IPR Protection In China’s Textile Industry.

7 December, 2017

 

Two weeks ago we were discussing IP protection in South-East Asia’s textile industry, in today’s blog post we are taking a closer look at the IP protection in China’s textile industry, which is still offering many promising business opportunities to European Businesses. The blog post will offer advice to textile producers, to the producers of yarns and fabrics as well as to the producers of textile machinery. In this blog post you can get further information on trade mark, patent, copyright and trade secret protection. 

 

China’s textile industry is both an opportunity and threat to European businesses. It is a major market for those supplying production technologies and a key supply base for textiles and finished goods. However, foreign technologies and brands that are not adequately protected often fall victim to infringement by Chinese competitors. This article addresses IP issues across subsectors of the textile industry, including textile machinery, yarns and specialty fabrics, finished fabrics and brand apparel & accessories. The areas of IP most relevant to the above sectors will be discussed, as well as smaller IP issues specifically affecting makers of brand apparel & accessories.

 

Trade Marks Protect Your Brand

 

Trade marks provide protection against use of identical or similar marks on similar goods. China uses the ‘first-to-file’ system, meaning that companies may lose legal protection in China and take the risk of infringing others’ trademark if the same or similar mark has already been registered in China by someone else. It currently takes two-three years from application to registration of a trademark in China, providing no opposition is filed against the application upon publication.

 

Because China uses the ‘first-to-file’ system, it is common for unscrupulous parties to register other’s trade marks first. It can be a difficult and expensive process to cancel, oppose or buy back a trademark that has already been registered. It is not uncommon that import agents or distributors register trade marks on behalf of the principal. It is recommended that the trademark is either registered in the name of the principal or transferred back to the principal to avoid later disputes. In addition to registering the trademark in the original language, it is advisable to register a distinctive Chinese language trademark, even if this is not the primary mark used. Without a well-promoted Chinese mark, the market may create a Chinese nickname for a product, and this nickname may be registered by unscrupulous parties to exploit the reputation of your brand.

 

Trade marks should be registered even if SMEs are manufacturing but not selling in China. China is a first-to-file jurisdiction; therefore, producers of yarns and fabrics who own valuable brand names are recommended to register names and/or logos as trade marks in China as soon as possible to protect their trademark. The process of cancelling, opposing or buying back a trademark is often a more difficult and costlier than simply registering the trademark.

 

Furthermore, a distinctive fabric design may be protected as a trademark if it has become distinctive through long use (for example, the “Burberry” check design is a registered trademark in China). However, such examples are rare and protection of patterns as a trademark is uncommon.

 

Patents Protect Fabrics and Textile Machinery

 

Patents must be registered in China; a patent registered overseas is not enforceable in China. China applies an “absolute novelty” standard for patents, meaning that the patented product or invention should not have been disclosed anywhere in the world before the patent registration application, subject to 12 months “Convention Priority” in certain countries. Patents may be filed directly in China or through the Patent Cooperation Treaty system. It may take approximately 24-36 months for an invention patent application to be examined and up to five years to be granted.

 

In addition to patents for inventions, China recognises utility model and design patents. These types of patents do not undergo a substantial examination, and as long as they are filed in the correct form, they are issued automatically. Utility models cover minor innovations, which may not be sufficiently inventive to receive invention patent protection. They are usually granted within 12 months of application and last for ten years. 

 

Design patents cover the exterior, ornamental design of products. Like utility models, they are also granted  within eight to ten months and last for ten years. It should be noted that the process of protecting designs in China is different from that of Europe, where designs are covered by design rights. In China, designs are best protected by design patents and in some cases, by copyrights.

 

Patents are only valid in the countries that they are registered in, and only patents registered in China are enforceable. Companies that manufacture textile machinery apply for patent protection in China not only because China is a market to sell machinery but also to defend against potential infringers who manufacture infringed technology that is exported to other markets outside China. Competitors often copy the design and shape of the machinery and its components and mislead customers to believe that the machinery has the same functions or quality as the original, often resulting in losses in sales for the original European manufacturer.

 

Producers of specialty yarns and fabrics should ensure that any patents obtained for their products are also filed in China to defend against Chinese competitors who may copy the technology and export it to other countries. Where possible, producers may carry out different processes in different locations to reduce the possibility of the whole process being disclosed. Furthermore, suppliers of yarns and specialty fabrics should ensure that their license contract terms are clear when determining the use of trade marks and patents by end‐users, and be vigilant against infringement by competing suppliers and end‐users of branded textiles who may falsely claim that their products incorporate the branded materials.

