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Protec8ng  your  IPR  in  China:  Prac8cal  

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Peter  Corne  &  Janet  Wong  13  March  2014  

 

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Today’s  Speaker    Peter  Corne    Managing  Partner,  Shanghai  Office      Co-­‐Chair,  Asia  PracGce  Group  Dorsey  &  Whitney  LLP    Tel:  +86(21)  6135  6100    Email:  Corne.Peter@dorsey.com  

 

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Today’s  Speaker    Janet  Wong    Partner,  Hong  Kong  office      Dorsey  &  Whitney      Tel:  +852  2105  0266  Email:  Wong.Janet@dorsey.com  

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Agenda:  •     Introduc8on–  IP  management  in  China  

•     How?  Difference  between  patents  and  trade  secrets  

•     Key  quesGons  to  consider  when  structuring  an  IP  porTolio  

•     Common  piTalls      

•     Prac8cal  strategies  for  protecGng  your  IPR  

•     Case  studies  

•   Take  –  away  messages  

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Poll  1  Which  cleantech  sector  best  describes  your  business?    

   A:  Power  generaGon  (wind,  solar,  Gdal,  marine)  

   B:  Biofuels  /  Energy  efficiency  

   C:  Power  storage  

   D:  Recycling  and  waste  

   E:  Others  

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Introduc8on:  ü  China  presents  great  opportuniGes  for  cleantech  ventures  but  this  market  

is  highly  compeGGve  

ü  Building,  formulaGng  and  management  of  IPR  is  important  for  cleantech  

ventures  in  China  

 

 

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Common  Ques8ons  1.  Do  we  have  to  file  patent  applica8ons  for  all  technologies  in  China?  

2.  How  can  we  do  that  given  a  limited  budget?        

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Patent  vs.  Trade  Secrets    

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Patent   Trade  Secrets  Length  of  protec8on  

20  years  for  invenGon  patents;  10  years  for  uGlity  model  patent  and  design  patent  

No  Gme  limit;  as  soon  as  it  has  been  kept  confidenGal    

Strength  of  protec8on  

•  RelaGvely  strong  •  Can  protect  technologies  which  are  

vulnerable  to  reverse  engineering  

•  RelaGve  weak  •  Independent  R&D  and  reverse  

engineering  is  not  barred  •  No  risk  of  compulsory  licensing  

Requirements  for  protec8on  

•  RegistraGon  requirement  •  Rigorous  examinaGon  and  straight  

patentability  criteria  

•  No  registraGon  requirement  •  Subject  to  definiGon  given  by  

statutory  and  judicial  opinion  

Timing   •  May  take  years  to  complete  the  registraGon  to  gain  full  protecGon  

•  Full  protecGon  takes  effect  immediately  

Patent   Trade  Secrets  Exclusivity   •  Enjoy  exclusivity  during  the  

producGon  period  •  Cannot  exclude  bona  fide  third  

party  from  independent  R&D,  reverse  engineering  and  reasonable  use  

Publicity     •  Mandatory  disclosure  during  patent  registraGon,  no  maAer  whether  the  patent  is  granted  or  not  

•  The  technology  will  eventually  enter  into  the  public  domain  

•  Can  be  kept  out  of  public  domain  so  long  as  confidenGality  can  be  successfully  maintained  

Costs   •  Patent  applicaGon  fee  •  Progressive  annual  fees  

•  No  registraGon  fee  •  Cost  to  maintain  confidenGal  status  

(can  be  very  high)  

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Patent  vs.  Trade  Secrets  (Cont’d)  

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Poll  2    Are  you  currently  opera8ng  in  China?    

       A:  Yes  

       B:  No    

       C:  I  am  Planning  to  

Key  Ques8ons  to  Consider  when  Structuring  an  IP  PorTolio  1.  How  long  is  the  lifespan  of  the  innova8on?  

2.  Will  the  technology  be  granted  a  patent?  

3.  What  will  the  commercial  value  be?  

4.  How  important  to  keep  the  relevant  technical  details  out  of  the  public  

domain?  

