The significance of this particular issue is exaggerated. The second part of the paper Intellectual property rights enforcement in China. What prompted the change? The United States could also exert meaningful influence through multilateral channels by calling on allies to demand reciprocity and by pushing to strengthen the role of international arbitration courts. A more constructive approach would involve a two-pronged strategy, built firstly on sustained efforts to improve institutions for legislating and enforcing effective IP protections while acknowledging the long-term nature of the process. However, as China is now the world’s largest economy,2 its lack of IPR enforcement is of much more significance than similar issues in smaller countries. It is only natural, then, that developing countries would primarily seek to upgrade their stocks of knowledge and technology through acquisition rather than invention. Enforcement of Intellectual Property Rights in China Download guide: Guide Last Updated 2013 Co-funded by: 1. Conduct comprehensive due diligence on suppliers and distributors prior to any agreement and on a regular basis thereafter. The second prong of the strategy would address the concerns of the U.S. security establishment that seeks to slow down China’s rising innovation capacity and even decouple the two economies. Trying to slow Chinese innovation will simply weaken its incentive to strengthen IP rights. It’s also a balance between the short and long term. China’s revision of its patent law as part of accession into the World Trade Organization in 2001 represented a major step toward compliance with international standards. At the same time, counterfeiters and infringers in China are increasingly sophisticated. When determining appropriate rules for IP, governments have to keep in mind that protections simultaneously spur creativity and inhibit the flow of knowledge. Register technology licensing contracts as required under the Ministry of Commerce’s Technology Import and Export Administrative Regulations. Send cease-and-desist (C&D) letters to infringers. Given the declining role of such ventures in relation to the political sensitivities generated, China has made moves toward dropping the requirement, most recently in March through its new Foreign Investment Law, which provides more flexibility for foreign investors and outlaws the practice of forced technology transfer, although how this will be implemented in practice remains a concern. Conduct an initial audit of the company’s China operations to determine IP assets, IP risks, and assign appropriate levels of protection to those assets based on the risk of infringement. Companies should register (or record) eligible IP in China as early as possible. Companies should recognize differences in how China’s legal framework treats ownership of improvements and liability, and that negotiated royalty rates in China are frequently lower than in other markets. Run background checks on key hires to check for any IP-related “red flags,” and include noncompete and nondisclosure agreements in employee contracts. Protests over the arrest of a popular opposition leader highlight the decline in what was a beacon of democracy in West Africa. Even the 2016 Special 301 Report by the generally bellicose USTR noted “[w]elcome developments” and “progress toward effective protection and enforcement of IPR in China.” China now ranks second globally (excluding tax haven countries) in annual spending on acquisition of foreign IP as well as in gross research and development expenditure. Such ties can sometimes give companies access to additional penalties under other laws, such as the Food Safety or Environmental Protection laws. Overall, China’s IP regime has made significant strides in just a few decades. This is the second post in a series of posts looking at the question of intellectual property rights in both China and India. What’s more, joint ventures are increasingly less common; they now account for less than a third of China’s inbound investment compared with two-thirds in the late 1990s, and many such deals are welcomed by foreign firms to facilitate their market access. When combined with the lack of legal enforcement, the issue of protecting intellectual property rights (IPR) is the single biggest hurdle for most companies to overcome … A man looks at his phone near a giant image of the Chinese national flag on the side of a building in Beijing on Oct. 23, 2017. IPR and enforcement in China The intellectual property rights (IPR) available in China are very similar to those available in Europe. For example, many software products that are eligible for patent protection in other jurisdictions are not in China, and are more commonly protected as copyrighted products. China is not the only country where IPR enforcement is viewed as a significant problem. Similarly, Article 23 states that the administration will grant a patent to designs which ar… The United States’ own centurylong drift toward strong protections is a case in point. And contrary to popular expectations, foreign plaintiffs have actually fared better in patent litigation in these courts than their Chinese counterparts. Regularly engage business partners to share the importance of those clauses to the ongoing business relationship, and ensure that partners fully understand what those obligations mean for both parties. During this phase, the country transitioned from a net acquirer of IP to a net innovator, which tipped the scales in favor of increased protection. Make IP protection a core responsibility of the entire China management team, not merely a function of the legal or brand protection teams, and adjust internal information flows and reporting structures to reflect those responsibilities. To protect their IP in China, companies should follow several steps: If a company doesn’t file its copyrights, patents, and trademarks in