IP Protection in China and India – not what one might expect !
The protection of IP assets in different countries is assisted by international treaties such as the Paris convention and the PCT agreement for patents, or the Madrid protocol for trademarks. Our customers are faced with the task of selecting target countries in which they wish to seek protection for their inventions, designs and brands. Other than Israel, the US and Europe are a popular selection amongst Israelis, because they are perceived as the ‘natural choice’ of Israeli companies interested in marketing their products and brands abroad.
With proper funding, business connections and legal consultants, additional countries such as Australia, Canada or Brazil are targeted. When it comes to IP protection, Israelis tend to favor Japan of SE Asian countries, despite the relatively high costs involved (translation expenses, official fees, filing fees, etc.)
It is disappointing to realize, that very few Israelis express interest in protecting their IP in India and China. As it turns out, Israeli prejudice towards SE society leads to misconceptions in the IP protection domain. These misconceptions have a poor effect on strategic marketing decisions in the field of IP protection.
The infamous mimicry industry in East Asia is driven by cheap labor and low production costs. Mimicry deters entrepreneurs from selecting China and India as destinations for IP protection in general, and trademarks in particular – despite the fact the China and India have become the industry leaders in production worldwide. However, unlike what one might think, both countries are characterized by respect towards innovative technology and genuine brands.
Consumption Habits in India and China
It is important to review the similarities between China and India. Both countries have a huge population: roughly 1.2 billion people live in India, out of which ~30% in cities and the rest in rural or sub-rural areas. Data regarding the population of China is vague, partly due to political motives. The size of Chinese population is estimated at roughly 1.3 billion people, out of which 35% reside in urban areas concentrated alongside Chinese coastlines.
The generally frugal culture of East Asia is very different than the spendthrift consumption common in the western world. This leads to significant wealth accumulation by the general public in these countries.
The evolution and absorption rate of technology in East Asia is phenomenal: 25 years ago, less than 1% of the Chinese population had access to telephone lines, unlike today’s exposure to telephony and internet services throughout China. With regard to the attitude towards novel and inventive technology: urban population in both countries will demand the latest technology trends. In rural areas of India, the population may find antiquated technology sufficient, but the Chinese consumer in rural areas will be more than happy to pay for the newest technology available on market.
The urban population of China and India is exposed to novel technology mainly through acquaintance with tourists and aggressive marketing of consumer goods by international corporations. The penetration of the English language to everyday life and ongoing business conduct has also contributed to this exposure. India and China have become a preferred destination for launching consumer goods in a variety of fields, such as communication gear (smartphones, tablet PCs, etc.) and automobiles. For example, the monthly rate of new vehicles joining the streets of Beijing alone is estimated at ~20,000.
Additionally, China and India are characterized by a strong demand for novelty in fields such as construction, medicine and agriculture:
- Similarly to Israel, only 11% of China’s territory is arable (as opposed to ~70% of the land in the US, for example). This is a cultivation ground for the field of plant variety protection. The government of India also respects and prioritizes novel applications in the fields of agricultural technology and agrochemicals.
- Medical personnel from China and India often study abroad. The medical system in these countries integrates traditional eastern healing methods with procedures, equipment and medicine commonly used in the western world. Many of our customers in the field of medicine cooperate with Indian hospitals in their quest for technology proofing and governmental approvals.
- A need exists for ecologic construction technologies capable of withstanding rough weather and incorporating long-term power saving.
In the world of brands and trademarks, it is important to make a distinction between India and China. The infamous mimicry industry of China is driven by western demand for inexpensive counterfeits, and not by the local culture. The Chinese consumer looks down on counterfeits, unlike the typical western consumer who may try to pass a counterfeit for ‘the real thing’. The increasing demand for luxury brands can be demonstrated through the popularity of the British Alfred Dunhill brand: The number of Chinese Alfred Dunhill branches in China is higher than in any other country worldwide. A more comprehensive overview of the brand shows that its presence in East Asian countries (Hong Kong, Taiwan, South Korea, etc.) is more significant than its presence in the Western world.
Small businesses in India tend to ‘adopt’ brands – add a famous international brand to a local similar or even different product than that represented by the original brand. One may find it funny that rural and sub-rural areas of India are flooded with counterfeits of Chinese origin, which are smuggled illegally into the country. It should be noted, however, that India’s tolerance towards counterfeits is an internal matter; it will be difficult to track IP infringement cases originating from India.
Patents and Technological Innovation
Cultural and governmental differences between India and China have greatly influenced local patenting laws and procedures.
India established the NIF (National Innovation Foundation) which started its autonomic operation as an independent office in the year 2000. Its purpose is to preserve, develop and commercialize traditional technological knowledge. Since its establishment, the NIF created a database of over one million records containing information gathered from over 520 Indian provinces. The NIF has also submitted over 100 patent applications in India, based on the records it collected, some of which have also been submitted internationally.
