THE RISE OF IP IN CHINA
PROTECTING YOUR INTELLECTUAL PROPERTY IN THE CHINESE MARKET HAS BECOME MUCH EASIER IN RECENT TIMES, BUT THERE ARE STILL RISKS FOR KIWI EXPORTERS.
Protecting your intellectual property in China has become easier, but there are still risks for Kiwi exporters.
China’s booming e-commerce market and a shift from primary products and manufacturing to more of a consumer-led economy, presents huge opportunities for Kiwi brands looking to expand into the region. In recent years the ‘Middle Kingdom’ has turned to nimbler sectors such as e-commerce, retail and technology to generate growth. The sheer size of China’s e-commerce sales in 2017 dwarfed all other markets – totaling over US$1 trillion.
An example of the power of this market is perhaps best demonstrated by Alibaba’s Singles Day event in November 2017 when $US25.3 billion in gross merchandise revenue was transacted. At its peak Alibaba was handling 256,000 transactions per second!
All this growth spells good news for existing Kiwi exporters and those currently eyeing the market. New Zealand’s Free Trade Agreement, coupled with China’s increasing appetite for imported luxury and high quality consumer goods, means the scale of potential business opportunities for New Zealand is immense.
But with increasing opportunity comes significant risk. Trading with China can seem complex – its business character is different to other markets and it operates at a different pace to New Zealand business. Getting it right requires persistence, good partnerships and a clear understanding of the Chinese intellectual property (IP) landscape.
Get it wrong and you not only risk damaging your brand, but also the whole reputation of New Zealand Inc.
Establishing a successful presence in China starts with properly understanding the market and its cultural differences. IP LAW IN CHINA It was only a decade ago that China was considered the place to have products manufactured on the cheap. As a result, counterfeits were rife and intellectual property difficult to enforce.
The perception that protecting and enforcing IP in China was fraught with difficulties, combined with the perception of a copying culture, led to many companies believing that protecting their IP, or even expanding into China, wasn’t worth the effort.
Although there are still risks involved, most notably ‘trade mark squatters’, China has made huge inroads in reducing these thanks to changes to its laws and trading environment.
China’s changing attitudes to IP has been a very deliberate move on the part of the Chinese government – although enforcement varies from region to region.
As a result, many New Zealand companies are increasingly protecting their IP in China from the outset to stop ‘knock-off’ products.
There are different levels of IP action in China, including the Chinese Trade Mark Office (CTMO). It is similar to the Intellectual Property Office of New Zealand (IPONZ), which deals directly with trademark rights – although neither deal with infringement.
Instead, China’s central government has specialist IP courts to deal with infringement and is particularly active when it comes to trade mark squatting. If a company can show bad
faith, it would have a stronger case for retribution. However, early application for trade marks is still critical in avoiding such proceedings.
But even though enforcement is creating the right environment for market entry, it’s still not an easy road for businesses looking to protect their IP. China’s IP examination process is strict, bureaucratic and time consuming, with trade mark registration taking 12 to 18 months (if not opposed or refused). So it’s extremely important to get it right the first time.
Although protecting IP can be a time-consuming exercise, the consequences of not doing it is not even worth considering. However, thanks to the Chinese government’s provision of incentives to register IP rights, Chinese companies are increasingly recognising the value of IP.
Consequently, social change towards IP rights is occurring and Chinese companies are not only respecting the rights of others, but also developing their own IP at an unprecedented rate.
China is now one of the most prolific users of IP systems, both domestically and abroad.
A WIPO report shows China topped the world’s patent and trade mark filings in 2016.
Furthermore, IP rights are soon to experience an even higher level of protection in China, with new legislation governing e-commerce currently being drafted.
IP PROTECTION: YOUR OPTIONS
Intellectual property rights provide ownership over a broad range of creations including brands, products, ideas, innovations and designs. These rights help to ensure IP owners get the full economic benefit of their creations by stopping others from using or creating something similar. As with other countries, China offers both registered and unregistered rights.
REGISTERED IP
Registered IP, as its name suggests, requires a formal process to register and secure the exclusive legal rights to something that is original and unique to a specific individual or company. This includes:
• Trademarks: A trademark protects a company’s brand or logo to ensure no other organisation can use it.
• Patents: A patent protects ideas and concepts in products, formulations and processes by giving the holder exclusivity in making, using or selling their invention.
• Design: Registered designs protect the shape, configuration, pattern and ornamentation of a product – essentially what it looks like and not what it does.
• Copyright: Copyright provides the creator exclusive rights for the use and distribution of an original piece of work.
UNREGISTERED IP
• Trade secrets: Any confidential business information that provides your organisation with a competitive edge may be considered a trade secret. This guide is produced with the assistance of Baldwins. For more information on how to protect your business in China, download their free e-book ‘Protecting your IP in China’ at https://www.baldwins.com/china-desk/ protecting-your-ip-in-china.