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Technology Transfer to China and South-East Asia:

How to Protect your IP

China & South-East Asia IPR SME Helpdesk

Patrice VIDON

European and French Patent & Trademark Attorney

VIDON IP Law Group (Europe – Asia)

Date: 18 May 2018

Welcome to the Webinar!

Mitchel SmoldersProject Officer

South-East Asia IPR SME Helpdesk

China IPR SME Helpdesk

18 May 2018 Copyright © 2018 South-East Asia & China IPR SME Helpdesk. All rights reserved.

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Name: Mr. Patrice Vidon

Firm: Vidon IP Group

Location: France

Email: [email protected]

Patrice Vidon, 58, MSc., LLM, MA (Economics & Management) is a European and French

Patent and Trademark Attorney having gained a rich practice of Intellectual Property

protection, licensing, management and enforcement in the P. R. of China and the

ASEAN, especially in relation to technology, patents of invention, know-how, R&D and

technology investment and transfer agreements.

He is a Founding and Managing Partner of Vidon IP Law Group (Europe - Asia), a 25 year

old network of more than 40 IP consultants, attorneys and lawyers in 8 offices, including

Paris and Shanghai. Patrice VIDON is a former President of the French Institute of

industrial Property Attorneys (CNPI) and of the European Committee of National

Institutes of Industrial Property Attorneys (CNIPA). Patrice Vidon practices from both the

European and Shanghai offices of VIDON IP Law Group (Europe - Asia).

Speaker’s Bio

18 May 2018Copyright © 2018 South-East Asia & China IPR SME Helpdesk & VIDON. All rights reserved.

mailto:[email protected]

Agenda WHAT DOES TECHNOLOGY TRANSFER MEANS ?

WHY IPRs MATTER IN A TECHNOLOGY TRANSFER ?

KEY TERMS IN A TECHNOLOGY TRANSFER AGREEMENT

SOME SPECIFICITIES PER JURISDICTION AND PER TYPE OF IP

PR of CHINA


WHAT DOES TECHNOLOGY TRANSFER MEAN ?


What Does Tech Transfer Mean? DEFINITIONS

TECH TRANSFER: A TYPE OF IP EXPLOITATION COVERING :- IP licensing (exclusive or non exclusive): however an exclusive licensee without

exclusive right of exploitation cannot prevent IP owner from exploiting by himself- Communication of know how: requires sophisticated agreements and procedures- Combined transfers: beware specific conditions for each component

A CODIFIED FORM OF ACQUIRING AND/OR LEVERAGING RESULTS OF R&D INVESTMENTSA written agreement where the owner (Transferor) allows a third party (Transferee) to

access and use its technology (protected or no by Intellectual Property, e.g. patents,trademarks, copyrights, designs) under specific conditions, in exchange of a paydown feeor other type of monetary compensation.

TECH TRANSFER LATO SENSU COVERS TWO MAIN DIFFERENT LEGAL SITUATIONS:- transfer of IP proprietary rights (such as patent, trademark, design rights of copyright,

..)- transfer of non proprietary rights such as know-how or trade secrets

-> legal mechanisms quite different in both instances ; combination possible

SPECIAL AGREEMENTS: Kown-how transfer - Franchising (licensing brand + business model) ; JV(e.g.: co-branding or R&D)


Understanding your Benefits & Risks

TRANFEROR TRANSFEREE

BENEFITS

Receives cash and ROI on R&D efforts Neutralizes competitors by preventing them

from developping alternative technologies May securize and/or expand market by

uniformizing tech offer (network econ omy and/technologies

Accesses expertise local partner if reciprocity agreement (cross-licensing, ..)

Security of using and selling an established technology with a proven track record (« minimized risks »)

Access to new and innovative technology to gain competitive edge (higher quality products, especially relevant to SMEs without in-house R&D dept

Espansion of customer base Faster entry into new market

RISKS

If transferee becomes competitor/improver If inappropriate use damages transferor’s

reputation If insufficiently mature technology or transferee

involve transferor’s liability

If freedom of exploitation of transferred technology challenged

If technology is outdated If cost of transfer is too high If accompanying know-how is insufficient


Poll I

Have you ever transferred or acquired technologies in China or South-East Asia?