5.  To  what  extent  does  the  company  need  market  exclusivity?    

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Key  Ques8ons  to  Consider  when  Structuring  an  IP  PorTolio  (cont’d)  6.  How  important  will  a  strong  defensive  posi8on  be?  

7.  How  vulnerable  is  the  technology  to  independent  R&D  and  reverse  engineering?  

8.  How  important  is  the  innovaGon  to  provide  leverage  for  licensing  and  partnering  opportuni8es  (such  as  joint  ventures)  or  increasing  valuaGon?  

9.  What  approach  will  beAer  build  business  credibility  and  boost  investor  confidence?  

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Ac8ve  Areas  of  Cleantech-­‐related  Patents  •  Smart  grid  •  Enabling  and  interfacing  technology  •  Energy  storage  •  Carbon  capture  and  storage  /  recovery  •  Emission  calibraGon  •  Offshore  wind  •  Electric  vehicles    •  Nuclear  •  Combined  heat  and  power  

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Common  PiTalls  •  Fail  to  iden8fy  IP  assets    •  Fail  to  take  out  appropriate  measures  to  protect  IPR  promptly    •  Assume   that   IPR   will   be   automa8cally   protected   or   owned   by   your  

company  •  Assume   that   the   IPR   protec8on   environment   is   same   as   your   home  

country  •  Fail   to   put   in   place   contractual   safeguards     (e.g.   confidenGality   or   non-­‐

compete)  with:  –  Employees  –  Business  partners  –  Other  third  parGes  

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Enforcement  of  IPR  in  China  •  Administra8ve  ac8ons  

–  Intellectual  Property  Offices  (IPOs)    –  AdministraGons  for  Industry  and  Commercial  (AICs)  –  Quality  and  Technical  Supervision  Bureaus  (QTSBs)    –  Copyright  Bureaus  

•  Criminal  sanc8ons  –  Public  Security  Bureaus  (PSBs)  

•  Customs  ac8ons  •  Civil  li8ga8on  

–  specialized  IP  courts  

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Prac8cal  Strategies  for  Protec8ng  your  IPRs  •  Assess  strengths  and  weaknesses  of  your  technologies  vis-­‐à-­‐vis  compe8tors  •  IdenGfy  the  appropriate  technologies  for  seeking  patent  inven8ons  

–  in  the  right  countries  –  in  the  right  types  –  using   the   right   strategies   (e.g.   keep   related   applicaGons   patent   pending,  

expedite  examinaGon  of  patent  applicaGon  or  defensive  publicaGon)  •  Don’t  forget  to  seek  registered  protecGon  for  other  registrable  IPR    

–  Sopware  –  Copyright  –  Trade  mark  –  Customs  recordaGon  

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Prac8cal  Strategies  for  Protec8ng  your  IPRs  (cont’d)  •  Take  out  adequate  measures  to  protect  trade  secrets    

–  physical  /  technical  –  contractual  

•  Put  in  place  contractual  safeguards  or  incenGve  programs  for  employee-­‐inven8ons    

•  Explore  opportuniGes  to  leverage  off  other  IPR,  e.g.    –  strategic  acquisiGons  –  joint  R&D  –  cross-­‐licensing  –  improving  exisGng  technologies  from  others  

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Case  Study  1    •  A   foreign   energy   technology   company   accuses   its   former   customer,   a   PRC  

company,   of   (a)   copyright   infringement,   (b)   thep   of   trade   secrets,   and   (c)  unauthorized  use  of  certain  turbine  control  sopware  source  code  and  the  binary  code  or  upper  layer  of  its  sopware.    

•  The   foreign   company   has   brought   a   series   of   proceedings   against   the   PRC  company  in,  inter  alia,  China.  

•  The  local  Intermediate  People’s  Court  threw  out  the  suit  of  the  foreign  company  on   jurisdicGonal   grounds   that   this   is   a   contractual  dispute  between   the  parGes  which  should  be  governed  by  the  Beijing  ArbitraGon  Commission.  

•  The  foreign  company  appealed  this  case  to  the  Supreme  People’s  Court  (SPC)  on  the   basis   that   it   is   purely   a   copyright   infringement   dispute   rather   than   a  contractual  maAer.    The  SPC  has  accepted  the  appeal  and  transferred  this  case  back  to  the  Immediate  People’s  Court  for  trial.  

