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Challenges of Protecting IPR in ChinaKnut K. Wimberger | emage workshop @ Austrian Patent Office, 19.06.2008
austria wirtschaftsservice 2
• aws Innovation Protection Program
• Protecting IPR in China - Challenges
• China‘s IPR system & policy
austria wirtschaftsservice 3
aws – Austria‘s promotional bank
a bank 100 % owned by the Republic of Austria („AAA“) limited liability company (GmbH) develops and implements programs according to the economic policies of the Austrian government
Focus: Financial and Service Support of investment projects of Austrian companies in Austria and abroad.
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aws Innovation Protection Program:
Increase awareness about the
importance of IPR protection
Support development of a global IPR strategy and IPR portfolio
Encourage the registration of
IPR in emergingcountries
Support enforcement of IPR
in case of infringement
Overall goal:
The protection of IPR of Austrian companies in emerging markets.
Strategy:
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IPP Service Network
Local partners: Patent agents Law firms Investigators Patent Offices Administration for Industry and Commerce Supreme Courts
The provinces: 90% of Austrian companies in China are located there Most of the IPR cases take place there
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IPP Financial Support
For SMEs, aws subsidizes up to 50% of the
registration and enforcement costs.
IPR Registration
Patent registration in China (without translation): ~ € 500 Trademark registration: ~ € 500 Utility model registration: ~ € 1.000 Patent registration from Austria
(PCT, including translation): ~ € 3.000
IPR Enforcement
Administrative proceedings: € 3.000 + Civil action: € 5.000 +
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• aws Innovation Protection Program
• Protecting IPR in China - Challenges
• China‘s IPR system & policy
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Why companies do not register their IPR in China:
Doubts that IPR in China represent „rights“ that can actually be protected
Corruption Bureaucracy Language barrier Resources (time, money, people)
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Counterfeiting in China:
Seven in ten European companies doing business in China say they have been victims of IPR theft.
In 2006, European manufacturers estimated that IPR theft cost them one dollar in every five they made in China.
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Most of the European Brands are counterfeit…
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Bags & baggage…
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Anoraks…
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Shirts…
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Shoes…
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Ties…
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Cosmetics…
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Watches…
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Genuine/Counterfeit Drugs
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Pens, lighters, razors…
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Oils…
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Cigarettes...
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Toys…
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Counterfeit Luxury goods…
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Child shoes…
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Candies…
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Fake car parts, including brakes…
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… and even entire cars designs
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Typical Trademark Infringement
Original
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Trademark Infringsments
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Infringing TM Application
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It‘s not only about the Chinese market:China‘s exports to the EU grow significantly
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Not only exports, but also FDI: China‘s FDI outflows reaches new records
Source: Economist
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China – the no. 1 in counterfeiting?
Origin of goods seized by EU customs (EU 2006 / OECD 2007)
China; 38%
Thailand; 10%HK; 8%
Turkey; 7%
Malaysia; 4%
USA; 4%
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Amount of seized goods at AT borders
(BMF 2006)
China; 23,35%
Thailand; 6,20%
HK; 7,32%
Turkey; 6,51%
USA; 0,40%
Others; 54%
India; 2,47%
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Corruption remains a major problem: Corruption Index 2006(Transparency International)
Rank Country 2006 2005 20045 Singapur 9,4 9,4 9,3
11 Austria 8,6 8,7 8,420 USA 7,3 7,6 7,542 South Korea 5,1 5,0 4,545 Italy 4,9 5,0 4,870 China 3,3 3,2 3,470 India 3,3 2,9 2,8
121 Russia 2,5 2,4 2,8156 D.R.Congo 2,0 2,1 2,0
Rank Country Score
1 Switzerland 7.8
2 Sweden 7.6
3 Australia 7.6
4 Austria 7.5
5 Canada 7.5
6 United Kingdom 7.3
7 Germany 7.8
8 Netherlands 7.3
9 Belgium, U.S. 7.2
11 Japan 7.1
12 Singapore 6.8
13 Spain 6.6
14 UAE 6.6
15 France 6.5
18 Hong Kong 6.0
26 Taiwan 5.4
29 China 4.9
30 India 4.6
Bribe Payers Index 2006
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Bureaucracy:Government institutions responsible for IPR
State Council国务院
State Intellectual Property Office (SIPO)国家知识产权局
Ministry of Agriculture 中国共和国农业部
General Adminstration of Customs (GAC)
海关总局
Ministry of Public Security (MPS)公安部
State Administration for Industry and Commerce
(SAIC) 国家工商行政总局
National Copyright Adminstration (NCA)
国家版权局
Local Copyright Authorities地方版权局
Trademark Office (TMO)商标局
Local Administrative Authorities for Industry and Commerce
(AIC)地方工商行政局
Supreme People’ s
Procuratorate (SPP)
最高人民检察院
Local Administrative Authorities fort Patent Affairs (AAPA)地方知识产权管理局
Chinese Patent Office
(CPO) 专利局
Patent Re-examination
Bureau (PRB) 专利复审委员会
Trademark CopyrightPatent
Fair Trade Bureau 公平交易局
Trademark Review and Adjudication Board 商标评审委员会
State Forestry Administration 国家林业局
© aws2006 KW
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Language barriers and costs:
Chinese lawyers charge fees that are comparable to European amounts