A: Yes, in China

B: Yes, in China or South-East Asia

C: No

D: No, but I am planning to do so


WHY IPRs MATTER IN A TECH TRANSFER ?


Why IPRs matter in TT ?RELEVANT IPRS TO HIGH TECH INDUSTRIES

COPYRIGHT (work must be creative,

automatic protection, author’s life + 50

years)

PATENT (invention solving a technical

problem in a new and non-obvious manner

and capable of practical application,

granting 20-year monopoly)

DESIGN (new, original and recognizable

and/or aesthetical pattern or shape)

TRADEMARK (sign must be possible, valid

and available, 10 years indefinitively

renewable): names, logos or symbols used

to promote and sell the product in the

marketplace (e.g.: Apple )

TRADE SECRET (business information

that is not yet publicly known, has

commercial value, subject to appropriate

measures to maintain the secrecy,

protected as long as remains secret)


Why IPRs matter in TT ?RELEVANT IPRS TO HIGH TECH INDUSTRIES


PROTECTABLE IP NON PROTECTABLE IP

e.g.: patent of invention or design patent e.g.: know how or trade secret

IDENTIFY YOUR IP ASSETS

How many IP assets your company uses/owns and how valuable they are to your business (brands, logos, designs, technology, processes, patent, copyrights, trade secret, know-how etc.)?Identify the potential risks to your business that could result in costly legal proceedings with employees or third parties (e.g.: design belonging to employee, logo or technology already in use by others etc.).

PROTECT YOUR IP

• Conclude appropriate contracts with your staff and business partners (employment,R&D, manufacturing contracts, NDAs etc.)

• Educate your business partners and staff on the importance of IP• Check freedom of use (use free official searching tools for overall idea)

File applns early/ Prioritize key markets Properly maintain your rights in force by ensuring timely renewals

Secure or restrict access to confidential/sensitive information/tech./trade secrets

ENFORCE YOUR IPR

Monitor market for IPR infringementDetermine nature, scope and source of infringement by conducting market surveys and investigations before proceedings (collect evidence)Consider combining civil and criminal actionsApply for Customs recordalTry alternative strategies (warning letters, negotiations,

Monitor compliance to contractual undertakings

KEY TERMS IN A TECH TRANSFER AGREEMENT


Key Terms in a License Agreement: Common Provisions

Key terms TIPS

Identification of the parties

Conduct a preliminary background check (financial status, shareholders, incorporation, court searches, ..)

Scope of transfer Identify nature and objectives of the transfer; specify whether obligation of means or obligation of results

Transfer process Specify details, steps ; identify responsabilities and key persons;

Transfer price amount; lump sum, royalties or mixed; payment terms and modes (

IPRs Trademarks, designs, patents, know-how, etc…

Liabilities Guarantee of performance ; compliance to laws ; freedom of use

Confidentiality and non competition

+ exclusive/non exclusive; improvements/grant back

Dispute settlement Applicable law; competent Court; Arbitration or Mediation Centre


SOME SPECIFICITIES PER JURISDICTION

AND PER TYPE OF INTELLECTUAL PROPERTY

• Main issues to be crosschecked for each country/jurisdiction• The Case of the PRC• The Case of Thailand• Other ASEAN countries


1/ STATUS OF APPLICABLE IP LAWS

2/ TYPE OF LEGAL SYSTEM (Civil Law; Common Law; mixed; …)

3/ RATIFICATION OF MAIN INTERNATIONAL IP TREATIES

4/ EXISTENCE OF SPECIFIC LAWS/REGIME AS TO IPR LICENSING (especially incase of technology control)

