This document provides an overview of intellectual property rights and strategies for protecting IP when doing business in China. It discusses how the IP landscape in China is evolving, with IP laws becoming more sophisticated and Chinese companies increasingly generating and asserting their own IP. The document then provides practical tips for MNCs, including preventative registration and enforcement strategies, and examples of strategies used by companies like Microsoft, Disney, and Warner Bros. in China. It emphasizes education, strategic partnerships and pricing in addition to enforcement.

1. Doing Business in China –
Intellectual Property Rights

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4. Practical Tips on
Protecting
Intellectual Property
Rights and Doing
Business in China
CALSTART Webinar
September 2013

5. 5
Overview about IP in China
• Chinese IP Laws are on par with comparable
laws of developed countries.
• China needs effective IP enforcement.
• The IP landscape in China is evolving.
• IP remains one of the top-five issues for
MNCs doing business in China.
• MNCs in China are developing and adapting
their IP strategies.

6. 6
The IP Landscape in China Is Evolving.
• Chinese IP laws are evolving and becoming more sophisticated
– recent patent law amendments
– proposed trademark and copyright law amendments
• China’s 12th Five-Year Plan put a strong focus on IP and technology
development and Chinese companies have been incented to generate
“indigenous IP rights.”
– Most of the patents filed by Chinese companies in China are utility model patents.
– The number of invention patents filed by Chinese companies in China is increasing.
– Chinese companies (such as Huawei) are aggressively filing patents globally.
• Chinese companies are increasingly using IPR as a weapon
– Chinese companies no longer play defenses in IP litigation - they have learned to sue and
counter sue their MNC competitors for IPR infringements as a business strategy.
– Chinese companies have started to challenge validity or enforceability of MNC’s patents.
– The majority of the IP litigation cases in China are between Chinese parties and the number
is increasing every year.

7. 7
To Deal with IP Infringement -
The Bad New is:
No Panacea!
No Silver Bullet!
No One Size-Fits All!

8. 8
To Deal with IP Infringement -
The Good New is:
There are some practical tips on:
- prevention
- enforcement

9. 9
Some Practical Tips on Preventive Measures:
• Always apply for patents (including utility model patents), register
trademarks and important copyrights.
• Keep certain technology as “trade secrets” instead of filing for patent
protection (the Coca-Cola approach).
• Keep core technology out of China by manufacturing key
components outside of China.
• Assign manufacture steps to different contractors in different regions
or countries to minimize the risk of misappropriation of the whole
manufacturing process.
• Selectively use licensing, JVs, or other business structures to exploit
IP assets in China, shift IP infringement risks, benefit from R&D
efforts of local partners and access to China-generated IP.
• Adopt new counterfeiting technologies such as RFIC and digital
rights management technology.

10. 10
Some Practical Tips on Preventive Measures:
• Strengthen internal systems and procedures (adopting strict security
procedures, contractual non-disclosure and non-use restrictions,
etc.).
• Register IP rights with the Chinese custom to prevent infringing
products from exporting outside China.
• Register IP rights with the Chinese regulatory agencies (such as
SFDA and the Ministry of Agriculture) to prevent infringing products
from obtaining regulatory approvals or permits.
• Adopt competitive pricing to drive counterfeiting products out of the
market.
• Continue to press Chinese government to adopt stronger IP
enforcement measures.
• Selectively invest in regions with good track records for IP
protection.

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Some Practical Tips on Enforcement Measures:
• Select “high profile” infringers to sue or prosecute to
maximize the deterrence effect 。
• Select the right moment (such as infringer’s pre-IPO
stage) to sue or prosecute to compel settlement or
compliance.
• Shop for the best forum.
• Hire experienced private detectors to collect evidence.
• Establish good relationship with local law & enforcement
agents.

12. 12
IP Strategies Adopted by MNCs
Education, Engineering and Enforcement
• Instead of focusing solely on enforcement, Microsoft has
adopted a “3E” approach: Education, Engineering, and
Enforcement.
• This 3E approach, together with other Microsoft efforts,
has generated significant rewards, including a
commitment from national government agencies and
certain major SOEs in China not to use pirated copies of
Microsoft software.

