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IP Layout You have no idea what you truly have!

Time:2020-06-30 08:46:16Browse:

Zhao Shuo 
Intellectual Property
Senior Legal Consultant

IP Layout: You have no idea what you truly have!

Given the present state of affairs, the only thing that matters to people is life and health, however, from the perspective of enterprises, Wang Jing & GH Law Firm fully understands the pressure and anxiety faced by business executives and managers due to restriction of business activities. Over the next few weeks, Wang Jing & GH Law Firm will showcase the topic of enterprise decompression during the epidemic period– intellectual property layout, to managers and executives. We hope to help you enhance your enterprise value without the need to go out during the epidemic and at the same time, realize profits from intellectual property rights.

IP Layout: You have no idea what you truly have!

An enterprise’s assets include not only tangible assets such as cash in hand and in the bank, real estate, equipment, goods and vehicles, but also intangible assets, such as accounts receivables, equity (financial assets) and intellectual property rights (IPR). Among these, IPR are intangible assets that are extremely important to enterprises but always not get enough attention.
When an enterprise contributes creative and innovative efforts in its production and operation, it means that it has already made relevant intellectual achievements. At such a time, it only needs to use a little legal knowledge of IPR to manage and operate these "unorganized" intellectual achievements, to obtain corresponding exclusive rights and interests. Even if these intellectual achievements are not managed, the fact is that they exist, and if the value can be garnered through management, then it is imperative to do so.
Different enterprises have completely different attitudes towards intellectual property rights. In the initial stage, enterprises mostly focus on "how to achieve a breakthrough in IPR from scratch". Most enterprises are pessimistic because they feel that "the certificate of IPR is like a waste paper, as they don’t know how to obtain value from these rights," however, truly successful enterprises are those that "utilize IPR through the legal system and realize profits".
Being an intangible asset, first of all, the very existence of IPR can enhance the value of an enterprise. Secondly, IPR can be traded and exchanged for a consideration. Thirdly, under specific conditions, based on IPR enterprises have the right to demand specific entities to pay corresponding fees to the enterprise, such as licensing fees, usage fees and infringement compensation.

Basis of IPR

Before formulating an IPR layout, it is necessary to clarify the basis of the IPR and the legal meaning of the said basis, so as to develop a more targeted IPR layout for the same.
Article 123 of the General Principles of the Civil Law makes the following provision for the object of IP right: civil subjects enjoy intellectual property right by law. IP right is an exclusive entitlement to the following objects legally enjoyed by the obligee: (I) Works; (II) Invention, utility model and appearance design; (III) Trademark; (IV) Geographical indication; (V) Commercial secret; (VI) Layout designs of integrated circuit design; (VII) New plant variety; (VIII) Other object stipulated by law.
Wherein, “works” means intellectual creations with originality in the literary, artistic or scientific fields, insofar as they can be reproduced in a tangible form, which is corresponding to copyright.
“Invention” means any new technical solution relating to a product, a process or improvement thereof. “Utility model” means any new technical solution relating to the shape, the structure, or their combination, of a product, which is fit for practical use. “Design” means any new design of the shape, the pattern, or their combination, or the combination of the color with shape or pattern, of a product, which creates an aesthetic feeling and is fit for industrial application. They are corresponding to patent rights.
“Trademark” means sign capable of distinguishing the goods or services of one natural person, legal person or any other organization from those of others.
"Geographical Indications", "Integrated Circuit Layout Design" and "New Varieties of Plants" are intellectual property rights stipulated in international treaties to which China has acceded, such as the Paris Convention for the Protection of Industrial Property and the TRIPs Agreement, which WTO member countries must abide. The protection regulations have been revised through relevant administrative departments in China. 
"Trade secrets" are protected under China's civil laws by the provisions on prohibiting infringement of trade secrets in the Anti-Unfair Competition Law.
In addition, the object of intellectual property rights also includes objects that have not been clearly defined in the General Provisions of Civil Law but stipulated by other laws. For example, the "Prohibition of Counterfeiting" provisions in the Anti-Unfair Competition Law, protect entities’ identical or similar identities from being used by others, such as commodity names, packaging and decoration that have a certain influence, names of enterprises that have a certain influence (including abbreviations, trade names, etc.), names of social organizations (including abbreviations, etc.), names (including pseudonyms, stage names, translated names, etc.), the main part of domain names that have a certain influence, website names, web pages, etc. that have a certain influence, and stipulate that entities have the relevant rights to enjoy a fair and honest competitive environment.
Irrespective of the type of enterprise, they are bound to be involved with several of the aforesaid intellectual property rights. Scientific and technological enterprises may be involved with patents, technical secrets, software copyrights, integrated circuit layout design, etc.; culture & entertainment enterprises may be involved with copyright in written, musical or artistic works; enterprises may be involved with trademarks, domain names, trade names, unique names, packaging and decoration, etc., used in their promotion and publicity, and enterprise management may be involved with business secret management, intellectual property risk control, etc.

