China IP Risks are Rising
With the fraying of relations between China and the West, Chinese companies are becoming increasingly concerned about their ability to maintain long-term relationships with foreign companies. Add in a flailing Chinese economy and you can understand why the incidence of Chinese companies "grabbing" IP from the foreign companies with which they conduct business is skyrocketing. Desperate companies do desperate things.
A Real-Life Example of China IP Theft
Our International IP lawyers are frequently hearing about these issues, often through panicked emails.
The below is an amalgamation of a few recently received emails, modified to make them more general so as not to reveal the senders:
I came across your blog while trying to secure a copyright here in China for my [artistic piece].
I'm an artist in-residence here in __________, all as part of a program between ___________ and China.
Morally and legally, I own the rights to all that I have created during the residency. However, I suspected my host was attempting to take ownership of my material's IP. I challenged them, and they indeed stated they consider themselves the owners of the IP. This is terrifying to me as I rely on my work to live. It is what I know and what I do. The materials they claim to own represent years of my own processes and months of my own hard work. Losing the rights to my creations would be incredibly difficult for me to recover from.
I have been trying to access China's online copyright registration page to register my works, but my lack of Chinese prevents me from doing so. Any quick advice you can give me would be greatly appreciated. I leave China soon and would really like to have this resolved before I leave.
Thanks.
Our responses to this sort of email are generally as follows:
I do not see how anyone other than an IP lawyer fluent in Chinese could secure a China copyright on their own.
However, my bigger concern is not whether you can obtain the copyright, but whether you are actually entitled to it. I fear there may be an agreement or contract (likely in perfect Chinese and poor English) between you and your host, stating that they receive all or at least some share of the IP rights to your creations in return for hosting you. I also worry that your host has already registered a China copyright for your works. If either of these things are true, there may not be much benefit in your seeking to register a copyright.
You may have a strong argument that the copyright to the works belongs to you because you created them. However, if there is a contract or a registration stating otherwise, you will likely need to engage in a legal battle to obtain ownership.
Ensuring IP Ownership in China and Other Emerging Markets
These recent issues faced by artists are just the tip of the iceberg regarding what has been happening in China lately. However, they effectively illustrate a crucial point for anyone doing business in China: ensure IP ownership is clearly defined and documented with your Chinese counter-party before your IP vanishes.
This crucial point holds true not just for China, but for any country with weak IP protections. I mention this because, in addition to seeing more companies lose their IP to Chinese companies, we are also witnessing more companies losing their IP to firms in other countries they are considering as replacements for China.
If you are looking to move your business from China to another emerging market country, do not reveal your trade secrets to anyone in those new countries (e.g., Vietnam, Cambodia, Mexico, Indonesia, Malaysia, Thailand, Turkey) without first ensuring you have the appropriate protections in place to safeguard your IP. It usually makes sense to start with a country-specific NNN Agreement and trademark registrations before proceeding further.
IP Protection Basics Internationally
1. Conduct Thorough Due Diligence: Before entering into any partnership or joint venture, conduct comprehensive background checks on potential Chinese partners, including their IP history and reputation. A thriving, legitimate company is far less likely to steal your IP than a company that does not actually exist or one in deep financial trouble. See Foreign Company Due Diligence Reports.
2. Secure Your IP Rights: Obtain strong IP protection, including patents, trademarks, and copyrights, both domestically and in China.
3. Implement Robust IP Management Systems: Establish clear IP ownership policies, employee training programs, and confidentiality agreements to protect your intellectual assets. Develop watertight contracts with Chinese your partners. These contracts should be in Chinese and explicitly outline IP ownership, usage rights, and confidentiality obligations.
4. Use Employee non-compete agreements. Though enforceability of non-compete agreements varies by jurisdiction, they can help prevent employees from misappropriating your trade secrets or using confidential information to benefit competitors. See China Employee Confidentiality and Noncompete Agreements.
5. Consider Alternative Market Entry Strategies: Explore alternative market entry strategies, such as licensing or exporting finished products, to minimize your China IP exposure.
Conclusion
It is a well-known fact that much is in flux with China these days, and this uncertainty increases risk. Those who do not take action to protect their IP are likely to suffer the consequences.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.