Brands looking to do business in a foreign market have a laundry list of items to check off when charting their entry. One of the more important items on the list is safeguarding the company’s intellectual property.
When it comes to IP strategies in China, an authoritative voice on the ever evolving topic is Dr. Paolo Beconcini, author of the book Rules of Engagement: Trademark Strategies, Protection and Enforcement in China.
Branding in Asia recently caught up with Dr. Beconcini at his office at Squire Patton Boggs in Beijing, to get his insight on navigating China’s changing IP legal landscape and how companies can best protect themselves.
Tell us about your book
The book is the result of a long period of reflection on my professional work. A few years ago I started to feel the need to write down and share with others my practical experience of trademark protection in China.
When I wrote the book I had in mind all those enterprises that cannot access high-quality legal advice and make informed business decisions about their IP rights because of little or no knowledge of how trademarks work in China. I also thought of all those western lawyers who, for the same lack of direct access to good, practical knowledge on China, have little or no possibility to make direct determinations on their clients’ trademark strategies in China. That is why the book has a business cut.
It is not the best system and it is surely less efficient and comprehensive than the IP systems in place in Europe and in the US. However, it has also been on a path of remarkable improvements in the last 10 years that make me look to the future with optimism.
I wanted to provide these readers with some insight that can be used practically, so that they can take a more active role when considering trademark strategies in China. That is also why the book does not care about politics per se and does not judge the law as good or bad, but takes it as it is and explains it to the readers. Hopefully they will find here some solid conceptual bases that can help right holders achieve successful trademark strategies based on their own goals and business models.
Your book talks about how a substantial responsibility for failure lies in the strategies pursued by brands and not with China’s enforcement authorities. Talk about that.
As I mentioned, the book was intended as a practical manual for sound business conduct in the legal environment in China as it is – a day to day business tool, if you like, for foreign rights holders and their lawyers.
The book is not criticizing nor absolving the Chinese IP system. We all know that there are shortcomings in that system, some of them very bad, as I think I openly point out in many places in the book.
At the same time, some basic errors have been made repeatedly by western companies in China in relation to trademarks, and that problem needed to be openly acknowledged as well.
The worrisome thing is that in the fashion or automotive sectors most fakes tend to be of an ever better quality and it becomes quite challenging to tell them apart from the original.
There is a tendency among some westerners to make a mistake and then criticize the Chinese legal system for it. For instance, a typical example in the case of trademark theft is to blame the ‘first to file’ system. In my view that’s preposterous. Once you have understood that China has a first to file system and that there are professional thieves who may steal your trademark, you can’t really blame anyone else for failing to prevent such an occurrence.
If you were to grade China on a scale of 1-10 for IP protection what would it be?
I have always thought that it’s not helpful to judge the Chinese IP system purely by comparing it to your own homeland or other similar western societies. It’s more instructive to look at the Chinese system in comparison with how it was structured before 2001, the year China entered the WTO.
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Enforcement should also be understood in the context of the particular political and administrative system of China, which has no parallel in Europe or in the USA. I have attempted in some parts of the book to put the trademark enforcement system in this broader context of the administrative structure of the Chinese State; it shows how complex this administrative structure is and how much the daily IP business is affected by such political dynamics among different governmental bodies.
It is not the best system and it is surely less efficient and comprehensive than the IP systems in place in Europe and in the US. However, it has also been on a path of remarkable improvements in the last 10 years that make me look to the future with optimism. For now I give the Chinese system a 5 for efficiency but an 8 for the ongoing efforts at improvement.
What are some cautionary tales for organizations considering doing business in the Chinese market?
All trademark challenges in China are born from business. Western companies must ensure they acquire the necessary knowledge of business conduct and legal protection, and try to become as clever as their Chinese counterparts. Most of all, it is secure when foreigners in China learn to play by the rules here, rather than seeking to impose their own ways on their Chinese counterparts.
A company that has invented something new and wants to produce it in China should first protect its trademark and patents in China before handing drawings and other know-how to the supplier. How many times have I seen young companies sink before even leaving the harbor because they had shared drawings for making prototypes in China only to find their products on sale everywhere for two thirds of the price!
We all know that there are shortcomings in that system, some of them very bad, as I think I openly point out in many places in the book. At the same time, some basic errors have been made repeatedly by western companies in China in relation to trademarks, and that problem needed to be openly acknowledged as well.
Registration of the necessary IP rights should take place from day one and China should always be included in the filing plans, even if the rights holder does not envision selling his product there. In fact, while fakes from China travel around the world, the best way to stop them is by attacking them in China. Also, when partnering with a local distributor or OEM, companies should conduct full background checks and not just trust word of mouth.
What about Chinese companies that are developing proprietary technology? Are they falling victim to IP violations themselves now in other markets?
If you look at statistics in China you’ll see that only a small percentage of IP litigation there involves foreigners. Most cases, both in the trademark and the patent field, involve Chinese parties. China has incentivized technical development as the way forward for the whole country and the foundation of its future well-being. Chinese companies have taken that seriously by filing trademarks and patents non-stop.
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Now, how much of these filings are original and new is questionable. A lot of the filings are indeed stolen or copied from others. Many may be western companies but many more are Chinese.
The same situation may not apply to infringement of trademarks for consumer goods, fashion, chemical and automotive products. Counterfeiting currently targets mostly foreign brands because they are sold both in China and abroad (most counterfeits are exported), while Chinese brands are not as well-known abroad yet.
Over the years some counterfeit goods in China have been downright comical in how blatant they were. Have any personal favorites?
I come across so many fakes in my life every day. The worrisome thing is that in the fashion or automotive sectors most fakes tend to be of an ever better quality and it becomes quite challenging to tell them apart from the original.
There are still funny cases where the fake is indeed very easy to spot. Most often this is when a famous brand is used on a totally unexpected product, like a car brand on sex toys, or when a luxury brand is used on a very bad quality product.
