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If you have an IPR issue, or any questions about IPR in China, please contact: question@china-iprhelpdesk.eu

November 2012

HELPDESK NEWS Building Valuable Patent Portfolios

EventsNew Helpdesk GUIDES Listen to our WEBINARSE-learning modulesBlog: China IP Insider

Steps to Valuable Patent PortfoliosChecklist of Essential ActionsTake-away Message

Issue 15 - Focus on Building Valuable Patent Portfolios

HELPDESK NEWSCOMPLETED EVENTS round-up

The China IPR SME Helpdesk took part in a total of 24 events in August, September and October 2012. In Europe these took place in Sweden, Belgium, France, Germany, Poland, Italy and Cyprus. China events took place in Beijing, Qingdao, Dalian, Nanjing and Chengdu, in partnership with associations from Germany, Poland, Netherlands, UK and Latvia. Event topics were diverse, including Understanding and Managing the Risk of Counterfeiting in China, Protecting your Designs in China, Using China Customs to Protect IPR, Trade Secrets and Non-Competition, among others.

The Helpdesk also held 3 live webinars that attracted 47 attendees from 5 EU countries and China. Topics covered were ‘China IPR Protection for EU SMEs in the Design and Fashion Industries’, ‘Franchises in China – What you need to know’, and ‘Successful Technology Transfer to China’.

New Helpdesk GUIDE update

In October the China IPR SME Helpdesk launched the first of a series of newly conceptualised ‘How to’ guides which will provide practical, step-by-step information on developing aspects of SMEs’ IPR strategy for China. The first instalment details the process for conducting a trade mark search in China and enables SMEs to concentrate their resources on registering a mark that is both available and right for their business. Download this guide and the rest of our guides free of charge from our website, here.

Listen to our WEBINARS

During August, September and October 2012 the Helpdesk held 3 new webinars. In September, Helpdesk expert Davide Follador explained how EU SMEs from the design and fashion sectors can use simple and cost-effective measures to protect their designs in China. In October, expert Fabio Giacopello explained the IPR issues related to franchising and distribution in China. In our second October webinar, Helpdesk expert Toby Mak further explained the IPR issues relating to Technology Transfer in China and how SMEs can protect their IPR. Webinar recordings and presentation slides can be downloaded here.

New Helpdesk E-LEARNING MODULES

The Helpdesk’s 7th and 8th E-learning modules were launched in September and October 2012, and are both available online now. The Helpdesk’s 7th E-learning module on protecting IPR when conducting R&D in China covers

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Disclaimer:

The contents of this publication do not necessarily reflect the position or opinion of the European Commission. The services of the China IPR SME Helpdesk are not of a legal or advisory nature and no responsibility is accepted for the results of any actions made on the basis of its services. Before taking specific actions in relation to IPR protection or enforcement all customers are advised to seek independent advice.

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© China IPR SME Helpdesk 2012Guide Last Updated 2012

Room 900, Beijing Sunflower Tower No. 37 Maizidian StreetChaoyang District Beijing 100125, P.R. ChinaTel: +86 (10) 8527 6922Fax: +86 (10) 8527 6923

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For more information please contact the Helpdesk:

The China IPR SME Helpdesk provides free, confidential, business-focused advice relating to China IPR to European Small and Medium Enterprises (SMEs).

Helpdesk Enquiry Service: Submit further questions to the Helpdesk via phone, email (question@china-iprhelpdesk.eu) or in person and receive free and confidential first-line advice within seven working days from a China IP expert.

Training: The Helpdesk arranges training on China IPR protection and enforcement across Europe and China, tailored to the needs of SMEs.

Materials: Helpdesk business-focused guides and training materials on China IPR issues are all downloadable from the online portal.

Online Services: Our multi-lingual online portal (www.china-iprhelpdesk.eu) provides easy access to Helpdesk guides, case studies, E-learning modules, event information and webinars.

1. Trade marks in China

Every company, no mat ter how big or small, has some intellectual property. The most common type of intellectual property right (IPR) is a trade mark. A trade mark is essential to all kinds of companies, whether you are a producer, distributor or service provider, as it allows clients to distinguish you from your competitors and builds the image and reputation of your brand.