5/ LOCAL MANDATORY LEGISLATION AS TO CONFLICT RESOLUTION,COMPETENCE OF JURISDICTIONS AND RECOGNITION/EXEQUATUR OFFOREIGN COURT DECISIONS

Main Issues to be Crosschecked for Each Country/Jurisdiction


Some Specificities per Jurisdiction and per Type of Intellectual Property

THE CASE OF THE

PEOPLE’S REPUBLIC OF CHINA


CHINA: Top Country for IP Filing and Enforcement

Yearly applications for patents of invention

IPR civil cases filed in 2016

Source: PRC’s Supreme Court


3 phases in adopting modern IP laws in the wake of the Open Door Policy (1978)

1° Technology control : 3 categories of licenses for importing/exporting technologies

2° Recordal of IPR transfersMake sure assignments of Chinese patents are approved and registered by the SAIC → Otherwise theforeign company has no right to the patent because the assignment contract is not formed. Broadlyspeaking, make sure you comply with China’s body of norms regarding import and export oftechnologies.

3° Beware contract provisions on technology improvementsProvide for separate compensation to Chinese partners for the grant-back of ownership rights in theimprovements → Otherwise the assignment clause may not be enforced by Chinese courts

4° Carefully select applicable Law and jurisidiction for conflict resolution•foreign venue for dispute resolution only if Chinese partners has local assets/operations

→ Otherwise enforcement of an arbitration award or court judgement in Chine can be difficult.

•in China, Courts in large cities (Beijing, Shanghai) may be more favorable to foreign litigators thansmaller Courts in smaller cities.•Arbitration: the Beijing China International Economic and Trade Arbitration Commission (CIETAC) or theShanghai International Economic and Trade Arbitration Commission (SHIAC) should be considered

Potential Pitfalls in Licensing IP in China: Specific Applicable Laws


Have you experienced issues with Tech Transfer operations in Chinaor South-East Asia?

A: Yes

B: No

C: I don’t know

Poll II


H-Bahn is an unmanned automatically

operated suspended monorail system

commercialized by Siemens

(lines operated in two cities in Germany)

Since 2011 Siemens has been attempting to introduce the concept in various Chinese cities with the assistance of Air Train International Shanghai and the CIDI (China Int’l Design Institute)

CIDI (China Int’l Design Institute) in Shanghai offers to redesign technologies for adaptation to the Chinese market

H-Bahn Dortmund

H-BahnFrom Wikipedia, the free encyclopedia

The H-Bahn ("Hängebahn", or "hanging

railway") in Dortmund and Düsseldorf is a

suspended, driverless passenger suspension

railway system. The system has been

developed by Siemens, who call the project

SIPEM (SIemens PEople Mover).

Two installations exist, one at the Dortmund

university campus, the other at the Düsseldorf

International Airport. While Siemens is no

longer actively marketing the system, and will

no longer carry out turnkey projects, new

installations are still possible in collaboration

with the Dortmund operating company.

Since 2011 Air Train International has been

marketing the system in China and as of May 2013 there are proposals to build lines in Shanghai and

Wenzhou. A number of other Chinese cities are also studying the system.[1][2]

Contents

1 Technical description

1.1 Suspension and propulsion

1.2 Cabin

1.3 Switching

2 History

2.1 Dortmund

2.2 Düsseldorf Airport

3 See also

4 External links

5 References

Technical description

The cabins are centrally controlled and don't need a driver. The system can operate on a schedule or

on-demand, whereby a passenger requests a carriage via the push of a button like with an elevator.

The maximum speed is 50 km/h. The system allows forking by a system of switches in the carrier.

Suspension and propulsion

H-Bahn - Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/H-Bahn

1 sur 5 13/02/2015 11:52


Case Study I: German H-Bahn

Case Study II: Structuring “sliced” tech transfers

Some Specificities per Jurisdiction and per Type of Intellectual Property

ASEAN COUNTRIES


ATTRACTION OF THE ASEAN REGION

AN ACTIVE ECONOMIC ZONE

ASEAN : +600 millions people

PIB x 3 in 10 years

Diversity in countries’ profiles

UE: ASEAN’s 2nd-largest trading

partner, after China.

