Category: China

EU Expands Enforcement Protections Against Counterfeit Goods: What IP Rights Holders Should Know

Last month, the European Parliament passed legislation and the European Court of Justice (CJEU) handed down a ruling that expands trade-related intellectual property (IP) protections in the European Union (EU) and beyond. Particularly, the European Parliament passed laws granting EU customs officials the ability to detain trademark counterfeit transshipments transiting the EU, while the CJEU ruled that EU customs authorities can seize counterfeit goods in the EU that were purchased for personal use from sellers outside the EU. Although these are positive developments that provide IP rights holders the ability to stem the flow of infringing goods, and ultimately better enforce their IP rights across borders, they also have important requirements and limitations that need to be understood.

Counterfeit Transshipments. On February 25th, the European Parliament approved amendments to the EU’s main trademark act (Council Regulation (EC) 207/2009) that will permit EU customs authorities to seize suspected trademark counterfeit goods that are being transshipped through the EU. According to reports, these reforms follow previous limitations on customs seizures that were handed down in recent CJEU decisions. Particularly, a joint 2011 CJEU decision (Koninklijke Philips Electronics NV v. Lucheng Meijing Industrial Co. Ltd. (C-446/09) and Nokia Corporation v. HMRC (C-495/09)) held that copyright and trademark counterfeit goods could only be seized by EU customs officials if they were intended for sale in the EU, and not merely transiting through EU territory.

The new Directive (T7-0118/2014) is an attempt to reverse (in part) the 2011 joint CJEU ruling by granting EU trademark owners expanded rights to legal action. According to the legislative text, a EU trademark owner will have the right to prevent others from bringing non-circulated goods into the EU that bear the owner’s trademark without authorization. This includes the “right to request national customs authorities to take action in respect of goods which allegedly infringe the [IP rights holder’s] rights.”

Beyond giving IP rights holders valuable protection against the flow of counterfeit goods into the EU, the Directive also has IP protection implications beyond Europe. According to the latest statistics available from the World Shipping Council, eight of the 50 largest container ports in the world are located in the EU. The Directive thereby gives IP rights holders the ability to stop counterfeit goods leaving a substantial number of the world’s major transshipment points, thereby limiting the global dissemination of goods infringing their marks.

Although the reforms are a welcomed enhancement of cross-border protections for IP rights holders, there are a few considerations and limitations IP rights holders should be aware of:

Trademarks Only. The Directive only applies to trademarks. Although an IP rights holder can register their EU trademarks, copyright, patents and geographical indications for monitoring by EU customs officials, the Directive’s transshipment protections only apply to trademark counterfeit goods. Similar measures may be soon adopted to prevent transshipments of counterfeit copyright goods through the EU as the European Commission is currently evaluating copyright reforms. Yet, the Directive’s exclusion of copyright counterfeit goods is particularly problematic as copyright counterfeit goods constitute a substantial amount of counterfeit goods being transshipped through the EU and other major markets.

Community Trademark Registration Required. To qualify for transshipment counterfeit protections under the Directive, a trademark owner would likely need to register their mark on a community-wide (EU) level with the Office of Harmonization for the Internal Market (OHIM). Each EU member state maintains their own trademark offices, granting a registered mark exclusive protection in their state respectively. Yet, a trademark owner would likely need a community trademark registration to qualify for the Directive’s transshipment protections as the Directive’s text only identifies “European Union trademarks” as qualifying for such protections. Fortunately, qualifying foreign IP rights holders may be able to more easily (and cheaply) obtain community registration(s) through registering their trademark(s) through the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (Madrid Protocol). However, requiring a community trademark registration to qualify for the Directive’s new protections puts EU member state trademark owners at a disadvantage compared to community trademark owners.

Customs Recordation Required. A trademark owner or rights holder would need to record their community trademark registration with EU customs authorities to qualify for the Directive’s new transshipment protections. Although customs recordation is not a specific requirement under the Directive to qualify for the enhanced transshipment protections, it is required to ensure EU customs officials are made aware of a community mark owner’s or right holder’s registration.

Directive Has Yet to be Enacted. Lastly, it is important to note that the Directive has yet to be enacted in EU member states and it remains to be seen how it will be implemented. EU member states have 30 months to implement the new Directive into their national laws, and although they are obligated to adopt the laws effectively and in the spirit of the Directive, the member states’ implementing legislation may have specific divergences.

Counterfeits for Personal Use. On February 6, 2014, CJEU ruled in Blomqvist v. Rolex SA (C‑98/13) that EU customs officials could seize and destroy non-EU originating counterfeit goods in the EU that were purchased by EU citizens for personal use. In Blomqvist, a Danish citizen bought a fake Rolex watch from a Chinese online seller. When the watch entered Denmark, Danish customs reported the suspected counterfeit to Rolex’s IP rights holder, who in turn demanded the destruction of the counterfeit watch. Danish courts found that because the counterfeit watch was purchased from a non-EU seller who was not directly selling or advertising to EU consumers, and because the watch was purchased for personal use, such a purchase did not constitute trademark or copyright infringement by the purchaser under Danish law.

The CJEU in Blomqvist reversed and found that Rolex’s copyright and trademarks were infringed, and that a EU IP rights holder does not have to prove that a non-EU seller was directly trying to sell or advertise counterfeit goods for personal use in the EU in order for EU customs officials to seize imports of the counterfeit goods. Under the EU’s previous customs regulations (Council Regulation 1383/2003), a EU trademark or copyright owner would have to prove that the counterfeit seller was directly trying to market their counterfeit goods to EU consumers in order for the personal purchase to be subject to infringement and seizure. As reported by commentators, the Blomqvist Court differed from the Council Regulation by establishing that an IP rights holder is entitled to protection of their EU trademark or copyright whenever an infringement of the same occurs in EU territory, and that counterfeit goods can be seized whenever such infringing goods enter EU territory.

Although the Blomqvist ruling gives IP rights holders stronger protections against foreign counterfeit sellers, like the Directive, there are considerations and limitations IP rights holders should be aware of:

EU IP Protection and Customs Recordation Required. Like the Directive, a trademark or copyright owner would need to ensure that their IP qualifies for protection in the EU and that they have recorded such IP with EU customs authorities in order to qualify for protections under Blomqvist.

Additional Investigation Suggested. Qualifying IP rights owners will likely need to investigate and track suspected non-EU counterfeit sellers to determine when and to whom they are selling personal counterfeit goods to ensure effective protection under Blomqvist. Rolex was fortunate in Blomqvist that a single counterfeit of their watch was detected by EU customs authorities. Unfortunately, not all brands are as well known as Rolex. A similar counterfeit personal purchase shipment for a lesser known brand may not have been as easily identified by EU customs authorities. These circumstances mean that an IP rights holder may need to perform their own monitoring to effectively detect personal shipments of counterfeit goods entering the EU. Unfortunately, this can be an expensive service that many IP rights owners do not have the resources to obtain.

