IPR and China – Putting Czech SMEs ahead of the game Presented by Helpdesk Experts: Simon Cheetham

IPR and China– Putting Czech SMEs ahead of the game

Presented by Helpdesk Experts:Simon Cheetham

Jannik Skou

The Helpdesk Initiative

• European business is 99% SMEs, about 2/3 of employment & about 57-58% of value added (a bit like ratio of Chinese origin goods to all counterfeit seizures….)

• Definition of SMEs isn't only 'micro-enterprises' (under 10 people) but extends up to 250 employees, so covers more of economy than you might think

• SMEs tend to assume that IPR is: costly, technical, 'too complicated' and 'not for me' leading them to do even less than they could do otherwise

• SMEs have fewer resources so need help

Helpdesk services

Office Network

Research/Publication

Business tools

Training/Workshop

Online Portal

IP Expert Network

Online Portal – A business tool for you to use

Upcoming events listed

Ask our IP experts a question

Navigation bar for ease of use

Business tools easily accessible

Helpdesk news

Coming soon! E-learning module: Trademark protection in China

Workshop Agenda

Getting ahead through innovation - why EU SMEs Need To Consider IPR

What Do You Need to Protect?

How Can Businesses Best be Protected:- Know before you go- While doing business with China

Why Do Companies Need To Consider IPR?

EU - China trade in 2008 = US$360 billion

EU China = US$113 billionEU China = US$247 billion

Source: Ministry of Commerce for China

PreventionT1. Statistics of Patent Applications in China by 2007

1,622,631

1,931,118

2,284,925

2,761,189

3,334,374

4,028,520

1,344,177

1,595,415

1,874,358

2,257,515

2,727,626

3,314,591

278,454 335,703 410,567503,674

606,748713,929

74,454 86,685 103,644 125,366 149,4810

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

2,750,000

3,000,000

3,250,000

3,500,000

3,750,000

4,000,000

4,250,000

until 2002 until 2003 until 2004 until 2005 unitl 2006 until 2007 Year

Number

Accumulated TotalDomesticForeignEU

Prevention

T3. Statistics of Trademark Application of Registration in China 2002-2006

371,936

452,095

587,925

664,017

766,319

321,034

405,620

527,591

593,382

669,276

50,902 46,475 60,334 70,63597,043

16,712 15,955 20,720 24,72344,859

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2002 2003 2004 2005 2006 Year

Number

TotalDomesticForeignEU

Why Do Companies Need To Consider IPR?

• To protect products & ideas

• To protect & harness brands & reputation

• To justify research & development costs

• To take ownership of new rights

• To prevent other companies from using inventions & designs

• To keep competitors at a distance

• To create a market for future development

• To create a strong defence in case of conflicts / infringement

• To record attract investors

• To enable licensing- & co-operation agreements;

• To arrive at the best decisions for registering rights internationally.

What Do You Need To Protect?

• Brand names

• Inventions

• Technology

• Artistic works

• Literary works

• Domain names

• Designs

• Software

• Systems & procedures

• Know how

• Trade secrets

How Can Businesses Best Be Protected?

Issues before you start doing business withChina, you should consider:

– Are your rights registered?– What countries are covered?– What about Chinese versions?– Who are you dealing with?– How do you know if they are reliable?


• China is a “first-to-file” country when it comes to IPR registrations.- Key issue for many EU Businesses – case study

• China, Hong Kong and Taiwan use separate legal systems, i.e. there is a need to file in both.

• For trademarks: register broadly in many classes, Chinese versions of your TM should be registered


While you are there:– Contracts/NDAs/confidentiality – notarise

agreements– Are they likely to develop your product – what

about IPR?– Does your supplier/manufacturer have control of

brand labels/moulds/production equipment/proprietary information?

– Assess risks – who else does the supplier work for? Is there a conflict of interest?


Precautions against loss of technology & IPR

– Modular sourcing– Protect parts against copying– Integrate in-house if possible– Don’t openly send tech drawings– Keep data in Europe– Do your homework: Integrate employees

Case study: Great idea – poorly executed…


• Consider how you want the relationship to work and what controls you need to put in place to secure your rights

• Conditions should be put into a written agreement and accurately translated and understood by all parties

• Take steps to verify that your potential business partner are genuine and share the same goals as you

• If possible, consider keeping your most valuable IP a ‘trade secret’, for example, the formula for Coca-cola.

