Mr. Michaud, Name Partner of the Michaud-Kinney Group (MKG), talks about IP issues in China, latest trend in IP laws and IP fights, and advices for students who want to become patent attorneys. Here’s a short introduction from MKG: “The Michaud-Kinney Group specializes Intellectual Property Law. At Michaud–Kinney, we work closely with our clients to develop an intellectual property procurement and portfolio management strategy that meets the client’s business goals and objectives. This proactive approach is driven by strong client relationships and innovative communication technologies, such as providing our clients with secure on-line access to their dockets. Before and during our representation, we gain a thorough understanding of our clients’ business and the competitive environment within which they operate. This enables us to develop highly effective IP-based global strategies that allow our clients to accelerate their business goals.”
Jackson: MKG has a branch office in Shanghai. MKG’s website even has a Chinese version. How does MKG practice in China?
Rick: We have business going to China as well as coming from China. As you know, we are an intellectual property (IP) law firm so our main business focus in China involves patents and trademarks. We file patent applications in China, and we have applications coming from China to the U.S. that we file on behalf of Chinese companies. The Chinese patent applications are typically sent to us from Chinese Intellectual Property law firms. We also use these Chinese firms to file patent applications for us in China. The focus of our office in Shanghai is to function as a marketing arm for MKG. We have found it very helpful to have someone in China that can inform law firms there about the benefits of doing business with MKG. With the significant time change between Connecticut and China, it also helps to have someone in China that can answer questions during regular business hours. Our goal is to file more patent applications in the U.S. for Chinese companies. Another reason we have someone directly marketing our firm in China is that many Chinese firms aren’t familiar with Connecticut or mid-size boutique firms. Instead, their contact has been with big city firms. Accordingly, our marketing efforts in China allow us to introduce the advantages and cost savings that are achievable using boutique firms outside of the larger cities.
Jackson: Are you also helping companies in the U.S. do business in China, or only the other way?
Rick: Both. We help companies in the U.S. protect their Intellectual Property in China. We do the same for Chinese companies that want their Intellectual Property protected here in the U.S.
Jackson: Is there any difference in legal practice in China than in the U.S. and other regions?
Rick: From the perspective of IP law, yes, there is some difference between Chinese and U.S. practice. China is similar to the rest of the Asian countries as well as to Europe in their handling of patents and trademarks. In the last several years, there has been significant effort towards global harmonization regarding how patents and trademarks are examined. As a result of these efforts, the dissimilarities in practices between countries regarding Intellectual Property have become less significant.
Jackson: I’m asking because I know piracy and IP violations have historically been an issue in China. How do you deal with this?
Rick: Piracy hasn’t been a large issue for us. Where we see the issue arise is in a reluctance on the part of some of our clients to file for patent and trademark protection in China for fear of being unable to enforce any patents or trademarks that may issue. While there are still some issues in China (and in many other places) regarding copyright infringement, I believe significant improvements have been made regarding patents and trademarks. This is due in part to the fact that China has significantly increased their Intellectual Property filings abroad so overall I believe China is paying closer attention to Intellectual Property rights and the system will continue to improve. I have had a couple of enforcement actions in China that have gone favorably.
Jackson: By improvement you mean enforcement or something else?
Rick: Enforcement, I would say. While there are still some issues, companies are now much more willing to file in China for patent protection.
Rick: That was the concern that the Chinese would not respect IP rights. However, things have improved in the past 6 or7 years. You have to remember a patent is good for 20 years, if it issues. Even if you have some concerns now, you have got to think about the fact that your patent has a life span of 20 years. If China continues to improve the handling of IP issues, and I believe it will, those patents are going to be more and more valuable. With the Chinese economy doing as well as it does, I think companies would be remiss if they didn’t take advantage of filing in China.
Jackson: Our club helps a lot of entrepreneur alumni who do some small and medium business in China. Do you have any suggestions for them regarding IP issues?
