While China’s IPR regime has improved over the years, counterfeiting and other IP infringements are still commonplace, making IP protection a priority when doing business in or with China. In order to demonstrate the importance of IP protection for European SMEs, the China IPR SME Helpdesk have provided two case studies involving European SMEs that were victims of IP infringement in China. The first case study demonstrates the importance of IP registration and IP regulation with contracts; the second shows how important it is to be informed of the details and nuances of China’s IP protection regime.    

Case study 1

SME background

Nationality:              Dutch

Industry:                   Producer of additives

Status in China:        WFOE

Case

A Dutch SME produces their additives in China under the name Roi Jaguar. Their general manager in China is tasked with making sure that the brand is protected in accordance with Chinese law. At one point the Chinese general manager leaves the company. Soon after he leaves, the Dutch SME discovers a very similar product on the Indian market called Roi Lynx. Both brands thus exist with the same word followed by the name of a species of big cat.

After some research, the Dutch SME finds out that after quitting the job its former general manager has started competing against it with very similar products. Also, after consulting the China IPR SME Helpdesk, the SME finds out the manager has registered the trademarks of the company in China in his own name instead of under the Dutch company in China.

The situation escalates due to some other related outstanding issues for which the former general manager still demands certain payments. The Dutch company refuses, so the former general manager goes to the local Authority of Industry and Commerce (AIC) and shows them the trademark certificate of Roi Jaguar, which results in the AIC confiscating the infringing products of the Dutch SME that carry the name Roi Jaguar. As the Chinese trademark registration is in the name of the former general manager, and the Dutch SME does not have the legal right to the name Roi Jaguar, the former general manager legally closes down the business of the Dutch SME with regard to the brand Roi Jaguar.

Action taken

The trademark registration carried out by the former general manager was done in bad-faith due to his existing relationship with the Dutch SME. The Dutch SME thus filed for a trademark cancellation as the trademark was registered in bad faith, and then subsequently applied for the trademark itself.

After first having filed the trademark cancellation, which temporarily stopped infringement of the Roi Jaguar trademark, the Dutch SME continued to produce the product, but under a different product name. Before the new product name was used, the company checked that there were no conflicting trademarks that had already been registered in China, with regard to additives for that new name. The Dutch SME then registered the wordmark, logo and the Chinese character name of the new product. Once the cancellation was concluded and the trademark was applied for in the Dutch SME’s name, the Dutch SME was able to put its products under the Roi Jaguar name back on the market.

Lessons learned

• Be on top of trademark registrations in China, and make sure the registration of the trademark is conducted in your own company name.
• Draft your contracts with care and with the assistance of legal professionals and translators to make sure that all terms, conditions and obligations are clear for both parties.

Case study 2

SME background

Nationality:              Spanish

Industry:                   Scientific research and development

Status in China:        Market entry

Case

A Spanish SME in the scientific research and development industry has patents on certain cutting edge surgical instruments, all around the world, including China. At an international exposition of surgical instruments the Spanish Company discovers a Chinese company advertising their patented products under the name of the Chinese company. The Spanish company obtains flyers and photos of the products. However, the Spanish company is also concerned that the Chinese company might have defensive utility model patents in place. Since utility model patents are approved quickly (usually within one year) and do not require an official examination of novelty, inventiveness and industrial applicability, this could potentially bar the Spanish company from entering the Chinese market.

Action taken

The flyers and photos of the products obtained by the Spanish company were not recognised as evidence under Chinese law. In China, potential evidence must be notarised by a Chinese notary public before it is recognised as official evidence. Therefore, the Spanish company hired a law firm and a Chinese notary public to facilitate this process.

The company first employed a patent attorney to make correct assessments on whether infringement actually occurred and on the patent portfolio of the Chinese company. This was necessary because Chinese companies often use defensive patents against foreign companies to scare them away from the Chinese market and from going through the financial burden of a patent infringement case.

If it were to go to a defensive patent case, the Chinese company would claim the original patents of the Spanish SME to be invalid and that the SME is therefore infringing upon the patents of the Chinese company, which are often utility model patents.

After conducting a patent search, it was revealed that the Chinese company indeed owns many utility model patents.

The Spanish company’s patent attorney will now need to carry out a patent assessment with regards to the infringement case after the notarised evidence is obtained. After obtaining the evidence, the Spanish company then has three options. The first would be to negotiate with the Chinese company to stop the infringement. The second would be to take administrative action through the local Intellectual Property Office where the infringer is located in order to raid the premises and confiscate and destroy the infringing goods and to penalise the company. The Spanish SME also has a third option of starting a court action against the Chinese company in order to obtain a long-term solution to the infringement.

Lessons learned

• Make sure evidence is notarised in China by a Chinese notary public.
• Assess a competitor’s patent portfolio before taking action.
• Assess whether or not a Chinese patent is infringed before you start any enforcement against a Chinese infringer.

The China IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to China, Hong Kong, Macao and Taiwan, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (question@china-iprhelpdesk.eu) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days.

The China IPR SME Helpdesk is co-funded by the European Union. To learn more about the China IPR SME Helpdesk and any aspect of intellectual property rights in China, please visit our online portal at http://www.ipr-hub.eu/.