Interview with our own IP Insider, Simon Cheetham: IP in China from an EU SME perspective

simon_cheethamIntroducing Simon

Simon Cheetham is the Team Leader of the China IPR SME Helpdesk. He is a China IPR Enforcement expert with over 30 years’ experience in commercial investigations, due diligence and IPR enforcement in China and internationally. He has lived and worked in China and South-East Asia for over 17 years.

He is also the Managing Director of ERINYES INTERNATIONAL LTD, a firm he founded to capitalize on his extensive experience of international investigations, loss prevention and enforcement work. He manages and directs the operations of the Company from Europe to the Far East. Simon began his career with the Hong Kong Police, where he was responsible for the detection and prosecution of a wide variety of crimes, including fraud and homicide.

We spoke to Simon about the conferences he has attended on our behalf recently, and the issues EU SMEs are most concerned about right now.

Which conferences have you attended recently?

After returning from the International Trademark Association Annual Conference in San Diego in May, where I met with some of our experts and other practitioners, I attended the EU-CHINA Days in Milan on 9-10 June. This was an Expo Milano 2015 event organised in collaboration with the EEN, EuroChambres and other organisations to facilitate informational presentations and B2B meetings between EU businesses and a delegation from Sichuan Province, China. Mrs. Li Dengju, Standing Member of CPC Sichuan Provincial Committee, spoke about the development of the Province which now accounts for around 25% of GDP in Western China and has become a communications hub for the region. Didier Herbert, Director DG Internal Market, Industry, Entrepreneurship and SME introduced and chaired panel presentations on EU-China business opportunities and EU support services; Didier Herbert oversaw the introduction of the China Helpdesk from its pilot phase in 2008 and has had a long term interest in the help and support we provide. Chris Cheung, Director of the EU SME Centre, was also there – the China Helpdesk works closely with the EU SME Centre as EU SMEs often need general business support in addition to advice on IP issues.

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From Milan I went straight to Brussels to attend the 3rd IPR Working Group meeting in the context of the EU-China Action Plan for discussions on “Efficient communication between Customs and businesses on IPR border enforcement”. This was an opportunity to mention IP border enforcement issues of concern to EU SMEs doing business in China and it was encouraging to hear from China Customs who are working to make IP border enforcement more accessible.

The following week I headed to Luxembourg to attend the 4th Greater Region Business Days event for both the China and South-East Asia Helpdesks. I and Brussels based colleague Ronan Breen, manned a booth in collaboration with the Mercosur Helpdesk and the EU SME Centre. This cross-sectoral trade fair brought together intermediaries and SMEs from the regions of Luxembourg, Wallonia, Rheinland-Pfaltz, Saarland and Lorraine (FR) over two days in Luxembourg city on 17-18 June. The event hosted workshops, panel discussions, stands and B2B meetings in the Luxexpo Centre just outside of the city centre of Luxembourg. I gave a presentation which covered the free services offered by the Helpdesks, included a short video and focused on some practical information and case studies. During the subsequent Q&A questions were raised which included specific interest in organising a technology transfer training event in Poland and a specific enquiry relating to live streaming technology and protecting newly developed software.

Later that week saw the official Brussels launch of the current phase of the China Helpdesk during which we linked by video conference with the team in Beijing. It is exciting to be working on a new phase, with continuity in terms of main services; but with a focus on service quality and innovative solutions.  There are some differences in management as we now have three implementing consortium partners – having added EBN for more visibility in Europe, but we continue to emphasize the “Know before you go” approach as we strive to raise awareness amongst the EU’s up and coming innovative SMEs.

A few days ago I also attended an event hosted at Lancaster University in the UK to deliver a presentation on managing intellectual property in China followed by Q&A and one on one consultations. The event was organised by the Lancaster China Catalyst Programme focusing on Business Support for International Innovation: Finance and IP Management in China.

Which IP questions were you asked the most frequently by SMEs at these conferences?

The range of questions was quite broad. There were those businesses that are interested in approaching the China market and would like an overall view of how they should go about doing that in a way that maximises the prospects to successfully make money from their innovative products or services. I spoke to them about identifying their key IP and registering what they can before approaching the China market. It is so important to register rights in China before entering into collaborative discussions or agreements as China is a first to file country and you don’t want someone else to run off with your creative idea or brand and register it first. Most SMEs in this position will need to rely on help from businesses in China so it is also important to take a step by step approach to collaborating with new business partners; use non-disclosure or confidentiality agreements at the outset and avoid issuing hasty blanket authorisations to produce samples or products, instead get a good agreement in place clearly defining how the business relationship will work and include clauses on IP, proprietary information and trade secrets.