What’s The Takeaway? These recent EU counterfeit enforcement reforms show that the EU is serious about preventing the cross-border flow of counterfeit goods. IP rights owners who have had problems with IP enforcement in the EU or through transshipments originating in the EU, now (or will soon) have enhanced means to protect their IP against counterfeits. Despite these advancements, IP rights holders should work closely with their counsel to ensure they understand and comply with the requirements and limitations of these recent reforms.

New USTR and IIPA Reports Describe the Current State of IP Protections for U.S. Businesses Abroad

Over the last week, the Office of the U.S. Trade Representative (USTR) and the International Intellectual Property Alliance (IIPA) released reports on the current state of intellectual property (IP) protections for U.S. businesses abroad. These reports provide updated insights on foreign countries and foreign retail markets (both physical and online) that have recently caused U.S. businesses the most IP protection difficulties.

Here is a summary of the reports:

IIPA 2014 Special 301 Report Submission

On February 8th, the IIPA submitted their 2014 Special 301 Report Submission to the USTR. As one of the largest U.S. lobbying groups for the copyright-based industries, the IIPA’s submission identifies the foreign countries the IIPA believes provides the most ineffective IP legal protections for U.S. businesses. The USTR’s final Special 301 Report (released annually April-May) provides reporting to the U.S. government and the general public on the countries that, according to the Omnibus Trade and Competitiveness Act (19 U.S.C. § 2242(a)), deny “adequate and effective protection of [IP] rights” or “fair and equitable market access to United States persons that rely upon [IP] protection.”

Although the U.S. government rarely imposes trade sanctions based on the Special 301 Report, a country’s listing in the final report often impacts the U.S.’ trade relations with that country and the degree to which the U.S. government initiates trade promotional activities with the same. From both a private sector and practical standpoint, the Report also represents a review of the markets that U.S. businesses have had the most IP protection challenges.

What countries did the IIPA recommend for inclusion in the 2014 Special 301 Report?

Priority Foreign Countries. For a second year in a row, the IIPA has identified Ukraine as being a “Priority Foreign Country.” This is the least favorable designation available under the Special 301 reporting system. Specifically, it identifies that country as one with the “most onerous or egregious acts, policies, or practices” that “have the greatest adverse impact (actual or potential) on the relevant [U.S.] products” without making efforts to ameliorate their status. 19 U.S.C. § 2242(b)(1)). Ukraine’s designation as a Priority Foreign Country was based on a number of factors, most notably the absence of effective online copyright enforcement, and unfair and non-transparent royalty society collections. Shockingly, the classification was also based on reports of widespread software pirating by Ukrainian government agencies.

Priority Watch List and Watch List Countries. The IIPA’s Special 301 Report Submission lists Argentina, Chile, China, Costa Rica, India, Indonesia, Russia, Thailand and Vietnam on the “Priority Watch List,” and Belarus, Brazil, Bulgaria, Canada, Ecuador, Greece, Israel, Kazakhstan, Kuwait, Mexico, Romania, Saudi Arabia, Switzerland, Taiwan, Tajikistan, Turkey, Turkmenistan, United Arab Emirates and Uzbekistan as “Watch List” countries. Although not as a severe rating as a Priority Foreign Country, being listed as a country on the Priority Watch List or simply Watch List means that a country has potential IP protection deficiencies that require varying levels of USTR monitoring.

Newly Non-Listed Countries. It is also important to note that the IIPA has recommended removing a number of countries from the final 2014 Special 301 Report due to their improvements in IP protection. These countries include Barbados, Bolivia, Colombia, Dominican Republic, Egypt, Finland, Guatemala, Jamaica, Lebanon, Pakistan, Paraguay, Peru, Trinidad and Tobago, and Venezuela.

Out-of-Cycle Review of Notorious Markets

Also, on Wednesday, the USTR released an Out-of-Cycle Review of Notorious Markets that identified physical and online markets reported by U.S. businesses and industry organizations as being engaged in substantial IP piracy and counterfeiting. The Review includes particular social media and file transferring sites hosted abroad, including sites hosted in Antigua and Barbuda, Bulgaria, Canada, China, Czech Republic, Finland (possibly), Netherlands, Poland, Russian Federation, Spain, Sweden, Ukraine, United Kingdom and Vietnam. Specific physical markets in Argentina, China, Colombia, Ecuador, India, Indonesia, Mexico, Paraguay, Spain, Thailand and Ukraine were also deemed notorious.

What’s The Takeaway? Every foreign market has its own IP protection challenges. U.S. businesses that are exploring expansion into new markets should consider the IIPA’s Special 301 Report Submission (as well as the USTR’s Final Special 301 Report due out later this year), and the USTR’s Out-of-Cycle Review of Notorious Markets to help evaluate the IP risks associated with such markets. Doing so can help to ensure that such businesses can better protect their IP assets as they expand.

Don’t Be Scared of Havarti! Geographical Indication Issues Exporting Businesses Should Consider

Late last month, the European Commission approved for publication (pre-registration) a geographical indication (GI) application for the Danish cheese HAVARTI. This raised concern amongst interested industry groups, and should cause concern amongst all export-focused businesses. Similar to trademarks, and particularly certification marks, GIs are legal protection granting producers of a particular type of product from a specific geographical region the exclusive right to use the geographical region’s name (or a regionally-known name) on their products and in related promotions. Being an exclusive right, GIs exclude producers from other regions from labeling and marketing similar or identical products under the same GI name. This means, for example, that a U.S. sparkling wine can never be sold as CHAMPAGNE in the EU, or a Kenyan tea as DARJEELING in India. If registered, the EU HAVARTI GI would exclude non-Danish cheese producers from labeling and promoting their Havarti cheeses in the EU as HAVARTI.

So what’s concerning about the potential EU HAVARTI GI registration for non-dairy businesses? Well, industry groups such as the Consortium for Common Food Names (CCFN) argue that allowing the EU HAVARTI GI application to be registered would contravene international standards by prohibiting non-Danish cheese producers from labeling and promoting their own Havarti cheeses in the EU as HAVARTI, even if they meet recognized international Havarti cheese production standards. From an intellectual property perspective, the registration would arguably expand EU GI protections to common (generic) named products. Commonly named GIs such as DIJON for mustard and CHEDDAR for cheese have traditionally been restricted from GI protection due to their common vernacular usage. HAVARTI is a widely known cheese variety this is arguably as generic as these other excluded food names. By allowing HARVARTI’s potential GI registration, the European Commission could possibly allow other generic named products to be registered as GIs, thereby hindering the promotional efforts, and ultimately success of many foreign goods in the EU.

Although the potential HAVARTI EU GI registration only directly impacts the global dairy industry and the EU market, it does underscore general issues all export-focused businesses should be aware of concerning GIs. Many businesses are unfamiliar with GIs, much less the extent to which GIs can impact their expansion and success in new foreign markets. GIs are granted legal protections in multiple countries for a wide array of goods, and can significantly impact a business’ foreign operations.

