TEN HIGHLIGHTS OF CHINA’S NEW PATENT LAW

Quote

Written by Mr. Jian Xu, IP Expert and collaborator of the China IPR SME Helpdesk

On 17 October 2020, China approved the fourth amendment to the China Patent Law (CPL), which will take effect on 1 June 2021. It has been 12 years since the last amendment made in 2008, so there a number of notable changes. Below is a brief summary of the highlights of the new CPL.

Design patents

There are two significant changes to the design patent in China via design patent term extension and the introduction of partial designs.

1. Partial design allowed

“Partial designs” is formally introduced in China. This is in line with international practice such as in the USA, Europe, UK, Japan and Korea. A significant boost of design filing activity can be expected due to allowance of this new category of design patents.

2. Design patent term extended to 15 years

The term of design protection has extended from 10 years to 15 years. This signals that China is under preparation to join the Hague system, which stipulates a minimum of 15 years protection term for member countries.

Phamarceutical patents

Another significant change is in the area of pharmaceutical patents through patent term compensation and introduction of patent linkage system. Continue reading “TEN HIGHLIGHTS OF CHINA’S NEW PATENT LAW” »

Revision of PRC Patent Law

Quote

Charles Feng
Partner Attorney-at-Law
East&Concord Partners

On October 17 2020, Xinhua News Agency revealed the progress of the revision of eight laws, which includes the fourth revision of the PRC Patent Law (the “Law”). The revision attracted huge attention from international IP communities as it addressed multiple issues that has been awaited by international and domestic IP owners.
According to the disclosed information, the revision will substantially strengthen the protection in multiple aspects.

I. Enhancement of Protection for Interests of Patentee
1. Increase of damages against patent infringements
2. Perfection of the system of burden of proof
3. Addition of principle of honesty and trust in patent law
4. Perfection of the administrative protective mechanism against patents
5. Addition of patent term compensation system as well as patent infringement solution mechanism in earlier stage

II. Promotion of implementation of patents
1. Perfection of employment invention system
2. Addition of open licensing system for patents
3. Perfection of system for grant of design patents
4. Addition of situation of grace period of novelty
5. Perfection of patent evaluation report system

III. Enhancement of protection of patents
1. Addition of punitive damages
Chinese courts are authorized to rule the punitive damages as much as one to five times of amount as calculated on basis loss of right owner, profits made by infringer as well as multiplies of royalties.
2. Increase of statutory damages
The statutory damages are increased from CNY 3 million to CNY 5 million, the minimum amount of damages is increased to CNY 30 thousand

IV. Perfection of Design patent system
1. Addition of protection against partial design
2. Extension of term of design patent protection from 10 years to 15 years
3. Addition of domestic priority system against design patents

V. Addition of situation for exception of loss of novelty
In order to deal with emergent situation including control of pandemic as well as promote the timely use of invention and creation to solve the public health issue, the revision added the situation “when the situation of emergency or specialty occur, the first publication for the public interests” as an “exception for loss of novelty”.

Mr. Feng is an IP Specialist with substantial experience on intellectual property and anti-trust law. Mr. Feng was ranked as one of Top 15 China IP Lawyers by Asian Legal Business under Thomson Reuters as well as ranked as Top IP Attorney by WTR in 2020. Mr. Feng was also recommended by LegalBand as Leading IP litigator and Leading non-litigation lawyer consecutively from 2016 through 2020. A case represented by Mr. Feng was ranked as one of 50 Model IP Cases by Supreme People’s Court of China in 2013.

Email:   Charlesfeng@ecp-ip.com ; fchao7847@hotmail.com

Cell Phone: +86-13910336970  Wechat: Fchao7847

Protecting your intellectual property during technology transfers in South-East Asia: Why is it important?

Quote

WRITTEN BY XUAN NGUYEN

The South-East Asian region consists of 10 countries with a combined GDP of USD 3 trillion (the 5th largest in the world) and a population of 649.1 million people[1]. Over the past few years, the region has emerged as a location for manufacturing diversification, particularly as a result of the USA–China trade war and, most recently, the Covid-19 pandemic.

ASEAN GDP

Technology transfers are the key enablers in the supply chain relocation process, and intellectual property (IP) is considered to be the crucial element – the factor that contributes the value. In this article, we will provide you with some tips on how to build and manage your IP portfolio in relation to technology transfers in South-East Asia.

Why is IP important in technology transfers?

A broad definition of technology will be used here, one including not only production technology, but also management expertise, marketing skills and general intangible corporate assets. Commercially exploiting technology across geopolitical borders can be managed through licensing agreements, joint ventures or by setting up your own business in order to share advanced skills, knowledge, or facilities among interested parties.

