I wish this wasn’t a common tale… an American company goes to their first international industry trade show and meets Chinese companies offering to represent their products in the Chinese market. For many industries, China’s large and growing market is a tempting one. And setting up distributorships may seem like an obvious first step. Wrong.
Protecting IP in China
Before ever going to your first international trade show, it is CRITICAL that you protect your key intellectual property. This includes your company name, product names and any patents that are core to your business. In China, intellectual property rights are established by the FIRST TO FILE, not first to use in the case of trademarks in the United States.
Isn’t this a Reason to Stay Out of China?
Many American tech companies tell me that this is exactly the reason why they stay out of China altogether. There are two problems with this approach. First, China is currently the software piracy and reengineering capital of the world. Whether you are operating in China or not, if the Chinese technology pirates see value in copying you, they will try. The second issue is that China will soon become the largest economy in the world. Almost every industry sector sees double-digit annual growth.
Going into Global Markets Hoping for the Best & Preparing for the Worst
If your American company is considering entering international markets, I highly recommend contacting your Intellectual Property attorney if you have one and checking to make sure that all of your IP is protected for the American market. Then, make sure that your IP attorney has a relationship with a reputable Chinese attorney who can help you search and register your key IP in China. If you are not certain about the Chinese lawyer, the US Chamber of Commerce in that Chinese city can help you vet this person and/or law firm.
In addition to China, you should register your trademarks, patents, etc. in any countries where your goods and services are marketed, manufactured, researched and/or developed, trans-shipped, where you plan future expansion AND where counterfeiting is likely to be a problem. Honestly, it’s considered a cost of doing business internationally.
For the company who went to the international industry trade show, a Chinese “distributor” came around and collected company literature and talked with a sales rep. The sales rep mentioned the company’s interest in expanding into China. The Chinese company went home to China and promptly registered the American company’s name and product names as Chinese trademarks. Now for the next three years, the American company cannot use their own name and product branding in the Chinese market without paying a sizeable fee to the extorting Chinese company to buy back their own trademarks. Please make sure that this never happens to your company.
For more information on international marketing and operations for technology companies, please contact Becky DeStigter, The International Entrepreneur. For more specific information about IP protection, please contact either the US Patent & Trademark Office or your company’s IP attorney.
Sources for this article: Scott Baldwin, Attorney in the Global Intellectual Property Academy at the US Patent & Trademark Office and Liam Zhu, Senior Partner and Trademark Attorney working in Beijing China. Information shared at the conference, “Protecting Your Patents, Trade Secrets, Trademarks and Copyrights in China and in the United States”, University of Colorado Denver, Denver, Colorado, USA 2012.