In this China Law Special, Robert Mooijekind discusses the protection of intellectual property for the creative industries in China. He gives foreign creative industry companies a number of tips on how to effectively protect their Intellectual Property in China, including the incorporation of a pragmatic company step-plan and the entering into of confidentiality agreements with Chinese parties having access to their Intellectual Property.
It can take years to develop an original product, but only days to copy it. This is reality for companies in the creative industries and a big hurdle for start-ups. At the same time, in China – where copying is still rife – the number of wealthy consumers eager to buy the original product continues to rise. Luxury brands increasing their prices 27% across the board in 2011 to maintain high-end status in spite of massive copying underline that copying does not render creative/artistic concepts unfeasible.
Copying cannot be prevented, only discouraged and countered. Effective protection of creative ideas requires a strategy adapted to the product and business. Emphasis is often put on registration of an Intellectual Property right (“IPR”). This provides basic legal protection from your product or service being copied, however it can not be solely relied on to prevent it.
This Special provides an introduction on the following questions:
• What are IPR and what do they protect?
• What are the first steps in protecting Intellectual Property (“IP”)?
• What further measures can be included in an IP protection strategy?
• What if your IP is being copied?
What are Intellectual Property Rights
IP means a creation of the human mind, such as a design, a book, a symbol or a name. IPRs protect these creations. Claiming legal ownership of IP can be done solely through creation itself (copyright), or through a combination of creation and registration (patents and trademarks) or contracts in regard to the creation (trade secrets).
Scope of protection
Once successfully claimed, the IP can, in brief, not be used, changed or claimed by other parties. If the IP is not claimed, in principle anyone can use it.
Protection of IP is always limited to the expression of an idea. Ideas by themselves cannot be legally claimed through IPRs. The idea must be expressed in writing, drawing, design, music or digital code. If your design or business concept proves to be successful and becomes a trend, your competitors will follow with similar products based on your concept. Protection provided by IPRs can only partially prevent this. However, copying does not necessarily harm a business. It can even benefit a business as long as the consumer can identify a product as the original or as a frontrunner within a particular trend.
IPR registrations only have national effect. This means a European patent or trademark can not be relied on in China. Registration of a trademark or design patent normally takes approximately two years. Companies are therefore usually advised to start registering IPR soon after deciding to enter the Chinese market.
First steps in protecting IP
1. Create a brand or product identity
Every brand or a particular product should have a story behind it. This identity is best to match the brand and product it supports as well as the person/company it originates from. A brand or product’s primary protection from copying stems from its originality.
2. Claim ownership of the identity
The brand or product identity can be protected through a trademark. A trademark provides you with an exclusive right on a (combination of a) word, picture, shape etc. you use to identify your product or service. Developing and registering a trademark will take approximately 2 years, but once granted, the trademark is exclusive as of the application date. This means that you can already start using the trademark but that unauthorised use of the trademark can only be countered after it is registered.
It is recommended to register both an English and a Chinese language trademark as many Chinese do not read English. Choosing the Chinese language sign requires careful consideration. Foreign names are mostly translated into Chinese phonetically, but Chinese characters (individual or together) can have different meanings. This meaning can sometimes even differ from province to province.
A trademark should be sufficiently distinctive, meaning it can not be generic or too descriptive of the product or service it is attached to (such as “CHAIR” as trademark for a chair), and different from existing trademarks in China in order to be successfully registered. A trademark is registered for certain types of goods or services (such as class 20 furniture, mirrors etc.). As long as the trademark is not well known in China, you can apply for an already registered trademark for different classes than it was registered for.
If you own a trademark you can prevent others from using identical or similar trademarks on identical or similar goods or services. You therefore win an opportunity to distinguish yourself from others to your (potential) customers. The trademark can be applied for at the trademark bureau of the State Administration for Industry and Commerce (“SAIC”) or through an international application covering China among other countries. A trademark will be granted for a term of 10 years. It is however infinitely renewable for another 10 years six months before the trademark will expire.
Trademark registration is often a good option, but not always required. Some products or services do not necessarily require trademark protection.
3. Claim ownership of a design
For the creative industries, both design patents and copyrights can be used to protect industrial design.
To qualify for a design patent the design needs to be sufficiently different from existing industrial designs disclosed in any part of the world. Unregistered designs should therefore be kept strictly confidential as publication before registration is likely to render a successful registration impossible.
