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Protecting intellectual property in China: How to protect your know-how.

Companies often invest a lot in the development of products or technical inventions. But there is a great danger that others will use these technologies for themselves and thus secure competitive advantages – at the expense of the inventors. What needs to be considered to effectively protect intellectual property in China? The Ecovis experts know what to do.

Companies are often sceptical when they think about intellectual property (IP) rights in China. But despite all the claims, there is a comprehensive legal basis in China to protect domestic and foreign IP. Moreover, there are continuous new developments to enforce and protect IP rights.

Making use of the various IP rights

Technical IP rights include patents, utility models and design protection. However, to enforce these IP rights in China, companies must first register them there. This is done by filing an application with the patent administration authority of the State Administration. It is important to note that the regulations in Hong Kong, Taiwan and Macau differ. The registrations of IP rights in China are not valid there. Therefore, companies must register their IP rights separately according to the respective local regulations.

Taking action against IP rights infringements

If a company is affected by an infringement of its registered IP rights, there are various ways it can take action:

• Judicial procedure
• Administrative procedure

The administrative procedure is the responsibility of the China National Intellectual Property Administration (CNIPA) and its local authorities. As a measure against IP rights infringements, businesses can also involve the Chinese customs authorities, as they are allowed to seize goods from counterfeiters.

In 2021, China updated its patent and copyright law and tightened the penalties for infringements. Patent infringements in China are subject to a compensation payment of up to CNY 5 million, i.e. around EUR 695,000. In addition, the government has introduced punitive damages. These go beyond the actual damages and are applicable upon proof of a deliberate offence.

Do you want to protect developments or products in China? We know what documents you need.

Richard Hoffmann, Rechtsanwalt, Ecovis Richard Hoffmann Rechtsanwaltskanzlei, Heidelberg, Germany

Protect trademarks in time

Trademark protection in China requires additional registration. Since China, like Germany, is a member of the World Intellectual Property Organization (WIPO), trademarks can be registered there through the Madrid System for International Trademark Registration (www.wipo.int/madrid/en). Nevertheless, it is advisable to register a trademark locally in China. This is because trademark protection in China does not begin with the use of the trademark, but only when it is registered, say the Ecovis experts.

Protection of trademark rights strengthened in China

Since 2019, there has been a new development that makes the malicious filing of a trademark punishable. This is the case when a person files a trademark that he or she knew or should have known would infringe the rights of a third party. This includes, for example, filing a previously unregistered foreign trademark. In January 2022, further guidelines came into force. These define criteria for identifying trademark infringements, such as registering a trademark without actually using it. In the event of legal problems with trademarks, there is also the alternative of initiating administrative proceedings. This lies within the responsibility of the China Trademark Office (CTMO).

Intellectual property rights

Unlike technical property rights or trademark protection, copyrights are effective in China even without prior registration. However, voluntary registration of a copyright in China is an inexpensive way to obtain additional protection. Registration is a good basis for evidence in the event of a lawsuit. There is also the alternative of administrative proceedings for copyright. The Chinese National Copyright Administration (NCAC) is responsible for this. The maximum amount of damages for copyright infringement is CNY 5 million. It is also possible to claim punitive damages.

How to protect intellectual property in China: Develop a strategy

It is sensible and advisable for companies to consider a strategy for IP protection when entering the Chinese market. The following are some tips for an IP protection strategy:

• Thoroughly document IP protection rights (evidence of registration, validity and ownership of the IP right).
• Integrate IP protection into employment contracts, for example through confidentiality obligations.
• Use the legal possibilities of IP protection in contracts with joint ventures, suppliers and trading partners.

Intellectual property protection: How to register your trademarks in China

Registration: A trademark must be registered with the CTMO. Foreign companies without a registered office in China are not allowed to register themselves. They must appoint a trademark agent, such as a local lawyer. All documents must be submitted in Chinese.

Registration fees: The official fees to register a trademark in one trademark class and for no more than ten products in China are usually only a few hundred US dollars. For each additional product in the class of goods, i.e. from the eleventh product onwards, additional fees are due. There are also costs for lawyers and translation fees.

Duration of trademark protection: The trademark is protected for ten years from the date of registration. Renewal is possible. In the case of international registrations extending to China, the term of protection can also be 20 years. If a six-month period has elapsed after the expiry of protection, during which companies can renew upon payment of increased fees, the trademark in question or a similar trademark is barred from re-registration for a full year.

