Category Management

Doing Business in China: Protect Intellectual Property

Companies are rushing to trade with China, the world’s second largest economy.

Use All Available Resources lores_globe_glass_bz

Your business should consider using Canada’s trade resources.

For example, register your trademarks and copyrights with the Canadian Border Services Agency. Customs will screen select shipments to verify that they comply with the Customs Act. Intellectual property can also be registered with Chinese Customs. Registration is not foolproof, however. In both countries, the screening process keeps only a small portion of infringing goods out of the marketplace.

Other Canadian agencies can also help sort out intellectual property difficulties. The Canadian Intellectual Property Office has a wealth of IP information. The Canadian Embassy can help locate IP attorneys in China as well as monitor the status of an infringement case within the Chinese legal system.

The Canadian Trade Commission also has extensive knowledge of Chinese intellectual property laws as well as industry-specific information regarding music, software, the automotive industry and pharmaceuticals.

You might also want to consider subscribing to blogs. There are a number of highly informative websites and blogs that cover Chinese intellectually property laws in detail. These sites also routinely cover enforcement actions.

In addition, consider creating Google alerts focused on Chinese intellectual property laws and enforcement.

Some organizations are expanding so rapidly into China that they dangerously postpone registering their intellectual property (IP). The importance of protecting IP cannot be overemphasized — it is often at the heart of a business’s success.

If your company plans to do business in China, or if it already is, it needs to be familiar with Chinese IP law. Beijing has strengthened those laws over the past decade, but work still needs to be done.

The Canadian Embassy recommends that every company’s plan for doing business with China include IP-protection strategies. Businesses that already operate there should review their IP policies and protections to ensure they have kept pace with corporate innovations and expansion.

Some companies mistakenly believe that Canadian intellectual property registration protects them in China. Others underestimate the risk of IP abuse. Patents and trademarks registered in Canada are not typically protected in China. To help prevent infringement, your business must register its intellectual property rights with the Chinese government.

The trademark and patent protection system in China operates on the basis of first-to-file rather than first-to-use or first-to-invent. This means that the first party to register is granted the rights. China’s intellectual property protections include:

Trademarks: Using trademarks is generally the most effective tool against infringement in China. It is easier to identify an infringing mark than a patent or copyright, which require a time-consuming administrative review.

Applications must be filed with the Trademark Office of the State Administration for Industry and Commerce (SAIC). Before beginning the process, conduct a search to confirm that no one else has registered your company’s trademarks. To ensure the maximum protection under the law, register your trademark in English and in Chinese characters. Despite different spoken Chinese dialects, a Chinese character trademark is understood by all Chinese consumers. Removing the language barrier with a character improves brand recognition and enables the products to reach a wider market. While you are at it, register your company’s Internet domains.

If your business has a physical presence in China it can file a trademark protection application directly. If it does not have offices there, it must use an authorized trademark agent. Warning: A registered trademark that is not used for three consecutive years in China is subject to cancellation.

Once a trademark license contract is signed, your organization must submit a copy to the Trademark Office within three months. The licensee must submit another copy to the local county SAIC. The contracts must include provisions showing your company agrees to supervise the quality of the goods the licensee manufactures and include a requirement that the licensee will put its name and address on the items.

Patents: Chinese patent law recognizes three kinds of patents: invention, utility model, and design. Applications are made to the State Intellectual Property Office. If your business doesn’t have an office in China it must apply through an authorized patent agent. The protection lasts for 20 years.

When your company applies for a patent in Canada, it can also submit an application for a Chinese patent. If your business already has a patent in Canada, you should apply in within one year for inventions and utility models and within six months for industrial designs. Any later than that and China may decide not grant a patent because authorities there won’t consider the invention to be “new and innovative.”

Copyright: As in other countries, there is no need to register a copyright to receive protection under Chinese law. Foreigners have copyright protection of their works if they were the first to publish the work in China. However, as is the case in Canada, registering a copyright with the Chinese authorities eases the process of copyright enforcement. Authorities can confiscate and destroy infringing products, but criminal prosecution is infrequent.

Trade Secrets: These also do not require registration. However, your business must be able to show that it has set up policies and procedures to safeguard its trade secrets. Your company’s treatment of the trade secret will dictate whether or not the courts grant protection. The theft of trade secrets is punishable under civil and criminal law.