Rick: Yes, there are a few suggestions I can offer. First, they have to keep in mind that depending on what nationality they are, if they are U.S. citizens, they are required to obtain a foreign filing license to file outside of the U.S. for patent protection. Normally, if you file in the U.S. first, you automatically get this foreign filing license. They also have to be careful about the rules here in this country. If you are going to file for patent protection, you have to be very careful because there are disclosure rules. Any public disclosure of your invention in this country starts a one-year clock ticking, and you have to file your patent application in the U.S. within that year. However, that same disclosure destroys your rights just about everywhere else in the world. So you need to file for patent protection early on. If you have an entrepreneurial company that is going to base their business on an IP asset, they really do need to consider filing as early as they can. There are ways to do that economically. For example, filing a provisional patent application gives them a more economical vehicle to initially obtain patent pending status. But they have to do it early. They have to be very careful about making any disclosures.
They also have to consider the cost of filing internationally. This can be very expensive. But if they avail themselves of the patent cooperation treaty, which we refer to as the PCT, they are able to basically buy some time, for relatively little financial outlay, to be able to designate virtually every country in the world they would be interested in, including China, and then having a period of 31 months to decide which country to go into. So that’s a good vehicle for them to take advantage of. And at the end of the 31 months, they are going to know a lot more about the viability of their business, and they probably would have better financial resources to take advantage of protecting themselves in various countries.
Jackson: Lots of the start-up companies are software and internet based. From the experience of our alumni, there is still strong violation in China. What advice would you give to those companies?
Rick: It’s difficult. Software patents are not widely recognized outside the U.S. So they have to again rely on copyright issues. They have to thoroughly do their due diligence regarding who they enter into partnership with. They may have to rely more heavily on agreements and contracts outside the copyright, IP arena. They have to deal with reputable firms so they have to do their homework on that. And they have to file for whatever protection they get, whether being copyright, patent and trademark. Bear in mind that these things would be valid for extended periods of time. And I have seen a trend in China of their respect for other’s IP improving greatly. And I expect that to continue. So while they may have some issues initially, as time goes on, things are likely going to improve.
Jackson: You mentioned partners. How about the competitors?
Rick: I think it can come from both. I have had an instance where a U.S. company had a trademark in China. The Chinese company made products for the U.S. company with the trademark on it. They started selling products in other countries bearing our client’s trademark. We were able to resolve that issue fairly effectively through the Chinese legal system. I would say it is probably more likely that diffuculty come from a competitor or unrelated company, but I have also seen it happen where perhaps bad choices were made regarding who to partner with, and the partner has taken advantage of the IP.
Jackson: You cannot control the competitors but who to enter into partnership is something you can control. What can we do to prevent partners to taking advantage of our IP?
Rick: First, you have to make sure you file for protection in China. You have to use a reputable Chinese law firm. There are lots of very good IP firms in China. And you have to inform them and keep them in the loop with respect to your situation so that if an issue does rise they can jump on it. The earlier you address these issues, the easier they are to resolve. If you wait too long, it may become difficult. The longer you wait, the less likely an infringer will be to be responsive to a law firm telling them to stop. You have to not only pick your partner well, but getting a good IP firm involved early on and keeping them informed is important.
Jackson: Now lots of Chinese companies are going abroad. What issues will they face?
Rick: For Europe, examination is similar to China. One thing they have to be concerned with in the U.S. is the way patent applications are examined. Examination is a little bit different; the rest of the world looks basically at the gist of the overall invention, but in the U.S., it’s a much more literal examination. So they have to prepare for that.
For enforcement actions, infringement issues in Europe are similar to those in most of the Asian countries. In the U.S., it’s a very long and very expensive process. And unlike many other countries, we don’t have a system where the losers pay the winner’s attorney’s fees. Both sides have to pay their own attorney’s fees. So it’s important for Chinese companies to bear in mind what those costs might be and to pick their U.S. law firms very carefully.
Jackson: Could you give us a rough idea how much it would cost if a company asks your law firm to protect their IP?
Rick: It’s a difficult question to answer. If you talk about patent, it depends on the complexity of the invention. Obviously a patent for a paper clip is a lot less expensive than a patent for a jet engine. For an average moderately complex patent, you are probably looking at drafting costs somewhat in the neighborhood of 6000 to 8000 dollars. But it greatly depends on the quality of the disclosure we get from the inventor and the complexity of the invention so it’s difficult to predict exactly.
