# Presentation: 455409

## Protecting IP

- May 23, 2006Frank Morris, Esq.

## Outline

- Patent: Invention, Utility Model and Design
- Integrated Circuit (IC) Layout Design
- Trademark
- Trade Secret
- Copyright: including software 	and Internet Copyright

## Patent

- Inventions:
-           -  Granted by the Chinese Patent Office (CPO), term 	is 20 years from application filing date (AFD)
- Utility Models:
-           -  Granted by CPO, 10 years from AFD
- Designs:
-           -  Granted by CPO, 10 years from AFD

## Patent

- Invention or utility model must possess novelty, inventiveness and practical applicability
- Novelty: no disclosure or publication before the filing date
-      no application filed by others before the filing date
- Inventiveness: an invention must have prominent substantive features and represents a notable progress utility model must have substantive features and represents progress
- Practical applicability: the invention or utility model can be made or used and can produce effective results

## Patent

- Does not lose its novelty if, within six months before the date of filing, one of the following events occurred:
- Where it was first exhibited at an international exhibition sponsored or recognized by the Chinese Government
-  Where it was first made public at a prescribed academic or technological meeting
-  Where it was disclosed by any person without the consent of the applicant

## Not Patentable Matters

- For any of the following, no patent right shall be granted:
- Scientific discoveries
- Rules and methods for mental activities
- Methods for the diagnosis or for the treatment of diseases
- Animal and plant varieties
- Substances obtained by means of nuclear transformation

## Opposition and Re-exam

- Opposition can be filed within 6 month after publication of allowed application, if no opposition, the application will be issued
- Reexamination requests can be filed after a patent has been issued
- May appeal to Patent Re-examination Board.  Appeal from the Board may be made to the Beijing First Intermediate Court

## Trademark

- Product/Service TM: Granted by the Chinese Trademark Office, term is 10 years from issue date, renewable every 10 years
- Association TM: obtained by an association  for its members
- Certification TM: issued by an association that supervises certain product/service to demonstrate the material/process/quality of the product
- Reciprocal trademark registration for member country of the Madrid Protocol.

## Copyright

- Do not require registration for protection
- Term is 50 years
- Protection granted for countries belonging to the copyright international conventions or bilateral agreements
- May voluntarily register with China’s National Copyright Administration (“NCA”) to establish evidence of ownership, should enforcement actions become necessary

## Unfair Competition Law

- Provides protection for unregistered trademarks, packaging, trade dress and trade secrets
- Required by the TRIPs to protect undisclosed information submitted to Chinese agencies in obtaining regulatory approval for pharmaceutical and chemical entities from disclosure or unfair commercial use
- China’s State FDA and Ministry of Agriculture oversee the marketing approval of pharmaceuticals and agricultural chemicals, respectively

## Cost / Benefit

|  | PCT | Germany* | U.K.* | Canada | Japan | China | EP | S. Korea | US |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Chapter I | $3,716 |  |  |  |  |  |  |  |  |
| Filing |  | $4,895 | $1,996 | $1,691 | $7,059 | $3,422 | $5,967 | $4,422 | $800 |
| Examination |  | $995 | $671 | $1,106 | $3,650 | $702 | $2,713 | $1,650 | $200 |
| Grant Fees |  | $352 | $201 | $592 | $681 | $111 | $3,468 | $1,231 | $1,700 |
| Total for Filing |  | $6,242 | $2,868 | $3,389 | $11,390 | $4,235 | $12,148 | $7,303 | $2,700 |
| Maintenance/Annuity (20 years) |  | $23,524 | $10,419 | $8,568 | $35,468 | $14,281 | $1,537 | $35,668 | $7,000 |
| TOTAL COST PER COUNTRY | $3,716 | $29,766 | $13,287 | $11,957 | $46,858 | $18,516 | $13,685 | $42,971 | $9,700 |
| Population |  | 82m | 60m | 31m | 127m | 1,140m |  | 48m | 293m |
| GNP |  | 2,271b | 1,666b | 959b | 3,582b | 6,449b |  | 858b | 10,990b |

- ________________________1 Based on an average application with 20 claims, 3 independent claims, 30 total sheets and large entity status
- * Part of the European Patent Convention (EP).