Below are some GI issues businesses should consider when entering new foreign markets:

Know the Practical Differences Between GIs and Trademarks. Before understanding what GIs restrictions a business may face in a foreign market, a business needs to recognize how GIs and trademarks differ. Unlike trademarks, GIs do not indicate or represent a individual business or their goods and services. They instead represent protections for the local conditions—natural or human-made (depending on the country)—that give products from a region their qualities and reputation. Based on these localized and natural characteristics, GIs cannot be extended, shared, or transferred to producers outside the region, and cannot be cancelled once registered. Further, in many countries that grant GIs legal protection such as the EU, member state governments, not individual producers or businesses, prosecute GI infringement claims. This means a foreign business can be assured that their unauthorized use of a registered GI in a foreign market will more likely subject them to a greater risk of legal action in that country compared to the threat of a lawsuit from a individual trademark owner.

The bottom line is that GIs prohibit exporting businesses from promoting and selling their goods in a particular country under a registered GI without much recourse.

Determine if an Export Market Recognize GIs—and to What Degree. After understanding the important differences between GIs and trademarks, businesses need to then evaluate whether the markets they wish to export to have GI protections and the extent of such protections. Nearly all countries recognize GIs for wines and alcoholic beverages through their World Trade Organization (WTO) commitments. Under Articles 22 and 23 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), WTO member states are required to extend specific GI protections for wines and alcoholic beverages, and to a reduced degree other agricultural and natural products. Most common law jurisdictions (U.S., Australia, and Japan, etc.) generally only extend GI protections to wines and alcohol beverages based on their WTO commitments. Yet, many countries, including several substantial markets, have gone beyond TRIPS’ minimum standards by providing enhanced GI protections to non-wine and alcohol agricultural products, and even non-agricultural products. The EU, China, India, and Russia, among others, extend the same level of legal protection to all agricultural and natural product GIs. Brazil, China, India, Russia, and Switzerland even extend GI protections to human made goods such as handcrafts and textiles.

Determine if There are Existing GI Registrations for Your Goods. Once a business determines whether the market(s) they wish to export their goods possess GI protections, they must evaluate whether the names of the goods they wish to use on their goods and related promotions are registered GIs. To do so, businesses must examine national GI registers in such export market(s).

Below are GI registers for some of the world’s major GI jurisdictions.

Country

Governing Agency

National GI Register

Brazil

National Institute of Industrial Property (Instituto Nacional da Propriedade Industrial -INPI)

INPI GI Registry

China

General Administration of Quality Supervision, Inspection and Quarantine

GI Product List

European Union

European Commission

Database of Origin and Registration (DOOR) Database

India

The Controller General of Patents, Designs, and Trade Marks

GI Registry

Russia

Federal Institute of Industrial Property

Register of Appellation of Origin of Goods

What’s the Takeaway? As the nature of GI protections are evolving in many of the world’s major markets such as the EU, businesses need to be even more aware of GIs and how they impact their operations in foreign markets. Due to the significant implications GIs have on the labeling and marketing of exported goods, businesses should work with qualified counsel to ensure that they comply with existing GI registrations to ultimately take advantage of foreign markets opportunities.

Dealing With (Foreign) Infringing Online Advertisements

Last week, I had the privilege of being a guest writer for Seattle-area based Efinitytech on an article dealing with infringing online advertisements. Although it was focused on combatting trademark infringing online advertising on U.S.-based search engines such as Google, Bing and Yahoo!, as well as U.S. social media sites such as Facebook and Twitter, it contained many of the same considerations trademark owners, and their agents, should consider when combatting infringing online advertisements abroad. However, there are a few additional foreign issues trademark rights holders should consider.

1. Obtain A Trademark Registration. U.S. businesses generally need a U.S. federal trademark registration to submit an advertising complaint to a U.S. online advertising website. A U.S. federal trademark registration establishes a presumption of ownership and exclusive rights in a trademark in the U.S. This gives U.S. search engines and social media sites assurances that a filed advertising complaint is valid.

Additional Foreign Considerations: A trademark registration is also generally required to submit ad complaints in other countries. Many countries do not even recognize a business’ rights in a trademark unless it has registered the mark with the country’s national trademark office. As a result, Google, Bing and Yahoo!, their foreign subsidiaries, as well as many other foreign advertising sites, require that a business have a valid trademark registration in the country where they are filing an online ad complaint. This means that if a rights holder wants to enforce their trademark rights against a foreign ad, they generally have to have a valid trademark registration in that foreign country.

2. Advertising Websites Have Different Trademark Enforcement Reputations. U.S. search engines and social media sites have their own track records for responding to advertising complaints. For example, Bing and Yahoo!’s U.S. sites will often remove an infringing ad upon evidence of a valid U.S. federal trademark registration, while Google U.S.’ site generally declines removing ads infringing a descriptive trademark, even if the mark is federally registered through acquired distinctiveness (aka secondary meaning).

Additional Foreign Considerations: The varied reputations of online advertising sites’ handling of trademark ad complaints are even more disparate at the global level. Many foreign sites have good track records, while others less so. Also, some foreign advertising sites have ad enforcement features that offer benefits beyond those offered on most U.S. websites. For example, China’s leading search engine, Baidu, allows trademark rights holders to register their Chinese registered marks with their representatives in order to prevent others from purchasing infringing ads and ad words on their website. However, like Google, Baidu’s IP enforcement system is imperfect, as it has been criticized in the past for failing to stop the sale of ad words to fraudulent advertisers.

3. Multiple Ad Complaints May Need To Be Filed. Trademark rights holders may need to submit multiple complaints against an infringer before an infringer’s ad appears removed. This can be due to the ineffectiveness of an advertising website complaint system, or more likely because an infringing advertiser has made several ad purchases, requiring the submission of multiple ad complaints in order to effectively remove all of an infringer’s advertisements.

Additional Foreign Considerations: None. Additional complaints may need to be filed for foreign trademark ad complaints as well.

4. Consider The Ramifications Of Filing An Online Complaint. Lastly, submitting an online ad complaint may impact an infringing advertiser’s online reputation as well as the trademark rights holder. Based on these ramifications, trademark rights holders should consider reaching out to alleged infringers, either directly or through an attorney, to see if the disputed ad can be removed amicably.

Additional Foreign Considerations: The consequences of filing online trademark ad complaints abroad is as significant, or even more so, then doing so in the U.S. As I have previously highlighted, countries maintain different beliefs and perceptions towards the legal rights that should be given to trademarks and other forms of IP. In particular, several important and emerging foreign markets such as Canada, Chile and New Zealand disagree with forceful online IP enforcement, as seen in their current rejection of copyright website takedowns. This means that submitting online trademark ad complaints may have similar or even more negative reactions in a business’ particular industry (and among the public) abroad than at home. Based on these circumstances, businesses should feel even more inclined to first reach out to foreign infringing advertisers before they submit online ad complaints.

