In What Ways Can Startups Obtain Competitive Advantages from Intellectual Property?

(By You Yunting) Large number of business opportunities have arisen from the rapid development of wireless and mobile technologies. As a result, new startups appear one after another, scrambling for these opportunities. However, the faster a market grows, the fiercer competition it involves. The process of Entrepreneurship is a race with other outstanding entrepreneurs, in which they use reasonable efforts to gain competitive advantages and win their rivals. If properly used, intellectual property rights can be very helpful in creating advantages. Here, let’s talk about what advantages can startups create by using intellectual property.

  1. Patent advantages

As defined by the Patent Law of the People’s Republic of China (“PRC”), patents include invention, utility model and design patents. Invention and utility model patents are for protecting technologies and design patents for products’ appearance. Personally, software startups usually do not need to file or only need to file a limited number of patent applications, while intelligent hardware developers need to file patent applications much more often.

The performance of most software providers relies on user experience and corporate execution. The scarcity of time is the biggest problem they face, so for them going through invention patent application process takes “too long in coming to be the help”. It generally takes over 30 months to get results of an invention patent application and a patent lawsuit would take even longer to receive an official decision. In most cases, defendants in patent lawsuits would commence patent invalidity processes, which involve one administrative process and two trial processes in court. The trial in court will be adjourned until the invalidity processes being completely finished. If retrial is needed in a lawsuit, the whole course of the proceedings may continue for 30 months or so. If a software provider relies on a patent in dispute to win the competition, it could be “too late” when a court decides on its patent claims. On the other hand, as new versions of software are updated very quickly, it is likely that a new generation of technologies have existed before patents for technologies of an old generation being officially approved, causing such patented technologies no longer to be wanted.

For hardware providers, however, patents are definitely important. After all, hardware patents cannot be circumvented as easily as software patents. Nevertheless, it is also difficult for them to use patents to impede their business rivals. Remember Nokia vs Apple cell phone patent case and Apple vs Samsung cell phone patent case. In both cases plaintiffs were paid billions of dollars as damages, but defendants still had very big market shares. In brief, patents are like long-range weapons in striking opponents, which should not be used as short-range arms.

  1. Brand advantages

Forms of “brands” include trademarks, domain names, Weibo accounts numbers, WeChat public account numbers, app names used in app stores, etc., of which trademarks are of the most importance. According to the Trademark Law of the PRC, a registered trademark holder has exclusive rights to use its registered trademark. Trademark rights have powerful effect in that all Chinese administrations for industry and commerce have trademark law enforcement power and courts are also competent to hear and decide on trademark infringement cases. When someone finds their registered trademark being infringed by others, they can report to an administration for industry and commerce or file a lawsuit. It won’t take much time or effort for them to have their trademark rights being protected. There are two main points, I believe, that mobile internet companies should do to protect their brands.

First, file trademark applications covering as many products, services and similar trademark names as possible. For example, if someone wants to use “娃哈哈” as a trademark name for doing e-commerce businesses, the type of trademark that he or she applies should at least includes software, instant messaging, logistics and payment. Besides, they should also file trademark applications for “哈哈娃”, “哈娃哈” at the same time, and even the name “Wahaha”, “Hahawa”, “Hawaha” (marks used to show pronunciations of the above Chinese phrases 娃哈哈, 哈哈娃 and 哈娃哈, also known as Pinyin) should also be filed, if necessary.

Second, take actions to protect other forms of brands other than trademarks. Before launching a new brand, register all domains, Weibo account numbers and WeChat public account numbers connected with that brand, and upload the app to secure an app name in app stores. For mobile internet companies, these are what they need to provide products and services. Rush registration prevails in the mainland China. Once they suffer rush registration, it will take much energy and time to protect their legal rights by going through legal procedures involved. In order to avoid rush registration, it is necessary to register all matters connected with a brand.

  1. Content advantages

The internet has made information reproduction and transmission much more convenient than ever before. The emergence of internet companies has a significant impact on traditional content providers whose business models are based on the right of reproduction. Internet companies gain profits by adopting new business models different from traditional ones. As internet technologies advance quickly, any business model of an internet company that currently exists will be completely replaced by a new one sooner or later. Therefore, content providers must seek and obtain legal exclusive rights to their contents to protect themselves from fatal risks caused by ever-changing internet technologies. Key points that providers of different types of contents that should be concerned with may vary.

Startups whose business scopes involve works like writing works, music works, art works and films/movie works, can confirm the copyright to their works by copyright registration. Copyright registration certificates can be used as a basis for protecting legal rights of the certificate holders when acts like plagiarism and illegal reproduction and transmission of their works are found.

Protection of software products is not the biggest concern for software product and service providers. Nowadays most startups are able to cross technological barriers to develop a similar software relying on users’ experience with no need to copy software codes. Therefore, most software businesses gain competitive advantages from data that they collect from users of their products or services. Although data are not copyrightable, startup owners can confirm their ownership to specific data by entering into agreements with persons from whom the data are collected or ones who are given access to such data. User Agreement and Non-disclosure Agreement made with employees or outside partners can be used as a basis for protection of exclusive rights to data.

Finally, the adaptation rights to mobile games licensed by well-known intellectual property right holders can form a special barrier for mobile game developers. For example, if a person obtains adaptation rights to popular comics like Naruto, Transformers from their authors, he or she can develop more attractive games based on these comics. Startups without adaptation rights cannot adapt others’ works, or they will suffer accusation from their competitors or original authors, making them impossible to overcome the barrier of adaptation rights.

Lawyer Contacts

You Yunting86-21-52134918

Disclaimer of Bridge IP Law Commentary

Leave a Reply

Your email address will not be published. Required fields are marked *