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 on “Intellectual Property Systems: A comparison between the EU and China” on August 18, 2021.
Mr. Peter Sczigel, Project Executive of the China IP SME Helpdesk, welcomed the participants to the webinar. The China IP SME Helpdesk is a project of the European Commission, providing free services to SMEs in EU member states, helping them with IP related issues in China. The free services include an enquiry helpline; training workshops; webinars; a website and blog; and guides and factsheets.
Ms. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association, introduced both organizations. The Chamber attaches much importance to IP and believes companies in China should have an IP strategy. China has already become a leader in innovation in several areas, such as the internet and artificial intelligence. Innovation is also one of the reasons why European companies want to be in China and many European business leaders see Chinese firms as equally or more innovative than European ones. In 2020, China became the EU's biggest trading partner in goods, overtaking the U.S. In the first quarter of this year, EU investments in China increased by 50% compared to last year, reaching USD2.35 billion. The value of completed Chinese investments in the EU in the first quarter dropped to USD500 million. According to the IMF, China's GDP growth will be 8.2% this year.
Mr. Simon Cheetham, IP Expert and Team Leader at the China IP SME Helpdesk, introduced the topic of the webinar: Intellectual Property Systems: A comparison between the EU and China. This is the seventh webinar jointly organized by the China IP SME Helpdesk and the Flanders-China Chamber of Commerce. The main point of this webinar is a comparison between China and the EU on intellectual property.
You can't look at one market in isolation. Goods and information flow quickly from country to country. China is now the largest exporter in the world and by far the largest market for e.g. electric vehicles. The first giga-factory that Tesla built outside the U.S. is in China. But China needs continuous growth to become a medium-level country in terms of GDP per capita. China needs to double its 2020 GDP again to achieve this status by 2035. China's 14th Five Year plans centers on the dual circulation strategy first articulated by President Xi Jinping in May 2020 as China began to plan its post-pandemic economic recovery with growth driven by strong domestic demand, combined with exports based on advanced manufacturing. Chapter 5 describes plans to build a digital China with seven core industries: computing; big data; the Internet of Things (IoT); the industrial internet; blockchain; artificial intelligence (AI); and virtual and augmented reality. It also specifies 10 areas where such technologies should be applied, including smart transportation; smart energy; smart manufacturing; smart medicine and smart government.
In this context, changes have been made to IP laws in China, which is leading to a steady upgrading of the IPR regimes. The two main factors which seem to be driving this change are accession to trade agreements – particularly the World Trade Organization Trade Related Aspects of Intellectual Property Rights (TRIPs) – and bilateral trade agreements to enhance growth through trade. There is also a recognition that innovation is key to increasing value. Innovation can only flourish under an effective IPR regime. There is a focus on employing China's fast growing domestic market and its powerful regulatory regime to decrease reliance on foreign technology and to develop indigenous technologies that will enable China to solve its environmental infrastructure and social issues. Indigenous innovation in China is seen as enhancing original innovation through co-innovation and re-innovation based on the assimilation of imported technologies. The Chinese government has warned against blindly importing foreign technology without plans to transform it into Chinese technology. The concern is that the importation of technologies without emphasizing assimilation, absorption and re-innovation is bound to weaken the nation's indigenous research and development capacity.
There are big developments in China's IP regime. We see a restructuring of IP registration, management and enforcement governing bodies in China, which is part of a bigger reorganization announced during China's two sessions in March 2018. The State Intellectual Property Office and the China Trademark Office have merged under the China National Intellectual Property Administration (CNIPA). This is beneficial, resulting in greater resources to handle and enforce IP cases, as registration and enforcement are handled by one body. We see a more unified institutional approach from the different bodies dealing with IPR in China. In October 2020, China's National People's Congress published the amended Patent Law which came into force on June 1, 2021. This introduced major changes on invention and design patents. The protection period for design patents is extended from 10 years to 15 years. One of the main reasons is that it would allow China to eventually join the The Hague system regulating design rights, which requires a minimum protection period of 15 years. The amended law allows companies to register partial designs, which has been a common practice in the EU and the U.S. Partial designs were not previously recognized in China, where design patents could only be obtained when applied for together with a product. The amended law also increases the amount of damages that can be claimed for patent infringement. In November 2020, the NPC passed the latest revision to the Copyright Law, which came into force on June 1, 2021. It contains a provision allowing for the shifting of the burden of proof from the copyright owner to the infringer with statutory and punitive damages matching the new Patent Law. The amended Copyright Law moves closer to the open-ended concept of copyright found in many countries with a strong civil law copyright tradition. It also adopted a more open-ended list of copyrightable works.
In June last year the European Union Chamber of Commerce released the European business in China confidence survey showing that European companies in China have seen continuous progress on drafting and enforcing of IPR-related regulations in China. The sentiment is that there has been significant improvement in IP protection laws and enforcement over the past decade. This was the highest positive sentiment rate in the survey since 2012. The outlook for IPR in China has been increasingly positive.
