China: The path towards enforcement in China
Kangxin Partners PC
There are many options for enforcing your trademark rights in China, but it is critical to develop a smart strategy
China’s IP system is sometimes perceived as opaque and intimidating. This is often exacerbated by the lack of information available on the realities of trademark enforcement and stories highlighting the troubles that brand owners have faced when trying to protect their rights. However, the truth is that it is entirely possible to enforce your trademark rights in China. In fact, the majority of negative stories are actually from brand owners which were late to register their rights and have thus had to fight parties which got there first under China’s first-to-file system. Rights holders do have a number of enforcement options and, with proper care, can join the long list of brand owners which have succeeded in China’s growing market. This article aims to shine a light on China’s hazy system, with a step-by-step outline of what action should be taken if infringement is detected.
Fact gathering and finding counsel
If you become aware of an infringer in China, you need to find a local attorney and ensure that you are ready with answers to the following questions:
- What registered trademarks or trademark applications do you already have in China?
- How did you discover the infringement?
- What do you know about the infringer’s activities to date?
- What type of goods and what trademarks are being infringed, that you know of?
- What effect is this having on your business?
- Do you know the identity of the infringer, the location of production or sales of infringing goods, whether the infringing goods are being exported or anything else about their sales or distribution?
- Have you licensed your trademark in China? If so, do you work with, or have you worked with, any manufacturers, distributors or other partners in China?
- What kind of time and financial commitments are you are willing and able to make in order to enforce your rights in China?
Many brand owners ask whether they can work with their current firm from their home country if it has an office in China. While this is nearly always possible, foreign firms often have a local Chinese firm that they work with. I would therefore recommend obtaining more information about the Chinese attorneys working on your case and clarifying how things will work between you.
Finally, I am often asked whether a cease and desist letter can or should be sent to an infringer as a first step. Understandably, this is often an inexpensive and fast solution, which is frequently used by brand owners in other countries. However, it is not always the best initial step to take against infringement in China. Such letters are often ignored and are thus a waste of time and money. Alternatively, they can give notice to an infringer, which may then try to hide its assets or evidence of infringement. While it depends on the specific case at hand, it is usually best to hold off on sending such a letter until you have discussed things further with your counsel, who will have specific experience of such situations.
After you have gathered the available information and hired local counsel, the next step is to conduct an investigation. It is critical to fully understand the situation and to be in a position to gather evidence which can then be used in actions against the infringer. An investigation can help you to obtain such evidence and gives you the opportunity to:
- conduct a notarised purchase of infringing products;
- document any infringing websites;
- record the infringers’ activities onsite (or at multiple sites);
- collect brochures or other marketing materials that are being used by the infringers;
- discover information about the individuals involved; and
- collect any other evidence and information that could provide a better understanding of the circumstances and be useful in an action against the infringer.
Develop a strategy
After an investigation, you are in a much better position to look at the big picture and decide the best route to halting this infringement. In China, there are two paths towards enforcement – administrative and judicial.
Administrative action tends to be the more common route due to the quick turnaround and lower costs. However, such actions do not allow rights holders to collect damages and the authorities may refuse to take on more complicated cases or get involved in cases of widespread infringement. Rights holders usually turn to local administration of industry and commerce (AIC) offices, which can conduct a raid, order the immediate cessation of the infringement, confiscate and destroy goods and tools and impose fines. Other administrative authorities can assist in certain situations – for example, where food products or pharmaceuticals are at issue, the Administration of Quality Supervision, Inspection, and Quarantine can step in; or where infringement is detected at a port, Customs can seize shipments.
Alternatively, rights holders can pursue enforcement through the courts if they wish to seek compensation from infringers or where a trial judge’s IP knowledge and legal expertise might offer a better resolution or in fact be the only option due to the dispute being more complicated. However, judicial action requires more time and money. The courts at the defendant’s registered address and where the infringing products have been manufactured, sold, stored or seized will all have jurisdiction over the case. A careful choice of venue gives you the opportunity to avoid local protectionism, utilise a court with richer experience in adjudicating trademark infringement cases, pick a court with a more positive view of your specific legal issue or strategically increase the defendant’s litigation costs.
To determine the best route, you will first need to choose between an administrative or judicial action by deciding whether it is important to collect damages or whether a quicker timeframe is critical, or your case is particularly complicated. Moreover, based on the investigation, which courts or local administrative offices can you file your case with? Once you have decided the exact courts or offices that are available to review your case, you should determine whether local protectionism may be an issue for any of your options and cross these off the list. While China’s system has improved greatly and the authorities in larger cities such as Beijing, Shanghai, Tianjin and Shenzhen will generally handle trademark infringement issues impartially, it is possible to still encounter issues of bias in smaller cities. Moreover, you should look at each of your options and see what the legal trends are based on past decisions. Different authorities may have opposing views on certain legal issues – your local Chinese counsel should be able to advise on which places to avoid.
Finally, in addition to the more common routes of enforcement described above, depending on the overall situation it may make sense to negotiate directly with the infringers to find a solution. Further, criminal action may be available and pursued by working with the public security bureau and the courts. In general, it is important to develop a full and creative strategy when tackling infringement in China.
After deciding where to file your case, you will need to prepare your filing documents and submit evidence.
Evidentiary requirements will differ between administrative authorities and the courts. For an administrative action, you will need to submit enough evidence to convince the authorities that a raid should be conducted. During this, the authorities will obtain additional evidence of infringement to decide what penalties are appropriate. On the other hand, more evidence will need to be submitted to the courts at the time of or soon after filing your case. Further, the courts have stricter requirements for evidence and authorisation of documents. All evidence and documents will need to be notarised or legalised and form a complete chain of evidence. The legalisation process can take several weeks, so it is important to start this as soon as possible. While you can ask the courts to assist in the discovery of evidence under certain circumstances, parties are largely responsible for collecting evidence on their own.
As mentioned above, the timeframe for administrative actions is much quicker than that for judicial actions. It takes anywhere from a couple of weeks to a few months for the authorities to conduct a raid and from there to issue an order to cease the infringing activity, confiscate and destroy any relevant goods and tools, and impose a fine. On the other hand, for a typical foreign trademark civil action, it will take the courts between six and 12 months to issue a decision, with an appeal taking another three to six months.
Alternatively, you can work with your attorney to determine the best way to approach the opposing party for negotiations. It is highly recommended that you conduct negotiations through a local Chinese attorney rather than engaging with the other side directly.
Preventing future problems
In addition to handling any current issues of infringement, remember to take this opportunity to look at your overall trademark situation and ensure that you have the steps in place to avoid any future issues, as far as possible. You may even wish to do this earlier in the process. Additional steps to consider include the following:
- File any additional trademarks or IP applications necessary to provide broad protection in China.
- File trademarks in Hong Kong, Macau or Taiwan in addition to mainland China.
- Record your trademarks and other IP assets with China Customs so that it can regularly look for infringing goods being imported or exported.
- Set up a trademark watch to detect further infringement.
- Re-examine your internal systems to ensure that records and information relating to your trademarks and other intellectual property are preserved, well organised and accessible when needed.
- Be prepared to conduct due diligence on future potential partners in China that could affect or even infringe your trademark rights.
- Tighten up your China agreements to further protect your intellectual property.
With this in mind, remember that there are indeed options for enforcing your trademark rights in China, but it is critical to develop a smart strategy based on your specific situation with experienced counsel. By being informed and prepared, you may find it far easier than expected to navigate China’s enforcement system.