Advice and anecdotes on protecting IP in China

Think China, and IP protection is not the first thing that comes to mind. While China has historically had a bad reputation protecting IP, panellists at the International Patent Forum in London highlighted some of the improvements made in the country to ensure foreign companies get a fair deal.

Stephan Wolke, head of IP and services at industrial engineering company ThyssenKrupp in Essen, Germany, provided some rather comedic examples of how he went about fighting for his company’s rights.

In 2001, ThyssenKrupp delivered a product to the International Airport in San Francisco. The company did not think of filing a patent immediately and instead made the product and the operating manual available in public records in California. Several years later a Chinese company took the product, patented it in China, and then counter sued ThyssenKrupp for using its own product.

 “It wasn’t funny anymore”, said Wolke.

He then took the Chinese firm to court showing that the technology was public knowledge as clearly illustrated in the drawings and outline in the Californian manual. The case, which began in 2011 (10 years after the product was delivered), was finally decided in ThyssenKrupp’s favour in 2016. This highlights that with enough grit and determination, European companies can bring cases to court and get fair rulings if they show they have all their ducks in a row. 

Finally, Wolke noted that there are significant savings involved if the company is considered high-tech. “You have to have a certain amount of people in R&D and a certain amount of patents.” If a company is registered in China and has at least 10% of its personnel involved in technologically related activities, the company can receive a 15% corporate tax concession.

Also speaking in the session was Andy Bartlett, divisional director of patents at the UKIPO, spoke of the relatively short history of the IP framework in China. “China had no system at all in the early 1980s, including enforcement regime. So in that 35-year period they have introduced initial intellectual property laws.”

With China having a more robust IP enforcement system in place now, more companies are going to court to protect their assets. Domestic companies are using the system to sue each other for infringement, with foreign-brought cases representing just 1.5% of all cases, Bartlett said.

“With so few cases the courts have the incentive to get the rulings right,” said Bartlett. He added that where there is wilful infringement of IP, the damages can increase 500%.

The third speaker was David Lambourne, head of IP at UK-based Morgan Advanced Materials, a global manufacturer of specialist products. He began by advising those looking to protect their IP in China to get on a plane and meet with people. He said: “One of the most beneficial things is jumping on a plane and talking to the IP providers. Talk to government services, and most importantly, road test a hypothetical with them.”

The panellists concluded that China has made significant strides in IP protection over the last 35 years. Managing IP reported in 2017 that foreign-based companies had a win rate of 80% in patent litigation trials. While the judicial system in China may still be in a fledgling state, increased domestic demand for protection has driven the need for more improvements in the judicial system. While far from perfect, the system is much better than it was.