March 31, 2021 Feature

Strategies for Building and Managing a Global IP Portfolio

Charles W. Gray and Sindy Ding-Voorhees

©2021. Published in Landslide, Vol. 13, No. 4, March/April 2021, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

As the world is shifting to a global marketplace, it is becoming increasingly more important for all companies and intellectual property (IP) owners to be thinking about a global IP portfolio. In this article, we provide some key takeaways to consider when strategizing an IP portfolio, with an emphasis on China.

Critical IP Considerations

Concerning patents, from a practical standpoint, you should first think about public disclosure (or lack thereof). That detail often gets overlooked but is critical due to different jurisdictions having varying public disclosure rules. For example, most U.S.-based applicants will be thinking of the one-year grace period that the U.S. provides for in the case of a public disclosure.1 However, in the European Patent Office, except in very limited circumstances, any public disclosure prior to the filing date of a patent application can be considered as prior art citable against the applicant.2 This standard is quite common in other regions in the world, and if overlooked, it can severely impact your global IP portfolio strategy.

Second, from a patent perspective, you should consider the different jurisdictions in which you (and/or your competitor) will or might do business. And then you must also understand the patent laws of those jurisdictions well enough (or otherwise leverage resources) to see if the invention is patentable in that jurisdiction. For example, if the invention is software-related or biotech-related, some jurisdictions may not allow for patent protection.3 The end decisions will depend on answers to questions like, “What makes sense for the business? Will you sue a competitor or alleged infringer? Do you think you may be accused of infringement?”

Similar to patents, for trademarks too it’s important to start from the business perspective and see what kinds of activities you have in other regions. For example, are there any activities contemplated in China, including any manufacturing in China? Or is China one of your major markets for selling? Note that China’s trademark system is a first-to-file system.4 So it is always a good idea to secure your trademark rights in China first. Otherwise, you risk someone else taking your mark or brand and registering it before you. This often happens when a product is launched in jurisdictions outside of China, at which point it becomes possible for Chinese applicants or competitors to register it before the product owner.

Another consideration for your trademark filing strategy is what kinds of products or services are at issue. Think about what your marks are for those products or services, how a consumer will “read” your brand, and whether it makes sense to have a localized version of your brand to resonate with the local market and consumer in that jurisdiction. For example, in the case of a product to be marketed in China, does the English name or mark make sense to a targeted Chinese consumer? Once you decide on your brand name and mark, work to secure the name or mark’s registration as early as possible.

Due diligence is also important. For starters, search in the trademark databases. In China, for example, once someone files a trademark application, that will show up in the registry within approximately two to three months. Further, it is advisable to engage local counsel to do the search for you to timely see what similar hits turn up and evaluate whether this brand name makes sense in the local context. This exercise also gives you as the mark owner the opportunity to adjust your name and address any similar marks found in the search, or even choose a unique or stronger mark. Moreover, if your brand or mark is an English mark, in China, there is a risk of another party either registering the same English mark ahead of you or registering a similar version of your English mark. The other party wants to take that spot ahead of you and then try to solicit profits out of your need for the registered mark. Also, these other parties are known to follow the news and track the activity on other jurisdictions’ trademark registries. So especially if your mark does not yet have a Chinese version or registration and there is a potential for entering the Chinese market, if that other party foresees a possible variation for a Chinese version, they will create that name before you (and register it).

When strategizing a global trademark portfolio, it is important to engage your marketing team early to know where your business footprint is going to go. It is also a good idea to start brainstorming good, strong names for translations or transliterations to create something unique to your company. And importantly, take steps to register it in the relevant jurisdictions.

You may also run into the situation where your desired mark is already taken (regardless of it being due to the actions of a bad actor). If you’ve already used that mark in other jurisdictions and have established a certain association between that mark and your brand, you can try to get that mark back through an assignment from a third party, a process that may save time normally spent in registering the mark yourself. It would be advisable to go through the relevant jurisdiction’s local counsel so they can help negotiate a reasonable price and terms. Sometimes this decision depends on the registrant and whether it is an individual or a well-funded entity. And it might not be easy to get them to assign a mark to you at all, let alone for a low price. So keep this possibility in mind as part of your plan when strategizing your global portfolio.

Pursuing IP Protection in China

There are quite a few reasons to think about IP protection in China. To start, the IP landscape in China is accelerating its importance not only to the companies within China but also globally as a world IP market. China is making strides in the enforcement arena, including litigation, damages, and even the trial processes. There are specialized IP courts, and even the IP appeal courts in Beijing are centralized. It is quickly becoming a jurisdiction where you can acquire and enforce your IP rights and drive value for those rights.