Then there were those SMEs that were either already aware of the need to put a strategy in place regarding their IP in China, but were not sure how to do that in the context of their specific business; or those that were already doing business in China and had realised they didn’t have full control of their IP or felt their business was under threat in some way. Every business is different so each can develop a tailored strategy to make the most out of their unique concept and there is much that can be done for very little cost.

What I find particularly interesting is the impressive range of business ideas and innovative concepts that EU SMEs come up with – from where I stand there is no shortage of creativity in Europe!

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Why SMEs are concerned about coming to China (if this is the case)?

I guess in most cases they are concerned because of a combination of factors. It is daunting for a business to step into any new market but more so when the market is further away and the language, customs and culture are so different. So it is the challenge of the unknown compounded by the challenge of how to successfully make money from their innovative products or services that causes concern. It does not help if you get a distorted impression from stories of EU SMEs fairing badly in China; yes companies sometimes get it wrong but in most of the cases I have come across problems arise because businesses have not registered their IP in China or because they don’t have an IP strategy for China. Some SMEs are worried they will face counterfeiting problems yet if they register their IP they will be able to get help from government agencies and will find there is more support available than in most EU countries. Also there is the old adage that counterfeiting is a sign of success, in the sense that counterfeiters will only copy a successful product, and through our interconnected world EU SMEs are not immune from imitating or competing products from China even if they choose to avoid the China market.

Are SMEs aware of the importance of protecting their IP in China?

My impression is that EU SMEs are generally aware that China is different and challenging but what is often missing is an awareness of what IP is and why it is so important to own it and look after it. The point about IP is that every SME owns some – every business has customers lists, goodwill, the “know how” to make something or offer a service, a website, and they have all given names and perhaps logos for their companies too. Some of this is proprietary information which needs to be kept confidential because it would damage business competitiveness if disclosed, and some will be openly and widely used (the company’s logo for instance as a recognisable indication of a link to the company and the quality of its products or services). The two key points about China that EU SMEs are often not aware of are, first: that IP registered or owned in Europe is not registered in China until you file a registration there and China is a first to file jurisdiction. Second EU SMEs are often not aware that they should register a Chinese name for their company or brand name as a trademark in China. If EU SMEs do not register a Chinese trademark, the market will create a Chinese brand for the company (most people in China do not speak or read a European language), and when a third party then registers that brand for those products and/or services, the EU SME will be put in a difficult position.

Are SMEs aware that their IP can be protected and enforced in China?

There are certainly some EU SMEs that know this but they do seem to be in the minority. In a sense we are facing a double challenge as Europe strives to internationalise, on the one hand many SMEs do not seem to be aware that their IP can be protected in China and on the other hand there has been a strong push in China to motivate Chinese businesses to register their IP.  There can be no doubt Chinese entrepreneurs are getting more IP savvy, just look at the number of domestic registrations. Chinese businesses recognise the commercial value of registering their IP so EU SMEs that aim to do business in or with China without registering their IP are at a disadvantage. When it comes to enforcing IP rights China has a world-standard set of IP laws and in that respect is much the same as Europe or the USA. It also has the infrastructure in place to facilitate acting on those IP laws whether through a large and helpful administrative authority willing to act on simple counterfeiting cases or specialist IP courts capable of hearing more complex cases. Of course no one running an SME wants to have to divert time and effort to enforcing their IP rights, but if you need to, the resources are there. Ideally, through registering your IP in China and having a good IP strategy in place, most infringers will be deterred in the first place. But let’s not forget that registering IP is not just about protection, arguably the most lucrative reason is that once registered that IP becomes a valuable asset.

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Simon’s top 5 tips for SMEs coming to China:

  • Before you do anything register your IP in China! Apart from copyright, you only own your IP where you register it and you have to be the first file in China.
  • Register a Chinese trademark in China;  the market will create a Chinese brand for your products or services as most people in China do not speak or read a European language. Don’t leave it to someone else to come up with a Chinese version of your brand and register it before you!
  • Approach the market from a position of strength (i.e. after filing applications to register your IP) and use agreements and contracts enforceable in China to collaborate with companies in China – get expert help on drafting agreements and contracts as this is such an essential step and worth the investment.
  • “Know before you go” – there is no substitute for having a plan and strategy; some of the best success stories I have heard have been those businesses that have carefully thought out the type of business they want to do in China and the ideal partner to work with and have then set out a plan to accomplish their goals. Avoid short cuts – if it is worth doing then it is worth doing right!
  • Last but not least, contact the China Helpdesk for free advice on how to do the above!

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