It was a rare victory for a Western company in China. In January this year Dyson, advised by Wragge & Co partner Gordon Harris and China IP head Dr Jian Xu, won a high-profile design rights case against China-based manufacturer Yongkang Yixuan for the latter’s infringement of the design of Dyson’s ’Air Multiplier’ fan, which uses innovative technology to create a smooth airflow without conventional blades.
For Dyson IP director Gill Smith there is a much longer game to play. Dyson’s fight for its design rights shows the struggle Western companies have in maintaining IP rights in China, but at the same time shows the merit of an aggressive defence.
The case itself was the culmination of eight months’ work, starting with the launch of the fan at the end of 2009.
“Within three months, Chinese companies were offering identical copies,” says Smith.
“We believe they bought samples of our fans in Australia and reverse-engineered them. They even used our images off our website and our copy.”
Tracking down those manufacturers is difficult. “Sometimes people are offering products without having any available – they seem to be testing the water before committing to manufacturing or ordering stock,” adds Smith.
Smith’s colleagues visit trade fairs in Hong Kong and on the mainland as part of preliminary investigations.
“It’s difficult to get the courts and authorities to take a case in instances where a company isn’t properly registered, so you can end up chasing your tail,” she says. “You’ll find a knock-off, so the first thing you do is instruct a private investigator to find out what’s going on, and you may or may not get results. We’ve had investigators go to addresses that turn out to be patches of scrubland.
“If you can find the company, you need to get a notary public to witness the purchase of an infringing product – which involves the investigator maintaining the confidence of the target company while they’re negotiating with it. Nothing is accepted by Chinese courts unless there’s a notary’s stamp on it. It’s time-consuming and quite expensive.”
The Chinese authorities have begun to respond to Western concerns. China’s State Council, presided over by premier Wen Jiabao, announced last October that it would authorise an intense six-month campaign against IP infringements. The ruling in March in favour of Isle of Man-based electric kettle control manufacturer Strix, which took legal action against two patent infringements, was warmly welcomed by Western IP lawyers.
However, hurdles remain. Like many other jurisdictions, China’s ’first-to-file’ system does not require proof of prior ownership, which leaves products open to registration by Chinese manufacturers.
Slow boat to justice
The key issue is the delay in the process, which creates enormous headaches for Western companies, says Smith.
“While the Chinese company is offering infringing products you’ve got to grit your teeth,” she elaborates. “While you’re gathering evidence to carry out a raid – and you often have to wait weeks – other companies will say, ’I’m going to have a piece of that pie’. Then you’ve got one, two or three other companies to deal with.
“The pace of administrative action is frustratingly slow. We’ve had actions where evidence of infringement was found and then a formal decision has been sat on for several months.”
The company is now looking more to civil actions, which are faster at between three and six months.
“Compared with US or UK proceedings, that’s like greased lightning,” comments Smith, approvingly. “As long as you can get your notarised evidence it’s pretty swift.”
There is also a problem with damages awards. In China, these are often calculated based on the infringer’s unjust enrichment rather than the IP owner’s lost revenues which, since counterfeiters usually sell their goods at a fraction of the price charged by rights owners, translates into low awards.
“I think the authorities are trying hard to make it happen, but Chinese courts are reluctant to award anything like a sensible amount of damages in cases of design infringement,” says Smith. “We’re getting pitiful results there – the equivalent of less than £10,000 in damages when it’s cost us many multiples of that to track down and deal with the infringing company.”
Linked to this is the issue of patent protection taking too long. Because of this, argues Smith, Chinese companies can say to their customers that Dyson has no patent.
“They say our design rights are invalid and a lot have filed their own utility models that use our patent drawings,” she adds. “If you’re a foreign company or individual applying for protection in China it will go through the patent office a lot slower than if you were a Chinese applicant, and that’s wrong. It means that if we want to bring a product into China, someone could nick our technology, patent it and then sue us for infringement.”
Smith’s assertiveness in protecting Dyson’s IP rights has had an effect outside the IP world. In a speech in Beijing on 10 December Prime Minister David Cameron said: “We need to work together to do more to protect IP rights because this will give businesses more confidence to come and invest in China.”
It was a sign that IP rights have become a big part of the political and business agenda. Indeed, in February Smith and her lawyers at Wragges met Chinese officials who are taking the comments made by Cameron and business secretary Vince Cable seriously.
“It’s terrific that the Chinese government is listening to concerns about the way we have to deal with copycat products,” says Smith. “We hope we can be of help in their effort to reduce the amount of litigation Western companies feel they have to bring in China in relation to copycat products.”