Akzo Nobel interview: How IP leverages international companies

What is your role at Akzo Nobel and when did the company enter the China market?

This is my second year with Akzo Nobel and my first position as in-house. Previously I was in private practice in China and the US. The company's China IP office is the APAC headquarters and its business structure runs parallel with legal service support. I am the director of IP APAC and our coverage encompasses all jurisdictions in the APAC area ex-Australia.

The company got into China pretty early, in 1994. Akzo Nobel now has established 36 factories, employs more than 7,000 employees and pays Rmb1.4 billion in tax annually in China.

What types of IP infringement have you been dealing with most this year?

Akzo Nobel's practice involves a mix of industries. We still have severe trademark issues all over Asia, but we have recently had more challenges in protecting trade secrets, such as in technology knowhow.

Trade secret protection in China is still evolving and tech-concentrated businesses are especially vulnerable. Not much has been done in terms of the regulatory environment and court practice. The difficulties come from both the economic reality of this developing area - as employee turnovers are huge - and the lack of experience in, and clear instructions from, the court system.

In most cases it's very difficult to meet the criteria set in the trade secret-related regulations, for example, plaintiffs have to prove the secrecy of their confidential information, illegal access and economic value of the secret. The access part is relatively easy, but proving that the information or knowhow was not known to the public is difficult. Most of the plaintiffs have to resort to a novelty type of appraisal by the judiciary appraisal institute. Another challenge is calculating damages. With trade secrets, you either have it or lose it. Often they are associated with not only a particular product, but business strategy as well, so while it's clear the damage is huge, determining the concrete amount is tough.

Establishing the specialised IP courts was a good move. But even their judges may confuse the issues between patent infringement and trade secret misappropriation, which are very different by principle. One protects the technology itself while the other is supposed to protect the honest business practice as stated in TRIPS. Moving general trade secret misappropriation cases from the general court to the IP court doesn't really solve this misconception.

How do you compare IP enforcement in China compared with that in other APAC jurisdictions?

Despite the challenges we face in China, compared with other Asian countries – especially those in Southeast Asia – IP protection is getting much better in the country. We also handle litigations or IP disputes in other places like India, Thailand and previously South Korea. There have been many improvements in these jurisdictions in terms of transparency in the court system. But as for judicial efficiency, there is still much work to be done. Another important aspect is predictability, which is a big problem. Most APAC countries have a statutory system instead of a case law system, so it's hard to predict the outcomes due to the different interpretations from time to time and court to court, even if we have similar sets of facts or evidence. This can make it difficult to guide business operations in those countries.

What are the biggest recent regulatory developments that have affected your work?

The PRC Trademark Law (中华人民共和国商标法) was amended last year, which was a positive development in terms of protecting bona fide business brand practice. It emphasised the legitimate use of a mark, expanded the subject matters of the trademarks and clarified protections for well-known marks. It also changed the opposition regime, which has made the law more practical and focused.

The PRC Patent Law (中华人民共和国专利法) will be amended quite soon. The draft has been published for comments. The proposed inventor remuneration system regulation is a huge issue for most multinational companies and is not in line with business reality. Although individual inventors can do their own research, almost all R&D activities are now designed and sponsored by the company and involve collective efforts by different groups – not just by the researchers but often marketing as well. The obligation to separately compensate the inventors seems to be counterproductive. We have submitted several comments to the legislative body in this regard.

The fourth draft is still on the old track, so it strays quite significantly from our strategy of moving more research projects to China. Although we have a big R&D centre in Shanghai with over 500 researchers, the complications of the inventor remuneration system and other issues like the lack of protection of trade secrets or tech knowhow lead our R&D functions in China to be mainly for practical development, implementation or incremental improvement of technology, rather than for fundamental research.

This year's Patent Law draft gives much more power to the AIC. Will this be a problem for businesses? Do you expect more interference from the authorities?

For modern businesses, it's key to be able to freely explore possibilities. Highly regulated areas are definitely detrimental to businesses' growth. In terms of AIC interference, due to the complexity of the technology and legal issues involved in patent matters, it would be difficult for the AIC to take effective action. More importantly, since there are no established administrative procedures for AIC actions, there aren't any proper procedural protections against the abuse of the new AIC powers. This added authority bestowed to the AIC strays from the current directive from the central government demanding less administrative intrusions. Any interference into business operations needs to be clearly defined and justified.

Has Akzo Nobel done any M&A in China? How do you deal with the transfer of IP rights?

The company had several M&A projects before I came on board. We support the legal department on IP issues of transactions. Our most significant M&A affecting China was the global acquisition of ICI, which was completed in 2008 but issues of IP legacies still linger around. We have to handle the transfer of trademarks and technology from ICI globally, which can be complicated due to the different business arrangements in the APAC area.

How has your outlook of working with IP changed by moving from private practice to in-house?

Practicing in a private setting is very different from being in-house or on the corporate side of IP management. My former role involved more IP litigation and other dispute resolution mechanisms like arbitration and negotiation. But in-house, the focus is on building up IP assets, and there is the added dimension of business operation to the perspective. The use of IP not only as a right but also as property has to stem from a business decision. IP has a greater leverage on international companies. For a Chinese company to grow into a global player, there is a lot to do on the IP front, both management and operation wise.