The Flanders-China Chamber of Commerce, the EU-China Business Association and the China IP SME Helpdesk, with the support of Flanders Investment and Trade, organized a webinar focused on “Changes in China's IP legislation and implications for SMEs”. This webinar took place on 14 July.
Mrs. Alessandra Capriglia, Project Manager at the China IP SME Helpdesk, introduced the Helpdesk, a EU-funded project providing free advisory services to European SMEs on IP protection and enforcement. The Helpdesk not only covers mainland China, but also Hong Kong, Macao and Taiwan. To date it has assisted over 100,000 SMEs not only in the EU but also in potential member states. The Helpdesk has an enquiry helpline, website and blog, organizes training workshops and webinars, and publishes guides and factsheets. The China IP SME Helpdesk is part of a network of IP helpdesks. The Helpdesk is present on social media Twitter, Instagram and Youtube. Most of the webinars are also uploaded on Youtube. The email address of the enquiry helpdesk is question@china-iprhelpdesk.eu Free and confidential advice is provided within three working days.
Ms. Gwenn Sonck, Executive Director, introduced the Flanders-China Chamber of Commerce and the EU-China Business Association. The Chamber attaches a lot of importance to IP and companies doing business with China should also have an IP strategy included in their China business plan. Doing business with China is not easy these times. The biggest problem for companies doing business with China right now is China's dynamic zero-Covid policy, but a step forward has been taken as the Chinese government reduced the quarantine period to seven days plus three days at home and also the number of flights is increasing. The invasion of Ukraine also causes disruptions in the supply chains and rising costs for transportation and energy. Despite these difficulties you need to persist. China remains an important market for our businesses and cannot be ignored. China's market offers long-term opportunities. According to the World Intellectual Property Organization, China ranked 12th in the global innovation index of 2021, up two places compared to 2020. China overtook the U.S. as the top filer of international patents, which is a key measure of innovation. In the past decade China has filed more than 400,000 patents in the area of artificial intelligence, accounting for 75% of the global total. Innovation is also one of the reasons why European companies want to be in China as it is crucial to do the innovation where the applications are.
Mr. Thomas Pattloch, IP Expert at the China IP SME Helpdesk talked about “Changes in China’s IP legislation and implications for SMEs”. There are a lot of changes in IP legislation, mostly for the better. If you think of having R&D in China there are a lot of new framework conditions we have to take into account. The background is that policy is important as Chinese companies think about China-U.S. decoupling, independent innovation and creating technology transfer that lasts. Also about filing as many patents as possible. As a competitor in the market in China, you are forced to run the same race to the top in terms of IP filing and protection.
Foreign companies are not as welcome as they were before. There is a stronger focus by the Chinese partners to stay within government sponsored programs. Some industries have big problems in China, such as the gaming and education industry, which have almost been shut down in the past year. If you are an SME and want to invest in China, you need to consider if you need a partner, and if your IP is protected. The Chinese system is very government focussed. Courts are not independent and need to take into account the instructions and policy line, not only due to Covid but also due to the party doctrine. There is a strong impact of party policy in all aspects of the economy and life.
Chinese companies are filing, which means you also need to protect your own name, technology and copyright if you intend to be active in the market. Chinese trademark applications number 9 million per year while in European countries it is only a few hundred thousands. There is also an increasing number of IP cases coming before the Chinese courts. The European country with the most patent cases is Germany with around 1,200 cases per year, while in China the number is 525,000. You need to be prepared to have a dispute if you are active in the market. You need to be aware of the fact that Chinese do litigate.
Litigating and enforcing a patent in China is easier than in many other countries where costs are higher, things are complicated and winning is hard. In China, foreign companies have a good win rate of about 70% to 80%. The process is quite straightforward. There is separation of infringement procedure and procedure on validity of patents. There is a specialized court system with judges who know what they are talking about. You need to be well prepared. There is an IP Chamber at the Supreme People's Court. Design patents are also regulated in the Patent Law and now you can also file partial designs. Patent invalidation is important if you find that somebody else has patented your design. It happens a lot. Compensation for infringement has risen, but you won't get rich. Patents are often used to keep a competitor out of the market.
The trademark law is very important because without a trademark nobody will recognize the product. China is driving the digitalization of the whole process. You can do an e-filing online through an agency to obtain a certificate, which is very important. Getting the trademark early on is also very important. Article 4 was introduced to make sure that you can get rid of trademarks which are not being used or not filed for the intention of being used. You can claim bad faith with the trademark office, but you need to present good arguments. Due to the number of cases, relying on the authorities alone is not good enough. Article 44 covers trademarks obtained by fraud or other improper means. A lot of knowledge and monitoring of the Chinese market is required and for SMEs that is a problem because they often don't have the time and the people and don't know where to look. You can use law firms or have somebody on the ground. Making sure your brand stays intact is a key requirement for a successful market entry.
Previously is was enough to have an announcement and a website to prove that you use a trademark, but that is no longer the case. The courts asks for real commercial use. Keeping track of what you do and how you sell is really important. In China the period for use is three years rather than five. Non-use cancelation is becoming increasingly important. When a trademark is similar to another one already in use you can try to get a letter of consent. The copyright law is underused and underestimated. Registering copyright in China is a good idea. Revisions to the Copyright Law were not as bold as in the other laws. In litigation you have to argue well that you have copyright. Copyright registration can be done at the Copyright Protection Center of China (CPCC). Logos are often protectable under the Copyright Law. Getting as many certificates and proofs of your rights will make your life easier.
The new guidelines for enforcement embody a shift of the Chinese mindset in terms of granting protection for IP. In 2017 the Party made an important document to do more about IP to become more innovative and become a tech superstate. So new tools for enforcement were introduced. But you need to provide evidence and this might be difficult. Now you can ask the courts to help you if you have done your homework in the first place. Platforms are now also a battle space for SMEs so it is important to know what you can do to enforce your IP in e-commerce.
Choosing a fight is something you need to be smart about. It costs time and energy. Have the right filings and do the monitoring. Mr. Pattloch concluded his presentation by presenting a few case studies, including Michael Jordan vs. “TRAB”. Don't forget to register your Chinese brand name.
A Q&A session concluded the webinar. How much does it cost to register a trademark? Mr. Pattloch: It costs about €400 for a trademark and €800 for a company registration. Is it possible to win a trademark case in court? Mr. Pattloch: Yes, it's definitely possible, especially if the case is clear. But you need to put effort into it and argue well.
