Intellectual Property Legal News: January 24, 2013 - Volume 1, Number 1

FIGHTING COUNTERFEITS IN CHINA - LIGHT AT THE END OF THE TUNNEL?

by Peter C. Pang, Washington, D.C. Office

While many foreign companies believe that China represents an exceptional business opportunity, concerns over patent, trademark, and copyright protection have long been viewed as a barrier to moving forward. While knock-off and copy-cat products originate in many countries, China was for years -- and still is -- considered the most flagrant offender.

In a private conversation with the Technical Services Bureau (TSB) of the Administration of Industry and Commerce (AIC), it was estimated by a senior official that perhaps as much as 6% of the Chinese GNP has some link to “unauthorized production of products”. This is a staggering number in view of the fact that China is the world's number 2 economy. Because it is an industrious and capable nation, churning out more college graduates per year (6 million plus) than the entire population of Norway (according to CBS Interactive, Inc.), with a knack for re-engineering products and a relatively cheap labor pool, it doesn't take much for a factory to replicate genuine articles sourced abroad.

Stamping out counterfeits in China for many companies has been a frustrating and unrewarding game of cat and mouse. Just when you think it is wiped out another infringer surfaces to take its place. Is there a smart and cost effective way of dealing with counterfeits in China?

The answer is “yes”, and it starts with a carefully thought-out and smartly implemented strategic brand program that involves both defensive and offensive measures designed to protect, preserve and enhance the value of intellectual property. One of the significant components of this strategy is for companies to determine exactly what their trademark status is in China, whether they are actively working or selling in China or not. Hundreds of products with well-known brand names that have historically only been sold outside of China may already be registered inside China by other parties. It is therefore conceivable that an unsuspecting foreign manufacturer doesn't even know that similar products, often of inferior quality, are already being sold under its brand in China. As China is a “first to register” country, having your key trademark rights properly registered early on - even before you enter the market - is an important component of a sound IP protection strategy.

When piracy cuts into a manufacturer's bottom line, aggressive...