Protecting Intellectual Property Rights in Hong Kong and China

Part of a presentation given on 19 November 2007 to the South East Trade Mission and the Leeds Legal Mission at the British Consulate-General, Hong Kong.

Registration

Registration of intellectual property rights is the most cost-effective way for a company to protect its IP assets. As China and Hong Kong are separate jurisdictions, registration in one jurisdiction does not extend to protection in the other jurisdiction. IP owners must register IP rights separately in each jurisdiction for more extensive coverage and protection.

Trademarks:

Registration significantly reduces procedural requirements in enforcing trademark rights against unauthorised users in both Hong Kong and China. In China, both the original and the Chinese translation and transliteration of trademarks should be registered.

Patents – utility and design:

Inventions, utility patents and design patents (in Hong Kong, design patents are called registered designs) must be registered to be protected. Hong Kong has a re-registration system for utility patents. A grant of a standard patent in Hong Kong is based on patent granted in China, the United Kingdom or the European Patent Office designating the UK. Without such a prior registration, the Hong Kong Patent Registry will not grant a standard patent.

Hong Kong offers an alternative, the short-term patent. This is based on the search report of an international searching authority or a report from one of the three jurisdictions mentioned above. The term of a short-term patent is four years and it may be renewed for an additional four years.

Copyright:

Hong Kong does not have a government-established copyright registry. To enforce copyright, a holder must offer independent evidence of the existence of the copyright.

China has a copyright-registration system and registration makes enforcement easier as it evidences the existence of the deposited materials from the time of deposit.

A Chinese registration may also be presented as evidence of the existence of the deposited materials in a Hong Kong enforcement action.

Domain names:

Trademark owners should consider registering the English and Chinese translation or transliteration of their domain names in China. This may help prevent hijacking of a company’s trademark by an unauthorised user in China.

Proactive approach

Companies must be proactive in protecting their IP rights. While there are governmental agencies and other mechanisms for protecting IP rights, IP owners must take the initiative in safeguarding and enforcing such rights. These mechanisms are only there to assist; they will not commence an action unless a company can provide details of unauthorised use.

Not just the legal department’s problem:

Relying on legal department staff as the company’s eyes and ears in the marketplace for protecting IP rights has limited effectiveness since most legal departments have limited human resources.

IP protection as a company’s core value:

A company should not rely on others to protect its IP rights. Management must make IP protection a core value. Employees at every level of a company’s organisational structure are its eyes and ears in monitoring infringement of the company’s IP rights in the market place. All employees at all levels should be educated about the company’s rights and encouraged and rewarded for reporting unauthorised use of the company’s IP rights.

It behoves management to instil IP awareness as part of the corporate culture and engage the entire company in the effort. Ultimately, it is up to the IP holder to protect its own IP rights. Engaging the entire workforce to help protect such valuable assets is good policy.

Trade secrets

A company must protect trade secrets – technical and operational information that is economically beneficial to the company.

Control access to trade secrets:

Unauthorised access to technical and operational information should be prohibited. This includes restrictions on employees, consultants, JV partners, vendors and others. Employees and outside partners should have access only to information necessary for performing their proper duties and responsibilities. Only a few people should have unlimited access to all information and all access by these individuals should be monitored and their activities documented.

Most problems involve someone with access to information:

The source of most unauthorised use of trade secrets and other sensitive information is someone given unmonitored access to such information. If information is valuable to a company’s operations, it is useful to a company’s competitor. Access must be monitored and controlled. A company should limit access to sensitive information to those with a need to know such information.

Track and restrict file transfer and chat programs:

Every company should have a system for tracking access to its computer systems and database. It should be able to track all access and file transfers of such information. A company should consider restricting the use of USB drives, notebook computers and other storage devices with its databases. As part of its best-practice guidelines and procedures, a company should have policies and guidelines for employee usage of MSN Messenger and similar information-sharing software applications on company computers, and limiting of uploading and downloading of information onto company computers.

IP audits and reviews:

A company should conduct regular internal IP audits and reviews as part of its IP protection program. There should be an internal team of IP auditors and reviewers with the authority to conduct random, unannounced audits and reviews of every computer within the company. The team must be fully supported by top management.

Ongoing market monitoring to keep abreast of competitors’ activities:

Monitoring of competitors’ activities is a useful way of detecting unauthorised use of a company’s trade secrets. Monitoring of former employees, manufacturers, vendors, consultants and service providers is also helpful in preventing leakage of valuable information.

Keeping sensitive information separate

To the extent possible, a company should compartmentalise its sensitive information by keeping different steps of production in different jurisdictions, for example separating R&D from production.

For instance, a company may wish to keep its R&D in the UK, its sales force in Hong Kong and its factories in China where each facility cannot access information and databases of other facilities. It may wish to manufacture crucial components in one factory and ship the completed components to another factory for assembly. The key is to prevent personnel in one facility from accessing information at another facility so that only a few top managers will have access to the company’s complete R&D, production or operational cycles.

Enforcement options

There are several enforcement options in Hong Kong and China available to holders of IP rights. Available remedies in the two jurisdictions are similar. They include:

Administrative:

In China, IP holders may choose administrative proceedings to enforce their rights. These proceedings tend to be faster and less prone to local influence. However, damages are not available to IP holders. Such administrative remedy is not available in Hong Kong.

Civil:

In both jurisdictions, civil remedies are available through local courts. In all major cities in China, there are special Intellectual Property Chambers within the People’s Court experienced in handling IP disputes. Although no longer binding since the handover in 1997, Hong Kong courts often follow UK court decisions in IP matters.

Criminal:

In both jurisdictions, infringement of certain IP rights may result in criminal sanctions.

Customs:

In both jurisdictions, the Customs service will work with holders of registered IP rights to seize and forfeit infringing goods entering its borders.

IP rights holders should establish and maintain communications channels with enforcement officials to inform officials of their concerns and challenges. Developing a working relationship with enforcement officials is helpful for understanding enforcement mechanisms and procedures available in the event of unauthorised use of IP rights.