Challenges of Protecting IPR in China Knut K. Wimberger | emage workshop @ Austrian Patent Office,...

Challenges of Protecting IPR in ChinaKnut K. Wimberger | emage workshop @ Austrian Patent Office, 19.06.2008

austria wirtschaftsservice 2

• aws Innovation Protection Program

• Protecting IPR in China - Challenges

• China‘s IPR system & policy


aws – Austria‘s promotional bank

a bank 100 % owned by the Republic of Austria („AAA“) limited liability company (GmbH) develops and implements programs according to the economic policies of the Austrian government

Focus: Financial and Service Support of investment projects of Austrian companies in Austria and abroad.


aws Innovation Protection Program:

Increase awareness about the

importance of IPR protection

Support development of a global IPR strategy and IPR portfolio

Encourage the registration of

IPR in emergingcountries

Support enforcement of IPR

in case of infringement

Overall goal:

The protection of IPR of Austrian companies in emerging markets.

Strategy:


IPP Service Network

Local partners: Patent agents Law firms Investigators Patent Offices Administration for Industry and Commerce Supreme Courts

The provinces: 90% of Austrian companies in China are located there Most of the IPR cases take place there


IPP Financial Support

For SMEs, aws subsidizes up to 50% of the

registration and enforcement costs.

IPR Registration

Patent registration in China (without translation): ~ € 500 Trademark registration: ~ € 500 Utility model registration: ~ € 1.000 Patent registration from Austria

(PCT, including translation): ~ € 3.000

IPR Enforcement

Administrative proceedings: € 3.000 + Civil action: € 5.000 +






Why companies do not register their IPR in China:

Doubts that IPR in China represent „rights“ that can actually be protected

Corruption Bureaucracy Language barrier Resources (time, money, people)


Counterfeiting in China:

Seven in ten European companies doing business in China say they have been victims of IPR theft.

In 2006, European manufacturers estimated that IPR theft cost them one dollar in every five they made in China.


Most of the European Brands are counterfeit…


Bags & baggage…


Anoraks…


Shirts…


Shoes…


Ties…


Cosmetics…


Watches…


Genuine/Counterfeit Drugs


Pens, lighters, razors…


Oils…


Cigarettes...


Toys…


Counterfeit Luxury goods…


Child shoes…


Candies…


Fake car parts, including brakes…


… and even entire cars designs


Typical Trademark Infringement

Original


Trademark Infringsments


Infringing TM Application


It‘s not only about the Chinese market:China‘s exports to the EU grow significantly


Not only exports, but also FDI: China‘s FDI outflows reaches new records

Source: Economist


China – the no. 1 in counterfeiting?

Origin of goods seized by EU customs (EU 2006 / OECD 2007)

China; 38%

Thailand; 10%HK; 8%

Turkey; 7%

Malaysia; 4%

USA; 4%


Amount of seized goods at AT borders

(BMF 2006)

China; 23,35%

Thailand; 6,20%

HK; 7,32%

Turkey; 6,51%

USA; 0,40%

Others; 54%

India; 2,47%


Corruption remains a major problem: Corruption Index 2006(Transparency International)

Rank Country 2006 2005 20045 Singapur 9,4 9,4 9,3

11 Austria 8,6 8,7 8,420 USA 7,3 7,6 7,542 South Korea 5,1 5,0 4,545 Italy 4,9 5,0 4,870 China 3,3 3,2 3,470 India 3,3 2,9 2,8

121 Russia 2,5 2,4 2,8156 D.R.Congo 2,0 2,1 2,0

Rank Country Score

1 Switzerland 7.8

2 Sweden 7.6

3 Australia 7.6

4 Austria 7.5

5 Canada 7.5

6 United Kingdom 7.3

7 Germany 7.8

8 Netherlands 7.3

9 Belgium, U.S. 7.2

11 Japan 7.1

12 Singapore 6.8

13 Spain 6.6

14 UAE 6.6

15 France 6.5

18 Hong Kong 6.0

26 Taiwan 5.4

29 China 4.9

30 India 4.6

Bribe Payers Index 2006


Bureaucracy:Government institutions responsible for IPR

State Council国务院

State Intellectual Property Office (SIPO)国家知识产权局

Ministry of Agriculture 中国共和国农业部

General Adminstration of Customs (GAC)

海关总局

Ministry of Public Security (MPS)公安部

State Administration for Industry and Commerce

(SAIC) 国家工商行政总局

National Copyright Adminstration (NCA)

国家版权局

Local Copyright Authorities地方版权局

Trademark Office (TMO)商标局

Local Administrative Authorities for Industry and Commerce

(AIC)地方工商行政局

Supreme People’ s

Procuratorate (SPP)

最高人民检察院

Local Administrative Authorities fort Patent Affairs (AAPA)地方知识产权管理局

Chinese Patent Office

(CPO) 专利局

Patent Re-examination

Bureau (PRB) 专利复审委员会

Trademark CopyrightPatent

Fair Trade Bureau 公平交易局

Trademark Review and Adjudication Board 商标评审委员会

State Forestry Administration 国家林业局

© aws2006 KW


Language barriers and costs:

Chinese lawyers charge fees that are comparable to European amounts

Multi-lingual Chinese staff is expensive to hire (and to retain)

Interpretation of laws and regulations often vage and depending on regional interpretation


Risks of having no IPR in China:

No legal basis to defend IPR against infringement

Collateral damage in third party countries (Chinese exports)

