doing business in china ip issues before you go

Doing Business in China IP Issues Before You Go

1

Gowlings: IP & China

James Longwell

Partner, Toronto

Intellectual Property

700+ professionals in 7 Canadian cities

120+ year history of excellence in practicing law

20+ year history of protecting IP in China

1St Canadian patent application filed in China in 1985

Gowlings has trained numerous Chinese IP

professionals through its visiting scholars program

Network of Chinese IP and business law professionals

2

Understanding the Differences

• Fear - Uncertainty – Doubt (F U D)

• China is an Unknown

• Many Doing first or early Intl deals in China

• Nation of large contrasts

• China in Western Media

• Bad news sells newspapers / TV

• US Trade Reports

• China is a perennial target

3

Understanding the Differences

• Legal basis: negotiating contracts, court

precedents

• China is a civil law jurisdiction

• Canada’s legal system primarily based on common

law:

• “legal” details are left to the lawyers

4

“As a matter of general principle, a patentee and

a licensee are free to contract as they see fit and

a consideration of problems in licensing

involves a consideration of as many facets and

legal situations as the ingenuity of the

negotiating parties may devise.”

Gordon F. Henderson, Q.C., “Patent Licensing, Problems from the

Imprecision of the English Language”, 63 CPR 99, at 100.

5

Chinese IP Protection

• Many Canadians are surprised by harmonization

of IP laws

• China has made enormous gains in ~20 yrs

• Continues to grow/strengthen its IP laws

• Our lack of knowledge contributes to F U D

6

Chinese IP Protection

• Comprehensive Protection in China

• Patent - Invention, Utility Model, Design

• Trademark

• Copyright

• Trade Secret

7

P/UM/D Application Filing Statistics

8

Chinese IP Enforcement

• Major differences between Canada and China

• Different government institutions and court

systems

9


• Canada – IP owner generally left to do its own

investigation and to bring civil law suit

• Choice of court

• Federal Court – IP infringement

• Court of Province for any matter: IP infringement,

contract dispute, trade secret breach, ownership

dispute

• Canada – police or customs agents at borders

rarely involved with IP infringement matters

10


• China – many more options:

• Administrative Enforcement

• AIC and AQSIQ / SIPO

• Investigative powers with ability to impose

penalty/sanction but no compensation to IP owner

11


• China – many more options:


• Concern that AICs do not want to shut down infringers

and harm economic growth – 3000 offices

• AQISQ / TSB less likely influenced by localism

12



• SIPO – State Intellectual Property Office (Patent

Office)

• Fewer resources for patent enforcement than other

administrative agencies

13


• Civil Enforcement

• To obtain damages, avoid AICs, etc.

• Forum picking – Court in a big city

• Criminal Enforcement

• Prosecution by Police in courts

• Must meet thresholds and overcome reluctance

14


• Increasing sophistication and reliance by

Chinese companies

• Number of patent infringement suits rivals US

• Incidents of Chinese companies suing foreign

companies in China

15


• Chint Group Co. and Schneider Electric

• Chint wins Utility Model suit over Schneider Electric

and its sales agent

• largest IP verdict (US $4.3M)

16


• Lanye Liquor and Shanghai Pepsi

• Lanye wins trademark suit against Shanghai Pepsi

over Blue Storm brand

• Shanghai Pepsi ordered to pay compensation (RMB

3M) and publish apology

17


• Neoplan (Man) and Zonda

• German bus maker wins $3M design patent fight over

Chinese firm (Jan 2009)

18

IP Strategies

• Be Prepared: Protect Before You Go

• Ensure IP house is in order:

• Ownership, NDAs, Non-competes

• Register your IP here and protect your trade secrets

• Know your IP

19

IP Strategies

• Protecting IP in China

• Register IP in China

• Registered IP is best

• Start before you go: e.g. file to protect TMs in China (in

English and Chinese) from Canada

20

IP Strategies


• Know your partners

• Establish who will own new IP

• Non-solicitation/Non-competition/Non-use

• Can’t make your products for anyone but you

• Mandate Trade Secret safeguards

• Negotiate rights to monitor/inspect

• Put people on the ground as nec.

• Employee non-compete / non-disclosure

21

IP Strategies



• License IP out, retain ownership

• Be selective

• Keep secrets at home; Disclose only necessary; Divide

between suppliers

• Foster culture of protection

22

IP Strategies



• Build trusting relationships with key legal / business

advisors

• Build strong relationships with government

23

Conclusion

• Chinese government is committed to improving

IP, reducing infringement and fostering culture

of innovation

• Change is swift

• Follow best practices: use prevention and build

a trusted support team

24

QUESTIONS?

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