Debunking 10 Common Myths About Intellectual Property (IP) Protection in China

Introduction

China, often portrayed as a challenging landscape for intellectual property (IP) protection, is home to several misconceptions regarding safeguarding IP rights. It’s true that China’s IP protection landscape differs from other countries, but this is true of all other countries, as each country has its own jurisdiction. This article debunks 10 common myths and provides valuable insights on how businesses can adequately protect their IP, especially patents, in this vital international market.

 

Myth 1: China Doesn’t Respect IP Rights

Contrary to the popular belief that China doesn’t respect IP rights, the nation has been making significant strides in reforming its IP laws and strengthening enforcement measures. China’s intellectual property rights framework includes different patent categories and operates on a “first-to-file” system. This system grants IP rights to the first person to file an application, emphasizing the importance of swiftly securing these rights.

Patent protection in China is comprehensive, covering invention patents that protect new technical solutions, utility model patents for functional design, and design patents that focus on aesthetic aspects. Recognizing and leveraging these distinctions is crucial for businesses looking to protect their innovations effectively.

 

Myth 2: Trademark Protection is Secondary in China

Some businesses may underestimate the importance of trademark protection in the Chinese market. However, just as patents protect inventions and utility models, trademarks protect brand identity, making them integral to a comprehensive IP strategy. To obtain trademark protection, businesses must register promptly. Unlike some countries that use a “first-to-use” system, China also operates a “first-to-file” system for trademarks. This places an even greater emphasis on timely registration.

 

Myth 3: Chinese Customs Cannot Help in IP Protection

Another common myth is that Chinese customs do not play a role in IP protection. Engaging with Chinese customs is a powerful measure to reinforce patent protection. This relationship allows the detention of shipments that infringe on registered IP rights, preventing the distribution of counterfeit products going out of China. Cooperation with customs authorities is essential to an effective IP protection strategy.

By protecting your patents and trademarks in China, you also protect yourself against others infringing on your products in China and prevent them from sending the products to other markets. In other words, you are solving the infringing problem at the root.

 

Myth 4: Contracts Have No Role in IP Protection in China

Contracts adapted to Chinese law are instrumental in protecting IP rights. The use of well-crafted contracts helps specify terms of collaboration, protect confidential information, and prevent unauthorized use of intellectual property. In particular, Non-Disclosure, Non-Use, and Non-Circumvention (NNN) contracts play a significant role in avoiding copying and protecting IP rights during business negotiations and manufacturing processes in China.

 

Myth 5: Counterfeit Goods Cannot Be Controlled

While the prevalence of counterfeit goods on Chinese e-commerce platforms poses a challenge, it is a myth that businesses are powerless in the face of this issue. Regularly monitoring these platforms and taking prompt legal action against violators are critical tactics. Owners of patents, trademarks, and other forms of IP in China have the right to take legal action against infringers, which can lead to significant penalties and deterrence against future violations.

However, suppose you do not protect your patents and trademark in China, and a Chinese company (for example, a company related to your manufacturer in China) starts selling your products in China. In that case, it is you infringe on the IP laws. You then can neither produce nor sell your products in China.

 

Myth 6: Chinese Courts Do Not Uphold IP Rights of Foreign Companies

This myth is perhaps one of the most harmful, leading to a perception of impotence in the face of IP infringement in China. However, resolving disputes in Chinese courts under Chinese law is entirely possible, and favorable outcomes are regularly achieved. To facilitate this process, businesses must have contracts adapted to Chinese law and jurisdiction.

Understanding the specifics of China’s IP protection landscape is vital to navigating this complex market. Businesses can take strategic steps towards safeguarding their IP in China by debunking these common myths. They can leverage various patent types, engage proactively with Chinese customs, craft sound contracts, protect their trademarks, and enforce their rights through legal action. Counterfeit goods and IP theft are challenges, but they can be successfully addressed with the right strategies and a solid understanding of China’s evolving IP protection framework.

 

Myth 7: It’s Enough to Use NDAs for IP Protection in China

A common myth is that using Non-Disclosure Agreements (NDAs) is sufficient to protect intellectual property in China. However, while NDAs are a critical component of any IP protection strategy, they often do not offer comprehensive protection, especially within the unique landscape of China’s legal environment.

In the Chinese context, Non-Disclosure, Non-Use, and Non-Circumvention (NNN) agreements are generally more effective. An NNN agreement is a more encompassing tool to prevent potential Chinese partners from misappropriating your IP.
NNN agreements offer three levels of protection:

Preventing the disclosure of your confidential information (Non-Disclosure).
Prohibiting the use of your confidential information for their benefit (Non-Use).
Disallowing the party from bypassing you to deal directly with your clients, suppliers, or contacts (Non-Circumvention).