What’s The Takeaway? As combatting infringing online advertisements has many of the same challenges and considerations in the U.S. as abroad, businesses wishing to protect their brands abroad need to identify the countries where they have or may have significant business and develop strategies to protect against online ad infringement. This requires considering foreign trademark registration, identifying major foreign online advertising websites, and developing processes and procedures to monitor and enforce rights against infringing advertising activity on such websites. Doing so can help businesses to more effectively protect their brands in the foreign markets they wish to grow.

Factors to Consider in Cross-Border Trade Secret Protection

Trade secrets are arguably the most common form of intellectual property transmitted across borders in today’s global market. Any business that seeks to capitalize on foreign market opportunities—either by working with a foreign partner or establishing their own foreign operations—is likely to transmit confidential information abroad. However, such cross-border transmissions directly impact the legal protections afforded to such information as the extent of trade secret protection and enforceability of trade secret rights varies between countries. Examining some of the main differences in trade secret protection and enforceability between countries is important as businesses increasingly must choose how to contractually structure protections for their confidential information abroad. Further, understanding the extent of trade secret protections afforded to confidential information in different markets can help businesses establish effective country-specific trade secret protection strategies that address the strengths and weaknesses of a particular country’s legal protections for trade secrets.Particular factors that should be considered include:

  • Qualifying confidential information
  • Injunctive enforceability of trade secret rights
  • Foreign judicial system effectiveness

Qualifying Confidential Information. A preliminary factor for businesses to consider is the extent to which their confidential information is protected under a country’s trade secret laws. Most countries have adopted a minimum level of legal protections for trade secrets, yet such protections often vary. World Trade Organization (WTO) member states are required to adopt minimum legal protections for trade secrets. Under Article 3 and Article 39(2) of The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), WTO member states must provide persons or entities of their countries and other WTO member states legal rights to prevent the disclosure of lawfully-held information that:

  1. Is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  2. Has commercial value because it is secret; and
  3. Has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

As this widely accepted minimum legal requirement is ambiguous, WTO member states have the ability to establish their own variation, often differing the amount and type of confidential information qualifying for trade secret protection. For example, the U.S.[1] and China[2] provide legal protection for confidential information that has actual (current) or potential commercial value, where TRIPS is silent about the time to which such value must be established.[3] This means that a business that has developed or acquired confidential information that will be commercially valuable at a future date will qualify for legal protection for such information in these countries, subject to protection and secretive requirements.

In contrast, several countries are silent on this commercial value issue and maintain other factors for determining trade secret protection. For example, in India, trade secrets have been judicially defined as “formulae, technical know-how or a peculiar mode or method of business adopted by an employer which is unknown to others.”[4]  Not only is this definition silent on when commercial value must be established, it is also silent on what constitutes sufficiently reasonable protection procedures for such information to qualify for trade secret protection.

As these examples illustrate, countries often maintain different qualifying standards for trade secret protection despite satisfying their TRIPS obligations. Based on these differences, businesses must carefully determine what portions of their confidential information qualifies for trade secret protection in a particular country.

Injunctive Enforceability of Trade Secret Rights. Trade secret owners must also consider their ability to protect their trade secrets through injunctive relief in a particular country. Most countries will grant a permanent injunction against a person or entity after they are found by a Court to have misappropriated a trade secret. However, this often requires initiating and succeeding in a legal action, which is not certain to succeed and may take a substantial amount time before being granted. This could harm the commercial value of the confidential information, and in many cases, the potential success of the trade secret owner’s foreign business operations or strategies. As a result, seeking a preliminary injunction, namely an injunction sought at the onset of a trade secret misappropriation proceeding, is essential to effective trade secret protection.

A business’ ability to seek a preliminary injunction to protect their trade secret varies from country-to-country. In the U.S., a trade secret owner may seek a preliminary injunction against a misappropriating party or parties providing them assistance through an initial motion in a misappropriation proceeding.[5] Although U.S. jurisdictions generally maintain high evidentiary burdens for trade secret owners to obtain preliminary injunctions[6], U.S. courts allow evidentiary exchanges between the parties (known as discovery) and copies of original evidence to be admissible under specific requirements. U.S. courts may also permit discovery proceedings to be expedited based on the sensitivity of the confidential information at issue.[7]

In contrast, other countries make obtaining a preliminary injunction more difficult. For example, preliminary injunctions are rarely granted in Chinese trade secret cases due to the absence of a discovery process and restrictive evidentiary burdens. Chinese trade secret proceedings do not have discovery processes and Chinese Courts will generally only accept original written forms of evidence.[8] This means that trade secret owners in China are forced to gather their own evidence, and can only admit original written evidence, which makes satisfying the evidentiary burden to obtain an preliminary injunction substantially more difficult.

As illustrated with China’s trade secret injunction procedures, trade secret owners need to determine what challenges they will face in enforcing their trade secret protections under a country’s judicial procedures, regardless of the extent of a country’s trade secret protections.

Foreign Judicial System Effectiveness. Even if a country’s injunctive judicial procedures are surmountable, a country must also have an effective judicial system to even allow injunctive enforcement to be brought forward. This requires determining whether a country has an effective judicial system to enforce trade secret protections. There are several resources for businesses to determine the effectiveness of a foreign country’s judicial system, including their national IP offices and trade agencies. In the U.S., the Office of the U.S. Trade Representative (USTR) publishes annual reports (known as Special 301 Reports) that identify IP enforcement concerns for U.S. IP owners by country, including ineffective judicial systems. For example, in the 2013 USTR Special 301 Report, the USTR identified Argentina, Bulgaria, Greece, Guatemala, India, Indonesia, Paraguay, Peru and Turkey as having judicial system inefficiencies for enforcing IP rights.

Parting Notes. Although the above-mentioned factors are important when evaluating cross-border trade secret protections, examining such factors only comprise a portion of an effective foreign trade secret protection strategy. Establishing the best protections for trade secrets abroad should also include other protection measures including the development of internal business protocols to prevent unauthorized information disclosures, among other procedures. Working with qualified counsel can effectively assist with evaluating both the above-mentioned factors and internal business protocols.


