The Canadian Trade Commissioner Service in China recommends that every company’s prospective China business plan include a strategy to protect its intellectual property (IP).

For those companies already operating in the Chinese market, it is never too late to review your IP strategy to ensure that it is keeping up with your innovations and market expansion and provides optimal protection of your core IP.

Is the Chinese IP protection system really functioning?

Effective protection and enforcement of intellectual property rights is critical for China’s successful transition to an innovation-driven economy and this has created a strong impetus for sustained progress in this area. China’s IP protection regime has developed rapidly since the country joined the World Trade Organization in 2001, and its laws are now generally in line with international standards. Significant improvements have also been made in the enforcement landscape through, for example, the establishment of specialized IP courts and tribunals in first and second tier cities. It is thus possible to enforce IP rights in China provided that they are properly registered or granted in China.

Nevertheless, foreign companies continue to express concerns with respect to bad-faith trademark registration, counterfeit products, and other types of infringements, all of which can have serious consequences on a company's ability to successfully use their IP as a source of competitive edge, whether it be in the form of technical solutions, innovative designs, brand recognition, or technical and management know-how.  In addition, enforcement proceedings can be lengthy, complex and costly, and local protectionism continues to limit the effectiveness of enforcement in certain regions.

Many of these challenges can be mitigated by developing an effective China-specific IP strategy based on knowledge of the Chinese IP regime, including its similarities and differences with the Canadian IP system.

What IP can be protected in China?

Trademarks, patents, copyrights, trade secrets (know-how), geographical indications, and plant breeders’ rights are all recognized forms of IP that can be protected under Chinese law.  

I have my IP protected in Canada, do I still need a separate IP strategy for China?

Intellectual property rights are jurisdictional rights. A Canadian patent, trademark or industrial design does not secure your corresponding rights in China. You should carefully consider registering your IP in China if you plan on doing business in China, including selling products over the Internet and/or manufacturing.

Registering IP in China can also be an effective way for Canadian companies to protect established markets and customers outside China by addressing potential IP infringements at the source. For example, a patent or trademark holder in China can register with China Customs so as to seize any infringing or counterfeit products and prevent them for making their way in third-country markets.

When do I need to start IP registration in China?

China applies a first-to-file principle on trademark registration. This means that the first entity to register a trademark in China will be granted ownership, regardless of prior use. This is a key difference between the Canadian and Chinese IP regimes that must be taken into account in a China-specific IP strategy.  

Canadian companies who do not promptly register their trademarks in China are vulnerable to having their brand registered by third parties operating in bad faith. This could be a squatter who is intent on selling the brand back to the Canadian company for a hefty price, or it could be a company that wants to make and sell products using the Canadian company’s brand recognition in China. Eventually, that same company could prevent the Canadian company from selling its own products in the Chinese market and even sue for trademark infringement. While recourse exists to deal with such situations, the quickest, safest and cheapest course of action is early registration.

Patents are granted on a first-to-file basis such that, all else being equal, whoever files first will obtain patent protection. After filing your first patent application for an invention, whether in Canada or elsewhere, you have a period of 12 months to file for protection of the same invention in other countries, including China.  After that period, the invention will no longer be considered new. It is therefore important to keep China in mind when filing the initial patent application.

Am I fully protected in China if my IP has been successfully registered in China?

Registration of IP in China, while essential to protecting one’s IP rights in China, may not be sufficient to deter infringement. Monitor the Chinese market and your existing export markets to ensure that copies of your products are not making their way to your clients.

Ensure good communication with your suppliers and maintain oversight of your distributors' activities. Make sure that you have clear contractual IP protection, including clauses on your ownership rights and use limitations, with your partner, distributor, licensee or employees. 

How do I enforce my rights if they are infringed in China?

As IP rights are private rights, it is up to the rights owner to take enforcement action. When Canadian companies encounter infringement, they should seriously consider enforcing their IP rights, based on a careful cost-benefit analysis. 

There are several ways to enforce your rights against unauthorized use of your IP in China. IP may be registered with the General Administration of Customs to prevent infringing products from being exported from China. Administrative enforcement can be a relatively fast and inexpensive course of action to stop infringing activities in straightforward cases. Civil litigation can be used, particularly when seeking damages from the infringer. China also provides IP remedies through criminal enforcement for commercial scale piracy and counterfeiting.

For more information on enforcement options in China, you may wish to refer to the Protecting your IP in China Guide developed by Canadian Intellectual Property Office.

Before taking any enforcement action, it is important to consult a qualified IP professional who is familiar with the legal system in China to explore the available enforcement options.

The Canadian Trade Commissioner Service in China has developed a list of Chinese, Canadian and international IP firms that can provide services in China or coordinate work with Chinese associates. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information.