It isn’t just products that need to have IP protection, when exporting ideas it’s also key that the IP of those ideas is protected too
Ideas and designs are the lifeblood of innovative and creative businesses and infringement can be particularly costly and damaging. Because ideas and designs that are not adequately protected can fall victim to infringement by potential Chinese clients and competitors, European businesses are sometimes reluctant to enter the China market and build relationships there. However, by effectively using the Chinese IP system and taking a few key steps, you can protect your company’s IP and foster successful partnerships.
There are three key IP issues often faced China by businesses working in creative industry sectors such as architectural and product design, graphic design, web-design, photography and cinematography and writing, etc. These are copyright, design patents and trade secrets.
As in Europe, copyright in China is automatically awarded upon the creation of a copyrightable work. Copyrightable works include: architectural or engineering drawings, works of fine art, applied art, literary works, music or sound recordings, dramatic or cinematic works, software, etc. It is important to remember that copyright protects only the expression of an idea, not the idea itself.
Once the work is created, in most cases, the creator will automatically enjoy copyright protection in all 164 member countries of the Berne Convention for the Protection of Literary and Artistic Works, including China. China also allows you to voluntarily register your copyright. Copyright registration is presumptive evidence of ownership if you wish to enforce your copyright and greatly reduces the preparation of evidence when there is a dispute. Copyright registration in China is inexpensive, easy, and generally recommended. For copyrights that are particularly important to the livelihood of the business it is strongly advised to do this.
A copyright of a work belongs to its creator, or the employer of the author. Protected creative acts include those intellectual activities that directly result in the creation of the work. Acts of support such as rendering services or material or financial resources are not considered creative acts however. For example, if an SME provides only managerial support to the creation of a work, it will not be considered the work’s author.
A few simple preventative steps means your creative work can be adequately protected in China
If it is expected that the copyright will be licensed, transferred, or used as an in-kind contribution to registered capital for the establishment of a legal entity in China, then copyright ownership must be clearly determined. Without evidence to the contrary, the person or entity whose name appears on the work is considered its author.
With regard to commissioned works, without an agreement which states otherwise, the copyright of the work belongs to the commissioned party. This means that if a third party is commissioned to create a work, then the copyright belongs to that third party, unless otherwise stated in a relevant contract.
In all other cases, the employee owns the copyright to the service work. However, the contracting business will enjoy preferential rights such as preventing the employee for a period of two years from licensing the work to a third party without consent, or if consent is given, obtaining an agreed share of the licensing fee. Employment contracts should clearly address who owns the copyright to works created by employees and provide, where desired, that copyrights to works created by employees be assigned to the employer in exchange for compensation. In addition to using copyright as a form of protection, it is equally important to make sure you do not infringe upon another’s copyright. This can easily happen when, for example, you use someone else’s photograph from the internet without permission in your project proposal.
A design patent protects the aesthetic features such as the shape, pattern and colour of industrial products. To receive protection for this, the design must be registered as a design patent, and designs registered in a foreign country do not enjoy protection in China. To qualify for protection, a design cannot be pre-existing and must be sufficiently distinguishable from other designs. Currently, it takes approximately 9 months to 1 year to obtain a design patent in China. A design patent gives you the exclusive right to use or allow others to use your design in China for 10 years.
You need to keep your design secret and ensure that it is safe until you have applied for a design patent in China. If you disclose your design anywhere in the world (in any way) before you apply for a design patent in China, you will be ineligible for protection in China.
In China, a trade secret is any non-public information of commercial value that is treated as confidential. Trade secrets include undisclosed designs, project proposals, price lists, contractual terms, business operational methods, contact lists, internal emails, business strategy or initiatives, etc. However, trade secrets protection is lost as soon as the information becomes public. Measures to ensure confidentiality include the use of confidentiality agreements, non-disclosure agreements, the use of passwords and the marking of documents as confidential, etc.
Prevention is the key to protecting trade secrets. Although legal action is available, it is often difficult and not always feasible to prevent the dissemination of sensitive information once it has been disclosed. It is a good practice to periodically catalogue what potentially valuable trade secrets you may have so that proper precautions can be taken.
Most cases involving the theft of trade secrets involve former employees or potential clients. It is important that all employees sign an agreement with non-disclosure provisions and, if necessary, non-compete provisions. It is also important that you limit access to valuable information to only those employees who need to know it, and to conduct exit interviews.
It is also a good practice to insist that third parties, including potential clients or suppliers, sign a confidentiality agreement before you start negotiations or transfer documents. Sometimes, a potential client may refuse to sign these agreements because they consider such a request “hostile”. Nevertheless, t is recommended that companies insist on an NDA, as not using an NDA will qualify your documents as non-trade secrets, since you will not have protected your confidential information in accordance with Chinese law.
Preventative Measures for the Protection of IP
Although there are effective legal and administrative remedies for IP infringement in China, cost-effective protection of creative ideas in China generally requires a combination of knowledge, prevention and business skill. Preventative strategies for the protection of IP include:
- Registration of IP
- Contractual protection
- Preventative operating measures
Your IP is most protected when properly registered. Design patents, invention patents, utility models, and trademarks must all be registered for them to be protected in China. Although copyrights do not need to be registered, registration is useful in the event you need to enforce your copyright. It is important to have a plan in place to determine which IP you will register and to take proper measures for that which you don’t.
In addition to, or in lieu of, registered IP rights, you can protect your IP by ensuring that contracts clearly stipulate the ownership of the IP and contain proper confidentiality provisions. However, contractual protection is only available once negotiations have matured to a point where a contract can be negotiated. In lieu of a full contract, insist on having a confidentiality agreement before negotiations start or documents are transferred.
Though seemingly daunting, a few simple preventative steps and the appropriate registration of rights means your creative work can be adequately protected in China. Remember these key points:
- Use preventative measures: don’t wait to take action. Most of the steps described above should be taken before entering the Chinese market. If you wait until a problem arises, there is a chance that it will already be too late to take action.
- Use the system: register your IP in China. China has a robust, effective IP enforcement system. Registered IP should include copyrights and design patents, as well as others such as invention patents and trademarks.
- Use contracts: protect your business from the inside out. Include contracts and agreements with all involved parties, including employees, partners and clients.