Business partners and IPR protection


• Consider what samples and promotional materials you provide to potential partners

• Ensure that your property is protected after an agreement has ended e.g. include the return of moulds within the written agreement

• Clearly state what Intellectual Property Rights are owned by whom in respect any items you supplied

• Use confidentiality, non-competition and non-disclosure agreements

• Specifically state that your supplier may NOT use a sub-supplier without your permission

Business partners and IPR protection


• Register IPR- Use a layered defence

• Domain names – a growing issue in China: list of officially recommended registrars on the CNNIC website: http://www.cnnic.net.cn/en/

index/0L/index.htm

• Keep trade secrets ‘secret’

• Contracts / sourcing

• NDA / Confidentiality agreements - notarize

• Check & ensure IP materials used correctly

• Control labels / packaging / marketing material etc

Detection

• Police your market e.g.- Check suppliers

- Audit manufacturers

- Internet sweeps

- Feedback from customers/sales staff

- Market surveys

- Customs (China & EU)

• Trade Fairs- Check exhibitor contract

- Research other exhibitors

- Prepare an IP pack

- Determine strategy

Enforcement

Administrative action:– There are over 30 different

administrative authorities. No-one coordinates nor investigates. You need to obtain evidence and convince the authorities, who can:

– carry out unannounced raids

– seize, impound and destroy fake goods

– issue punishment decisions– impose fines (not large)– revoke business licenses

Criminal action – usually escalated via Admin Authorities

SAIC building - Beijing

Enforcement - RaidsExamples of raids – car parts, garments, shoes

Enforcement - Raids

Exterior of Military area – PLA production base

Shoe boxes printed with sale price in £ & Euros

Factory making infringing footballs

Enforcement

Civil action – plenty of resources:- 120,000+ lawyers, 10,000+ law offices, 350,000 court staff

To guide you through the maze:– Trade associations / Chambers of Commerce etc– China IPR SME Helpdesk– Complaint Centers

Summary & Questions

• You don’t have to be an expert –there are plenty out there

• Register rights – if you don’t own it you can’t protect it

• You need to be the first to file IPR in China• Use good contracts• Prevention better than cure• Be proactive

Online Protection of IPR in ChinaJannik Skou

Thomsen Trampedach GmbH

Online Protection of IPR in China




• Content– Introduction 1. Overview: The Internet and China2. Why is internet domain name protection in

China important?3. How can European SMEs protect their IP assets

online and mitigate related risks?4. The domain name registration process in China5. How can one recover an infringing .cn domain

name?


Introductory Project Meeting

EU-China Chamber of Commerce, Beijing12 March 2009

Jannik Skou

Danish partner at Thomsen Trampedach GmbH, Swiss based consulting company

Has 10 years experience with domain name strategy and online brand protection

Serviced a number of top 500 multinational brands

Service Areas

Domain Name Strategy, Online brand protection, domain name and brand monitoring, recovery of domain names, investigations

Business process optimization for domain name registrars and ISPs

Introduction

Online IPR Strategy

OperationsDomain name policy, work flows, monitor, enforce etc.

Marketing IT IPR Protection

Visibility Infrastructure and security

Domains as IP assets

IP Strategy Domain Strategy

1. The Internet in China is booming

• Almost 300 million netizens• Surpassing the US as largest Internet Nation (VIDEO CCTV 2008)

• Growth of 41.9 %

Source; CNNIC.cn

Internet is going mobile – especially in China

• 650 Million mobile users*• 40 % of netizens accessing Internet via Mobile phones **• China Telecom to purchase 50 million mobile phones this

year, 20 million 3G mobile phones.*• China´s ”go West – programme” likely to accelerate growth in

number of mobile netizens in China

• Why important for European SMEs? • Direct navigation > increase importance of domain names

– Impatient : Guess for the name of the website

Sources: *ChinaDaily.com.cn and **CNNIC.cn

Rapid Growth in Domain Names

• The world’s largest country code; .cn• More than 14 million .cn registrations• .cn dominating domain registrations in China (80% .cn)

Domain Names in China not just another TLD

• Romain Characters .cn • Simplified Chinese .cn• Traditional Chinese .cn• Chinese Characters ”dot”

Chinese Characters• Key Words• Wireless Keywords• 34 Regional suffixes (bj.cn,

sh.cn etc.)• .cn / com.cn/ net.cn /

org.cn

• domain.cn • 清华大学 .cn

• 北京大学 . 中国• 手机

– (‘mobile phone’ in Chinese)

The .cn Domain name regulations have four important characteristics

• It is based on a ‘first come, first served’ principle • Instant registrations• Low costs • Low demands for documentation

• as long as the domain name is available, anybody can register the domain.

