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IPR Protection: Wake Up and Smell the (Starbucks) Coffee

Protection of intellectual property is a key concern for businesses in China (increasingly for locals as well as foreigners). As a result the government has been under pressure to offer better protection, and it launched a protection campaign in September 2004, then set up a leading group for developing a strategy for intellectual property protection in 2005.

In the first 11 months of 2005 it is reported that courts across China accepted and adjudicated:

  • 3,250 criminal intellectual Property Rights (IPR) violation cases, up 28.21 percent from the same period of 2004
  • 12,700 civil IPR violation cases at first instance, up 26.94 percent from the same period of 2004.
  • The latest case has involved the famous “Silk Street” market in Beijing – where many business people, diplomats and tourists can often be found “researching” the range of fake products. LVMH, Louis Vuitton, Prada, Burberry and Gucci brought a civil case against several stores, and the landlord. In a landmark decision, they won the case, and are due damages (but only around the equivalent of US$12,000). It is yet to be seen whether the ruling will have an impact, and the offending products are still on sale…

    Two other big foreign brands – Starbucks and Ferrero Rocher – have also won cases recently. In the case of Starbucks a local company was using the Chinese translation of the name (“Xinbake”) as well as a similar logo to the US firm’s. Starbucks was awarded the equivalent of around US$62,000. Ferrero Rocher, which was reported to have spent US$800,000 on IPR protection in recent years, won a court ruling (on appeal) in Tianjin against Montresor (Zhangjiagang) Foods, which produces copycat chocolates. Montresor was orderd to stop production of the chocolates and to pay compensation equivalent to about US$86,500.

    Despite these awards, abuses remain common, and companies are well advised to take care of their IPR – prevention is certainly better than cure. Contact us to discuss your concerns.

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    (Updated 18/1/2006)