Should we update the law for semiconductor layout protection?

Abstract

Semiconductor industry is a significant part of global economy. WTO, the US and China have enacted legislations to protect semiconductor layout design work. This paper discusses these legislations and their differences. In addition, the author analyzes why these legislations are outdated and offer little use. The author suggests encouraging semiconductor manufactures to protect and even to police semiconductor layout design works submitted by their customers and infringers.

Introduction

Importance of semi-conductor

Semiconductor plays a significant role in our daily life¹. Semiconductor chips have embedded in almost all kinds of products, from microwave oven to traffic lights to computers. Some said human civilization could advance in unprecedented speed in the past few decades is mainly to the invention and adoption of semiconductor².

Over the next five years to 2008, IDC expects the worldwide semiconductor market to grow at a compound annual growth rate of 12.5 percent, rising from US$160 billion in revenue in 2003 to US$282 billion in 2008.

On a separate survey, Semiconductor Industry Association (SIA) reported worldwide sales of semiconductors rose to $16.28 billion in March 2004, from the $15.58 billion reported in February 2004 and a 32.3 percent increase from March of2003. SIA also reported global sales of semiconductors grew to $48.8 billion in the first quarter of 2004 compared to $36.4 billion in the first quarter of 2003.

Semiconductor industry growth will “create opportunities for new applications that will spawn new industries and it will ensure the continued vitality of many of the information technology industries. Semiconductors have had this unprecedented impact on the economy because the industry has provided its customers with exponential increases in performance per unit expenditure of resources for several decades.”³

This is why intellectual property of semiconductor is a key element in the intellectual property industry, legislation and lobbying. This paper focuses on how WTO, China and the US protect semiconductor layout design, which is a crucial processing of making semiconductor chips, their comparisons and where should the intellectual protection goes from here.

What is a layout?

A layout in semiconductor could have many meanings for semiconductor design engineers. It can refer to an electronic diagram, a process to connect elements in a chip, a manual process to place components on a chip or a film developed for lithography process.

In this paper, the WTO definition of semiconductor design work will be used. The US Copyright Law called semiconductor layout design as “mask work” because of historical reason.

Mask

The manufacturing of a mask ready for semiconductor chip manufacturing is a much sophisticated process comparing to the manufacturing process two decades ago. This is because the size of semiconductor transistors has shrunken significantly. The toleration and resolution of a mask becomes very strict.

Figure 1 shows, from a very high level, how a design schematic turns into a semiconductor chip. Once a silicon layout is created from a design schematic, a mask could be manufactured. The mask is a piece of film that has the silicon layout printed on it. Then a laser or electronic beam will project the silicon layout on a silicon wafer.

Figure 1. Semiconductor Lithography⁴

Infringement

It can be noticed that shall the design schematic, silicon schematic or the mask is not protected technically or legally, an infringer could easily⁵ reproduce silicon chips. The access of design schematics and silicon schematics usually could be controlled within a semiconductor design company. The mask, however, could be transferred among the semiconductor design company, mask manufacture and the silicon chip manufacturer. This is where an infringer could steal or infringe the intellectual property on the mask.

Semiconductor Layout Protection

Many countries have enacted legislation to protect semiconductor layout work. This is due to three reasons:

1. to comply with WTO membership requirement
2. to protect their domestic semiconductor layout design companies
3. to promote protect their domestic semiconductor manufacturing companies

The third point is probably the main driver why China, Japan, and Korea agree to the semiconductor layout work protect originated from the US.

WTO

In May 1989, World Intellectual Property Organization (WIPO) adopted a treaty on integrated circuits at Washington, D.C., USA. Some refer this treaty to “Washington Treaty”¹. The Washington Treaty did not enter into force until WTO included an agreement² (“WTO Agreement”) on Trade Related Intellectual Property (TRIPs) that cross-referenced the Washington Treaty.

