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Intellectual Property Risks and Strategy for the Belt and Road Initiative

United Kingdom May 24 2019

Chinese businesses face challenges in ensuring their competitiveness when operating in foreign markets throughout the Belt and Road Initiative (“BRI”). Intellectual property (“IP”) can be key to overcoming these challenges and realising a business’s full potential. Therefore, Chinese businesses must be prepared with comprehensive IP strategies that support their business objectives in the BRI.

IP is often the most valuable asset within a business and refers to creations of the mind which can be protected by laws that enable individuals and companies to earn recognition, and financial benefit from their innovations. Generally, most types of IP can be protected using:

- Patent/utility model: Prevents third parties from commercially exploiting a protected product or process for a limited time period (typically 20 years in the case of a patent, and six to ten years for a utility model);

- Trade marks: Allows consumers to distinguish goods or services of one undertaking from those of another;

- Design rights: Protects the visual appearance of a product, such as its shape, pattern or colour;

- Copyright: Arises automatically without requiring formal registration; protects original works such as books, software, media, artistic content and web content;

- Confidentiality: Trade secrets, and knowhow.

Registered IP rights are territorial. This means that, while a Chinese registered IP right provides protection in China, separate registration would be required in other BRI countries. Depending on the BRI country, unregistered IP rights may be available.

Like many BRI countries, China is party to international IP agreements such as the Patent Cooperation Treaty (“PCT”), the Paris Convention, the Madrid Protocol and the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”). Accordingly, there are many legal IP principles that apply across the BRI. It is, however, important to be aware of differences between Chinese IP laws and the IP laws in other BRI countries. For example, the type and duration of IP right can differ between China and other BRI countries.

Failure to implement an appropriate IP strategy could expose Chinese businesses to various risks in the relevant BRI countries, such as potential loss of revenue due to competitors copying their ideas, loss of IP ownership, and infringement of third party IP rights.

Plan ahead: Advance planning is crucial to maximise the potential of your IP in the BRI and to ensure that important deadlines are not missed. This may include implementing internal IP policies and systems, understanding the different types of IP rights, assessing the required type of IP protection, choosing the BRI countries in which IP protection is needed, and appointing specialist legal advisors to provide support.

Confidentiality: Keep details of your innovation confidential until an application for IP registration has been filed, or until you are certain that registered IP protection is not needed. In some cases, it may be appropriate to keep details of the innovation as confidential information instead of applying for registered protection. If you must disclose confidential information to a third party, such as a potential foreign collaborator, make sure that they sign a non-disclosure agreement (“NDA”) so that the information is kept confidential for as long as necessary. Awareness of foreign requirements for dealing with confidential information is crucial for ensuring proper compliance.

Ownership: Establishing ownership of IP is important to ensure one’s ability to properly exploit the IP. Having an agreement in place to establish correct ownership of IP reduces the risk of the uncertainty, time and cost associated with entitlement disputes. Different countries have different regulations for determining ownership of IP. Thorough awareness of these differences is especially important if you employ staff across multiple BRI countries or are in collaboration with a foreign company and the innovation you wish to protect was made in a foreign BRI country.

Registration strategy: Applications for registered IP rights can be made through national, regional, or international registration routes. In the UK and Europe, these routes include:

- Patents: National patents, European patents, and PCT patent applications;

- Utility models: National utility models;

- Trade marks: National trade marks, EU trade marks, and international trade marks (via the Madrid Protocol);

- Designs: National registered designs, EU registered designs, and international registered designs (via the Hague Agreement).

The optimal registration route will depend on the applicant’s commercial objectives, budget, and time resources. If registration is required across multiple countries, it is usually more cost-effective to use regional or international registration routes

Where or by whom the innovation was made can affect where a patent application must be filed.

Enforcement: Be proactive in enforcing your IP rights, otherwise lack of enforcement can result in third parties freely infringing your IP rights without fear of penalty. Take steps to put yourself in an advantageous position by:

- Actively monitoring the marketplace for third parties exploiting your innovation;

- Taking action if you think someone is infringing your IP;

- Being aware of different legal avenues for enforcing your IP rights;

- Making sure you use your registered trade mark to avoid losing the registration, and using your trade mark correctly to avoid confusion about the origin;

- Understanding the impact of IP rights on goods in transit within BRI countries.

Freedom to operate: Irrespective of whether you have any IP rights, do your due diligence in checking whether your proposed commercial activity could infringe a third-party’s IP rights. This may require performing clearance searches for third party IP rights, which may be needed in several BRI countries. Failing to do this might result in exposure to lawsuits, and wasted time and money spent on research and development, and commercialisation that cannot be continued, as a result of IP infringement.

Seek professional advice: Given the complexity in dealing with different legal requirements across multiple BRI countries, foreign IP legal advisors should be consulted early to help devise and implement a comprehensive and cost-effective IP strategy that is applicable to the BRI countries of interest. Ideally, these advisors should have the track record and experience of working with Chinese businesses, combined with a deep-rooted understanding of their unique needs. In this regard UK IP law firms are well positioned to provide the required legal and strategic support for UK and European IP issues. Chinese IP law firms can recommend UK IP law firms that they trust and have an established business relationship with.

This article was first published in the Belt and Road Report: A Guide to UK Services (April 2019).

Potter Clarkson LLP - Jason Teng


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