[1] Uniform Trade Secrets Act, § 1.4; 18 U.S.C. § 1839(3)(b).
[2] J. Benjamin Bai and Guoping Da, Strategies for Trade Secrets Protection in China, 9 Nw. J. Tech. & Intell. Prop. 351, 359 (2011) available at http://scholarlycommons.law.northwestern.edu/njtip/vol9/iss7/1  (citing Zui Gao Ren Min Fa Yuan Guan Yu Shen Li Bu Zheng Dang Jing Zheng Min Shi An Jian Ying Yong Fa Lv Ruo Gan Wen Ti De Jie Shi, Interpretation of Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition, art. 10, Fashi 2/2007 (Sup. People’s Ct. 2007) (China)).
[3] Pedro A. Padilla Torres, Overview of International Trade Secret Protection, National Law Center for Inter-American Free Trade, (2001) available at http://db.natlaw.com/interam/mx/ip/sp/spmxip14.htm.
[4] Zafar Mahfooz Nomani and Faizanur Rahman, Intellection of Trade Secret and Innovation Laws in India, J Intell. Prop Rights, 341, 346, (Jul. 2011) (citing American Express Bank Ltd. v Priya Puri (2006) III LLJ 540 (Del) (India)).
[5] Ronald S. Wynn, Trade Secret Litigation: TROs, Preliminary Injunctions, and Some Things to Think About First, HansonBridgett, 2-3, Mar. 2012 available at http://www.hansonbridgett.com/Our-Attorneys/~/media/Files/Publications/IP_alert_trade_secret_litigation_2012.pdf.
[6] Id. at 2 (burden generally includes “(1) probable success on the merits, (2) irreparable harm without the requested injunction, and (3) a balance of hardships between the trade secret claimant and the alleged misappropriator that favors the injunction”).
[7] Id. at 3.
[8] J. Benjamin Bai and Guoping Da, supra note 2, at 362-63.

Understanding Foreign IP Customs Notification Registration Procedures

In recent years, many national customs offices have established notification procedures to allow IP rights holders the ability to alert customs officials of their IP rights in order to assist them in their import inspection activities. Like Internet Service Provider takedown requests on the Internet (more information about these procedures), IP customs office notifications is a tool for IP rights holders to protect their IP rights abroad by reducing the global spread of infringing goods and content by preventing its cross-border transit—and in many cases, assisting in its destruction. However, to utilize such protection measures, an IP rights holder must ask themselves:

  1. Can you submit such a notification in a particular country?
  2. Does the country you wish to enforce your IP rights have an IP customs notification system?
  3. Does such a country’s national IP customs notification system include the type of IP you wish to protect?
  4. What are the particular foreign customs agency’s IP notification requirements?

Can you submit a IP customs notification? Generally, an IP rights holder can only submit an IP customs notification to a foreign customs office if their IP qualifies for protection in that foreign country. Determining if particular IP qualifies for protection in a country depends on the type of IP the rights holder wishes to protect and to what extent the rights holder has secured foreign legal protections. Here is how it breaks down:

Trademarks. If an IP rights holder wants to submit a foreign customs notification to protect a trademark or service mark in another country, they usually need to have registered that mark in the IP office of that specific country or through a centralized international registration mechanism like the Madrid Protocol (more information about the Madrid Protocol). This is because trademark protection is territorial, meaning that a trademark or service mark registration only grants its owner rights in the mark in the territory of the registering country. So for example, if a U.S. company registers its trademark in the U.S. for particular goods or services and wishes to protect that trademark against infringing imports into New Zealand, it must also register that mark through the Intellectual Property Office of New Zealand or the Madrid Protocol in order to submit a trademark notification to the New Zealand Customs Service.

Of course there are some important exceptions to this territoriality requirement to keep in mind. The European Union maintains a community-wide trademark system (Community Trade Mark) allowing one community registration to qualify for customs notification registration in all EU member states (a list of EU member states is available here). The African Intellectual Property Organization (OAPI) also maintains a community trademark system where a single OAPI community mark registration is recognized in 16 African nations (a list of EU member states is available here).

Patents. Like trademarks, a patent rights holder must generally have a registered patent in the country to which they wish to register an IP customs notification. Unlike trademarks, however, there are no current community registration exceptions. As a result, patent rights holders must register their patents in the country to which they wish to register their IP customs notifications.

Trade Secrets: Generally, as trade secrets require that their owners keep the content of their secrets confidential in order to maintain its legal protections, any disclosure of such secrets to customs officials likely eliminates such secrets’ protections. Therefore, there does not appear to be any national customs IP notification systems that permit trade secret notification.

Copyright. Unlike trademarks and patents, a work qualifying for copyright protection in one country may qualify for copyright protection in other countries in order to allow foreign customs notification registration. However, depending on the country, foreign copyright authors may need to file a copyright registration in order to submit an IP customs notification. A work qualifies for international copyright protection under the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) when it becomes attached. Attachment requires that the author of the work be a national of a Berne Convention country (Berne Convention countries), the author is a habitual resident of a Berne Convention country, that the work is first published in a Berne Convention country, or that the work is published in a Berne Convention country within 30 days after an initial publishing in a non-Berne Convention country. If a work is attached through any of these means, it is treated as if the work originated in each Berne Convention country, and is then subject to each Berne Convention country’s copyright protection requirements in order to qualify for copyright protection in that specific country.

If a work qualifies as an attached work under the Berne Convention and the IP rights holder wishes to register their protected work in a foreign Berne Convention country customs office, they will be able to file a customs registration without having authored the work in the foreign Berne Convention country. Yet, as mentioned above, countries differ on national copyright registration requirements for IP customs notifications. Australia, for example, does not require Australian copyright registration prior to submitting a customs notification application to the Australian Customs Service. However, several major markets, such as the U.S., China and India, require that copyrighted works be registered in their country prior to registering an IP customs notification.

Does the country you wish to enforce your IP rights have an IP customs notification system? Not all countries maintain IP customs notification processes. Some substantial and growing markets, such as Brazil, Canada and Chile, do not currently maintain IP custom notification systems. However, many major markets and transshipment countries maintain various types of IP customs notification systems including Argentina, Australia, China, European Union (EU), Hong Kong, India, Japan, Malaysia, Mexico, New Zealand, Russia, Singapore, South Korea, Taiwan, Thailand, Turkey, Ukraine, United States and Vietnam, among others.

Does such a country’s national IP customs notification system include the type of IP you wish to protect? Several countries only maintain IP notification systems for particular types of IP. For example, The U.S. Customs and Border Protection (CBP) only accepts copyright and trademark notifications, not patent notifications (the CBP only examines imports for patent infringement based on a Section 337 exclusion order from the U.S. International Trade Commission (more information available here)). In contrast, several other countries monitor and detain imports for possible patent and geographical indication infringement. India’s Central Board of Excise and Customs (CBEC) in particular monitors imports for copyright, geographical indication, patent and trademark infringement.

What are the particular foreign customs agency’s IP notification requirements? Once an IP rights holder verifies that their IP qualifies for legal protections in the foreign country they wish to submit an IP customs notification, and that the type of IP they wish to notify customs about can be registered, the IP rights holder’s customs notification must comply with the foreign customs office’s own notification requirements.

Below are the IP customs notification submission requirements for some of the worlds’ major markets.

