The Flanders-China Chamber of Commerce, the EU-China Business Association and the China IPR SME Helpdesk organized a webinar focused on “Enforcement of Intellectual Property Rights in China” on 5 November 2020.

Moderator Peter Sczigel, Project Executive of the China IPR SME Helpdesk introduced the webinar’s topic and the speakers. The China IPR SME Helpdesk is a project of the European Commission, which has been operating for more than 10 years. It provides European SMEs with IPR-related advice, how to do business with China, how to register patents and trade marks, and how to deal with any perceived or real IPR infringements in China. The major tool is the enquiry helpline, reachable through the website, email or telephone, and it is free of charge. The free and confidential advice will be provided within three working days.

Ms. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association, introduced both organizations.

Mr. Matias Zubimendi presented the topic of the webinar, how to enforce intellectual property rights in China.

1. Introduction to IPR. Innovation patents and utility models protect the technical aspects, products and processes in a way that the owner of the technology will be the only one capable of manufacturing, producing, importing and exporting the intellectual property rights. The company will have a monopoly over the technology and be able to control who imports and exports products made with the technology. One way of enforcing IPRs is having control of which products can enter or leave the country. Design patents protect how the products looks. Trade marks protect the distinctiveness of a product, namely a sign that is capable of distinguishing your product from the product of your competitors. It can be a logo, a name, a combination of colors, or sounds, anything that helps a product to be distinguishable from another one can be registered as a trade mark. Copyrights protect originality, the expression of an idea. They do not protect the idea itself but how to express it in words or sounds. They require registration but even without it there is a level of protection. Trade secrets and know-how protect information that is secret and protected by the company by specific measures. There are two main principles in IPR protection: registration and territoriality. Registration means that your IPR will be protected once registered. In China, IPR that is not registered has almost no protection at all and if you want to enforce IPR it is very important to have a registration. In China there is the “first to file rule”, which means that the company that first registers IPR will have priority over any other registration. In case of bad faith registration there are however alternatives. It is advisable to register IPRs before entering the Chinese market, because it will easier, faster and cheaper to protect your IPRs. The territoriality principle means that registration will grant protection only within the territory of the country where it was registered. China has four jurisdictions – mainland China, Hong Kong, Macao and Taiwan – each with its own intellectual property rights office and you would need to register your IPRs in each one if you want to have full protection in the entire territory of China.

2. Essential to do’s before the enforcement proceeding. Talking about enforcement of IPRs, it means that there is another company that is infringing or potentially can infringe one of your IPRs. The first thing to do is to find a Chinese attorney and to find company information of the company infringing your IPRs. This can be done by consulting the public database National Enterprise Credit Information Publicity system at http://gsxt.saic.gov.cn/ . The database holds all public information about every company registered in China. It will show you who the shareholders and the legal representative are, as well as the capital, address, phone number and IPRs. It is possible that you have to deal with shadow companies which use a public name that is not their real legal name. When consulting the database, you need the legal name of the company in Chinese. The English name may not match the Chinese one. It is good practice to request the business license of the company to obtain the legal name of the company. You can also use Google or Chinese search engines to try to find the legal Chinese name of the company. The second thing to do before enforcing is collecting evidence through public Chinese notaries. If you are abroad or are using a foreign notary you need to legalize the documents at the Chinese Embassy in your country. In the case of online infringement it is possible to obtain evidence through blockchain, for example to prove the contents of a website at a certain moment. There are companies who collect evidence digitally to be used in the courts.

3. Enforcement proceedings. What are the different options? There are six alternatives: negotiations; administrative actions; custom seizures; notice and take down; civil litigation; and criminal sanctions.

3.1. Negotiations: The first method to try is cease and desist letters, which is a legal document in which you are requiring the other company to stop specific actions such as selling counterfeited products. Cease and desist letters work in China in a very similar way as in Europe although they are not as effective. You will need the signature of an attorney. Make sure you have already collected evidence because after receiving a cease and desist letter, the infringing company may for example remove infringing products from its website. When negotiating with a Chinese company you can use the stick or the carrot method, either warning them that you will sue and ask compensation or showing them their mistake and asking them to pay license fees to use your technology. Considering the fact that legal actions are expensive and can take years, for SMEs it is worth considering the carrot option, because the company will earn profit from the license and be able to solve the problem in a short period of time.