The WTO Agreement requires all WTO members to establish legislations to protect semiconductor layout-design.

Layout Design

WTO Agreement defined the design to be “three-dimensional disposition, however expressed, of the elements, at least one of which is an active element, and of some or all of the interconnections of an integrated circuit, or such a three-dimensional disposition prepared for an integrated circuited intended for manufacture.”

Registration

There is no specific layout design registration requirement under WTO Agreement. A member of WTO can choose to have (i) no registration required, (ii) voluntary registration required or (iii) mandatory registration required.

If there is no registration required, a semiconductor layout design usually enjoys automatic protection when it is created. In a voluntary registration system, a designer can choose to register the layout design or not. The advantage of registration for the inventor is to establish a priority date. A designer must register the layout design in order to enjoy the protection in the mandatory registration system.

There are pros and cons when a member of WTO adopts one of these three registration schemes. A more detailed analysis will be discussed later.

Duration

The protection required under WTO Agreement is at least ten years. WTO Agreement stated that the ten year period is calculated from the first date of registration.

Infringement

WTO Agreement considered the follow two situations as an infringement to the holder of the semiconductor layout-design if authorization of the holder is not seek:

1. reproducing, whether by incorporation in an integrated circuit or otherwise, a protected layout-design in its entirety or any part thereof, except the act of reproducing any part that does not comply with the requirement of originality; and
2. importing, selling or otherwise distributing for commercial purpose, a protected layout design or an integrated circuit in which a protected layout design is incorporated.

WTO Agreement identified three exceptions that certain reproduction and selling are allowed.

1. for the purpose of evaluation, analysis, research or teaching
2. for the preparation of a second and original layout design
3. if a layout design is independently developed

The main purpose of these exceptions is to allow continual innovations on semiconductor layout design. This theme is similar to those exceptions in copyright, patent and industrial designs.

China

China enacted its own semiconductor layout design work legislation, Regulation on Integrated Circuit Layout Design Protection (“China Regulation”), in March 2001. The act became effective on October 1, 2001. Basically, the law follows closely with the WTO Agreement.

Layout Design of Integrated Circuit

The definition of integrated circuit is “semiconductor integrated circuit, that is, a product, in its intermediate or final form, which uses semiconductor material as its chip, in and/or on which two or more elements, at least one of which is an active element, and some or all of the interconnections are integrally formed and which is intended to perform a certain electronic function.”⁶ The layout design work is defined as a “three-dimensional disposition of the two or more elements, at least one of which is an active element, and some or all of the interconnections of an integrated circuit, or such a three-dimensional disposition prepared for the manufacture of an integrated circuit.”⁷

Priority Date

The China Regulation does not state explicitly how to determine priority date. In Article 12, it indicated that the term of protection under the China Regulation starts “from the date of filing an application for registration or from the date on which it was first commercially exploited anywhere in the world, whichever expires earlier”.

Registration

Layout design works must be registered with the intellectual property administration department of the State Council of China in order to enjoy the China Regulation protection. According to Article 8, any unregistered layout-design shall not be protected under the China Regulation.

Duration

The China Regulation offers a ten year protection to layout design work from the first date the protection starts.

Exceptions

China Regulations allows “reverse engineering” exception to foster innovation, include “reproductions for the purpose of evaluation, analysis, research, or teaching -- it is legal to create and sell an original layout design based on the aforementioned evaluation and analysis of the protected layout designs.”⁸

Another exception is in cases of national emergency, Chinese government could license the layout design work compulsorily⁹ with reasonable compensation to the layout design work owner.

