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Intellectual Property in China


Intellectual property rights (“IP Rights”) are a key factor for the competitiveness of a business. Since Asia remains the first area of counterfeiting, IP Rights protection is a priority concern for investors willing to extend their activities therein.
 
One shall keep in mind that IP Rights are territorial, and that registration only provides protection within the countries where they are registered. As such, IP Rights are only enforceable in China upon valid registration with the relevant Chinese authorities. In addition, China applies a “first-to-file system” for the registration of IP Rights, meaning that the first registrant will hold those rights, regardless their original user.


COPYRIGHTS
 
Copyrights are legal rights created by the law of a jurisdiction, according to which the author of an original work is granted exclusive rights on the use of such work. They include “moral rights”, which are personal and cannot be waived, licensed or transferred; and “economical rights”, which give the author the exclusive right to exploit such work in consideration for economic gains, including the right to distribute, perform, and/or license the latter.
 
In China, copyrights are automatic and arise as soon as an original and reproducible work is created. There is no requirement to register them. However, their enforcement is made much easier when voluntary registration has been ensured. Copyrights registration is administered by the Copyright Protection Centre of China (“CPCC”). Upon acceptation of the application (after payment of the application fee), the CPCC takes around 30 days to complete examination. Thereafter, a Copyright Registration Certificate is issued. Applications must be filled in Chinese (Mandarin), and foreign entities having no presence in China shall appoint an agent to register on their behalf. There are no specific fees for maintaining a copyright registration. The period of protection lasts 50 years from the date of creation or publication of such work by a legal entity, and for all the lifetime of its author plus 50 years for individuals.


TRADEMARKS
 
Trademarks designate recognizable signs that legally distinguish one company's products and/or services from any others. Such signs may include symbols, words, devices, letters, numerals, logos, sounds, three-dimensional shapes or a combination of these.
 
In order to enjoy protection in China, trademarks must be registered either through the international or national system. The international registration system is available under the Madrid Protocol through the World Intellectual Property Organization (“WIPO”). Under such system, a trademark agent will file an application with the national trademark office of the home country of the applicant, which will then pass the application on to the WIPO. Upon examination of the latter, the WIPO will notify all the Madrid Protocol members (including China) in which the applicant wishes to be protected. If, within 18 months, no objection is made, the trademark will be registered (including in China). Under the national registration system, trademarks shall be registered with the China Trademark Office (“CTMO”). Applications must be filled in Chinese (Mandarin), and foreign entities having no presence in China shall appoint an agent to register on their behalf. Delays are more or less comparable with the timeframe for international trademark registration: around 4 months from application to examination, up to 9 months for examination by the CTMO, 3 months opposition delay from the publication date, and a few additional weeks for the issuance of a registration certificate (total around 17 months).
 
In China, trademark eligible for registration shall be (i) legal (i.e. not have discriminative or offensive content, not consist in exaggerated or fraudulent advertising, etc.), (ii) distinctive (i.e. the signs shall enable distinguishing the goods and/or services from those of another competitor), and (iii) not functional (i.e. the purpose of the design must be to fulfil an aesthetic role, not a functional role). Likewise other members of the WIPO, China classifies products and services into 45 classes, according to the Nice Classification. However, China further divides these classes into specific sub-classes. This unique China feature shall be strategically considered when applying for trademark registration. In addition, foreign companies are recommended to register 2 versions of their trademark: the original one, and a Chinese version, adopted specifically for the Chinese market. Choosing a Chinese equivalent trademark can rely on (i) literal translation, (ii) phonetic translation, or (iii) a combination of literal and phonetic translations. Registrations in Western alphabets and Chinese characters require 2 separate registrations, and therefore trigger additional costs. Trademark protection lasts 10 years from the date of registration and is indefinitely renewable, as long as the trademark is effectively used (trademarks which are not used for 3 consecutive years can be cancelled) and that registration fees are paid.


PATENTS
 
A patent designate the exclusive right granted to an inventor or assignee for a limited period of time, in exchange for detailed public disclosure of an invention. A patent is a negative right and prevents the use of an invention without the patent owner’s consent.
 
China protects 3 kinds of patents: inventions, utility models and designs. An invention patent is granted for new technical solutions or improvements to a product or process, as long as they are practicably applicable. In addition, to be patentable, an invention shall be new and shall not have been disclosed to the public. Utility model patents protect products with new shapes or structural physical features. Design patents protect the following external features of a product: its shape, pattern, color, or a combination of these.
 
There are 3 ways to file a patent in China: (i) directly with the State Intellectual Property Office of the People’s Republic of China (“SIPO”), (ii) first within a foreign country member of the Paris Convention, and by extension within China, or (iii) under the Patent Cooperation Treaty, selecting China as one of the designated states. In any case, patent owners willing to extend the protection of their invention in China shall apply to the SIPO. Applications before the SIPO must be filled in Chinese (Mandarin), and foreign entities having no presence in China shall appoint an agent to register on their behalf. Patent filing includes filing fees and annuity payments (during all the duration of the protection). Patent protection lasts 20 years for inventions and 10 years for utility models and designs.


ENFORCING IP RIGHTS IN CHINA
 
IP Rights registered in China can be enforced through 4 different procedures: (i) administrative procedure, (ii) customs seizure, (iii) civil litigation, and/or (iv) criminal prosecution.
 

  • In China, the following administrations are empowered to take actions against infringers: the Intellectual Property Office (“IPO”), the Administration of Industry and Commerce (“AIC), the Copyright Office, and the Administration for Quality Supervision Inspection and Quarantine (“QSIQ”). They are both entitled to: (a) organize raid action, seize and destroy counterfeiting goods, (b) order the infringer to desist, and (c) impose fines for infringements of registered trademarks or copyrights. Such administrative actions are quite fast and cost-effective. However, no compensation for damages can be awarded by those administrative bodies.
 
  • China General Administration of Customs (“GAC”) is empowered to confiscate infringing goods and impose fines on infringers. IP Rights holders moving goods in and out of China, are highly recommended to register their IP Rights with the GAC. It makes it easier for the GAC to enforce proceedings, either upon notification of infringing shipments, or spontaneously, seizing suspicious shipments. Recordal protection lasts 10 years, or the duration of the IP Rights’ protection (whichever is shorter).
 
  • Civil litigation enables IP Rights holder to seek the following remedies: injunctions, damages, delivery and/or destruction of the infringing goods. Such procedure is efficient, but time consuming and more burdensome than administrative actions. For evidence purposes, most documents shall be notarized (and legalized if coming from overseas). Maximum statutory damages may not cover the effective lost suffered by the IP Rights owner (even though their thresholds have been raised by the new China Trade Mark Law).
 
  • Criminal prosecution can be activated: (i) directly by the Public Security Bureau (“PSB”) upon report by an IP Right owner, (ii) upon transfer of a case from a Chinese administration, when IP Rights infringements reach certain thresholds, or (iii) upon filing of a private criminal lawsuit. Punishment can include fines and/or imprisonment.
 
October 2015

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