13. 13
IP Strategies Adopted by MNCs
Engagement
• Disney has an agreement in place with the Creative Power
Entertaining Company (CPE) under which Disney has obtained the
global right to develop and commercialize all derivative products
under “Pleasant Goat 喜羊羊 .”
• Such licensing arrangement gives Disney the opportunity to explore
a popular Chinese cartoon character globally while permitting CPE
to realize the value of one of its key assets (value it is otherwise
unable to realize on its own).
• Such licensing arrangement helps CPE to “go abroad,” an effort
strongly encouraged by the Chinese government.

14. 14
IP Strategies Adopted by MNCs
Adaptive Pricing Strategy to Combat Piracy
• Warner Bros has used competitive pricing as a strategy to fight against
piracy.
– Warner has released cheaper and simply packaged DVDs at a price
that is competitive to the cost of the piracy copies, as a strategy to
gradually covert the market.
– At the same time, top-end products, such as commemorative albums
and limited editions are sold at a higher price and have been proved
popular as gifts, which is consistent with the Chinese “gift-giving”
culture.
• Warner Bros has teamed up with an Influential Partner: In addition to the
pricing strategy described above, Warner Bros also teamed with China’s
state-owned distributor, which is affiliated with the Culture Ministry of China.
With its own financial interest at stake, the Chinese partner is also motivated
to weed out pirated products from the market.

15. 15
IP Strategies Adopted by MNCs
Strategic JVs/Partnerships
• Team up with an Influential Partner
• IP/Technologies Focused Partnerships:
– Obsolete or soon-to-be obsolete technology that is not currently available in China: the
transfer of which to a Chinese partner would not create potential competition risk. Such JVs
would allow an MNC to indirectly exploit its technology in China and allow Chinese partners
to achieve dominant positions in China through access to technologies that are not available
in China.
– Development-stage technology or technologies that need to be localized: forming a JV to
collaboratively develop or localize a new technology would allow an MNC to reduce R&D
costs, benefit from the fruits of R&D globally, and take advantage of government incentives
in clean technology, alternative energy, biotechnology, and other industries encouraged by
the government.
– Complimentary technology: partnering up with a Chinese company in a neighboring industry
or with a complimentary technology to develop new products and explore new uses.

16. 16
IP Strategies Adopted by MNCs
New Anti-Piracy Technologies
• New labeling/packaging technologies, such as radio-frequency
identification chips (“RFIC”), have been used by pharmaceutical
companies, makers of special materials and jewelries, to detect
counterfeits.
• New encryption technologies, such as digital right management
technologies are being developed to prevent excessive copying on
personal computers.

17. 17
IP Strategies Adopted by MNCs
Corporate Venture Capital
• A number of MNCs in the telecom, pharmaceutical, retail, and other
industries are actively using corporate venture capital arms to invest in
Chinese start-ups to:
– developing new IP assets in China
– developing localized IP assets in China
• Provide an opportunity to selectively invest in local Chinese companies that
are developing technologies that are
– complementary to the use of the MNC’s own technology
– expand the use of the MNC’s own technology
• Cultivate a new generation of Chinese business partners who share similar
respect for IP rights.

18. 18
Wenseng “Wendy” Pan, JD & PhD
Wenseng “Wendy” Pan is a partner in O’Melveny’s Shanghai office
and a member of the Transactions Department. Her practice focuses
on mergers and acquisitions, joint ventures, technology based
transactions and strategic partnerships, especially transactions
involving intellectual property rights in cross-border settings.
She is admitted to practice before the US. Patent and Trademark
Office and has a deep understanding about intellectual property law.
She is experienced in structuring, negotiating and executing
transactions involving intellectual property rights through licensing,
strategic alliance, acquisition and other commercial transactions.
Her licensing experience covers a broad range of industries, including
the biopharmaceutical, software, gaming, entertainment, retail, e-
commerce, consulting businesses. She is a frequent speaker on
licensing opportunities in China.
O’Melveny & Myers
Shanghai Office
37/F Plaza 66, Phase 1
1266 Nanjing Road West
Telephone:
+86-21-2307-7031
Facsimile:
+86-21-2307-7300
Email: wpan@omm.com

19. 19
approximately 800 lawyers 15 offices 3continents 23languages
International Reach

