Intellectual Property Rights in China

For a business entering the Chinese market, understanding intellectual property rights in China can be a complex task. The enforcement of intellectual property rights (IPR) is always one of the top concerns for a US company entering the Chinese market. The perception is once a business enters China the company’s intellectual property is copied and misused, so it is very important to understand a company’s IPR and know how to protect them. Let’s first look at what intellectual property is then delve into what IPR for a business in China are and the country’s IPR enforcement.

Intellectual Property

First, what is Intellectual Property? Intellectual Property is the creation of an idea that the law then designates the creator owns. According to the World Trade Organization, intellectual property rights are rights given to someone over a creation/idea for a set period of time. Intellectual property broadly includes patents, copyright, trademarks, industrial design, plant breeder rights, trade dress, and sometimes trade secrets.

Intellectual Property Rights in China

As a member of WTO, China must meet minimal Intellectual Property Rights. A company entering China should read over all IP laws which can be found at: http://www.chinaipr.gov.cn/. Also a business must understand that any copyrights, patents, trademarks filed in the US are not valid in China and all IP must be registered in China as well. For more specific IPR see http://www.ncac.gov.cn for Chinese Copyrights, http://www.sipo.gov.cn/sipo_English/ for Chinese Patents) and http://sbj.saic.gov.cn/english/index_e.asp for Chinese Trademarks.

Enforcement of Intellectual Property Rights in China

If a company secures all the necessary documentation and another company in China infringes upon them, there are four main options for enforcement: administrative, customs/ border, civil and criminal. The company may also hire a Chinese IP lawyer to send a ‘cease and desist’ letter or negotiate or mediate with that company before pursuing legal action. While there is not adequate enforcement of the already substandard IP laws by US standards, there has been improvement over the last few years and recently there was renewed interest by the 26th Session of the China-US Joint Commission on Commerce and Trade (JCCT) to combat IP infringement in China.

See: http://www.chinaipr.gov.cn/article/internationalupdates/201511/1882750.html

Due-Diligence Considerations

Since enforcement is hard due to China’s ever-growing economic growth, a company’s due-diligence will always be its most valuable tool.  A few suggestions are: keep up to date on the IP laws including local Chinese laws, consult with reputable businesses familiar with IPR in China, work with reputable IP lawyers in China, develop IP-related clauses in contracts for employees and third-parties and keep your data secure. Keeping your data secure can mean several different things depending on the business. If one has a technology company, data encryption will be key, for example, a movie production company would want their data encrypted as well as documents shredded. Manufacturing in China can be tricky as well. If a company manufactures its product in one facility, the process or idea is easier to steal or reproduce. It recommended to break up manufacturing into different areas of China so no one plant has the whole product. If a company were importing a product, they would want to make sure not to disclose any IP even if it is registered, and to also register everything with both Chinese and US Customs. In the end, a company must do it’s own due diligence in order to protect its intellectual property from being misused.

Allison Shapiro
MBA Candidate 2017