EBN, an online publication geared to supply chain professionals, recently ran a piece called Why Apple’s Patent Fight With Baili Should Serve As A Wake-Up Call. Although the piece is well-meaning, and its generic thesis – that Western companies need to do more to protect their IP in China – is correct, many of the details are either misleading or flat out wrong.
I suppose the headline should have been a tipoff. Apple’s patent fight with Baili should only serve as a wake-up call for companies that have been asleep for the past decade. It is not news that Chinese registrants (I am chary of using the word “entrepreneurs” to describe trademark squatters) have gotten the better of Western companies for quite some time.
The rest of the article unspools from an incorrect thesis: that trademarks, copyrights and patents are all registered solely on a first-to-file basis.
For trademarks, this thesis is largely correct. China is indeed a first-to-file country, and many Chinese companies have registered trademarks that “belong” to Western companies. We have written about this phenomenon (and how to combat it) about a thousand times. Okay, maybe not a thousand times. But enough that sometimes I feel like a Johnny One Note.
For copyrights, this statement is completely incorrect. China is NOT a first-to-file country. As a signatory to the Berne Convention, China recognizes copyrights from all 171 other Convention countries, which covers the vast majority of the world. China does not require formal registration (although it’s invariably a good idea to prove ownership). And it is simply not true that a random Chinese entrepreneur could register “your” copyright. The one caveat is that the Copyright Protection Center of China does not substantively review copyright applications at the time of registration, so anyone could register “your” copyright. A college student in Guilin could register a copyright for Ghostbusters tomorrow, but the actual owner of the copyright (presumably Columbia Pictures) could easily invalidate that registration by showing proof of ownership. I’m less sanguine about the outcome of a Huey Lewis – Ray Parker, Jr. battle over the theme song, but I’d love to see the Chinese courts take it on.
For patents, this statement is correct, but misleading. Even though China (like the US) is a first-to-file country, it is also a signatory to the Paris Convention and it has an absolute novelty requirement. If an invention has been marketed, sold, or otherwise made known to the public anywhere in the world, it can no longer be patented in China. So the idea that a Chinese company could take a bunch of existing American products and register valid patents for them in China is false.
But I must offer a few caveats to the above. First, design patents and utility model patents do not undergo substantive examination at the time of registration in China, so it is possible for almost anything to be registered. But in theory, a spurious patent will not survive an invalidity challenge. Second, it would not take much to alter an existing design so that it becomes sufficiently novel to survive an invalidity challenge. Third, just because a law is unambiguous doesn’t mean it will be applied correctly.
The main problem with the article’s discussion of patents, however, is that it ignores the common situation where a foreign company engages a Chinese factory to design a new product without benefit of a written agreement indicating who will own the related IP. Although the foreign company may reasonably think that it is the true owner of the patent for the new product, the factory may just as reasonably think that it is the true owner. Especially when the factory hasn’t been paid any extra money for product design.
The solution is not to complain that Chinese companies are taking unfair advantage of you; the solution is to act like a rational player and protect your IP. That means having proper agreements with your manufacturers and taking the initiative by filing patents of your own before having anything manufactured. My colleague Steve Dickinson covered the former issue in an excellent recent three-part series – see here, here, and here.