Pirates Beware! Gearing Up for the China IP Enforcement Lecture

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Sad so say, I’ve achieved nothing of merit this holiday weekend due to the ravages of what I will in future only refer to as “The Beijing Pox.” Nasty little bitch that it is, my brain has not been firing on all cylinders for quite a few days. Alas, I suspect that no one has noticed any difference in my mental faculties.

Anyway, I am forced to come out of my diseased cocoon tomorrow for a class (also, it’s Monday). Tomorrow’s lecture is “China IP Enforcement,” which for the FDI class lasts only three hours. Not really enough time to get into much detail, so the right approach is key.

The way I usually look at the topic is from a client management point of view. A strictly academic approach (i.e., here are the laws, now learn ’em) is not very useful when dealing with a subject whose practice is quite a bit different from what relevant law provides to an IP owner. But since the class is geared towards training a future FDI corporate lawyer, I try to keep it simple and address the following:

  • What issues will your clients be facing?
  • What are the most common IP enforcement options?
  • Case management techniques.
  • Government (public) and corporate (internal private) IP policy issues.
  • Enforcement challenges.

There are many ways to slice and dice this material, but that’s a decent way to sum it up. The most important part of the lecture is to get the would-be corporate lawyers to think about their potential role in a future IP infringement matter and get them to realize that they have certain responsibilities.

I prefer to take the mystery out of this stuff. Yes, China IP infringement is not the most straightforward legal matter to tackle. However, it is just another problem to solve, and not unlike a typical foreign investment case, or a trade dispute, or a commercial transaction.

I like to stick with the basics. The important details flow from this stuff:

1. Identify the actual problem.

Slightly more complicated than it sounds. Yes, in most cases, we are dealing with IP infringement. But you have to drill down to determine the actual facts, not what your staff/suppliers/distributors tell you is going on out there in the marketplace. Sometimes this involves getting professional investigation help. After a little more digging, you might be surprised to learn that the good, or bad, news obviates the need for a full-blown enforcement action.

2. Determine the goals of the IP owner.

This has to be done quite early, but after the pertinent facts are learned. Some client goals are based on faulty intelligence or unrealistic expectations. Usually here we are talking about a combination of “stop the infringement” and “get compensation,” but others are possible, including moving the parties towards a transaction like a license, assignment, or acquisition. Needless to say, you not only need to learn about goals, but to at least do a quick and dirty hierarchical list of what is desired, acceptable, tolerable, and unacceptable.

3. Identify and evaluate the IP.

Sometimes that “IP infringement” is non-actionable unfair competition, meaning that one firm is copying something of another firm, but there is no IP involved that can be protected, and the facts are insufficient to back up an unfair competition theory. Unless you know what you own, you’ve got nothing. That being said, this knowledge can lead to some mitigation work, such as registration of IP. However, based on my experience, if you learn at this stage that your “IP” is actually nothing, you’re pretty much screwed.

4. Know your enemy.

Again, probably time to find an investigator. Depending on who the infringer(s) is(are), your case might be dead on arrival. And by the way, I am not necessarily talking about facing a huge, powerful State-owned Enterprise; you might have even more trouble with a bunch of tiny, fly by night operators that are difficult to track down. Either way, no one needs to waste time and money tilting at windmills, so figuring out as early as possible whether your opponent is vulnerable (from a legal perspective) is key.

5. Isolate your legal options.

At this point, one should be able to cross quite a few options off the list, both in terms of legal theory (e.g. unfair competition, trademark infringement) and dispute resolution. As with other points along the way, sometimes the answer is that there is no viable winning strategy. If that’s the case, hopefully you will not have to deal with a client in denial who insists on the “just do something” futility gambit. Stay away from those guys.

6. Formulate strategy.

Based on the available options, a strategy has to be put into place with fallback options, if possible; note that the plan might include parallel actions. This strategy, along with its (realistic) budget, needs to be signed off on by all the stakeholders, preferably by senior management like a Board of Directors. The last thing you want is to have your marching orders yanked away just when you’re getting somewhere.

7. Implementation.

This part gets into the nitty gritty, and unfortunately I don’t have enough time to discuss too many details in class – three hours goes by quick. In practice, implementation usually means getting experts involved, including (yes, again) investigators, local IP agents, local government, etc. If you’re a foreign lawyer, you always have to get local experts involved, since you are legally not allowed to go into court, apply for an administrative action, etc.

Perhaps the most important aspect of the above list is that there’s nothing magical in there, nothing that isn’t fairly obvious. There are no “insider” tips, no secret techniques, no panacea that makes all the pain go away — aside from the best advice of all, of course, which is register your IP as early as possible and monitor all usage of it.

No, and as I keep trying to tell my students, this stuff is not rocket science; it all just boils down to good case management and making informed decisions based on accurate information.

Unfortunately, a lot of folks like to jump the gun on these matters and end up making poorly-informed, ill-conceived decisions way too early, often emotional knee-jerk reactions pushed by corporate HQ, and souring the entire IP enforcement process.

The most important lesson for the kiddies is, as usual, the old Apollo 13 line: just work the problem.