Avoiding the Pitfalls: China
Many growing kiwi companies are looking to export or establish offices in China – with 1.3 billion people, China is a colossal target market. It is New Zealand’s second largest trading partner, representing over 9% of total exports.
Exports into the country have traditionally been agriculture and raw materials, but as economic reforms and trade agreements open up the country to international business, New Zealand Trade and Enterprise (NZTE) predicts big opportunities ahead for companies in a wide range of industries, including food & beverage, infrastructure and technology products, health and education.
For companies entering the Chinese market, protecting brands and intellectual property is critical. The China Patent and Trade Mark Office (SIPO) have improved the systems and processes involved in applying for and obtaining IP rights in recent years, but there are still many pitfalls to enforcing IP rights in China.
It is not widely understood outside of China that there are two different levels of patent for mechanical inventions: standard patents and patents with a lower level of invention, termed utility models.
Standard patents refer to any new technical solution relating to a product, process or improvement and go through a robust level of examination. A utility model represents an incremental invention relating to the shape or structure of a product and undergoes a very quick or cursory examination. The two types of patent also differ in that the utility model has a shorter term, is granted typically within six months of filing and has lower post filing costs.
Exporters of mechanical goods should consider using one or both types of patent depending on the level of importance of the IP and IP strategy of the company. For example, a company may only want a Chinese patent primarily as an initial deterrent perhaps against a manufacturer copying the design – the lower tier utility model may well provide the desired level of deterrent and avoids the considerably higher cost of a standard Chinese patent.
The enforcement of trademark and patent compliance is still a major obstacle as piracy is rampant, particularly outside of main Eastern seaboard cities in China. There is a lack of general awareness that infringement is a crime, and local protectionism is strong in the face of central government and foreign ownership.
If your trademark or patent has been violated, you should respond quickly – file paperwork with the courts, hire a local IP counsel, and keep all original evidence. We advise that you protect your ideas in your key markets, for infringement action can be taken against importation of infringing goods into a patented country and this may be easier to do than pursuing infringement in China.
Another consideration is the prompt registration of your domain name and trade marks in all localised versions. For example the domain name www.exporter.com or www.exporter.co.nz would be represented in China as www.exporter.cn. It is common for opportunists to find foreign trade marks and domain names and register the local version before the exporter does and then extort the valid holder for payment in return for the domain name. Chinese rules regarding trade mark also favour the first to file rather than the valid holder overseas hence obtaining trade mark rights early in China if important to the IP strategy is important.
If you are exporting to China and would like assistance with your IP strategy, call CreateIP on 03 374 6098.
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