Sorry for the farm analogy, but I just finished looking at my itinerary for an upcoming Iowa trip.
Got a call the other day from a U.S. company furious about a competitor in China who had registered both its trademark and its patent in China.
How’s that you say?
Let me explain.
This U.S. company had just started doing business in China when one of its competitors (a European company, BTW, not a Chinese company) sent the U.S. company a cease and desist letter saying that the U.S. Company was infringing on both the European company’s trademark and patent in China.
This did not sit too well with the U.S. company because the patent on which it was allegedly infringing in China was the same as a patent the U.S. company had in the United States and the same held true of its trademark. I was in the midst of trying to resolve a client crisis when this company called and in no mood to discuss the finer points of China IP law with them so I suggested that they go back to their US patent and trademark attorneys (two different law firms I learned) and talk with them about next steps.
What did this U.S. company do wrong so as to allow itself to be in this horrible predicament and what can it do now to try to resolve it? I will answer the second question first because that is in many ways the less important one.
If it is going to have any chance of getting “its” trademark and “its” patent back in China, this U.S. company is going to need to pursue various actions in China to try to do so. On the trademark front, I am guessing (guessing because I do not have the facts to know for certain) that its best claims will be that the European company secured the trademark in bad faith (these are very tough claims) and/or that the European company must relinquish the trademark for non-use. On the patent front (and again I am guessing because the U.S. company was not clear on what sort of patent we were even talking about), its best claim will likely be that the European company’s patent should not have been granted because it lacked novelty.
The more important question is what should this U.S. company have done to have avoided the complicated and no doubt expensive situation in which it now finds itself? It should have filed for its own trademark and patent in China before its European competitor did.
We wrote about this many years ago in Getting A Patent In China. The China Patent Shuffle:
Kelly Spors, the Wall Street Journal’s spot on Q&A columnist on entrepreneurship and small business answered a question today on securing a China patent.
The question asked of Ms. Spors by a U.S. patent holder is whether it is “worth spending the money for a patent in China to prevent knockoffs from being made there?”
Ms. Spors says probably yes.
She starts out by noting that given “China’s reputation for meagerly enforcing intellectual property rights, getting a patent there may seem like a pointless expense. But you may kick yourself later on if you don’t.”
She then rightfully notes that in spite of the problems companies have in enforcing their patents in China, they are sometimes critical to prevent others from patenting YOUR product:
The big risk: If another company patents your idea first, it can turn around and sue you for infringement. It isn’t as much about “getting a patent in China as preventing other people from getting one,” says Siva Yam, president of the U.S.-China Chamber of Commerce, a Chicago-based organization that helps businesses navigate China. Mr. Yam says the Chinese government is trying to better enforce patents, so having a Chinese patent may be worth more in the future.
Mr. Yam recalls a few years back when a Pennsylvania company decided not to seek a patent in China since it was already selling the technology there. But a Chinese company later sought and received a patent on a similar technology and then sued the U.S. company, along with writing letters to its customers threatening to sue if they continued doing business with the firm. The Chinese company eventually backed down, but not before the U.S. company had spent ample time and money fending off the claims.
She says it also makes sense to get a Chinese patent if you are selling your product into the Chinese market and that a “patent will allow you to fight back if the manufacturer starts selling knockoffs of your product.” She then notes that if you are going to seek a China patent of that which you have already patented in the United States, you must do so within a year of filing your U.S. patent application, unless you get an extension by filing an international patent application.
She is absolutely right about this. The China lawyers at my firm have received countless phone calls from companies agonizing over whether or not to get a China patent until we end that particular agony by telling them that they are too late.
I am probably a bit less upbeat than Ms. Spoor on the benefits of securing a China patent because they do tend to be difficult to enforce in China. One of the Chinese lawyers with whom we regularly work is even of the view that getting a strong trademark and constantly updating your product militate against the need to get a patent most of the time. But this ignores the problem of someone else stepping in and registering “your” patent in China.
Though we are constantly seeing instances where Chinese companies swoop in and register someone’s US trademark in China, it is less common with patents and I think this is because it is generally considerably more complicated and expensive to register a patent than it is to register a trademark.
Bottom Line: f you are doing business in China or even just considering doing so, you should be looking now at what you can do to protect your IP (patents, trademarks, copyrights, trade secrets, etc.) in China.