SIPO posted 2012 financial report

Just read the latest SIPO (State Intellectual Property Office of China) financial report, it is an interesting read.

Last year, SIPO received RMB 3414 million from public funding and RMB 1456 million received as operating income. The operating income includes patent application and examination fees, as well as training, publication and other data services. The expenses that was directly related to Intellectual Property services was RMB 3340 million.

I was trying to check this with the number of patent applications being processed by SIPO, I was not able to obtain the 2012 figure. The 2011 figure shows that SIPO process 526,412 new Patent of Invention application in one year. If we also add Utility Model and Design Patent, the number of new applications processed in 2011 was 1,633,347.

The fees collected for Patent of Invention, Utility Model and Design Patent are different, but just to average out, the average cost to manage and process one patent application is reasonably low.

For example, for a Patent of Invention, the official fee for examination is just RMB2,500 (about USD407), this is a small number when we compare it to EPO's search and examination fee!

The SIPO's financial report was posted here (in Chinese). The latest SIPO statistics was posted here.

Recently, when I was eating in Chinese restaurant and a waiter gave me a Herbal Tea printed in red and called "加多寶“ (JDB Herbal Tea), it made me curious what was the story behind this red package renamed. Actually, JDB Herbal Tea was called Wong Lo Kat Herbal Tea before. Since in my childhood, it had many advertisements covering all printing and TV advertisement. It was famous in HK in a period then suddenly disappeared in HK supermarkets and convenience stores. However, it has silently covering all restaurants and supermarkets in China. From historical record, the JDB group had purchased the trademark of "Wong Lo Kat" since 1990. Around 20 years, It had over 100 billion revenue in 2008 and it had 150 billions revenue in 2010. The trademark of "Wong Lo Kat" was worth 22 billions in 2006. There were some other similar drink brands from HK to enter China market but they had no such bright result. This legend was ended in 2011 when guang yao group (廣藥集團) had no more authority of this trademark to JDB group. 

We are not commenting from the legal aspect. However, from the economic side, we can find some implications: 

1) Trademark can be cost unbelievable worth or cost nothing. Around 1990, guang yao group (廣藥集團), JDB group and everybody believe "Wong Lo Kat" worth 600K only. However, it is worth 22 billion in 2006. Surely, nobody knows how much it costs after 2020.   

2) JDB Group CEO is smart and brave to buy the trademark of Wong Lo Kat Herbal Tea and promote it to number one drinks in China. However, can he makes another legend by JDB Herbel Tea name? With the old and same equation of Herbal Tea and heavy promotional strategy, some still guess their sales revenue will decrease from 150 billions to 100 billions. There are some critical points to be considered. 

a) JDB Group is still holding the trademark of "Wong Lo Kat" in HK. Even "Wong Lo Kat" faded out in HK market. However, if they keep same name selling in HK market. It makes inland customers confused. The worst situation, when a customer is confused by both name, they will choose the third brand in market. Even the HK market is small, however, it affects those inland customers who always travel between HK and Guang Dong region. 

b)  The sales channel is critical to market share in China. Actually, guang yao group (廣藥集團) has more than thousand medical retail store. Furthermore, it has signed contract with another group for nearly 13K retail selling points in China. That's why they have confidence to collect the trademark of "Wong Lo Kat Herbal Tea" back. With the free rider on strong promotional strategy many years, they only provide enough selling point, then customer will pick them up. Therefore, they spent 7 millions promotional budget only in 2012.

c) The cost of JDB group is heavy when the cost of guang yao group (廣藥集團) is little. Compared to 7 millions promotional budget, JDB group has already spent 12 billions (50% increase compared with last year) to build up their new own brand drink. It does not include other costs such as renew packing, stocks replacing, etc. JDB group has fixed factories for Herbal Tea production while guang yao group (廣藥集團) is contract working with different factories for production. JDB group needs large amount of sales to keep their factory for running. Therefore, they need customers replace JDB Herbal Tea instead of "Wong Lo Kat Herbal Tea shortly. Otherwise, it will make their annul revenue decrease much continuously. 

d) Some believe it is lose-lose situation. When guang yao group (廣藥集團) suddenly diversify its business to drink industry. Actually, guang yao group (廣藥集團) has no production lines but give authority to more than 4 factories for production. It means the quality and taste is a little different. In worst situation, guang yao group (廣藥集團) will make Wong Lo Kat Herbal Tea become no more welcomed by Chinese. and JDB group is also been kicked out from the market. Surely, Guang yao group (廣藥集團) will think it is win-lose situation, Guang yao group (廣藥集團) give up the choice to arise the trademark fee but choose to add this 150 billion side revenue to their 450 billion core business revenue. Compared to JDB group's core business is Herbal Tea, Guang yao group (廣藥集團) still wins in case they get 1% market share only.