Enforcement

China Regulation, like many other legislations and contracts in PRC, try to promote consultation between the owner of the semiconductor layout design and infringer first before escalating the disputes to the judiciary system. “The intellectual property administration department of the State Council (“SIPO”) may, upon the request of the parties, mediate in the amount of compensation for the damage caused by the infringement of the exclusive right of layout-design. If the mediation fails, the parties may bring a law suit before the people's court in accordance with the Civil Procedure Law of the People's Republic of China.”¹⁰

SIPO has the authority to issue order to stop the infringement, confiscate or destroy the infringing products. It also has the power to impose penalty but no power to award compensation.¹¹

USA

In the US legislation semiconductor layout design is called "mask work". The concept of mask work to layout design is the same to the semiconductor industry: especially the US does not restrict a mask work to its technical definition, such as a film with printed circuits on it as discussed earlier.

Mask

The definition of semiconductor under the US Copyright Law is a product¹²:

1. having two or more layers of metallic, insulating, or semiconductor material, deposited or otherwise placed on, or etched away or otherwise removed from, a piece of semiconductor material in accordance with a predetermined pattern; and
2. intended to perform electronic circuitry functions;

A "mask work" is a series of fixed or encoded related images:

1. having or representing the predetermined, three-dimensional pattern of metallic, insulating, or semiconductor material present or removed from the layers of a semiconductor chip product; and
2. in which series the relation of the images to one another is that each image has the pattern of the surface of one form of the semiconductor chip product;

Priority Date

Under US Copyright Law, Chapter 9, Article 902(al), a layout design enjoy protection on the date the layout design is (i) registered (the date of application, deposit of identify materials and fee submitted to the US Copyright Office) or (ii) first commercially exploited anywhere in the world, whichever occurs first.

Article 902 (a2) gives the President of the US Copyright Office the power to extend the protection to layout works from nations, which also have comparable priority scheme in their semiconductor layout work legislations.

Registration

The US adopts a mandatory system to protect layout design. It mandates designers to submit their layout design for registration in order to enjoy protection. Designers has a two-year window from the first date when the layout design work is first commercially exploited anywhere in the work.

Duration

The US Copyright Law offers a ten year protection to layout design work from the first date the protection commenced as described in Registration.

Exceptions

Although the owner of the layout design work enjoys exclusive rights in his work, there are exceptions to those rights in order to promote fair use and innovations. Exceptions to those rights, listed in Article 906, are:

1. reproduction of layout design work solely for the purpose of teaching, analyzing, or evaluating the concepts or techniques embodied in the layout design work or the circuitry, logic flow, or organization of components used in the layout design work; or
2. distribution of a product that incorporates the results created from (1) in an original layout design work which is made to be distributed

Enforcements

The US applies civil action principle to enforce owners' rights of semiconductor layout design works. Under Article 910, the owner is entitled to institute a civil action for infringement against the alleged infringer. Shall the infringement is from a product imported from aboard, the owner could obtain a court order to restrict the import. Violations of the court order could result seizure of the imports.

However, the court may ask the owner to post a surety bond in case the infringement is proven to be unjustified to compensate the loss suffered by the alleged defendant.

Comparison

Legislation

The WTO agreement and legislations enacted by China and the US are similar. There is not much difference.

One of the most controversial legislations is that China has the right to utilize a layout design work in national emergency.

Enforcement

The US supports a transparent and standardized court procedure that makes their judicial system accessible. In China, the judicial track has proven to be 'problematic' for a number of reasons: first, lack of professional training of Chinese judges and legal officials; second, official corruption; third, 'outside pressures', such as threats to judges; fourth, Chinese judges have no security of tenure; fifth, there are few penalties for non-enforcement of court rulings (refusing to obey a court order is not a crime in China and there is also a lack of infrastructure to enforce the rulings).

In the case of layout designs in China, all disputes are handled out of the central office in Beijing. This may be advantageous to foreign layout design rights holders because provincial authorities may be more concerned about the local economic effects of shutting down a counterfeit operation, while the central government is more likely to focus on the long term economic benefits that arise from IP protection.

