Compliled by Thomas E. Walsh, Jr.

East West Bridge Inc.

IP Protection is an important issue today for any firm contemplating selling products in China. The following information is a guideline for evaluating these issues. East West Bridge Inc. has been successfully assisting North American firms enter the China market for over 20 years. We can put that experience to work for you.

More importantly, as you will see in the following paragraphs, the U.S. Government strongly suggests that firms entering the China market engage the assistance of professional firms offering the services provided by East West Bridge Inc. Cort Smith, CEO of EWB clearly stated that “The only way to protect your IP in China is to be there – to have a direct presence in the PRC, and that is what we provide to North American firms. We are the China experts”

The Department Of Commerce, U.S. Commercial Service, urges that firms evaluate whether their company is prepared to meet the challenges posed by China’s system for regulation of international trade. They further point out that, “Your company should consider identifying an export management firm with China experience or approach a different market with fewer technical, logistical, cultural and business risk hurdles before attempting business in China. The U.S. Embassy in Beijing also adds the following:

China’s system for regulation of foreign commercial activity is difficult to navigate and non-transparent. Companies new to market are strongly encouraged to retain professional services to structure commercial transactions. U.S. exporters may locate an extensive list of American business service providers…

East West Bridge Inc. is proud to be a registered U.S. Commercial Service, China Business Service Provider (BSP).

The U.S. Embassy in Beijing reports that “Since joining the World Trade Organization, China has strengthened its legal framework and amended its IPR laws and regulations to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Despite stronger statutory protection, China continues to be a haven for counterfeiters and pirates. According to one copyright industry association, the piracy rate remains one of the highest in the world (over 90 percent) and U.S. companies lose over one billion dollars in legitimate business each year to piracy. On average, 20 percent of all consumer products in the Chinese market are counterfeit. If a product sells, it is likely to be illegally duplicated. U.S. companies are not alone, as pirates and counterfeiters target both foreign and domestic companies.

Though we have observed commitment on the part of many central government officials to tackle the problem, enforcement measures taken to date have not been sufficient to deter massive IPR infringements effectively. There are several factors that undermine enforcement measures, including China’s reliance on administrative instead of criminal measures to combat IPR infringements, corruption and local protectionism, limited resources and training available to enforcement officials, and lack of public education regarding the economic and social impact of counterfeiting and piracy.

The Best Protection is Prevention

Though China is a party to international agreements to protect intellectual property (including the WIPO, Berne and Paris Conventions, among others), a company must register its patents and trademarks with the appropriate Chinese agencies and authorities for those rights to be enforceable in China. Copyrights do not need to be registered but registration may be helpful in enforcement actions. A brief summary of China’s patent, trademark, and copyright laws follows below.

Patent: China’s first Patent Law was enacted in 1984 and has been amended twice (1992 and 2000) to extend the scope of protection. To comply with TRIPS, the latest amendment extended the duration of patent protection to 20 years from the date of filing a patent application. Chemical and pharmaceutical products, as well as food, beverages, and flavorings, are all now patentable. China follows a first-to-file system for patents, which means patents are granted to those that file first even if the filers are not the original inventors. This system is unlike the United States, which recognizes the “first to invent” rule, but is consistent with the practice in other parts of the world, including the European Union. As a signatory to the Patent Cooperation Treaty in 1994, China will perform international patent searches and preliminary examinations of patent applications. Under China’s Patent Law, a foreign patent application filed by a person or firm without a business office in China must be made through an authorized patent agent, while initial preparation may be done by anyone. Patents are filed with China’s State Intellectual Property Office (SIPO) in Beijing, while SIPO offices at the provincial and municipal level are responsible for administrative enforcement.

Trademark: China’s Trademark Law was first adopted in 1982 and subsequently revised in 1993 and 2001. The current Trademark Law went into effect in October 2001, with implementing regulations taking effect on September 15, 2002. The new Trademark Law extended registration to collective marks, certification marks and three-dimensional symbols, as required by TRIPS. China joined the Madrid Protocol in 1989, which requires reciprocal trademark registration for member countries, which now include the United States. China has a ‘first-to-file’ system that requires no evidence of prior use or ownership, leaving registration of popular foreign marks open to third parties. However, the China Trademark Office has cancelled Chinese trademarks that were unfairly registered by local Chinese agents or customers of foreign companies. Foreign companies seeking to distribute their products in China are advised to register their marks and/or logos with the China Trademark Office. Further, foreign companies should register appropriate Internet domain names and Chinese language versions of their trademarks. As with patent registration, foreign parties must use the services of approved Chinese agents when submitting the trademark application. However, foreign attorneys or the Chinese agents may prepare the application. Recent amendments to the Implementing Regulations of the Trademark Law allow local branches or subsidiaries of foreign companies to register trademarks directly without use of a Chinese agent.

Copyright: China’s Copyright Law was established in 1990 and amended in October 2001. The new implementing rules came into force on September 15, 2002. Unlike patent and trademark protection, copyrighted works do not require registration for protection. China grants protection to persons from countries belonging to copyright international conventions or bilateral agreements of which China is a member. However, copyright owners may wish to register voluntarily with China’s National Copyright Administration (NCA) to establish evidence of ownership, should enforcement actions become necessary.

Unfair Competition: China’s Anti-unfair Competition Law provides some protection for unregistered trademarks, packaging, trade dress and trade secrets. The Fair Trade Bureau under the State Administration for Industry and Commerce (SAIC) is responsible for the interpretation and implementation of the Anti-unfair Competition Law. SAIC also provides protection of company names. According to the TRIPS Agreement, China is required to protect undisclosed information submitted to Chinese agencies in obtaining regulatory approval for pharmaceutical and chemical entities from disclosure or unfair commercial use. China’s State Drug Administration and Ministry of Agriculture oversee the marketing approval of pharmaceuticals and agricultural chemicals, respectively.

China’s IPR Enforcement System

Addressing infringement of IP in China follows a two-track system. The first and most prevalent is the administrative track, whereby an IP rights holder files a complaint at the local administrative office. The second is the judicial track, whereby complaints are filed through the court system. (China has established specialized IP panels in its civil court system throughout the country.) Determining which IP agency has jurisdiction over an act of infringement can be confusing. Jurisdiction of IP protection is diffused throughout a number of government agencies and offices, with each typically responsible for the protection afforded by one statute or one specific area of IP-related law. There may be geographical limits or conflicts posed by one administrative agency taking a case involving piracy or counterfeiting that also occurs in another region. In recognition of these difficulties, some regional IP officials have discussed plans for creating cross-jurisdictional enforcement procedures. China’s courts also have rules regarding jurisdiction over infringing or counterfeit activities, and the scope of potential orders.

The Bottom Line

To protect your IP rights in the PRC you need to be there, period. And you need the services and expertise offered by East West Bridge and our professional staff to safely navigate and bridge the treacherous waters of operating a successful China business. After all is said and done, Our Business is helping North American business establish sales in China. That is what we do, and we do it very well.

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