The story is totally different in case JDB group keep "Wong Lo Kat" trademark but Guang yao group (廣藥集團) starts their own brand name Herbal Tea. Therefore, we can see the value of trademark is hard to measure.

Related news in Chinese:

news reference 1: http://big5.ce.cn/gate/big5/district.ce.cn/newarea/roll/201207/17/t20120717_23497293.shtml

news reference 2: http://www.singtao.com/yesterday/chi/0821eo02.html

news reference 3: http://big5.jrj.com.cn/gate/big5/finance.jrj.com.cn/industry/2012/09/04031314342020.shtml

history record reference: http://zh.wikipedia.org/zh-hk/王老吉涼茶

China trademark "Only if you are interested" 非誠勿擾

Jiangsu Broadcasting Corp was recently sued over a trademark used for one of its most poplar TV shows. Jin Ahuan, an e-business worker, said he registered the trademark 非誠勿擾 - or "only if you are interested" - for matchmaking and marriage services in 2010.

In the same year, Jiangsu TV started a dating game show with the same name, which Jin said infringed his trademark right. But attorneys for the defendant said the two marks "belong to different categories and look different".

As a matter of fact, the movie 非誠勿擾 (translated as If You Are The One in IMDB) was shown in China and all over the world in 2008! The story was about match making that a Chinese man and woman trying to find the right person. So who is infringing whom?

The problem of trademark protection in China

Everybody read about Apple settles iPad trademark case in China with payment of USD60 million to Proview. If you missed this news, you can check this out in New York Times.

This is only a reflection to what is happening in China related to 'well known' foreign trademarks. As we wrote earlier, we are getting cases related to trademark squatting in China. Individual, not a business, registers hundreds of foreign trademarks waiting to sell it. The iPad cases just proved that it can be a good business. Recent cases also demonstrated that posting a registered mark for sales is not a good reason for 'applicant with bad intention', the real trademark owner still have a hard time to fight back. All these combined, actually let the Chinese 'seller' set a higher price to sell the registered marks.

The bad things is, trademark squatting is spreading to Hong Kong. What we can tell is, if you value a name or symbol that your business had been using for a long time, and you have intention to coming to China or Hong Kong, do the mark registration ASAP.

Of course, we do trademark too.

Trademark registrations in China

The latest number of trademarks applications reached 10,000,346 in China as of 29 March 2012. The cumulated number of trademarks granted was 6,892,999.

The annual number of applications reached 1.41 million in the year 2011, a growth of 32% over 2010.

This is a big number, but how many of them are squatters?

Trademark squatting in China

We are surprised by the depth of trademark squatting until we see one.

We came across a case whereby a trademark registered in Australia for the sales of fashion clothing. The lawful owner then applied for registration of the same mark worldwide. But the registration of the mark failed in China, as it was already registered. We were then asked to provide our opinion on the subject.

We search a few Chinese web sites and found that the goods were sold in www.taobao.com (something like eBay) That is, they are being sold on a small scale in China and the manufacturer does not have a presence in China

When the "lawful" owner of this mark wanted to apply it in China, it was rejected as the same mark was registered a few years back. When we were asked to provide opinion on the subject, apart from the normal thing, we also found out that the Chinese trademark owner was an individual instead of a company that also applied another 50 trademarks under the same class 25. Some succeed and some failed.

This person had yet to apply any mark for Chinese products, what an individual with international prospective.

What it takes for his attention to apply for a mark registration? All these marks are national or international brand that have yet to have a presence in China. So that good citizen of China is creating brand awareness before their lawful owner.

We were thinking should we start an anti-squatting action to call each lawful owner to instruct us to get back the trademark from these Chinese squatters. To be or not to be, that is a problem when we have spare resource. Advert time: For those foreign trade mark agent or trade mark owner, you can have us to do some search, may be something interesting may pop up.

A folk innovator of China

Maybe most of us would imagine that only a large corporation could afford to invest in an innovation. Nevertheless, a folk innovator of China displays that our concept is wrong.