Future Domain Name Developments already end of 2009

• New gTLDs - .car, .shop, .brand, .berlin

• New fast track IDNs (internationalized Domain Names) – local characters ”dot” local characters– Chinese government specifies four Chinese character

domain names as the first candidates which are ".Zhongguo (means China)", ".Gongsi (means company)", ".Wangluo (means Internet) and ".CN", which is the original domain name in China's domain name system. *

• VIDEO chinese characters in domain suffixes• *Source: http://english.ipr.gov.cn/ipr/en (China Daily)





name?

Why is internet domain name protection important in China?

• I have a .com domain name or a .cz – that should be sufficiant...

• You heard that Chinese Chery will buy Volvo?• Let us find them:

Chinese Car Manufacturer...easy to find?

Oups, I forgot the ”.” after www

Try again... www.chery.com, right?

I can buy that...just make an offer...

… it must be cherycars.com then…

Or chery-auto.com ?

Or cherymotors.com ?

What about Google then ?

Hmmm….do I have to look for a .cn domain?

Cheryauto.cn ?

Maybe just chery.cn ?

Where is theENGLISH button?

Chinese use and search for .cn...

And Expect Chinese Content!

Internet in China attractive..For foreign companies... And infringers

• More shopping / purchasing online• Easy to establish online business

– Less administration in terms of JVs, WOFEs etc.• Large growing domestic market

• BUT: Easy for Criminals as well– Poor protection for right owners– Easy to stay anonymous– Easy to copy online– Easy to ”hit and run”– Hardly any penalties

Types of Online Threats

• From Cybersquatting to Typosquatting• Online Counterfeiting

– Infringing domain name– Under

• Alibaba.cn, baidu.cn, ebay.cn?• Elsewhere

• Fraud– Scams and slamming

• Phishing• False affiliation

Possible impacts of online criminal activity

• Traffic diversion• Lost emails *@company.cn • Brand dilution• Lost reputation• Lost trust

> Lost business and lost customers or even law suits from consumers against IPR holders!





name?

3. How can European SMEs protect their IP assets online and mitigate related risks?

• Create a Domain Name Strategy– What is the purpose of domain name registrations?

• Protection of IP• Increasing visibility (Online marketing)• Infrastructure (emails, websites, intranet)• Security (risk mitigation – avoid lost emails, lost traffic etc)

....REGISTER! Do not rely on enforcement

First step, though is...

Research

• Domain Name Audit• Which domains are registered – by whom?• How are these domain names being used?

(Web content, emails)

Set guidelines

• Domain Name Policy• Which exact domain names and keywords to

register?– company names, product names, abbreviations,

translations, transcriptions, IDN.IDNs with hyphens? Regional TLDs?

• How to register and use the domain names?– Active use, individual websites for Search engine

optimization, DNS, emails, redirecting?• Which existing third party domain names and

keywords to recover?– Anonymous buy back? Legal actions? Observe?

Monitor and Enforce

• Monitoring • Which possibly infringing domain names are

registered by third parties on an ongoing basis?• Which new websites are selling our products or

eroding our brands?• New Online threats emerging?• New industry trends?• Enforcement• Recover third party domain names, take down of

infringing websites, or take legal actions.





name?

4. The domain name registration process in China

• Translate name– Transliterate and transcript

• Check for availability – Roman and Chinese names– http://www.cnnic.cn/en/index/index.htm

• Check for infringement– Do others hold a right to this domain name (TM, company name?)

• Choose a registrar– Usual European registrar or get Chinese registrar recommended– Foreign registrars http://www.cnnic.cn/html/Dir/2007/06/25/4671.htm

• Activitate domain name– Point to website, create emails, other

• Renew domain name

• Price: 15-40 EUR per .cn domain name per year. Volume discounts typically available.– Multiple periods (1-10 years available)

• Special Chinese Restrictions on domain name registrations are...

