21 Apr Protecting your intellectual property in overseas markets
Gov. Jim Doyle’s recent trade mission made clear that China represents phenomenal opportunities for Wisconsin companies. But we also learned that Wisconsin companies doing business in China and other parts of the world must take important steps to protect their intellectual property and technology.
On the mission to China, we saw that significant counterfeiting still occurs, despite the efforts of both businesses and the Chinese government to prevent it. Therefore, Wisconsin companies should be prepared to take both legal and practical steps to protect their valuable intellectual property.
With regard to legal steps, it is important to register trademarks, copyrights, domains and patents in China and other key markets. Registration provides the basis for enforcement against those who would infringe on your rights. If you are exporting or want to export to China, for example, you should file confidentiality and non-compete agreements, written in Chinese and English, in both China and the US. Contracts should specify your total control over the production and distribution processes and your ownership of tooling. Contracts should also require the overseas manufacturer to obtain signed confidentiality and non-compete agreements from key employees and hold the manufacturer responsible for any breach of agreement by employees.
We heard from experts in China that aggressive prosecution of infringers and defense of your intellectual property rights were essential. The constant mantra was that infringers like “soft targets.” We learned that spirited resistance encourages infringers to move on to softer targets. Therefore, if you have evidence of infringement, immediately engage counsel and use criminal and civil prosecution to the fullest extent necessary. In cases where the infringing goods are exported from China or other countries, US unfair competition laws can be invoked. Aggressive prosecution not only will shut down the present infringer, but it also will send a clear message to other would-be infringers that you are prepared to undertake the time and expense to protect your intellectual property rights.
As a practical matter, you can take steps in your manufacturing processes that will make it difficult for counterfeiters to successfully infringe on your intellectual property. By establishing a wholly foreign-owned enterprise structure, rather than a joint venture, you can retain control over both the technology and the manufacturing process. By retaining control over the assembly operation, you can ensure that no other manufacturer has access to your complete manufacturing process. Likewise, sourcing key components from several manufacturers will prevent any one of them from being able to manufacture the complete product. You should also build anti-counterfeiting elements, such as special chemicals or colors, into your product. Careful control over sensitive information is key. Others have advised that you should build and maintain strong ties with Chinese or other host government officials who are willing to enforce the protection of your intellectual property.
Gov. Doyle chose China as the location for his first trade mission because China is now our fourth-largest export customer, and Wisconsin’s annual exports to that country are increasing by more than 50 percent. It is obvious that the Chinese market holds great promise for Wisconsin companies. Let us not fear to engage with this market; rather, let us act prudently to mange our risks and take advantage of this opportunity to grow our businesses.
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Cory L. Nettles is the Secretary of the Wisconsin Department of Commerce. This commentary is part of WTN’s Vision Series.
This article incorporates some information from a Wisconsin Department of Commerce Alert on Intellectual Property Enforcement in China that was prepared by Foley & Lardner, Milwaukee.