He Zengrong, a folk innovator of China, who has paid patent maintenance fee for 9 years, has been granted on five applications since 1998, including two invention patent. As an innovator of enthusiasms, Mr. He brings his own innovations to take part in every ‘’Patent Supermarket’’ in Wuhan(武漢) each month to consult with investors there.

Mr. He believes his invention---Electric mosquito coils terminator. When his daughter had produced a baby in hospital, he had used his Electric mosquito coils to drive the mosquito. He expressed that only using his own Electricmosquito coils could make him to feel at ease. At present, Mr. He’s Electric mosquito coils can bring 20,000 RMB a month for him and he will put that money as capital on his innovation.

"The certification of patent is the proof of success for each innovator." Mr. He said. Without a certification of patent, the corporation might turn down to collaborate because of the high risk and the low market acceptance. In an other word, having a certification of patent can increase an opportunity to cooperate with corporation.

Finally, Mr. He claimed all innovators would also have a common wish that using their innovations contribute to the society. Mr. He, a folk innovator of China told us that enthusiasm and persistence were the most essential elements for innovation. Mr. He is so successful and was single out in a Chinese report by the SIPO.

McDonald's blocks the yellow ‘’W’’ on red!!

"You use 'M' as your company trade mark so that I would be banned to use 'W'? Your 'M' trade mark represents a door, whereas our 'W' represents a container. There is no relationship with McDonald's," a spokesman of 'WONDERFUL萬德福' said.

'WONDERFUL萬德福' is a company involved in producing different kinds of foods and related services in China, uses a yellow 'W' on red as its trade mark. In 2003, WONDERFUL's trademark registration was objected by McDonald’s. The outcome was that WONDERFUL was revoked with the registration in the restaurant category.

However, McDonald’s does not satisfy the result and further pursue for the removal of the 'W' mark completely.

The legal process is now being handled in Beijing's court. http://hk.news.yahoo.com/紅底黃字w商標-麥當勞要封殺-213301877.html

Translation of Chinese patent applications into English

Demand for translation works has been increased in the past 12-months.

In the standard process for our clients who file their first patent application in China and followed by filing the same in US and EPO, we translate from Chinese to English for any redrafting work done by patent attorney in US or Europe. This is an obvious choice for those inventor / applicant who can approve Chinese language.

Our US clients have their patent applications first filed in US need translation from English to Chinese for further redraft before filing to China SIPO.

In the past year, we also have requests from foreign attorney to translate Chinese patent application into English for possible litigation process in US or China, and this type of demand is increasing.

One client believed that his competitor have a patent granted in China that actually copied some of the key features of his products. In order to start the legal process to invalidate the Chinese patent, the first step was to perform evaluation and a formal translation of the Chinese patent was performed by us and the client's US attorney reviewed the Chinese patent. After that we have also translated a few US patents into Chinese for the legal process in China to invalidate the competitor's China patent. The legal process in China is now in progress.

With change to PCT rule 34.1 on minimum documentation to include Chinese patent documents as prior arts becomes effective on 1 July 2012, we think that the demand for translation on patent application related to Chinese language would be increased. Our translators in Hong Kong and China would pick up more business in the near future.

A background analysis on the subject can be found in an April blog from The Patent Bric. The Chinese news posted on SIPO can be found here.

An Unprecedented Era of Innovation

Chief of China Intellectual Property Office pointed out that the world is entering into an unprecedented era of innovation-intensive and industrial revitalization. There are four characteristics of such era: technology update and conversion cycle are shortened, the amounts of technologies increase violently, the frontier technologies become more complex and the links between technology are close.

Furthermore, the Officer claimed the system of intellectual property, which is an essential and supportive tool for the development of innovation, should conform the era to satisfy the demand of market.

The news (in Chinese) can be found here.

China is going to focus on 10 Major Technologies!!!

Recently, the patent analysis and early warning group of State Intellectual Property Office has emphasized that China is going to lock eyes on patent analysis and early warning via its internal meeting. China strives to break with the inherent ideas and makes new ideas actively. There is no doubt that such internal report plays a supportive role for the preset guidance and decision-making audience.

The patent analysis and early warning programs of State Intellectual Property Office will focus on the10 major technologies, including, LTE technology (4G), high-performance computer chip instruction system, smart grid technology, bio-breeding technology, high-performance rare earth functional materials, cloud computing data center cooling and energy saving technology, vehicle fuel cell technology, carbon-chemical technology, oil and gas exploration and development of geophysical exploration technology and environmental pollution detection.

