Navigating the New Silk Road in intellectual property rights: Clyde & Co highlights China’s role

Comment, Insight, Legal, Markets, Trade and Commerce — By on July 23, 2019 at 6:13 PM

Elliot Papageorgiou, Yan Gong, Mark Devaney and Rob Deans.

Navigating the New Silk Road in intellectual property rights: Clyde & Co highlights China’s role

 By James Brewer

As China pursues its Belt and Road initiative, spanning 66-plus countries, it is officially taking the protection of intellectual property rights extremely seriously.

Despite this, foreign businesses dealing with China, in sectors ranging from maritime to advanced IT, should be careful to protect themselves from infringements of patents, copyrights and trademarks.

This was the message from a Clyde & Co panel of experts at a seminar at the London headquarters of the law firm focusing on “the changing IP landscape in China and the Middle East and what it means for European IP owners and practitioners.”

The team said that Chinese interests are filing a huge number of applications for rights protection as their country expands its investments in Europe – notably in the UK – and in the Middle East and Africa. The lawyers spent much of the seminar offering advice on how to deal with the  menace of  transgressors.

As China pushes westwards and across Africa, access to seaports is an important factor, said Elliot Papageorgiou of Clyde’s Greater China IP team. Also offering insights were his Greater China colleague Yan Gong, and Middle East specialists Rob Deans and Mark Devaney.

Clyde & Co’s City address.

Mr Papageorgiou said that the Belt and Road Initiative will see China export goods, services, technical standards, policies and especially its IP philosophy. The flow of goods and services from China, through the Middle East and into Europe, coupled with the investment in infrastructure along those routes, means a re-think of IP strategies to adapt to the changing landscape

The initiative was “not magic from an IP perspective.” It was important to protect rights at origin and destination points and invest in border-measures.

The “China Manufacturing 2025” initiative or CM2025 seeks to raise domestic content to 70% by 2025 and promote technological breakthroughs in 10 priority sectors. The designated sectors are advanced marine equipment and high-tech vessels – “China will go into every niche,” said Mr Papageorgiou; rail and rail equipment; agricultural machinery and technology; aviation and aerospace equipment; bio-pharmaceuticals and medical equipment; integrated circuits and new IT technology; high-end electronic equipment; high-end manufacturing control machinery and robotics; new-energy vehicles; and new and advanced materials.

CM2025 was introduced in May 2015 to transform new and traditional industry into a leading global manufacturing  power. It aims to enable China to influence global standards, supply chains and drive innovation.  It has specific objectives to 2025 and more general objectives all the way to 2049. Step 1: to 2025, Step 2: to 2035, Step 3: to 2049.

Internationalising manufacturing means moving parts of supply chains overseas.

With Chinese companies facing outward, IP services were needed in key route and destination countries, including the Middle East and Africa, Europe and especially in the UK. This means we should expect greater internationalisation of brands and concentration of patent prosecution and disputes in the priority sectors and key Belt and Road locations, said the Clyde & Co panel.

A key context is the troubled US-China relationship in which the Americans, alleging large-scale intellectual property violation, have been pressing for stronger IP commitments and enforceability.

Chinese president Xi Jinping declared at the April 2019  Belt and Road Forum that his nation “will intensify efforts to enhance international cooperation in intellectual property protection. Without innovation, there will be no progress. Full intellectual property protection will not only ensure the lawful rights and interests of Chinese and foreign companies; it is also crucial to promoting China’s innovation-driven and quality development.”

The Clyde & Co team drew attention to the scale of Chinese investment  and construction in Europe. In the period 2005-2018, the UK attracted more of these than any other country, in excess of $80bn; followed by Switzerland, Germany, France, Italy, Netherlands and Greece., according to the American Enterprise Institute. The UK had benefited by Euro42bn of investment, twice the level of Germany. “China has not just bought British, it has invested and… I think this is good news for us, given the Brexit situation,” said Mr Papageorgiou.

“China itself has something to offer, and something to lose if its IP rights are not respected,” the legal experts insisted, saying that China is being really serious in protecting IP. “There are a lot of worse places” in that sense, it was said.

China trade mark applications in 2018 were 7.31m, up from 5.75m in 2017 and double the number in 2016. Before 2010, there were well under 1m annually.

Applicants based in China filing international trademark applications under the Madrid protocol (which enables registration and management of trademarks with a single application and one set of fees for protection in up to 121 countries, including China, the UK and US) were 6,900 (ranking third) in 2018; 5,230 (again ranking third) in 2017.

China was a designation in international trademark applications in 24,289 instances in 2018, and 22,556 in 2017, ranking second in both cases. Designations in applications from entities based in China were 59,624 (ranking first) in 2018, and 49,808 ranking second in 2017.

The number of patents granted in China peaked in 2016. When two years ago the fees were halved, there was a big bump up in applications.

China has a whole plethora of IP rights, making the country one of the best jurisdictions along the Belt and Road routes, it was said.

Translations have become critical, as an increasing number of Patent Co-operation Treaty (PCT) filings come from China:  The treaty assists applicants in seeking patent protection internationally for their inventions, and facilitates public access to technical information relating to those inventions. By filing one international patent application under the PCT, applicants can simultaneously seek protection for an invention in many countries.

Clyde & Co warned against trying to save on translations which could result in rights being unenforceable. The firm advised reverse-translating important patents and seeking infringement advice based on the local Chinese-language patent. A higher standard appeared to be applied to foreign filings, but this was not a ‘strategic conspiracy.’

In addition to the priority CM2025 sectors, one should expect more filing along the BRI pathways in software, business methods,  connectivity and ‘industrie 4.0’ (the name given to the German initiative to establish that country as a lead market and provider of advanced manufacturing solutions, of the so-called fourth industrial age).

A total of 334,961 litigation cases was filed in 2018, up from 213,480 the previous year. Businesses should be prepared for vigorous defence by infringers: “expect infringers to have their own rights, sometimes quite legitimate, if maybe narrow,” was the advice. Search infringers’ rights before taking any action.

Know and choose your jurisdiction and enforcement authorities: “never underestimate home-game advantage in China.” Advocacy was essential in China, involving such resources as national embassies and IP attaches, EU delegations and European Union Intellectual Property Office representatives, national chambers of commerce and the EU Chamber.

Customs recordal was essential and could include customs patents. One should prepare for additional powers of patent administrative authorities in a new patent law (the 4th Patent Amendment) due to come into force in November 2019.

Mr Deans referred to multibillion dollar investments under the BRI in trading hubs, including a $300m deal in Abu Dhabi as the Middle East hub. This involves an alliance between Cosco and the UAE capital’s Khalifa Port, which would make it one of the biggest ports in the Gulf.

He said that in the Middle East there was no equivalent of EU directives or regulations regarding intellectual property rights. Legislation was drafted at Gulf Cooperation Council level, with each state left to adopt the legislation … or not.

There was variation in approach to trade mark law across the region.

The GCC trade mark law was implemented and adopted in Kuwait from December 28, 2015, and in Bahrain from May 29, 2016. Saudi Arabia Trade Mark Office adopted the law on September 29, 2016:

Oman had adopted a law in 2017, and publication of implementing regulations was awaited. A law in Qatar of 2014 awaited  publication of implementing regulations; and the UAE had not implemented or adopted legislation.

The Clyde & Co team summed up that businesses should be aware that the “movement in trade and related IP rights is from East to West not West to East.”

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