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Foreign businesses must be prepared to face litigation as a result of increased intellectual property regulations.

The Japanese capital is undergoing a resurgence. Foreign firms operating in China are increasingly becoming the focus of an increasing number of intellectual property lawsuits brought by Chinese corporations. Increased intellectual property law, which has resulted in large sums of damages being awarded by courts for breaches, has opened the floodgates to litigation.

In recent years, Chinese companies have grown increasingly defensive of their own intellectual property rights, with the number of IP-related cases filed in China in 2020 more than trebling that of 2016.

Japan’s firms are being forced to modify their China intellectual property strategies, which have historically centred on dealing with infringements involving Chinese businesses, in order to be better prepared for the possibility of being sued by Chinese rivals as a result of this trend.

Ryohin Keikaku, the Tokyo-based business that operates the Muji network of home goods shops, is one example of a Japanese company that has been involved in intellectual property legal battles with Chinese corporations.

As a result of the company’s victory in a trademark lawsuit filed against it by Beijing Cottonfield Textile Corporation and another Chinese company established in July, Kenko Kikuchi, head of the company’s legal and intellectual property affairs department, stated, “We will continue to keep our eyes on the ball.” For more than two and a half years, the parties engaged in legal warfare.

In China, the Japanese company Ryohin Keikaku, which operates the Muji shops, is continuing its legal battle to preserve its ‘Mujirushi Ryohin’ (no brand, high-quality products) trademark. Reuters is a news agency that reports on international affairs.
In spite of this, Ryohin Keikaku is embroiled in more than a dozen court battles with other businesses over the use of its trademarked “Mujirushi Ryohin” (meaning “no brand, high quality goods”) printed in Chinese characters on some of its woven fabric items, such as bed coverings and towels. The Japanese company’s battle to preserve its trademark in the nation seems to have no end in sight at this point.

Ryohin Keikaku is one of a rising number of international businesses that have been targeted by intellectual-property-related litigation in China. Apple has been sued by a Chinese artificial intelligence firm, which alleges that the company’s voice-recognition technology, Siri, infringes on a patent owned by the U.S. technology giant.

The majority of Intellectual Property (IP) disputes between Chinese and international businesses have traditionally included allegations of infringements by the Chinese parties, according to Japanese attorney Yoshifumi Onodera. “However, the number of instances in which the reverse is true is rising. We are getting an increasing number of requests for legal assistance from Japanese businesses that are doing business in China ” he explains.

The number of intellectual property cases filed in China has been increasing. In 2020, Chinese courts of first instance heard a total of 28,528 intellectual property infringement lawsuits including sectors such as patents, utility models, and designs, representing a 28 percent increase over the previous year. The number of copyright and trademark lawsuits is also on the rise.

There are two major reasons contributing to the rising tide of intellectual property lawsuits. One example is the increasing quantity of intellectual property (IP) held by Chinese companies. In the past, China was infamous for the widespread availability of counterfeit goods, earning the nickname “Copycat Heaven.” Although there is no shortage of counterfeit goods in China, Chinese businesses now have a greater number of their own intellectual property rights to defend.

The country of China was the world’s leading source of foreign patent applications for the second consecutive year in 2020, with a total of 68,720 filings. IP security is becoming more important to a growing number of Chinese technology-oriented businesses as part of their overall business strategy.

The second element is strengthened intellectual-property laws. In 2019 and 2020, the Chinese government updated the country’s trademark, patent, and copyright legislation. The changes have increased the maximum amount of damages that may be awarded by courts in these types of situations. As a result of the amendments, punitive damages are now available, which may be awarded in addition to real damages under specific situations. In instances involving severe infringements of intellectual property rights, awards of five times the actual damages may now be made.

The burden of evidence for plaintiffs in patent infringement proceedings has been lowered as a result of the revisions to the patent law. According to attorney Makoto Endo, bringing patent infringement lawsuits will become more advantageous as a result of this. In other words, Chinese businesses are more likely than ever before to file lawsuits against international rivals for intellectual property infringement.

Five-generation wireless communication technology, as well as artificial intelligence, are two technological domains where this development has especially significant ramifications. The Chinese government is encouraging technological advancements in these sectors as part of a national technology development initiative.

Many Chinese firms are developing 5G and artificial intelligence technologies that are world-beating. Specifically, Onodera expects an increase in the number of Chinese litigation filed against international businesses using these technology.

According to Rieko Michishita, a U.S.-registered lawyer who works out of China, “Japanese businesses tend to be sluggish in strengthening their defence against possible litigation threats.” According to Michishita, many Japanese firms, even those with prior experience suing Chinese corporations for intellectual property infringement, find themselves in a difficult position to defend themselves in court in IP matters in which they are being sued.

When individuals are the ones who are suing, they have the freedom to gather evidence and create tactics for court fights at their own speed. When they are sued, on the other hand, they are required to respond quickly to the acts made by the plaintiffs in the lawsuit. Japanese businesses, on the whole, are not very adept at this.

In many instances, Japanese corporations delegate little or no power to their Chinese affiliates in their home country. These businesses may find themselves at a competitive disadvantage as a result of the time they spend consulting with their Japanese headquarters.

“It is very uncommon for a Japanese business to panic when it is sued in China and fail to respond in a timely manner in accordance with the law,” explains Michishita.

It is likely that in such an instance, the Japanese firm would go on a frenzied wild goose hunt in order to locate a local politician or business person who can assist it in the lawsuit.

Companies should at the very least perform internal simulations and create guides to cope with litigation filed against them, Michishita advises. “It is imperative that companies undertake internal simulations and develop manuals.” It is essential to get familiar with the Chinese legal processes that are involved. It is essential to assign shared responsibility for checking issues that need internal approval as well as providing the required time to deal with them, according to the Japanese head office and local units, she argues.

The patent infringement cases against its Chinese competitors have been filed by a large Japanese company with no prior experience in Chinese courtrooms, against its Chinese competitors. According to the Japanese company’s executive in charge of intellectual property problems, the action is partially meant to serve as a learning step in order to become better prepared for being sued. By collaborating with local attorneys who are well-known for their expertise in intellectual property disputes, the business hopes to become more familiar with the legal processes as well as the fast legal answers required by Chinese corporations.

China has earned a reputation as a litigious culture, and this trend has now extended to intellectual property issues as well. If foreign businesses have a tendency to be too willing to make concessions in commercial conflicts or seek financial settlements in order to avoid escalating them, they may find themselves as preferred targets of litigation.

Whether they are the plaintiffs or the defendants in intellectual property litigation in China, it is becoming more essential for Japanese and other international businesses to have effective and feasible plans and strategies for dealing with IP cases in China. This includes clearly defining the responsibilities performed by the headquarters and local units, which is an essential component of the overall strategy.