An ounce of prevention is worth more than a pound of cure
Preventing an Intellectual Property China Syndrome
Filing for intellectual property (IP) protection in China,
even
if you never intend to market or sell your products in China, can be
very beneficial, and potentially cheaper in the long run.
If you use or plan to use a Chinese manufacturer
to make your products, being proactive in seeking Chinese IP protection for your
company’s intellectual property can help avoid a figurative production line meltdown.
A typical unscrupulous scenario is as follows.
You are a law abiding U.S. company, trying to
make a buck by selling your products in the U.S.
You contract a Chinese manufacturer to make
your products that you sell exclusively in the U.S. (or at the least, you will
not be selling the products in China).
You
may or may not have applied for U.S. IP protection that will give you the right
to prevent others from making or selling your products in the U.S. and to
prevent the importation of knock-off (counterfeit/infringing) products into the
U.S.
Since you are
not marketing or selling your products in China, you do not
file for IP protection in China.
All is
going great.
The Chinese manufacture is
making your products, shipping them to the U.S. and the products are selling
like hotcakes.
Next, a nefarious company then enters the scene.
Seeing no Chinese IP filed, the nefarious company
submits its own application for Chinese IP protection covering the product that
you are manufacturing in China.
China
has a relatively simple registration process for some IP (e.g. designs and
utility models).
The registration
process does not include an independent investigation to determine whether the
registrant is the actual, original creator of the IP; China just takes the word
of the signed declaration of the registrant.
As a result, the unsavory company gets a Chinese registration covering
your company’s IP.
The final blow comes when the ruthless company goes to your
Chinese manufacturer with the fraudulently secured Chinese IP registration, and
insists that your Chinese manufacturer cease producing your product or be sued
for infringement.
Your recourse is relatively simple, but not cheap.
You can request an invalidity proceeding with
the Chinese government to invalidate the improperly secured Chinese
registration.
To do so, you need to have
proof that your product was publically known (e.g. sold or advertised) before
the Chinese IP registration was filed.
Oh, you will also need a Chinese attorney and will need to pay a Chinese
government fee for requesting the invalidity proceeding, neither of which are
inexpensive.
What could the U.S. company have done to prevent its
manufacturing production line from being possibly shut down for fear of an
infringement lawsuit from the ruthless company?
The U.S. company could have filed its own application for IP protection
in China.
The U.S. company’s Chinese IP
would act as a shield to prevent the ruthless company from falsely claiming its
IP in China.
The typical costs (attorney
and government fees) can be as much as 50% less to register your IP in China as
compared with the costs for invalidating an improper registration of another.
Depending on the circumstances, being
proactive in filing for IP rights in China may be more cost effective and
beneficial than waiting to defend your rights against this dishonest practice.