International laws, including Chinese laws, grant legal protection to trade marks providing they comply with a few basic requirements: the mark must be distinctive; must not have previously been used by others in the same market; and must not describe the product, e.g. you cannot register ‘apple’ as a trade mark for apples.

Trade marks are territorial in nature and therefore must be registered in every count ry. A t rade mark registered in Spain, for example, is not automatically valid in China. If you want to obtain protection in China you must register with the China Trade Mark Office (CTMO) either by directly filing a domestic application or by filing an international extension through the Madrid System.

More information on register ing and enforcing your trade mark in China including information on bad-faith registrations and the first-to-file system can be found in the China IPR SME Helpdesk publication, ‘Guide to Trade Mark Protection in China’.

1. Trade marks in China

2. Why conduct a trade mark search?

3. Step by step guide

4. After the search: next steps

5. Useful links

2. Why conduct a trade mark search?

Before you apply to register your trade mark in China you should check that it is available and has not been previously registered by another company (known as a ‘bad-faith’ registration), or is too similar to any other registered trade mark. This step will prevent you spending resources on an application which will be rejected and could delay your business operations in China.

Trade mark agents can conduct a trade mark search on your behalf but you can conduct an initial search by yourself on the CTMO online database which records all trade marks applied for and registered in China. The database is available in English and is free to use. Please note that there may be a delay between some applications being filed and appearing on the CTMO database.

3. Step by step guide

The CTMO onl ine database can be used to search for a l l t rade marks registered or currently in the application process in China. The database is available in both Chinese and English. The CTMO recommends using Internet Explorer 6.0 to conduct the search as other browsers do not display the information correctly.

Before you begin please accept the disclaimer in order to continue with the search. As the disclaimer

How to Conduct a Trade Mark Search

strategies for avoiding common pitfalls faced by SMEs during the establishment of R&D related activities in China and features chapters on Thinking Ahead, Ownership, Licensing and Building an IP Portfolio. The 8th module addresses how contracts can be used to protect your IPR in China, highlighting key provisions and agreements which should be incorporated, along with case studies. An interactive contract and quizzes to test the reader’s learning consolidates the lessons from this module. Take E-leaning modules 7 and 8 now on our website here.

UPCOMING EVENTS & WEBINARS round-up

• 27 November, Paris: IP Protection Tools and Technology Transfer in China, Paris• 28 November, Brussels: IP Protection Tools and Technology Transfer in China, Brussels• 29 November, Rotterdam: IP Protection Tools and Technology Transfer in China, Rotterdam• 5 December, Beijing: Helpdesk Stakeholder Meeting• 13 December, Beijing: China IPR Pub Quiz• 13 December, Webinar: IPR Protection for the Automotive Industry in China• January 2013 (date TBC), Brussels: Helpdesk Stakeholder Meeting• 30 January 2013, Cologne: Licencing and technology transfer: Cooperation with China and enforcement of IP-rights

Subscribe to the NEW HELPDESK BLOG: China IP Insider

The Helpdesk blog, China IP Insider, was launched in October 2012. Our posts will seek to support anyone who has a business in China or wishes to start one there, particularly European SMEs. Posts will come from a variety of experienced contributors, including Intellectual Property experts and lawyers, business owners, the networks that support them, and the China IPR SME Helpdesk project team members - people whose daily professional lives incorporate building businesses in China. The blog will also give SMEs the opportunity to voice their opinions and experiences of operating in China. If you have an interest in business in China, have insights into how a business can best operate there or need practical observations from those that do, this blog is for you! Subscribe to our blog here.

Building Valuable Patent Portfolios

The real steps to developing a valuable Patent portfolio require good discipline and good management. Due to budget constraints for most SMEs, it may not be entirely realistic to apply for and register all their inventions, and therefore scrutiny is required to figure out which are the ‘must-file’ patents. Always remember that it is extremely difficult to enforce your rights in China or prove ownership for inventions that are not patented.