Registration

Under Article 15 of the Chinese law, “In case the layout design applied for registration contains sensitive information of national security or of great importance to the country and needs to be held confidential, the information will be handled according to relevant regulations of the State.” This comes down to the question of how China would interpret the phrase “of great importance to the country”. China does recognize that the protection of IP is in its self interest. Chinese entrepreneurs will only be successful if they are able to earn a return on their research efforts, profits that will be greatly reduced if their products are copied.

Problem with the current mask-work protection

In the US, the numbers of semiconductor layout design works registered were 352, 508, and 558 in 2003, 2002, and 2001 respectively¹³. The number was 758 in 1999. This trend shows that the current semiconductor layout design work legislation is not respected by the semiconductor designers and their companies. The legislation must be amended to reflect the current status of semiconductor design.

The semiconductor industry dynamics has changed dramatically in the last two decades. There are three major driving forces shaping the semiconductor industry and making current legislations outdated and inadequate – (i) mark manufacturing, (ii) fabless design, and (iii) design methodology.

Mask Manufacturing

A piece of mask allows semiconductor circuits to be projected on semiconductor wafer. Projection through the mask using laser or electron beam allows mass production of semiconductor chips possible.

Currently, the state-of-art semiconductor fabrication is going to 90 nm width. 90nm is a major technical challenge because the width of a circuit on the chip is very close to the visible light wavelength. This makes mask fabrication process more expensive. Lasers and electron beams are used to reduce diffraction to ensure the projection on the semiconductor wafer is within the tolerance. This involves huge amount of capital investment in purchasing expensive equipment. This raises the entry barrier.

The number of qualified mask manufacturers has been decreasing. Those who are still staying in the industry are those having long term perspectives and more unwilling to help others in manufacturing masks for infringed semiconductor chips.

Fabless Design

In 1980s, the semiconductor fabrication industry was not as capital intensive as nowadays. The term “fabless design” was not even invented. Almost all semiconductor design companies took the vertical integration business model that they manufactured what they designed. There was almost no semiconductor fabrication only company. Companies like Intel, Texas Instruments, Motorola, and IBM all have their semiconductor fabrication facilities.

Figure 2. Texas Instrument Semiconductor Fabrication Sourcing¹⁴

The semiconductor industry business model has evolved dramatically. It changes from all-in-one vertical model to a multi-horizontal model. A semiconductor design company, especially those in low-volume and new comers, nowadays outsource mask production, fabrication, testing, packaging and backend designs to third parties, which are specialized in their own fields. Some may purchase intellectual property cores from other designers to shorten the development time and risk.

Semiconductor fabrication becomes so specialized that even the major traditional semiconductor companies are outsource a large portion of their manufacturing to semiconductor manufacturing companies, such as Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) and Semiconductor Manufacturing International Corporation (SMIC). Texas Instruments and Motorola have announced to outsource some of their semiconductor factorization process to Chinese semiconductor fabrication companies¹⁵.

The semiconductor manufacturing companies has no incentives to assist semiconductor layout design infringers. Infringers are usually pundits who are small and have no capital. A semiconductor manufacturing company would have to risk its reputation when assisting an infringer. Once its reputation is ruined, it would be almost impossible to receive any manufacturing order any more.

Semiconductor manufacturing companies are offering practical protections that semiconductor layout design legislations have been trying to offer.

Design Methodology

The major force that makes current semiconductor layout design protection obsolete is probably the semiconductor design methodology. In the past, when the number of transistors inside a semiconductor chip was small, it was possible to layout the semiconductor chips manually. As the semiconductor industry has evolved to millions of transistors being manufactured in a semiconductor chip, semiconductor designers have been increasingly relying on abstract models to simplify designs and make the designs more manageable.

These abstract models, such as algorithms, synthesizing codes, schematics, netlist, and test vectors, can be created in many different stages of semiconductor design. These abstracts models are created electronically and be transferring electronically with a stroke on a keyboard.

