According to one report, Chinese intellectual property (IP) theft costs businesses up to $600 billion per year, with some companies exploiting well-known brands to sell counterfeit goods both on the Mainland and internationally via exports. As a small or medium-sized business owner considering an expansion into the territory, it’s natural to be worried that your brand will be at risk, but the truth is, the country has made a great deal of progress in recent years, with changes to legislation designed to protect businesses of all shapes and sizes. At Zudu, we’re passionate about anti-counterfeiting and have even developed exclusive technology to protect businesses ready to push their products to an affluent Chinese audience. Although it is now easier than ever to shield your brand from counterfeiting and theft in China, there’s still a lot of work you need to do. Below, we’ve put together some tips to help you get started.
Register your IP in China
Whether you’re planning on selling your products in China or you simply want to futureproof your business, registering your IP in the country is one of the most important things you can do. It doesn’t matter whether you’re already registered in the UK or in other markets; in China, it won’t be recognised. Unlike many territories, China operates a first-to-file approach to intellectual property, and anyone can register your trademark or trade name before you. If they do, you’ll need to buy it back from them - and even face legal action if you try to use it.
One high-profile example of this is Tesla. Chinese businessman Zhan Baosheng registered the Tesla trademark in the country years before the carmaker began trading there. When it wanted to expand, Baosheng then sued the company. This case was ultimately resolved amicably but demonstrates the importance of acting fast and being cautious of trademark squatters who register names with no intention of using them. If your name’s available, get it!
Trademarks are typically fast and inexpensive to register in the country, whereas patents require your application to be translated into Chinese and filed before public disclosure. It’s possible to backdate a patent application depending on the nature of your business, but we recommend speaking to a local IP lawyer or business expert to manage this on your behalf.
Carefully craft contracts
When you’re working with manufacturers, suppliers, or distributors in China, it’s vital that you review your contracts and ensure that they protect your intellectual property. One of the most common contract types in the country are NNNs, which stands for non-disclosure, non-use, and non-circumvention, designed to stop manufacturers from using your IP or selling it on to others. For example, Apple has an NNN with Chinese suppliers to ensure they cannot build more iPhones for a rival smartphone manufacturer and sell them under a different name.
Although you should work with a local professional who can best guide you through the legal challenges in China, having it looked over by a professional in the UK is a sensible idea. It’s also common for businesses to issue contracts with their manufacturers and suppliers in more than one language to ensure all parties understand the agreement and responsibilities.
Keep a watchful eye
Although it’s impossible to visit every Chinese market and ecommerce store to look for products or services similar to yours, monitoring your IP is a good idea. Search engines can help identify infringements and you can work with a lawyer to issue takedown notices, and request compensation depending on the nature of the breach. The good news is that major platforms such as Alibaba, Baidu, and Taobao take infringement incredibly seriously and will take down content, product listings, or profiles that infringe your rights quickly. You’ll first need to submit proof of IP rights and highlight infringing content or products. Takedowns typically take 2-5 days, though some websites allow defendants to challenge them first.
Think about customs
One of the biggest challenges in protecting your intellectual property rights is that 80% of all counterfeit goods are manufactured in China - with the majority exported to other territories.
Monitoring potential breaches and infringements around the world can seem impossible, but you can register your intellectual property rights with the General Administration of Customs in China (GACC) in the country. Unlike some custom authorities which only worry about imported goods, the GACC examines goods leaving China and can seize those which infringe intellectual property rights. The China IPR SME Helpdesk says the GAAC prevented more than 15,000 containers of infringing products being sold in external markets last year.
The truth is that not every product leaving China will be examined, but registering your intellectual property with the GAAC can go a long way in reducing potential infringements.
Build your Chinese brand
Finally, don’t underestimate the importance of building a strong brand in China. Though you will undoubtedly face more counterfeit and intellectual property infringements as your reputation grows, you’ll also gain favour with the general public. Depending on your digital marketing campaign, you can even position yourself as a leader in your niche, making it harder for competitors to create goods and services that live up to your value proposition.
When we worked with Keith Brewery as part of their expansion into China, we centred our digital marketing efforts around highlighting the difference between the genuine and fake product and allowed users to “verify” the legitimacy of their products with a QR code and WeChat Mini Program. Such efforts are cost-effective, build brand loyalty and advocacy, and help you outmanoeuvre “bad actors” who use others’ intellectual property illegitimately.
Though protecting intellectual property in China can seem like a minefield, it doesn’t have to break the bank or take up all of your time. Let the experts help develop your brand in China and implement policies that will ensure your hard work doesn’t go to waste. Give us a call on 01382 690080 or click here to schedule a free consultation with the Zudu China team.