The intellectual property and trademark landscape is changing very quickly in China, according to sources at the China Pack conference, held May 23-24 in Chicago.
Although intellectual property issues eventually will be addressed in China, it is just one of a huge number of social and economic issues that the Chinese government needs to address, said Tianjun Hou, an associate with law firm Foley & Lardner LLP in Palo Alto, Calif. He spoke about intellectual property in terms of China's broader economic environment.
``Much has been reported on China's red-hot economy,'' he said. ``Eight-hundred [research and development] centers have been established by multinationals in China.''
Foreign companies have invested $580 billion in China between 1995 and 2006, and the investors include more than 400 Fortune 500 companies.
Still, for China, 800 million people still are in farming, many of whom are at subsistence levels and not well-educated; 200 million rural people are either unemployed or underemployed; 100 million to 150 million migrant workers who converged on cities need to be integrated; 12 million jobs are needed per year to keep pace with growth in population. In the entire schematic of the Chinese economic revolution, the national pension, health care and adequate housing are urgently needed. The western part of China remains significantly less economically developed.
Against that background, Hou said, the government will place emphasis on intellectual property protection in proportion to the extent that the issue is deemed to impact China's economic growth.
Under the Chinese government's 11th Five Year Plan, announced in 2006, there will be a focus on developing science and technology where self-reliant innovation is a national strategy.
A national intellectual property strategy in line with the plan is expected to be released at any time, Hou said.
It also is important for Western companies to understand that domestic Chinese companies increasingly develop their own intellectual property and lobby for more effective protection.
Intellectual property largely is territorial in nature, he said, and U.S. patents and trademarks do not provide protection in China. The U.S. patent and trademark must be filed and registered in China to be enforceable there.
Under the Berne Convention, there is no need to register U.S. copyrighted works for them to be enforceable in China. However, according to Hou, registration is recommended to facilitate that enforcement. And, if a U.S. firm doing business in China does not file patent protection in China, it should fully expect that someone else in China will, he said.
Companies that are serious about doing business in China also must know what it takes to secure patent rights there.
``For example, in China, whoever files a patent application first for the same invention will be awarded the patent right, as in most other countries,'' Hou said.
But in the United States, the patent will go to the first to invent. Also, if an invention is important in doing business in China, a company or inventor must file the application before any publication happens anywhere in the world, or they may lose the right to file a patent in China.
With trademarks, the rights are awarded in China to the first to register, not the first to use the trademark. Therefore, ``it is strongly recommended to register your trademark as early as possible in China,'' Hou said. There also is a huge backlog in the Chinese trademark office, and it takes 30 months to register a trademark.
To secure intellectual property rights in China, Hou said companies also must be aware that China is part of the Patent Cooperation Treaty and Madrid Protocol, and companies should use international treaties to secure their rights. Also, companies should work with good local counsel within China to ensure an enforceable patent and a good Chinese version of a trademark.
Hou recommended companies stay ahead of counterfeiters by upgrading products to outpace imitation and rely on technology to discourage counterfeiting, including the use of holograms and radio-frequency identification.
Also, more foreign companies are using civil courts to solve complex intellectual property rights disputes.
``Judges are much less likely than administrative officials to succumb to pressures of local protectionism,'' Hou said. ``The quality of judges has greatly improved in recent years and generally speaking, the courts in the larger cities such as Beijing and Shanghai now are of reasonable high quality.''
But, one limitation of judicial enforcement in China is that there is no discovery procedure, so it's difficult to collect evidence to prove damages or illegal profits, even though infringement may not necessarily be difficult to prove.
Yange Han, who handles advisory services for PricewaterhouseCoopers LLP in New York, said companies need to be active in managing the intellectual property process.
``China will quickly adopt in the next few years the Western [intellectual property] strategies,'' she said. Still, intellectual property theft or counterfeit problems will continue in the next few years in China.
``It will be uncertain for many years to come,'' she said. Her firm wrote the research report, ``Redefining Intellectual Property Value,'' based on independent and third-party research.
She said Western firms should reduce their dependence on conventional intellectual property strategies and consider using very specific tactics.
For instance, when it comes to mergers and acquisitions activity: ``When you look for acquisition targets, look at acquiring companies that are possible infringers,'' she said.
The China Pack conference was sponsored by IntertechPira, based in Leatherhead, England.