When a pundit steals or copies an original abstract model from an owner, the pundit could eventually develop a semiconductor chip that is very different from the original abstract model. Without assistance from whistle bowler, it would be very difficult to collect evidence against the pundit.

There is still solution on this. Since state-of-art semiconductor chip designs must obey rigorous design rules and conditions suggested by semiconductor manufacturers, a semiconductor chip developed by a pundit must still display certain technical characteristics of the original design. Semiconductor manufacturers could act as a referee or a policeman to ensure their customers are playing fairly. The assumption is that a semiconductor manufacturer values its reputation as its the most important asset.

Conclusion

The importance of protecting intellectual property of semiconductor layout design work is obvious. The current WTO, the US and China legislations try to protect intellectual property by focusing on the layout design work. Unfortunately, this approach has not much value nowadays. Semiconductor designers, manufacturers and legislators should work together to update legislations to reflect the new trends in semiconductor industry.

[1] S. McIntosh – “If current annual semiconductor growth trends continue, it has been predicted that by the end of the first decade of the 21st century, electronics will be the biggest industry after agriculture.”, Conquering Semiconductor’s Economic Challenges by Increasing Capital Efficiency, Proc. 1997 IEEE Int. Symp. On Semiconductor Manufacturing, pp. 1-3, 1997.

[2] Mr. Kastenmeier in the The House Report on the Semiconductor Chip Protection Act of 1984 presented on May 15, 1984 illustrated the official view on the semiconductor industry – “Integrated circuits, better known as semiconductor chips, have revolutionized our entire way of life. Semiconductor chips are used to operate microwave ovens, cash registers, personal and business computers, TV sets, refrigerators, hi-fi equipment, automobile engine controls, automatic machine tools, robots, printing presses, cardiac monitors and pacemakers, X-ray imaging and scanning equipment, blood testing equipment, word processors and printers, telephones, and many other medical, consumer, business, and industrial products. New and better uses for chips are emerging regularly and society is rewarded with a corresponding enhancement of life. More than perhaps any other invention, the semiconductor chip has brought us into the information age.”

[3] Erich Bloch, Dr. Ralph Cavin, The Economy, Federal Research and The Semiconductor Industry, Semiconductor Industry Association, March 8, 2000

[4] Gerhard Schlueter, Klaus-Dieter Roeth, Carola Blaesing-Bangert, Michael Ferber, Next generation mask metrology tool,

[5] “Easily” is relative. Mask manufacturing for 0.6μm and for 90 nm semiconductor layout designs involves fundamentally different technologies. The more advanced a mask manufacturing process, the more difficult to infringe. More detailed analysis will be discussed in later sections.

[6] Regulations on the Protection of Layout-Designs of Integrated Circuits, Chapter I, Article 2 (1)

[7] Regulations on the Protection of Layout-Designs of Integrated Circuits, Chapter I, Article 2 (2)

[8] Daryl G. Hatano, China’ Semiconductor Chip Protection Law – A Work in Progress, December 4, 2003

[9] Regulations on the Protection of Layout-Designs of Integrated Circuits, Chapter I, Article 25

[10] Regulations on the Protection of Layout-Designs of Integrated Circuits, Chapter I, Article 31

[11] Grace C. Chen, Protecting Your Semiconductor Technology: An IPR Road Map, www.usembassy-china.org.cn/ipr

[12] Protection o/Semiconductor Chip Products, US Copyright Office

[13] Copyright Law Administration, Copyright Registration, US Copyright Office, 2001-2003

[14] K. Ritchie, Manufacturing and Process Technology, http://www.ti.com/corp/docs/investor/analyst/ritchie/ritchie.pdf

[15] http://www.motorola.com/mediacenter/news/detail/0,,3432_2843_23,00.html

A peek into China patent system and practice by reading Centron Telecom IPO prospectus

A peek into China patent system and practice by reading Centron Telecom IPO prospectus

There are many initial public offerings (IPO) going on in Hong Kong. As an IP manager and an investor, I naturally pay special attention to IPO of technology companies. One of the companies is Centron Telecom (星辰通信). Although the intellectual property section in the prospectus of Centron Telecom is not large, there are many subtle observations that can be useful to understand how Chinese companies manage their intellectual properties.