China, its IP has no formal protection there. Yukon Huang is a senior fellow at the Carnegie Endowment for International Peace. In its complaint, the United States alleged that China’s policies on technology transfer prevent foreign patent holders from enforcing their patent rights in China or negotiating licensing contracts on market-based terms. In the 1990s, IP theft was rampant, although Western policymakers largely ignored it when China specialized in low-end manufacturing fueled by cheap and abundant labor. Enforcing these rights within the EU and abroad affects EU growth and jobs. [email protected], Shanghai Compartmentalize critical steps in the design and production processes for IP-intensive products—and the equipment used to manufacture these products—to limit the likelihood that any one employee has access to all the information needed to copy IP. Most of these activities are legitimate and voluntary and have clearly benefited U.S. business interests. Ironically, if the West wants China to get better at protecting IP, it also needs to work with China to help it to become a more innovative nation. Engage with local government officials to convince them to conduct enforcement proceedings. Republican Rep. Mark Green talks about forthcoming bipartisan legislation that would protect U.S. technology from Chinese espionage. It also wants to levy tariffs as punishment for infractions without Beijing retaliating. To be successful in China, companies should develop an integrated IP protection strategy that reflects the nature and extent of the IP problems they face and is grounded in a realistic assessment of internal goals and resources. All rights reserved. To begin with, it had no patent law prior to 1984. Any grand bargain will require progress on a key structural issue: intellectual property (IP) rights. [email protected]. Not until 1891, thirty years into the golden age of the independent American inventor and a full century into the history of U.S. IP law, did the passage of the Chace Act finally extend protections to foreigners. No wonder, then, that getting China to better protect IP is a point of rare consensus among both the White House and the Democratic leadership. Minimum damage payouts for violations have continually increased, as have durations of patent protection. Weigh various channels available to halt infringement in China, including administrative, civil, and criminal channels. Generally, private rights are protected in the short-te… Yet observers tend to lose sight of the broader picture and single out the illegitimate and questionable methods. 86-21-6288-3840 As part of that due diligence, investigate how those companies view IP, including IP they access through business partnerships and their own IP. Educate local officials responsible for allocating the resources for and enforcing IP protection about the company’s IP protection needs. Build relationships with government officials at multiple levels in IP-related government agencies and courts relevant to the company’s industry, before any problems arise. In short, change is occurring at China’s own initiative, and U.S. companies have taken note: In a American Chamber of Commerce in China survey, 96 percent of respondents stated in 2018 that China’s enforcement of IP rights improved or stayed the same in the last five years compared with 86 percent in 2014. For instance, China’s world leadership in patent quantity—though not in quality—signals its commitment to develop a robust innovation ecosystem at home. When European ideas, brands and products are pirated and counterfeited, EU jobs are affected. Notions of individual achievement—let alone legal protection for inventions—were heavily suppressed prior to the Deng Xiaoping era in ways that have continued ramifications. Law:PRC Patent Law, 1984; amended in 1992, 2000, and 2008 Relevant ministry: CNIPA A patent grants a legal right to patentees for their creations, including inventions, utility models, and designs. In determining a course of action, companies should consider company resources, timelines for action, and the strengths and weaknesses of each channel. US CHINA TRADE DEAL PHASE 1 Unterzeichnet am 15. Beyond that, in the most recent US-China Business Council Member Survey, just 5 percent of respondents reported having been asked to transfer technology to China, and this concern ranked 24 out of 27 top challenges facing foreign companies. Such a database can help educate staff about the types of infringement that a company may face, and increase the likelihood of spotting future problems. China presents unique challenges due to the size of its market and ongoing difficulties implementing a robust IPR protection and enforcement system. intellectual property. Consider tracking data flows and employee file transfers (both paper and electronic), engage internal stakeholders such as the human resources department in early conversations about developing and implementing policies that monitor employees in this manner. Broadly speaking, two prescriptions have been proposed: the natural evolutionary and the rule of law views. This best practices document lays out key strategies and tactics that companies should adopt in their attempt to identify and protect their IP in China, both to prevent IP problems before they occur and to tackle IP infringement once discovered. Negotiate clauses in technology transfer and licensing contracts to address company needs on royalty rates and ownership of improvements. [email protected], Beijing Establish IT mechanisms to limit employee access to sensitive information, such as separate computer terminals or specialized passwords. Economists see the accumulation and dissemination of knowledge as key to sustainable economic growth. Washington, DC Companies should be aware that documentary evidence (as opposed to oral testimony or non-official documents such as marketing materials) carries more