20. 20
Counsel to the World’s Leading Companies

21. 21
100+ lawyers in Greater China. Offices
in Beijing, Shanghai, and Hong Kong and
20 partners exclusively in the China
practice group
China practice teams in the United
States, Singapore, Japan, and the
United Kingdom that work closely with
our China offices
Regarded as one of the preeminent
China practices of any international law
firm
Publishers of in-depth reports on areas
of current interest in Chinese law as a
service to our clients and friends
• Long History in China
– One of the first international law firms licensed by the Chinese
government to maintain offices in both Beijing and Shanghai
– We were among the very first US law firms to establish a Shanghai
office, and ours is one of the largest mainland offices of all
international law firms
• Hong Kong, China, and International Law
– One of the first US firms licensed to practice Hong Kong law
– Lawyers experienced in advising on a broad range of Hong Kong
law matters including energy, M&A, general corporate, and
regulatory work.
– Extensive knowledge of the China market and work closely with
local law firms on local and cross-border matters (we are not
allowed to practice local law in China as is the case with all
international law firms)
• Transactional and Dispute Resolution
– Staffed to meet the needs of clients for large scale projects and
able to form teams to conduct due diligence, regulatory filings,
negotiations, documentation and closings in both English and
Chinese
– Experienced dispute resolution team has advised on contentious
situations involving most Asian jurisdictions
O’Melveny has the leading practice in China

22. 22
Strong Government
Relationships
We have stronger relationships with
the Chinese government than other
law firms. China is relationship based,
and our longevity here has enabled us to
forge connections and gain support by
major stakeholders, including:
• Chinese and international financial
institutions
• Chinese law firms
• Chinese approval authorities
• Chinese government think tanks
• local and international industry
chambers
• major Chinese corporations
(whether State-owned or not)
• China’s leading academic
institutions
We put these relationships to work for the
interests of our clients
Strong Professional Relationships and Contacts within China
• We’ve recently advised both clients and relevant government
authorities on cutting edge developments, including:
– Launching on the proposed international board in
Shanghai
– Qualified foreign limited partners ("QFLP") pilot schemes
in Shanghai, Chongqing, Beijing and Tianjin
– Antitrust and IP protection
– Another ongoing confidential pilot scheme in Shanghai

23. 23
O’Melveny’s China Strengths – Full Service
Platform
Our lawyers’ capabilities span virtually every area of legal practice, including:
• Anticorruption and Antifraud Compliance Counseling & Internal Investigations
• Antitrust & Competition
• Business Tax
• Capital Markets
• Dispute Resolution
• Energy and Natural Resources
• FDI/Market Entry
• Fund Formation
• Infrastructure
• Intellectual Property
• M&A
• Private Equity and Venture Capital
• Real Estate and Distressed Asset
• Restructuring and Insolvency

24. 24
Intellectual Property Practice
Key Facts:
• Internationally recognized team
 “[O’Melveny’s] illustrious name attracts a range of
clients for IP work.” Chambers USA
 “Brings a strength to the table that not many
others can match… clients benefit from a
strategically strong presence in Asia.” Legal 500
• Lawyers with technical backgrounds and education in
engineering, physics, computer science, and life
sciences, including several Ph.D.s
• Team offers comprehensive and coordinated
representation on the most complex patent and
technology matters, including multi-jurisdiction, multi-
lawsuit, and multi-defendant cases
• Deep experience litigating in the International Trade
Commission in addition to United States District
Courts, Courts of Appeal, and the US Supreme Court
Representative Clients:

25. 25
Technical Expertise
Over Two Dozen Lawyers with Advanced Technical
Backgrounds
• Chemistry
• Civil Engineering
• Computer Science
• Electrical Engineering
• Industrial and Operations
Engineering / Industrial Design
• Material Science
• Mechanical Engineering
• neuroscience
• Physics
20 Lawyers registered to practice before the United
States Patent and Trademark Office

26. 26
Transactional Intellectual Property
• Business lawyers dedicated to protecting and exploiting IP
assets
– Technology acquisitions and dispositions
– Spinoffs and restructurings
– Corporate partnering transactions
– Joint ventures and strategic alliances
• Market leader in structuring and closing complex and novel
transactions that drive the realization of IP value
– First-ever transaction licensing core US IP into China
– Billion-dollar Sirna sale involving Nobel Prize technology
– Multiple US-China technology driven joint ventures
• Practical, business-oriented counseling informed by technical
backgrounds and professional industry experience
• Frequently serve as de facto directors of intellectual property
• Unparalleled experience handling transnational IP-intensive
deals involving the US and China, Japan, Europe, and the
Middle East.
• Lawyers in:
• Silicon Valley
• San Francisco
• Shanghai
• Beijing
• Newport Beach
• Los Angeles
• London

27. 27
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