[Supervised by a patent attorney] Hong Kong Intellectual Property's "Latest Strategy for 2025": Pitfalls of patents and trademarks that are different from those in China, and the introduced "5% tax...

Introduction: That "Chinese patent" may be a piece of paper in Hong Kong

Hong Kong, the gateway to the Asian market.

Many Japanese companies are expanding their business there as a financial and logistics hub, or as a base for expansion into mainland China (Greater Bay Area). However, there are no end to cases where fatal misunderstandings are made in the handling of intellectual property rights.

The most common misconception is that "If you obtain a patent or trademark in China, you will be protected in Hong Kong."

I would like to start with the conclusion.

Patent rights, trademark rights, and design rights acquired in mainland China (People's Republic of China) have no effect in the Hong Kong Special Administrative Region.

Under the "one country, two systems" principle, Hong Kong maintains a legal system (common law) and intellectual property rights system that is completely independent from mainland China. Therefore, in order to protect your products and brands in Hong Kong, you need to obtain rights through a route unique to Hong Kong.

Furthermore, in 2024, "Patent Box Tax System (patent preferential tax system)" will be introduced in Hong Kong, and IP strategy has significantly changed from a mere "protection" to a "tool for generating profits."

In this article, we will thoroughly explain from a patent attorney's perspective an overview of the patent, trademark, and design systems in Hong Kong, the differences from mainland China, and "filing strategies that take advantage of tax benefits" that Japanese companies should consider immediately.

1. [Starting in 2024] What is the highlight of Hong Kong's intellectual property "Patent Box Tax System"?

Before we start explaining the system, we would like to share with you the latest information that will have the most impact on managers and financial personnel.

In July 2024, "Patent Box Tax Incentive" was implemented in Hong Kong.

This is a system that significantly reduces the corporate tax rate from the previous 16.5% to 5% on income generated from eligible intellectual property (patents, etc.) (license fees, intellectual property equivalent included in product sales, etc.).

Target intellectual property

• Patents (standard patents, short-term patents)

• Plant variety rights

• Copyright protected software

This is the turning point in your strategy! “2026 Problem”

There are important conditions to receive this tax benefit.

During the transitional period of two years from enforcement (until July 4, 2026), "re-registration" using overseas patent registration (such as China or the UK) will be eligible for tax breaks, but after July 5, 2026, "local registration in Hong Kong (OGP)" will be required.

In other words, the passive method of ``registering Hong Kong in addition to China'' may not allow you to receive this tax benefit in the future. ``If you want to receive tax benefits in Hong Kong, you should undergo an independent examination in Hong Kong (OGP route).'' A strategic shift is now needed.

2. Hong Kong's patent system (Patents): fully understand the complex "three routes"

Hong Kong's patent system is unique in the world. Depending on your company's objectives (focusing on cost, tax benefits, or speed), you need to choose between the following three routes.

① Standard Patent: Re-registration route (R route)

This is the method most commonly used by Japanese companies. This is a system in which patents are registered using the examination results of the following three designated patent offices, without conducting their own examination in Hong Kong.

[Designated Patent Office]

1. China National Intellectual Property Administration (CNIPA)

2. UKIPO

3. European Patent Office (EPO) *Specifying the UK

[Procedures and strict deadlines]

The biggest link in this route is "deadline management". You must complete the following two steps without delay, even by one day.

• First step (request for records): Request to Hong Kong within six months from the publication of the application in the designated patent office (China, etc.).

• Second stage (registration/grant request): After the patent is registered (published) at the designated patent officeWithin 6 months, request to Hong Kong.

This "6 months" is very severe. Unfortunately, there are many cases where people feel relieved that they have obtained a patent in China, only to find out that the deadline for filing procedures in Hong Kong has passed. If you choose the re-registration route, it is essential to manage your schedule from the time you file your application in China to the transition to Hong Kong.

② Standard Patent: Original examination route (OGP route)

This ``Original Grant Patent (OGP)'' was newly established in 2019 and is currently attracting attention.

The route is to directly apply to the Hong Kong Intellectual Property Department (HKIPD) and undergo substantive examination without waiting for the results in China or the UK.

• Advantages: It is possible to acquire rights quickly without being affected by the examination status of other countries. And as mentioned above, this isthe most reliable route for application of the future patent box tax system.

• Disadvantages: Due to the substantive examination fee, the cost tends to be higher than the re-registration route.

However, for companies with large profits in the Hong Kong market, considering the tax benefits (16.5% → 5%), it is well worth choosing the OGP route even if it costs more. As of the end of 2024, there have been over 1,000 applications in total, and usage is rapidly increasing.

③ Short-term Patent

This system is for products with short life cycles.

• Protection period: Maximum 8 years (4 years + 4 years renewal).

• Examination: Only formal examination (registration without examination).

• Characteristics: At the time of application, it is necessary to submit a "Search Report" prepared by an International Searching Authority, etc. It is similar to the Japanese utility model, except that method inventions and chemical substances are also protected.

3. Hong Kong's trademark system (Trademarks): "Blind spot" where Madpro cannot be used

Trademarks are the cornerstone of brand protection, but Hong Kong has the aspect of being an "isolated island" in the international trademark system.

Not affiliated with Madrid Protocol (Madpro)

This is the biggest point to note.

When Japanese companies acquire overseas trademarks, they generally use the Madrid Protocol application through WIPO (World Intellectual Property Organization). China is a member of Madpro, but Hong Kong is not.