Governing Law

Types of IP Covered

Notes

Forms/Links

United States 19 C.F.R. 133.1 et seq.
Copyright and Trademark Instructions: Copyright and trademark notification (known as e-Recordation) requires:

-Registering a trademark with the U.S. Patent and Trademark Office or a copyright with the U.S. Copyright Office

-The trademark or copyright’s U.S. registration number

-The name, address and citizenship of the IP rights owner

-The place(s) of manufacture of goods bearing the trademark or copyright

-The name and address of individuals authorized to use the trademark or copyright

-The identity of a parent company or subsidiary authorized to use the trademark or copyright (if any)

Fees: US $190.00 per copyright and trademark (per class of goods and services).

Effective Duration of Notification: 20 years.

e-Recordation Notification Portal
Australia
Copyright Act 1968, Subsection 135(2)

Trade Marks Act 1995, Section 132

Copyright and   Trademark General Notes: Australian IP customs notifications are known as Notices of Objection.To register a copyright or trademark notice with Australian Customs Service, an IP rights holder must submit: (1) a notice of objection form; and (2) a deed of undertaking. Both types of forms as well as further instructions are located in the right column.

Duration of Notification: Four years.

Copyright

Copyright Notice Instructions

Copyright Notice Form

Copyright Deed of Undertaking

Trademarks

Trademark Notice Instructions

Trademark Notice Form

Trademark Deed of Undertaking

China Decree of the General Administration of Customs, No. 183 Copyright, Patent and Trademark Requirements: To file a IP customs notification with the General Administration of Customs (GAC), an application must include:

-a copy of the IP rights holder’s business registration certificate and a Chinese translation

-a copy of the Chinese registration certificate for the copyright, patent or trademark

-Proof of Power of Attorney (if registered by an agent)

-Registration fee (see below)

-Licensing agreements (if any)

-Pictures of the relevant goods and their packaging

Submission: Forms can be filled online or by mail.

Fees:Approximately US $130.00 (800 RMB).

GAC Online Notification Form (In Chinese)
European Union Council Regulation (EC) No 1383/2003, Article 5.5 Copyright, Geographical Indication, Patent and Trademark The EU refers to IP customs notifications as Applications For Action. Applications require: (1) a completed application form; and (2) a completed Article 6 Declaration. Both forms are located to the right.

Note: Individual EU member states may maintain their own IP customs notification systems (a link to individual EU member state customs agencies is available here).

Community Application For Action

Community Article 6 Declaration

India  Notification no. 47/2007 – Customs (n.t.) Copyright, Geographical Indication, Patent and Trademark Registration: The CBEC requires that copyrighted works be registered with Indian Copyright Office, and geographical indications, patents and trademarks with the Office of the Controller General of Patents, Designs & Trade Marks prior to submitting a CBEC customs notification.

Ports of Entry: The CBEC also requires that notifications be submitted to particular ports of entry.

Duration of Notification: Minimum period of one (1) year.

Online Notification Submission Portal

**Note**: The above requirements are meant for comparative educational purposes only. IP rights holders should consult with national customs agencies or qualified attorneys in the jurisdictions they wish to enforce their rights to confirm these and other IP customs notification requirements.

Further Steps. Once an IP rights holder’s IP is registered with a foreign customs office, the foreign customs office will generally notify the rights holder or their representative of any infringing inbound shipments and may detain and potentially destroy infringing imports. However, such detentions may include legal proceedings, as well as additional country-specific enforcement procedures. IP rights holders should obtain qualified local counsel to assist with these enforcement activities.

Enforcing Online Copyright Protections Abroad: Understanding Foreign Takedown Notice Requirements

Establishing methods for enforcing copyright protections online has become increasingly important to protecting a content owner’s rights in their works—as demonstrated by the recent launch of the Copyright Alert System (CAS) in the U.S. Most content owners do not have the same resources for online copyright enforcement as the Media and Internet service provider industries (two central sponsors of CAS). However, nearly all owners of protected works can take advantage of relatively inexpensive online copyright enforcement methods to protect their works in many of the world’s major markets. The most commonly used means of enforcement are takedown notices—demands sent from content owners to Internet Service Providers (ISPs) or website hosts to remove infringing content hosted on websites under their control. Depending on the circumstances, an ISP may be compelled upon receiving a takedown notice to remove infringing content from a hosted website, or in some cases, an entire website, for a temporary or extended amount of time.

Takedown notices can have substantial implications on an infringer’s online presence. A takedown can interrupt access to a infringer’s site, potential disrupt or halt their business, and can possibly result in the deletion of their site’s user comments and feedback. With these potentially serious consequences in mind, a rights holder should consider exhausting all alternatives before submitting a takedown notice against an infringing website.

Determining whether to and how to utilize takedown notices as a international copyright enforcement tool requires understanding a few things:

  • What international legal protections does a rights owner have in their works
  • Where are works being infringed online
  • Where is an ISP subject to jurisdiction
  • What countries have national takedown procedures and what are such countries’ requirements
  • Further issues after a takedown notice is submitted

Let’s break these down a little further:

What International Legal Protections Does a Rights Owner Have in Their Works? A rights owner cannot consider utilizing takedown procedures abroad without first establishing that their works qualify for international copyright protection. A work qualifies for international copyright protection under the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) when it becomes attached. Attachment requires that the author of the work be a national of a Berne Convention country (A list of Berne Convention countries is available here), the author is a habitual resident of a Berne Convention country, that the work is first published in a Berne Convention country, or that the work is published in a Berne Convention country within 30 days after an initial publishing in a non-Berne Convention country. If a work is attached through any of these means, it is treated as if the work originated in each Berne Convention country, and is then subject to each Berne Convention country’s copyright protection requirements in order to qualify for copyright protection in that specific country.

If a content owner has questions about whether their content qualifies for international copyright protection, they should consider consulting with their national copyright office or a qualified attorney.

Where are Works Being Infringed Online? To determine if any enforcement measure can be utilized, it is essential to know where in the world a work is being infringed online. If a work is being used without authorization and is available on the Internet in a particular country, it is likely being infringed in that particular country. For example, if a song by a Spanish artist, that qualifies as a protected work under the Berne Convention, is uploaded without authorization by a Malaysian file sharer to their website and is accessible throughout the entire world, it is being infringed in both Malaysia and Spain, as well as potentially in the other 164 Berne Convention countries.

Where is an ISP Subject to Jurisdiction? In order to effectively submit a takedown notice in a country where a protected work is infringed online, the ISP of the infringing website must be subject to that country’s laws in order for the ISP to be potentially compelled to comply with a takedown request. Generally, an ISP is only subject to the laws of a country where it is physically located or countries where it is engaged in enough commercial activity to establish personal jurisdiction. Determining an infringing site’s ISP can be completed through conducting a WHOIS database search. Such a search may also help identify the ISP’s host country by providing details about the ISP. However, this is not always a certainty.