weight with Chinese officials. In 2014, China debuted three specialized IP courts, and there are as many as 19 more in the pipeline. Review information that could be sent to third parties before transmission to ensure that it is not sensitive, or that the benefits of sending it outweigh the risks of it being leaked. Firms should consider several general principles for effective management of their intellectual property. As a country evolves from a net acquirer of IP to a net innovator, its calculations change, and strong protections are more attractive. Monitor laws, regulations, and judicial interpretations to ensure that the company’s IP enforcement strategies are valid under Chinese law. In China, any citizen, legal person or organization entitled to intellectual property rights whose rights and interests have been infringed may bring a lawsuit to the people's court in accordance with the … External pressure should play an important role, but ultimately China’s internal incentives will carry more weight. But in reality, trade, foreign investment, licensing, international research collaboration, cross-border movement of experts, collection of open-source material, imitation, reverse engineering, and, yes, theft have all contributed to China’s technological progress. Examples of areas that may require scrutiny include employment contracts, IP licensing arrangements, and evidence collection procedures. IP enforcement has consistently placed among the top handful of issues raised by US-China Business Council (USCBC) member companies every year in USCBC’s annual membership survey. Compared with the U.S. experience, China today seems right on track. Make adjustments based on the IP audit, and dedicate resources in alliance with the company’s IP protection goals. China’s IP laws and regulations increasingly reflect international standards, and China has indeed made steady efforts to better protect and enforce IP rights. Many countries have followed this blueprint, but China draws special attention because of its size and its top-down, state-led model. Build a database of company infringement cases and infringers and make it available to key employees across the company’s China offices. Protecting intellectual property rights in China turns out to be a real challenge for foreign corporations, which operate on that market. To find the right tradeoff, they must take stock of their country’s innovative capacity, consider international norms and standards, weigh wide access to knowledge against incentives to invent, and seek common ground between the short-run interests of firms and the long-run interests of society as a whole. Decades in the trenches have equipped multinational corporations with hard-won expertise and a set of strong preventive best practices, including internal controls and external engagement with key stakeholders. Establish and publicize clear reporting channels for outside stakeholders to report cases of IP infringement. The Problems Of Intellectual Property Rights 2654 Words | 11 Pages. Work with Internet marketplaces and Internet service providers, such as Alibaba and Taobao, to remove infringing goods or pirated materials from websites, and to take down websites providing infringing products or content. 86-10-6592-0727 Consider “venue shopping,” or bringing infringement proceedings in jurisdictions (and through enforcement channels) with a better record of IP enforcement. The rattled stock market gets all the trade war attention, but it’s the sharp decline in China’s U.S. investments that should alarm Americans. Companies should also understand the full range of IP for which they might file, including multiple types of patents (utility model, design, and invention), as well as trademarks and copyrights. China has acceded to the major international conventions on protection of rights to intellectual property. Control and monitor employee access to sensitive equipment and facility areas based on job title and function. China's judicial institutions for intellectual property protection. Rather than go against the grain, the United States should instead commit to working with China to foster open innovation and design knowledge transfer systems that both sides would see as fair and mutually beneficial. For example, the United States asserted that China’s regulations — that give a Chinese party to a joint-venture agreement the right to continue to use technology transferred under the agreement after its expiration — violat… It is well recognized that intellectual property rights (IPR) violations are at the heart of the economic conflict with China. For many companies, this means keeping vital designs and latest-generation technologies overseas while bringing to China IP that supports their business in country. Delineate based on job title and function which employees have access to what types of information. Build ties with, and conduct due diligence on, IP service providers and investigative firms to identify enforcement resources that fully comply with relevant Chinese regulations. The focus is to examine the current situation of intellectual property protection in China. © 1996-2021 by the US-China Business Council. China's major trading partners, particularly the United States, persistently criticize China for delivering, at best, half-hearted enforcement of intellectual property rights (IPR) norms. Closely monitor or prohibit the use of flash disks, portable hard drives, laptops, cell phone cameras, and other devices that could be used to capture and transmit sensitive information. But there are lessons to be gleaned from America’s own humble (and not so innocent) beginnings. Check the Internet regularly for infringing domain names and for websites that are used as platforms for counterfeit products. This Article traces the development of intellectual property rights in China since the country’s reopening in the late 1970s. Countries do