Companies most commonly transfer their technology by licensing their IP rights (such as patents, trade marks, designs, software, trade secrets, know-how, etc.). Protecting your IP before disclosing it is crucial to ensuring your monopoly on the information in question, allowing you to expand your market presence, providing you with a return on investment in research and development (R&D) and encouraging further innovation. According to the Ocean Tomo survey, today intangible assets have increased their contribution to account for up to 90% of a company’s value[2].

my-visual_48710936

Secure your IP through registration, non-disclosure agreements (NDAs) and a strategic plan

The first step in managing your IP is to identify it. Therefore, in your transfer strategy, you should think about what kind of intangible assets you are considering disclosing to your potential partners. Based on your resources and target destination, evaluate the elements you want to be part of your technology transfer strategy, and consider whether it is beneficial to monetise the specific IP in question (such as the patent, trade mark, design, software, trade secrets, know-how, or a combination of the above).

For example, in a franchising deal, you not only transfer your brand and business model, but also operating manuals, quality control procedures, training policies, marketing strategies, business advisory support systems and many other confidential aspects of your business. Be aware of all the information you will disclose to your partner during the process – from commencing negotiation until entering into a deal – so that you can anticipate the possible risks and initiate a suitable protection plan.

You must be aware that IP protection is territorial. Therefore you need to formally register patents, trade marks and designs in each country you want to be protected in. An IP protection strategy must be front and centre when considering investing in South-East Asian countries. Obtaining registration before the start of a technology transfer negotiation is ideal. However, even having an application in place before opening talks is worthwhile; it strengthens your position and reduces the risk of a failed discussion ending up with the theft of your IP by your potential local partners.

In the era of digitalisation, the software is a crucial part of the IP involved in many technology transfer deals. You should pay special attention when licensing your software; there are two main ways to protect it, patent and copyright. Patents ensure extraordinarily strong protection but are not easy to obtain, firstly because it’s a long and costly procedure, secondly because not all software is deemed to be patentable.  Therefore, you probably have to rely on protection under copyright law. In almost all South-East Asian countries works are automatically protected by copyright upon their creation, however a system for voluntary registration also exists. Copyright registration is very useful when there are disputes over a copyrighted work. It’s much to better to have it before entering a tech transfer agreement.

There is no registration system for trade secrets, know-how or other intangible assets, therefore companies should always have a strategic policy in place to retain such assets, and their competitive edge. A good starting point is to sign an NDA with your potential partner before entering into any initial negotiations, and ensure that it’s translated into the local language. This is also a way to detect the intentions of your potential partners, and to test their reliability.

It’s an unfortunate truth that people won’t pay for what they can steal. Many licensees attempt to reverse-engineer your products to save costs and gain an advantage in the marketplace (i.e. they are able to sell their products at much lower prices). Under current IP legislation, there is little you can actually do about this process other than to build a strategy that prevents such activities from taking place. For example, in your technology transfer plan, you may consider having certain components of your products manufactured/assembled by different parties, or using separate locations to help reduce the risk of your IP being misappropriated.

Searching for a partner and due diligence

The crucial factor in the success of technology transfers is choosing the right partner. During the negotiation process, you are going to disclose your IP in order to attract potential partners. It is worth spending some time reviewing all the assets in question, including any registered IP belonging to your potential partners, any litigation in which they have been involved, or any issues that could arise in the future when signing a deal with them.

Entering into a contract

The risk to IP associated with technology transfers varies depending on the type of IP you want to transfer and the form of collaboration planned (such as licensing, a joint venture or setting up your own business). You should analyse the potential risks and include the necessary clauses in contracts to prevent IP violation.

pexels-bongkarn-thanyakij-3740400

First of all, make sure a confidentiality clause or NDA is a part of your contract. Taking the fact that the information may be used by your partner’s employees – or that the information might be disclosed to third parties – into account, appropriate measures to protect confidential information should be clearly written into the contract.

It is also worth having a formal procedure in place to deal with the identification of both the existing IP and IP that would arise in the future. In many cases, your partner may be able to improve on your IP and use it to develop another generation of products. Therefore, it is wise to include a clause that deals with the ownership of any potential improvements.

Importantly, companies must ensure that the contract allows local enforcement methods to stop the sources of IP violation, rather than reverting to EU legislation or systems of arbitration. In cases of infringement, you have the right to seek direct remedies from the local authorities. This resource can enable you to quickly obtain emergency injunctions, search-and-seize orders or asset-freezing orders, which are especially helpful in cases of trade secret theft by an employee or a third party. It is common practice to include an accompanying arbitration clause as a secondary means of resolving disputes. In the South-East Asian region, Arbitration in Singapore is usually recommended as the country has the advantage of excellent legal and technological expertise, a highly skilled judiciary and widespread English fluency.

