China becomes a global IP powerhouse — with 1.3 million patent applications filed in 2016 — more and more international companies are trying to take advantage of this booming economy. However, many Western companies remain sceptical of the Chinese patent system and are reluctant to strike licensing deals with Chinese companies, because of stereotypical horror stories about unlawful imitation and infringement. As with any form of IP risk, it is never possible to eliminate completely the chance of any negative outcomes — but there are some steps you can take to help reduce exposure to risk. The same as any other market, the key is researching and knowing the local peculiarities.
We explore the 5 common mistakes organisations make when moving into the Chinese market.
You’ve failed to properly understand the full IP landscape
First, don’t fall into the trap of not doing enough research. Don’t only review China’s core IP laws and regulations, such as the Patent, Trademark, Copyright, and Anti-Unfair Competition laws, but also the growing body of other laws and regulations that impact China’s IP environment, including (but not limited to) the Corporate Income Tax, Antimonopoly, and Labor Contract laws. [1]
Not being ready to enforce your rights
Entering a new market and protecting IP also means being ready to enforce or defend your rights. As soon as you enter the market, you should have the tools and processes in place to monitor the marketplace for any unauthorized use of your IP and budget plan for enforcement. In most cases, when European SMEs identify infringement, they should actively enforce their rights. [2] Utilize official enforcement channels to pursue infringers.
The NDA you had your supplier sign means very little in China
Non-disclosure agreements (NDAs) provide little protection from imitators in China. NDAs are designed to protect trade secrets from being exposed to the public — however, the real concern is companies copying inventions for their own benefit and using your knowledge to compete with you.
It’s better to sign NNNs — non-use and non-circumvention — rather than just NDAs. The terms in your agreement must be enforceable and in compliance with Chinese laws. For an NNN to be enforceable in Chinese courts, it must be written in Chinese and governed by Chinese law.
Often, American companies will make the mistake of bringing over an NDA based on US law — which is difficult to enforce or uphold in Chinese courts. [3]
Not getting to know your Chinese partners in person.
Having a colleague or partner in China — who understands Chinese culture, the way they do business and can speak the language — is essential too.
Not only can they guide you, but a local partner can save time and reduce barriers by ensuring effective communication. Plus, many documents will need to be prepared in Chinese if they are to be used to defend IP there. [3]
Not being ready to do due diligence quickly enough.
Chinese business culture has an emphasis on friendship and trust. Once the foundations have been laid — for example, you’ve cooperated and built a good relationship — the deal can happen very quickly.
As Matthew Wahlrab, Founder and CEO of Innovative Foundations and 2017 IAM Strategy 300 Award Winner, explained to us in an interview, “One thing that catches people by surprise is how fast things move in China compared to the US. It’s not uncommon to fly over there and on the way back receive a contract on the plane… Be prepared for diligence because they move fast. You need to have everything ready to rock and roll — especially IP — otherwise they will find licensing partners somewhere else.” [4]
Take our free course, ‘How to protect IP in China’ for more information on everything you need to know about IP protection in China.
About this article:
This article was written by PatSnap Academy, which provides free, on-demand video courses covering cover a range of topics relating to IP and innovation, presented by renowned industry experts.
Sources:
[1] https://abovethelaw.com/2014/06/how-to-protect-your-ip-from-china-it-is-possible/
[3]https://academy.patsnap.com/courses/5aa90c52a8103300142e12e2/units/5c0150af5574d56c7ac9e21c
