September 12, 2018
China has reached out to the West in product protection and anti-counterfeiting efforts. The IP sector now stands at an important crossroads, says Timo Helosuo, CEO at Kolster.
Western companies can set out to conquer the Chinese markets and have peace of mind in doing so, so long as they remember one thing: product protection. The same applies to Chinese exports to the West. As the flow of brands between the hemispheres now runs in both directions, Chinese companies too wish to ensure that their products reach Western markets securely.
The fear of counterfeits is mutual, as pirated products are very much a worldwide problem. The global market for pirated products is now valued at 640 billion US dollars and rising. It is also now in the interests of the Chinese to tackle counterfeiting.
This means that we stand at an important crossroads as intellectual property (IP) sector operators. We are entering a new era in which the common standards on IP rights are being upheld and actively developed by both China and the West.
At Kolster, we have worked closely with the Chinese in patent and trademark issues since the 1980s. This work has not gone unrecognised. In 2017, Kolster become the first foreign IP operator to be accepted as a full member of the China Trademark Association (CTA). The Association’s members include both trademark owners and key operators in the trademark sector. Our membership preceded those of companies such as e-commerce giant Alibaba.
The CTA is a partially state-controlled association, and its executive council is appointed by the state. Its duties include issuing statements on IP disputes and playing a central role in the development of IP practices.
The development of partnerships is crucial, both between operators in the sector and between associations and countries at legislative level. Indeed, whereas the Finnish Patent and Registration Office works in close cooperation with its Chinese counterpart CNIPA, at Kolster we have long-standing and strong ties to China in the field of trademarks.
Our experiences have taught us that the Chinese choose business partners based on reliability, not size. Our approach in China was not to lecture the locals, but to build healthy interactions. By acting in an agile and dependable way, we get noticed.
At formal occasions, the high esteem enjoyed by the Finnish state is also frequently mentioned. The Chinese have not forgotten that, back in 1950, Finland was among the first countries in the West to recognise and establish diplomatic ties with the People’s Republic of China. Finland was also the first western nation to conclude a bilateral trade agreement with China. In China, these matters are not easily forgotten.
While building bridges on IP matters between China and Finland, we are also paving the way for other operators in Europe and the US to gain better relations in China. A common set of rules benefits all parties. It is also essential to let our partners in China know that Finland is both part of and a gateway to Europe, and can be reached directly without a layover in Germany, for example.
A totally new phenomenon has arisen: the hijacking of Chinese brands in Europe. Many explosively growing Chinese brands are seeking to enter the Western markets, where pirated products operate in e-commerce in particular.
This has, in turn, encouraged China to take rapid action in developing its IP sector. In 2017, the official fees for trademarks were halved.
China’s readiness to make huge leaps like this indicates genuine capacity for change and is bringing dynamism to the overall economy. Change occurs once there is a real need for it. In a reversal of attitude, China too is now regarding IP rights as a necessity rather than a nuisance.
In short, China is rapidly overhauling its IP matters to match international standards. For example, the amounts of compensation awarded in legal proceedings are already approaching international levels. Previously, if a Chinese company stood trial for the illegal copying of a Western brand, the amount of compensation awarded would not even cover the winner’s legal expenses. This meant that seeking justice was futile. However, this too is now changing.
Chinese companies are also heavily subsidised by the state when exporting their brands to the rest of the world. Efforts to gain a foothold in the global markets are now serious, partly due to the ongoing trade war. The Chinese state is also systematically increasing its investments in hand-picked technology companies.
In light of this, the notion that all brands entering China are immediately copied and counterfeited is no longer accurate. If this still occurs, the fault is unlikely to lie with Chinese legislation. A more likely cause is that those seeking to enter the market are neglecting their IP matters. For this reason, the checklists of every company with global aspirations should be topped by a reminder: take care of product protection and patents.
Our work is progressing step by step and we know that our words carry weight in China. The next opportunity for dialogue will be in late September, when Kolster hosts the executive council of the CTA during its visit to Finland. We expect that we will have a great deal to discuss.
CEO Timo Helosuo
timo.helosuo@kolster.fi, tel +358 40 5761659