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Protecting Intellectual Property
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In any foreign market, companies should consider several general principles for effective protection of their intellectual property (IP). For background, link to our article Protecting Intellectual Property and Stopfakes.gov for more resources. IP infringement and theft is widespread in China, and firms operating there must take steps to protect their IP rights, ideally before entering the China market. This includes taking steps to protect the company’s brands, safeguard the company’s technology, and enforce IP rights. 

Protecting Brands

China’s first-to-file trademark registration system allows bad-faith applicants to preempt the rights of legitimate trademark owners by obtaining a registration and then holding the mark hostage or free-riding on the reputation established by the rights holder. Companies should take steps to prevent bad faith registrations by filing early for trademark protection. The manufacturing and trading of counterfeit products is still widespread in online and physical markets in China and continues to spread globally. 

Safeguarding Technology

Trade secret theft is common in China, and attempts at judicial enforcement are often not successful. Some regulators and administrative authorities in China employ inappropriate measures to force U.S. companies to disclose technology IP, typically in the form of trade secrets, in exchange for approving a product, or entering a market segment. 

Enforcing Intellectual Property Rights

It’s not enough to have laws on the books; they must be enforced. Gathering facts and evidence to support an action in China can be a major challenge. Burdensome procedural formalities can hinder enforcement efforts, and even if a case is successful on the merits, often the damages and other relief awarded are too small to adequately compensate the right holder or to have a true deterrent effect. Pursuing enforcement remedies can also result in reprisals, or threats of reprisals, from government officials. Rights holders may also be subject to local protectionism. 

Although China has many respected jurists, there are many inconsistencies in the application of the law, often to the detriment of foreign litigants. 

Companies planning to do business in China should understand that the U.S. and Chinese IP legal systems are different. Registration of rights in the U.S. does not automatically confer rights in China. You should take the time to learn about the differences between the two systems and develop and implement a comprehensive strategy for protecting, monitoring, investigating, and enforcing your IP in China. 

Customize your strategy according to your industry and business needs. Strategies differ depending on the business, the IP rights to be protected, and plans for doing business in China. To be successful in China, plan ahead. Do not rely on one form of IP protection. Create a basketful of IP rights in China. IP rights can overlap, such as copyright and trademark registrations.  A multi-layered and interlocking IP portfolio can provide synergistic protection, compensating for gaps in China’s IP system. 

Plan early for enforcement. Develop your strategy with enforcement in mind, including hiring competent China IP counsel who can provide a full range of protection and enforcement services to develop a comprehensive IP strategy. It’s also important to keep good records because IP enforcement in China generally requires original documentary evidence (e.g. certificate of registration) to establish rights. 

Instill in your U.S.- and China-based workforce a sense of IP ownership and make IP protection and enforcement the responsibility of your entire domestic and China team. Beware of insider threats. China’s infringers are adept at finding new methods or technologies to counter enforcement efforts. Remain vigilant and monitor developments.  

Take advantage of U.S. government resources, including the U.S. Patent and Trademark Office’s China IP Attachés in Beijing, Shanghai, and Guangzhou, for help in developing strategies for protecting and enforcing IP, setting priorities, finding local help, and addressing atypical problems with Chinese counterparts, including advocating for rights holders under exceptional circumstances. USPTO’s China IPR Toolkit is a resource to assist U.S. companies with protecting and enforcing their IP rights in China. This 36-page document is a good primer on how to protect your intellectual property in China. Another resource is PTO’s report “Administrative Enforcement of IP Rights in China”.

To access China’s Investment Climate Statement, which includes information on the protection and enforcement of intellectual property rights, visit the U.S. Department of State 2024 Investment Climate Statements website. 

For more information, contact ITA’s Office of Standards and Intellectual Property Rights (OSIP) Director, Stevan Mitchell at Stevan.Mitchell@trade.gov or the IP Attaché at the U.S. Embassy in Beijing, Michael Mangelson at Michael.Mangelson@trade.gov.