IPR protection for European SMEs in Clean …...2011/09/29  · The China IPR SME Helpdesk provides...

IPR protection for European SMEs in Clean Technology

Industries

29 September 2011

Welcome to the webinar

Philippe Healey

China IPR SME Helpdesk Project Manager

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The China IPR SME Helpdesk provides free, confidential, business-focused advice

relating to China IPR to European Small and Medium Enterprises (SMEs).

Helpdesk Enquiry Service – question@china-iprhelpdesk.eu

Training & Events

Materials

Online Services - www.china-iprhelpdesk.eu

Today’s Speaker David Chen, Associate

Ropes & Gray LLP

david.chen@ropesgray.com

Direct: +86 21 6157 5283

David is a U.S.-trained intellectual property (IP) attorney based in Shanghai. He

has lived and worked in China since 2007 and specialises in IP-related commercial

transactions and IP advisory. His practice covers contentious and non-contentious

IP matters in China, including IP litigation, technology transfer, licensing, and patent

landscape and freedom to operate.

David regularly acts for clients in structuring and negotiating IP aspects of

commercial transactions, drafting IP-related contracts, and advising clients on

obtaining, protecting and enforcing their IPR. His clients include companies from a

number of industries including energy, chemical, manufacturing, high technology,

software, telecom, and consumer products.

Opening Poll 1

Which cleantech sector best describes your business?

a) Power generation (wind, solar, tidal, marine)

b)Biofuels / Energy efficiency

c) Power storage

d)Recycling and waste

e) Other

Opening Poll 2

What is driving your business to enter or consider entering the Chinese market?

a) Access to large potential market

b)Lower cost

c) Access to talent pool

d)Government support

e) Other

Overview

• IP rights in China

• Challenges of IP protection in China

• Developing a workable IP strategy

• IP protection strategies

• NDAs

• “Black Box”

• Compartmentalisation

• Information security

• Key lessons learnt

Intellectual Property Rights in China

• Trademark

• Copyright

• Software

• Patent

• Invention

• Utility Model

• Design

• Trade Secrets

• Confidential Information

• IC layout design

• New plant varieties

• Domain names, trade names

"A light bulb in black and white." Image credit: Flickr, PlastAnka

Challenges to IP enforcement in China

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Challenges to IP enforcement in China

• No discovery

• Documentary evidence

• Difficulty proving damages

inadequate damages

• High burdens of proof, discretionary burden shifting

• Inexperienced judges

• Conservative judges, reluctant to make inferences hard to enforce complex or process patents

• Difficulty enforcing judgments

• Disclosure of trade secret often

necessary, confidentiality concerns of court and testing agencies

• No direct evidence of improper means "your word against theirs“

• Criminal enforcement usually requires a strong relationship with local police, political impetus

• Local protectionism, corruption or nationalism (foreign v. China) may be at play

Different goals call for different strategies

IP strategy

Competitive advantage

Business objectives

and capacity

IP portfolio

Poll 3

How does your business use or intend to use its IP?

a) Licensing

b)Block competitors

c) Attracting investment or obtaining government subsidies or tax incentives

d)Participating in R&D networks

IP transfer in an interconnected world

IP

Subsidiaries

Licensing

Government

Suppliers/ Contractors/Distributors

Employees

Investors/ Shareholders

What is your IP strategy for each point of contact?

Non-disclosure Agreements (NDAs)

• Use NDAs to establish your IP protection position at the start

• Have a NDA already drafted to minimize the issue

• Balance practical considerations with IP protection

– Will requiring non-competes for employees prevent the right people from working on the job?

– What signal will making an exception send to the partner/employee?

• Reference an outside IP protection plan to maintain flexibility

• Consider multiple NDAs

– with partners

– with partners' employees

– with your own employees

• Key clauses in a NDA

– non-disclosure (incl. 3rd parties, affiliates, advisors)

– scope of use/non-use

– non-solicitation

– non-compete

– non-assignable

– disclosure procedures

– disposal

– "need-to-know" principle, standard of care

– IP ownership

– employees

– enforcement obligations

– audit rights

– liquidated damages

– governing law and dispute resolution

– injunctive relief

Cornerstones of IP protection in technology transfer

• Assume leaks will happen – Reduce impact of each disclosure – Compartmentalization – Re-engineer, re-design IP for transfer to

