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Protect your IP in China and other overseas markets

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Protect your IP in China and other overseas markets article image

If you are thinking of exporting into a foreign market you need to ask, does your business own or use any kind of intellectual property (IP)? IP is the intangible property of your mind or intellect. The IP owned or used by a business can include trademarks, copyright works, designs, patents and trade secrets. Even though you may have created your IP, you do not always automatically have the exclusive rights to use, exploit or stop others from using it. Furthermore, in some instances it may be possible for others to stop you from using your IP even though you created it. In Australia (except for copyright and circuit layout rights) you must take steps to protect your IP, either under a formal registration system or by contractual means. It is also important to check that use of your IP is not infringing on other people's existing IP rights. The IP used by your business should be treated in the same way when expanding overseas. Before entering foreign markets you should ensure that IP risk management forms a central element of your business strategy. IP risk management identifies and manages your IP risks and allows your company to make decisions on how to maintain important controls over its ownership without infringing existing IP rights of others in a foreign country. Failure to ensure that your products don’t infringe on the IP rights of others in a foreign market before you enter that market can be costly. For example, if you use a trademark in a foreign country which is identical or similar to another trademark registered in that country by a third party for similar goods, you could be liable for trademark infringement. If infringement is suspected, your products may be detained at the border and their distribution stopped. If you are found to infringe another party's IP rights, in addition to hefty fine imposed at the border, you may be forced to cease selling the infringing products or pay damages if litigation ensues. As well as identifying and managing your IP risks, the next step before venturing overseas is to protect your IP from being infringed. This is because if your exported products are popular overseas there is a likelihood that opportunists will want to market or develop similar goods by copying your products, technology or branding. Without sufficient IP protection in place it may be difficult or impossible to prevent piracy of your IP. This will ultimately result in a loss of market share or profit for your business and, in some circumstances, damage to your company's reputation (from low quality imitation products).

Managing your IP risks: a checklist

Here are some measures you should consider before making that big move overseas. 1    Contact an experienced IP professional. An experienced IP professional can assist in identifying the IP in your business (such as a trademark, patentable technology, a design or copyright) as well as implementing a suitable IP risk management strategy for the country concerned. 2    Find out about the legal environment and understand the commercial realities of your country of interest. Although there has been a significant trend for countries to harmonise their laws and procedures regarding the protection and enforcement of IP, it is important for businesses to realise that many areas of considerable difference between countries remain. For instance, some countries do not recognise various IP rights unless they has been registered in the respective country. See Did You Know? below for more information.. 3    Undertake marketplace and infringement searches in your country of interest. When entering an overseas market, it is important to ascertain if your IP infringes on any existing IP rights in that country. These searches are essential to minimising your risk of infringement and damages and should be conducted by an IP professional. IP searches are much more complex than a simple search of the internet and generally also involve searches of formal IP Registers in your country of interest. 4    Obtain protection for your IP in your country of interest. You should arrange to protect your IP in the market you are entering and seek advice as to whether your IP should be protected under a formal registration process in the overseas country (such as trademark, patent or design registrations) or by contractual means (such as confidentiality agreements). 5    Select your business partner carefully. If you are taking on a business partner in your venture overseas, make sure that you choose carefully. Look for a partner with an established reputation who has IP of their own. Other considerations include: •    deciding which company will own the IP relating to the exported product •    identifying where respective interests, commonality and competition lie •    inserting IP protection clauses in contracts with employees and partners, as well as in marketing plans and •    ensuring that you have signed confidentiality agreements with your partner and its employees and contractors. 6    If your business intends to design or manufacture products overseas, consider: •    including IP protection measures during the design process (for instance by ensuring that employees sign confidentiality agreements and assign any IP created under their employment to your business, as not all countries presume IP developed by employees belong to the employer)

•    conducting an ‘IP audit’ of your entire supply chain and pinpointing areas of potential attack •    maintaining secrecy around sensitive or key elements of the production process •    spreading manufacture across different locations in order to prevent imitations and overruns of your products being made. By following these guidelines you can ensure that you minimise your IP risk and maximise your chances of success in a foreign market.

Case study

Apple asserts its trademark rights in China

Apple’s experience highlights the importance of implementing an IP risk management strategy prior to expanding overseas. In 1993 Apple Inc. obtained Chinese registrations for Apple and the Apple logo which would last until 2013. In 2008 a Chinese electronics company used a logo consisting of an apple with two wings on its website, products and packaging. Fortunately Apple was able to assert its registered rights and the Chinese company was ordered to pay damages of 400,000 yuan (approximately AUD66,000) for infringing its trademarks. China has a ‘first-to-file’ rule for trade marks. This means that the first person to file a trademark application will have priority over a prior user of the mark in China. Had Apple not formally protected its trademarks under the Chinese registration system, it would have had much more difficulty in asserting its trademark rights over the Chinese company.

Did you know?

•    A patent granted in Australia does not offer any protection in other countries. •    Copyright must be registered in some countries such as the United States and China before it can be enforced. •    Trademarks in countries with different alphabets or characters should be registered in those alphabets. •    China, Indonesia, Japan and South Korea follow a ‘first-to-file’ rule in relation to obtaining trademark rights. This means that the first person (or company) to file an application for a particular trademark in one of these countries generally has priority over a prior user of the same mark in that country. In other words, if a company that has been using a particular trademark or brand fails to register it, another company may potentially steal the trademark by registering it first.

Further information

IP Australia, the Federal Government agency that administers registered IP rights, has a suite of country-specific fact sheets explaining what Australian exporters should know about protecting their IP overseas (http://www.ipaustralia.gov.au/ippassport/index.shtml). Each fact sheet describes various challenges exporters may face in a specific market such as the US or China and key differences between the IP system in that market and Australia. -Ann Fen Lim is an IP specialist and a Partner at Linkwell Lawyers in Sydney, Australia. 1315 WORDS

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