not enact strong IP rights systems until their ability to innovate at home displaces reliance on outside knowledge. Send representatives to look for counterfeiters at industry trade shows and trade fairs, such as the Chinese Export Commodities Fair (Canton Fair). Privacy Policy. China’s Record on Intellectual Property Ri... accumulation and dissemination of knowledge, copying and adapting the British power loom, annual spending on acquisition of foreign IP, gross research and development expenditure, America Will Only Win When China’s Regime Fails, Biden Team Engaged in ‘Rigorous’ Debate Over Ending Forever War, How Biden Benefits From Limiting His Own War Powers, Quad Summit’s Vaccine Deal Is Biden’s Bold First Move in Asia. But history tells us to be cautious; Washington’s demands are unrealistic. According to some reports, Chinese IP theft has cost the United States $225 billion to $600 billion a year. Work with vetted IP investigative firms to collect evidence on the company’s behalf, monitoring firm activities to ensure that evidence is collected legally. Jeremy Smith is a junior fellow at the Carnegie Endowment for International Peace. Together, the paper discusses the enforcement of these IP regulations and its impact on innovation and patenting activity. The enforcement of protection of intellectual property rights is difficult in the Peoples Republic of China. Historically, rapidly growing emerging market economies tend to be cited as they transition to higher income levels. The United States’ experience demonstrates the tendency of IP rights to co-evolve with innovative capacity. Intellectual property rights have been acknowledged and protected in China since the 1980s. Conduct a realistic assessment of the business risks and benefits of transferring IP to China. One recurring difficulty has centered around repeated violations of intellectual property rights (IPR) in China. Your Intellectual Property Rights in China For free, confidential, business-focused IPR advice within seven working days E-mail: question@china-iprhelpdesk.eu Introduction Important Contract Provisions to INCLUDE Important Contract Provisions to AVOID Non-Disclosure Agreements Confidentiality, Remuneration and Other IP Provisions in Contracts Sample Non-Disclosure Agreement (NDA) … Concern about IP enforcement remains a major factor influencing company strategies and operations in China. Education regarding IPRs is inadequate, so there is little awareness that infringement is a crime. Consider using a company’s contributions to local development or tying the case to larger goals such as product safety or public health, to illustrate to local officials the value of pursuing a case. tual property rights in China – with a review of the evolution of intellectual property law, with a focus on patent legislations. They often exploit procedural loopholes, proactively seek to invalidate legitimate patents and trademarks, deploy advanced techniques such as reverse engineering, and find new ways to infiltrate legitimate distribution networks and build their own parallel networks. But progress is not always straightforward, and U.S. actors continued to engage in ideas theft even after the country became a net innovator. Many in Washington would counter that an innovative China poses a national security risk, particularly in key industries with dual-use technologies like 5G and artificial intelligence. (For more on the pros and cons of various enforcement channels, see the next page.). Long-term: society benefits from creations and inventions, including when the period of protection expires and they enter the public domain 2. China’s Record on Intellectual Property Rights Is Getting Better and Better. Conduct exit interviews with departing employees to recover any sensitive materials and remind them of confidentiality obligations. Professor Zili Yang Econ314 11.26.2014 Hyunsup Yoon The problems of Intellectual Property Rights In China Abstract After Deng Xiaoping’s reform and opening up policy in 1978, China recorded an annual average growth rate of 9.67 percent in China. Consider possible locations where the company could file an infringement case, and collect evidence accordingly. How did a private Chinese firm come to dominate the world’s most important emerging technology? Any grand bargain will require progress on a key structural issue: intellectual property (IP) rights. Throughout the 19th century, imitation played a vital role in the United States’ ascent up the value chain, a process that was deliberately aided by relatively weak protections for IP. Conduct a careful review of internal documents that can demonstrate infringement, including physical and electronic evidence. Januar 2020 Auszüge aus dem Fact Sheet: Intellectual Property: The Intellectual Property (IP) chapter addresses numerous longstanding concerns in the areas of trade secrets, pharmaceutical-related intellectual property, geographical indications, trademarks, and … Intellectual property rights is one of the reasons for the ongoing trade war between the US and China, with the US accusing Chinese firms of repeatedly stealing the intellectual property of American companies and Beijing stoutly denying the allegations. Counterfeiting, for instance, is estimated to result in approximately 20 per cent revenue loss for many global products; and losses from piracy and counterfeiting activity extend to as high as 90 per cent for movies and software.i However there are now several ways that companies can effectively protect their intellectual property in-market. Include IP protection clauses in all contracts and agreements. Domestically, protection of intellectual property law has also been established by government legislation, administrative regulations, and decrees in the areas of trademark, copyright, and patent. Review the company’s internal IP controls to determine whether they provide sufficient protection. Both