The five patent applications

In the prospectus, Centron claimed that they have five pending patents. These five pending patents were listed in page VI-11. I copied the section here.

Centron Patent Applications (source: page VI-11, Centron Telecom Prospectus)

All five patent titles seem related to wireless communications. Four of them also have the keyword CDMA in it. However, let's get deeper.

The fifth digit of a China patent application number indicates the type of the patent application. 1 is for invention. 2 is for utility model. 3 is for design. Among these five patent applications, only the first one is an invention application. The last one is a design application. The other three are utility model.

Invention patent could last for 20 years in China while utility model and design could only last for 10 years. Readers from common law system may find the utility model strange. It is, however, based on continental law system, like Germany and Japan. Utility model patent application must be related to physical objects.

As a result, we can safely conclude that the second to the fifth patent applications are related to physical designs of wireless devices. Most likely, they are about repeater structure and repeater interface of a few particular designs. This makes me a bit uneasy about how innovative Centron Telecom is.

File patent applications just for IPO?

The most interesting discovery is the filing date. All five patent applications were filed on February 8, 2007, just about four months prior to the IPO. Is it a conincidence that all inventions happen at the same time? Did the IPO underwriter advice them to do so?

This act has many implications. I do not believe there is no innovation in Centron Telecom. Neither do I believe that the management pays no attention to intellectual property protection. I think that it is because of business priority. Most companies in China used to compete in price and most of them are manufacturers. They work very hard to lower the per unit cost. Their R&D department, if exist, does not have must power in company politics.

By the time the company decides to go for IPO, the company is told that investors want to know if the company is a "technology" company with bring future or just another low-cost manufacturer. In order to satisfy investors, the company rushes to file a few patent application that the R&D department has been advocating for a long time.

Of course, what I said in the last two paragraphs are pure speculative. What I worry the most is if this kind of practice will still be common to most technology companies in China.

Competitors Comparison

Wireless coverage solutions market share (source: page 63, Centron Telecom Prospectus)

According to Centron Telecom, Combra (HKG:2342) and Grentech (NASDAQ:GRRF) are the two leading competitors. Their Chinese names are 京信通信 and 国人通信 respectively. As a diligent investor, I decided to conduct a quick due-diligence.

I entered the names of both companies in the search engine of State Intellectual Property Office of PRC (SIPO). Here were the search results:

• Combra - 44 invention patent application, 42 utility model patents applications, and 24 design patent applications
• Grentech - four invention patent application, seven utility model patents applications, and 13 design patent applications

The ratio of invention patent application for Combra, Grentech and Centron is 44:4:1. For utility patent application, the ratio is 42:7:3. It is a huge difference.

Two tiers systems

This quick due-diligence brought me a huge relief. This shows that technology companies in China are aggressively pushing the technology envelop. Each company has different road maps.

Some focuses on innovation. Some focuses on cost. Some focuses on brand image. The leaders and the runner-ups, like many industries in the US and Europe, may not want to choose the same path to success.

In terms of innovation, in the wireless communications coverage equipment industry, we can see that there are two tiers. This trend, I believe, will continue. It is difficult to say which tier is better for an investor. However, as an IP manager, I can sleep comfortably. This is because Chinese companies are going to spend more on intellectual property application, registration and protection. This translates to a better career prospect for me.

Disclosure: (1) I subscribed Centron Telecom IPO. (2) I have no financial interest in Combra or Grentech.

