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CHINA - IP Issues

Silas BrownBriffa

East Midlands InternationalTrade Association

Wednesday 12 July 2006

Introduction

• Brief overview of doing business in China

• Commercial arrangements in China:– Manufacturing in China– Registering IPR in China– Trade secrets

• IPR Infringement in China – counterfeiting and infringement of IPR– IPR enforcement routes

China

• China joined WTO November 2001• IPR enforcement improvements - pledges.• Massive growth:

– 2004 GDP growth 9.5%– 2005 GDP growth 9.1%

• Trade between China 2005:– UK exported £2.3bn, up 17%– UK imported £10.5bn, up 23%

Guanxi

• “Guanxi” - literally means “doing business through value laden relationships.”

• Main reasons for building business relationships in China:– export– license and manufacture

• Foreign invested manufacture enterprise (FIE)

关系

Manufacturing: The Basics

• Licence: legal permission to do or own a specified thing (i.e. manufacture goods)

• Authorising third parties to do something that they would not otherwise be entitled to do and exercising control over how they do it

• Contract law: Manufacturing Agreement

Manufacturing in China

• Know your manufacturer

• Heads of Agreement

• Lead costs?

• Full Manufacturing Agreement

• Communication

Manufacturing in China

• Points of particular importance to China

• Timetable:– when will tooling be completed– when will sample/prototype be completed– what do you expect and when– approval procedure for samples before mass production

• Brand/designs:– need to ensure and control quality– register rights preferably in advance– translation

Manufacturing: Key Terms

• Parties to the agreement• Purpose• Exclusivity?• Financial - minimums, royalties, licence fees• Quality control, approvals and insurances• Use of trade marks• Warranties• Termination

Registered Protection in China

• Trade Marks– International classification of goods– Protection

• Designs– System of registration of “design

patents”– Protection

• Patents

Trade Secrets Protection

• Non-registrable IP rights

• “Technical and management information not in the public domain”, which:– can bring economic benefit; and– the rightful party has adopted measures to

maintain in confidence

• Agree and enforce a Confidentiality Policy

• “Counterfeit” – product which imitates another– unauthorised reproduction of a trade mark

• Also includes:– original product, produced beyond the scope of

the commercial agreement– look-alike products

• “Unfair Competition” in the PRC– look and feel of a product– not reproducing the trade mark

Counterfeiting

Examples

Examples

• Practical Steps– Carry out regular investigations

– Identify scale of problems

– Identify the source

– Gather evidence – photographs, film, investigator’s statements etc.

Keeping Track of IP Infringements

China - IPR Enforcement Routes

• Enforce where appropriate and cost effective

• Means of enforcement:– Administrative routes - designated authorities for

patents, trade marks, copyright and unfair competition.

– Civil routes - special courts designated for IP and “The People’s Court.”

– Criminal routes/ Customs - “The People’s Procuratorate”

Enforcement Routes Administrative Authorities

• SAIC - State Administration for Industry and Commerce

• China Patent Office (CPO)

• National Copyright Administration (NCA)

SAIC

• Evidence

• File complaint (submissions) through government designated agency

• Raid Action - may need to conduct pre-raid investigation as goods move quickly

• Remedies

Raid

Enforcement Routes Civil Action

• Evidence • Complaint filed by PRC lawyer

• Immediate order for preservation of evidence and property

• File suit - i.e. request for trial in court• Hearing• Remedies

Enforcement RoutesCriminal Action

• Infringement must be an exact counterfeit• Infringement must involve “very large”

amounts of illegal income or “especially serious circumstances”

• Complaint filed by PRC lawyer • Very wide powers of investigation• Penalties

Summary

• Protect your IPR through legal agreements

• Register your IPR in China

• Enforce wisely and cost effectively

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