Protection plus

Foreign and Chinese firms robustly protect their intellectual property rights

Righting the wrongs of patent rights

Improved grounds for IPR in China aid foreign, local firms

Protecting intellectual property rights has been the single biggest hurdle for most companies to overcome when entering the Chinese market. But as the number of IPR cases being filed, including against Western companies, is growing steadily in China, it shows that the world's second-largest economy is becoming more serious about protecting valuable ideas. Protection plus

The growing number of foreign companies appearing in the Chinese courts for IPR violations are also a clear indication that China is making rapid strides up the innovation ladder. With more patent filings than any Western nation, China is no longer just a factory, but rather a destination where ideas are given shape and incubated into successful global enterprises.

Rising domestic IPR awareness, the influence of foreign companies tightening their IPR framework, or even suggestions that they have been exploiting loopholes are often cited by experts for the tightening of the IPR system in China.

According to the Supreme People's Court, judges nationwide announced verdicts in 24,544 IPR cases during the first five months of this year, with 2 percent, or 504 lawsuits, involving overseas litigants. Most of the overseas litigants were from the United States, European countries and Japan, says Kong Xiangjun, president of the top court's intellectual property tribunal.

Fierce competition, as well as a tendency for trade protectionism in certain countries, have led to a remarkable increase in cross-border IPR conflicts, he says, adding that most of the IPR lawsuits involving overseas companies concern infringement of trademarks, patents or copyrights.

Rising awareness of IPR protection among IT companies, and intensified efforts of judicial departments to combat copyright infringement have also contributed to the high incidence of such cases, Kong says.

Multinational giants such as Microsoft, Apple, General Electric, Abbott Laboratories, Michelin, BMW and Honda are among the big ticket IPR litigants in China in recent years.

Increasing number of recent cases have put foreign companies in the defendant's seat.

Protection plus

French company Schneider Electric paid $23 million compensation to the Zhejiang-based Chint Group in 2009 for infringing the latter's patent on electrical apparatus technology.

In 2009, French electrical company Schneider Electric agreed to pay $23 million (17 million euros) to the Zhejiang-based Chint Group as settlement to end a three-year patent lawsuit. The French company was accused of violating Chint's rights by selling five models of apparatus, which fell within the protected scope of Chint's patent rights.

Chint's success spurred several Chinese enterprises to pay closer attention to IPR protection and use legal actions for protection.

Tech giant Apple Inc was the focal point of several IPR disputes last year. In the first instance, a Shenzhen court found the US company guilty of violating the iPad trademark in the Chinese market. The trademark was registered by a local company Proview Technology and Apple was forced to pay $60 million to get control.

The second case involving Apple was brought up by Shanghai-based Zhizhen Network Technology Co, which accused the California-based company of infringing its patent for Xiao i Robot, claiming it was used in Apple's intelligent digital assistant Siri.

At the second hearing of the case earlier this month, Apple rejected Zhizhen's accusation and refused to compare the two technologies for appraisal, saying the results would be pending on the State Intellectual Property Office's decision on its application for invalidation of Xiao i Robot's patent.

Chen from Jones Day feels that the implementation of the "national intellectual property strategy" since 2006 has been the main reason why foreign companies are facing many IPR challenges in China.

"The government has provided policy support in areas such as fiscal incentives and tax reduction to encourage patent filings, and this has led to double-digit growth in patent applications over the past seven years," he says.

According to the State Intellectual Property Office, China received more than 1 million patent applications in the first half of this year, up 18 percent year-on-year.

China also awarded the most patents last year, even more than the combined amount filed by the next four nations, Chen says.

Protection plus

Protection plus

"Though there are many reasons for foreign companies being charged with IPR violations in China, in reality it has more to do with the fast changing global economic landscape," says Tony Chen, a Shanghai-based patent lawyer working with American law firm Jones Day.

"China's laws are fine. It's not just a question of the laws. A lot of times it's a question of implementation, not just by the Chinese government, but by companies that are doing business in China," says Dan Harris, founding member of Asia-focused commercial law firm, Harris & Moure.

"Every April, national and local governments put out new reports of double-digit patent filing growth over the past year. Does this mean China's innovation activities surpass the combined activities in the next four countries?"

Regardless of their correlation to innovation, more patent rights also mean more reasons to sue competitors. The Chinese patent office issued more than 1 million patents in 2012, most to domestic parties.

Most of the IPR lawsuits are generally a result of rising awareness by Chinese companies of IPR protection, and Chinese IPR owners have also learned from examples in the US about going after companies with deep pockets, Chen says.

Dan Harris, founding member of Asia-focused commercial law firm, Harris & Moure, based in Seattle, says Chinese courts are starting to get tougher on IPR violations, and while that is a good thing, particularly with respect to trademarks, the courts also need to be tougher in enforcing them.

"A lot of times foreign companies complain about IPR in China, when in reality it was the foreign company that made the mistake when it went to China of not sufficiently protecting its rights."

Harris says China is a lot better now compared with a decade ago, because the country is getting wealthier, and because Chinese companies are starting to become more conscious about IPR. [Full story]

Major IPR disputes in China

Apple Inc vs. Shenzhen Proview Technology

In December 2012, Shenzhen Proview Technology, a small company on the edge of bankruptcy, sued Apple for using the iPad trademark in China. The Shenzhen company said it had got patent protection for the trademark in 2000. Apple later agreed to pay $60 million (45 million euros) to end the case. Protection plus

Michael Jordan vs. Qiaodan Sports Co

In February 2012, NBA star Michael Jordan filed a lawsuit for wrongful use of his name in China, and accused Qiaodan Sports Co of profiting illegally by using his name on its marketing materials and products. "Qiaodan" is the Chinese translation for "Jordan" and has been used by the Fujian-based company since it registered the name in 2000. Qiaodan Sports has countersued Jordan for damaging its reputation. No court decision has been made yet.

