China: Intellectual Property Strategies For The People´s Republic Of China

Last Updated: 13 February 2008
Article by Matthias Stecher and Willi Vett

According to figures published at the beginning of 2007 and derived from a study by the Organisation for Economic Cooperation and Development ("OECD"), worldwide about USD 176 billion is turned over with counterfeits, which accounts for approximately two per cent of the world trade. On a legislative level, the PRC has made considerable efforts to better protect proprietors of industrial property rights. However, there are still great problems in enforcing industrial property rights in the PRC effectively and lastingly.

The counterfeiters follow the simple rules of a market economy and look for products which promise high profits at a low financial risk. The range of fake products starts with the usual mass-produced items, such as DVDs and software, to special machinery, aeroplane parts and medication. The market for distributing counterfeit products is not limited to the PRC but can be found throughout the world.

It is therefore imperative that companies with business in the PRC develop a tailor-made intellectual property ("IP") strategy.

A comprehensive IP strategy should be developed specifically for the company and products in question, be reviewed regularly in order to take timely account of any changes in the company's or counterfeiters' environment and should comprise a combination of the following components:

  • Legal measures
  • Operational / company-internal measures
  • Technical measures
  • Political measures

Legal Measures As Part Of The Overall Strategy

Legal measures assist in pursuing preventive and repressive objectives. Preventive legal measures include the registration of IP rights and careful contract management. Repressive legal measures relate to the enforcement of the IP rights by legal action.

Two goals are pursued by registering IP rights in the PRC. Firstly, a registration creates the necessary legal basis to proceed against counterfeiters in the PRC. The importance of registration is paramount, as the PRC legal system provides practically no possibility of taking action against infringers if one's own IP rights are not legally protected in the PRC. Thus, for example, PRC law does not automatically protect designs without being registered and, thus differs form European law. It is also noteworthy that it is not possible to take legal action against a manufacturer of so-called "slavish copies" on the basis of the PRC Act against Unfair Competition, unless further conditions are met.

The PRC provides for the possibility of copyright registration which facilitates enforcement in the event of a dispute. In addition, as a member of the Berne Convention, the PRC recognizes that copyrights arise automatically upon creation of a work. The registration of copyrights with the competent "Copyright Protection Center of China" (CPCC) is quick and cost-effective and usually takes about 30 days.

Trademarks are registered by applying to the Chinese Trademark Office. Since, the PRC has acceded to most international treaties relating to IP, the trademark application procedure at the Chinese Trademark Office, by and large, follows the usual international standards. However, the Chinese Trademark Office is severely understaffed and as a result, applications for trademark registration regularly take about two and a half to three years from the time of filing the application until a final decision is made by the Trademark Office.

The protection of patents, utility patents and design patents is governed uniformly in the PRC Patent Law. The patent application process at the Chinese Patent Office takes about five years, the application process for a utility patent takes about two years and the application process for a design patent takes approximately nine months.

The second reason why IP rights applications should be submitted in good time in the PRC is that counterfeiters are then prevented from registering these IP rights (that are originally owned by the proprietor) in the counterfeiters' name. What initially sounds preposterous is, unfortunately, reality for many companies in the PRC. Counterfeiters in the PRC do not shy away from the costs of applying for IP rights because they are worth it in the long term. Considering the work overload the Chinese Trademark Office currently has to deal with, proceedings for the cancellation of a PRC trademark are likely to take at least five years, if successful at all. During this period the counterfeiter can use the registered mark exclusively and can even prohibit the rightful proprietor from using it within the PRC. The timely application for IP rights in the PRC is therefore strongly advised even if the companies at risk decide, as part of developing their IP strategy, not to take legal action against infringements under any circumstances.

Finally, IP rights can also be registered with the PRC General Administration of Customs. The purpose of the registration is to prevent counterfeit products from being imported and exported and thus to cut off the counterfeiters' access to sales markets. The process for registering IP rights with the customs authorities is simple and inexpensive and has, in the past, resulted in a number of encouraging results.

Enforcement action against infringing acts can be filed with the civil courts. The local jurisdiction of the court is determined either by the defendant's place of residence or its seat of business, the location in which contracts relating to the dispute were fulfilled or where the infringing act took place. If the claimant fails to adequately substantiate a claim for damages, the court can estimate the damages as it deems fit. In such case, the maximum sum of RMB 500,000 (approximately € 50,000) may not be exceeded.

The PRC law provides a dual system for enforcing IP rights. Apart from civil court action, proprietors of IP rights also have the possibility of administrative proceedings in the PRC. The competent authorities in the PRC can issue cease-and-desist orders, fix fines, conduct further investigations and raid the business premises of the infringer, and can take measures to prevent further acts of infringement. Administrative authorities cannot award damages. Any such claims must be pursued by way of civil court action. In serious cases of infringement, the administrative authorities should also involve the public prosecutor's office.

