China IP Protection Rising -- Just As Predicted
Today's Wall Street Journal has an article on how China's desire to "climb out of low-end manufacturing" is driving a rapid improvement in intellectual property protection there. This article, entitled, "As China Reins in Piracy, Some Seek Faster Results," [subscription may be required] coincides with exactly what I have been saying since we started this blog: China's IP protection will continue to improve as protecting IP becomes more important for China.
In just the last month or so, China has seen a slew of high profile crackdowns on piracy, with Viagra and DVD counterfeiting kingpins getting very long and very public sentences. According to the Wall Street Journal, foreign companies are noticing:
Foreign-company executives, surveys and government officials all note improvements. The biggest change has been at the top: Senior leaders including Premier Wen Jiabao now declare that improving the protection of intellectual property is a "strategic policy" for the nation. That is because they want Chinese companies to climb out of low-end manufacturing and develop their own technologies and brands -- which will need protecting. Software producers like Microsoft Corp. have seen some of the clearest early benefits.
The article goes on to point out companies that view this increasing IP protection as "clear enough to allow them to invest for the future in the confidence that improvements will continue. AstraZeneca PLC and Novartis AG this year each committed to spending $100 million on research and development in China. Drug companies depend on selling patented products, and both companies cited China's strengthening protection of such rights in support of their decision to invest." Other foreign businesses see the same positive momentum:
"The positive momentum leads us to believe that things can only get better," said Keith Feldman, general manager of the international home-entertainment unit of News Corp.'s Twentieth Century Fox studio. He said the improving enforcement of intellectual-property rights is one reason Fox decided to try to start selling DVDs in China, even though it must still compete with illegal copies that can sell for less than a dollar.
"There's no question they have made progress," Secretary of Commerce Carlos Gutierrez said in an interview this month during a visit to Beijing.
This article tracks the advice CLB co-blogger, Steve Dickinson, gave at the recently completed China Law Forum on the need for foreign companies to act proactively to protect their IP in China. IP enforcement in China is far from perfect, but it is (at least in some areas) already effective and it is improving. This means foreign companies must examine their intellectual property options in China and this means in most cases it will make sense for these companies to register their trademarks, patents and copyrights in China. Registering your IP in China (or anywhere else for that matter) does not provide iron-clad protection, but a failure to register does all but assure you of no protection at all.
http://www.chinalawblog.com/cgi-bin/mt/mt-t.cgi/1605
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Comments
Hi Dan
The fact that IP protection in China is getting improved might also fall into what China Rises called "slow motion" stories-monumental in importance but unfold very so slowly that people hardly notice them.
You were one of the first that raised this point as I remember- to protect your IPRs, whether in China or not, you should go and register them soonest possible.
It's true as a general principle, but lately I'm wondering what will happen after advising clients that they should register their IPRs, say if 1) the patent registration is rejected by China's authority and 2) clients claim that they don't register those "core technologies or formula" because these core technologies will be "stolen" after registration.
I've come across both scenarios and the latter one is so common among Chinese clients that I almost guessed if this is a normal pratice- these people are successful private-enterprise entrepreneurs and generally very sharp in terms of catching or spotting the issues. My arguement was the details of such core tech are not supposed to be made known to public in the process of the registration and after that. But apparently the clients don't buy it and claimed that's all "in theory". So I was wondering whether this is just an excuse for non-registration or it is typical Chinese mentality, or it could be that in realty it happened that registration doesn't lead to protection but the other way around.
As for the first question, the reason for the patents being rejected according to the clients, was they forgot to file the application for "material examination" (mechanism of registration is first formal examination followed by the substansive examination). It sounds reasonable, but my questions were why they don't have someone monitor the registration process and what are the measures to mitigate any loss incurred due to the patents being rejected.
Again, they replied to say there won't be any loss because the patent application was for some unimportant formula- now we go back to the first point.
Just out of curiosity, have you come across any of these?
wei
Posted by: Made in China | November 27, 2006 6:56 PM
*what are the advantages if supplier in china will be paid through china branch office rather pay from head office in singapore.
*Can we save import Tax of custom tax Etc..
kindly explain.earliest reply needed.
thanks & regards..
Posted by: bali | November 27, 2006 11:46 PM
Made in China --
You raise some very good points. So could in fact, that rather than answer them here, I will do a post on it.
Thanks.
Posted by: China Law Blog | November 28, 2006 11:57 AM
Bali --
There is no way I can answer your questions without a whole lot more facts and even then, I doubt I could answer it. For answers to these questions you are going to need to retain and pay for an attorney and/or accountant in China.
Posted by: China Law Blog | November 28, 2006 11:59 AM
Hi Dan,
I'm curious to know the quantity of US IP cases against Chinese entities. Would you have any sense of this? I've read that for many large corporations such as Microsoft, the revenues exceed by far the losses due to IP infringement, so they do business in China anyway. Clearly there has been pressure from the US to address IP concerns and your posting is an indication of results. Do you think this will open the door to more cross-border law suits as the framework for protection evolves?
Thanks & Regards,
Kris
Posted by: Kris | December 9, 2006 6:38 PM
Kris --
Thanks for checking in.
I have seen the numbers on this (and then promptly forgotten them) and the number of foreign companies bringing IP lawsuits in China is increasing substantially every year. There are, however, two ways to look at this. The courts are enforcing IP so companies are suing. Or, the number of violations is increasing. Frankly, I think it is a bit of both.
Microsoft has had luck working with the government to reduce piracy of its software, which is still rampant. Yet, I have no doubt Microsoft is making money in China. Most of the companies with which my firm works try to stay ahead of counterfeiters by having a strong brand name and/or constantly updating their products.
Posted by: China Law Blog | December 9, 2006 8:52 PM