Multi-lingual Chinese staff is expensive to hire (and to retain)
Interpretation of laws and regulations often vage and depending on regional interpretation
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Risks of having no IPR in China:
No legal basis to defend IPR against infringement
Collateral damage in third party countries (Chinese exports)
Less competitiveness in ChinaPotential IP „attacks“ from
Chinese competitors
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• aws Innovation Protection Program
• Protecting IPR in China - Challenges
• China‘s IPR system & policy
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Past and Future of the Chinese IPR System
200.000
180.000
160.000
140.000
120.000
100.000
80.000
60.000
40.000
20.000
Patentapplications 1996 - 2006
Invention
Utility ModelDesign
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
1.4.19851.Patent Law
2000
2.Amendment of Patent Law
(TRIPS )
04New IPCustomsRegulations
1985
Accession to Paris Convention
1995IP – Customs Regulation
19933.Chamber Introduced To courts
05New penalRegulations regarding IP
1997
Penal Law Amended for IP matters of fact
2003Umsetzungs -verordnung tritt in Kraft
19921.AmendmentTo Patent Law
11.12.2001
WTO Accession
1994
Accession to PCT
Patent Duration
06IP Complaint and Service
Centers
present
Currently 3. AmendmentIn the works – no reaction to comly withInternational treaties, but implementation of national IP policy
0611th 5.year programContains separate IP
chapter
2006 Patent Applications at largest Patent Offices:1. JP 427.0782. US 390.7733. CN 173.3274. KR 160.9215. EP 128.7136. DE 60.2227. TW 47.841 AT 2.505
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850.000 IP lawsuits in the making
0
50000
100000
150000
200000
250000
300000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Inventi on
Uti l i ty Model
Desi gn
Patent Applications, Source: SIPO Source: Economist
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Dual Track IP-Enforcement
Rechtsdurchsetzung
(auf Antrag des Rechtsinhabers auch
parallel)
Behörde
Gericht
Regionale Büros der National Copyright Administration (NCA)地方版权局
Formal-entscheidung (Bestehen der IP-Verletzung)
Entscheidung in der Sache
(Schadens-schlichtung)
Verwaltungs- verfahren gegen die
Behörde
Zivilrechts- Verfahren gegen
den Verletzer
Mittleres Volksgericht中级人民法院
(Kammer für Verwaltungssachen,
1. Instanz)
Berufung
Hohes Volksgericht高级人民法院
(Kammer für verwaltungssachen,
2. Instanz)
Mittleres Volksgericht中级人民法院
(3. Kammer: Zivilsachen, 1. Instanz; Bestehen der
Verletzung und der Schadenshöhe)
Berufung
Hohes Volksgericht 高级人民法院
(3. Kammer: Zivilsachen,2. Instanz bzw 1. Instanz bei Streitwert > 100mio
RMB))
Revision
Oberstes Volksgericht 最高人民法院
(3. Kammer: IP-Sachen)
Regionale Büros der Administrative Authorities for Patent Affairs (AAPA)地方知识产权局
Regionale Büros der Administration for Industry and Commerce(AIC)地方工商行政管理局
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Enforement Methods
Method Decision Dis-Advantage
1 Cease & Desist Letter IPR owner / infringer + affordable, without public involvement ( 面子 )- No enforcement possible; Risk of losing the choice of court location and risk of losing important time2 Private Communication IPR owner / infringer
3 Administrative Enforcement Local IPO (AAPA, AIC)地方知识产权局
+ without public involvement ( 面子 ), extensive enforcement competences (seizure, destruction, closure, etc), simplified evidence preservation - no damage reward, civil proceedings as last instance, limited penalties without impact on infringers, local protectionism
4 IPR Registration with Chinese Customs
Local Customs Authority地方海关局
+ since 2004 authorized to perform custom seizures, IPR registration required and infringments should be indicated- Prevents export only, no action against infringer
5 Civil Enforcement 44 Middle, 32 High, 1 Supreme Court + preliminary injunction possible; efficient enforcement- Slower than administrative enforcement, public proceedings, not all court have IP experienced judges, comparatively high costs
6 Criminal Enforcement MPS; Procuratorate, Police + highest degree of determent, > 5000 IP convictions in 2007 - Thresholds are difficult to be reached; police is busy with other crimes
7 Political Lobbying Government Authorities (SOIPP, MOFCOM, State Council, etc)
+ measures are imposed top bottom – efficient- High impact that may require public trade off, access to political groups difficult
8 WTO Proceedings WTO + extensive consequences- No method for individual companies
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Public & Private IP Policies
„…future competition in the world is IP competition…“ 温家宝 | Wen Jiabao, Prime Minister
(June 2004)
„The country's top leadership is committed to building China into an ‚innovation nation‘ in 15 years…“ 薄熙来 | Bo Xilai, former Minister of Economy (April
2006 )
„Some Chinese entrepreneurs tell me: If foreign companies don‘t respect their IP in China, I won‘t respect it neither.“
王翔 | Wang Xiang, JD, PhD., Patent Attorney, Jones Day (December 2006)
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Aiming at the pole position - again:China‘s share of world GDP
Source: Economist
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China‘s IPR strategy:
Chapter 7 of the 11th Five-Year-Plan: Promoting independent innovation Enhancing the capability building of
independent innovation Strengthening the role of enterprises
as main entities of technological innovation
Intensifying IPR protection Deepening the institutional reform of
the sci-tec system
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China is creating a hi-tech environment: Graduates of engineering universities:
China: 640.000 (2004) Source: Ministery of Education/China US: 220.000 (2004) Source: Dept. of Education EU25: 420.000 (2003) Source: Eurostat
China will be the location for R&D: Approximately 50% of all planned
R&D facilities of Western companieswill be located in China.Source: Booz Allen Hamilton & Business School Insead (2006)
R&D expenditures: In 2006, for the first time China
has spent more on R&D than Japan. Source: OECD
China vor Japan: Forschungsausgaben nach Kaufkraftparitäten (OECD)
1981
1986
1991
1996
2001
2006
JP
US
EU
CN
DE100 Mrd.USD PPP
200 Mrd.
400 Mrd.
300 Mrd.
Thank you for your attention.