The original posting dated 19 Sep 2011 can be found here (in Chinese).

Seminar on Patent infringement and litigation in July

Just received a mail from China Law Society Training Centre that they are going to organize a seminar on Patent Infringement and Litigation, the seminar is to be held on 9-11 July 2011. The contents of the seminar is very attractive for me, though I do not have the qualification to appear in Chinese court, but it is good to know the law and the process. I have a couple of litigation cases that I am working back and fro with Chinese patent attorney and attorney of law to plan for some actions to be taken shortly.

The instructors of the seminar include 'expert' from the Beijing Courts and High Court. Cost of the seminar is reasonable, using Hong Kong standard, it is only RMB2000 (about USD300) plus hotel and expenses.

Too bad that I have to assist in a court case in Hong Kong starting from 4 July 2011. So I will not be able to attend this time and hopefully they will organize another one in Guangdong in the near future.

In case you are interested, and able to understand Chinese, here is information related to the seminar.

Summer promotion by China Intellectual Property HK Limited

Our company is running a promotion this summer. We charge a flat fee for filing patent of invention application to State Intellectual Property Office of China for US$3,000 per application (translation, drafting and examination fee excluded). This fee also include claiming of foreign priority and condition applies.

Our company is also giving away free iPad2 (32G Wifi) for any inventor or foreign patent agent who fill 3 patent applications through us by 30 Sep 2011. To qualify, you must confirm and approve the final draft of patent application suitable for filing to State Intellectual Property Office of China and pay up cost on account before 23 Sep 2011.

Note: The US$3,000 fee represents a standard application process and handle patent of invention only. The fee does not include translation of patent application in your language into Chinese, and possible redrafting of patent application suitable for filing in China, and cost of draftsman work on patent drawing. Examination fee is not paid at time of filing and is not included in the US$3,000 quoted fee. Applicant is required to provide foreign priority certificate and courier to our office.

File a patent in China and claim a Taiwan priority

No matter what was said in the past, if you have first filed a patent in Taiwan (Republic of China), within 12-months' time, you want to file the same patent in China, you cannot claim the priority date of the Taiwan application.

Starting from 22 Nov 2010, you can do that (with a small but).

On 12 Sep 2010, China and Taiwan had agreed to accept and recoginize each other's priority certificate. So for a patent application first filed to Taiwan patent office on or after 12 Sep 2010, the same application can be filed to China patent office after 22 Nov 2010 and claim the priority date of the Taiwan application. When filling in the proper forms, it should state that the first filing office is "Taiwan Region", not Republic of China.

It is good to know that, though two patent offices required filing in Chinese, but in Taiwan, you need to file in Traditional Chinese, while in China, you need Simplified Chinese. And apart from character translation, the use of technical terms are different. Some type of redrafting is required between the two versions.

China prepare to put in more effort to protect IP rights of foreign enterprise

In a news announcement made on 8th November 2010, Chinese authority reinstate it's effort to protect IP rights of foreign enterprises.

A meeting was held in Chongqing City (重庆) on 7th November 2010 on the subject matter. The head of State Intellectual Property Office said that 100 or more policy had been rolled out annually in the last 5 years.

It was felt that China has developed leading edge technology in some of the fields, including energy, high speed train and information technology, as a nation, China should have interest in protecting itself in the IP area.

I hope foreign enterprises really had felt the effect in the past 5 years and give hope in the coming years. However, it is still not an easy task to deal with local authority, including the court and custom office with issues related to IP, not to mention when you have to deal with local administrative officials if there is a factory making infringement goods.

The Chinese news announcement can be found here.

Chinese Nobel Prize winner

Just want to let the world know, we have another Nobel Peace Prize winner of Chinese nationality.

The Nobel Peace Prize winner is now serving a 11-years jail term in a prison in North East China. He was charged for co-signing Chapter 2008, promoting human rights in China.

The gentleman is Dr Xiabo LIU. At time of writing, it is believed that Dr Liu is not aware of the prize announcement, Mrs Liu is scheduled to visit him tomorrow.

A common Chinese saying: Liu, go home and have dinner with your family.

Patent as a collateral

Recently as part of the government policy to encourage invention and application of patent from Chinese inventors, banks in China started to use patent right as part of collateral for a commercial loan. As of September 2010, there are 24 banks and 16 guarantee companies in China accepted such property as collateral.

