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IPR Protection in China for European SMEs: Focus on

Chemical Industry

20 June 2011

Welcome to the webinar

Philippe Healey

China IPR SME Helpdesk Project Manager

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„Contact Us‟ section

The China IPR SME Helpdesk

@iprchina

Fan page: “China IPR SME Helpdesk”

Group page: “China IPR”

"China IPR"

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 – question@china-iprhelpdesk.eu

Training & Events

Materials

Online Services - www.china-iprhelpdesk.eu

Today’s Speaker

• Toby Mak, PhD, Patent Attorney

• Registered Chinese Patent Attorney with PhD in Chemistry. Born and educated in Hong Kong. Worked at one of the largest law firms in Hong Kong for 8 years before moving to Beijing. Over 12 years of experience in IP.

• Tee & Howe Intellectual Property Attorneys

• e-mail: toby.mak@teehowe.com

• Tel: +86 10 8391 3118

Opening Poll What are your major IP concerns relating to China? - Fraudulent / fake products

- Your IPR validity challenged

- Infringing products from competitors

- Being sued for infringement

- Relationship with Chinese partners

Executive Summary

IPR

China

Problems and solutions related to IPR for doing business in China

Problem Solution

IPR’s validity is challenged Obtain IPR with care

Alleged of or sued for infringement 1. Freedom-to-practice exercise 2. Use of IPR as one of the bargaining chips

Own IPR taken by others Invalidation or entitlement ← can be avoided if IPR is established, particularly in China

Relationship with Chinese partner (distributor, manufacturer, and/or researcher) 1. Licensing 2. Termination of relationship (including

handling of excess goods/remaining project items)

3. Handling of collaboration research results

1. Background check of partner 2. Handling of agreements with care 3. Awareness of ownership of IPR

Fraud product Criminal enforcement

Executive Summary

IPR

China

• Obtain IPR in China with care → need to know:

1. Method of treatment not allowed 2. Stringent requirements on support 3. Extreme restrictions on after grant amendments 4. Specific unity and clarity requirements

• Background check of partner – assets and reputation • Handling of agreements with care – capable to terminate when

relationship turns sour • Awareness of ownership of IPR – do you really own it?

Brief overview of IPR

IPR

China

• Legal mechanisms for protecting original creative work

• Different kinds of IP protect different aspects of a single product

• Worldwide consensus → TRIPS

Forms of IP in China

Key messages: 1. Patents and designs only available in registered form in China. 2. Registered rights are territorial in nature. A EP registered

trademark/patent/design has no right in China, and vice versa. 3. Trade secrets may work for chemical industry but has to be dealt with care

Kind Registration

needed? Scope Exclusivity

Trademark Yes and no •Identity of the provider Yes (upon registration)

Copyright No •Exact expression of the creative work

No

Patent (including

Design) Yes

•For Patent, technical solution as defined by the claims •For Design, aesthetic feature(s) of a product as in the figures

Yes

Trade secret

No •Information not known to public

No

Establishment of patent and design rights in China

• What kinds of patents are there in China?

• What are the processes involved?

• Why should a patent attorney be involved?

• Issues specific to foreign applicants

• Costs for establishing patent rights

What kinds of patent are there in China?

• First-to-file

• Chemical structure is not a “structure” for utility model

Kind Subject matter Duration Substantive Examination

Invention patent

Technical solution (in the form of apparatus and/or method)

20 years Required

Utility model Technical solution only in the form of improvement on shape and/or structure

10 years Not required

Design Aesthetic feature(s) of a product 10 years Not required

Examples of different kinds of patent in China

• CN patent no. ZL02819792.5 of BASF • Dyed sheath/core polyamide-containing fibers with

improved dyeing uniformity having

– core fiber component formed from any fiber-forming polyamide or copolyamide

– sheath portion with a non-dyeable fiber-forming polymer that resists dye migration at room temperature, relative to nylon 6. The non-dyeable fiber-forming polymer can be polyolefins (e.g., polypropylene, polybutylene, etc.), fiber-forming polystyrene, fiber-forming polyurethane, and certain polyamides

Examples of different kinds of patent in China

• CN patent no. 87211958U of BASF

• Regular parallelepipedon cassette tape and its outer case component for tape recording medium

Examples of different kinds of patent in China

• CN patent no. ZL200830137974.X of FIAT

• Does not appear to be in the market yet

Why should a Chinese patent agent attorney be involved?

Establishment of patent rights in China – issues specific to foreign applicants

• By law, foreign applicants can only file patent applications in China through licensed patent agency firms

• Translation into Chinese is a must – quality varies

• Quality of translation affects examination and validity

Establishment of patent rights in China – issues specific to foreign applicants

• Prepare filing of application in their own country first – national security requirements

• International mechanisms for pursuing equivalent rights in China

• Specific time limits for each mechanism

CN Invention Patent Application Flow Chart

Application Filed

1.5 yrs

Examination Office Action

Response to Office Action

Decision to Grant

Grant of Patent

2-3 months

Re-Publication

Publication

Request for Examination

1.5 yrs

1-2 yrs

Cost and time to procure CN patent

• Time - generally granted in 2.5 to 6 years from 1st priority date. Can be accelerated by paying some fees earlier.

