China enacts new regulations on customs protection of IP rights

China

China's new Regulations on Customs Protection of Intellectual Property (IP) Rights, which enable customs to detain and confiscate goods infringing IP rights, will come into force on March 1 to replace the 1995 regulations.

The new regulations will introduce the following amendments:

  • The recording of IP rights with the customs authorities will no longer be a prerequisite for customs to act upon a rights holder's application to seize suspected goods.

  • Customs will only be authorized to detain goods suspected of counterfeiting if the rights owner (i) has applied for customs to seize the goods, or (ii) has responded within three days to the customs' notice that they had seized goods on their own initiative. If the rights owner fails to apply for the goods' detention within three days of the notice, customs will have to release the goods.

  • Customs will only conduct investigations in order to determine whether there is a case of infringement where they find the suspected goods at the border. For goods detained upon the application of a rights owner, the rights owner must apply for property preservation to the People's Court, which must then notify customs within 20 days of the goods' seizure. Failure to do so will result in customs releasing the goods.

  • The validity of the recording of IP rights with the customs authority will be extended from seven to 10 years. The same will apply to the recording of a renewal.

  • A rights owner will have 30 working days (instead of 10 currently) to record any change to its rights from the date the change occurs.

  • Rights owners will no longer have to make an actual monetary payment when requesting customs to detain suspected goods: a security will suffice. The new regulations, however, do not specify what form the security can take. This will be clarified by the General Administration of Customs in documents to be published subsequently.

  • The value of the detention bond is changed from "FOB [free on board - ie, where the seller has an obligation to deliver goods to a named place for transfer to a carrier]/CIF [cost, insurance, freight - ie, where the seller is to arrange for the carriage of goods by sea to a port of destination] value of the goods" to "not exceeding the value of the goods".

  • Customs will no longer deduct the fees for storage and disposal of the goods detained from the bond payment for detention, unless the rights owner fails to pay the fees that should be settled directly with the warehouse. This is to address complaints concerning excessive storage and disposal fees charged by customs in the past. The possibility for the consignor/consignee of goods to make monetary payment to release detained goods will be restricted to patent cases. The payment will be limited to the value of the goods - instead of twice that value as currently requested.

  • Customs will no longer have the power to order the consignor/consignee of the infringing goods to pay a fine. Customs can only confiscate the goods upon confirmation that the goods are counterfeit.

  • The rights owner will be authorized to buy the infringing goods from customs. This will be in addition to the current means of disposal such as destruction of the goods or the infringing parts thereof, or using them for charitable purposes.

Yvonne Chua and Howard Tsang, Wilkinson & Grist, Hong Kong

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