How to protect against IP theft?

15th of September 2010
How to protect against IP theft?

European manufacturers of cleaning equipment and systems are increasingly experiencing cases where their products are being copied by producers in the Far East and sold in Europe at much lower prices. ECJ takes a look at the scale of this problem and asks how manufacturers can best protect their intellectual property (IP).

The violation of intellectual property rights is a thorny and complex issue. ECJ spoke to various European cleaning manufacturers to gauge their thoughts and opinions on the current climate of intellectual property (IP) violations. Markus Asch, managing director of Kärcher believes that: "There is an increasing need to look at IP protection. In the past copycats were often a source of amusement but in the current climate of sophisticated copying technology machines can be copied producing almost similar results to the product of the original company.

"This constitutes a real threat as the counterfeiters can produce the end product at 20 to 30 per cent of the budget of the original company. If this becomes a standard occurrence manufacturers investing in innovation and development will be at a great disadvantage."

According to Asch, IP violations have increased over the last few years and his firm had first hand experience of this in 2009 when a copy of one of its professional cold water high pressure cleaners appeared in China. Although Kärcher did not have a patent the product was nevertheless considered to be a theft of intellectual property as 99 per cent had been copied and Kärcher was able to launch a legal suit on these grounds.

Asch is clear regarding the responsibilities of trade show organisers in reference to intellectual property. “Can an exhibition eliminate IP theft? No. But, can an exhibition preserve its professionalism by trying to restrict it as much as possible? I would say yes. An exhibition can create and manage a certain environment that can restrict copycatting as much as possible. This was missing at RAI's ISSA/Interclean this year. "

Asch continued: "The picture I got from RAI is that it cannot do anything to prevent copycatting but can offer support when a problem arises. I think this is wrong. The obligation of a professional exhibition provider is to provide an environment that tries to prevent intellectual theft by being very clear and up-front in communication. It is not enough to deal with consequences. It is more important to prevent such problems in the first place by educating exhibitors and being very clear with them about the consequences of property theft."

Kai Stolzenberg, managing director of sweeper producer Stolzenberg, has also been a victim of copycatting. At an ISSA/INTERCLEAN exhibition four years ago it found a distributor showing a copy of one of its machines. Unable to take action against the Chinese manufacturer Stolzenberg had to take approximately 20 distributors to court – a lengthy and costly procedure. Although it did not seek help from RAI in this particular case, as a rule Stolzenberg thinks trade show organisers, including RAI, should be more proactive.

He feels they should take advantage of their house rights and exclude companies which do not conform to their rules. Every exhibitor at RAI has signed up to respect IP rights. If such rights are breached Stolzenberg feels RAI can exclude a party on the basis of contractual violations.

On another note Stolzenberg said: "The investments in research and development are quite a large percentage of the total product price in our industry and if a company does not have these expenses it is easy even for a German manufacturer to compete with the original German manufacturer."

As far as Stolzenberg is concerned political action is required to regulate IP laws. He does not think manufacturers or trade show organisers are capable of acting alone as even the largest company in the cleaning industry is too small to put any pressure on political decisions. However the political voice of the industry associations might be more effective as they can "combine the voice of many small companies to make a louder voice".

Giancarlo Ruffo, president of Comac, has also fallen prey to copycatting. "We discovered a few years ago that a company in China was cloning our scrubber dryers known as Vispas. Generally speaking, you can't protect your rights in China today. They keep making copycats and exporting them. Our machines such as scrubber dryers,  vacuum cleaners and floor machines have been on the market since the 20s. There is nothing really to be patented in terms of technology but companies around the world have developed their own line of machines and some Chinese companies copy these products identically."

Ruffo also raised the issue of the expense of patents. "Patents outside Europe are very expensive. You have to buy a patent for each individual country. If  you want to cover your products with an international patent the cost is  very high to the point of being prohibitive and you must remember that companies in the cleaning sector are not that big as a rule. We have taken legal action without success. In Europe the Chinese can't touch the Vispa as it is protected, but copycats are sold in Saudi Arabia , the USA and South America and we can't do anything much because we don't have a worldwide patent."

Despite the fact every single detail of his machine was copied, Ruffo observes that  it is very difficult to establish at a trade show that a product has been copied: "The problem is that once an exhibitor puts a copycat on the floor it is almost impossible to argue the point because they deny it outright. Our Vispa was copycatted at ISSA/INTERCLEAN this year. We went to the company involved in this copying and confronted it but it argued that its product was slightly different from ours.