**Cost**** ****/**** ****Benefit**

## Applications Filed

|  | Domestic | Foreign | Total |
| --- | --- | --- | --- |
| 1997 | 12,713 | 20,953 | 33,666 |
| 1998 | 13,726 | 22,234 | 35,960 |
| 1999 | 15,596 | 21,098 | 36,694 |
| 2000 | 25,346 | 26,401 | 51,747 |
| 2001 | 30,038 | 33,166 | 63,204 |
| 2002 | 39,806 | 40,426 | 80,232 |
| 2003 | 56,769 | 48,549 | 105,318 |

**Applications Filed**

- 1-NY:1940669.1

## Applications by Country

|  | 2000 | 2001 | 2002 | 2003 |
| --- | --- | --- | --- | --- |
| Germany | 2,787 | 3,454 | 4,015 | 4,522 |
| France | 1,387 | 1,521 | 1,932 | 1,941 |
| Great Britain | 802 | 913 | 1,025 | 1,314 |
| Japan | 9,888 | 13,736 | 18,275 | 24,241 |
| Korea | 1,861 | 2,498 | 3,626 | 5,015 |
| US | 8,418 | 8,994 | 10,012 | 12,221 |

- 1-NY:1940669.1

**Applications by Country**

## Enforcing IP Rights in China

- Administrative Regulations
- Customs Protection
- Criminal Penalties
- Civil Suits

## Administrative Action

- IP owner may file complaint to local IP administrative office
- Local IP administrative office can impose injunctions, order destruction of infringing products or equipment for manufacture, and determine amount of damage
- Parties can appeal to local court

## Customs

- IP Customs Protection Regulations
- Administrator may seize the products upon IP owner’s request (with proof), or its own initiative
- Upon seizure, all parties will be notified
- IP owner may request a transfer of the case to civil court, or start an administrative proceeding, or leave the dispute for a more formal investigation by customs
- Intended recipient may post a bond to obtain release of the products

## Criminal Penalties

- Violating IP may be a crime under Chinese Criminal Law
- Crimes of IP Infringement: Infringement must cause severe damage to IP owner
- May result in 3 years or more imprisonment, and a fine

## Civil Litigation Remedies

- Preliminary Injunction
- Monetary Damage
-  Lost Profits
- 	Profit gained by infringer
- 	Reasonable royalty
- 	Emotional distress
- Other Remedies
- 	Public apology

## Civil Litigation

- Methods of enforcement:
- Investigate, freeze or transfer bank account deposits
- Withhold or deduct income
- Forfeit, put into custody, freeze or auction off assets
- Search for hidden assets
- Force the losing party to submit legal documents designating assets or securities for transfer
- Force the losing party to transfer asset ownership or title

## Doing Business in China:Summary of Legal Issues, Negotiating Contracts, Useful Clauses & Considerations

- May 23, 2006Irene Chiu, Esq.

## Facts on China

- 2nd highest level of foreign investment in the world
- Fastest growing consumer economy in Asia
- > 1.3 billion population
- GDP growth has averaged 8% throughout the last 20 years
- Major cities are such as Beijing, Tianjin, Shanghai, Guangzhou and Shenzhen
-  China entered into the WTO in 2002
- Will host the 2008 Olympics Games

## 5 Methods to Establish Operations in China

- Representative Office
- Branch Office
- Outsourcing
- Wholly Foreign Owned Enterprises (WFOE) or Wholly Owned Foreign Entity (WOFE)
- Joint Ventures (JVs)
- Equity Joint Venture (EJV)
- Cooperative/Contractual Joint Venture (CJV)

## Selecting the Chinese Partner

- Typical reasons to opt for a joint venture include:
- Chinese policy discourages or prohibits wholly foreign-owned enterprises in the sector in question
- The Chinese partner holds a dominant market position, which the proposed joint venture will inherit
- The Chinese partner has a distribution network, assets, relationships, or other advantages that will permit the joint venture access to markets, raw materials or quotas

## Due Diligence

- Major due diligence areas should include:
- Nature and Powers of the Partner
- Financial Records
- Employees
- Contractual Obligations
- Tax
- Ownership of Assets

## Offshore Holding Structures

- Foreign investors prefer to conduct their Chinese investments through a series of offshore, single purpose, limited liability companies

## Feasibility Studies

- The jointly drafted feasibility study should set forth:
- The form and objectives of the venture
- Sources and uses of investment
- Products to be produced
- Anticipated scale of production
- Arrangements for obtaining the site, facilities, technology and equipment to be used
- Sources of raw materials
- Foreign exchange sources
- Financial projections and economic benefit analysis
- Labor requirements and training plans
- Market analysis

## Partnership Issues

- Transition issues for transfers of existing facilities into joint ventures
- Land use issues
- Valuation issues
- Registered Capital
- Non-competition clauses

## Partnership Issues (cont’d)

- Export percentages and foreign exchange
- Capitalization requirements and approvals
- Chinese law opinion letters
- Conditions to effectiveness of joint venture contracts
- Defaults on registered capital contributions by the Chinese party
- Exit routes
- Post WTO and Other issues

## Thank you!

- Doing Business in China Whitepaper Available Upon Request
- Morgan Lewis’ Greater China Practice
- Beijing Office
- Q&A
- Frank Morris, Esq., New York Office
- Email:	fmorris@morganlewis.com
- Phone:	212.309.6632
- Irene Chiu, Esq., Princeton Office
- Email:	ichiu@morganlewis.com
- Phone:	609-919-6628

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## Slide 31