15 Oct 2019
Guangdong province is China’s bridgehead for trading with foreign countries. Many mainland firms in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) have been actively “going out” to expand their business overseas, while trying to improve competitiveness through transformation and upgrading.
However, such companies may face all kinds of challenges abroad as the international market environment becomes increasingly complicated. In the development of high value-added and high-tech business in particular, companies are prone to getting embroiled in complicated deals. Problems over intellectual property right (IPR) and disputes with foreign parties over trademarks and patents arise from time to time. Speaking recently to HKTDC Research , Dr Alex Lau , an IPR advisor in Hong Kong, pointed out that although a company may avoid infringement accusations by continuously registering rights or purchasing the brands and technology at issue, these methods may not produce the desired results without appropriate planning and management.
To illustrate his point, Lau cited a case of export to the United States which he handled in the past, saying: “A US importer purchased some consumer goods from China. When the goods had been shipped to the US, they were sued by a local US company for patent infringement (this US importer was licensed by a Hong Kong company to sell the products in the US). These two companies went to court in the US, but the problem was actually traceable to the time before the goods were exported from China.
“This US company facing infringement allegations purchased goods from China whose IPR ownership had not been clarified well. Despite this, the mainland exporter instructed another mainland manufacturer to produce the goods upon receiving the US order. Since the disputes of the IPR ownership occurred prior to export, pursuing court proceedings or negotiations merely in the US could not effectively resolve the problem for all parties concerned.”
What merits attention is that IPR protection or claims usually have geographical limitations. In handling international trade issues, it is necessary to not only take into consideration the validity of the IPRs concerned, such as whether the trademark or design patent is appropriate and valid, but to also find out whether these rights need to be duly registered in mainland China and in the relevant export market, or whether the manufacturer, exporter, importer, etc. in question has secured the appropriate rights/licence in the places concerned. If these rights are registered or licensed in mainland China alone and appropriate measures have not been taken in the export market, they may still face infringement accusations in the export market.
Lau explained the intricate factors in play, saying: “Although this mainland company and its US client were unaware that the goods may have infringed on the rights of others and the accusations may be open to dispute, the accused may find itself lacking sufficient grounds to dispute the accusation without proper IP planning and management. On the other hand, even if the US accuser wins the litigation, it may not be able to prevent a similar case from happening and may not be able to seize this opportunity to extend its rights to the mainland market if it has not been duly registered in China or taken the necessary precautionary measures.
“It is obvious that this case involves more than just the Chinese and US companies mentioned and the IPR registration/management systems and jurisdictions of China and a foreign country. It is a typical case of foreign-related IPR disputes on the mainland. Due to factors such as language barriers and differences in business habits and cultures between the mainland and foreign countries, it may be difficult for the disputing parties to attempt to resolve their dispute in the overseas or mainland market simply through their own negotiations.
“They need to seek assistance from a professionally trained third party to co-ordinate negotiations and find out effective dispute resolution. In addition to full investigation, this third party may also assist all companies concerned in conducting cross-border negotiation or mediation and help them conclude a valid total solution by seeking common ground, while resolving differences in a bid to achieve an all-win result.”
Hong Kong is world-renowned for having a good IPR protection system. With service providers who comply with international business practice and are well-acquainted with the habits and culture of mainland firms, it is a trusted service platform for mainland as well as foreign companies.
In particular, Hong Kong service providers can offer total IPR solutions to mainland, Hong Kong and overseas companies. As well as helping clients handle the registration and assertion of general rights and other management matters through their widespread networks in various parts of the world, they can also assist companies in IP strategy and due diligence and provide them with useful IPR service support in their local and international business.
They can help companies effectively deal with third-party IPR infringement claims in the event of dispute, also providing mediation, arbitration or litigation management service for disputes and co-ordinating efforts to seek an all-win solution for all parties in dispute. Such companies may help negotiate arrangements for IP acquisition, assignment and/or licensing, after clarifying the facts, rights and duties of the parties concerned, and provide an alternative dispute resolution mechanism for cross-border disputes. They can also help organise mediation to achieve settlements acceptable to all concerned parties in the whole GBA and in all Belt and Road markets, and make proper arrangements for IPR ownership.
 HKTDC Research and representatives of the Department of Commerce of Guangdong Province interviewed Dr Alex Lau in Hong Kong in the third quarter of 2019.
 Dr Alex Lau, founder of the Hong Kong Intellectual Property Advisory Services Ltd, is the IP Advisor of the Trade and Industry Department of HKSAR Government.
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