談談稻香的知識產權 (1)

正在進行招股的稻香， 在他的招股書風險聲明中說他們在中國的“稻香”商標 (trademark) 品牌申請被拒絕。因為，另一所公司北京稻香村食品集團經擁有“稻香村”這商標。 由于““稻香”跟“稻香村”很相似，所以稻香不能擁有“稻香”這商標。盡管“稻香村”商標已彼国家工商行政管理总局商标局取消，但稻香難再申請“稻香”商標。 而在 書英文版第109頁的知識產權一段中，除了商標外，沒有再談其他的知識產權 (intellectual properties)。

我不單是管理知識產權的，也是稻香的擁躉。 但當我讀完稻香的 書，不禁有點兒失望。 為什麼稻香這麼遲 申請商標？為什麼稻香沒有其他知識產權，如口號 (slogan)，專利 (patent)， 外觀設計 (design patent) 等？ 這并不是小題打造。要是稻香何憑 這IPO 在中國大展拳腳，擴展食物加工廠，物流中心，稻香也要把自己的知識產權意識提高，使自己更具競爭力 。

讓我們把稻香和其他世界知名的集團的比較。 我選擇了必勝客 (Pizza Hut)，Morton，Outback。 因為他們都有上市，而且在香港也有分店。

要專利來作什麼？

在 Google Patents Search，只有必勝客有 25 個專利。 Morton 和 Outback 在他們的年報也沒有提及專利。似乎專利對飯店沒有大用途？讓我們嘗試研究專利在飯店行業的角色。

菜式是差不多不可能申請專利。就算一道菜的用料是創新的，但要說服專利局用料的配搭不是“顯而易見”是絕不容易的。

烹調方法是可以申請專利的。必勝客就有四個薄餅制作方法的專利，4367243， 5256432, 5720998，6327968 ， 6843167 。而 4367243 是必勝客最早的專利之一。試想想如果必勝客沒有專利的保衛 ，而被競爭對手控告侵權，后果可以很嚴重。必勝客可能要賠償專利人，也可能在一段時間內不能再制作薄餅。相反若稻香被對手就一種烹調方法控告，稻香大可不再用那一種烹調方法。所犧牲的，最多是幾道菜式。食物菜式愈是被標準化，擁有專利的重要性愈迫切。

美國專利 5256432 - "Method of making pizza with a pizza toppings disk"

調味料也是可以申請專利的。但飯店通常不會為調味料申請專利，因為調味料不是他們的專長。調味料供應商就不同。他們根據不同的材料份量，處理方法，制作過程申請了很多調味料的專利。 籍著這些專利，他們一方面為他們的研究取得保護，另一方面賺取版稅。

很多公司專注菜單電腦系統的設計和推廣。他們擁有專利來保護他們的知識產權。但飯店很少申請菜單電腦系統的專利，因為這不是飯店的專長。

必勝客還為他們制作薄餅的設備和保暖袋申請了15個專利。

食物要外觀設計嗎？

盡管專利法沒有禁止為食物申請外觀設計,但外觀設計要求被保護的對象是工業產品，并可以被復制出來。 飯店的設計，餐具，桌子等是可以申請外觀設計的。在美國必勝客 有11個外觀設計的專利，Morton ， Outback一個也沒有。

必勝客為他們飯店的外型申請了一個外觀設計專利 （D202878）和不少與薄餅餐具有關的外觀設計專利 （D287795， D536578，D504056） 。

美國外觀設計專利 D504056 - "Ladle"

總結

和必勝客相比，Morton ， Outback 在專利方面的成績差很多。有興趣的可以把必勝客（屬于 YUM! 集團），Morton ， Outback股票成績比一比。這可能是跟管理層有關，也可能是商業運作根本就是不一樣。我認為專利成績是取決於管理層對專利的認識和知識產權認同。

如稻香想他朝可以和必勝客的成績相比，今天就要用大膽地不單在菜式和服務上創新，也要在其他的配套，如烹調方法，設備，飯店的設計上再下一番功夫，并申請專利來保護他們的知識產權。

遲一點，我們會再談談稻香的商標。

Pepsi's "Blue Storm" marketing campaign created a hurricane for itself

PepsiCo (NYSE: PEP) is found liable for infringing a trademark of a small Chinese beverage company.

