China lawyer Mark Schaub, a senior partner at KWM, has dealt with many cases for foreign firms, accusing Chinese companies of infringements of their intellectual property (IP). In an interview with Gao Feng Advisory’s CEO Dr. Edward Tse, Mark Schaub shares some of his legal experiences in China at Wei Xin.
The IP protection system is not perfect in China but it’s improving a lot. By way of illustration, we’ve got something like 5,000 lawyers in China and the busiest and most dynamically growing part of our practice is IP litigation. These IP litigation cases are mostly Chinese companies suing each other. This shows that IP rights are increasingly protected here and Chinese companies are also protecting their rights through litigation. They would not be doing this if it was not effective.
Ed: Many of our foreign clients are still very concerned about IP. The situation on the ground here in China has actually improved a great deal. Have you seen cases where foreign companies sue Chinese companies for IP infringement and won?
Mark: Yes. There have been many cases where foreign companies have won. When people think about IP, most people are thinking about things like DVD copies, fake fashion clothes or consumer goods. A lot of people address these kind of breaches through administrative processes – these do not result in very large fines. What we’re talking about today is more in relation to tech companies. For these companies it is important to deal with parties who might be stealing their technology. In those cases, foreign companies have won cases and the amounts of damages being awarded are rapidly increasing. In places where they have special IP courts like Shanghai or Shenzhen, it’s unlikely to be ’any strong bias against foreign companies. The main issue is often the foreign companies fail to take all the steps needed to protect their IP rights in China. Secondly, the problem has been that the amounts of damages awarded are relatively small. Chinese judges are not like American judges and are very conservative in awarding damages. But for IP holders, the situation is improving and the amounts of damages being awarded are getting larger now.
Ed: Many of my foreign clients are very concerned about whether that process is fair and transparent. What is your observation on the evolution of that process over the years?
Mark: I’ve found over the years that many people prefer arbitration but I actually have a preference for Chinese courts, because in the tech setting, Chinese courts are quicker. They’ve got more weapons in their armory. Enforcement is easier and the cost is lower. My experience has been that the most difficult company to go against is a private entrepreneurial company in a second or third-tier city. Those companies often have strong relationships with the courts and may be affected by local protectionism. The other extreme would be a large state-owned company or a listed company in Shanghai, Beijing or Shenzhen or one of the tier-one cities. Courts in these cities are more transparent and professional. Perhaps when considering IP litigation, it is important to consider what kind of party you’re going up against as this will likely determine the experience.
We’ve got one client whose software program was hacked and people were able to buy it on Taobao for 20 RMB. We have worked with Taobao and they are very quick when it comes to closing down infringers. Now, when we send Taobao a letter they immediately close down the concerned vendor. Accordingly, you have to be up-to-date and smart as to how to approach IP issues in China. It does not always make sense to spend lots of money on law firms fighting a major court case which may not lead to a real solution. You have to look at other ways to protect your IP. Look for strategic, clever and bespoke solutions rather than just following the normal process.
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