Role of consulting in protecting corporate IP rights

By Frank Liu, Tiantai Law Firm

With the strengthening of China’s intellectual property (IP) protection, more enterprises are gradually realizing the importance of IP strategy and are willing to get advice on projects or cases from professional agencies before taking any specific action. However, in practice, there are still many companies that focus only on short-term urgent solutions, while ignoring the overall strategy for projects or complex cases, and advice in the process of implementation. In this case, if the final result is not ideal, it is very likely that companies will simply attribute the unfavourable result to the legal services, or even the legal mechanisms, while ignoring the real causes.

The reasons for neglecting consultation are that, on one hand, there may be misunderstandings about the services provided by external professional institutions. Companies tend to believe that external professional organizations can only provide assistance in trademarks, patent applications, anti-counterfeiting, lawyers’ letters and litigation business that falls within their respective capabilities.

刘建强 -FRANK LIU-天驰君泰律师事务所-合伙人-Partner -Tiantai Law Firm
Frank Liu
Tiantai Law Firm

On the other hand, most professional institutions in the market currently only focus on one or several specific legal services, and provide customer strategy consulting as an aid to specific action, or as a value-added project free of charge. In the above cases, the enterprises may mistakenly believe that the consultation involves no expertise, while professional organizations are more inclined to provide standard and modular consulting services to cut costs. The result is that companies are reluctant to pay for consulting, and it becomes difficult for them to get high-quality consulting services from professional organizations.

Adverse effects of neglecting consultation. Due to the inherent exclusivity of IP rights, there are often conflicts with other parties in the protection of IP rights. Since the rights and market conditions of opposing parties may change at any time, it is necessary for enterprises to make corresponding strategic adjustments. In the process, any negligence may lead to unfavourable results. For instance, a trademark or patent might be invalidated for failure to detect and respond in time. Therefore, consultation runs through the entire process of IP protection. The possible adverse effects of ignoring consultation can be illustrated by three common examples:

    1. The trademark of a foreign right holder, A, has been cyber-squatted by someone else who registers his/her trademark in the same core category and domain name. The holder A hopes that his/her lawyers will handle the cybersquatting. However, effective trademark registration is the basis for domain name registration. It is very difficult to entrust a firm to deal with the domain name registration only. A better way is to deal with trademark preemption first, and then the domain name preemption.
    2. A right holder, B, found that a store sold products that infringed on its own trademark rights. The holder B immediately lodged a complaint and successfully fought the counterfeit. However, the counterfeit manufacturers and wholesalers, which had cost him a great deal of time and money, escaped attention. It turned out that the goods of the peddler who was cracked down on were purchased from the manufacturers and wholesalers. What appeared to be a successful crackdown on counterfeits shied away from the true villains, which could not be traced. It was not only a waste of money, but also a loss of an excellent opportunity to eliminate the source of counterfeits.
    3. A right holder, C, believes that it costs less to retain attorneys for cracking down on counterfeits based on a fully contingent fee. Plus, the right holder may be indemnified of the damages proportionately, as agreed upon successful counterfeit or litigation efforts. The right holder thinks that either way it wins. However, after years of anti-counterfeiting, the market is still flooded with counterfeit goods, and the share of fake goods has been increasing year by year. C is completely confused.

In fact, the infringers who are easy to deal with are soon found, but it takes more time and money to sort out the pack of infringers who are most harmful and cunning, to make a difference. As for anti-counterfeiting or litigation, it’s not a good idea to retain attorneys fully based on a contingent fee, as they usually avoid addressing the infringers who do the greatest harm and are not easy to deal with in order to avoid possible losses in the contingent fee model. This inevitably results in more and more fake goods, and the ultimate loss is borne by the right holders themselves.

Make counseling work better. It can be seen that in the protection of IP rights, the lack of effective planning and consultation is likely to lead to failure of the action itself. Even successful, swift and effective individual actions can lead to greater strategic failure. Without a deep understanding of IP protection and accumulated experience, a strategy that appears impeccable can lead to negative consequences.

From the point of view of process, it is best for enterprises to formulate strategies and carry out corresponding professional consultation at the beginning of determining the protection of IP rights in China. In addition, companies need to consult at any time to obtain the best solution adjustments due to the changing situations in the process of IP protection. Furthermore, in major cases, and stubborn and experienced infringers, rush actions are likely to lead to the failure of other important cases; it is best to consult on the overall strategy of the action to achieve the best result. Therefore, consultation actually runs through the protection of IP rights, from the beginning to the end.

Due to the increasing complexity of IP infringements in recent years, simple means of combating infringements according to previous experience have become difficult to repeat with ideal results. As the number of infringement cases encountered by a single company is limited, it is difficult to draw on its own past experience to combat counterfeits. It is a wise choice to gain valuable experience by relying on professional institutions for consultation.

Although the success or failure of individual actions in IP protection is important, comprehensive and customized consultation throughout IP protection is often more important than individual cases.

Frank Liu is a partner at Tiantai Law Firm


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