China has become the world's leading nation for patent filings. In order to sustain this level of innovation, it is essential that an effective IP protection regime is in place.

In response, China's intellectual property rights (IPR) landscape has undergone substantial improvement.

Today, China has established one of the world's most active intellectual property court systems to safeguard innovation. Specialised intellectual property courts in Beijing, Shanghai, and Guangzhou are now handling increasingly sophisticated complex cases. Damages awards have risen substantially, reaching tens of millions of RMB in landmark cases, while the average time taken to resolve intellectual property disputes has decreased.

This does not mean that the system is perfect, nor that infringement has disappeared. However, it does mean that well-documented, properly registered intellectual property rights can now be reasonably effectively enforced - even in a system where “guidelines are not absolutes and enforced selectively and pragmatically.”

Key takeaways

The “first-to-file” (rather than a first-to-use) system is absolute. Intellectual property ownership is granted to the first registrant, rather than the first user or inventor.

Treat intellectual property protection as your first and most important investment. Register your trademarks across all relevant classes, along with patents, designs and domains.

China’s active court system is designed to protect innovation, and foreign companies with properly registered intellectual property rights.

Trademarks and patents receive strong, enforceable legal protection.

Trade secrets remain the most vulnerable assets. Once disclosed, they are difficult to contain. Protection of trade secrets requires a layered approach involving robust contracts (e.g. NDAs and paid non-competes), Chinese Customs and cultural training.

Foreign intellectual property can be protected in China

China practices the first-to-file system whereby ownership is granted to the first registrant, regardless of who used the intellectual property first. Your prior global use is largely irrelevant.

Before you have any market exposure, you should complete your registrations. Delaying registration could result in domain squatting, and reclaiming your brand at a later date would cost much more than the registration fees.

What works: trademarks and patents

Registered trademarks and patents are given genuine legal protection. Foreign companies are increasingly winning infringement cases, particularly against organised counterfeiters and direct competitors. Courts in major cities have awarded substantial damages and injunctions.

The ”well-known mark” doctrine provides extra protection for globally renowned brands, even against bad faith registrations in different classes.

Enforcement of criminal law against the counterfeiting of physical goods, particularly luxury items, pharmaceuticals, and consumer electronics, has improved, with raids and prosecutions now routine in major markets.

What remains difficult: trade secrets

Trade secrets and know-how are more difficult to protect. Once disclosed to Chinese partners, employees or suppliers, they can spread through professional networks, despite non-disclosure agreements being in place. The burden of proof in trade secret litigation is high.

Enforcement in lower-tier cities remains inconsistent. While the courts in Shanghai and Beijing are sophisticated, those in rural or third-tier jurisdictions may lack expertise or demonstrate local protectionism.

Protecting trade secrets and enforcing non-competes

To protect trade secrets, a layered approach is required, incorporating robust contractual clauses (e.g. non-disclosure and non-compete agreements), operational controls such as need-to-know access, and regular cultural training on confidentiality.

Although Chinese law permits non-compete agreements for senior management and technical staff, these are not widely accepted and are only legally valid under strict conditions.

Consequently, many companies find it more effective to implement ”golden handcuffs” (e.g. deferred bonuses and equity vesting) than to rely solely on legal restraints.

How to go about it (our view)

Before you have any market exposure (trade shows, partner meetings, etc) you should complete your registrations concerning: trademarks for your brand name, logo and tagline in both English and Chinese; patents for your core technology and designs; as well as your .cn and .com.cn domains.

Step 1: Our pragmatic experience suggests that in today's China a foreign small enterprises can consider some exposure without revealing the above mentioned intellectual property before protecting the IPR.

Step 2: Find the right advisor for you.

Step 3: Engage in the patent or other protection process before you actually do business.

How to go about it (the lawyer advise)

Seek professional/legal advice before you visit China and discuss the most cost-effective methods of protecting your company's IP in China:

Method 1: Register your trademarks and patent. Witness evidence generally carries lower evidential weight than documentary evidence such as copyright registration certificates.

Method 2: Perform takedowns of infringing products from Chinese websites.

Method 3: Register with Customs as Chinese Customs will not just block the import into China of infringing products but will also block the export of infringing products.

Method 4: Engage a brand monitoring service who will monitor the web for infringing products.

Method 5: Monitor China Trademark Office's regularly published trademark applications for opposition.