“WORKING EFFECTIVELY WITH CHINA” – Prevention is better than cure!

Earlier this month, ACID Accredited law Firm DMH Stallard and ACID co-hosted a successful forum entitled “Working effectively with China”. Attendees from various different industry sectors were addressed by Simon Rodwell, Director of Hunter Rodwell Consulting, who has 28 years of experience in business, consultancy and as a government adviser in China, and by members of the Intellectual Property team at DMH Stallard. Simon spoke of the main issues affecting SME’s dealing with China in terms of the protection of their intellectual property rights and preventative measures against infringement. His clear message was that ‘prevention is better than cure’ and that there are many options companies can take to protect their intellectual property rights without the need to litigate.

The key points arising from the forum were that registering intellectual property rights, undertaking due diligence on potential partners or customers in China, and having effective commercial contracts in place can pay dividends in terms of reducing the risks of later infringement and in managing enforcement more effectively. Lunch forums are just one example of industry specific initiatives supported by ACID’s accredited law firms and provide useful member feedback which helps to form ACID’s strategy on subject specific matters in the future.

Defending your IP in China — Prevention is Better than Cure! – Simon Rodwell’s Guidelines.

As in so many spheres of commercial activity, there is a contrast between the experiences of SMEs and the large corporates in attempting to defend their IPR in a remote market. SMEs tend to bear the greater burden because they find it harder to afford advisers, lawyers and other resources to help them fight abuse. They also have fewer managers and may exert less influence on their national authorities and trade representatives in China. When problems occur many smaller companies are unable to meet the costs of taking legal or administrative enforcement action against infringers: costs which must be measured in management time as well as in money.

Some SMEs are under the illusion that China is a market where they can disregard the normal business disciplines and ‘make a quick buck’; others are so put off by the perceived dangers to their IPR that they stay away. The sensible answer is often to take a middle course: prepare, assess the risks and keep one’s eyes open when in the market.

Above all, there is a need for effective avoidance measures. These should be part of all companies’ strategies for protecting their IP, whether they are exporting or investing overseas. A high proportion of European SMEs — the EU estimates up to 80% — fail to register their IP rights, which precludes them from fighting cases through conventional means.

As well as explaining the need for adequate preparation, this presentation briefly reviews various practical methods for avoiding IPR infringement, including the necessity for commercial discipline in areas such as due diligence, documentation, contracts, staff and operating procedures, and suggests ways in which companies can obtain external assistance.

Undertaking these measures in a distant and complex market is not easy. But sensible preparation aimed at avoiding infringement can be the most straightforward – and cost-effective – means of protecting your intellectual property from abuse.

ACID Guidelines

Register your IP rights in both the EU and also in China. Seek the advice of a specialist IP lawyer based in China.

Ensure you use agreements which you can rely on in China. Find out comprehensive background information about the manufacturer, try to get a recommendation and visit their factory. The more involved you are on a personal basis with your Chinese business counterparts, the better the relationship will be

Always put detailed agreements in place with the manufacturer, be it an initial confidentiality agreement or a manufacturing agreement further down the line. Ensure you use the services of a translator who has a proven track record

Always obtain an acknowledgement of your IP rights in all agreements

Educate the manufacturer about IP law. Demonstrating a strategy for a fierce defence of IP will communicate a strong message

Monitor the market for any infringing products and enforce your rights to give signals that you are serious about your rights

Retain audit rights over their books and their factory and use these rights to conduct regular visits to their factory, especially on termination of any agreements. If you are suspicious you should consider instructing investigators to approach the manufacturer posing as a potential customer to see whether they are prepared to supply your designs to third parties

Keep written records of all commercial dealings. Keep control of physical aspects such as documents, tooling, packaging, production and especially production overruns
If your IP rights are infringed in China, it is best to bring your case to the attention of the judicial authorities and encourage them to take action by filing a private criminal prosecution, as police and prosecutors are not always keen to pursue IP cases.

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