Looking at an overview of the IPR regimes in China and Europe, we can see that in China only registered IPR is protected. If you have not formally registered your IPR in China, then you can't enforce those rights in China. Although copyright does not need to be registered in China, it is available and is advisable as Chinese courts require registration of copyright in order to accept your case. In the EU, proof of earlier use might be sufficient to enforce unregistered IPR. In China, your IP is only protected from the date of registration, whereas in the EU conditional protection is granted from the date of filing. IPRs are territorial. Taiwan, Macao and Hong Kong have separate IP systems. IP that is only registered in mainland China is not protected in Taiwan, Macao or Hong Kong. IPRs registered in a European country are only protected in that country and do not extend to China. Patents and trademarks in China can be extended internationally. China is a party to the Patent Cooperation Treaty and the Madrid system administered by WIPO. This can simplify the international extension procedure for patents and trademarks. The registration processes in China and the EU are obviously different.
The trademarks comparison between China and the EU shows a difference in scale. In 2020 there were over 5.7 million trademarks registered with the CNIPA and 7,500 applications for international registration from domestic applicants in China. In mainland China visual and sound trademarks are recognized, but in Europe scent trademarks are also recognized. In China, Chinese translation of a trademark is something that you should consider. It is not required by Chinese law but it is useful to translate trademarks to be better protected and appeal to customers in China. The best trademarks are those that sound the same and make reference to some defining characteristic of the brand or have a positive meaning in Chinese culture. In China registration through the Madrid system is possible and is the same as in Europe. China uses the international classification of goods and services but does make a further sub-class division.
Registration of patents in China takes less than one year for utility model patents and three to five years for invention patents. Invention patents are valid for 20 years, utility model patents are valid for 10 years. In Europe the time required for registration depends on the EU country. In China invention patents need first be applied to the State Intellectual Property Office for a confidentiality examination if the first application is to be made outside China. Without this it is not possible to obtain a valid patent in China, whereas in Europe there is no mandatory confidential exam. Utility models are widely used for inventions in China. Utility models are new technical solutions which involve the specific shape or structure of a product. Utility patents are granted faster and do not require a confidential examination. Utility models are much less common in Europe and not all European countries offer this form of protection. The Patent Cooperation Treaty (PCT) route is also available in China, but not in Taiwan and Macao. Parallel filings of utility model patents and invention patents is common in China. In this way the applicant benefits from the early granting of the utility model patent as well as from the long term protection of the invention patent. Once the invention patent has been granted, the utility model patent has to be abandoned. In 2020 the CNIPA authorized 530,000 invention patents, bringing the total number of patents in mainland China to 2.2 million. The number of invention patents per 10,000 people reached just under 16. In 2002, 2.3 million utility and 730,000 design patents were authorized.
Designs need to be registered as design patents in China in order to be protected, whereas design can be protected either as unregistered community design or as a registered design in Europe. In China copyright is protected from the date of creation and registration is an option. In China databases can be protected with copyright as compilation works and in the EU if they are original intellectual creations. In China, trade secrets need to be protected by physical, technological and contractual measures in accordance with the China Anti Unfair Competition Law. Until 2016, in Europe there have been no harmonized laws related to the protection of trade secrets. To be protected, trade secrets need to be undisclosed to the public and provide some competitive edge. In June 2016 a directive on the protection of undisclosed know-how and business information against unlawful acquisition and use was adopted. Member states are required to comply with the directive.
On enforcement, in China the IPR holder carries the burden of proof and is required to collect evidence to present in court. All evidence needs to be notified by a Chinese notary. According to the revised Trademark Law, in certain cases the infringer can be ordered to provide additional evidence by the court. In Europe the courts can order the infringer to provide relevant information and courts can help the IPR holder collect evidence. In China trade secrets can also be enforced in court and through administrative actions whereas in Europe trade secrets are enforced by the courts only. In China, administrative bodies offer a fast and relatively cost effective way to deal with trade and copyright infringements. Administrative authorities are authorized to carry out raids, to confiscate infringing goods and impose fines on the infringers, but they can't award compensation for damages. Online copyright infringements can be dealt with in the internet courts and they accept evidence electronically.
Finally, Mr. Simon Cheetham presented a case study using blockchain to record copyright. The case was presented to the Hangzhou Internet Court and was conducted online. The court accepted the blockchain as evidence, ruled in favor of the plaintiff and damages were paid. This works for online infringements only. Mr. Cheetham also gave a few tips for SMEs entering the China market. IP risk increases from following your EU customer to setting up a wholly foreign owned enterprise to entering a joint venture with a Chinese partner. It is important to take your time to look for the right partner. Mr. Cheetham also emphasized that the importance of non-disclosure agreements cannot be overestimated.
A Q&A session concluded the webinar.