- Largest source of FDI in 2014

(approx. 20% of total FDI in the

region).

- More than 10,000 European

companies operating in Southeast

Asia.

ASEAN: EU’s 3rd-largest

trading partner, after US and China.


INTERNATIONAL TREATIES IN ASEAN

*Expected in 2018


PITFALLS IN TECHNOLOGY TRANSFER IN SOUTH EAST ASIA

- Secure your IP assets

- Due Diligence and Negotiation Process

- The example of license agreement in Thailand

- Protecting and transferring non patentable know-how


#2 – DUE DILIGENCE AND BUSINESS MODEL

• Find the right Partner: Strong market study, Identify the competences,

integrity, support needed, potential dependence. Do not pick a potential

competitor, anticipate possible future developments through contracts.

• Due Diligence: Identify/review all assets of potential partners including

IP (check if duly registered, verify the ownership, validity term,

expiration dates, potential disputes)

• Negotiate and sign a NDA agreement: Prevention is the key to

protection. It is crucial that the company understands how to maintain

and manage the secrecy of its valuable information by taking

appropriate measures. Clearly define a) which information is

confidential, scope, obligations, conditions of use and methods to

maintain the secrecy so there is no room to deny any violation or

infringement and b) which documents containing the above information

are subject to confidentiality. Determine to which extent the person is

exposed to sensitive information. Determine the legal consequences of

disclosing/using it without the company’s prior consent


Technology Transfer

12 December 2016 Copyright © 2016 South-East Asia & China IPR SME Helpdesk. All rights reserved.

THE CASE OF THAILAND

No specific legislation on licensing or tech transfer• Provisions included in IP laws (Trademark, Patent, Copyright, Trade Secrets) and laws governing

contracts (Civil and Commercial Code, Trade Competition Act, Unfair Contract Terms Act etc.).• Draft Franchise Business Act is still pending

Civil law country and “freedom of contract” jurisdiction:• Principle: freedom of the parties with limited interference of the Thai Courts.• Exceptions: unfair competition clauses, public policy or law violations. Clauses unfairly or

excessively restricting the rights of a party will be invalid (e.g.: a clause exonerating theLicensor in case of fraud or negligence will be void, Section 373 of CCC and Section 8 of UnfairContract Terms Act), importance of severability clauses.

Licensing or franchising can be a good choice for foreign SMEs (depending on sector ofactivity) given the current legal framework restricting foreigners from operating all retail, wholesaleand most of the service businesses (unless paid up capital is more than THB 100 million for majorityforeign-owned companies).

THAILAND IPR Licensing Landscape: General Overview

12 December 2016 Copyright © 2016 South-East Asia & China IPR SME Helpdesk. All rights reserved.

THAILAND: Case Study

Facts: Defendant purchased the product (specific piece of a retaining wall system) from the Plaintiffand manufactured the same in Thailand without any prior authorization of US IPRowners/Licensors. Patent was registered in the USA. No application was filed in Thailand. Accordingto Section 38 of the Thai Patent Act B.E. 2522, a License can only be recorded once the Thai patentis registered.

Decision: Supreme Court Phuketcement Co., Ltd./J.R.M Engineering & Construction Co., Ltd. andothers [No. 3094/2549 (2006)]:Since the patent was not registered in Thailand, recordal of the license agreement could not bemade. Consequently, the Plaintiff was not recognized as a Licensee and thus, did not qualify as aninterested party to bring the case before the Court and seek damages for patent infringement.


Technology TransferWhat about non patentable know how?

THE CASE OF THAILAND


THAILAND: Trade Secret protection: Considerable value for businesses if adequately protected!

