IP and China: Best Practices Part 2
Intellectual property is consistently a top concern for companies seeking to manufacture goods in China, if not the #1 top concern. If you haven't already, check out Part 1 of this two-post series where we break down some of the preliminary legal and due diligence work needed to ensure the maximum protection of your intellectual property. The biggest takeaway? Always verify your vendors, and monitor them. In Part 2, we are going to dive into monitoring and enforcement of your IP in China, but this assumes you have taken the steps listed in Part 1, including registering your patents and trademarks, so that you have the full authority to enforce them with the steps listed below.
We reviewed several expert sources on the matter, from law firms, trade organizations and global brand managers, to compile a two part best practices breakdown on how to protect yourself from IP issues when partnering with Chinese vendors.
Once you have registered your IP to protect it, the next step is to monitor for cases of patent or trademark infringement - and pursue the measures needed to take them down when discovered. From the USCBC:
1) Actively monitor your IP
- Send representatives to look for counterfeiters at industry trade shows and trade fairs, such as the Chinese Export Commodities Fair (Canton Fair).
- Review distribution networks at all levels regularly for weak links and possible entry points for counterfeit products.
- Monitor IP publications, including the PRC Patent and Trademark gazettes, for new patents and trademark applications to see if they infringe on the company’s IP.
- Establish and publicize clear reporting channels for outside stakeholders to report cases of IP infringement.
- Check the Internet regularly for infringing domain names and for websites that are used as platforms for counterfeit products. These include e-commerce sites such as Alibaba and Taobao.
They even suggest creating an anonymous hotline for reporting IP infringement, with rewards offered to suppliers, distributors and other vendors, as well as their workers, for reporting suspected violations.
Once you have found a case of counterfeit products or other unauthorized uses of our IP, you'll need to proceed diligently and methodically in order to successfully eradicate it - and prevent it from spreading.
2) Build a case
The most important thing to know is that the more evidence you have against a potential infringer, the more likely you will be to succeed in compelling the Chinese government authorities to take action against them on your behalf. A rash response, before proper steps have been taken, may simply alert the violator that they have been discovered, causing them to change names, move their operation or otherwise subvert any actions to stop them. From the USCBC:
- Conduct a careful review of internal documents that can demonstrate infringement, including physical and electronic evidence. Companies should be aware that documentary evidence (as opposed to oral testimony or non-official documents such as marketing materials) carries more weight with Chinese officials.
- Work with vetted IP investigative firms to collect evidence on the company’s behalf, monitoring firm activities to ensure that evidence is collected legally.
- Consider possible locations where the company could file an infringement case, and collect evidence accordingly.
Most of the major vendor websites and platforms in China have clear processes in place to file a claim against a supplier should you be able to prove infringement. But going a step further will make sure they do not appear again under a different name. This means enforcement through cease and desists, and further legal action.
3) Enforcing your IP
There are several routes that enforcement can take, from the most basic cease and desist, to civil action against the infringers, the companies that warehouse the products, and the platforms that sell them. The scale of infringement, and threat it represents to your company, should determine how far you should go in enforcing your protected IP. From the USCBC:
- Send cease-and-desist (C&D) letters to infringers. C&D letters can be a cost-effective way to stop infringement in some cases, especially those involving small infringers.
- Work with Internet marketplaces and Internet service providers, such as Alibaba and Taobao, to remove infringing goods or pirated materials from websites, and to take down websites providing infringing products or content.
- Weigh various channels available to halt infringement in China, including administrative, civil, and criminal channels. In determining a course of action, companies should consider company resources, timelines for action, and the strengths and weaknesses of each channel. (For more on the pros and cons of various enforcement channels, see the next page.)
- Engage with local government officials to convince them to conduct enforcement proceedings. Consider using a company’s contributions to local development or tying the case to larger goals such as product safety or public health, to illustrate to local officials the value of pursuing a case. Such ties can sometimes give companies access to additional penalties under other laws, such as the Food Safety or Environmental Protection laws.
- Consider “venue shopping,” or bringing infringement proceedings in jurisdictions (and through enforcement channels) with a better record of IP enforcement.
For copyright infringement, Harris Bricken has an excellent four part series Copyright Takedowns in China that summarize the regulations that establish China’s copyright takedown procedures and discusses how China’s takedown regulations apply to cloud service providers.
Need help with your China partner due diligence? Nuna Network is here for you. We’re the partner of choice and go-to resource for businesses or individuals seeking guidance in researching, developing, and establishing bespoke data and monitoring solutions with over 180+ million companies indexed across 55+ data points. Feel free to reach out to a Nuna Network data expert to discuss further.
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