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IPR: Enforcement of Intellectual Property Rights in China
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1. IPR and enforcement in China


The intellectual property rights (IPR) available in China are now very similar to those available in Europe. The registered rights available are invention patents, utility patents, design patents and trademarks. Copyright can also be recorded. There are unregistered rights derived from the law on trade secrets and unfair competition, but these are difficult to rely on (the consensus is that only 30% of trade secret actions are successful) and it is therefore advised that rights owners register their IP with the relevant authorities.

 

2. Enforcement proceedings:


There are four main enforcement options in China: administrative actions, civil litigation, criminal sanctions and customs seizures.


1) Administrative actions:


The key Chinese administrative bodies are the Intellectual Property Offices (IPOs), the Administrations for Industry and Commerce (AICs), the Copyright Office, and the Quality and Technical Supervision Bureaus (QTSBs) (local divisions of the Administration for Quality Supervision Inspection and Quarantine). These are empowered to take certain actions against companies that are infringing intellectual property rights. These bodies between them have the power to:

• Raid defendants’ premises and to seize and destroy infringing items;


• Impose injunctions to force the infringing party to desist; and


• Levy fines on the infringing party for TM infringement, copyright infringement and counterfeiting patent certificates, (but not patent infringement).


Administrative bodies offer a relatively fast and cost-effective way to deal with trademark and copyright infringements, and to gather evidence for patent infringements. They are generally comfortable when dealing with trademark cases because it is usually an easy matter for the AIC officials to compare the trademark with the counterfeit or allegedly infringing product and decide whether there is infringement, as well as simple copyright cases. However, administrative bodies are less confident when it comes to analysing the scope of protection of a patent and the infringement thereof. The main use of an administrative action in a patent infringement case or complicated copyright case is to obtain evidence.

In the event that a right holder cannot collect sufficient evidence to pursue administrative or civil action against an infringer, it may still be possible to apply to QTSB to impound the infringing goods on the grounds of breaching quality or safety standards.

A right holder wishing to file an administrative action will need to instruct a lawyer to file evidence about the existence and ownership of the right as well as evidence of the infringement. Your lawyer will provide further details if you decide to pursue this type of action.

A simple trademark, copyright or QTSB administrative action lodged with a local administrative body would likely last between three and six months and cost CNY 20,000-50,000.

An application to an IPO to obtain evidence in relation to the infringement of a design patent would cost in the region of CNY 30,000-80,000, with a civil action to follow.

2) Civil litigation


Civil litigation is equivalent to a court case in Europe. The usual remedies sought are injunctions, damages, delivery up and destruction (of tools/products). A civil action will generally take six to 12 months from the issuance of proceedings until handing down of the judgment.


Infringing acts under Chinese Patent law include sale, offer for sale, use, manufacture and export. It is usually easiest to obtain evidence of sale or offer for sale, but even this is not entirely straightforward because Chinese courts require this type of evidence of infringement to be given by a notary public figure. In practice, this means that the purchase of, or offer for sale of, the allegedly infringing item must be witnessed by a notary public figure who then certifies that the particular unit was purchased from, or offered for sale by, the particular entity. This type of sample purchase, or witness of an offer for sale, only proves that one sample was sold, or offered, and so may not be sufficient to persuade a court to grant a worthwhile damages award. An Evidence Preservation Order (EPO)may be used to obtain evidence of manufacture.


An EPO is an action in which the court will seal and/or take photographs of infringing articles at the defendant’s premises. A bond of between CNY 20,000–1 million to the court might be payable, depending upon the size of the claim and the requirements of that particular court.


Once evidence of infringement has been obtained, either by way of a sample purchase or an EPO, then the main proceedings can be commenced. The conventional rules apply on jurisdiction and the defendant must therefore be sued either in the place where the tort (a civil wrong i.e. an infringement) was committed, or in its home city or province. If the home province of the defendant is known to have an inexperienced court system then it is best to try to ensure that the sample purchase is completed in another jurisdiction with more experienced IP judges (such as Beijing, Shanghai, Shenzhen or Guangzhou).


3) Criminal sanctions


Criminal sanctions are only used in relation to patents where the counterfeiting of the patent certificates themselves has taken place. Such actions are rare; criminal proceedings are more common in relation to trademark and copyright infringements. There are three methods of bringing criminal sanctions:


• IP owner reports to the Public Security Bureau (PSB);


• An administrative agency transfers its case to a criminal agency when it comes to suspect the damage inflicted by the defendant exceeds certain thresholds; or


• A trademark owner can choose to file a criminal lawsuit with the court known as a private prosecution.


The PSB has sole discretion on whether to accept a criminal case and if the PSB accepts the case it will begin proceedings by collecting evidence. Once it has sufficient evidence then the PSB will pass the case to the prosecution agency which assesses whether the case may proceed to trial or not.


The prosecution agency presents the case at trial. The Court will decide liability and the appropriate sentence. Punishment may include imprisonment of up to seven years and/or penalties. It is important to bear in mind that the IP owner cannot recover damages through this process, but of course a favourable ruling would be a valuable deterrent to potential future infringers.


4) Using customs to halt exports and gather evidence


While practice, as ever, varies across China, many Chinese customs authorities will proactively enforce trademarks registered with them.  However, generally they will not do the same for patents nor copyright and therefore patent/copyright owners wishing to have infringing goods seized by customs must inform the customs officers of the precise details of each shipment to be seized (including the container number). In practice, obtaining this information entails extensive use of private investigators.


Goods seized by customs are strong evidence of extensive infringement. This means that even though customs release the infringing goods on payment of a counter-bond, claimants can use the evidence to claim a high damages award.  Further, the damages award will be paid out of any counter-bond posted by the defendant, thereby mitigating the risk of non-payment. 

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3. Enforcing a judgment


If the defendant does not comply with the terms of the court judgment or a court endorsed settlement then the claimant should apply to court to enforce the judgment. In these circumstances it will benefit the claimant greatly if it had obtained an APO earlier in proceedings because the damages award will be paid out of the preserved assets. 

Case study: combining administrative and civil actions for trademark infringement

It is possible to combine administrative actions with civil litigation. As always, the first step is to register the IP rights that your company wishes to protect. Then put in place procedures to monitor trade fairs, online sellers, and any other areas where infringing products might be sold or marketed.

If you then come across infringing products you will need to gather some evidence in the form of a sample purchase with an official receipt. You should then instruct your lawyers to file an administrative action with the competent local AIC, at the same time as filing a civil action for trademark infringement.

 

Take away messages


The important points to remember are:


1 Register your intellectual property rights. Unless you have registered your rights you have almost no recourse in China.


2 Be vigilant. Patrol trade fairs and surf the various b2 band b2c websites (such as Alibaba and Taobao) on the lookout for infringing articles.


3 When you identify infringement, enforce your rights. If you build a reputation for being litigious then companies will be less likely to infringe your rights in future. The resources required to achieve such a reputation very much depend on the extent of the infringement.


4 Build your case carefully. Ensure that you are taking action against the right company in the right form.

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