Starbucks Corp vs. Shanghai Starbucks Cafe Co

In 2004, Starbucks Corp and Shanghai Unified Starbucks Corporation considered Shanghai Xingbake Cafe Co's use of the Chinese and English name of Starbucks as infringement of their trademarks and unfair competition, and sued the company in court. The local company was ordered to stop using the name Starbucks and pay 500,000 yuan ($81,650; 61,000 euros) to Starbucks and its Chinese partner.

Protection plus

Chanel Co vs. Beijing Silk Market

In September 2005, Chanel Co took action against Xiushui Company, accusing it of selling fake purses and urging it to take measures to prohibit trademark infringements. The court judged that the market should stop infringement immediately and compensate Chanel for economic losses and other reasonable expenditure incurred in the litigation.

[Read more]

'Apple took a bite without approval'

Protection plus

Chinese company takes tech giant to court for IPR infringement

Though no verdict has been handed down as yet in its action against Apple Inc, Zhizhen Network Technology Co believes that Chinese companies can effectively use the existing legal channels in China to protect and safeguard their intellectual property rights.

The Shanghai-based company was in the news recently after it took the US tech giant to court for alleged patent infringement. Zhizhen said Apple's popular Siri application, or intelligent digital assistant, installed in iPhones, iPads and iMacs, infringes on its patents for the voice-controlled assistant, Xiao i Robot. The virtual assistant is mostly used in smartphones, televisions, cars, Web browsers and even in call centers.

Yuan Hui, chairman and chief executive of Zhizhen, says that by taking on a formidable opponent like Apple, it knew it was opening a can of worms.

"Many people thought that we were taking on Apple just to earn a name for ourselves and our products, but it is really an effort to safeguard our valuable IPR and not for a fast buck," he says.

"Shameless and self-hype were the comments used by several Apple fans to describe us on social networking sites, while some others who supported us called us the 'David who challenged Goliath'. These comments have not really swayed us in any way and we are determined to protect what is rightfully ours," Yuan says while talking to China Daily in his simple but spacious office at a high-tech park in west Shanghai. [Full story]

Related readings

US companies seek tougher enforcement of IP laws

More foreign companies involved in IPR cases

Li stresses importance of innovation, IPR protection

SPP calls for cooperation on IPR cases

Apple in court over alleged IPR infringement

China's IPR lawmaking, enforcement making progress

Two views

Riding the crest of a boom

BY Giles Chancea [A visiting professor at the Guanghua School of Management, Peking University]

Chinese legal system and courts are doing a commendable job in protecting intellectual property rights

With the Chinese government starting a nationwide effort to strengthen IPR protection through the legal system and the Chinese courts, it is boom time for intellectual property rights in China.

Protection plus

Last year, the number of civil IPR cases that were received by the courts in China rose by 46 percent year-on-year, to 87,419. The growth has continued at an even faster rate this year. More than 80 percent of the IPR cases heard in 2012 in China were copyright and trademark cases. Disputes over patents, unfair competition and technology agreements made up the rest. More than 2 percent of the cases heard involved non-mainland litigants, a substantial increase from previous years.

There are two main reasons to explain the sudden increase in foreign participation in IPR cases heard by the Chinese courts.

The first and most obvious is the increasing involvement in China of all kinds of manufacturing and service companies from around the world. Many foreign companies, particularly in the United States, have held back from selling or manufacturing in the Chinese market for reasons of cost, as well as for fear that their products will be pirated in China. These companies fear that Chinese competitors will not just take their Chinese market away from them, but eventually their home market as well. They feel that they have no choice but to come and compete in the Chinese market, which is often one of the largest in the world for their products. [Read more]

Toward a better IPR regime

BY Yang Jing [a researcher with the Beijing Intellectual Property Society]

Despite remarkable achievements, China needs tougher measures for protection of high-tech intellectual property rights

No matter which way foreign investment enterprises obtain intellectual property rights, it has always been a topic that generates heated discussions all over the world.

It is easy to understand the IPR misgivings of developed countries as they are gradually losing their competitive advantage in labor-intensive products and services. On the other hand, they have managed to retain and strengthen their competitive advantage in high-tech products and services. It is this advantage that is now being closely linked to protection of intellectual property rights.

The unscrupulous activities of some Chinese companies on the IPR front had in the past proved to be a major concern for several US and European firms. Commercial counterfeiting, copyright and industrial design infringement and other intellectual property infringement had impaired the competitive advantage enjoyed by nations like Germany in invention and innovation.

According to a survey conducted by Georg-August-University of Goettingen, in 2012, the losses incurred by German companies due to all types of IPR violations from China were between 7.6 billion euros and 11.6 billion euros.

Fiercer international competition and the rise of protectionism in the US and Europe has also led to an increase in the number of IPR lawsuits against Chinese companies in the first five months of the year.

Of the 24,544 IPR lawsuits, about 504 were foreign-related IPR cases, according to data provided by the Supreme People's Court of China.

[Read more]