Enforcement of Intellectual Property Rights in China: Part I

If you have registered your intellectual property (IP) and found it being infringed you will want to enforce it, but what recourse do you have in China? Below is a summary of a recent report written by the China IPR SME Centre explaining the available enforcement options.

219270845_11The intellectual property rights (IPR) in China are very similar to those in Europe; registered rights available include invention patents, utility patents, design patents and trademarks (TMs). Copyright can also be recorded.

If you receive information that your IP is being infringed you need to gather evidence detailing the nature and scale of infringement. Once you have gathered sufficient information you can begin to explore enforcement options.

Enforcement proceedings

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

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 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, 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.

A simple trademark, copyright or QTSB administrative action lodged with a local administrative body would likely last between three and six months and cost RMB 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 RMB 30,000−80,000, with a civil action to follow.

Civil litigation

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

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. Even if this evidence can be obtained it 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 RMB 20,000–1million might be payable to the court, 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 commence. 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 their 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.

Once the right owner has gathered sufficient evidence, they might also consider applying for an Asset Preservation Order (APO). This is an action in which the court will freeze bank accounts and/or other assets of the defendant. Again, the court may require the payment of a bond commensurate with the level of damages claimed.

Once the right holder has gathered sufficient evidence, seized/frozen assets of the defendant and built a strong case for infringement, then the matter will proceed to a brief trial. The trial is usually preceded and followed by settlement negotiations mediated by the judge. If no settlement can be agreed then the judge will retire to consider his decision and will hand down a judgement in due course.

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:

  • The 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.
  • 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 they accept the case it will begin proceedings by collecting evidence. Once they have sufficient evidence they will then pass the case to the prosecution agency which assesses whether or not the case may proceed to trial.

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.

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.

If product is seized and the claimant wishes to pursue legal action then it must pay a bond equal to the value of the goods seized. The defendant may then pay a counter-bond of an equal amount in order to have the goods released.

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.

Take away messages

The important points to remember are:

  • Register your IPR. If you haven’t registered your rights you have almost no recourse in China.
  • Be vigilant. Patrol trade fairs and surf the various b2b and b2c websites, such as Alibaba and Taobao, on the lookout for infringing articles.
  • 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.
  • Build your case carefully. Ensure that you are taking action against the right company in the right way.

China IPR Helpdesk project logoThe China IPR SME Helpdesk is a European Commission funded project that provides free, practical, business advice relating to China IPR to European SMEs. To learn about any aspect of IPR in China, visit our online portal at www.china-iprhelpdesk.eu. For free expert advice on China IPR for your business, e-mail your questions to: question@china-iprhelpdesk.eu. You will receive a reply from one of the Helpdesk experts within seven working days. The China IPR SME Helpdesk is jointly implemented by DEVELOPMENT Solutions and the European Union Chamber of Commerce in China.