In brief – Beware the risks to your IP that would not arise under our legal system
The risks for businesses involved in sourcing product offshore are increasing. As an example, recent experience shows that the People's Republic of China can pose a particular hazard to intellectual property if the risks are not managed.
Risks exist even with products intended for the Australian market
Historically, Australian businesses have not been particularly focused on protecting their products and services in other countries where they did not intend to market their products or services.
However there are escalating risks for businesses involved in another country, even where the involvement is limited to sourcing the manufacture of products intended for the Australian market.
Arrangements for product manufacture in the People's Republic of China provide a cautionary example.
What if someone registers your trade marks in the PRC before you do?
If someone registers any of "your" trade marks in the PRC before you do, then they can stop you and anyone else in the PRC from making product for you that is marked with "your" trade mark. That applies even though you aren't selling in the PRC.
They can even block the export of product from the PRC.
PRC basically has a "first to file" system, so if someone beats you to the punch, you could be in trouble.
And if someone obtains a relevant PRC patent registration, then that also could be used to stop the manufacture or export of your product from the PRC. Again, that applies even if you aren’t selling in the PRC.
Having an Australian trade mark or patent or similar registration of itself only provides rights in Australia.
If someone copies your product or runs off with your ideas in the PRC, you need to look to whether you have appropriate contract or other rights. You also need to consider how those rights can be enforced in the PRC.
The PRC doesn't recognise a judgment from an Australian court, but an arbitration decision (award) can be enforced there if there is an adequate arbitration clause in the contract.
Broadly, the best approach mirrors what you would do in planning for a new product in Australia, but being mindful that most of the action is going to take place in another country and you will have to abide by their rules.
Apple and the iPad trade mark
The widely publicised dispute between Apple and Proview over the ownership of the iPad trade mark in China is a sobering note for manufacturers and owners of intellectual property in general.
Proview is seeking an embargo on imports and exports of iPads and has recently won a court ruling against sales of the popular devices in China.
Basic tips for safeguarding your IP
- Identify what is involved (just some examples – trade marks, things that can be protected by patent, designs, confidential information, ownership of dies, copyright documents including plans or specifications, knowhow) – work out and apply a protection strategy consistent with the law in the other country – do that first.
- Identify what might trip you up in the other country (those same examples are applicable) – work out and apply a "freedom to operate / clearance" strategy.
- Work out exactly who you are dealing with and check them out.
- Fully document the deal in a signed contract.
- Include agreement that the English language version of the document prevails over any other version.
- Include a full workable arbitration clause.
- "Blackbox" what you can – try and keep your unregistered IP to yourself.
- There is always less risk if your money is still in your own pocket – minimise advance payments (including any commitment to pay like an unconditional letter of credit) until you have had a chance to examine the shipment in Australia.
- Consider having at least two manufacturers in the other country for competitive tension or at least keep duplicate dies etc so that you can go elsewhere if needed.
- Check your insurance.
We gratefully acknowledge the input of several PRC commentators and a number of clients who have direct experience of these matters.
This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal or financial advice. Please seek your own legal or financial advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.