IP Protection

Strategies and Methods to Protect Intellectural Property in China

by Sara Cheng

I recently presented on IP protection in China at a business conference. Here are my notes on some strategies and methods I used as a reference at the presentation, which might be useful for those who are seeking commercial mechanism rather than legal actions to protect IP in China.

 Large companies: Being an industry leader and one-stop solution provider:
-Keep innovating to keep a leading position in the industry. It is a costly approach and work well with large companies;
-Bundle core products/services with non-core but related products/services so that you offer a one stop solution or a whole package for your customers. The demand for your core products/services will drive the growth for non-core business, as your customer will find switching cost or operation cost is to high if they use your core services while using someone else other services.
-Also you may charge for the products/services which are hard to be copied while providing for free other products/services which could be easily copied so that you will take all the market shares your IP infringer may get;
-Build the IP protection in the R& D or product development phase;
-Get involved in the process in industry standard or quality standard development and drafting. Chinese companies are most good at this to protect their IP and monopolize the market.

 Vertical integration or horizontal integration: backward acquire your supplier to control the core knowhow or forward integrate with your clients to share risks and cost and better control your IP; or alternatively you enter related industry sectors by acquiring or being partially acquired so you provide a broader range of related products and services to lock in your customers and hence protect your IP;
 Target the “right” market, .e.g Microsoft China focused on the market segments which are so concerned about their brand, legal position and market image and also those who could be easily tracked, such as Fortune 500’s subsidies, large Chinese private companies and Chinese government-owned enterprises.
 Technical ways, such as dingo for software, online service delivery rather than providing it in the form of softcopy;
 Internal IP protection through technical methods:
-Track your sales by offer free membership and free complementary services to your clients so they will not switch to others while you can track your sales and market;
-Firewall, monitoring of emails, back up of materials, etc;
-Leverage media especially online monitoring by brand promotion, online forums, blogs etc.
-Give incentives and retain your key staff who mater your core knowhow;
 Protect IP from your stakeholders and Build a network of stakeholders who assist you to protect IP

-In lots of cases, your clients or suppliers are IP infringers so put certain terms and conditions in your contract with them to protect your IP or at least warn them the potential penalty of IP infringement;
-Sharing some knowledge while keeping the core knowhow so rather than taking the risk to infringe IP, potential IP infringers will focus on maximising the benefits as a “peripheral” partner. Microsoft adopted this approach;
-Leverage stakeholders such as clients, suppliers, media, end customers etc to monitor the market and potential IP infringement.
-Get more people to work with you on your IP protection by licensing the IPs or more creative way mutual licensing or multi-cross licensing so you work with a network of organizations to protect and benefit from each others’ IP.
 Focusing and giving strategy:
-Look at the cycle of your products and services. If it is at the later stage of product cycle, you may consider the option to share the knowledge for free to beat the market share your IP infringers may get, and hence reduce their profit margins and dampen financial viabilities;
-Last but not least, if you have limited resources, focus on IP protection of your core technology knowhow or in the most important market, the one which you are most advanced, which is hard to be copied and which you can get the best profit margin.

If you require assistance with IP issues in China, please contact Sara Cheng.

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