Jackson: RPI like other engineering institutes transfers IP. Our club is thinking of transferring RPI IP to Chinese companies. Do you think it’s doable?
Rick: It’s certainly doable. Typically when they talk about transferring IP from a University tech transferring office, usually there is a patent application on file. My experience is you are typically dealing with patents which are currently pending. And so what you are dealing with there is a licensing issue. The first thing to do is to get the university to agree to licensing terms to license the technology out to whatever the entity is. Often it is the inventors themselves, or some companies that the inventors are forming. Once a license is obtained, assuming that they get the right to go out and sub-license, it’s a fairly straightforward matter to transfer the IP out to entities in other countries in the world. So it’s more of a licensing issue which needs to be worked out by the tech transfer office and the particular individual or company.
Jackson: For RPI engineering students (undergrad/master/PhD) who want to practice law, is there any advice to them?
Rick: I guess you are talking about engineering students who want to become patent attorneys. There are a couple of things. Very valuable to law firms is some industry experience. It’s very helpful that an engineering student have some experience working as an engineer so that they are able to talk the talk and walk the walk when they start dealing with engineering inventors from other companies. I would recommend if they are going to go to law school, you can certainly become a patent agent before becoming a patent attorney. What that involves is having the right number of scientific credits and taking the patent bar exam. You don’t need to be an attorney to take that. So if they are interested in a career in patent law, one very good path would be take the patent bar as early on as they can, and then to get a job in a patent firm while they are still going to school, and start learning the process of drafting patent applications and responses to the Patent Office. That makes them much more valuable to a law firm. And in this economy, that’s going to make them stand out from someone who gets out of law school without any experience.
Jackson: How about the students who want to start a company but don’t want to be a patent attorney? Learning IP issues certainly will help them and I know some alumni did that.
Rick: To start a company, you don’t need to be a patent agent. The suggestion I would have is to talk to a patent attorney before they start a company. Most of the attorneys give free consultations. So they can get a basic idea of what they can and cannot do with respect to things like disclosures; and going out and offering things for sale; and bringing people on. For example if an invention is made by three inventors, the U.S. patent is issued to all three inventors. Each of them owns 100% of the patent. That can be a problem if one decides to leave the company. So the company should make sure that all of the IP rights of the inventors are assigned to the company. And they need to do that very early on. So there are things they should know but just the basics which wouldn’t take long to give them. It will help them immensely in not doing things that could destroy their ability to protect whatever IP they have.
Jackson: Now the U.S. patent is granted to those who file first instead of having the idea first. What impact will it have?
Rick: In September 2012, we will become a “first to file” country. That puts us in line with the rest of the world. We are the only “first to invent” country left out there. So it becomes more of a race to the Patent Office so to speak.
Jackson: So you think there won’t have a big impact on the motivation of inventors?
Rick: I don’t know if there will be a great impact on whether innovation will still take place. I know there will be a great impact on the Patent Office. I expect to see a much larger volume of filings and probably provisional application filings because people and companies are going to be very concerned that someone else is going to beat them to the punch.
Jackson: Good news for you guys.
Rick: One would hope. It may be. I think there will be some confusion initially. But I think it’s probably a good thing we get in line with the rest of the world so that there is a more harmonized system so everybody knows what to expect.
Jackson: We are all familiar with the recent patent war between Google, Microsoft and Apple. People say the next tech war is on patent. What’s your insight?
Rick: Well I think those fights have been going on for quite some time. Any time you’ve got a company fighting with another company over technology it usually involves one or more patents. I think what has happened lately is that there have been many lawsuits over things like cell phone technology between companies like Google, Nokia and Apple, involving many patents at a time. These companies have built up large patent portfolios so that they will have some defence against other companies attacking them. And I think with the technology advancing so rapidly, and the market being somewhat limited, you are going to see a lot more of these fights go on.
Acknowledgment: we appreciate Mr. John Mutchler ’89, Intellectual Property Lawyer at Michaud-Kinney Group LLP and Adjunct Professor at Rensselaer Polytechnic Institute at Hartford for his help connecting RiC with Mr. Richard Michaud.