Less competitiveness in ChinaPotential IP „attacks“ from

Chinese competitors






Past and Future of the Chinese IPR System

200.000

180.000

160.000

140.000

120.000

100.000

80.000

60.000

40.000

20.000

Patentapplications 1996 - 2006

Invention

Utility ModelDesign

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

1.4.19851.Patent Law

2000

2.Amendment of Patent Law

(TRIPS )

04New IPCustomsRegulations

1985

Accession to Paris Convention

1995IP – Customs Regulation

19933.Chamber Introduced To courts

05New penalRegulations regarding IP

1997

Penal Law Amended for IP matters of fact

2003Umsetzungs -verordnung tritt in Kraft

19921.AmendmentTo Patent Law

11.12.2001

WTO Accession

1994

Accession to PCT

Patent Duration

06IP Complaint and Service

Centers

present

Currently 3. AmendmentIn the works – no reaction to comly withInternational treaties, but implementation of national IP policy

0611th 5.year programContains separate IP

chapter

2006 Patent Applications at largest Patent Offices:1. JP 427.0782. US 390.7733. CN 173.3274. KR 160.9215. EP 128.7136. DE 60.2227. TW 47.841 AT 2.505


850.000 IP lawsuits in the making

0

50000

100000

150000

200000

250000

300000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Inventi on

Uti l i ty Model

Desi gn

Patent Applications, Source: SIPO Source: Economist


Dual Track IP-Enforcement

Rechtsdurchsetzung

(auf Antrag des Rechtsinhabers auch

parallel)

Behörde

Gericht

Regionale Büros der National Copyright Administration (NCA)地方版权局

Formal-entscheidung (Bestehen der IP-Verletzung)

Entscheidung in der Sache

(Schadens-schlichtung)

Verwaltungs- verfahren gegen die

Behörde

Zivilrechts- Verfahren gegen

den Verletzer

Mittleres Volksgericht中级人民法院

(Kammer für Verwaltungssachen，

1. Instanz)

Berufung

Hohes Volksgericht高级人民法院

(Kammer für verwaltungssachen,

2. Instanz)

Mittleres Volksgericht中级人民法院

(3. Kammer: Zivilsachen, 1. Instanz; Bestehen der

Verletzung und der Schadenshöhe)

Berufung

Hohes Volksgericht 高级人民法院

(3. Kammer: Zivilsachen,2. Instanz bzw 1. Instanz bei Streitwert > 100mio

RMB))

Revision

Oberstes Volksgericht 最高人民法院

(3. Kammer: IP-Sachen)

Regionale Büros der Administrative Authorities for Patent Affairs (AAPA)地方知识产权局

Regionale Büros der Administration for Industry and Commerce(AIC)地方工商行政管理局


Enforement Methods

Method Decision Dis-Advantage

1 Cease & Desist Letter IPR owner / infringer + affordable, without public involvement ( 面子 )- No enforcement possible; Risk of losing the choice of court location and risk of losing important time2 Private Communication IPR owner / infringer

3 Administrative Enforcement Local IPO (AAPA, AIC)地方知识产权局

+ without public involvement ( 面子 ), extensive enforcement competences (seizure, destruction, closure, etc), simplified evidence preservation - no damage reward, civil proceedings as last instance, limited penalties without impact on infringers, local protectionism

4 IPR Registration with Chinese Customs

Local Customs Authority地方海关局

+ since 2004 authorized to perform custom seizures, IPR registration required and infringments should be indicated- Prevents export only, no action against infringer

5 Civil Enforcement 44 Middle, 32 High, 1 Supreme Court + preliminary injunction possible; efficient enforcement- Slower than administrative enforcement, public proceedings, not all court have IP experienced judges, comparatively high costs

6 Criminal Enforcement MPS; Procuratorate, Police + highest degree of determent, > 5000 IP convictions in 2007 - Thresholds are difficult to be reached; police is busy with other crimes

7 Political Lobbying Government Authorities (SOIPP, MOFCOM, State Council, etc)

+ measures are imposed top bottom – efficient- High impact that may require public trade off, access to political groups difficult

8 WTO Proceedings WTO + extensive consequences- No method for individual companies


Public & Private IP Policies

„…future competition in the world is IP competition…“ 温家宝 | Wen Jiabao, Prime Minister

(June 2004)

„The country's top leadership is committed to building China into an ‚innovation nation‘ in 15 years…“ 薄熙来 | Bo Xilai, former Minister of Economy (April

2006 )

„Some Chinese entrepreneurs tell me: If foreign companies don‘t respect their IP in China, I won‘t respect it neither.“

王翔 | Wang Xiang, JD, PhD., Patent Attorney, Jones Day (December 2006)


Aiming at the pole position - again:China‘s share of world GDP

Source: Economist


China‘s IPR strategy:

Chapter 7 of the 11th Five-Year-Plan: Promoting independent innovation Enhancing the capability building of

independent innovation Strengthening the role of enterprises

as main entities of technological innovation

Intensifying IPR protection Deepening the institutional reform of

the sci-tec system


China is creating a hi-tech environment: Graduates of engineering universities:

China: 640.000 (2004) Source: Ministery of Education/China US: 220.000 (2004) Source: Dept. of Education EU25: 420.000 (2003) Source: Eurostat

China will be the location for R&D: Approximately 50% of all planned

R&D facilities of Western companieswill be located in China.Source: Booz Allen Hamilton & Business School Insead (2006)

R&D expenditures: In 2006, for the first time China

has spent more on R&D than Japan. Source: OECD

China vor Japan: Forschungsausgaben nach Kaufkraftparitäten (OECD)

1981

1986

1991

1996

2001

2006

JP

US

EU

CN

DE100 Mrd.USD PPP

200 Mrd.

400 Mrd.

300 Mrd.

Thank you for your attention.

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