For further information please contact:

Richard Hoffmann, Rechtsanwalt, Ecovis Richard Hoffmann Rechtsanwaltskanzlei, Heidelberg, Germany
Email: richard.hoffmann@ecovis.com

Immigration and permanent residency: US immigration service changes the rules

The US immigration service US Citizenship & Immigration Services (USCIS) is adopting a risk-based approach that waives interviews for certain applicants who have filed Form I-751 (Petition to Remove Conditions on Residence).

Non-citizens who obtain permanent resident status based on a marriage that began less than two years earlier, receive their status on a conditional basis for two years. Filing Form I-751 enables these conditional permanent residents (CPRs) to remove the conditions on permanent resident status.

If you need assistance with filing an I-751 or would like to discuss an interview waiver, please feel free to contact us.

Maria Gandarez, Partner, Pryor Cashman LLP*, New York, USA

Effective immediately, this update replaces the previous agency guidance that required CPRs to undergo a mandatory interview if they obtained CPR status via consular processing. Under the new risk-based approach, USCIS may waive the interview requirement if the adjudicating officer determines the following:

• The applicant generally meets the eligibility requirements.
• There is sufficient evidence of a bona fide marriage.
• The joint-filing requirement is eligible for a waiver (if applicable).
• There is no indication of fraud or misrepresentation in supporting documents.
• There are no complex facts or issues to resolve.
• There is no criminal history that would render the CPR removable.

By adopting this new risk-based approach, USCIS hopes to increase efficiency and decrease processing times. This update comes as a result of the agency’s continuing efforts to better allocate staffing resources, eliminate burdens for applicants seeking benefits and address the concerns of the public and stakeholders.

For further information please contact:

Maria Gandarez, Partner, Pryor Cashman LLP*, New York, USA
Email: mgandarez@pryorcashman.com

*Ecovis cooperates with Pryor Cashman LLP, a US-based law firm with offices in New York and Los Angeles.

New Requirements for Japanese Consumption Tax Invoicing: The Tax-Qualified Invoice System

A Japanese Consumption Tax (JCT), equivalent to VAT, was introduced in April 1989. Since then, the standard tax rate has gradually increased to 10%. In addition, an 8% reduced tax rate was implemented from 2019 for certain goods and services.

Effective from October 1, 2023, the Japanese consumption tax system will be significantly reformed with the introduction of a new JCT invoice system. This tax reform serves as a turning point, becoming a VAT system similar to that in Europe, from the following three perspectives:

1. Consumption tax ID number
2. The JCT Invoice
3. Eligibility of consumption tax credit for customers/buyers

1. Consumption Tax ID number

Any business entities wishing to be a “JCT Invoice issuer” must register for a Consumption Tax ID number at the tax office. Registrations can be submitted from October 1, 2021 to March 31, 2023.

Only a consumption tax-eligible entity can become a “JCT invoice issuer”. Consequently, when a consumption tax-non-eligible entity, such as a consumption tax-exempt entity, wishes to become a “JCT Invoice issuer”, the entity must first file an election to become a consumption tax-eligible entity. Once an entity becomes a “JCT Invoice issuer”, the entity cannot return to being a consumption tax-exempt entity, even if its taxable sales for the base period falls to 10 million yen or less.

We know the details and would be happy to advise you on the implementation of the new consumption tax system in Japan.

Kazuhiko Chiba, CPA – Certified Public Accountant, ECOVIS APO, Tokyo, Japan

2. JCT Invoice Requirements

Only a “JCT Invoice issuer” will be able to issue a JCT Invoice. Each invoice must have:

1. Name and the tax ID number of JCT Invoice issuer.
2. Date of transaction,
3. Transaction details (clarification of item subject to reduced tax rate),
4. Transaction amount by the applicable tax rate,
5. Consumption tax amount by the applicable tax rate, and
6. Customer’s name.

3. Eligibility of Consumption Tax Credit for Customers/Buyers

From October 1, 2023, a consumption tax-non-eligible entity, such as the consumption tax-exempt entity, will not be allowed to issue an invoice with consumption tax. If such an entity does issue an invoice with consumption tax, the customers/buyers cannot then claim the input

consumption tax credits. However, there will be a transitional measure to allow the partial recovery of input consumption tax credits for a six-year period, from October 1 2023 to September 30, 2029.

As with the present consumption tax system, in order to claim the input consumption tax credits, customers/buyers should maintain:

1. accounting books with necessary information, and
2. the JCT Invoice