Check-list of essential actions to keep in mind:

• Quality patent drafting: The initial draft can be done in Chinese or a foreign language. You may even file an international application (PCT) from China if it is justifiable to do so from the cost and strategic perspectives. However, if the application needs to be translated, attention should be given to the quality of translation; it is not unheard of for a poor Chinese language translation of a patent draft to incapacitate a foreign enterprise from asserting their rights.

• Foreign filing licence: If the invention is made in China, either by Chinese or European engineers, the filing of the invention for patents requires a foreign filing licence, which is given by the State Intellectual Property Office (SIPO). Very often foreign filing licences are granted quickly unless the technology relates to sensitive areas such as national security.

• Filing entity: If a Chinese entity, which is set up by a foreign SME, alone or jointly with a Chinese business partner, retains all the IPR ownership, the Chinese entity must file patent applications under its own name. The patents can later be transferred or licensed to the foreign SME. If a foreign SME manages to be the sole owner of all the

technologies under the R&D activities, the SME may apply for the patents under its own name.

• Transferring of patents after the filing: The Chinese government has imposed restrictions on (or in certain instances has banned) the transfer of ownership of certain types of technologies to foreign companies or individuals. Such types of technologies mostly include unique innovations, or otherwise have significant long term effects on China’s social, economic and technological interests. For example, prohibited technologies for export could include those related to the manufacture of traditional Chinese medicine, land surveying, breeding of livestock, encryption, and computer network security. It is advisable to check the Catalogue of Export Restricted Technologies and the Catalogue of Export Prohibition.

• IP other than patents: Besides patents, copyrights and trade secrets can also be of high importance. IP ownership or licensing agreements should include detailed information on both copyrights and trade secrets.

• Recordal and registration for licences: If IP licensing is adopted in R&D activities, registration and recordal requirements may be necessary under Chinese laws and regulations. Technology licences may need to be registered or recorded with local government authorities such as the Chinese Ministry of Commerce (MOFCOM) and the State Intellectual Property Office (SIPO) to comply with several legal requirements. If the licence has royalty payment clauses, the recordal and registrations are necessary under the foreign exchange control rules for the payments to be remitted through local Chinese banks to overseas bank account.

• Employee remuneration rules: If a European SME hires employees to conduct R&D and to contribute to inventions, it is important to note Chinese employee remuneration rules. The current rules allow the employer and employees to dictate how the employees are rewarded for their inventions. However, in the absence of an agreement between the employer and employee, default rules under the Chinese patent law will be implemented. For example, an inventor or ‘creator-employee’ may claim for 2% of the business profits annually derived from the invention or utility model patents he or she invented. It is also important to remember that if the remuneration agreed in the contract is too low (and therefore deemed ‘unreasonable’ under Chinese law) the term on the remuneration in the contract may be void and the employer will end up paying a higher amount in fees. In order to understand the definition of ‘reasonable’ reimbursement, reference may be made to the Chinese patent law, which requires, in the absence of other agreements, the employer to give a bonus of no less than RMB 3,000 to an employee who completes an invention patent, and RMB 1,000 to an employee who completes a utility model or a design patent.

Take-away Message

It is crucial to plan ahead carefully when developing and patenting innovations in China; especially in the context of engaging in Research and Development (R&D) or establishing Wholly Foreign Owned Enterprises (WFOE) or Joint Ventures (JV). Who owns the rights on paper is of fundamental importance to Chinese courts and so care should be taken to define ownership through contracts and paying attention to Chinese regulations. Also remember that China operates a ‘first-to-file’ system for patent registrations, so make sure you register those ‘must-file’ patents before anybody else gets the opportunity to.

For more information on IPR in China please contact us:The China IPR SME HelpdeskTelephone: +86 (10) 8527 6922 Email: question@china-iprhelpdesk.euOnline: www.china-iprhelpdesk.euBlog: www.china-ipinsider.eu

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Disclaimer:The contents of this publication do not necessarily reflect the position or opinion of the European Commission. The services of the China IPR SME Helpdesk are not of a legal or advisory nature and no responsibility is accepted for the results of any actions made on the basis of its services. Before taking specific actions in relation to IPR protection or enforcement all customers are advised to seek independent advice.

Project implemented by:

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