To help further safeguard your IP rights in China, consider these steps:

  • Conduct due diligence on partners, agents and distributors. Associates or former employees are frequent sources of intellectual property infringement
  • Cover all aspects of your business’s IP with clear contracts that include clauses on your ownership rights and on limitations over the use of IP by partners, distributors, and licensees. Contractual problems are a frequent source of infringements. Have your legal advisers review all agreements and consult with you during negotiations.
  • Require employees to sign confidentiality and non-disclosure agreements as well as accords dealing with the use and ownership of intellectual property.
  • Engage a qualified intellectual property attorney if you plan to pursue an enforcement action. The Chinese agency to notify will depend on the type of intellectual property involved as well as the region of the country where the dispute has arisen.

If your organization does not register its intellectual property it risks having its inventions registered by others operating in bad faith. While there are mechanisms to pursue recourse, the legal processes can take years to wind their way through the system at considerable expense and trouble. The safest action is to register your intellectual property as soon as possible and to remember to register the Chinese character versions of their trademarks.

International Business: Revisit the Risks

lores_library_law_books_shelf_bzIf your company operates abroad, it needs to be aware of laws that are likely tougher than those in Canada when it comes to the liability of fraud.

Corruptions and bribery are among the laser focused topics covered by very tough legislation in, for example, Britain and Spain. Here are some measures your company should consider putting into place to tackle those two specific crimes and avoid stiff penalties. In the contemporary marketplace, it is no longer enough to claim that payments were necessary because that’s the way they do business there. Monitor all activity. Be certain your business can demonstrate to a court’s satisfaction that it had the necessary procedures in place to block criminal activity. Be able to show that your business monitors the activities of employees, enforces its code of conduct and anti-corruption policies, and tracks, reports and stops corruption in its tracks.

On top of that, a company must have:

  • The mechanisms necessary to track all payments made in the course of business.
  • A sustained track record of handling any discrepancies or explicit violations efficiently and effectively.

Understand the risks. Consult with your attorney and accountant to conduct a risk assessment focusing on the:

  • Effectiveness of your company’s anti-bribery training and education programs.
  • Risks inherent in each country and region where your organization does business. Find out about the best practices used by businesses with similar operations.
  • Size, frequency, nature and risks of your company’s transactions.
  • Extent to which the business hires third parties to sell or deliver its products or services.
  • Ability of the organization to monitor, investigate and report potential violations of the Spanish law, the Bribery Act and the Corruption of Foreign Public Officials Ac

Invest in education. All employees, as well as suppliers and contractors, should be expected to read and commit to your business’s code of conduct. The code should be clear about the company’s stand against corruption. Education and training materials should contain sufficient information on the legal and corporate consequences of bribery and other forms of corruption.

Consider adding another step to the process when vetting and approving vendors and other third parties. They should be aware of the scope and potential liability under the British and Spanish law. The best way to be sure vendors and third parties have read and understand the company’s code is to test them. The testing process should be designed to show that they understand the elements of bribery, know how to report suspicious activity and are clear what breaking the law can mean to them as individuals, to their companies and to your business.

Managers should take advantage of every opportunity to set the tone. For example, when training sales people, revisit corruption laws and explain how they affect their duties. Real-world examples and role-playing can be extremely effective

Consult with your attorneys about international fraud laws and have your legal counsel review your company’s practices and governance procedures.

Six Issues to Consider When Managing Remote Employees

office home silo man description sizeAllowing employees to work from home can provide significant benefits for your staff and your company. It can improve morale, reduce real estate and facility costs. It can even reduce traffic congestion and make the environment cleaner.

However, appropriate oversight is necessary to avoid potential fraud and abuses that can wipe out many, if not all, of the benefits associated with a work-from-home program.

Pros

Cons

Cost savings.
Having employees work from home can reduce demand for office space and cut facility operating and parking costs.
Not for everyone.Some employees
fear less “face time” will reduce chances for promotion. Others need an office environment.
Work/ life balance.
There is more time for employees to care for their loved ones and address home emergencies.
Time disputes. 
Without a system to record hours, disputes may arise over the time actually worked.
It’s green.
Reducing the number of commutes to the workplace saves fuel, reduces vehicle carbon emissions and traffic congestion.
Performance fears.Managers may equate remote work with lower performance and may need to adjust to a culture oriented more to results than processes.
Continuity.
Working from home may mean that at least some of your company’s operations can continue during a snowstorm, natural disaster, terrorist attack or other emergency.
Security.
The IT infrastructure must be properly designed. Some jobs may simply not be able to be performed at home for security reasons.
Accommodation.
Working from home can better accommodate individuals with disabilities.
Friction.
Staffers in the workplace may resent remote workers.
Enhanced performance.
Remote workers may exceed their performance in the traditional workplace. Many report that they convert the old drive time into productive working hours. There may be fewer interruptions andabsenteeism may drop.
Worsened performance. 
Outside a traditional structure, some employees may lose productivity by cleaning house, watching their young children, watching television or being otherwise distracted.
Job satisfaction.
Working from home can increase personal freedom and flexibility, improve morale, and decrease stress.
Safety. 
There may be liabilities if employees are injured off-site. Consult with your attorney.
Retention and recruitment. 
Offering a work-at-home option can boost your company’s attractiveness in the job market and lead to reduced turnover.
Equipment cost, loss and damage. 
You must address who pays for equipment, how it is to be used and what to do if it is lost, stolen or damaged.
Staying in touch.
Using instant messaging, conference calls, webinars, collaboration software and other technology can help employees feel less isolated.
Team conflicts.Relationship problems among remote teams can be harder to resolve than those among on-site employees.