China and the United States agree that the issue of intellectual property rights is among the top three most controversial points in the bilateral trade relationship, with the other two being the exchange rate of Chinese currency and the excessive volume of the U.S. trade deficit with China. Engage with industry associations, including IP-, industry-, and country-specific associations, to exchange best practices for IP protection, identify cases of infringement, and (if appropriate) develop collective strategies and actions to advocate on concerns. INTELLECTUAL PROPERTY RIGHTS IN CHINA NEUESTE ENTWICKLUNGEN . Other countries offer good lessons for acknowledging and redressing past wrongs. Short-term: intellectual property protection is mostly limited in time (there are some exceptions). Issues. More recently, China’s efforts to promote indigenous innovation and support strategic sectors as outlined in its highly contentious Made in China 2025 program added to the pressure on domestic companies to both obtain technologies from abroad and develop domestic capacity to innovate. For companies facing problems with exported counterfeits, this includes recording IP with Customs in Beijing and educating local customs officials about the company’s products in order to monitor for counterfeits. problems experienced in the China market. From 21st-century America’s perspective at the technological vanguard, it appears natural that China should be pressured to adhere to higher standards. Consider incorporating into the production process technologies and techniques that are difficult to copy, such as chemicals, foils, inks, labels, papers, stamps, and threads. China and others see such efforts as vital to evading the middle-income trap. Work with local and national media as appropriate to address negative publicity that could accompany an IP case against a domestic company. The article suggests that it is actually the biggest problem, which a company operating in China is going to face. Regularly engage business partners to reiterate the importance of IP protection, and, where appropriate, partner to boost IP protection efforts, such as supplementing monitoring resources or jointly engaging with government officials. Intellectual property (IP) is a longstanding, critical concern for companies operating in China. This paper provides a brief introduction to intellectual property and intellectual property rights in the global economy. Its own IP rights system began with the Copyright Act of 1790, which explicitly did not grant any protections to foreign works, stating, “Nothing in this Act shall be construed to extend to prohibit the importation or vending, reprinting or publishing within the United States, of any map, chart, book or books written, printed or published by any person not a citizen of the United States.” During the early days of its industrialization, the United States was a world leader in IP rights violations, a fact often overlooked in the current discourse. Comments on US & Chinese laws & regulation, USCBC Best Practices for Intellectual Property Protection.pdf. China even became the most litigious country in terms of the number of IP-related cases as early as 2005, and the number of cases has increased at a rate of over 40 percent per year for the past two years. In spite of China’s very real progress, the United States continues pressuring the country to further improve IP protections. From Diplomacy to “Sex With Stalin,” board and video games have long drawn from the wild world of international politics. The United States should compartmentalize the issue by building a collaborative regulatory framework rather than imposing blanket restrictions. 202-429-0340 Manage supplier, vendor, and distributor relationships through multiple personnel to limit the ability of local staff to abuse business networks. Little agreement, however, exists about the origin and solutions for this provocation. Chinese government-sponsored search-engine Baidu provides numerous links to third-party websites that offer online counterfeit products. During the literature review of IP protection in China, it is found that China introduced intellectual property legislation as early as 1950 (Asia Law & Practice, 1995). Most notably, the businessman Francis Cabot Lowell helped launch the United States’ industrial revolution by copying and adapting the British power loom, one of the most impactful inventions of the 19th century. Key agencies include not only core IP agencies like local branches of the State Administration of Industry and Commerce and the Ministry of Public Security, but also agencies that could impact a company’s IP protection efforts, such as the General Administration of Customs and local branches of the General Administration of Quality Supervision, Inspection, and Quarantine. Part I provides a brief history of the Chinese intellectual property system and examines the various intellectual property disputes between China and the United States in the late 1980s and the early 1990s. 1. C&D letters can be a cost-effective way to stop infringement in some cases, especially those involving small infringers. For one, requiring joint ventures is by no means unique to China; this is a common practice in many emerging market economies. China, it is very likely that their IP will be at risk. SAIC’s Antimonopoly and Anti-Unfair Competition Bureau (formerly the Fair Trade Bureau) oversees trade secrets disputes under the Anti-Unfair Competition Law. These risks should be acknowledged, but they can be mitigated; however, Huawei and other private companies cannot be expected to overcome deep-seated trust problems on their own. While the level of IP consciousness among Chinese citizens is growing, regular communication of the importance of IP is critical to instill a sense of ownership of company IP among key stakeholders.
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