Currently, the total cumulative loan portfolio of the amount RMB25 billion (around USD3.7 billion) was borrowed in 2000 projects that involved at least one patent right as part of collateral, that is, around USD1.8 million per project. According to the report dated September 30, 2010, the new loans approved in the first eight months of this year tallied to 77 cases that involved 504 patent rights with a total of of RMB 4 billion (around USD 600 million).

However, the report did not disclose the average value of each patent right in each loan and what other assets were involved in the loan application process. So in the end, may be the the banks are still considering the hard asset that are used to pledge the loan, and then throw in any intellectual property just to please the government officials. The report also mentioned that the current policy of using patent right as loan collateral is still at it's pilot stage since December 2008 and we are not sure how aggressive banks and other financial institutions to take on the surge in patent application from Chinese inventors.

China “National” Products – with or without

Do you love your country? This is a question always asked by the authority. How do you define a “patriot”? How about consuming the national brands of products? Well, the names of national brands of products in China usually start with “Kuo” which means “country” or “national” …

“Bank of China” (中國銀行), “Petro China Company” (中國石油天然氣股份有限公司), “National Wine: Gui Zhou Moutai” (國酒貴州茅台), “Chung Hwa Pencils” (中華牌鉛筆) … wait a second, are they really produced by the country?

Some Chinese parents have a preference to name their children starting with “Kuo” (國) (pronounced in Putonghua) or “Kwok” (國) (pronounced in Cantonese) as their first name, it means “country” or “national”. They would usually add another preferred element/meaning as the second name after “Kuo” or “Kwok”, e.g. Kuo-Ming (means “clever”) for boys, Kuo-Mei (means “beautiful”) for girls … wait a minute, are they “made in China”?!

You may consider the above ridiculous, however, it may become necessary after an official notice about products containing the name or trademark as “China”, “country” etc. has been published at the PRC’s Trademark Office, the State Administration for Industry and Commerce (CTMO) on 28 July 2010.

This notice is composed of 3 major parts:

(1) Compliance of Laws/Regulations (法律依據);

(2) Review of trademarks containing the word of “China” (含「中國」字樣商標的審查審理標准); and

(3) Review of trademarks containing the first word of “country” (首字為「國」字商標的審查審理標准).

Ironically, some “national” brands of products exist in the market for a long period of time, causing the consumers (local and overseas) to believe that they are really produced by the country! The best example is “National Wine: Gui Zhou Moutai” (國酒貴州茅台). It is usually served for overseas (especially from USA) presidents, ambassadors and senior officers in China since mid 1970’s.

With the enforcement of this new law/regulation, some existing “national” products which have been in the market for some time would be put in an embarrassing position. Hopefully the brand-building of these “national” products is blossoming in a mutual-beneficial way!

Patent of Invention and Patent of Utility Model in China

For patent applicants in China, or inventors in China, the cost to apply for a patent of Invention and Patent of Utility Model is still a major determination factor. That is why you can see a lot of China originated patent applications are Patent of Utility Model.

This, as a matter of fact, created a large (relatively) number of patent specification that eventually did not go through any examination process. It is just too easy, in terms of cost and process, to get a Patent of Utility Model granted.

We have been approached to provide opinion for value of a granted Chinese patent, with a good story and a patent certificate. Quite often, we cannot put a value on it. This is a polite way of saying that it is worthless.

Patent applications after publication

I have a couple of calls from different clients related to the publication of patent application (Patent of utility module).

China has a very rigid time schedule, that application are published 18-months after filing date. Anyone who cares to know, can go to the web site http://www.sipo.gov.cn to search for it. That means the invention as described in the application becomes publicly available. Patent applicant may consider to request for examination (if not already done so). Applicant can request for examination within 3 years after filing, failing which, it lapses.

Applicant can withdraw the patent application before publication, then it would not be available to the public, the application and the knowledge related to the invention will remain confidential. Once it is published, then it is no longer confidential information, as the original patent application was intended for 'skilled person of the trade' to understand and to build the embodiment according to what was disclosed in the application. So filing a patent application without going through examination like disclosing your way of building a new invention.

Having said that, there are clients who just want to file an application in China and do not want to spend time and money to go through the patent examination process. There are different commercial considerations for doing this. One being that you have three years' time to claim that you have one 'patent-pending' for the cost of the filing. If the invention is not commercial viable after testing the market for 18-months, applicant can just abandon the patent application.