William Zheng often listens to complaints from clients seeking legal advice on intellectual property right (IPR) infringement cases - usually involving an Internet domain name or a company trademark.

The complaints usually center around the bureaucracy of the Chinese judicial system, incapable judges or unfair treatment of foreign companies in China.

"I tell them that before taking any action, they should first ask the question of what is the root cause of the IP infringement," says Zheng, a special counsel in the corporate practice group at a United States law firm .

"They should make every effort to protect their domain names or trademarks before they enter Chinese markets, he says. "If they are going to take action in China, they should trust Chinese government authorities, including the courts, to render a fair verdict."

The Chinese American has been working in Shanghai for more than four years. Before joining Sheppard Mullin this March, he worked as foreign counsel for a leading domestic law firm with his practice focused on foreign direct investment, including providing advice on IPR issues.

He says he is impressed by the progress made by Chinese courts in handling IPR infringement cases, especially the improving performance of judges.

"Chinese courts, especially in big cities, have set up a special court for IPR infringement cases and the judges there are well educated or have received excellent training in foreign law schools or law firms," Zheng says.

It is part of the Chinese government's efforts in fighting IPR violations and its attempt to build a fair and solid system to protect the legal interests of any business operator in China and punish offenders, he says.

"Some of my foreign clients worry that litigation in China favors the local parties. I generally tell them it is a thing of the past. After the entry of China into the WTO, and with the nation becoming one of the biggest recipients of foreign direct investment, judges in China do not judge cases based on nationality. Gone are the days when a foreign party can complain about lack of legal basis for a judgment," Zheng says.

Similar to those rendered in the US, Chinese court rulings are logically made based upon the application of the facts to the law. Even in cases where his clients failed to receive a favorable verdict, they still accept the outcome, he adds.

"As time moves on, I found more foreign companies, especially medium- to small-sized enterprises, are taking positive attitude on IPR litigation in China rather than merely complaining," he says.

Yet instead of spending money and time to solve problems in court, Zheng suggests the foreign companies take measures to protect intellectual property, including domains, trademarks and logos, before they expand their business into China.

In 1985 China joined the century-old Paris Convention for the Protection of Industrial Property that helps protect intellectual industrial property rights.

Under the treaty, any person who has duly filed an application for a patent, the registration of a utility model, an industrial design, or a trademark, in one of the member states has the right of priority.

The periods of priority are 12 months for patents and utility models, and six months for industrial designs and trademarks.

"Any company that intends to develop their business in another country should know the importance of international treaties and use them to protect themselves. It is not advice unique to China. It can work in every member country," Zheng notes.

While appreciating China's escalating efforts in establishing a fair legal system to protect IPRs, Zheng suggests that the Chinese government should adopt favorable policies for foreign companies in joint ventures to encourage them to introduce more top technology to China.

Under existing laws, the ownership of an improvement made on technology contributed by a foreign company to a joint venture belongs to the joint venture company rather than to the foreign partner.

"It is not a problem in wholly owned foreign-funded companies, but a joint venture remains a popular entry vehicle for foreign companies seeking to gain a footing into the expanding Chinese market," Zheng says, adding that in certain sectors, joint ventures are at times the only choice for foreign companies.

But when some joint ventures, especially those created in late 1990s, broke apart "it allowed Chinese companies to gain free ownership of the technology, which hurts the enthusiasm of foreign companies for contributing their best technologies", he notes.

As a legal consultant, Zheng provides solutions to his clients that include advising on strategies to protect ownership of technology improvement in the event of dissolution of a joint venture.

However, if it could be addressed systematically, it would be good in attracting further foreign investment and overall economic growth, he says.

(China Daily 11/12/2007 page9)
 
 
 

2013-07-17