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IP enforcement in China
July 16, 2012
Much is written and talked about concerning IP matters and potential IP infringement in China. It is sometimes suggested that no effective action can be taken in China when IP infringement occurs. Is that however really the case?
Since joining the World Trade Organization (WTO), China has amended its IP related laws and regulations to be in line with international standards. There are a number of ways for enforcing IP rights in China. The most prevalent is administrative proceedings, whereby a local administrative office deals with a complaint filed by an IP right holder. Secondly, there are court proceedings, whereby complaints are filed through the court system. Thirdly, IP rights can be enforced in China through Customs, which primarily focuses on preventing the export of infringing goods.
China has a quite unique domestic administrative IP enforcement system. IP administrative proceedings are held by IP Management Administrations' which are provincial or municipal administrative government departments for managing IP affairs, such as local IP Offices. Procedures for administrative proceedings involve a claimant submitting a written complaint with supporting evidence, a local authority undertaking a raid or inspection, and the parties reaching a settlement agreement or one party appealing to the court. IP management administrators can deal with IP infringement and counterfeiting cases. They can also settle IP disputes as a mediator. a. IP Infringement Acts of patent infringement include the manufacture, use, offer to sell, sale or import of patented inventions or utility models, products made using patented processes or made to patented designs. In China rather than registered designs there are design patents, and therefore all comments relating to patent infringement also relate to design patents (registered designs). Patent infringement also covers utility models which are a type of protection available in China and some other countries, usually for small and often incremental inventions/advances. Acts of trademark infringement includes using a trademark that is identical with, or similar to, a registered trademark in respect to the same or similar goods without the authorization of the proprietor of the registered trademark. For infringement cases, local patent management administrators can inspect premises, order injunction, and destroy infringing goods and equipment/moulds for making infringing goods. However, it has no power to award damages to the IP owner. b. IP Counterfeiting Acts of patent counterfeiting include marking a patent registration number on a product, its packaging, in advertisements or contracts without authorisation from the patent owner, and forging a patent certificate or patent application document. Acts of trademark counterfeiting include selling goods known to bear a counterfeit registered trademark, and making or selling counterfeit representations of a registered trademark. In IP counterfeiting cases, the IP management administrators can order the infringing party to cease counterfeiting acts. They can also impose a fine on counterfeiters. The provinces which have the most counterfeiting cases are coastal provinces, including Guangdong, Fujian and Jiangsu, which are also the provinces having the greatest manufacturing capacity in China. c. Mediation of IP disputes The management administrators can mediate between parties before a final decision is made. This often happens after a raid or inspection. The parties may come to a settlement agreement during mediation, which is enforceable by both parties as a contract.
IP proceedings can also be initiated through the court system. China has a hierarchical court structure, including (from top down) the Supreme People’s Courts, the Higher People’s Courts, the Intermediate People’s Courts and the Basic People’s Courts. A higher level court deals with appeals against judgments of lower courts. Lower level courts can also request important cases to be transferred to a higher court. China has IP Tribunals in the Intermediate People’s Courts and Higher People’s Courts. At the end of 2011, there were 82 intermediate people’s courts with jurisdiction over patent cases and 119 basic-level courts had jurisdiction over general intellectual property cases.1 The number of civil IP litigation cases in China is much less than that of administrative cases. However, it is expected that the number of IP litigation cases will significantly increase due to an increasing number of Chinese patent applications, and an increasing desire to enforce IP rights among IP right holders in China.
Administrative proceedings vs. court proceedings
Administrative proceedings are generally quicker and less expensive compared to court proceedings. Administrative proceedings typically last between three and six months, while court cases typically take a year at first instance, and longer with appeals. However, administrative enforcement has its limitations. Administrative enforcement is generally limited to injunctions, seizure of infringing goods, and small administrative fines. It cannot order damages to IP holders. Fines are usually low and may not be serious enough to have deterrent effect. In contrast, court proceedings may award damages to IP right holders and have a much larger deterrent effect. In addition, for patent infringements, court proceedings are better suited for complex invention patents, whilst administrative proceedings are well suited for simple product patents. In some instances Court proceedings may follow administrative proceedings, and using the evidence obtained in the administrative proceedings.
In China, IP right holders can use customs authorities in China to prevent export of infringing goods. For copyright and trademark enforcement, an IP owner may record his IP in a database to be used by the General Administration of Customs (GAC) for identifying infringing goods. Alternatively, the owner can inform the GAC of a known infringing shipment, which will then be detained if the IP owner satisfies a bonding requirement. It can be difficult for Customs to identify patent-infringing goods without pre-notices from IP owners. This is because the Customs’ actions are normally limited to visual inspections of goods, and the infringement of many patented inventions, such as computer implemented inventions, chemical and pharmaceutical inventions, cannot be easily identified by such superficial inspections. Determination of patent infringements usually requires in-depth analysis from technical and IP experts.
Current challenges and future outlook
Although China has IP law and regulations in line with international standards, and government officials committed to enforce IP rights, enforcement has not generally been sufficient to effectively deter IPR infringements. Counterfeiting and piracy continue to be commonplace in many parts of China. The piracy rate in China is one of the highest in the world. It is reported that one fifth of all consumer products in the Chinese market are counterfeit. There are several factors that undermine enforcement measures, including a lack of serious deterrents for IPR infringements, corruption and local protectionism, limited resources and training available to enforcement officials, and lack of public awareness on the economic and social impact of counterfeiting and piracy.2 Despite the above, China has made significant progress in IP enforcement in recent years. The number of patent applications and IP litigation cases continue to increase year on year. The government has recruited an increasing number of IP administrators and patent Examiners. The number of patent attorneys and other IP professionals in China has been increasing dramatically over the last decade. The courts and other IP enforcement measures will further improve with more time and experience.
1 Intellectual Property Protection by Chinese Courts in 2011, http://big5.fmprc.gov.cn/gate/big5/www.chinesemission-vienna.at/eng/xw/t924422.htm, 04/19.2012.
2 Protecting Your Intellectual Property Rights (IPR) in China - A Practical Guide for U.S. Companies, January 2003, U.S. Departmnt of Commerce International Trade Administration
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