China Rules in 2012 – Including the IP World?

Chinese utility model holder Chint completed its major victory at the Zhejiang High People’s Court in Chint v. Schneider over French competitor Schneider through an unprecedented $ 23 million settlement (RMB 157 million), approximately half the damages awarded two years ago by the Wenzhou Intermediate People’s Court.

Interestingly, in a 2007 publication, Harold Wegner and Sharon R. Bamer explain the details of the lower court proceeding and the practical implications of Chinese utility model law protection.

In a more recent (2009) publication by the same authors, the importance of utility model protection (and other IP protection) in China is explained, with a focus upon the Chinese utility model application which is widely used in China -226,000 applications were filed in 2008 – shows that overseas applicants file less than 1% percent of the utility models in China.

Western companies have shown complacency in protecting their IP interests in China. Partly as they believe the system is not good anyway, so why bother protecting your IP, partly as they have relied on strong IP presence in JP, US and Europe hoping that this would deter Chinese from entering their markets without sufficient license backing. China however has become an important worldwide IP player and learns fast, very fast. China has set up their own technical standards, compelling foreign companies to comply with China’s technical and IP requirements to enter their market. Interestingly this creates a new demand for China patents by Western companies.

Some companies like Royal Philips Electronics NV have been among the few companies smart enough to foresee in a very early stage (early 90’s) the increasingly powerful Chinese IP policies and have acted accordingly by massively patent their inventions also in China. Many companies followed that trend.  Although many patent applications and utility model applications have been filed in China, for many of the products in consumer electronics one would like to look for early-stage IP (say mid to late 90’s) to make a strong IP presence in China.

Recently a European IP management company, OTB IP management B.V. – managing over 2,000 electronics patents formerly owned by Philips Electronics – announced it is looking into possibilities to ” separate” their patents into China-only packages patents, which they offer to US and European, Korean and Japanese companies intended to bolster IP presence in China to counterbalance Chinese companies with strong IP on their own market.

[1] Sharon R. Barner & Harold C. Wegner, Second Generation Chinese Patent Sophistication: Lessons from Chint v. Schneider, TACPI, Tokyo, November  6, 2007

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