On October 6, 2019, CNBC published an article titled, “U.S. Small businesses are fighting an uphill battle against counterfeiters in China: ‘It’s like whack-a-mole,’” written by Spencer Kimball.
The article highlights the continuing challenges faced by small and medium-sized enterprises (SMEs) in protecting their brand from Chinese counterfeiters. Its analysis relies on two SMEs that have taken steps to battle counterfeiters with significant challenges, some success and many lessons learned.
GUEST CONTRIBUTOR INVITATION
I invited prominent IP attorney Paolo Beconcini of Squire Patton Boggs (US) to comment on the article and this is what he had to say:
BLAME IT ALL ON CHINA!
I am sure you have all read about similar stories from China. The message that you get from these readings is that China enforcement is bad and inefficient; China does not protect IP rights of a foreign company sufficiently; even when available, enforcement tools are expensive.
The tone is generally negative, frustration and powerlessness, at best a tinge of unfounded hope. If you are reading articles on the topic from the early 2000s on, they all read the same. By repeating these stories as a mantra, we really created a useful tool to escape our responsibilities: Blame it all on China!
IS CHINA ENFORCEMENT BAD AND INEFFICIENT?
The result of such mindset is under everybody’s eyes: US companies, especially small-middle enterprises, continue making the same mistakes when challenged with China IP, on and on. This is because, by blaming it all on China, they will be blinded to their own mistakes and won’t learn from them.
CHINA IS A FIRST-TO-FILE COUNTRY
The story of Mrs. Brons and her invention is paradigmatic of such an attitude. Although we do not know from the article whether hers was a design patents, utility model or an invention patent (I guess the first one), the gist of the story is that she decided not to have it filed and protected in China. China is a first to file country and designs or utility models are not examined as to the substance.
WHAT DOES THIS MEAN?
This means that, if you leave that place unoccupied, someone will take it. At that point you will have the burden to spend many times more what a filing fee would have cost to recover the stolen right. Why do you blame China for having spent so much money invalidating hostile patents and for not being able to enforce your IP?
The relevant laws on IP protection are clear and often well translated into English. Hers was a business choice. She decided not to invest in China. How can she blame China now for spending a lot of money for something she could have gotten for pennies if she had wanted to?
WHAT DO WE NEED TO EMPHASIZE?
What we need to emphasize here is that you cannot blame it all on China. There are tools and ways to reduce risk and minimize the impact of counterfeiters. This case does not show to me that there are bad issues with China, but rather that Mrs. Brons did not have a good business plan to start with, and that she was not well counseled when determining her IP portfolio. Period.
CHINA IS NOT TO BE ABSOLVED
Now, I am not absolving China. There are challenges and we can get frustrated. However, the second example in the article in question, seems to me to better reflect the reality.
WHAT A BRAND NEEDS TO DO
First of all you need to do your part by securing your proper IP portfolio in China. One step earlier: no matter your business model, you cannot afford anymore to ignore China when you plan your business strategies. Having IP rights secured in China will help your business even if you are not currently very active there. It will help you for instance, by giving you the option of attacking infringers at the source.
CONSIDER THIS FACT
Consider in fact that enforcement on the country of destination of infringing goods amount to merely 1% of all the trafficked fakes around the world. If you want to make an impact, you need to secure IP rights in China and enforce them there. As the second case in the article shows, you can enforce.
TAKE TIME TO LEARN THE CHINESE IP PROTECTION SYSTEM
There are challenges in the enforcement, you must understand how enforcers and judges think and work, how the whole system functions beyond the letter of the law. With the time, once you master that, you can see that you can be successful in your IP protection and enforcement in China as much and better than many other countries.
This educational process is something we all need to go through if we want to succeed in China and we start by learning it their own way (avoid cultural neocolonialism) and acknowledge our mistakes, and of course, by giving up blaming it all on China.
GUIDANCE FOR SMALL AND MEDIUM-SIZED ENTERPRISES
Now, after over 18 years of doing China IP enforcement for foreign brands, raiding millions of fakes and having helped the Chinese police jail hundreds of people, I think I can try to sum up some wise old rules to guide small-middle enterprises that are, for obvious budgetary reasons, more at risk of extinction due to China fakes:
1. Always plan China into your business from day zero.
2. Always file your trademark and patents in China or extend your international ones to China immediately.
3. Select your local partners well. You may need a reliable companion to help you through tough times.
4. No matter whether you are in the Chinese market with your products or not, counterfeiters will surely be in your home market anyway.
5. There are no easy solutions, but there are always solutions in China.
6. Take off your foreigner hat and wear a Chinese hat when you do business in China.
7. Very Important: IP issues are but a symptom of a business disease. Get a good doctor and fix your business first!
IT IS NOT CHINA’S FAULT
If you do not have spare change to file some trademarks and patents in China, then do not bother to complain about China. It is not China’s fault.
PAOLO BECONCINI/PROFESSIONAL BIOGRAPHY
Since 2012 Dr. Paolo Beconcini has headed the firm’s China Intellectual Property team spanning over several offices, including Beijing, Shanghai, Hong Kong and Los Angeles. Paolo consults companies seeking protection for their IP rights in China and legal action against infringers, advising on issues of law and enforcement, conducting evidence gathering and piloting their cases through the Chinese legal system.
A sought-after authority on IP protection and litigation in China, Paolo manages the trademark, copyright and design portfolios of European and US clients, conceives and implements IP litigation strategies, regularly appears in Chinese courts and attends IPR administrative and police raids on counterfeiters. His record of success in patent and trademark infringement lawsuits includes landmark cases designated “case of the year” by several IP journals. He leads business intelligence teams that pursue evidence of counterfeiting operations, particularly concerning automotive, fashion and consumer goods.
Paolo is frequently invited to speak at conferences devoted to the growing field of Chinese IP, and has been actively involved in field projects, including trademark and patent enforcement training programs for Chinese civil servants. Paolo is regularly interviewed on China IP matters by media around the world such as The Wall Street Journal, CNN, BBC, The Times, Bloomberg, La Tribune and Il Sole24 Ore, to name a few.
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