Principles of IPR Layout

The ultimate goal of IPR layout is to improve the competitiveness of the enterprise, obtain competitive advantages such as a larger market share, or obtain financial benefits by utilizing the IPR. The principle of IPR layout is nothing more than being "based on the present and striving for the future". All IPR layouts can be summarized into the following three layouts: protective layout, adversarial layout and reserve layout.
Among them, the protective layout is to protect the IPR of the enterprise's own technological achievements and to set up a composite rights basis as much as possible. In formulating the layout, the difficulty of safeguarding rights in the future should be minimized as much as possible, and the possibility of others evading the enterprise’s IPR should also be eliminated as much as possible. The protective layout is the basis of the IPR layout. The object of the layout is the intellectual achievements originally created by the company that differs from comparative competitive products, especially intellectual achievements that directly correspond to the enterprise’s core competitiveness, or the identity and brand directly bearing the enterprise’s goodwill. The purpose of the protective layout is to ensure that the enterprise maintains a certain advantage in its main business and prevent others from counterfeiting its intellectual achievements. Since the object of the protective layout is the enterprise’s existing technological achievements, it is best to consider setting up combination rights. For example, when internet companies plan the IPR layout for software products, they can consider registering software copyrights, applying for computer program patents, or setting technical secret rights. With respect to scientific and technological enterprises, a patent layout should be considered for technologies with wide applications in the industry or which can be easily reverse engineered, while the trade secrets layout can be considered for technologies that have a long gestation period, which can exceed the patent protection period. For the name, identity, logo, advertising phrases, etc. of an enterprise, a complex layout using trademarks, copyrights and appearance design patents can be considered. 
The adversarial layout is designed against major competitors in areas where disputes are likely to occur. When formulating the IPR layout, enterprises should analyze the IPR situation of competitors of competing products, try their best to build the company's intellectual property compliance framework, and reduce the risk of infringement. However, in case of intellectual property barriers that cannot be bypassed, an adversarial layout should be considered in upstream and downstream industries, market segments, or other weak points of the competitors' intellectual property. If competitors launch intellectual property attacks, these adversarial rights can be used to counterattack and seek a more favorable negotiation position or promote cross-licensing and sharing of the market. For example, in the recent Remdesivir drug patent incident, Gilead, the original pharmaceutical manufacturer, established a relatively comprehensive protective patent layout for the structure, preparing method, application, crystal form and other aspects of the drug. After carrying out targeted pharmacological research on Remdesivir against novel pneumonia coronavirus, Wuhan Institute of Virology filed a patent application requesting protection of the use of Remdesivir in treating novel pneumonia, as a lower-level application of Remdesivir’s "antiviral use". The filed patent application is a dependent patent on Gilead's prior patent. In theory, if the patent applications of Gilead and the Institute of Virology are all granted, neither Gilead nor Wuhan Institute of Virology can enjoy completely independent rights to the technical solution of Remdesivir’s usage to prepare specific anti-novel coronavirus drugs, and either party's separate implementation may constitute infringement. Under normal circumstances, both the prior patentee and dependent patentee will negotiate through litigation or directly seek cross-licensing. However, as the examination time for invention patents is about 3 years, even if the patent applications of Gilead and the Institute of Virology's patents would be granted by then, novel coronavirus should be defeated at that time. From the perspective of market profitability, there might not be any manufacturer focusing on promoting the preparation of specific anti-novel coronavirus drugs, Remdesivir included. Just like when the SARS virus was eliminated, except for a few scientific research institutions, domestic mainstream pharmaceutical companies have not invested a lot in research and development costs on the research of viral respiratory infection drugs. The patent application behavior of the Institute of Virology is a neutral and adversarial layout, but it is too early to discuss subsequent patent disputes at this time. In short, the adversarial layout aims to eliminate the potential threat of competitors to the enterprise as far as possible and seeks restrictions or counterattack options.
The reserve layout is a forward-looking layout for highly relevant technological achievements of the industry in terms of possible new businesses, new generation products and new technological directions of the enterprise in the future. For example, in the field of communications, when people use 3G and 4G technologies, Qualcomm, Samsung, Huawei, etc. began to launch a reserve layout for the next generation of communication standards—5G technology. These reserve patents also have a reactionary effect on the formulation of communication standards. Let’s take Wahaha Group as another example in the layout of trademarks. In addition to registering the Wahaha trademark under Category 32 (mineral water and beverages), it has applied for the trademark under Category 29 (soy milk and milk powder), Category 7 (food processing machines and vending machines), Category 43 (fruit juice bars and ice cream shops), Category 3 (cosmetics and spices), Category 11 (electric coffee brewers, water supply equipment, water purification equipment and machines, drinking fountains), Category 35 (vending machine rental) and other categories. Although Wahaha Group's current products are mainly beverages, the above-mentioned other types of businesses are reasonable business expansion directions, and also can prevent competitors in related industries from deliberately using the "Wahaha" identity and benefiting from Wahaha Group’s goodwill.
The reserve layout for intellectual property requires managers to have keen market perception, predict future product development and industry transformation trends, predict which technological achievements will control basic technological achievements in the future market (with many users) or make breakthroughs in the industry (with great influence), and be able to deploy the IPR layout and make claims in unclaimed fields, by predicting the same.


With respect to the IPR layout, managers and executives should firmly believe that the enterprise possesses more than what they know and there is much more that can be utilized and deployed. It’s like you already have the best ingredients in your kitchen, and all you need now is some good cooking skills. In the next few topics, we will let you know how to design the intellectual property layout of your enterprise for each rights basis. So, stay tuned!


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