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Confronting China’s IP Counteroffensive

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Doing business in China requires a preemptive intellectual property (IP) strategy because local firms built IP arsenals after learning from past patent battles. As foreign companies flocked to China over the past three decades, they faced significant IP risks such as counterfeiting and the difficulty of enforcing IP rights. Now they have a new problem—an escalating risk of committing an infringement of Chinese intellectual property rights. While China remains a major factory of the world, Chinese government officials have been pushing to transform the country into an innovation powerhouse. Several recent moves have been made to transform the economy, including policies to support the development of IP. Consequently, there has been an influx of Chinese patents filed in the manufacturing and technology sectors, and the impact of these patents is being felt domestically and internationally. <br><br>To gain long-term IP rights in China requires a local patent in one of three categories: a) regular invention patent, b) utility model (UM) patent, or c) design patent. Besides driving a dramatic increase in patent filing, Chinese public policy has had a disturbing side effect—an explosion of domestic UM filings. This paper recommends that foreign companies file UM patents on their OEM and ODM products in China as soon as possible—even before sourcing Chinese manufacturers. Foreign companies, especially SMEs in the manufacturing and technology sectors, must implement a Chinese market IP strategy that includes filing UM patents and/or design patents before entering. They should see this as a necessity, even if they don’t plan to enter the Chinese market anytime soon. If they don’t, foreign companies should heed the advice given to Chinese firms by American lawyers in 2003: expect to be sued.
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