The "Blue Storm" Trademark

A small Chinese beverage firm Wild Blue (author's own translation) registered the "Blue Storm" trademark in China in May 2002, see Fig 1.

Fig 1. "Blue Storm" trademark registration by Wild Blue

However, PepsiCo used the same words "Blue Storm" as a marketing campaign slogan starting in the summer of 2005. PepsiCo put "Blue Storm" on its soda can, poster and TV commercials. One of the advertisements, see Fig 2, of this marketing campaign featured four pop stars from China, Hong Kong and Taiwan dressing in blue and has the words "Blue Storm" at the bottom. PepsiCo also put the slogan on its bottle.

Fig 2. PepsiCo "Blue Storm" poster (source: sina.com)

This could be a free advertisement for the small Chinese beverage firm. Unfortunately, PepsiCo "Blue Storm" marketing campaign was too successful. Distributors and retailers in were well aware of the PepsiCo marketing campaign and understand the importance of trademark IP rights. They assumed "Blue Storm" was a trademark owned by PepsiCo. They refused to carry beverage from Wild Blue as they were afraid of trademark infringement. In one occasion, a retailer called the police. The police seized products from Wild Blue until Wild Blue showed the "Blue Storm" trademark registration certificate.

Court Decisions

With no choice, Wild Blue decided to defend its intellectual property rights and brought PepsiCo to the city court of HangZhou. In the first court decision announced in December 2006, PepsiCo successfully argued that the use of "Blue Storm" was not an infringement. PepsiCo claimed that they did not use "Blue Storm" as a trademark, but merely as a marketing theme. They also claimed that consumers were not confused.

Wild Blue appealed the decision. On 24 May 2007, ZheJiang Senior Court, a provincial senior court, accepted the appeal from Wild Blue The court ruled that the use of "Blue Storm" words on a can was equivalent to trademark use. PepsiCo was ordered to (1) pay damage to Wild Blue RMB 3 million, (2) stop using "Blue Storm" in all activities related to manufacturing, sales, advertising and marketing, and (3) publish statements in media to clear the confusion created. The ruling is in Chinese and can be found here.

It is not clear yet if PepsiCo will appeal the decision from the Zhejing Senior Court.

Implication

How could this happen? Either (1) PepsiCo staff forgot to check the trademark registration, (2) its legal advisors did not believe that it was a trademark infringement, or (3) its business manager believed that Wild Blue would take legal action. Nevertheless, it reflects that corporations, both domestic and foreign, have to educate their staff continuously about the relationship of IP and their work. I believe Chinese companies are beyond the stage of being IP ignorant. They are at the stage of "IP confused". They may not know when to involve their legal counsel to make business decision. Legal counsels should help their companies or clients by proactively engaging in their daily business activities.

Unfair treatment? The author of this article used the keywords "Pepsi infringement" in Chinese and English to search related news about this case. There are 1,020 hits reported by Baidu (the leading search website in China) and 5 hits reported by Google. 4 of the 5 hits from Google are unrelated to this case. Why did the foreign media not report this case? Could this news not be interesting enough? May be foreign journalists do not believe PepsiCo could make such mistake? There is a growing feeling in China that the western countries are using IP to oppress development in China.

IP Enforcement Distributor and retailers in China are very aware of IP related issues now. As this case demonstrate, they do not want to carry goods that may infringe others' IP rights. They may even report cases to local authority. Also, small companies are ready to fight as David fought against Goliath. They are not shy to take legal action any more.

Afterthought

The table has turned. Chinese companies and Chinese government have learned many hard lessons on intellectual property. It will not be surprised that Chinese companies will launch series of patent lawsuits against foreign companies in China soil.