Intellectual Property And Sourcing from China

A startling proportion of products sold in the UK are sourced from China. In today's competitive market UK retailers are seeking to cut costs and sourcing directly from China is a common solution. In doing so, retailers need to take steps to avoid infringing their original supplier's intellectual property rights ("IP rights").

What IP rights might be relevant?

The main IP rights of relevance to retailers are patents, designs, copyright and trade marks:

Patents

Patents protect new products (or parts of products) for up to 20 years. For example, if the product in question is an umbrella with an innovative opening mechanism, that mechanism could be protected with a patent.

Designs

Designs protect the appearance of products . There are different types of design rights, the registered right lasts for up to 25 years and the unregistered right lasts for 3 years. Taking the example of the umbrella, a design could protect any patterns on the material of the umbrella, or the shape of the handle or case. In the UK there is an additional design right which protects the shape and/or configuration of products for 10 to 15 years. This right is unique to the UK and can be a particular problem when dealing with Chinese factories who have not dealt with the UK before because they are often unaware of the right. Hence product which can be sold successfully into continental Europe cannot always be sold in the UK.

Trade Marks

Trade Marks are words or logos which distinguish one trader's products from another's. Examples include 'Coca Cola', 'Sony' or 'IBM'.

Copyright

Copyright protects recorded material, such as writing, music and films. In the context of fast moving consumer goods, copyright is mainly encountered in the context of instruction booklets, point of sale material (such as photographs) and packaging.

Risk Assessment

Having selected the products to be re-sourced, retailers need to assess whether direct sourcing could infringe their original supplier's IP rights.

As part of this assessment retailers should review their contract with the original supplier. Some retailer's contracts will have passed IP rights in the relevant products to the retailer, meaning that direct sourcing is low risk.† Realistically, however, many retailer's contracts will not mention IP rights, or there will be no written contract.

Retailers will generally need to assess the products and work out what IP rights could apply. Retailers need to assess the position both...