TRADE SECRETS ACT B.E. 2545 AMENDED BY TRADE SECRET ACT (NO. 2) B.E. 2558 (2015)

Definition Transfer Infringement Remedies and Penalties

Section 3:

business information

(i) not yet publicly

known*,

(ii) possessing a

commercial value

derived from its

secrecy and

(iii) for which

appropriate

measures have been

taken to maintain the

secrecy

Section 5: May

stipulate any terms

and conditions for the

maintenance of the

secrecy. Shall be made

in writing. Shall be

deemed to cover a

period of 10 years if

no time period

specified in the

contract.

Section 6: Act of

disclosure,

deprivation or

usage of trade

secrets without

the consent of the

owner in a manner

contrary to honest

trade practices

(breach of contract

espionage,

infringement or

inducement to

infringe

confidentiality…)

Section 9: Conciliation or Mediation

Section 8: Petition to the Court for

interim or permanent injunction.

Section 11: destruction or confiscation of

materials, apparatus, tools or other

equipment used in the infringement of

trade secrets.

Section 13: actual damages, punitive

damages, lost profits…

Section 33: Unauthorized disclosure with

malicious intent to cause damage to the

trade secret controller’s business subject

to imprisonment which may not exceed

one year or a fine which may not exceed

200,000 Thai baht. Note: Burden of proof

on the Plaintiff (need to show clear

evidence of infringement).


#1 – No registration with the DIP required in order to gain protection.No registration requirement either for the licensing of trade secrets.

#2 – Identify & Describe your trade secret:Anything that gives an advantage over your competitors. Determine early what the trade

secret is and why is it a trade secret.

#3 Physical protection policy:bank vault, locker, security system, internal policies such as using authorization system,

logins, passwords, placing confidentiality stamps on sensitive documents, employee

badges etc…

#4 Confidentiality policy:Determine who needs to know and to which extent, Create Awareness regarding the

sensitivity of the information and legal consequences of disclosing / using it without the

company’s prior consent, include confidentiality provisions in all the company’s

employment agreements, contract separate NDA with and Trade licensing Agreements

with business Partners.

Most of cases before the IP&IT Court dismissed due to the absence of

appropriate measures to maintain trade secrets.

THAILAND: How to protect your Trade Secret?


THAILAND: Trade Secret Case Study

Facts: The plaintiff claimed that one of its employee had disclosed confidential information (namely

information related to the plaintiff company’s customers, quotations and provenance of its goods) in

breach of a non-disclosure clause which was duly included in the employment agreement.

However, the plaintiff was unable to demonstrate that appropriate and specific measures had been taken

to prevent its employees (whom are not usually connected to such information) from having access to

the documents containing the trade information.

Decision: Supreme Court Industial Heat Combustion Solutions Co., Ltd. and others./Mr. SomsakSukkasem and others [No. 10217/2553 (2010)]:The Court considered that a general non-disclosure clause included in an employment agreement

is not a measure appropriate enough to preserve the secrecy of the confidential information. The

plaintiff's claim was thus dismissed.

Industrial Heat Combustion Solutions Co., Ltd. and others

Plaintiffs

Mr. Somsak Sukkasem and others

Defendants

Take appropriate measures to maintain the confidentiality of the trade secret!


TO DO list for European businesses in Asia

1.- Build a strong proactive IP policy at home and in the target countries

early priority filing of IPR and recording of KHs

2.- Pre-analyze

market study, IP surveys and due diligence

Understand specificities in target country (ex. : China high competition; prevalent public action; huge market, partners potentially too smart or too unprepared; patriotism..)

3.- Prepare negotiations

NDAs

build a strategy and a roadmap (be proactive)

4.- Strategic safe harbours and tight monitoring of partners

contract management (incl. R&D; employment contracts)

enforce

Take-Away Messages


Q&A

Name: Mr. Patrice Vidon

Firm: Vidon IP Group

Location: France

Email: [email protected]


mailto:[email protected]

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Industry specific guides, incl. textiles, machinery, creative industries

Business guides, incl. technology transfer

Country Factsheets, incl. Mainland China, Hong Kong, Macao, Taiwan and the 10 South-East Asian countries


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