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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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„Contact Us‟ section
The China IPR SME Helpdesk
@iprchina
Fan page: “China IPR SME Helpdesk”
Group page: “China IPR”
"China IPR"
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 – [email protected]
Training & Events
Materials
Online Services - www.china-iprhelpdesk.eu
Today’s Speaker David Chen, Associate
Ropes & Gray LLP
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
10
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
20
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
23
Q & A
David Chen, Associate
Ropes & Gray LLP
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 – [email protected]
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