As to patent prosecution and acquisition of patents, China is making significant changes that are scheduled to go into effect in June 2021 as part of the fourth amendment to the Chinese Patent Law. Highlights of these amendments include5:

  • Provisions for patent term adjustment and patent term extension (due to patent office delays and drug approval process)
  • Patent linkage (i.e., withholding marketing approval on new drugs until any patent disputes are resolved)
  • Litigation reform, including increased damages for infringement, provisions for willful infringement, and a three-year statute of limitations
  • Open licensing framework (to encourage use of patents in China)
  • The six-month grace period for preserving patent eligibility post-public disclosure now also includes new provisions for public disclosures made in emergency or extraordinary situations

On the trademark front, it is a similar story. Thinking about China when considering your global IP portfolio strategy is especially important because in China, trademark rights are gained by registration. This is different from many other jurisdictions, where using your mark will help you to gain trademark rights. In China, you cannot just use but rather must register in order to claim trademark rights. So if you ignore the possibility of securing your trademark registration in China, at some point you might just run into an infringement risk.

Note also that the world in general is seeing an increasing number of trademark applications every year, and from a brand perspective they’re particularly increasing in China. So if you don’t get your name and other IP assets protected, chances are high that someone else in China will. And what’s worse, they may say you are infringing their IP rights and have a case against you. Such a situation will inhibit your future development in China, so it’s best to think ahead and be proactive rather than reactive in your IP protection strategy.

Similar to the updates in patent law in China, China’s trademark examination standards are getting more comprehensive, and new rules and amendments come out every year to protect the true brand owners’ interest in China. If you are concerned about it being a complicated jurisdiction where you do not know all the rules or where other players in your market are, it is advisable to engage local Chinese counsel. The procedures are also becoming increasingly fair, and there are specialized IP courts to serve as your legal recourse if you encounter any issues during and after registration. If you proceed step-by-step early on in your IP portfolio development process, you’ll soon get your registration in China complete; and if there is an infringement issue in China, you will have an arena in which to claim your rights. But if you have no rights to claim, you can’t go that far. Again, it is best to think about your IP strategy to include China early and often.

China has a centralized registration process from the trademark perspective. From the copyright perspective, however, it’s a dual system in that you can register your copyright at either the national level or the provincial level6 (the latter could take less time). And some provinces within China also have special copyright protection centers in which to assert your copyright claims against infringements. One example is in Guangzhou, the capital city of the province of Guangdong, known for shoe manufacturing. In this province, there are specialized IP protection centers to protect your designs, sketches, and images of the shoes. You can register the copyright and even design patent in the design works at the provincial level, which can provide a quicker, lower-cost enforcement solution. But note that copyright registration and protection at the national Chinese copyright center are also available.

You may now ask which is best: protection at the provincial level or the national level? The answer (not surprisingly) is that it depends. Maybe the copyright owner simply lacks the knowledge that they can register at the national level, which is often the case. Another reason could be that provincial-level copyright protection is enough for the copyright owner’s immediate purposes, especially if the identified infringements occurred in the same province as the copyright owner. Most of the time, though, it could be a situation where the copyright owner wanted to register at the national level, but provincial-level protection provides an easier and more flexible way to deal with bad players in the market. So provincial-level protection gives quicker protection and can allow for local law enforcement to help enforce the copyright owner’s local rights. Remember that China is a huge country, so sometimes localized protection can be just as effective as national protection.

IP Protection Considerations Beyond Doing Business in China

There are many reasons to think about pursuing IP protection in China outside of actually doing business in China, a few of which we touch upon here.

Particularly for new product launches that do not necessarily have a direct relevance in or to the China market, it’s hard to anticipate within the 20-year window of a typical utility patent’s term whether or not you will eventually be doing business in China. However, at least considering China in your strategy is a good idea for other strategic reasons. As one example, consider the possibility of your competitors doing business in China. If you end up in an enforcement lawsuit against those competitors in the U.S., you can put additional pressure on them by enforcing your IP in China against them as well, even if you are not doing a lot of business in China.

Also consider patent application options that are specific to China, particularly the utility model patent application, which usually gets allowed with minimal substantive review. It is common for a competitor, a bad actor, an unknowing joint venture partner, or another manufacturer to see a publication of your invention in a Patent Cooperation Treaty (PCT) application in China and essentially file that same application in their name in China. In addition, from an optics standpoint, marketing teams at trade shows in China love to include information about any relevant patents (both issued and pending) in their marketing materials, almost like a badge of honor. Again, to prevent the opportunity for competitors to use your own IP rights against you, it is best to proactively file for that patent protection in China yourself first.

