IP Protection Strategies In China For Start-ups.

23 January, 2018

 

In today’s blog post we are taking a closer look at how start-ups, planning to set up their activities in China or have their products produced in China,  could best protect their IP rights. You will learn more about the importance of patent protection and trade mark protection and why these types of IP are essential for the start-ups.

 

For small start-ups the prospect of where to even start with an IP strategy can oftentimes be a daunting task as other concerns like building a good team, structuring the company, attracting investment and developing the product tend to take up all the time and attention of the business owners. At the same time, a robust IP Strategy is crucial for business’ success when planning to enter the lucrative market of China. Besides helping the start-ups to protect their innovations from competitors, IP assets can also be a significant pull-factor when attracting investors.

 

Protect your inventions with patents 

 

Patent protection in extremely important for start-ups as patents protect innovations, limit competition and help to defend against claims of infringement by other companies producing similar products. Furthermore, patents can attract investors, which is fundamental for start-ups. Thus it is important to apply for patent protection in China when planning to enter its market.

 

China has three types of patents: invention patents, utility model patents, and design patents. For hardware inventions, all three should be considered because each can help to protect your product in different ways.

 

An invention patent is granted for innovations in the field of technology that are new and inventive over the prior art (any information relating to the invention which has already been made public), and that possess practical applicability. A utility model patent is granted for new technical solutions relating to the shape and/or structure of an object. In general, the degree of invention required for a utility model patent is not as high as for invention patents and these patents are often used for upgrades.  A design patent is granted for original designs relating to the shape, pattern, colour or a combination of an object and it protects the ‘look’ – or cosmetic appeal – of a product.

 

Invention patents are protected for 20 years while utility models and design patents are protected for 10 years. The average duration of application/registration procedure is 3 to 5 years for invention patents while for utility/design patents it amounts to 1 year. In order to obtain enforceable protection rights as soon as possible, it is advisable to file a utility and invention patent application in parallel, and abandon the utility model patent once the invention patent has been issued.

 

Start-ups should keep in mind that patents are granted under the ‘first-to-file’ rule, meaning that timely patent protection in China for each and every innovation is absolutely crucial.

 

Don’t forget to protect your trade mark 

 

In start-up industry, competition is fierce and companies also invest considerably into branding in order to distinguish their products from the products of others. It would thus be devastating if someone else started to use a similar trade mark and benefit from the hard work of the original trade mark owner. Furthermore, it is particularly important to register trade marks in China because ‘bad-faith’ registrations is still a major problem in the country. Bad-faith registrations exist where a third party (not the legitimate owner of the mark) first registers the mark in China, thereby preventing the legitimate owner from registering it in the country. These unscrupulous companies would normally try to resell the trade mark back to its legitimate owner at an inflated price. It is also not uncommon that these trade mark hijackers try to sue the original brand owner for allegedly violating their registered trade mark rights in China. Forgetting to registering a trade mark in China could thus very easily end the start-ups’ business endeavor in China.

 

When registering a trade mark in China, SMEs should keep in mind that trade mark registration classes (according to Nice Classification) are further divided into sub-classes in China. It is important to register the trade mark for the correct class and subclasses. If sub-classes are not designated in the application, the China Trade Mark Office (CTMO) examiner will decide which subclasses registration the applicant will receive, which might not be the most desired one for the applicant. Furthermore, if an SME forgets to register in all of the relevant subclasses, unscrupulous companies may register the SME’s trade mark in these subclasses themselves.

 

As the registration of a trade mark in original Roman characters does not automatically protect the trade mark against the use or registration of the same or similar trade mark written in Chinese characters, it is highly advisable to additionally register a version of a trade mark also in Chinese characters.