Administrative steps can offer quick and effective legal protection in cases where the infringement is clear cut. However, an administrative action is not advisable in difficult cases because the administrative authorities have only very limited means of investigating complex cases.

Legal measures of an IP Strategy also include contract management. Joint venture partners, employees (particularly those in senior positions), suppliers, distribution partners and even customers may have insight into a company's business structure, access to business secrets, possibilities of using IP rights etc. and should therefore be under a contractual obligation to maintain the confidentiality of business secrets and to use IP rights only to the extent permitted and necessary.

Company-Internal Measures

It is particularly important to develop a management structure within a company, which allows for the comprehensive implementation of the IP strategy throughout the company. The team responsible for the development and implementation of the IP strategy must have a certain degree of decision-making freedom and must be assisted by management. Only then is it possible to ensure that events, requiring a quick reaction by the company, are reacted to with the appropriate speed.

Just as an IP strategy is made up of various components, the team responsible for enforcing the IP strategy should also be comprised of (senior) employees from various departments. Cooperation amongst team members is crucial to the success of the IP strategy, as although a lawyer from the legal department at home may have the requisite knowledge and competence to take action against the exhibition of counterfeit products, only a field worker can discover the sale of counterfeit products at a trade fair in the PRC.

It is therefore necessary to train and sensitize one's own employees. If counterfeiting is discovered the same must be reported to the company. If, for example, a subcontractor who manufactures the final product using various components, orders more components than are necessary for manufacturing the requested quantity of final products, then it can be assumed that the subcontractor is overproducing in order to make an extra profit by distributing such over-produced final products itself. It is imperative that any such conspicuous incidents be brought to the company's attention so that appropriate action can be taken.

In addition, pre-emptory measures should be implemented to enhance the difficulty of copying. This particularly includes keeping know-how and confidential information secret. The company's own employees should be provided with information about products and production only to the extent absolutely necessary for them to be able to do their work. For example, it is not necessary for all of the employees of a company to have full access to the company server, on which the entire know-how of the research and development department is stored. Employee turnover in the PRC is notoriously high. We often hear of cases in which former employees move to competitors who then suddenly produce products identical to those found in the former employer's product line. If private detectives then invite the former employees to an interview in which the private detectives pretend to be head-hunters, the employees bring their laptops with them to show what data they have downloaded from their former company's server and what (stolen) know-how they can bring into the new job.

Furthermore, an attempt must be made to deprive counterfeiters of market share. This can, for example, be done by binding customers long-term to the chosen products, by offering products together with a service package which counterfeiters cannot offer etc. Such a service package can include training on machines, software etc. or the possibility of receiving inexpensive updates. Manufacturers should not opt for price wars as a means of winning back market share from counterfeiters, for counterfeiters already have a considerable market advantage because they have not incurred any costs on research and development. The list of possibilities that can be used to contest market shares from counterfeiters is long and depends on the product concerned. Here, it is important to develop an appropriate in-house strategy.

Technical Measures

There are a number of technical possibilities of making products and packaging counterfeit-proof. From "black-boxes" developed in-house which cannot be reproduced and without which a product does not work, to relatively inexpensive anti-counterfeit markings on the products or packaging, to high-tech products such as "DNA markers" or "radio frequency identification" etc., whereby the companies or end users can ensure that they do in fact have a genuine product in their hands. Technical measures are particularly intended to provide protection against counterfeits in the supply chain and can be used to ensure that no counterfeits by suppliers end up in production and that, further down the chain, no counterfeit end product ends up being distributed.

Political Measures

The political and legislative environment in the PRC is constantly changing. The PRC government is also increasingly willing to consider suggestions from abroad. In the long term, a certain amount of political involvement by foreign companies in the PRC is therefore also helpful in order to improve the enforcement of IP rights in the PRC. In the PRC, a number of pressure groups for the protection of IP rights have formed. These groups are demanding, on a political level, reforms to PRC laws and regulations on IP rights for the proper implementation of the same. A well-known pressure group is, for example, the Quality Brands Protection Committee (

The members of such pressure groups also often form joint task forces to take joint action against counterfeiters. The advantage of such joint actions is that resources can be shared and, due to greater political influence, especially from large multinational companies with very good political connections that may join such joint action, the Chinese enforcement authorities are more willing to take comprehensive action. Political measures also include effective cooperation with the local and national press, as repressive legal measures are also supposed to deter other (potential) counterfeiters. It is therefore important to inform the public about such measures.

Final Comments

The enforcement of industrial property rights in the PRC remains extremely problematic. Foreign investors in the PRC have to expect that their products will be copied. Even a carefully formulated and implemented IP strategy will not prevent this. However, an IP strategy will help to keep the scope and the consequences of counterfeits down to a manageable level.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions