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Jamie Rowlands discusses intellectual property protection (IP) in China, looking at the benefits of registering IP in the jurisdiction.

Transcript

Jamie Rowlands: Hi, my name is Jamie Rowlands.  I am a partner in the Intellectual Property Group here at Gowling WLG and I am here to talk a little bit around IP protection in China and particularly looking at whether it really worth registering IP in China as of today's date?

Just by a way of background I spent four and a half years heading up our China office. I was based in Guangzhou in southern China so I have had a lot of experience litigating patents, trademarks and designs in China over the last four and a half years.

So the first thing I wanted to do today is really try to dispel the myth that lives on that frankly China is nothing but the wild west when it comes to intellectual property both for prosecution and enforcement. That is just not the case anymore.

The reality is that China has made great steps forwards since joining the World Trade Organisation in 2001. There is a legislative framework that broadly speaking works, actually litigating in China can be relatively claimant friendly and importantly when compared to other jurisdictions, pretty cheap.

The Chinese Government is making a real drive to move from the manufacturing base industry that lives and thrives in China today to a much more knowledge and innovation based economy and at the centre of that IP is really key.

With that introduction I think it is just worth saying that it is not a perfect picture in China at the moment. Where I lived in Guangzhou it does not take long for you to be visiting a market full of watches, many of which are counterfeit or, going to a leather market with significant amounts of bags that can be labelled with brand owners' trademarks.

But I think it does need to be given some context. Yes there are problems, yes there are things that still need to be done in China but overall as long as you protect your IP in good time it is certainly possible to protect in China.

So just looking at some basics and particularly around patents. There are three types of patents you can protect in China. You have the invention patent, which protects new and inventive products and processes that last for 20 years. You also have the utility model that gives you 10 years protection like the invention patent an invention has to be new and inventive but it goes very much more to the structure of the product and finally design patents are commonplace in China and a really good source of protection for IP.

When you talk about China in terms of IP filings, the statistics like many things in China are absolutely mind boggling. In 2017, 1.4 million patent applications were made in China, that is an absolutely staggering amount when compared to Europe for example where it was a mere 170,000 and again design patent applications in 2017 there were over 600,000 design applications in China. That was just over 50% of all applications all around the world.

So the numbers, the innovation, the companies that are beginning to register in China are absolutely staggering and so too were trademarks. In 2017 there were 5.7 million trademark applications made in mainland China and again if you compare that to Europe which filed only 370,000. So again a very, very staggering and significant number and so to with enforcement.

In 2017 there were over 200,000 IP Court cases filed in China and that really needs to be compared against say the United Kingdom where there would be certainly no more than 1,000 cases and you will see there is a sharp growth in the number of cases filed in mainland China from say 2010 up until today's date and this kind of demonstrates that there is an ever increasing workable system in China from a litigation perspective as long as you get your strategy right and that is the critical point.

So what do the Courts look like for IP in China as of today's date? Well there has been significant shifts and some really positive developments in the last few years. Back in 2015 China introduced three specialist IP Courts. One in Beijing, one in Shanghai and one in Guangzhou and they are set up with IP Judges that have significant experience in litigating intellectual property.

They are genuinely sophisticated Courts, that understand the complexities of IP and critically are partisan in nature and the result of that is if you can get into those jurisdictions as a foreign claimant and if your case is supported by evidence you do have a fair chance of certainly winning an action and in our experience having litigated many hundreds of cases in China. As I said at the start of this talk China is a relatively claimant friendly jurisdiction and it would be fair to say that 70-80% of our cases have been successfully won as a foreign claimant in China.

Other developments are in 2017 in addition to the original three IP Courts that were set up the China Court system has increased that and rolled out a further 15 specialist IP tribunals in tier two cities which again is a really positive development showing the importance the Court system is placing on understanding and litigating IP Court cases successfully.

Last year, the back end of last year the system started beginning of 2009 the China Court system introduced a central appeal Court for IP cases as well and again this is a really helpful development because it has put the appeal process in the hands of a number of Judges that again really have a good understanding of IP. So those are really positive developments.

I think if there is one takeaway message for everyone in this podcast, it would be the importance of actually registering your rights in China and registering them in good time. Certainly in China registered rights are far stronger protection than unregistered rights. Yes it is possible to use copyrighting in some cases and indeed we have the Anti-Unfair Competition Act whereby cases can be bought before the Court in relation to unfair competition.