"Even though we had documents proving that our machine was patented it was impossible to get a court order right away. The copycat company was informed by us that if it did not remove the copycat products we would take legal action. Although as a result we managed to get the machines removed both the pictures and the stand remained part of the show."

Regarding possible remedies Ruffo suggested: "You need to get a sincere commitment from the companies that participate in these shows that they will not exhibit any copycats. Some companies sign everything but that does not necessarily mean anything.

"A possible solution is investing a great deal of money in one’s brand so that customers do not tend to buy one piece of equipment but instead invest in the product of a well-known company  backed by research and development."

Ruffo believes that there is a lack of legislation in China regarding IP protection. He would like to see more support from industry associations but is uncertain what form this should take as the situation is extremely complicated. He emphasised: "You must understand 95 per cent of products in our industry don’t have patents. The machines we use don't have patents anymore because they have been in production for a long time and for products like these there is nothing we can do against Chinese copycatting.

"Only a few Chinese companies can afford to travel and exhibit at trade shows but many others with less money will just export copycats around the world. The problem has got worse over the last few years . I see no sign the situation will resolve itself in the future."

Difficult to police

Matthew Dwelly, marketing manager of Brightwell Dispensing, adds his experience and thoughts on the subject of intellectual property violations. “We found a company in China manufacturing counterfeit copies of one of our soap dispenser products and it used a number of vendors or distributors to export them to Europe, USA, Australia and other places where we hold worldwide patents. Thanks to our patents or trademarks or registered designs we can get an injunction in four working days against anyone importing them or using them."

The copycatting of goods is a difficult process to police. According to Dwelly one can only tell if it is occurring by visiting trade shows, researching on the internet or by being informed by customers. Brightwell discovered that the offending Chinese company intended to display counterfeit goods of its products at ISSA/INTERCLEAN in Amsterdam this year. Trade organisation ISSA was unable to help - the company concerned was not an ISSA member.

Brightwell Dispensing’s patent attorney contacted the Chinese company concerned and advised it that if it exhibited the counterfeit goods a legal injunction would be taken out. Consequently the Chinese company pulled out of the exhibition.

Dwelly makes various suggestions to improve  matters in the future:

• RAI and other show organisers should make clearer policies in their terms and conditions regarding patent and counterfeit issues, possibly allowing the holder of the patent who is reporting a copycat company to present their case prior to the exhibition.

• An industry organisation like ISSA should perhaps produce a guide or helpful documents for companies experiencing this problem for the first time and offer advice on protecting their inventions.

• ISSA should draw on other manufacturers' experiences and connect companies who have had this problem allowing them to share information on methods of preventing the impact of counterfeit products.

ECJ also contacted Rob den Hertog, project manager for ISSA/INTERCLEAN at Amsterdam RAI. He stated: "RAI is committed to safeguard IP rights at all its exhibitions and expects all professional manufacturers to know that they cannot infringe such rights. The protection  of IP rights is specifically stated in the standard terms and  conditions of event participation and participants signing up for stand space are made aware that they cannot infringe such rights."

However if a company’s products are being exhibited at ISSA/INTERCLEAN by a copycat manufacturer RAI advises them to take legal action by starting summary  procedures in the District Court in accordance with Dutch law. This is because RAI (or any other exhibition organizer) is not specialised in patent rights and is not in a position to determine, beyond any doubt, if and to what extent patents are breached.

A provisional judgment can be obtained in a day or two and to help facilitate matters RAI has a shortlist of Dutch IP attorneys and interpreters available. Hertog emphasised: "Amsterdam RAI follows due process and will act in accordance with the court orders and if required will remove the products and if necessary close the booths of the exhibitor in question."

In den Hertog’s opinion, to avoid such IP infringements manufacturers should protect their IP rights diligently and start legal action as soon as they encounter such activities and not wait until exhibitions take place. He stresses that professional exhibition organisers are doing their utmost to prevent IP violations during exhibitions but can act only in accordance with court orders.

Hertog argues RAI cannot do more for risk of making mistakes or erroneous judgments in this complex issue of IP rights. Otherwise they risk prosecution from aggrieved parties and damage to their reputation. Hertog asserted: "We will not hesitate to exercise necessary measures when the Dutch court order is in our hands."

Intellectual property rights, their protection and violations are clearly a minefield that provokes a multitude of interests and perspectives. These complex issues need to be addressed.

Read about the round table meeting held by ECJ to discuss this issue in more depth


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