Why Should I Protect My IP in China?
In 2021, around 110,000 invention patents were granted to foreign applicants in China, a YOY increase of 23%. In the same year, 194,000 trademarks from foreign applicants were approved, a YOY increase of 5.2%. In recent years, IP applications from foreign applicants have generally steadily increased, although Covid-19 has had a great impact on 2020’s numbers. This trend demonstrates an increased confidence in China’s IP protections.
So, why should you seek IP protection in China to begin with? Does it actually work, given the notorious threat of counterfeits? This article will answer your questions.
What value does IP contribute?
generate income through licensing and sales;
increase a business’ value to investors and financing institutions; and
increase sale, merger, or acquisition value.
IP carries extra marketing value in China
If your product is innovative, then having your IP registered is a good way to build the credibility of your brand and make a good impression to your potential clients. Registration is the ultimate proof of originality. Furthermore, if your product is related to new technology, registration proves you have the ability, capability, and resources to carry out innovative research. It’s all about proving that you are who you say you are.
Registering your IP can protect your interests in potential markets
Even if you don’t currently have a plan for the Chinese market, this is still important. China is a big market; by registering your IP, you are protecting your potential interests in the market for the future.
The protection must be considered in two ways:
preventing counterfeits and removing counterfeits from the market; and
avoiding having your product removed from the market by counterfeiters.
In recent years, China’s IP protections have improved, especially on ecommerce platforms that used to be notorious for counterfeits. For example, Alibaba has established its own IP protection system, where registered IP owners can report products that have infringed their rights on the platform and typically, said product will be removed within 3-5 working days. However, the problem remains for those who have not registered their IP.
China has a history of IP squatting. The country uses a first-to-file system, meaning that if someone patents your invention before you do (if you do not have priority due to applying for the patent elsewhere), then they become the owner of that patent. Using the IP protection methods mentioned, they can actually block your product from sale, as you are now deemed the ‘counterfeit’. In this scenario, it’s extremely difficult and expensive to revoke their rights to the IP.
The bottom line: Don’t “因小失大” (lose the big because of the small)
Even if you register your IP, there may still be counterfeits, meaning you will likely lose some of your market share and profits. However, don’t let this likelihood dissuade you from taking early and crucial action! With proper protections, you can keep this loss minimal, and if you don’t register your IP, you could well become the ‘counterfeiter’, meaning you may lose all of the Chinese market.
Please note: the contents of this article do not constitute legal advice, and are only for general information and advice.