Intellectual Property Protection in China
- Evalueserve
China is already a hub where key players from every industry have – or are likely to have in the near future – a strong presence. Unfortunately, China is also known as a place where unprotected technology is likely to be copied. If a company wants to manufacture – or sell – its products or services in China, it must protect its intellectual property in the country. Excellent knowledge of the Chinese patent system is necessary.
The Chinese patent system was formulated around 1985 and has been further developed over the last 20 years. During this period, the Chinese government realized the importance of Intellectual Property (IP) protection, and developed the comprehensive legislation and institutions that are responsible for patent examination and enforcement.
Types of patents in China
In China, the SIPO (State Intellectual Property Office) grants three types of patents:
- Invention patents or 20-year patents,
- Utility model or 10-year patents,
- Design patents.
Patent Protection
Law suits relating to patent infringement have been on the rise in China. In 2005, local courts across the country accepted 2,947 civil cases related to patent rights, which is a 15.6 percent increase over the previous year. In comparison, US courts received a total of 2,973 cases in 2004 and the number fell to 2,812 in 2006. Similarly, a total of 13,424 intellectual property disputes (including disputes relating to patents, trademarks, copyrights and other forms of intellectual property) were filed with Chinese courts in 2005, whereas only 10,905 cases were filed in the United States.
The reasons for this increase in patent litigation can only be speculated. One major driving factor seems to be the general level of awareness of IP issues in China, which has partly been fueled by the aggressive enforcement of patents by multinational companies.
China has a well-established hierarchy of courts, which is a part of a two-track system for patent enforcement:
- The administrative track: The patent holder can file a complaint at the local patent administrative authority where the infringing activity is believed to have occurred.
- The judicial track: The owner can file a complaint through a legal process and make a request for injunctive relief and/or damages.
The administrative Track
The administrative track is preferred by many patent holders because the time required to start the investigation and determine whether an infringement has occurred may be considerably shorter than pursuing it through the courts. Less evidence is required to begin an investigation, making it less expensive.
Although the entire administrative procedure is simple, the administrative track has several disadvantages, such as limited compensation for the patent owner, smaller fines that fail to deter future infringements, difficulties caused by the lack of coordination between the local administrative authorities, and the possibility that an investigation may be affected by local protectionism, corruption, or the lack of appropriate administrative resources.
Judicial Track
When a patent holder decides to follow the judicial track, potential damages can be much higher and may include the confiscation of unlawful gains, elimination of the effects of the infringement, and issuance of a public apology. On the other hand, although injunctive relief and higher compensatory damages are available from the judicial track, litigation is a costly process in China. Furthermore, the plaintiffs are responsible for collecting all the evidence because there is no discovery process in China, and this process can be very time consuming and expensive.
Conclusion
The growing number of patent applications and patent infringement disputes in China indicates positive development within the Chinese intellectual property system. However, it remains to be seen whether the country’s system can effectively cope with the pressure of exponential growth. At least for now, the Chinese government seems to have taken the right steps in setting up a fairly strong infrastructure, which includes (a) a searchable patent database that is available online, (b) an appeal mechanism and a hierarchy of courts for handling intellectual property disputes, and (c) a fairly clear distinction between the administrative and judicial processes. Various amendments made to the Chinese patent law, as well as their implementation, seem to have ensured a level playing field for entities operating in China. The challenge for the Chinese government is now to make sure that these amendments are effectively implemented throughout the country, and not only by a limited number of courts.
Evalueserve provides custom research and analytics services to a globally dispersed client base of Global 5000 companies, Investment Banks, Hedge Funds, Private Equity Firms, Law Firms, VC Firms, IP Advisory Firms, and Consulting Firms in the following areas – Intellectual Property, Market Research, Business Research, Financial and Investment Research, Experts for testimony and other advice, Data Analytics and Modelling, and Knowledge Technology services. Currently, Evalueserve has a workforce of 2,500 professionals in research centres in Delhi, Gurgaon, Noida (India), Shanghai (China), Santiago-Valparaiso (Chile) and Cluj (Romania). Evalueserve China has 150 employees. Additionally, 60 client engagement managers are located in all major technology, business and financial centres globally. For more details, please visit www.evalueserve.com and www.circleofexperts.com
Other articles by Evalueserve:
More Information on Business in China:
Click the links to return to the China Business Law Section or learn more about Considering Business in China, Starting a Business in China, and Chinese Negotiation.
