China Law Blog

Just came across what I consider the best comprehensive yet basic article on protecting your IP in China. It is by Godfrey Firth, who is with the Business Advisory Services at the US-China Business Council in Shanghai and it is entitled, "The best offense is a good defense—and vice versa." (h/t to China Success Stories) The article is comprehensive in that it outlines virtually all of the basic strategies applicable to protecting various types of intellectual property (IP) in China and it is basic in that it provides a broad overview for the layperson.

Firth's thesis is that a "successful China IP protection strategy needs to encompass both offensive and defensive elements:"

Firth sets forth "some practical measures" companies should take to protect their IP in China, rightfully noting that the "specific measures a company adopts will vary depending on the company's industry and level of involvement in the China market."

Firth calls on companies to make protecting their IP in China a responsibility of everyone in the company, not just the lawyers. He suggests companies communicate and enforce a clear IP protection strategy throughout the company by "communicating the value of protecting IP to all employees, business partners, and customers" and by "instilling a sense of 'ownership' of company IP in staff."

He then lists measures companies can use to protect their IP. He notes that since China is a "first to file," not a "first to use" country, companies must register their IP in China as soon as possible. For trademarks, he suggests companies register their brands in both English and Chinese and carefully select the categories and subcategories in which they file. For patents, he notes china offers design, invention, and utility model patents and he suggests companies should generally file "both utility and invention patents for the same item, since utility patents receive little substantive review and are usually easier to acquire. Once an invention patent is granted, the utility patent can generally be dropped, as utility patents last only for 10 years from the date of application, compared to 20 years for invention patents." Though registration of copyrights is not required to secure protection, companies should nonetheless "consider registering their works with the National Copyright Administration (NCA), since registration provides a public record and serves as useful evidence in court." He correctly notes that registering software copyrights "may be quite sensitive, since it may require providing some source code to NCA." Lastly, he states that companies should consider trade secret agreements as an additional means of protecting their IP

Firth then lists the following non-legal means for protecting IP:

1. Design your product so it is difficult to copy and "compartmentalize the production process so that no single unit can produce a complete product." Outsource different parts "to different companies to minimize the risk of inadvertently creating a new competitor." If possible, keep your "key technologies and procedures" and "vital designs or latest-generation technologies" in your home country.

2. Know who you are hiring and make your employees sign non-compete and non-disclosure agreements (NDA).

3. Conduct due diligence on your potential and current suppliers and distributors. Research their networks and identify weak points through which counterfeit products can enter distribution. Select partners with reputations of their own to protect. Include IP protection clauses in your contracts with them.

4. Keep a close eye on competitors by, among other things, monitoring the patents and trademarks they seek. This can help "prevent the registration of copycat trademarks and patents." Firms should be especially alert to design and utility patents filed for infringing products.

The article concludes with the admonition that even after doing all of the above, "companies must devote time and resources to detecting violations and taking legal action; a company's legal rights mean little in China unless the company chooses to protect them." Firth details some of the various administrative, civil, criminal and even political actions, companies can take if they discover their IP has been compromised in China.

What I find so interesting about this article is that so much of what Mr. Firth prescribes for protecting IP applies to doing business in China beyond IP. I am in the process of preparing a speech on protecting your company from bad Chinese products and much of the advice regarding IP applies to bad product protection as well. With both IP and product issues, it is important to cover yourself with good contracts, but it is of at least equal importance to engage in due diligence regarding those with whom you are dealing and to monitor constantly your Chinese partners once a relationship is established.

Getting your legal and operational house in order will obviously not prevent all China problems, but it is a necessary start.