Advice on protecting intellectual property rights in China

China Intellectual propertyChina patentcopyrightFeature storyIP protection
For many multinationals, intellectual property is among their top concerns when investing in China. These IP concerns loom particularly large for high technology manufacturers who may be enticed by low costs and government incentives but wary of aggressive competitors. While significant risks exist, there are a number of steps that managers can take to safeguard their secrets. This week, RightSite shares some inside tips on keeping your intellectual property safe. 

RightSite: What kinds of rights are protected as intellectual property in China and what are some measures taken by the Chinese government to safeguard investors' IP rights?

Shen: Important laws regarding IP rights include The Copyright Law of the PRC, The Trademark Law of the PRC, and the Patent Law of the PRC. These laws cover the basic forms of intellectual property including patents (external design, invention and utility model), trademarks, copyrights, and trade secrets. These statutes stipulate the legal responsibilities to be borne by anyone who violates others' intellectual property rights, including civil liability, criminal liability and administrative sanctions. So in terms of the written codes, China's framework for intellectual property protection is fairly well developed.

RightSite: Are there any major differences in the way these statutes protect intellectual property compared to international standards in more developed markets?

Shen: As a member of WTO, China is subject to several international treaties and conventions. TRIPS (Related Aspects of Intellectual Property) is the most important agreement which sets down minimum standards for many forms of intellectual property regulations and requires all WTO members to provide strong protection for intellectual property rights. After China's entry into WTO in 2001, China has made amendments to national laws and regulations to meet the requirement of TRIPS. In this respect, China has no major difference with other WTO members.

RightSite: According to your experience, what are some typical intellectual property issues that foreign investors encounter while doing business in China?

Shen: Most foreign companies are already aware of the fact that counterfeit products and trademark infringement are common in China. While these problems are not unique to China, they still create a legitimate basis for concern by investors. However, significant progress can already be seen in enforcement of intellectual property protections. For instance, many firms specialized in IP-related investigation and enforcement have been set up to assist foreign companies with anti-counterfeit campaigns, collecting evidence, seeking protection from relevant authorities and litigation issues.

RightSite: Manufacturing companies are often exposed to trade and technical secret revelation in the workplace, could you give some advice to these companies to reduce the risk of these secrets being misused?

Shen: It is crucial for manufacturing companies to develop an IP protection strategy and to have it as a integral part in their long-term business strategy. Active measures may include controlling access to trade secrets by introducing security measures and restricting access to relevant computers, equipment and documents. Companies should also sign confidentiality agreements with workers and management staff holding key positions, which require them to not disclose any technical secrets and information, such as production technology and process obtained, to third parties. In addition, technical staff may also be restricted from working for a competing employer that produces the same type of products or is engaged in the same type of business for a prescribed period.

RightSite: In the case of foreign-China joint ventures and foreign-China contractual arrangements, how can involved parties avoid future disputes over the ownership of intellectual property?

Shen: Foreign companies entering into contractual arrangements with Chinese firm should have IP ownership and allocation issues stated clearly in their business agreement from the very beginning. For joint ventures, intellectual property as an intangible asset contributed by one party of the joint venture company is regarded as an asset of the joint venture company. In these cases, it is best to include language in the contract that provides for the precise disposition of the intellectual property in the case the joint venture is terminated either at its natural term, or through some early termination mechanism.

RightSite: Dealing with IP violations and possible litigation is a nightmare for any investor, can you give three suggestions to foreign investors on how to protect intellectual property while doing business in China?

Shen: There are a number of effective ways to safeguard your intellectual property in China. I would recommend that investors first consider the following:

•Be familiar with rules
Foreign investors should understand China's position on IP protection and be familiar with laws and regulations on this matter.

•Know what to do if your IP is violated
Enforcement options for dealing with IP violation in China are administrative enforcement, civil litigation and criminal enforcement. 

•Be innovative in protecting your IP
Companies can fight counterfeiting and misuse of trademarks by forming industrial associations, which allows members to share information and work together to closely monitor the environment on a constant basis. 

RightSite: Many foreign investors are concerned about the effectiveness with which China's IP laws are enforced. Is there any major progress made by the government to improve this enforcement?

Shen: China has made great progress during the past two decades and has introduced a set of laws and regulations to ensure intellectual property get protected for all businesses in the market. Another noticeable change is the change in attitude. Pushed by the nation's rapid economic development and encouragement on innovation, China's protection on intellectual property has changed from passive protection to active protection. With the raised awareness on intellectual property, local authorities have strengthened efforts on infringement crackdown to create a fair competition environment.

Graduated from Peking University and SOAS, University of London, and currently advising clients at Shanghai Promise Law Firm,  Mr. Shen Linchang has over 14-years legal experience and specializes in transnational investment consulting, international commercial litigation, and intellectual property services. Mr. Shen can be reached by email at yzslc@yahoo.com.cn. He is also the creator of the professional group "China Intellectual Property" on Linkedidn.( http://www.linkedin.com/groups?gid=2088688 )

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