Intellectual Property Rights

The risk of IPR abuse is commonly cited by UK companies as one of the main deterrents to doing business in China.  In reality the situation is complex and in a recent survey UK companies actively involved in the Chinese market placed IPR ninth in a list of challenges.  From having no IP protection law in the late 1970s China has progressively enacted legislation to the point where it broadly matches or exceeds our own.  However, enforcement has been an issue.  China is a large country with a strong regional government system (regional and local authorities may not be as committed to protecting IPR as central government, particularly if a factory producing counterfeit goods is a major employer in an area of high unemployment) and a very young IPR history.  Substantial progress in enforcement has been made in recent years, partly driven by the rise of ‘home grown’ IPR developed and owned by Chinese companies themselves. The number of patents being filed by Chinese organisations is rapidly increasing, and a large number of Chinese companies are using the legal system, successfully, for redress where they have faced infringements.

UK companies are increasingly indicating support on IP issues from local Chinese authorities, however it is still important to consider the threat of IPR abuse of your products or services.  As part of your market entry strategy you will need to establish how you can protect your rights, how much it will cost and what other steps you could take, such as including IPR in due diligence checks and monitoring the market for possible infringements.

Trademarks and logos can be a particular issue.  Unlike many other countries, the first person to register a trademark in China is the legal owner, and if you have been pre-empted, then lengthy cancellation and court proceedings will be necessary, with no guarantee of success.  It is important to consider this before entering the market - whether you are selling or buying - as it has been known for Chinese manufacturers to register the trademarks of foreign customers.

It is wise to take a practical, as well as a legal view, on IP protection.  In some cases, for example where existing patents are several years old, patent registration in China is not possible, also, smaller companies may struggle with the costs involved.  Practical steps include choosing partners carefully; developing business relationships that are of mutual benefit and hence a deterrent to infringement; retaining key elements of IP; and working with several partners, rather than “putting all the eggs in one basket”.

CBBC have produced guidelines and a newsletter on the subject of IP, please contact ipr@cbbc.org for more information. An experienced independent IPR lawyer is invaluable in helping you to establish the best strategy for your company, a number of CBBC members specialise in this area and we are happy to put you in contact with them.

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