IP protection in China

March 6, 2007 in Latest, News Leave a reply

IP Theft"How can we do business in China and still protect our Intellectual Property?"
The short answer is:  you can’t, at least not through the American legal system.  And you will need specialized legal help to attempt to protect your IP under China’s legal system.
"China’s interests are in reducing the cost of IP, not in protecting it," according to Kenneth DeWoskin, of Pricewaterhousecoopers.
Among the reasons:
  • China’s economic growth
    is based on low-cost manufacturing, and IP licenses just add cost

  • Government R&D priorities favor derivative products for domestic
    markets, rather than true innovation that needs patent protection

  • Policy makers continue to favor the public good over property rights

UPDATE: "This over simplifies the problem; there definitely are ways to protect your Intellectual Property" says Dan Harris, a partner at Harris & Moure in Seattle.

Harris authors ChinaLawBlog.com
as a source of China legal and business information.  He has several
compelling articles on IP protection in China.  If you are concerned
about IP protection, his site is well worth a look.


Patent Protection, Chinese Style

China has a "first-to-file" patent system,
but it’s not clear whether that means first to file anywhere or first
to file in China. Chinese
manufacturers pay close attention to new products going into
production for U.S. OEMs, and decide if these products have market
potential in China. They then file patents for the devices in the Chinese
patent office before U.S. companies do, claiming patent ownership.

Make no mistake, infringement is a rampant problem, often leaving you with no protection. 
In IP rights cases, if Chinese courts respond at
all, it is usually too late to do anything. It is almost impossible to get
an injunction to stop the alleged offenders.

The theme seems clear for the Chinese Government: IP rights must be
constantly balanced against the public good for the sake of China’s
economic development
IP protection

What you can do

  • Disperse your deployment among multiple companies that are in different relationship networks

  • Manufacture
    pieces of the product in different locations, so that no one sees
    the whole picture

  • Do your final assembly in the United States

  • If at all possible, tie-in additional services into the fundamental value of your product.  Copycats are seldom able or willing to deliver the added value. 
The PricewaterhouseCoopers report, "Redefining Intellectual Property Value: The Case of China",
says recent Chinese government statements and draft antimonopoly laws
emphasize the public good over private gain. As evidence, the Chinese National
Standards Administration has required licensing concessions from patent
owners if their IP is to be included in approved national standards.
Meanwhile, provincial and local governments have a great deal of
economic autonomy, and—from a practical standpoint—the legal autonomy,
to do what they deem necessary for the economic benefit of their
This legal autonomy affects your company specifically through China RoHS.
Read this for information on the risks of China’s RoHS law and how to protect yourself.