For non-China-based businesses, it’s valuable to secure your trademark rights before entering into business in China. Sometimes you want to even consider partnering with a Chinese entity to do your business in China or license your rights to Chinese partners to make or sell your goods in China. In those circumstances, trademark registration is essential because you need to have your rights to license, and to offer those rights in China, you need registration first.

If you are an original equipment manufacturer (OEM) and only manufacture your goods in China, some businesses don’t have Chinese trademark registration and instead only pursue trademark registration for their brands in destination countries. In those circumstances, the mainstream opinion is that OEM activities are not considered “trademark use” as long as you have trademark registration in the destination country and no products are circulated in the China market; all products manufactured are for export in those circumstances, so you would unlikely be at risk of trademark infringement. In 2019, however, there was a Chinese Supreme Court case that involved a different opinion from a mainstream opinion that the Chinese Supreme Court had held for many years, so this is still a fairly unsettled area of law. It’s really case by case, and it’s not always true that you will not be involved in any trademark infringement proceeding. If you only export goods to other countries and you do not have your trademark (borne on the goods) registered in China and with Chinese Customs, at that point, some other party who had your mark registered at Chinese Customs could potentially stop you from exporting outside of China.

Harmonizing Global Filing Strategies

In some ways at a 10,000-foot level, this is not that hard because all the basic rules for obtaining patent protection are similar enough. But when you get down to it, there are some glaring holes depending on the jurisdiction and language in which you start. The way you go about it successfully is to do the analysis for harmonizing your filings as early as practical. If possible, before the priority filing, reach out to your counsel in the other jurisdictions in which you are interested in filing.

If your priority filing is in the U.S., then when you have a draft application ready, and you feel this will also be a really important case for filing in Europe and China, you should show at least the claims and the figures, or preferably the whole application, to your local European and Chinese counsel for their feedback. See if there are any glaring holes to be filled at the outset. For example, in China, if you do not adequately express the technical problems and features in your initial filing (which is not typical in U.S. drafting practice), your patent application’s validity may be hampered for issuance in China. Additionally, the claiming styles in Europe and China are slightly different from the U.S. Any shortcomings can possibly be fixed or addressed at the national filing phase; but be forewarned that China, for instance, has many more restrictions on the ability to make amendments. In the U.S., contrarily, we generally have lots of leeway and flexibility for making amendments. For example, if you are going to file in the U.S. from another jurisdiction (e.g., from a PCT application, after translation into English, if you do a bypass continuation as opposed to regular national phase entry), you have the ability to make more changes to the specification. A more exact translation is not necessary. So, this might be a recommended global filing strategy in certain situations.

But in China, the ability to make amendments is fairly limited. For example, you cannot simply pull in information that was disclosed elsewhere in your specification and place it in your claims via an amendment. Amendments in Chinese patent application prosecution are usually more about pulling dependent claim elements into independent claims. Europe has procedural restrictions as well. So, it is advisable to have early discussions among the various local counsel in the relevant jurisdictions (if possible) to ensure the priority application is as robust as possible for eventual national phase entry into those other jurisdictions.

For trademarks, one cost-effective way to harmonize your global filing strategy is to utilize the Madrid Protocol to register your mark in various countries, including China. From the trademark protection perspective in China, however, a separate national filing is recommended for several reasons. First, in China, the goods/services specifications are very unique when compared to other jurisdictions, in that they can be fairly specific and strict in their requirements. So while registering your mark through a Madrid Protocol filing will initially allow for expansion of your application into China, other details if not handled properly will hinder the registration in China. For example, sometimes the International Bureau in the China office will not necessarily accept the specifications and translations that are submitted. There may be a “nonstandard” specification or an incorrect text conversion which results in refusal of the entire application. Another issue that comes up sometimes is that often we can only expand to the same scope of goods and services as what you had in the original application filed through a Madrid Protocol. In other words, whatever scope you applied for in your earlier application will be the same scope of goods and services in the China trademark application. That could result in severely limited protection in China. So if you want to have full protection for one class of goods or services in China, a national filing will give broader coverage of goods and services. The idea is to protect as broadly as possible to prevent others from seeking registration on the subclasses you left out in your original application.

So while it makes sense in some circumstances to use the international trademark registration system, many trademark owners use the national system either exclusively or in parallel to cover their rights more broadly from a defensive perspective.

Main Differences between IP Protection in China and the U.S.

With patents, the existence of the utility model and invention patent protection in China is a main difference. Also, China tends to be more lenient on software patents than the U.S. and Europe. China also tends to be very restrictive on amendments. So, the initial claims for a Chinese patent application need to be buttoned down pretty well at the outset.