• Filing costs - For an English specification having 20 pages (each page about 320 words) and 20 claims, the total filing costs are about 18500RMB (about 2000 Euros)

Establishment of patent rights in China – issues specific to foreign applicants

• Research and/or development in China - seek approval from Chinese SIPO before foreign filing

• Current infringement and enforcement environment in China – trademarks are very useful

Usefulness of trademark in China

• Current situation

– Plain and direct infringement – exact copy of product

– Fraud – products that look exactly the same but does not work

– Administration enforcement – government officers cannot handle complex IP analysis

• Trademark – direct visual comparison → easy to be handled by officers

• Disadvantage → changes to avoid infringement are easy

• Often need criminal enforcement → high evidence threshold → do NOT prepare your own evidence

Trademark registrations in China – General note • Time – about 8 to 14 months from filing to

registration

• Filing costs - 3400RMB (about 375 Euros) for first 10 goods, and each good in excess of 10 cost 120RMB (about 13 Euros)

Tips

• Cover BOTH marks in original EU language and Chinese marks

• Distinctiveness of a mark – ONLY count situation within China

Trade secret - characteristics

• Any information not available to the public

• Good side

– No registration required → no registration fee

– Can last forever as long as secret is maintained

• Bad side

– Need to take substantive measures to maintain the secret – e.g. NDA, marking, internal policies, measures to communicate with 3rd party

– Once breached to the public, the public is free to use

– ONLY can target and claim damage the person who made the breach

Trade secret in China • Typical scenario – an ex-employee joined competing company,

or even forming his own company using technologies from ex-employer

• In order to successfully sue for breach of trade secret by a person, the petitioner needs to prove: – the information is indeed qualified as secret

– that person does not have the right to breach

– that person did know and breach

– the damages suffered by the petitioner

• Usual defense – the secret was worked out independently, for example by reverse engineering

• Relief – stopping that person from using the secret, and compensate for the loss

Trade secret – practice in real commercial world

• Shift focus – maintain advantage by keeping secret, but not using trade secret as enforcement tool

• Identify good candidates for maintaining secret

– Bad – chemical structures, compositions and formulations (particularly for pharmaceuticals), large scale manufacturing process

– Good – particular conditions of manufacturing process, specific sources of materials as starting materials

Trade secret – practice in real commercial world (cont’d)

• Maintain the secrets in good way

– Known to least number of people v. large scale operation

– Fragmentation of operation – product has components a+b+c, each manufactured in a different place in the same country, or even in different countries

• ↑costs + lost control after breach v. benefits from trade secret

Trade secret – practice in real commercial world (cont’d)

Handling of leaving employee

• Identification – key persons and their movement

• Interrogation - at exit, ask for information on

– The next destination

– What he knows but has not told you

• Implementation of measures to reduce damages

– File patent application ASAP for inventions

– Change involved process, if possible

Establishment of patent rights in China – issues specific to foreign applicants

• Be ready for validity challenges – invalidation

• Usual grounds of invalidation

– Novelty

– Inventiveness

– Support

– Sufficient disclosure

– Clarity

Pfizer’s CN Viagra patent 94192386.X

• Challenged by 8 Chinese companies

• 1st instance (in 2004) – Pfizer lost → no reason to choose this single compound from the other compounds due to lack of data supporting the selection

• From 2004 to 2nd instance – SIPO required experimental data for each and every single compound in the claims for proper support

• 2nd instance (2007) – overturned invalidation → the skilled person can reasonably expect the compound to work

Current support requirement

• “The skilled person can reasonably expect the invention to work”

Tips

• Experimental data is still required, but not for each and every one compound

• Experimental data must be contained in the specification – any data submitted after filing will be ignored

• Example – a compound with various alkyl, alkenyl, aryl, nitro, amino, sulfono and so on substituted groups with various numbers of carbon atoms – Bad approach – only provide experimental data for C1-C6 alkyl

– Good approach – provide experimental data for alkyl, aryl, nitro and amino groups

Extremely stringent restrictions on after grant amendments

• Only forms of amendments allowed after grant:

– Combination of existing granted claims

– Deletion of claims

• Unallowable amendments after grant:

– Deletion of feature(s) from claims

– Addition of feature(s) mentioned in the description but not in the granted claims

– Correction of any errors in the claims or the description

• A CN patent was invalidated as the valence of an element was wrongly stated in the patent

• Tips - ONLY ONE CHANCE to make things right

Specific unity requirement

• Unity – one patent can only cover one invention

• Markush claims – many alternatives covered by one claim

• Too many alternatives → more than one inventions are covered → need to file divisionals → ↑costs

Specific unity requirement

• R1 to R4 are various different substitute groups including alkyl, aryl, amino, and so on

• X is selected from O, N, S

• n is from 1 to 3

Take Away Messages • Copyrights, designs and utility models are of less relevance

• Trademarks are useful in the current Chinese IP environment, particularly against fraud products

• Chinese companies are targeting patent rights from foreign companies

• Patents should be obtained with care → only one chance to make things right

• Standard of support requirement is similar to that in Europe

• Submission of data after filing does not work

• Heavy reliance on patent, trademark or trade secret alone is unwise

Closing Poll

If you have not registered your IP in China, Why? - There is no market for my product in China

- Budget concerns

- Enforcement concerns

- I actually have registered my IP in China

Q & A

Toby Mak, PhD, Patent Attorney

Tee & Howe Intellectual Property Attorneys

e-mail: toby.mak@teehowe.com

Tel: +86 10 8391 3118

Upcoming Helpdesk Webinars

Save the dates of our upcoming events:

• 22 June 2011 – Qingdao (China): IPR as a Business Asset in China

• 23 June 2011 – Beijing (China): IPR protection for Clean Technology SMEs

• 29 June 2011 - Brussels: Essential IP Knowledge for EU SMEs in China

STAY TUNED FOR UPCOMING WEBINARS!!!

Thank you

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 – question@china-iprhelpdesk.eu

Training & Events

Materials

Online Services - www.china-iprhelpdesk.eu

For more information please contact the Helpdesk:

Room 900, Beijing Sunflower Tower

No. 37 Maizidian Street

Chaoyang District

Beijing 100125, P.R. China

Hotline number: +86 (10) 6462 0892