If an ISP is located in the country where a work is infringed online, a rights owner only needs to establish whether that country has takedown procedures (see next section) to determine whether they can utilize takedown notices. However, determining whether an ISP is subject to the copyright laws of a country where it is not physically located is more difficult. In the U.S., a foreign ISP must at least have sufficient “minimum contacts” with the U.S. for the foreign-based ISP to be subject to U.S. law, and potential liability under the Digital Millennium Copyright Act (DMCA). Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945). Generally, such contacts have required purposeful interactions with U.S. citizens and commerce, such as marketing its services in the U.S. that would foreseeably bring the ISP under U.S. jurisdiction. Asahi Metal Indus. v. Superior Court, 480 U.S. 102, 112 (1987). It must also be “reasonable” to bring the ISP under U.S. jurisdiction, based on multiple factors. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980).

To illustrate these requirements using the previous example of the Spanish musician: Let’s assume that an Australian ISP hosts the Malaysian file-sharer website whose infringing content is available in the U.S., but the ISP does not market or make its services available in the U.S. In this case, the ISP would likely not be subject to U.S. law. Therefore, it is likely that the ISP is only subject to Australian law due to its location in Australia—and possibly Malaysian law if qualifying under Malaysian personal jurisdiction requirements. Alternatively, if the Australian ISP actively markets its services to U.S. citizens and businesses, the ISP may be subject to U.S. jurisdiction, and thereby potential liability under the DMCA. This would give the Spanish artist the ability to submit a U.S. takedown notice against the Australian ISP that would subject the ISP to potential liability under the DMCA if is fails to take action on the takedown notice.

Two important things to note:

  • Failing to qualify for jurisdiction does not mean a rights holder is barred from demanding an ISP to takedown content that infringes a protected work. It simply means that an ISP may not be compelled or have incentive to remove infringing content because they are unlikely to face liability.
  • Many content submission sites like YouTube and Facebook, as well as search engines such as Google and Bing, maintain their own takedown submissions procedures that are generally available to users regardless of their geographical location or where a protected work is infringed online.

What Countries Have National Takedown Procedures and What are Such Countries’ Requirements? To effectively utilize takedown procedure against an ISP, the ISP’s host country or country to which it is brought under personal jurisdiction must possess takedown procedures for rights holders, and such rights holders must comply with such procedural requirements. This requires understanding:

  • Whether the country to which the ISP is subject to jurisdiction has takedown notice legislation
  • If so, what are the country’s takedown notice requirements and procedures.

National Takedown Notice Legislation. Surprisingly, not all countries maintain takedown notice legislation for rights holders. Major markets including Argentina, Brazil, Canada, India, Israel, Mexico and Russia are among those that don’t currently have takedown notice procedures. Despite such gaps, a large number of Berne Convention countries have enacted takedown notice legislation including the U.S., Australia, China, France, Italy, Germany, Japan, New Zealand, Singapore, South Africa, South Korea, Taiwan and the United Kingdom, to name a few.

National Takedown Notice Requirements: Below are the requirements for takedown notices in a number of major markets that have notice and takedown legislation.

Country

Legislation

Takedown Notice Requirements

United States DMCA (17 U.S.C. § 512(c)(3)(A))
  1. A physical or electronic signature of a person authorized to act on behalf of the rights holder alleging infringement;
  2. Identification of the copyrighted work(s) claimed to have been infringed;
  3. Identification of the material that is claimed to be infringing and wished to be removed or disabled, including any reasonable information that would allow an ISP to locate the material (i.e. website addresses);
  4. Information reasonably sufficient to allow the ISP to contact the rights holder (i.e. address, telephone number, e-mail, etc.);
  5. A statement that the rights holder has a good faith belief that the use of their content is not authorized by the rights holder; and
  6. A statement that the information provided is accurate, and under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.
Australia Regulation 20I, Schedule 10, 1969 Copyright Regulations
  1. The statement: “I, the person whose name is stated below, issue this notification for the purposes of condition 3 of item 4 of the table in subsection 116AH(1) of the Copyright Act 1968 and regulation 20(I) of the Copyright Regulations 1969.”
  2. The statement: “I am the owner (or agent of the owner of the copyright) in the copyright material specified in the Schedule [See number 7], being copyright material residing on your system or network.”
  3. (If submitted by a copyright owner) The statement: “I believe, in good faith, that the storage of the specified copyright material on your system or network is not authorized by me or a licensee, or the Copyright Act 1968, and is therefore an infringement of the copyright in that material.”;
  4. (If submitted by a copyright owner’s agent) The statement: “I believe, in good faith, that the storage of the specified copyright material on your system or network is not authorized by the copyright owner or a licensee of the copyright owner, or the Copyright Act 1968, and is therefore an infringement of the copyright in that material”;
  5. (If submitted by a copyright owner’s agent) The statement: “I have taken reasonable steps to ensure that the information and statements in this notice are accurate.”;
  6. The copyright owner or their agent’s name, address, e-mail address, telephone number and fax number; and
  7. An attached schedule to the notice including a description of the copyright material and the location of the infringing content.
China Article 14, Regulations on the Protection of the Right to Network Dissemination of Information Networks
  1. The rights holder’s name, contact information and address;
  2. The titles and website addresses of the infringing content which is requested to be removed or disconnected;
  3. Preliminary evidence of the works’ infringement; and
  4. A request that the service provider remove the infringing content.
Japan Article 3(2)(ii), Act on the Limitation of Liability for Damages of Specified Telecommunications Service Providers and the Right to DemandDisclosure of Identification Information of the Senders
  1. Information on the particular infringement;
  2. Suggested actions to be taken by the ISP;
  3. The rights in the work that are allegedly being infringed;
  4. The reasoning why the rights holder believes that an infringement has taken place; and
  5. The rights holder’s contact information.
South Africa Section 77(1), The Electronic Communications and Transactions Act
  1. The rights owner’s full name, address, telephone and e-mail address (if any);
  2. Identification of the right of the protected work that has been allegedly infringed;
  3. Identification of the material or activity that is claimed to be the subject of the infringement;
  4. The requested remedial action to be taken by the ISP;
  5. A statement that the rights holder is acting in good faith;
  6. A statement by the rights holder that the information in the notification is true and correct to their knowledge; and
  7. The copyright owner’s electronic signature.
United Kingdom Section 124(a)(3), Communications Act 2003
  1. A statement that there appears to have been an infringement of the owner’s copyright in the protected work;
  2. A description of the apparent infringement;
  3. Evidence of the apparent infringement that shows the infringer’s IP address and the time at which the evidence of infringement was gathered;
  4. Notice must be sent to the ISP within one (1) month of when evidence of the infringement; and
  5. The notice complies with any other requirement of the initial obligations code.

Note: Some of these national take down requirements are derived from translations. Rights holders should consult with National Copyright Offices or qualified attorneys in the jurisdictions they wish to enforce their rights in order to confirm these and other take down notice requirements.

