Should I File Patents in China?  

POSTED BY Bruce Story AT 10:15 A.M. MAY 20, 2009

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There is a lot in the news about IP piracy and counterfeiting in China. This may cause you to be indecisive about whether or not it is important to file patents there. It is also very clear from the numerous analytics work we have done in almost every industry that only a handful of companies have a clear filing strategy. Many of our clients ask us what they should do. We have seen that today most IP infringement problems in China center around copyright and the entertainment industry, but we are predicting that patent disputes will become in vogue following the historical trends of other companies. Historically, only those companies that have the foresight to develop patents in developing IP countries have early leverage and benefits.

We feel, and have been advising during our IP strategy engagements, that since China is a large manufacturing hub with a large growth market in the world, it is important to protect your intellectual property there. Although intellectual property laws were only enacted relatively recently in China, the Chinese government and industry is recognizing the value in IP. The growth rate of patent filing in China is about 20% per year in the last few years. In fact, 90% of IP enforcement actions are being brought by Chinese against Chinese entities. The government is allowing larger statutory damages awards in IP infringement decisions as it seeks to increase the negative consequences of infringing on intellectual property rights, notwithstanding the challenge of the dichotomy of the future implications of IP rights in a communistic country.

China has three different kinds of patents: Utility Model, Design and Invention. The Utility Model and Design patents have 10 year terms while the Invention Patent has a 20 year term. There is a place for each of these types in your strategy to protect your IP in China.

If you are wondering if you should strategically develop IP rights in China, we would suggest you understand initially what other competitors are doing by developing an IP Landscape and IP analysis of the landscape and if that leads to concerns, you may consider an IP Strategy to guide you to developing the "right kind of IP" in China. You can't enforce IP in China if you don't have IP there! Please contact us if you would like help in developing an IP strategy to protect your rights in China.

Five key issues should always be considered when making a decision on foreign filing of IP:

  1. Presence of competitors selling, making or licensing
    By developing an IP landscape and doing an IP analytics you can know if your competitors are investing in patent protection in a particular country. This may presage their market entry in that country. The Landscape will help you understand the Value Chain, competitors, purchase chain and patent exhaustion issue that will help you deal with what and where to file patents.
  2. Size of relevant market
    By doing a marketing valuation of your product and linking this to the IP Landscape we can get an understanding as to whether the market in China is large enough to justify the expense of filing and maintaining a patent to protect it there. Also, through our IP analysis you may find that there is potential for licensing your patent there? We have provided many IP valuations to help our clients answer these questions.
  3. Ability to enforce
    When considering claims to file, it's important to understand several aspects of the potential claims to see if they have the strength for enforcement. We have been working with our collaboration partners to link patent claims to reverse-engineerablity processes, a key step in understanding if the particular patent claims are detected. Is the legal system of the particular country competent for enforcing intellectual property rights? Is there a good track record of enforcement? Also, our IP navigation service allows us to further strengthen the invention to ensure that it is as strong as possible before filing. We have found many clients requesting this service because it is felt the patents they do file should be very strong.
  4. Future trends
    Even if the answers to the above questions do not drive your company to file patents in China, it's important to consider what the future trends in China are. Almost all predictions show China GNP expanding for the next 20 years and, along with this, their legal system is improving as well. This means manufacturing will continue to move there from developed countries. This forecast tells us and our clients that "in-licensing" (that is, licensing in manufacturing technology to use in China) is increasing to establish a manufacturing base. Our IP dimensional scoring methodology is very useful for reviewing large groups of patents in a field to find those that are valuable enough for you to in-license and for finding early and inexpensive partner arrangements. ipCG has a full staff of trained licensing professional to help you in your goals for in-licensing.
  5. Firewalling
    Many our clients understand that it is very difficult to control their technology once it's released into China. However, ipCG has developed a proprietary methodology for IP firewalling, that includes processes such as 1) locking down trade secrets, 2) bifurcating technology, and 3) redesign inventing for ensuring non reversibility etc.

Through use of ipCG's services and experienced staff, we can help you answer these questions about China and recommend the right IP strategy for your situation.

TAGS: Bruce Story | IAM | Strategy | China
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