South-East Asia has become a promising destination for supply chain relocation. Technology transfers are the key enablers of this process. However, the risks of IP infringement there always threaten your revenue and reputation. Companies should understand the degree of their exposure to risk and make sure to put the appropriate measures in place to protect their intangible assets when investing in the region.

For more information on technology transfers in South-East Asia, check out our latest guide here.

The South-East Asia IP SME Helpdesk is an EU initiative that provides free, practical IP advice to European SMEs in South-East Asia. EU companies can send questions to question@southeastasia-iprhelpdesk.eu and will receive a reply within 3 working days.

[1] https://www.aseanstats.org/wp-content/uploads/2019/11/ASEAN_Key_Figures_2019.pdf

[2] https://www.oceantomo.com/intangible-asset-market-value-study/

 

A PRACTICAL OVERVIEW OF THE DOCTRINE OF EQUIVALENCE IN CHINA

Quote

Written by Mr. Jian Xu, IP Expert and collaborator of the China IPR SME Helpdesk

Equivalence infringement, or the doctrine of equivalence, was officially introduced into Chinese patent law legislation in 2009, through the implementation of the Chinese Supreme Court’s judicial interpretation, which stated the following:

Equivalent features shall mean features which use identical means to achieve identical functions and realise identical effects, and which can be contemplated by people skilled in the art without creative effort.

The Chinese court has since developed a three-step method to determine equivalence infringement, which is conveniently referred to by the Chinese legal community as the “three (basically identical) plus one (obviousness)” approach.

Continue reading “A PRACTICAL OVERVIEW OF THE DOCTRINE OF EQUIVALENCE IN CHINA” »

EXTRAS FOR EXPERTS: HOW TO SECURE AND ENFORCE YOUR LEGAL RIGHTS IN THE FIRST-EVER DIGITAL CANTON FAIR

Quote

Written by Jamie Rowlands, IP Expert and collaborator of the China IPR SME Helpdesk

COVID-19 is rapidly changing the way we live as well as the way we do business. Therefore, the Canton Fair, China’s largest import and export fair, will unsurprisingly need to revolutionise how its 127th event is ran when it takes place in Guangzhou between 14th and 25th June. It will move the business from offline to online and will go completely digital for the first time.

This article looks at how a digital Canton Fair will work in practice and, more importantly, how it could impact the strategy for companies who might need to enforce their IP.

What is happening to the sellers and buyers?

Sellers

The sellers will have the capability to upload the introductions in advance including the pictures, descriptions and even the technology, etc., which the products apply to the trade platform.

With the AR technology, all-round 3D display for the products could be available. All the above information could be previewed by the attendees via the internet before the trade.

Buyers

As a buyer, it will be possible to access real time 24-hour live shows that display the products and allows real-time dialogue with the sellers. All the live shows can be played back at the convenience of the buyers.

The buyers will be able to access the Canton Fair online and easily find products they are interested in. They will be able to look around and negotiate deals as effectively as if they were physically at the Canton Fair, but without the crowds and queues.

Canton Fair has recently published step-by step instructions on its official website, which could be a useful reference.

What does this mean for IP protection?

Even though the Canton Fair has gone digital, the good news is that the organisers have introduced a virtual IP Complaints Centre where it will still be possible for IP owners to make complaints against infringing sellers. The detail of the virtual IP Complaints Centre can be found on the Canton Fair website.

The process of making a virtual complaint is broadly similar to the process that was used in previous physical Canton Fairs. But, obviously, there are also differences to consider – some that could be helpful for IP owners and some less so.

Potential positives

There are a number of potential positives.

Firstly, online searching. Products and sellers will be easily searchable online, which could make it easier and quicker to target products that may be relevant from an infringement perspective.

Secondly, online takedown. Complaints will, of course, be filed online and takedowns can, therefore, be completed rapidly once infringements are identified. It is a positive that Customs will also join the live stream and assist the trade fair online, which enable the Customs actions to be instant if necessary for IP protection.

Thirdly, all-weather surveillance. In addition, it should make it more difficult for sellers to hide the alleged infringing products “under the table” which, in our experience, happened relatively regularly. For example, it was not uncommon to patrol the Canton Fair on the first day and find none or very few infringing products, only to find on the second day there were many more infringing products on show because infringing sellers knew that the first day was when most of the foreign companies patrolled the Canton Fair. The transparency of an online virtual Canton Fair remove some obstacles of targeting alleged infringing products.