In contrast, a standard NDA typically only covers the non-disclosure aspect, leaving potential loopholes for IP misuse. Therefore, NDAs are often insufficient for IP protection in China. To ensure comprehensive protection of IP rights, it’s advisable to utilize NNN agreements and NNN clauses. Without such contracts and clauses, your IP is left vulnerable, and taking legal action after infringement can be significantly more challenging.

 

Myth 8: There’s No Need to Adapt Contracts to Chinese Law

One prevalent misconception among foreign businesses is the belief that there’s no need to adapt contracts to Chinese law for intellectual property protection. This myth can lead to severe implications, as contracts that do not comply with Chinese law may be deemed invalid, making them unenforceable in Chinese courts.

It is paramount to draft contracts under the purview of Chinese law and in the Chinese language to prevent translation problems later and lower enforceability in China. Not only does this ensure that your agreements are legally enforceable, but it also aids in avoiding misinterpretations or ambiguity due to cultural or linguistic differences.

Chinese courts also seldom follow rulings from jurisdictions in other countries. Thus, choosing jurisdiction in China for the contract you use in China is essential.

Adapting contracts to Chinese law goes beyond mere translation; it requires a comprehensive understanding of Chinese legal principles, the regulatory landscape, and business culture. It is a process best undertaken with the guidance of legal professionals with expertise in Chinese law, offering businesses the best possible protection of their intellectual property in China.

 

Myth 9: English Contracts are Sufficient for IP Protection in China

Another common fallacy is the belief that having contracts solely in English for IP protection in China is sufficient. While English is commonly used in international business, this does not apply when dealing with IP protection in China.
In reality, Chinese courts prefer, and sometimes require, contracts to be in Chinese or at least bilingual (English and Chinese). Contracts entirely in English are less enforceable and can even be invalid because of poor translations later on, as the courts in China rely on translations of English contracts into Chinese.

Having a contract in Chinese ensures clarity and minimizes the risk of misinterpretation by Chinese counterparts and authorities, thus offering more vital protection for your IP rights.

It is important to note that the Chinese version of a contract should be drafted by a legal professional familiar with Chinese law and the specific terminology related to IP rights. This will ensure the Chinese version of the contract is enforceable in China.

 

Myth 10: It’s Better to Apply for IP in China Internationally Than Directly in China

Some businesses may believe it’s more effective or efficient to apply for IP protection in China through international treaties or agreements rather than directly within China. This perception may stem from the idea that international applications offer broader protection or streamline the process by allowing businesses to apply for protection in multiple jurisdictions simultaneously.

However, this is a misstep. While international treaties facilitate applications for IP protection in multiple jurisdictions, they do not negate the importance or advantages of applying directly in China.

Firstly, the application process via international systems takes longer, and ultimately, national applications in China are still required as the applications are just sent to an agent in China that deals with international and local applications. Secondly, and more importantly, direct applications with Chinese authorities allow for better control over the registration process as there is more direct communication, which is essential if, for example, patent applications where the quality of the application ultimately has to be in Chinese is very important for the outcome of the application.

 

Conclusion

Businesses need to debunk prevalent myths to navigate the complex landscape of IP protection in China effectively. You can significantly bolster your IP protection by understanding the patent categories, the importance of prompt trademark registration, the role of Chinese customs, and the significance of NNN contracts in China. Adapting contracts to Chinese law, translating them into Chinese, and applying directly for IP rights in China also contribute significantly to a comprehensive and robust protection strategy.

Counterfeit goods on Chinese e-commerce platforms pose challenges, but businesses can counteract these issues through regular monitoring and swift legal action. With a strategic, informed, and proactive approach, you can protect and leverage your intellectual property in China for sustainable success.

 

 

Contact us if you need legal help in China, like drafting contracts that follow Chinese law, background investigation of Chinese companies, protecting patents, trademarks, and verification of contracts to the law in China, etc.

If you require our assistance or have further questions about our services, please do not hesitate to contact our Customer Relationship Manager, Jan Erik Christensen, at janerik@ncbhub.com. We look forward to hearing from you and helping your business succeed in China.

Contact us if you need help with drafting of contracts that follows Chinese laws and are enforceable in China, background investigation of Chinese companiesprotecting patents, trademarks, verification of contracts to the law in China, or help with other legal challenges that you have in China.

If you require our assistance or have further questions about our services, please do not hesitate to contact our Customer Relationship Managers Jan Erik Christensen, at janerik@ncbhub.com  or Milla Chen, at huimin.chen@ncbhub.com. We look forward to hearing from you and helping your business succeed in China.