It  is  important  to  properly  manage  and  safeguard  your  IP  assets  and  be  prepared  to  enforce  them!  13  March  2014   21  

Case  Study  2    Tesla  Motors  v.  Zhang  Baosheng  

•  ZHAN  Baosheng,  a  Chinese  businessman,  applied  for  a  series  of  TESLA  /  Te  Si  La   (特斯拉)   marks   in   China   between   2006   and   2009   prevenGng   the   U.S.  electric   car   designer   and   manufacturer,   Tesla   Motors,   from   using   and  registering  these  marks.  

•  Zhan   also   operated   a   website   using   a   “Tesla   Motors”   .cn   domain  (www.teslamotors.com.cn)   and   a   Tesla-­‐branded   account   on   the   Chinese  microblog  site  Sina  Weibo.  

•  Tesla   Motors   subsequently   filed   a   series   of   opposiGon   and   cancellaGon  proceedings  against  ZHAN’s  filings  for  the  TELSA    /  Te  Si  La  marks.  

•  According  to  public  reports  in  Jan  2014,  Tesla  Motors  has  resolved  a  trademark  issue  that  had  long  prevented  it  from  using  “Te  Si  La”,  its  preferred  version  of  its  name  in  Chinese,  in  China  (by  way  of  seAlement?).  

Trade  mark  rights  cannot  be  neglected  in  the  first-­‐to-­‐file  country!  

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Case  Study  3  Huge  fine  imposed  on  a  French  winemaker  suspended  

•  Castel,   a   French   winemaker   established   since   1949,   had   been   using   the  Chinese  characters  Ka  Si  Te  (卡斯特)  for  its  markeGng  in  China  but  failed  to  get  this  name  registered  as  a  trade  mark  in  China.  

•  Castel  sought  to  cancel  a  trade  mark  registraGon  for  Ka  Si  Te  used  by  a   local  wine  company.  

•  In  return,  Castel  was  sued  for  trade  mark  infringement.    •  Castel  was  order  by  the  Intermediate  People’s  Court  in  Wenzhou  to  pay  a  fine  

of   RMB34  million   (around   4  million   Euro)   for   trade  mark   infringement.   The  said  ruling  was  uphold  by  the  Wenzhou  High  People’s  Court.    

•  The  highest  court,  Supreme  People’s  Court,   recently  ordered  a  re-­‐trial   in   this  case  which  will  have  the  effect  of  suspending  the  payment  of  the  fine.  

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Case  Study  4  •  Employee  X  was   involved   in  developing  certain   technologies   for  Company  A.  

Employee   X   lep   Company   A   and   joined  Company   B.     His   role   is   to   develop  technologies  similar  to  that  he  was  developing  at  Company  A.      

•  Employment   Contract   between   Company   A   and   Employee   X   was   silent  regarding   restricGon   or   prohibiGon   from  working   on   similar   technologies   for  compeGtors  aper  terminaGon  of  employment.  

•  Company  B  files  a  patent  applicaGon  for  technologies  developed  by  Employee  X.  

•  Employee  X  asks  for  compensaGon  in  connecGon  with  technologies  covered  by  the  patent  applicaGon.  

•  Company  A  is  considering  whether  to  sue  Company  B  and  former  Employee  X  in  connecGon  with  technologies  developed  by  former  Employee  X.  

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Take  Away  Messages  

ü  Iden8fy  and  assess  your  IPRs  

ü  Take   out   protec8ve   measures   to  

safeguard  your  IPRs  

Ø Not   only   your   technologies   but  also  your  brands!    

ü  Exploit  your  IPRs  

ü  Seek  legal  advice  

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Q&A  

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    Peter Corne Managing Partner, Shanghai Office Co-Chair, Asia Practice Group Dorsey & Whitney LLP Tel: +86(21) 6135 6100 Email: Corne.Peter@dorsey.com

    Janet Wong Partner, Hong Kong office Dorsey & Whitney Tel: +852 2105 0266 Email: Wong.Janet@dorsey.com

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