Possible challenges and counter measures

However, there are likely to be challenges at the same time.

Firstly, evidence preservation. In our view, one of the biggest difficulties in the virtual Canton Fair will be the evidence gathering.

Online trade leads to more uncertainty. Less physical evidence will undoubtedly cause complication to fix the evidence. In judicial practice, companies sometimes have difficulties bringing cases to court due to challenges in getting and preserving the substantial evidence. However, especially but not limited for the IPRs such as copyright, trademark and design patent, we are happy to help ease your burden by preserving evidence by doing the webpage notarization and time stamp certification, as well as notarised purchasing on your behalf.

Secondly, infringement identification. From the perspective of identifying infringement, infringement comparison would face challenges without having the physical products to support the complaint especially for patent infringement (including invention patents, utility models and design patent infringement).

This issue could be solved by applying the 3D-display in some degree when comparing the products with the design patent, trademark, copyright, etc. But when it comes to the invention patent and utility model, it is still questionable. Unlike the copyright, trademark and design patent, which mostly can be analysed using the pictures and text, invention patent and utility model shall be compared with the physical products in hand.

There is a possibility that once the IP protection receives the complaints from the right holder, it requires the sellers to send the physical products for comparison offline. However, we still need to wait and see the official detailed guidance.

Your IP enforcement strategy in the future

The world has suddenly changed due to COVID-19. It is predicted that the influence may last for several years and possibly much longer. This is very likely to quicken the pace of the development of digital trade more generally. The IP protection strategy needs to be adjusted accordingly to adapt to this shifting trend.

We have had very significant experience in assisting clients to protect their IP at the Canton Fair with great success. Therefore, we set out some helpful hints and tips below.

Before the Canton Fair: it is all about the preparation

  • Classify your IPRs. Identify your key IPRs and make sure they are registered in China.
  • Arrange your strategy in advance, i.e. to enforce your IP at the Canton Fair, or to use the fair as an opportunity to open a case as well as gathering evidence.
  • Prepare the documents. If you are going to enforce your IP, related documents should be prepared in advance, for example, certificate of registration, power of attorney, business license, etc.

During the Canton Fair: do not be hesitate to protect your IP

  • Make good use of the searching functions of the online Canton Fair. Pay attention to the products from previous infringers. This is a good opportunity to have an in-depth investigation.
  • Notarised purchasing or webpage notarisation can be carried out if you target an alleged infringer. Remember to download the record of the live show displaying the alleged infringing products and save the related information as evidence for further actions.
  • Check out the webpage for IP infringement complaints and learn how to effectively make a complaint. If the evidence gathering is completed, online complaints can be processed.
  • Don’t forget to assert your IP rights to the web visitor throughout the exhibition.

After the Canton Fair: follow up is critical

  • Follow up with the actions taken during the Canton Fair and the evidence gathering.
  • Check again if the infringer you targeted at the Canton Fair has stopped the infringement and keep monitoring if the sellers of similar products misuse your IP right.

Your corporate commercial solutions to the cross-border transaction

Do due diligence beforehand

  • Make sure that you do the due diligence on the potential business partners before each transaction. In previous years, when Canton Fairs took place offline, you were able to come and see, and have an intuitive understanding of the Chinese companies coming to the fair, including their staff and their actual products. They might even invite you to their factory or office where you could have a good look at what they could provide and how they are doing in their facility. However, this year, with the Canton Fair taking place online, buying through the online fair would be of no difference from buying on Alibaba or other B2B e-platforms, which makes doing your due diligence on your Chinese business partner much more important.

Be wary of potential fraud

  • As everything is happening virtually this year, it is very likely to attract fraud. If your “supplier” sends over their bank account information asking for payment for the goods, always double check with the contact person you deal with by phone before making any payment to re-confirm that the account information is indeed that of the supplier.
  • Contact your bank and call the police immediately if you think you have fallen for a scam.
  • You may also want to take good record of all documentation evidencing the transaction as a precaution, although this is a habit that you would need to have whether attending the fair online or offline.

Prepare for contract templates

  • Try to have a properly drafted contract or general terms and conditions attached to each order that you place, and ask the supplier to sign them when accepting the order. Although we understand that people in the business of international trade would prefer to have the legal documents as simple and straightforward as possible for proceeding with the transaction quickly, a properly drafted contract or terms and conditions, which does not necessarily need to be lengthy, will be worth the price when there is a dispute between you and the supplier.

This article was originally published on the website of the law firm Gowling WLG