 

The pattern of apparels can be protected through design patents. Since 1 October 2009, the Chinese Patent Law has enabled designers to register two or more similar designs (up to ten) for the same product within one application. However, these applications are not available for different designs, making them unfeasible for designers that have a very large turnover of new designs. Furthermore, design patent applications may take 8-12 months to be granted protection, which is often too long to protect fast-moving seasonal designs. The advantage of a design patent is that it is relatively easy to enforce, and simply owning a design patent may be enough to deter others from infringing SMEs’ designs.

 

Use Copyright to Protect Technical Manuals

 

Copyrights are granted automatically, although China does allow voluntary registration. Copyright registration will be accepted as evidence of copyright ownership in the event that you wish to enforce your copyright against an infringer and greatly reduces the preparation of evidence. Administrative enforcement of copyright is possible through the National Copyright Administration, although the local administrative authorities tend to focus on enforcement of pirated software and media products. Where the infringement is not literal (i.e., not an exact copy), it is more suitable to bring cases to the People’s Court. If the copyright is not registered, it is important to keep dated records of the first creation of the work so that the date of creation and ownership of the copyright can be proven.

 

A critical component in textile manufacturing technology may be operating software and technical manuals to operate and/or maintain machinery. Such materials are automatically protected in China as works of copyright. However, it is recommended that companies register the copyright to prove ownership in case of infringement.

 

In some cases where machinery has been copied by a competitor through reverse engineering and it is not protected by invention, utility or design patents, the only recourse that the original manufacturer may have is to claim copyright infringement of software or operating manuals. This only addresses the copying of the software and manuals but does not protect the design of the machinery itself.

 

Apparel designs may also be protected as works of copyright. Copyright protection is granted automatically on creation of a work, allowing a design to enjoy double protection through a design patent and copyright. Having a registered copyright in China is a convenient way to show evidence of ownership. You can also record a series of works under one copyright application, for example, all the same designs in one season. However, it should be noted that copyright can be more complicated to enforce compared to a design patent. Therefore, the fact that no registration process is required to enjoy copyright protection should be balanced against a greater cost of actually enforcing the right if infringed, compared to a design patent.

 

Sometimes It’s Best to Keep It a Trade Secret

 

In some cases, products or processes are protected as trade secrets instead of patents. Some companies may even prefer to protect their product or their processes as trade secrets (or a combination of patents and trade secrets). Trade secret protection is particularly common for processes, making it difficult or impossible for a competitor to discover the process through reverse engineering.

 

China defines a trade secret as valuable information that is not publicly known, and the owner has taken steps to keep it secret. The owner of the secret must take his/her own measures to keep the information secret. Trade secrets are only violated when another party has taken information that was explicitly kept confidential.

 

It is important to note that reverse engineering (i.e., disassembling a machine or product to learn how it is made) is a common practice in China. Only a product or process granted with a patent may be protected from reverse engineering. Should a competitor discover the secret information through his/her own reverse engineering efforts, it is not considered an act of infringement. Trade secrets are often lost by owners failing to isolate the secret information. In many cases, it is the owner’s employees who pass the information to others.

 

Therefore, companies with trade secrets should pay particular attention to protecting trade secrets within the organisation and ensure that there is a clear process in place. In the event that information is leaked, having records of the measures taken in order to protect the trade secret is important in providing concrete evidence that the information was intended to be confidential. Therefore, in order to preserve a trade secret, the owner should identify exactly what information constitutes the “secret” and take steps to isolate it. Within the organisation, there may be physical barriers such as passwords or contractual barriers such as strict confidentiality clauses in contracts for employees or any licensees who have access to the secret.

 

It is also essential to require any potential partner in China to sign a Non‐Disclosure Agreement (NDA) before revealing any commercial or technical information. Although NDAs are recognised by China’s courts, its most valuable function is often to signal to potential partner that the company is serious about protecting your IPR. China’s Labour Contract Law allows restriction for departing employees in key positions to work for a competitor for up to one year, although reasonable remuneration should be provided.

 

In case of unauthorised disclosure or unauthorised use of information regarded as trade secret, both administrative action through the Administration of Industry and Commerce (AIC) and judicial enforcement through the People’s Courts are available. However, given the complexity of trade secret infringement cases and the high value of the information, cases are normally handled by the People’s Courts. There are also criminal sanctions for trade secret infringement if the monetary value of the theft is particularly high.