No IP Enforcement In China. That Cannot Be True.
Spoke with a client today regarding IP protection in China. I gave my usual speech on China's protection of intellectual property, which, very briefly summarized, goes something like this::
IP protection in China is admittedly not that great, but it is better than widely portrayed. If you are selling movies on DVD or software on CD, then it is every bit as bad as you have no doubt heard. If you want to register and then enforce your patent there, do not expect your protections to be as good as the United States. But one thing we should very seriously talk about is how we can help protect your technology in China through trade secret/confidentiality agreements and through trademarks, both of which have a pretty good record of being enforced in China.
My client then said he has heard the Chinese courts never enforce patents held by foreigners. I told him that though patents are definitely not as strong in China as in the United States, the idea that foreigners can never protect their patents in China is just not true. A few hours later, an article, entitled, British victory in China as patents dispute boils over showed up in my email box.
The gist of the article is in its first sentence: "The British company whose founder invented the kettles that switch off automatically when they boil has had China patents win." The British company is Strix, whose founder John Taylor, invented the "kettle control" and who, today, makes most of its products in Guangzhou, China. Strix learned that two Chinese companies were copying its China patented technology and it sued those companies and was just awarded USD $1.5 million against them by the Beijing No. 1 Intermediate People's Court. Of equal importance is that the Court froze defendants' "liquid assets, including the bank accounts" at the commencement of the lawsuit a year ago, pretty much ensuring Strix will be able to collect its judgment.
So next time someone says China never enforces patent rights held by foreigners, you tell them that cannot be true.
Comments (8)
Read through and enter the discussion by using the form at the endasdf - February 2, 2010 9:31 AM
Aside from the legal benchmark, can some explain to me why an auto shutoff switch should warrant a patent? I mean, people boil water, and don't want to overboil and evaporate the water, and perhaps even cause danger. Isn't such an innovation a natural and inevitable development? So why does just being the first to come up with such a solution warrant unlimited protection and monopolistic benefits. Surely, if Strix had not come up with the solution, someone else would have, and probably very quickly as well.
Is this an example of excessive patent spamming? I know the laws obviously sided with Strix, but the underlying scenario just doesn't sit right with me.
FOARP - February 2, 2010 2:01 PM
@ASDF -
Patents are easy to obtain. The next time someone brags about how many patents they have to you, just smile and nod, because I could go out today and draft a patent with a good chance of it getting issued without really inventing anything useful. A patent in itself is not important, what the patent monopoly covers is.
You may think an auto-off for a kettle when it boils is obvious. Great. Did you think that before you first saw one? More to the point, can you design and build one?
Do you know what the solution chosen by Strix is and how it differs to the prior art (i.e., previous state of the art, such as, for example, thermostats of the kind you use in your water-heater)?
In fact I would like to bet that all Strix has is a newer kind of auto-off with advantages over previous auto-offs which the reporter from The Australian didn't think worth going into. Relax - Strix has not been enjoying a continual monopoly for the same auto-off for the past 60-odd years, but has been continually seeking to improve their auto-offs, just as all tech companies of note seek to improve their technology to keep ahead of the opposition.
Patent protection is not 'unlimited', it is usually limited to a 20-year period, and there are exceptions under most national regimes for things like experiment, educational, non-commercial private use etc.
FOARP - February 2, 2010 2:47 PM
@Dan - I think it's worth mentioning that it is actually much easier to get a patent in the US nowadays than it is in China. A few years ago I wouldn't have believed this myself, but the patent examiners at the SIPO (State Intellectual Property Office - China's patent office) are nowadays in no way the inferiors of the USPTO examiners.
Part of this is a decline in standards in the US - back in 06-07 I would have expected to see only maybe 1% of our applications going through without office action (i.e., without any objections or rejections being raised to anything in the patent) but now it is, at the very least, 10% - an astounding figure which represents a large number of patents which may be easily invalidated in litigation being issued. By comparison the SIPO examiners regularly raise high-quality rejections on the very same subject matter that the USPTO allows through without office action.
The end result of this is going to be a large number of US patents of dubious enforceability, and Chinese patents which, so long as a court can be found which will give you a fair hearing, are very easily enforced.
Chip - February 3, 2010 3:10 PM
asdf's post shows the very mentality that makes IP protection such an issue in China.
Iwao Furuya - February 9, 2010 1:08 PM
One of my clients, a large, diversified multinational high tech group with worldwide sales and operations (81,000 employees in 70 countries) through scores of local subsidiaries and joint ventures, has asked me to explore whether they may use guarantees of the Multilateral Investment Guarantee Agency (MIGA the political risk insurance of the World Bank Group) to insure some of the patents, processes and other protected industrial property rights they endow to their local affiliates and joint-ventures against the growing "political risk" which they incur in China, as a result of the government's and courts failure to provide adequate protection to their IP rights, when it is not the outright infringement or theft of those rights by SOEs or spinoff companies controlled by state entities and agencies. My client wants to keep doing business in China which accounts for a substantial percentage of their business, but would like to give more "teeth" to their contracts, whether with SOEs or JVs.
They believe these IP rights should be eligible inder MIGA's "breach of contract" or "non-honoring of sovereign financial obligations" coverage. Is it the case? Do you know anything about this type of coverage?
FOARP - February 10, 2010 6:12 AM
@Iwao Furuya - Good/interesting question. Simply going on first impressions and brief reading of the MIGA website I'd have to say no. A patent is not a contract but an enforceable right for which fees are paid, The state does not grant protection in return for the various registration/maintenance fees, these fees are merely incidental/ancillary to the process. Likewise, a patent is not a sovereign financial obligation, the state is under no financial obligation to the rights holder as a result of granting of the patent, instead the rights holder relies on the state to recognise their right.
However, MIGA has been around since 1988, so my bet is that, if these two categories can be used in relation to state-granted rights (like pilots/drivers licenses, medical certification, exploration rights, mineral exploitation rights, state monopolies, fishing licenses/rights etc.) then an argument can be made by analogy as to why patent/trademark should be allowable, so this would probably be your best starting point.
Brian Dunham - May 11, 2010 6:31 PM
On the Strix issue, that case was overturned in the Beijing Higher People's Court. I found this on a new website
http://www.chinaipcompass.com/
http://www.chinaipcompass.com/?op=download_attachment&case_id=93
Jared - February 15, 2011 9:28 AM
Seems to me that companies are pushing harder than before to compete with competitors
without doing the actual work of inventing new things rather just building on the work
of others I think as this trend continues so will the cases of patent enforcement
increase. For more info on the subject. http://www.aminn.org/patent-enforcement