Customs report sends strong signal to errant IP owners

In June 2010 the Legal Department of the Chinese Customs General Administration (CGA) circulated a report called the “Notice on Re-release of Goods under the IP Rights Border Protection Measures”.
The report notes that Customs are encountering two serious difficulties with IP owners who have recorded their IP rights on the CGA database:
  • IP owners are failing to respond to Customs notices of suspected infringing goods within the statutory three-day deadline. In some cases, it is obvious to Customs that the goods are counterfeit. However, the goods must be released if there is no response from the IP owner. The result is that Customs officers’ time and efforts are wasted and, therefore, they are less inclined to detect and report infringements for those rights holders in future.
  • IP owners are failing to update the list of authorized suppliers (or 'white list') on the CGA database. As a result of this, Customs is regularly detaining shipments from suppliers that turn out to be authorized, but not listed as such on the database. This not only disrupts the IP owner’s own supply chain, but also wastes the effort of Customs officers.  
The report proposes that, if an IP owner regularly fails to respond to detention notices, Customs officers, at their discretion, may stop reporting to the IP owner any future shipments. Such a measure is actually provided for in Article 16 of the newly amended Regulations of the Peoples’ Republic of China on the Customs Protection of Intellectual Property Rights, which took effect on April 1 2010.
If the IP owner continually fails to respond to reports, or fails to update its 'white list' and causes serious disruption to legitimate shipments or to Customs’ normal duties, local ports should report to the CGA, which has discretion to cancel the recordal on the CGA database - a measure which is also provided for in Article 11 of the regulations.
Once the IP recordal is cancelled, the CGA may refuse a re-application for a certain period of time. However, how long the cancellation would apply before the IP owner can re-file for recordal has not been stipulated. It has been reported informally by Customs officers that the CGA intends to send a strong message by cancelling the recordal of at least one blacklisted IP owner within the coming months. It was also disclosed by a Customs official that, according to internal statistics, approximately 60% of IP detentions reported by Customs turned out to be authorized, which represents a considerable waste of resources.
Attached to the report was a blacklist of IP owners which the CGA has already identified as failing to respond to Customs notices or update their supplier list. This blacklist will be circulated and updated monthly.
IP owners should ensure that they are prepared to respond to every report from Customs of suspected infringing shipments, and not simply 'cherry pick' cases. Where the detained goods are a very small quantity, IP owners should work to reduce the cost of handling the case, rather than simply ignoring the report. Being blacklisted brings the risk that they will no longer receive any reports from Customs.
For IP owners that are already on the blacklist, Customs officers simply proposed that they should immediately re-engage with Customs and start responding actively to Customs reports. They will be removed from the list when it is updated. IP owners with authorized suppliers should use the CGA IP recordal online database to update their 'white list' in real time. Suppliers’ details and authorization terms can be loaded into the database and amended at any time.
Managing a 'white list' of authorized suppliers may still pose challenges for IP owners that source an extensive range of branded merchandise from China, often through intermediaries, which may be shipped from hundreds of different supply sources. However, for most IP owners, there is now a strong incentive to work actively with Customs, manage authorized suppliers and reduce the wasted effort in China’s IP rights border protection system.
Chris Bailey, Rouse, Guangzhou

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