3.2. Administrative actions can be pursued through the China National Intellectual Property Administration (CNIPA), the State Administration of Market Regulation (SAMR), the Quality and Technical Supervision Bureaus (QTSBs) and the Copyright Office. Those administrative bodies can order raids on defendants’ premises to seize and destroy offending items; impose injunctions to force the infringing party to desist; and levy fines on the infringing party for trade mark infringement, copyright infringement and counterfeiting patent certificates, but not for patent infringement. The main benefit of administrative actions is that they are fast, inexpensive, are very good for collecting evidence, and are performed by experts who know what they have to do.

3.3. Custom seizures. The Custom Office allows companies to register their intellectual property rights online in English free of charge. It is especially useful in the case of trade marks and design patents. The registration is important because once it is done, every time a product is leaving or entering China, custom officers seeing the trade mark have to notify the company and deposit the products in the Customs Office for at least 22 hours during which the company that has been notified can decide whether to take any action. This is one of the most efficient methods for the protection of IPRs. This is especially important if your company is planning to manufacture the product in China for sale in different jurisdictions. If you have your IPR registered in China, you can control who can import and export your technology and you could prevent the infringing products from being exported from China.

3.4. Notice and take down. This is similar to how online anti-infringement works in the EU on platforms such as Amazon and Ebay, and in China on Taobao or JD. Notice and take down is organized by the online retailers. A new e-commerce law from 2019 regulates this. The law gives the e-retailer the duty of using this method, which usually takes less than one week. If the e-retailer does not take action, it will also be liable for infringement. Most e-retailers now offer IPR protection programs, many in English. The notice and take down procedure requires you to prove that the complainer is the rights holder of the IPR; the links to the infringing products, and the business license or certificate of your company. The infringing products will be removed from the e-retailer’s website, but you will not receive compensation. This procedure is fast, inexpensive, performed by experts, and it allows you to collect evidence.

3.5. Civil litigation. In China there are three alternatives for civil litigation: the regular People’s Courts, the Intellectual Property Courts and the Internet Courts. In the case of innovation patents, it is advisable to got to the intellectual property courts because it may require experts to understand the case. Internet courts are new, the entire process happens online, and the cases you can take to these courts are very specific, such as online copyright infringement and e-commerce cases. The main advantage is that the whole procedure only takes up to 27 days. In civil litigation, there are three preventive actions that can be taken. The evidence preservation order (EPO) is useful for collecting evidence of something that was manufactured, including collecting photos and invoices. This requires a bond of between CNY20,000 and CNY1 million, so it is expensive. The second action is the Asset Preservation Order (APO) to prevent the offending party to simulate a bankruptcy to avoid paying compensation by freezing the bank account. This will also require a bond. Finally, there is the preliminary injunction, which is useful for trade secret cases to prevent a person disclosing sensitive information. Civil litigation is very useful because it will provide compensation, allow to destroy and confiscate the infringing goods and stop the infringer from continuing selling the goods.

3.6 Criminal sanctions. Common cases are patents, trade marks and copyrights. The IP owner can report the case to the Public Security Bureau (PSB). It is also possible for administrative agencies to transfer the case to a criminal agency when the suspected damage exceeds a certain threshold. A trade mark owner can also choose to file a criminal lawsuit with the court, known as a private prosecution.

Take away messages.
• Register your intellectual property rights. Unless you have 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 reactive, and if needed 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 form.

You can contact the Helpline at question@china-iprhelpdesk.eu

A Q&A session concluded the webinar. In case of IPR infringement is it more useful to settle it in court or directly with the other party? This will depend on the case and how many resources the company has. If you do not have many resources and you go to court, it will be almost impossible to pay all the fees. If you do go to court, first contact a Chinese attorney and design a good strategy.

Additional information: New judicial guidelines issued by the Supreme People’s Court (SPC) to protect new-type intellectual property rights in an innovative manner came into force on November 9. Courts in Shenzhen, which have seen a boom in IP-related disputes in recent years, are allowed to explore ways to safeguard IP rights in some new sectors, including artificial intelligence (AI), life sciences technology and internet information. The guideline consists of 33 articles. The Guangdong Higher People’s Court heard 165,000 IP cases from January to October, of which 60,000 were filed in Shenzhen. Punishments for IP violators have also been intensified since last year. “The amount of compensation in patent cases solved by the province’s courts since 2019, for example, has risen by about 1.5 times, and compensation in more than 20 cases each exceeded CNY10 million” said Gong Jiali, President of the Guangdong Higher People’s Court, the China Daily reports.