By Marshall J. Brown And Yan Zhao, Foley & Lardner LLP
This article is part of our Spring 2010 edition of Legal News: China Quarterly Newsletter, Eye on China.
Although sovereignty was transferred to the Peoples Republic of China (PRC) in 1997, Hong Kong still maintains its own intellectual property governance. However, many companies express confusion over separate Hong Kong patent filings, wondering whether such protection is even necessary, whether it is worth the cost, and whether it is feasible to effectively enforce patents in Hong Kong.
When considering whether to file in Hong Kong, it is helpful to understand the basics of the Hong Kong patent system as well as financial, legal, and administrative considerations that may affect such filing decisions.
The Hong Kong Patent System
Hong Kong has “standard” and “short-term” utility patents. An applicant can obtain a standard patent (with a term of up to 20 years) based upon a filing in the State Intellectual Property Office of the PRC, the European Patent Office, or the United Kingdom Intellectual Property Office. In each case, an applicant must request recordation of the application in Hong Kong within six months after the publication date of the application by the designated patent office. The application is not substantively examined in Hong Kong. Instead, the applicant simply files a request for registration in Hong Kong within six months after the patent grant in the designated patent office. The Hong Kong standard patent is therefore identical to the patent granted by the designated patent office.
The short-term patent (with a term of up to eight years) is similar to the standard patent in that there is no substantive examination of the application. One applies for a short-term patent by submitting a search report from an international search authority or one of the designated patent offices. If the applicant complies with the proper formalities, the short-term patent is granted within three months.
Besides utility patents, a design registration can be obtained by a process similar to that for industrial designs and design patents in other countries. An applicant files a request for a design registration directly in Hong Kong, either as a first filing or while claiming priority to a previously filed foreign application. The term of the design registration can last up to 25 years, so long as the proper renewal fees are paid every five years.
The Limitations of the Hong Kong Patent System
Although it is relatively easy to obtain a Hong Kong patent, enforcing the patent is not so simple. First, Hong Kong patent rights do not extend into the PRC. One therefore cannot, for example, file an infringement action against a manufacturer in Shenzen (just 20 miles from Hong Kong) unless the infringing product is brought into Hong Kong. Unless one has patent rights in China, Chinese exporters can avoid a Hong Kong enforcement action simply by having their products shipped through Shenzen, Guangzhou, or another major Chinese port.
Even if infringing products have a physical presence in Hong Kong, there are still other obstacles to enforcing the infringed Hong Kong patent. Traditionally, Hong Kong patent litigation has been rare, and Hong Kong does not have a large number of qualified and experienced patent litigators. Furthermore, Hong Kong patent litigation is relatively expensive compared to surrounding jurisdictions, with costs often reaching $300,000 (U.S.) or more.
Notwithstanding the drawbacks, the Hong Kong patent can still play an important role in a company’s worldwide patent portfolio. Although there are other large ports in China, the Port of Hong Kong is still one of the largest in the world, processing more than 24 million container loads of goods in 2008. Additionally, with more than seven million people and being among the highest in Asia for per capita income, Hong Kong is a potentially lucrative consumer market. As a result, companies may still find it worthwhile to obtain
Additionally, Hong Kong also is home to some of the largest trade shows in the world, including the Hong Kong Electronics Fair, the Hong Kong Optical Fair, and the Hong Kong Houseware Fair. As the exhibition of infringing goods can constitute a public use and/or offer for sale, companies can use Hong Kong patents to stop the exhibition of these products at some of the most important events of the year. In particular, a patent holder may file a complaint with a trade fair’s on-site legal counsel against exhibited products for patent infringement. Should the trade fair’s legal counsel agree with the infringement allegations, the trade fair organizer can request that the exhibitor remove the suspected infringing products from the exhibition. If the exhibitor refuses to cooperate, the Hong Kong Trade Development Council can enjoin the exhibitor from attending Hong Kong trade shows in the future. The Hong Kong patent can therefore be quite valuable in disrupting infringers’ ability to market their products directly to potential customers.
Furthermore, although Hong Kong patent rights do not extend into the PRC, it is possible to enforce Hong Kong arbitration awards and court judgments in Chinese courts against Hong Kong infringers. Additionally, Hong Kong courts, following the common law system, have a reputation for granting relatively large damage awards. Therefore, even though patent litigation in Hong Kong is fairly expensive, an infringement judgment can serve as a valuable weapon against companies with a sizeable Chinese presence
To File or Not to File?
Given the above, there is no single strategy in deciding whether to obtain Hong Kong patents. For a company whose only major consumer market is the United States, it may not consider the Hong Kong patent to be worthwhile if it is willing to aggressively pursue and enforce its U.S. patent rights. Similarly, if a company performs its manufacturing domestically and believes that the manufacture of knockoff products in China is unlikely, it also may decide that a Hong Kong patent does not make financial sense.
On the other hand, companies with a worldwide focus clearly can benefit from a Hong Kong patent. Such companies can use Hong Kong patents to stop the shipping of products through Hong Kong, prevent the local sale of infringing goods, and prevent infringing products from being offered for sale at some of the world’s largest trade shows.
For smaller companies who are having products manufactured in China, Hong Kong patents also may be beneficial. Companies routinely have to deal with current and former suppliers producing knockoff goods, often using the same tooling used to make the company’s own products. In such cases, Hong Kong patents can be used to help stem the flow of these goods before they reach U.S. or other markets, particularly if used in conjunction with corresponding Chinese patent protection.
Therefore, although Hong Kong patents may not have a great deal of value for everyone, for many companies, they may be able to play a valuable role as part of a broader intellectual property protection strategy.