TopTenWholesale.com interview with Michael Fedrick

In an exclusive interview, TopTenWholesale.com gets an up-close and personal look at what an intellectual property attorney with 19 years of experience securing patent and trademark protection worldwide for a variety of clients ranging from start-ups to Fortune 500 companies, has to say about intellectual property protection in China. Currently working with clients in the U.S., Europe and Asia, Michael Fedrick is fluent in Mandarin Chinese, and frequently lectures on matters involving all aspects of intellectual property law to students and members of the business community. His professional history includes serving as counsel for biopharmaceutical Baxter Healthcare Corporation, where he was responsible for intellectual property matters relating to product lines with sales in excess of $1 billion, where he spearheaded the patent and trademark work for a new pharmaceutical product from inception through FDA approval.

TTW Rueben: When doing business in a global economy – particularly with China involved – the role of intellectual property protection is a hot topic that has spurred a raging debate from a variety of businesses across all platforms. Damages done to Hollywood’s movie industry are some of the first examples that spring to most people’s minds, but I’d like to know how you define the basic threats of IP infringement, as they relate to the wholesale and retail industry?

Michael Fedrick: The threats to infringement vary based on the product type and the type of intellectual property involved.  By way of introduction to intellectual property, it comes in three flavors from a lawyer’s perspective: patent, trademark and copyright.

Patents cover product features that involve either a technical innovation or a new ornamental design. Trademarks protect product branding.  Copyrights, finally, protect the creative content of a product.  Which type of intellectual property has the most value to a product will depend on the nature of the product.

Copyrights are the most difficult to protect because of the types of products involved: music, video, and software.  These are all distributed in electronic form, and are easily copied on equipment available to consumers as well as to larger-scale infringers.

As far as wholesale and retail products are concerned, they’re more likely to involve trademarks and/or patents.  Here the issues are different, and at least somewhat more manageable.  If you can locate a trademark infringer in China (either a manufacturer or distributor), and this sometimes is the most difficult challenge, there are relatively streamlined procedures available to address the activity.

Because of the decentralized nature of production and distribution in China today, the costs of identifying and taking action against patent and trademark infringers are greater than in a more developed markets, such as that of the US or Europe, where market segments tend to be dominated by a relatively small number of enterprises.  This lowers enforcement costs by reducing the number of infringers or potential infringers against which (expensive) legal action might have to be taken.

TTW Rueben: US perceptions of IP protection in China are rather bleak, since it’s plain to see that a country with a relatively young and inexperienced government – and over a billion people to manage – is faced with challenges that might make it nearly impossible to eliminate or even curtail IP infringement at large. What do you think are the first lines of defense that will be solidified, in the struggle to level the playing field?

Michael Fedrick: The first line of defense, getting laws on the books that provide the type of intellectual property protection that we’re used to (in the US, Europe, and Japan, for example), has already been set up.  China’s IP laws are commensurate in scope with those of most of the developed world, and China is a member of every major international treaty concerning intellectual property.

Time should solidify the second line of defense, the legal system, which is still very young.  China didn’t have a market economy before the 1980′s, and significant private commercial activity dates only to the early 1990′s, so the experience of the legal system with commercial disputes is really only about 20 years old (China’s intellectual property laws date only to the mid-1980′s).  Litigators in the US have a difficult enough time accurately predicting the outcome of a case for their clients, due to uncertainty with how a particular judge (or jury) will view it, but this is compounded in China by the greater inexperience of judicial and administrative decision makers.

With that said, a large volume of intellectual property cases are being pursued in China, by both domestic and foreign rights holders, with some success.  So the experience base is growing.

What will improve the adherence to and enforcement of intellectual property more generally will be the consolidation of production and distribution, particularly in the major commercial areas, which seems likely to happen over time as domestic companies grow and look to expand their operations.  This will make it easier to identify and take action against intellectual property infringement, if and when it occurs.

TTW Rueben: Do you foresee a global call to action involving the protection of Intellectual Property? If so, would countries like China become instrumental in controlling the piracy, or is the onus really on those who release new ideas into the open market to perhaps exclude certain markets, as Google has done? Why do we even bother to try to enter volatile markets, when it seems that stealing ideas is a practice that overshadows any legal social framework?

Michael Fedrick: Intellectual property is primarily a private legal right and is enforced worldwide almost exclusively by the owners of such rights.  This is true in the US as elsewhere. Although criminal penalties (the type of penalty initiated by a branch of a government) exist in the US, they are rarely deployed, and appear to be used more often in China in fact than in the US.  So the onus on enforcement is always on the private sector.  This can be facilitated by government, and in an environment of widespread intellectual property infringement it’s not unreasonable to ask for more help from government.  But as long as China remains a market economy, the Chinese government can’t change the decentralized manufacturing and distribution system that currently exists, and so can’t entirely level the playing field.

There are reasons, both defensive and offensive, to protect intellectual property in China though.

TTW Rueben: Please explain the use of defensive vs. offensive IP protection to our readers.

Michael Fedrick: Trademark rights in China (as in most of the world) are granted based on a first-to-file basis.  Prior use of a trademark in China or elsewhere in the world gives a company no rights to it unless they’ve first filed to register it.  If a company is doing business in China, registering the trademarks that it’s using there should be a part of its due diligence.  This prevents, for example, a distributor or contract manufacturer from obtaining such rights and blocking a company’s ability to work with a different Chinese entity.

By “offensive” uses of intellectual property, I’m referring to enforcement actions.  Filing for patent, trademark, or copyright protection for enforcement purposes is potentially worthwhile, under one or both of two circumstances. One is that an enterprise currently has a market in China worth protecting.  Even though the costs of enforcement are high, intellectual property may be one of the few tools available to protect that market.

A more important reason to consider intellectual property protection now is that China will be a larger, more attractive market and will have a more experienced judiciary in three, five, or ten years. Ensuring that a patent or trademark in China is available then may mean that it has to be protected now.

TTW Rueben: Thank you very much for your time, Michael. I’m sure the readers of TopTenWholesale.com News will discover valuable insights, after reading your comments and thoughts on a topic that will most certainly shape the future of trade practices in the global sector. For those who would like to follow your moves, please give us a way to keep track of what you have going on in the future. Any websites, books, upcoming conferences, etc.?

Michael Fedrick: I give talks frequently in southern California and write articles when I get the chance. The best way to find out about these would be visiting the Loza & Loza, LLP website for details on our current projects and achievements.

* Editor’s note: I’ve corrected my own misspelling of Mr. Fedrick’s last name from the commonly mistaken use of “Fredrick,” and I feel it’s worth pointing out to the readers of the TopTenWholesale.com Blog!