In other words, even if you designate "China" in your MadPro application, the effect will not extend to Hong Kong. The only way to obtain trademark rights in Hong Kong is to file an individual application directly with the Hong Kong Intellectual Property Office (Paris route).

Many companies have become relieved that China has been included in MadPro's designated countries, and have overlooked acquiring rights in Hong Kong. Counterfeit goods dealers target these "white space areas of rights."

"Series trademark" to reduce costs

Hong Kong has a unique system that does not exist in Japan or China: "Series Trade Marks".

This is a system that allows multiple trademarks that are substantially the same but differ only in minor aspects (color, font, punctuation, etc.) to be filed together in one application.

For example, if you apply for a set of ``color version'' and ``monochrome version'' of the same logo, or ``horizontal writing'' and ``vertical writing'', you only need to pay the application fee for one application (plus a small additional fee), so you can protect variations while keeping costs down.

Language strategies and segmentation

• Language: Hong Kong is a world of "Traditional Chinese" and "English". Rather than using mainland China (simplified characters) trademarks as is, you should consider applying for traditional Chinese versions or characters that match the local Cantonese pronunciation.

• Retail Services (Class 35): Hong Kong is a retail city. It is extremely important to obtain Class 35 certification, which protects not only the product itself, but also the name of the store or online store.

4. Hong Kong's Registered Designs: Global novelty is key

I will also touch on "Registered Design" which protects product designs.

Characteristics of the examination system

Hong Kong designs are registered through formality examination only. Substantive examinations such as novelty (new design) will not be conducted. Therefore, registration can be completed quickly within 2 to 3 months after application.

Taking advantage of this sense of speed, it is possible to use the system aggressively in conjunction with large-scale exhibitions such as the "Electronics Fair" and "Gift Fair" held in Hong Kong. **"Apply just before the exhibition, bring your registration certificate, and warn counterfeiters at the venue."**

Pitfalls: Risk of invalidation due to worldwide public knowledge

Just because there is no review does not mean that any design is a valid right. Under Hong Kong's Design Law, "worldwide public knowledge" is grounds for loss of novelty.

Even if a registration certificate has been issued in Hong Kong for designs that have already been sold in Japan or published on a website, there is a high risk that the design will be invalidated as ``no novelty'' when you try to exercise your rights (to exclude counterfeit products).

(*There is no problem if the application claiming priority is filed within 6 months of filing in Japan)

Currently, the Hong Kong government is reviewing the design system (considering the introduction of substantive examination, etc.), and discussions on legal reform are expected to become more active after 2025. You always need to catch up on the latest information.

5. Intellectual property strategy: Why acquire rights in "Hong Kong"?

"Hong Kong is a small market so it will be postponed"

Some managers think so. However, it is essential to obtain rights in Hong Kong for the following three reasons.

Reason 1: Controlling "checkpoints" in logistics (border measures)

Hong Kong is one of the world's largest logistics hubs. Counterfeit products manufactured in mainland China (such as Shenzhen and Dongguan) are often exported to Europe, America, and the Middle East via Hong Kong.

If you have a patent or trademark in Hong Kong, you can apply to Hong Kong Customs (Customs) for an injunction against infringing goods. Even if it is difficult to detect the virus within mainland China, if it can be stopped in Hong Kong, which is the logistics bottleneck, it will prevent its spread around the world.

Reason 2: Tax savings (maximize profits) with patent box

As mentioned at the beginning, the tax rate on intellectual property-related profits generated in Hong Kong will be 5%. For Japanese companies with regional headquarters or sales offices in Hong Kong, building an appropriate patent portfolio is directly linked to "improving profit margins". The IP department will change from a "cost center" to a "profit center."

Reason 3: Reliable legal system (common law)

Hong Kong's judicial system is based on British law (common law) and is more transparent and predictable than mainland China. In the unlikely event of a dispute, you can expect a fair judgment, which is important for ensuring the legal stability of your business.

6. Advantages of hiring a patent attorney: increasingly complex procedures and strategies

Hong Kong's intellectual property system is in a period of transition, with the introduction of OGP in 2019, the introduction of Patent Box in 2024, and the new system after 2025 (revamping electronic filing, stricter residency requirements for agents, etc.).

It is no longer a simple matter that can be handled "after China".

Advantages of working with us

1. Combined strategy of “tax x intellectual property”:

   In addition to simply obtaining a patent, we can also provide advice from a management perspective, such as ``Which route should I apply to receive the benefits of the Patent Box?''

2. Strict deadline management (docking):

   A dedicated system manages the "6-month deadline" and priority deadline for re-registration routes to prevent accidental expiration. Especially when linking with Chinese applications, mistakes cannot be tolerated.

3. Strong network with local agents:

   The 2025 rule revision will strictly require agents in Hong Kong to "reside and have a physical base in Hong Kong." Our office works with reliable local authorized agents, so there is no need to worry about delays in the process.

4. Original proposals such as series trademarks:

   We will make detailed proposals such as utilizing Hong Kong's unique system to reduce costs.

"I have applied to China, but Hong Kong was unmarked"

"I'm worried about counterfeit products coming through Hong Kong"

"I want to know more about the patent box tax system"

If you are a company with such concerns, please feel free to contact us. We will propose the optimal intellectual property plan to protect your business and maximize profits.