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88 Country starter pack Business practicalities in China brand had been registered in China by an unaffiliated Chinese party even before the firm considered entering the Chinese market. It can be difficult, time-consuming and expensive to recover these marks, so it is far better to register trademarks early. This should not in itself distract potential investors from the potential of the Chinese market. Risks, such as IP theft, can be managed, while the regulatory processes in China are improving. Clearly, the administration and enforcement of IP laws in China are quite different from that operating in Australia, and enforcement of IP rights in the former are possible through both administrative and judicial avenues. But unless foreign entities have a residential or business address in China, applications must be filed through Chinese agents or attorneys. Foreign investors can register IP in China for trademarks, patents, designs and copyright. However, each of these is administered by a different government body. The primary law in China pertains to copyright. This protects copyrighted works of foreigners that are either first published in China or in countries that are signatories to the World Intellectual Property Organisation (WIPO) copyright protection treaty, which includes Australia. Apart from the Copyright Law, other key laws are the Trademark Law and the Patent Law, with customs authorities also playing a role in China’s enforcement of IP laws. Registering IP rights ahead of entering the Chinese market is essential because without doing so, an Australian business would be unlikely to be able to enforce them later. There are various methods for registering IP, depending on its type. The Australian Government’s IP Australia website outlines the following information for Australian businesses operating in China: Trademarks • Trademark applications must be filed with the Chinese Trademark Office (CTO), which is part of the State Administration for Industry and Commerce (SAIC). • It is essential to conduct a trademark search prior to registration. • The trademark should be registered in both Mandarin and English. • Other related rights, such as domain names and company names, should also be secured through registration. • It is advisable to file trademark applications in China as soon as possible due to the ‘first-to-file’ rule. • Three-dimensional shapes and colour combinations can be protected as trade marks in China. Other nontraditional marks, such as sounds and smells, are not yet able to be registered, although extending protection to these marks is currently being considered. • Enforcement of a trademark without registration is possible, although the process tends to be more expensive and less predictable. • Since 2004, customs recordation of IP rights has offered cross-border measures to help protect IP. • Trade mark registrations may be removed from the register if they are not used for three or more consecutive years after registration. Patents • The State Intellectual Property Office (SIPO) is responsible for administering patents. • Two forms of patent protection are available in China: invention patents (equivalent to Australian standard patents, with a term of 20 years) and utility models (for lower level inventions, with a term of 10 years). Inventors may apply for both patents for the same invention. • The patent examination process in China tends to be longer than in Australia. • Certain types of subject matter are not able to be patented in China. • SIPO regional offices provide administrative enforcement. • Registration should be made through a registered patent agent in China. Designs In China, designs are registered through SIPO. Protection is available for 10 years. Known as design patents, they do not undergo substantive examination and can be obtained relatively quickly. Copyright Unlike Australia, it is possible to register copyright in China. The National Copyright Administration Office is responsible for administration of copyright. No registration is required but registering copyright with the authorities is advisable.
Country starter pack Business practicalities in China 89 Trade secrets • Trade secrets are technical or management information that is unknown to the public, but which is of practical value and can bring economic benefits to the rightful party. Product and brand elements such as unique names, packaging and ornamentation are also perceived to be trade secrets. • In China, trade secrets do not require registration. • The principal law governing trade secrets is the Anti- Unfair Competition Law. • The principal administrative enforcement agency is the Fair Trade Bureau of SAIC. Plant varieties Plant varieties are protected in China for a period of 15 or 20 years, depending upon the type of plant. Technologies Since October 1, 2009 China has placed restrictions on the cross-border transfer of certain technologies. Violation of your IP Australian businesses should be prepared to act quickly and decisively to enforce their IP rights should they be infringed. There are several enforcement options for dealing with violation of IP: • Administrative enforcement • Civil litigation • Criminal law enforcement • Cease and desist (C&D) letters. Administrative enforcement The main way to deal with infringements is to file a complaint with one of the Chinese enforcement agencies that have specific powers to enforce IP rights: • Patents: SIPO • Trademarks: SAIC • Copyright: National Copyright Administration Office Customs and other agencies such as the Technology Supervision Bureau also have powers to deal with counterfeit goods. While their powers vary, these administrative agencies can usually fine offenders, seize goods or equipment and issue penalties. However, they do not have powers of arrest and cannot award compensation. While the administrative enforcement is usually very quick and low cost – it does not require any court procedure – it can be a limited deterrent and fines may be small. For complex IP cases, businesses may need to use the courts and for very large cases, may want to pursue a criminal prosecution. An administrative action can cost between $4,400 and $8,900. Civil litigation Companies can take civil action through a local People’s Court or an Intellectual Property Tribunal. The courts are suitable for dealing with: • More complex cases that cannot be handled by administrative authorities • Breaches where aggrieved parties seek damages, or want to send a strong message to the infringer. Civil litigation is more suitable where the infringer has assets and has the ability to pay damages. Though slower and more expensive than administrative action, companies increasingly are choosing the litigation path. Although damages awards for IP infringement are much lower than might be expected in Australia, they have been rising in recent years. Businesses seeking to bring a case to the courts should do so in larger cities, such as Beijing, Shanghai or Guangzhou, rather than in local courts which may have less IP expertise or which may be vulnerable to local bias. It is possible to combine administrative and civil action, so that an administrative ‘raid’ can be conducted first, followed by a civil suit to claim compensation. Costs for civil litigation can vary considerably depending on the complexity of a case, but may vary between $22,000 and $44,000. Criminal prosecution China’s criminal law allows for prosecution of serious cases of piracy and counterfeiting. Only cases that are relatively large-scale, and where trademarks or copyright have been copied exactly, are eligible. The threshold for prosecution is based on a specific monetary value of the case, although valuing the case (by the number of counterfeit goods sold or seized) can be challenging. The police, as in many other countries, have limited resources and may be reluctant to investigate cases that they consider minor. Generally, the aggrieved party needs to prepare the details of the case in advance and report to the police, who do not simply act on preliminary leads. It is common for a case to be transferred from the administrative authorities if it’s considered large enough. Criminal cases require investment of time and resources to investigate leads and guide the case through the prosecution process. Costs can range from $22,000 to $44,000. Cease and desist letters C&D letters can be an effective way of putting a stop to infringement, if the infringer is too small in scale or not serious enough to warrant spending a lot of money. For example, traders on the internet are a suitable target for C&D letters demanding that they take down any infringing online products or logos.
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