Intellectual property compliance challenges and recommendations facing Chinese chip companies in the United States

Author | Intellectual Property Center, Lawyer Lu Jiayi

First, new challenges in the context of anti-globalization

After more than 30 years of vigorous globalization, companies from all over the world are accustomed to working together to jointly develop cutting-edge technologies. This cooperation has not only accelerated the iterative upgrading of technologies, but also made the global technology ecosystem more diverse. However, in recent years, the anti-globalization atmosphere has prevailed in various countries, especially the United States, which has introduced a number of laws restricting China's access to chip-related technologies, which undoubtedly poses a huge challenge to the original global R & D cooperation system.

In this environment, Chinese companies need to respond cautiously to avoid violating relevant laws and regulations that affect the exercise of their legitimate rights and interests. For Chinese chip companies, how to effectively carry out technology research and development and exchange on the premise of protecting their intellectual property rights and abiding by laws and regulations has become an important issue.

Second, the US legal system on chip protection

The legal system for chip protection in the United States is complex and complex, including the Chip Act, trade secret protection laws, and import and export control laws.

The main goal of the Chip Act is to strengthen the competitiveness of the U.S. semiconductor industry. For Chinese chip companies, the bill has a significant impact on their business development. For example, the bill specifically imposes restrictions on Chinese companies' access to semiconductor technology and production equipment, and prohibits recipients of chip bill funds from expanding semiconductor manufacturing in China or any country that poses a threat to U.S. national security.

Chip technology is a core part of the information technology field, and the protection of trade secrets involved is crucial to the competitiveness of semiconductor companies. In the United States, the definition and protection of trade secrets are mainly provided by the "Defend Trade Secrets Act" (DTSA) and the "Uniform Trade Secrets Act" (UTSA) of each state.

The DTSA defines a trade secret as: "All forms of financial, business, scientific, technical, economic, or engineering information, including patterns, schemes, compilers, programs, devices, methods, techniques, processes, and codes." For chip technology, this definition is undoubtedly very comprehensive.

The relevant laws on the import and export control of chip technology in the United States mainly include the Export Administration Act (EAA) and the Export Administration Regulations (EAR).

These laws and regulations are enforced and maintained by the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce. The EAA and EAR primarily control two types of exports: direct exports, in which items are shipped directly from the United States to other countries, and re-exports, in which items are shipped from one country to another, but the goods or technologies involved originate in the United States.

In the case of chip technology, if the technology is developed in the United States or involves key American technologies, it may be subject to the EAR even if it is produced and exported in other countries. The EAR divides controlled items and technologies into two broad categories: one is the Commerce Control List (CCL) and the other is EAR99.

The CCL covers a range of specific items, including some with military, nuclear, or other strategic uses. EAR99 is a broad term for all items and technologies outside the CCL, which are subject to export controls in certain special circumstances, such as when the destination is a sanctioned country in the United States or a **** related entity.

For the semiconductor industry, especially high-end chip technology, many items and technologies are listed in the CCL, such as integrated circuits, microprocessors, semiconductor manufacturing equipment, etc. The export of these items and technologies requires permission from the US government. Notably, the EAR also stipulates an "end-user and end-use" export control principle.

Even if certain items and technologies are not covered by the CCL, those exports will require a license if their end-users are involved in acts that the United States has determined are malicious, or if the end use could threaten U.S. national security or diplomatic interests.

Recommendations on compliance by Chinese companies

Chinese companies should pay close attention to the new trends in US law, layout and pay attention to their intellectual property compliance obligations in advance. For example, at the stage of contract signing, they should clearly stipulate the rights and obligations of cooperation, as well as the liability for breach of contract, etc., to avoid compliance risks due to vague contract terms.

At the same time, Chinese enterprises should also establish and improve their internal intellectual property management system, strengthen their awareness of intellectual property protection, and classify and manage the technologies involved to ensure their compliance. In addition, Chinese enterprises should also strengthen communication with US lawyers and patent attorneys to obtain the latest legal information and advice in order to deal with possible legal problems.

Take the patent compliance risks that Chinese companies may face in R & D in the United States as an example. Due to US export control laws, if there are US personnel involved in R & D work, it is recommended that the R & D results of US personnel be patented in the United States alone. It is not recommended to apply for patents for the results of joint research and development between China and the United States. Otherwise, it may face the risk of US patent rejection or revocation.

Because if there are both American and Chinese personnel among the inventors, the email exchange between Chinese and American inventors may be challenged to violate technology import and export laws, resulting in violation of IDS disclosure obligations and invalidation of the patent.

In general, Chinese chip companies face intellectual property compliance challenges in the United States no less than their technical challenges. Therefore, in addition to continuously improving their own technical strength, Chinese chip companies also need to deeply understand and master US intellectual property laws in order to gain an advantage in the global market competition.

Lawyer Profile

Lawyer Lu Jiayi

Attorney of Zhiheng (Qianhai) Law Firm

Member, Trade Secret Law Committee, Intellectual Property Center

Business area

Intellectual property infringement litigation, patent invalidation disputes, antitrust (standard essential patent) disputes, trade secret infringement disputes, software copyright infringement disputes

Center Profile

Intellectual Property Center

Objective of Zhiheng Intellectual Property Center: To build a first-class intellectual property legal service center.

The Intellectual Property Center has a complete set of specialized intellectual property departments such as patents, trademarks, copyrights, trade secrets, rights protection, international, layout analysis, and operation transactions, forming a complete industrial chain from basic applications, planning and layout, risk prevention and control, anti-counterfeiting rights protection, operation transactions, and international protection.

The Intellectual Property Center is led by a team of first-class intellectual property experts, with a complete service process and an integrated service system. It provides professional legal advice and solutions in various fields of global intellectual property, striving to ensure that every case and project can receive the best solutions developed by experts, so that customers can experience the most rigorous and professional services.

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