A few months back I wrote a post entitled “6 Tips for Start Ups and Innovators on Intellectual Property Management in China“. Since then I´ve read a couple of very useful posts at the China Law Blog that have extended this list to 15 tips… most of them free!(read the list bellow in my post). The first post from the China Law Blog is titled “Top Seven Intellectual Property Mistakes By Foreign Companies Doing Business in or with China” and quotes a post by the High Touch Legal Services Blog, entitled, “Top Ten Intellectual Property Mistakes of Startup Entrepreneurs“. The second post from the China Law Blog is titled “Six Ways to Protect your China IP. No Lawyer Required” and is based on inputs from an article entitled “Enforcing Intellectual Property Rights in Weak Appropriability Regimes: The Case of de Facto Protection Strategies in China” written by professors at the University of St. Gallen (Switzerland) Marcus M. Keupp, Angela Beckenbauer and Oliver Gassmann.
So here goes the updated list of tips on how to protect your IP in China… most of them with no money expenditure required!:
- BUILD IN YOUR BUSINESS PLAN THE NEED FOR IP MANAGEMENT FUNDING.
IP Management is expensive and money is not going to magically materialize, so unless you have a business plan that already foresees the need to properly manage IP you will soon get into trouble.
- GENERATE CASH FLOW BY COMMERCIALIZING IP.
You may need to develop ways to commercialize your IP to generate a cash flow during the first years. This is not easy, as assessing the value of your IP may be difficult in the first years.
Some Ideas on how to commercialize IP:
- Selective Licensing, people you may license IP to that is not going to cause you any problems…
- Assignment of non-core IP (with buy-back clause, if possible).
Warning! Companies may approach you to talk about your ideas and then go and use them themselves… They know you will not have the money to sue them!
- Private Equity… but you may need to give up a lot. You must have confidence in your ideas and negotiate really tough.
- IPO (Limited Possibility)
- LEARN AS MUCH AS YOU CAN ABOUT IP.
Going to a big firm may be too expensive for a start up so learn from IP books (there are a lot of books about this topic out there), learn from IP websites, learn about claims… learn as much as you can.
- DON’T PUBLISH ANYTHING ABOUT YOUR INVENTION
Don’t publish about your invention or research. Once you publish it… it has gone public!
- KEEP IT CONFIDENTIAL
Sign NDAs with ANYONE you talk to and always mark everything as “confidential”. That will help you if you need to prove that your secrets/ideas have been stolen.
- KEEP IT A TRADE SECRET- DON’T PATENT IT.
Some companies believe that the most effective mechanism to protect their IP is actually not to patent it. The belief is that if you can work on the development for a few years and get well ahead of your competitors then you have lead time advantage… and that could be the most effective way to protect your IP.
The “secret” definitely needs to be something that can’t be reversed engineered (for example a production process) and you must be confident in your ability to maintain the secrecy.
- USE EMPLOYEE INVENTION AGREEMENTS
Employees agree to report anything to the company that they invent that result from any work performed on behalf of the company and those inventions are assigned by the employee to the company.
- DO NOT ASSUME THE COMPANY OWNS CONTRACTORS’ WORK PRODUCT…
The Chinese Copyright Law provides that, short of prior arrangement, the copyright in commissioned works belongs to the commissioned party…. that is, the 3rd party! So make sure you have signed an agreement to assignment the copyright to your company.
- REGISTER ALL YOUR IP, NOT JUST PATENTS
China Law Blog notes here that companies seem to underestimate the importance and value of trademarks and trade secret agreements in China
- IDENTIFY AND PROTECT TRADE SECRETS via agreements with their employees or via NNN Agreements with outsiders.
- SIGN CONFIDENTIALITY, NON COMPETE AND/OR NON CIRCUMVENTION AGREEMENTS WITH YOUR CHINESE SUPPLIERS
- FOCUS ON ACHIEVING TECHNOLOGICAL ADVANTAGE so that imitation is impossible or difficult
- NURTURTE YOUR INTERNAL GUANXI (good salaries, training…) , so that employees feel so committed that they are less tempted to sell your IP.
- BUILD STRONG EXTERNAL GUANXI
Good relations with officials and institutions you can turn to in case of IP infringement.
- LIMIT THE ACCESS TO PRODUCT FUNCTIONALITY THROUGH A SAFE PASSWORD OR OTHER “ACCESS KEY”
Here the China Law Blog shares an example of a client that sells an equipment that requires a protected password for full functionality.
Do you have any other tips to add to our list?