Like Israel, India has a stable legal system based mostly on British law. Laws regarding the protection of IP are strongly correlated with Europe’s IP system. Major reforms in Indian patent law were held in 1999, 2002 and 2005 in order to have it adapted to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).
In some cases, patent registration processes may be delayed as a result of the dispersal of governmental offices in different Indian provinces, such that registration requests are handled in an order that is not necessarily chronological. Despite this issue, experience teaches us that the Indian examination process is timely and very efficient. It should be noted that the Indian patent office expedites requests for which patents been granted by other countries, such as Europe or the US.
There has been a significant increase in the number of patent applications being handled by the Indian patent office: statistics show that in the previous decade, the number has quadrupled. International businesses have also begun to realize India’s potential: in the years 2004-2005, only 53% of patents enforced in India belonged to non-Indian business entities, but in 2010-2011 percentages have risen to 83%.
In India exists an Intellectual Property Appellate Board, specially constituted for hearing patent, trademark and design disputes, other than infringement and passing off matters which are subject matter of the Courts of India. Higher Courts in India are well versed in intellectual property disputes.
Unlike India, China’s legal system has changed significantly over the years. Traditional Chinese laws were changed after the Communist revolution of 1949, when a socialist legal system was developed. The Sino-Soviet split in 1961 caused the entire legal system to collapse, and all legal work was suspected of being counter-revolutionary. Several attempts have been made towards implementing a constitution in China, and in 1982 the PRC was established (People’s Republic of China).
The legal system of modern China is less than 30 years old. The “All China Lawyers Association” (ACLA) has only 200,000 members, as it was founded in 1986. Approximately 120,000 of the registered attorneys have received their law degrees in the last 5 years. For the sake of comparison, the number of registered attorneys in Israel is roughly 50,000. It is to be understood that law enforcement in general, and IP law enforcement in particular, is challenging due to the scarcity of registered attorneys.
Up until 25 years ago, IP examination was performed by Quality assurance personnel… It is no wonder that the counterfeit industry has developed so intensely in this atmosphere. However, the fast growth of the Chinese legal system has had a positive contribution to the development of IP protection.
One aspect of IP protection in China is the possibility to register a Utility Model (AKA Petty Patent). Registration requirements for utility models are less strict than those required for patent applications, and focus on novelty (rather than the inventive step). Exclusivity is given for a period of 10 years (compared to 20 years in patents), but the registration process is also significantly faster. One of our customers was able to receive a court order, stopping all manufacturing operations of two Chinese factories who infringed their utility models.
In India, the Prime Minister’s Task Force on Micro Small and Medium Enterprises (MSMEs) also supports future registration of Utility Models. It is expected that introducing the relatively simple and inexpensive Utility Models into the Indian IP system will contribute to the entrepreneurial spirit in the country.
Implications on Israeli Entrepreneurs
‘Post IDF Trekking’ in East Asia has contributed greatly to the acquaintance of Asian population with the state of Israel and the Jewish people. The good news is that Israelis and Jews are highly respected in China. The Chinese perception of Israelis as having ‘business acumen’ is a positive one, in a society which revolves its everyday life around business and entrepreneurship.
Israeli inventiveness is respected not only in China and India, but also in the other countries of East Asia, such as South Korea, Taiwan, Vietnam and Singapore, who cultivates its Israeli connections especially when it comes to the field of security.
There is a great hunger in East Asia for patent-based technology. Capital required for the development of innovative technology into usable applications is also available in the region. Even China has opened its gates in the past 4 years, and allows its citizens to invest abroad.
It is important to emphasize that companies and investors who decide not to pursuit patent registration in China or India will not receive any form of IP protection. In this case, the saying “it’s never too late” does not apply. Nevertheless, creative thinking may enable partial relief.
IP related exclusivity is granted as in most countries:
- Patents – 20 years from the priority date
- Industrial Designs – 10 years (with a renewal option)
- Utility Models (China) – 10 years from the priority date
- Trademarks – Unlimited protection which needs to be renewed every 10 years
It is my personal opinion that Israeli entrepreneurs and companies should favorably consider their options WRT marketing their products in East Asia, in particular China and India. Amongst other considerations, special thought should be devoted to the subject of IP protection in these countries.
It is important to consult with a registered patent agent / attorney with a global business approach and acquaintance with relevant contacts in the East Asia, in order to establish a marketing and legal strategy for the protection of IP assets.
* Daphne Levy will soon be completing her Patenting internship in “Gold – Patents and Financial Services (1992) Ltd.” in Haifa, Israel. (article published on Aug 2011)
We wish to thank Edward E. Lehman of LEHMAN, LEE & XU, Beijing, China & to Rinita Sircar of D.P Ahuja & Co., Calcutta, India for their contribution in preparation of this article. Both Ed and Rinita are from established and distinguished IP firms in their countries, and have been Gold-Patents’ partners for many years.