China – Control points – Use unique, customized

designs/equipment

• Live or die by documentation – Document entire "chain of custody" – Periodic announced and unannounced

security audits and site visits – Require periodic disclosure of

contractor's information

• Prevention is critical – Internal procedures to assess and

approve disclosures – Strong IT and HR security solutions – Stronger than necessary site security – Consistently and aggressively prosecute

violators – Develop culture of non-disclosure – Reward good partners – Periodic training

• Direct management strategies at object (information) and vector (employee) nexus – Management systems fail because they

are not fully directed at addressing the connection between the object (information) and the vector (employee)

– Necessary in order to have evidence directed at this critical juncture

“Black Box” strategy

input process output

Compartmentalization strategies in collaborative environments

Sub-contractor Structure

Co-contractor Structure

• Advantages – Direct disclosure to sub-

contractors – Compartmentalization – Develop multiple partnerships

simultaneously

• Issues – May not be feasible in all cases – Coordination and cost – Reduces expediency – Collaboration between

subcontractors and contractor may nullify benefits

Contractor 2

Contractor 1

Deliverable

Contractor 3

Information

Contractor 1 Contractor 2

Information

Deliverable

Document control facilitates sharing of information in collaborative networks

Commercially available digital rights management systems

• Microsoft Active Directory Rights Management System (AD-RMS)

• Adobe LiveCycle Rights Management

Protecting and Consuming Data

1. User creates document and sets permissions

2. Computer obtains certificate from RMS server

3. File is encrypted using certificate

4. File is distributed through unsecured channels

5. Target recipient receives encrypted file

6. Request sent to RMS server for a use license

7. RMS server authenticates request, creates a use license with specific rights policy permissions

8. Use license sent to target recipient

9. Target recipient granted access to the file with assigned rights

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Case Study: Biofuels

• Background: GreenFuel, a German biofuels company with a prototype plant in the Germany, wants to construct a scaled-up plant in China to take advantage of lower costs and government support to further enhance commercial viability. GreenFuel wants to minimize capital investment, so seeks a Chinese partner to license the technology in order to build and operate the plant.

• IP portfolio: GreenFuel owns some complex process patents in China covering the technology, however, most of its critical IP is in the form of know-how.

Case Study: Biofuels (continued…)

• IP risk analysis:

• GreenFuel must transfer all its technology

• GreenFuel will have a difficult time enforcing its patents in China

• Can GreenFuel “black box” or “compartmentalize” its technology?

• Can GreenFuel control its confidential information and know-how?

• Can GreenFuel structure license fees to recoup its investment before losses due to IP risk?

Key lessons learnt No easy solutions to protecting IP

Have a medium- to long-term IP strategy

Investors expect IP protection

Develop a useful patent portfolio suitable for your business objectives

“Picture” patents are easier to enforce than process or complex patents

Utility models and designs, use them, but do not rely on them

Prepare your technology for transfer (“black box”, “compartmentalize”, register patents, invest in know-how and confidential information security systems)

Build in IP risk into revenue/royalty models

Use NDAs consistently

Watch your employees closely

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Q & A

David Chen, Associate

Ropes & Gray LLP

david.chen@ropesgray.com

Direct: +86 21 6157 5283

Upcoming Helpdesk Webinars

Save the dates of our upcoming webinars and events: • 4-5 October 2011 – Patents in China and US, Chambery and St Etienne

(near Lyon), France

• 6 October 2011 – UK-China SME Forum, Liverpool, UK

• 20 October 2011 – Using Contracts to Protect your IPR, Guangzhou, China

• 21 October 2011 – Using Contracts to Protect your IPR, Shenzhen, China

• Webinars: TBC

- Focus on the Food and Beverage Industry

- Contracts and Hiring Process

Thank you

The China IPR SME Helpdesk provides free, confidential, business-focused advice

relating to China IPR to European Small and Medium Enterprises (SMEs).

Helpdesk Enquiry Service – question@china-iprhelpdesk.eu

Training & Events

Materials

Online Services - www.china-iprhelpdesk.eu

For more information please contact the Helpdesk:

Room 900, Beijing Sunflower Tower

No. 37 Maizidian Street

Chaoyang District

Beijing 100125, P.R. China

Hotline number: +86 (10) 6462 0892