Continuation practice (or lack thereof) is also quite different in Europe and China from U.S. continuation practice. In China and Europe, it is typically just called the “divisional” practice. You usually cannot file more divisionals from the original filing. In China, you really just get that initial shot and one other potentially at the next stage. It is not like in the U.S., where one initial patent application filing can turn into many via continuation practice.

Finally, patent examiners really do not want to do interviews in China, and generally they just won’t.

With trademarks, in China, knowing the types of subject matter eligible for trademark registration is critical. For example, you cannot yet register a single color as a trademark. In China, the trade dress concept is still developing. It is not easy to get a trade dress application registered without significant evidence that you’ve already used the trade dress and gained significant fame from that design.

Also, it is important to think about what would be the most important or suitable to protect the core value of your business: trademark or copyright. For example, register your software as copyright instead of registering from a trademark perspective. See what makes the most sense for your product. Sometimes this may even mean pursuing a combination of copyright and trademark registrations.

Enforcing Global Brands

For patents, the only way you could address this would be to initiate an invalidity proceeding in the China patent office. You could also use the court system and engage in certain circumstances with the customs enforcement agencies.

For trademarks, several enforcement agencies can help you. As one example, the Market Supervision Bureaus under the Administration for Industry and Commerce can help you to enforce someone’s use of your trademark or copyright without authorization. If you find counterfeit products bearing your mark, you can file a complaint with the provincial Market Supervision Bureau. They may launch investigations themselves and/or be convinced to initiate a government raid. It is advisable to conduct some investigation into the counterfeiter first and find evidence that they are making the counterfeits on the spot and that they have the counterfeit products in stock on their premises. With factors like these, the government agency would likely help you. Another key point is that sometimes the bureau does not want to make a judgment call on whether the goods are indeed counterfeits. But if the alleged counterfeiter is using your exact mark, the bureau would be more willing to initiate a government raid and to penalize the counterfeiter. The same situation applies if you find someone using your trademark and engaging in unfair competition. That being said, it applies not only to situations where another party is using your trademark but also to situations where they are using the same or similar store setting (for example, if you find a competitor using the same design to create a similar vibe as your brick-and-mortar store, which has already established a certain degree of recognition among the general public, you can also seek the bureau’s help for your unfair competition claim).

Customs can be your friend, too, especially when exporting goods out of China. It is recommended that you record your registered trademarks or copyrights in the customs database system so that inspectors would know that you are the true brand owner and so they could stop shipments or ask if this is an authorized shipment as the products are bearing your exact mark or design.

Key Takeaways

  • Remember to be proactive about your considerations of which jurisdiction to enter when thinking about expanding your global IP portfolio.
  • There are many strategic reasons to file for patent and trademark protection in China as well as other parts of the globe.
  • Brand protection in China is not like in the U.S. Many steps must be taken in China that may seem unnecessary in the U.S., so having local counsel’s guidance in China (and indeed, in any other jurisdiction in which you are looking for IP protection) is a must.
  • Be proactive rather than reactive by keeping at the top of your mind a defensive filing program to shut out registration options for third parties in all relevant and ancillary classes and for primary brands in all classes.
  • Consider securing copyright in all respects for your brands and full coverage and enforcement of online rights, including domain names, social media handles, and app names and logos. 

Endnotes

1. See 35 U.S.C. § 102.

2. See, e.g., European Patent Guide point 3.3.002 (20th ed. 2020), https://www.epo.org/applying/european/Guide-for-applicants/html/e/ga_c3_3_1.html.

3. See, e.g., Ania Jedrusik & Phil Wadsworth, Patent Protection for Software-Implemented Inventions, WIPO Mag. (Feb. 2017), https://www.wipo.int/wipo_magazine/en/2017/01/article_0002.html (comparing the international patent landscape of the patentability of software-enabled inventions using the U.S., Europe, and Japan as examples).

4. See Shi Yang, China: How China Improved Its First-to-File Trademark System, Mondaq (June 29, 2020), https://www.mondaq.com/china/trademark/958734/how-china-improved-its-first-to-file-trademark-system.

5. See Stephen Yang, Review of the 4th Amendment of China’s Patent Law, Mondaq (Oct. 30, 2020), https://www.mondaq.com/china/patent/1000092/review-of-the-4th-amendment-of-china39s-patent-law-.

6. Except for copyright registration for computer software, which can only be applied for through the national Copyright Protection Center of China.

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Charles W. Gray is a partner at Kilpatrick Townsend & Stockton LLP, specializing in patent counseling and prosecution of U.S. and international patent applications and licensing negotiations.

Sindy Ding-Voorhees is a counsel in the Greater China Brands team at Kilpatrick Townsend & Stockton LLP and works between the firm’s New York and Beijing offices.