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Why seek IP Protection in China?

March 29, 2012

Despite the fact that China has made notable developments in the last decade, many people remain uncertain about the need to seek IP protection in China, and may have various concerns over getting IP protection in such a remote and developing country.

The following aims to give an insight as to why it can be beneficial to seek IP protection in China and may be strongly advisable for your business, and also to address various concerns one may have when considering IP registration and enforcement in China.

Obtaining a monopoly in a vast and growing market.

With the largest population and the second largest economy in the world, China should be seriously considered if a company wishes to expand its business internationally. China’s population is roughly four times that of the US and three times that of Europe. Thanks to rapid economic development, China has enjoyed an increasing average wage which was 10% of the world’s average in 1978 and had increased to 30% by 2007. The minimum wage in China has increased by 12.5% annually between 2006 and 2012. It is not therefore surprising that China is one of the top 10 countries in sales for most industries, and that there are 470 Fortune 500 companies with Chinese branches. With IP registration in China, one can have monopolies in this vast and growing market. No matter whether you wish to enter this market yourself or to license your technology or trademarks to others operating there, it is essential to first have your IP registered. Without IP protection in China, one is most likely to surrender this huge and profitable market to competitors and counterfeiters. Despite its enormous size, the Chinese economy is still growing rapidly and is expected to continue to do so for the foreseeable future. With GDP increasing at an average annual rate of 8% over the last decade China has already over taken Japan as the second largest economy in the world. It is predicted to over take the US as the largest economy in about 20 years. Given the momentum of economic growth in China, a Chinese patent is more likely to increase in value than an equivalent patent registered in most other jurisdictions over a patent’s lifetime, which is generally up to twenty years.

Registering IP in China to rule out competitors and deter counterfeits.

With enormous manufacturing capacities, low manufacturing costs, a large, well-educated workforce and a stable government, China has been considered by many industries as a desirable place for manufacturing. From heavy machinery to household products, no matter what your company makes, you are likely to find competitors with a manufacturing base in China or who are planning to set up a manufacturing base there. China has also been catching up on research and development (‘R&D’). In 2011 China was second only to the US in terms of total R&D investment and was second only to India in terms of R&D investment attracted from foreign countries. China has just overtaken Japan as having the largest number of patent applications from resident applicants, i.e. Chinese companies or individuals, with almost 300,000 applications being filed each year. China’s global image is undergoing a transition from “Made in China” to “Designed in China”. It is therefore strategically important to register your IP in China for both your competitive advantage in the Chinese market and for reducing the possibility of competitors exporting products made and designed in China to other countries. There is good potential for licensing and cross-licensing your IP with your competitors or business partners in China. Admittedly, China is also a country in which counterfeit goods can be easily made and sold and misappropriation of many forms of IP is commonplace. Fewer and fewer foreign companies are now surprised to find a China-produced counterfeit. It is strongly recommended that businesses have formal legal protection of IP rights, such as patents, trademarks and designs, well in place before entering the Chinese market.

Issues you may want to know when considering IP registration and enforcement in China.

Over the last 20 years China has developed mature IP laws generally in line with international standards. In 2010 China had over 10 times more copyright litigation cases and well over 3 times more patent and trademark litigation cases than the US. Although generally criticised for its prevalent IP violations, China has improved over the past ten years. Companies can take steps to enforce intellectual property rights in China using court proceedings and administrative procedures through provisional IP offices. Statistics show that in IP lawsuits between Chinese and foreign companies, foreign companies won seventy percent of cases. This is partially due to the fact that foreign companies are generally more experienced in IP litigation and are more willing to spend money in seeking and enforcing IP rights. The cost of obtaining a granted patent registration in China is generally comparable with registration costs in many other countries. Translation may take up a large proportion of the costs of issuing proceedings. This is balanced by relatively low attorney fee (typically around $150/hour compared to $300-450/hour in the UK) in the prosecution stage. Patent renewal fees over 20 years for a Chinese patent are about £8,000, in comparison with £11,000 for a German patent, £4550 for a UK patent, and around £6000 - £9000 for a US patent. Swindell and Pearson Ltd are experienced in Chinese patent prosecution and Chinese trademark registration and are always ready to help you obtain high quality Chinese IP protection. We have long term working relationships with reputable Chinese patent and trademark agents. Our patent attorney and associate Charles Huang is a native Mandarin speaker who pays regular visits to China and keeps abreast with the most recent developments in Chinese patent law. Please contact Charles Huang for more details [email protected] or your usual contact at Swindell & Pearson Ltd.

Swindell & Pearson has been helping businesses and individuals protect and defend their ideas, innovations and brands for over 130 years. With its head office in Derby, the firm also has offices in Stoke, Wolverhampton, Stafford, Sheffield and Burton. To find out how Swindell & Pearson can help you with any intellectual property requirements please get in touch via [email protected] or by telephone on 01332 367 051.