Recently, China sought to reassure foreign investors that it would never close its doors to the outside world and was committed to making China a fairer place to conduct business. “We are protecting the legitimate rights of foreign enterprises according to law,” said Chinese President Xi Jinping during a roundtable discussion with international business leaders at the Boan Forum for Asia. Xi’s comments come as U.S. investors and businesses grow increasingly wary about the investment environment amid concerns over rising costs and the protection of intellectual property. Among other costs, workers’ wages have increased much in recent years, forcing foreign businesses to balance shrinking marginal profits against risk of intellectual property loss.
Companies conducting business in China are acutely aware of the risks regarding their intellectual property rights, and attention to detail in both the pre-contracting and contracting stages is key to combatting IP infringement. As a pre-contracting matter, a U.S. company needs to identify the types of IP rights because, like the U.S., China classifies IP rights according to the type of IP. Following identification of the different IP rights potentially at risk, the U.S. company should further ascertain whether appropriate registrations of certain IP rights have been sought in China, and if not, whether it shall pursue such registrations. In the contracting stage, it is critical that a U.S. company use a legal contract that clearly defines ownership of the IP rights. Such a legal contract should identify the IP rights at issues, and have provisions covering term, territory and exclusivity or non-compete.