Before allowing employees to commute to their home-based desks, answer the following questions to help ensure that you minimize the risks and maximize the returns of the program:

1. Which jobs make sense from home?

There are numerous positions within a company that, despite pleas to the contrary from employees, are not suitable candidates for a work-from-home program.

For example, allowing a manager with a broad span of control to work at home is typically not a good idea. Managing by phone is far less effective than being physically present. Also, employees are likely to resent that their manager works from home while they are stuck in the office.

Before announcing a work-from-home program, identify all of the positions that will not be allowed to participate. Be sure to engage your company’s legal counsel to ensure that the process does not violate employment law or create employee relations issues.

2. Which employees will be eligible?

For employees that are underperforming or have a track record of discipline issues, working from home may be viewed as an opportunity to “hide out” and avoid the scrutiny that comes from working in an office. Together with your human resources department, develop criteria that employees must meet in order to be considered for the program.

For example, you might require candidates to earn a “meets expectations” rating in their performance reviews and have no outstanding discipline issues.

3. How will you monitor productivity?

There is an assumption that once employees are allowed to work from home their productivity will at least be equal to their “in office” performance — or may even be better. This may be true, but for employees who have never worked from home before, the distractions of home life (including a significant other, young children, noisy next-door neighbors or just plain loneliness) may be too much to bear and their productivity may actually decline.

This begs the question: Once an employee is out of sight, how will their performance be monitored? There are a number of technology solutions that can track keystrokes, periodically capture pictures of the employee’s computer screen as well as record activity within specific software systems. Regardless of the approach used, there must be some mechanism to track productivity and ultimately performance.

4. Should home workers use company computers?

An employee’s personal computer may not have the most up-to-date virus software in place and that raises the risk that the person could download a virus that could affect both the home computer and the company’s entire network. It is also conceivable that the employee’s computer can be accessed by other members of the family. That raises a real concern of data loss or theft, as well as disclosure of customers’ private information.

There can also be problems if an employee is working on a personally owned computer and the employer receives an e-discovery request. Electronically stored information is routinely requested in civil and criminal proceedings. Complying can be difficult if, for example, an employer doesn’t know what files or records employees have on their home computers or if an employee alters files or destroys them after an e-discovery request is received.

If at all possible, remote employees should only be allowed to use company-issued computers. Doing so ensures that the employee’s computer is subject to the same virus and system upgrades as the rest of the company issued devices and less likely to contract an infection that could bring the company’s information technology infrastructure to its knees. Mandating that employees use company computers also reduces the risk that your business will be unable to comply with an e-discovery request.

5. What happens if data does go “missing?”

Allowing employees to work in their home offices can give them the false impression that no one is watching what they are actually doing with the company’s data. Before your company launches a work-from-home program, think about the data that remote employees can access as well as what would happen if that data were lost, stolen or misplaced.

For example, if an employee working from home decides to steal confidential data, how would your company know? If the employee was the victim of a home invasion and the company laptop was stolen, several issues arise:
1. How much of the company’s data is stored on that laptop?
2. Is it encrypted?
3. What could your company do to limit or mitigate the potential damage?

6. What about travel expenses?

The potential for expense fraud and abuse by remote employees should be a major concern. One of the simplest ways to combat expense fraud by work-from-home employees is to ensure they are appropriately identified in the company’s expense reimbursement system as remote employees.

For example, most expense reimbursement systems require that an employee include their home office or base on their expense statement. For remote employees that designation could appear as Remote or VE (virtual employee) or WFH(work from home). The actual naming convention is not important. What is important is that your company can periodically target expense reimbursement requests from remote employees to ensure that expenses are reasonable, consistent with their remote status and consistent with company policy.

With appropriate policies, management and safeguards in place, you can help ensure that your company reaps the benefits of a work-from-home program and that employees perform at their best, whether they are working down the hall in the workplace or in their home, or in an off-site office far away.