In brief – Beware the risks to your IP that would not
arise under our legal system
The risks for businesses involved in sourcing product offshore
are increasing. As an example, recent experience shows that the
People's Republic of China can pose a particular hazard to
intellectual property if the risks are not managed.
Risks exist even with products intended for the Australian
Historically, Australian businesses have not been particularly
focused on protecting their products and services in other
countries where they did not intend to market their products or
However there are escalating risks for businesses involved in
another country, even where the involvement is limited to sourcing
the manufacture of products intended for the Australian market.
Arrangements for product manufacture in the People's
Republic of China provide a cautionary example.
What if someone registers your trade marks in the PRC before
If someone registers any of "your" trade marks in the
PRC before you do, then they can stop you and anyone else in the
PRC from making product for you that is marked with
"your" trade mark. That applies even though you
aren't selling in the PRC.
They can even block the export of product from the PRC.
PRC basically has a "first to file" system, so if
someone beats you to the punch, you could be in trouble.
And if someone obtains a relevant PRC patent registration, then
that also could be used to stop the manufacture or export of your
product from the PRC. Again, that applies even if you aren't
selling in the PRC.
Having an Australian trade mark or patent or similar
registration of itself only provides rights in Australia.
If someone copies your product or runs off with your ideas in
the PRC, you need to look to whether you have appropriate contract
or other rights. You also need to consider how those rights can be
enforced in the PRC.
The PRC doesn't recognise a judgment from an Australian
court, but an arbitration decision (award) can be enforced there if
there is an adequate arbitration clause in the contract.
Broadly, the best approach mirrors what you would do in planning
for a new product in Australia, but being mindful that most of the
action is going to take place in another country and you will have
to abide by their rules.
Apple and the iPad trade mark
The widely publicised dispute between Apple and Proview over the
ownership of the iPad trade mark in China is a sobering note for
manufacturers and owners of intellectual property in general.
Proview is seeking an embargo on imports and exports of iPads
and has recently won a court ruling against sales of the popular
devices in China.
Basic tips for safeguarding your IP
Identify what is involved (just some examples – trade
marks, things that can be protected by patent, designs,
confidential information, ownership of dies, copyright documents
including plans or specifications, knowhow) – work out
and apply a protection strategy consistent with the law in the
other country – do that first.
Identify what might trip you up in the other country (those
same examples are applicable) – work out and apply a
"freedom to operate / clearance" strategy.
Work out exactly who you are dealing with and check them
Fully document the deal in a signed contract.
Include agreement that the English language version of the
document prevails over any other version.
Include a full workable arbitration clause.
"Blackbox" what you can – try and keep your
unregistered IP to yourself.
There is always less risk if your money is still in your own
pocket – minimise advance payments (including any
commitment to pay like an unconditional letter of credit) until you
have had a chance to examine the shipment in Australia.
Consider having at least two manufacturers in the other country
for competitive tension or at least keep duplicate dies etc so that
you can go elsewhere if needed.
Check your insurance.
We gratefully acknowledge the input of several PRC
commentators and a number of clients who have direct experience of
IP is the legal property in the innovation in your business and it is that which drives your revenue and profit growth.
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