Further Issues After a Takedown Notice is Submitted. Finally, it is important to note that there are issues to consider after a takedown notice has been submitted. First, an infringer may respond to a takedown notice by submitting a counter notice attesting to their rights in a protected work, even after their online content or website has been blocked or removed. Also, an ISP may refuse to act after a takedown notice has been submitted. If these circumstances arise, one should consider contacting a qualified attorney to discuss further actions.

Special thanks to co-author Kenneth Louis Strocsher, J.D. Candidate, 2014, Seattle University School of Law.

China Flag

Public Hearing on U.S.-China Relations Expected to Highlight Chinese IP Protection Concerns

The U.S.-China Economic and Security Review Commission (USCC) announced in the Federal Register today that it will host its first public hearing this year on February 7, 2013 in Washington D.C. on national security concerns in the U.S.-China economic and security relationship, which will likely include intellectual property (IP) protection issues. Titled “China’s New Leadership and Implications for the United States,” the hearing is intended to collect input from businesses, academics, and government officials on the current status of the U.S.-China relationship for the USCC’s 2013 Annual Report to Congress. The USCC’s last annual report (2012 Annual Report available here) highlighted multiple Chinese IP concerns including inadequate enforcement of IP rights for foreign goods, inconsistent Chinese IP legislation, the theft and loss of foreign businesses’ IP  for such businesses operating in China and in joint-ventures with Chinese businesses, IP cyber espionage, and other related issues. Such annual reports are intended to provide recommendations to the U.S. Congress for legislative and administrative action.

The USCC is expected to hold other public hearings through 2013 as it compiles its annual report. Interested parties may attend hearings or submit comments. Further information on the February 7th hearing as well as attendance and comment submission procedures are available here.

Making Your IP Licenses U.S. Export Compliant

Export regulations have been in the news recently as U.S. officials pledged during the December U.S.-China Joint Commission on Commerce and Trade to relax technology export controls on exports to China, and the Department of Commerce is currently evaluating several export control reforms. Although these developments may allow U.S. businesses to more easily access foreign markets, it also underscores the need for businesses to understand how their exports, and particularly their intellectual property (IP) licensing, is regulated by U.S. export regulations and what steps they should take to ensure export compliance. Beyond avoiding fines and potential criminal charges, ensuring U.S. export compliance can help businesses develop effective IP licensing procedures to reduce challenges to their international operations and realize foreign market opportunities.

Ensuring U.S. export compliance in IP licensing requires an understanding of what U.S. export regulations are and what issues should be evaluated. With the exception of certain goods and technologies, the Department of Commerce’s Bureau of Industry and Security (BIS) establishes U.S. export controls through the Export Administration Regulations (EAR), which provides requirements and restrictions for IP licenses based specifically on a license’s commodity, software, or technology (Items) and the countries to which the items is being licensed. Particularly, the following four issues should be evaluated when licensing IP:

(1) Is your license subject to EAR? Many acts that would not on first glance be considered an export may be subject to EAR. Generally, any Item transmitted from the U.S. to a foreign country or foreign citizen is regulated by EAR. Not surprising, shipments of U.S. Items from the U.S. to foreign countries are subject to EAR. However, as any transmission of Items to foreign countries or foreign citizens is subject to EAR, the licensing of protected content or technology uploaded online for download abroad or by foreign nationals in the U.S. may be subject to these regulations. Such transmissions also include oral briefings, telephone calls, faxes, and e-mails containing Items to foreign countries and foreign citizens both in the U.S. and abroad. By encompassing these multiple activities, your licensing of copyrighted material, patented technology, or even trade secrets, may be subject to EAR.

(2) What is your EAR classification? If your IP license is subject to EAR, determining what your export compliance requirements are depends on the license’s Items. Such Items and their corresponding export requirements are obtained through identifying the Items’ EAR classifications. BIS classifies all Items for EAR through Export Control Classification Numbers (ECCN), which are available on its Commerce Control List. Establishing a licensed Item’s ECCN number helps to determine whether a licensor needs to obtain an export license prior to licensing.

Often, businesses and rights holders determine which ECCN matches their licensed content or technology for export compliance purposes.  However, it is always worthwhile for a licensor to submit a request to BIS to properly classify their licensed content or technology to ensure export compliance.

(3) Where are you licensing to? In addition to a license’s Items, the country to which the license is being made to establishes what restrictions and requirements a IP licensor will subject to. Those well-versed on current world events might find some of EAR’s restrictions self-evident, yet each country provides different sets of requirements and restrictions for IP licenses, often those one may generally not associate with some of the U.S.’ largest trade partners. Not surprisingly, licensing of IP to Canada, arguably the U.S.’ strongest ally, is exempt from most export licensing requirements, while licensing to countries perceived to be a geopolitical security risk or subject to the U.S. embargoes, such as China and North Korea respectively, may be prohibited. However, licensing of content or technology to some of the U.S.’ largest and most dependable trading partners may pose unexpected export requirements. For example, licensing radiation transport calculation and modeling software to Brazil, one of the U.S.’ top 15 trading partners, is subject to export licensing requirements, while relatively smaller trading partners such as Turkey are exempt from some of these licensing requirements.

As a result of EAR’s country-specific and often divergent export control requirements, licensors should consider the export control consequences of where they decide to license their items to when entering into licensing agreements.

(4) Are there any additional considerations? It is important to note that EAR does not regulate all export controls. Foreign embargoes establish export restrictions beyond EAR, which are governed by the Treasury Department’s Office of Foreign Assets Controls (OFAC), and the Department of Defense, Department of State, and Department of Commerce may maintain their own individual export restrictions. As a result, it is important for licensors to work with their counsel and government authorities to determine whether their IP licensing is subject to these additional export restrictions.

What’s the takeaway? So what lessons should licensors take away from examining these export control issues? Being conscious of the type of licensing being conducted, the content or technology being licensed, and where such items are being licensed to can help ensure compliance with U.S. export controls and ultimately realizing foreign market opportunities.

Are there additional export control issues you face in licensing your IP?

Special thanks to Jennifer Jolley for her assistance.

USTR Releases Review of Notorious IP Infringement Markets

The Office of the U.S. Trade Representative (USTR) released an Out-of-Cycle Review of Notorious Markets on Thursday, December 13, 2012, which identified physical and online markets reported by U.S. businesses and industry organizations as being engaged in substantial intellectual property piracy and counterfeiting. The Review included particular social media, multi-platform, deeplinking, cyberlocker, business-to-business, business-to-consumer, bit torrent indexing, bit torrent tracking, and pay-per-download websites. Specific physical markets in Argentina, China, Colombia, Ecuador, India, Indonesia, Mexico, Pakistan, Paraguay, Thailand, and Ukraine were also deemed notorious.

Other notable changes in the Review included the removal of Chinese websites Taobao and Sogou as notorious markets, for their efforts to work with rights-holders to identify infringing content on their websites.

A copy of the Review is available here.