But they are higher barred and more difficult as a general rule cases to prove. Registered rights are very much the way to go in China and really two main points around that. Firstly the importance of registering early, China is well known for its bad faith trademark applications and the earlier one gets in and registers a trademark the lesser likely you are going to find yourself on the wrong end of having to attack a bad faith application and secondly if you register your rights you are giving yourself some blue sky around your IP within China even if you never actually enforce in the jurisdiction.

And so just a couple of points specifically on design patents. Design patents in China are really useful rights they are, well we have experience in litigating design patents very regularly indeed. You can get a design patent for an entire product, an entire sellable product. Now that does mean that you can get protection for component parts as long as they are saleable separately. So for example you could register a car as a whole or you can register the grill of car as well.

In China the criteria for registering a design patent is in relation to its exterior shape. Any patent, so it could be 3D or 2D and if actually specified a particular colour. Design patent protection is ten years from the date of filing and I think it is just worth noting that that is going to be increased to 15 years to keep in line with the Berne Convention in the not too distant future.

Design registration in China is pretty cheap. It costs around 850 US dollars per application but as I will come to in a minute you can also do a whole tranche of designs, well up to ten designs, similar designs in one go, in one application and that reduces the cost for designs two to ten very significantly.

An important point to note in China is that there is an absolute novelty requirement and that means that whereas in the EU you have a 12 month grace period where you have disclosed the design to the public as long as you actually file a design registration within that 12 month period novelty will be maintain. That does not bite in China, if you have disclosed the design anywhere in the world you will be under threat of attack from a novelty perspective in China and that is a really important point to note.

There is a possibility of claiming priority from an earlier design patent that was filed in another jurisdiction and there is a sixth month period in order to do that.

So moving on, one case I wanted just draw everyone's attention to is a recent case in relation to design patents is JLR fighting against a Chinese manufacturer of a lookalike car to the Evoque and that was the LandWind, this is a long running dispute in China and I want to mention it really for two reasons. Firstly just to demonstrate the importance of not prior disclosing oneself in China from a design perspective and secondly just to show that it is in certain limited circumstances possible to use other protection other than design patents to protect the getup or look of a particular product.

So firstly just in relation to the novelty point, JLR sued the Chinese manufacturer who was manufacturing the LandWind car which is almost a carbon copy of the Evoque and the primary case was in relation to design patent infringement. Unfortunately JLR had shown the Evoque car prior to getting an application in China for the design patent of the whole car and the result of that is that their design patent was revoked and therefore they could not go forward with that course of action. And this was problematic because frankly it was the simplest way to ensure that the manufacturer of LandWind ceased it activities in relation to the car.

Because of that JLR had to start two further courses of action. One in relation to copyright infringement and the other in relation to unfair competition. These were difficult courses of action, the good news is and I think again a positive step forward for Courts in China is that JLR's unfair competition action was successful, they successfully argued that given the reputation of JLR in the market in China that the manufacturer of the LandWind had effectively misused their get up which confused consumers.

So that was successful and that is a really very positive decision in China. They tried to assert three dimensional copyright that is an action that did not succeed and just again demonstrates the difficulty of getting a 3D copyright claim up and running in mainland China.

So finally just to end on just a couple of other tips to bear in mind. There is always the IP piece in China and that is important protecting your IP early and then enforcing as necessary. But also if you are going to China and intending to use suppliers or partners in China it is really important you do your due diligence properly on those partners.

Prevention is the best way to proceed so decent due diligence on any Chinese partner is essential and just always ensure that if you are disclosing any information to a third party in China that a robust NDA is put in place. If you are ever dealing with a company that is refusing to sign up to or negotiate some form of confidentiality agreement then alarm bells should definitely be going at that point.

Then I think the final point to make is that really it is important just to disclose confidential information on a need to know basis and ensure that a good trail is kept so that you have control as much as possible as to where that confidential and to whom that confidential information is flowing.

So that is a whistle stop tour of some key points in relation to intellectual property in China. The overall point is that as long as you get your strategy right and file your IP, file that key IP in China as soon as possible, then it is possible to both protect and enforce your IP in China.

Thanks very much.