Article 27

• 1) Those that are against the basic principles prescribed in the Constitution;2) Those jeopardize national security, leak state secrets, intend to overturn the government, or disrupt of state integrity;3) Those harm national honor and national interests;4) Those instigate hostility or discrimination between different nationalities, or disrupt the national solidarity;5) Those violate the state religion policies or propagate cult and feudal superstition;6) Those spread rumors, disturb public order or disrupt social stability;7) Those spread pornography, obscenity, gambling, violence, homicide, terror or instigate crimes;8) Those insult, libel against others and infringe other people's legal rights and interests; or9) Other contents prohibited in laws, rules and administrative regulations.

• Article 28• Domain Name registrant sign the registrant agreement with the Domain Name Registrar.

(Online)

• Source; China Internet Domain Name Regulations – Order No.30, Ministry of Information Industry of the People's Republic of China (from cnnic.cn)

– Also; please BE AWARE OF...

What to do?

• ignore the email• reply to the email that you will report this email to

CNNIC (the Chinese domain name registry) as a “slamming” and fraud attempt

• forward the email to CNNIC at [email protected]• register some of those domain names you were

maybe already considering to register. Register through your local or usual registrar.





name?

5. How can one recover an infringing.cn domain name?

• Assess impact– Risk– Rights

• Options– Buy back– Legal actions

• Domain Dispute• Go to court

Option 1

• Buy Back– No legal rights?– Urgency?– Anonymous through agent?– Price; typically just lower than alternative dispute

resolution fee

Option 2 – Legal action – Domain Dispute

• Legal assistance:– Send polite cease and desist letter– Send ”threatening” cease and desist letterIf no success or response:

• ‘CNNIC Domain Name Dispute Resolution Policy’. – HKIAC Hong Kong International Arbitration Center

(http://dn.hkiac.org/cn/cne_welcome.html)– CIETAC China International Economic and Trade Arbitration Commission’s

http://dndrc.cietac.org/static/english/engfrmain.html – In Chinese if no other agreement – all documents to be translated– Cost for one domain name dispute case is appr. EUR 450, to which one has to add an

attorney fee of around 1200 EUR. – Duration 2 months

• It is recommended to get assistance from IP Law firms - either Chinese or international - with expertise in domain name disputes.

Option 2 - Legal Action - Domain Dispute

• The main criteria for proving a prior right to a domain name are– the disputed domain name is identical with or confusingly similar to

the complainant's name or mark in which the Complaint has civil rights or interests;

– the disputed domain name holder has no right or legitimate interest in respect of the domain name or major part of the domain name;

– the disputed domain name holder has been registered or is being used the domain name in bad faith.

• Note: A domain name dispute has to be carried out within two years after the initial registration of the .cn domain name. After this period one has to go through the legal system, which can be a timely and costly affair.

Latest decisions – as of April 09

Option 3 Go to court

• If either party wishes to go to court the general legal system takes over from arbitration.

• Costs: 100-600 EUR plus attorney fee!!• Duration:

• within a year (8-10 months)*• Appeal – additional one year

• Sources: Bettinger, 2008: ”Handbuch des Domainrechts.”

Wrap UpPoor Online IPR Protection may lead to– Lost traffic (Direct navigation)– Poor visibility SEO– brand dilution– fraud– lost reputation– lost emails– Counterfeiting– Lost Customers

SolutionsCreate a strategy:– Proactive approach – REGISTER

Cheap and fast – also for infringersMonitor and enforce – Enforcement is working : time and cost consuming

Online IPR Strategy

OperationsDomain name policy, work flows, monitor, enforce etc.

Marketing IT IPR Protection

Visibility Infrastructure and security

Domains as IP assets

IP Strategy Domain Strategy

Thank You

Mr. Simon Cheetham is the TeamLeader for the China IPR SMEHelpdesk and works for ErinyesInternational in London

Questions ?

Helpdesk expert Mr. JannikSkou is based in Denmark and works for Thomsen Trampedach GmbHwww.thomsentrampedach.com

Email: [email protected]: +86 (10) 6462 0892

Website: www.china-iprhelpdesk.eu

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IPR and China – Putting Czech SMEs ahead of the game Presented by Helpdesk Experts: Simon Cheetham

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