A design patent only protects a certain design attached to a designated product. It does not protect applications of the design to products not designated in the patent.
For example a design patent on a chair does not cover the same design applied to a table. To extend protection to the table an additional design patent covering the table would need to be obtained.
Design patents can be registered with the State Intellectual Property Office (“SIPO”). China also accepts international patent applications made through the Dutch or European Patent Office. The application is subject to a preliminary review by the SIPO. Once granted, a design patent is valid for 10 years starting from the date of filing.
A design, but also for example technical or artistic drawings, texts, photographs, or computer software coding, may also be protected by a copyright. No registration is needed for protection. The protection provided by a copyright starts automatically when an original design is created. Even though no registration is needed to obtain a copyright, it is recommended to register a copyright(s) at the National Copyright Administration (“NCA”). A registration at the NCA provides presumptive evidence that the registrant owns the copyright on a certain work. Registration of a copyright in China takes between 12 to 18 months and should therefore be conducted in advance of market entry.
Protection again only extends to a specific application of a design, such as the chair. With regard to China it is important to note that the copyright protection on a two-dimensional design (of a chair for example) does not extend automatically to three-dimensional applications of that design (the produced chair itself). If a design is created by an individual who is not in an employment relationship, copyright protection endures during his or her life and 50 years thereafter. In case the individual works in an employment relationship the employer is normally entitled to the copyright on created designs. The protection is valid for 50 years starting from the first date the work becomes public.
Further measures in an IP protection strategy
It is difficult to discover where and by whom a product or service is copied and when discovered it takes substantial effort and funds to successfully counter it. It is therefore essential to ensure protection from copying by those parties with the earliest access to the IP such as employees, agents, distributors, or customers. This is done mainly through confidentiality measures within a company and confidentiality agreements with those having access to IP.
Confidentiality measures within a company include limiting the number of people having access to the information, having people with access (employees or others) sign confidentiality agreements (either in an employment agreement or separate, preferably with a high contractual penalty on breaches) and physical measures (passwords on digital documents, hard copies stored in closed storage).
Companies are advised to include in their contracts with other parties clauses which describe their IP and, if applicable, IPRs. Also, the other party should be requested to declare that they will respect these rights and that the IP will not be used without your prior permission.
The advantage of contractual protection on IP is that enforcement of a contract is, in general, easier than enforcement of IPR. It is harder to prove infringement of an IP right than breach of contract. The disadvantage is that the protection offered by a contract only extends to contracting parties. It can not stop others from using the protected IP retrieved through legitimate ways when it becomes public or through independent invention or design. That is when IPRs prove most useful. With IPRs in hand anyone can be stopped from using the IP rights were granted for, no matter how someone retrieved it, even through reverse engineering or otherwise.
What if your IP is copied?
If IP is being copied, gathering evidence is always the first priority. After sufficient evidence has been collected, a lawyer will normally first issue a letter in which the infringers are ordered to cease their activities. If this proves to be unsuccessful, the infringement can be either reported to the local department of the responsible government agency, such as the SIPO or the NCA, or it can be the subject of enforcement proceedings before the designated local court.
The administrative route is usually more cost and time efficient than a legal procedure. A government agency will take action on a report of infringement within approximately 4 months. Its administrative fees are much lower than court fees. However, the administrative route is less suitable for typical infringements in the creative industries as it is meant for simple and evident infringements. In addition, contrary to legal proceedings, no damage compensation can be awarded by a government agency. In recent years, court proceedings have been increasingly used by foreign companies as an effective means to enforce their IP rights.
This article shows ways to effectively protect IP in China. Practice learns that most companies are faced with theft or copy of their IP by parties they are (very) familiar with, such as their employees, agents, distributors, or customers. Through preventive business conduct and contractual protection, chances of IP getting stolen will already have been radically decreased. However, in general these methods should not be fully relied on as they do not provide the same level of protection as IP rights do. China offers IP rights with similar registration procedures and extent of protection as IP rights in a foreign business’ country of origin. Enforcement of these rights through administrative or court action is increasingly effective.
However, what works best for your company depends on the characteristics of your company and the specifics of your activities in China. HIL has extensive experience in advising companies active in China on an effective IP protection and enforcement strategy. We would be delighted to assess your situation and provide you with further advice on the basis thereof.