How to Enforce Your IP Rights in China
Before taking any legal actions to enforce your intellectual property (IP) rights in China, you should obtain China IP rights because any judgment obtained through a U.S. court on your U.S. IP rights is difficult, if not impossible, to collect in China. Once you have obtained China IP rights, you have four common options to enforce them. Before taking any of the four enforcement actions, you should, however, obtain evidence of infringement and affix it by notarization to comply with courts’ requirements on admissible evidence. This measure is to protect yourself against potential liability of abusing IP rights if the evidence later becomes unavailable.
The first enforcement option is to file an online report. Large online retailers like Alibaba and Taobao have established portals for online reporting of IP infringement. Their reporting procedures are similar to those of the U.S. online retailers.
The second option is to send a cease and desist letter. A Chinese translation accompanying the letter at times can work wonders.
The third one is to seek administrative actions, which are additional IP protection tools provided by the Chinese government. China IPs—patent, trademark, and copyright—are enforced through separate local governmental agencies. These agencies are the Local Intellectual Property Office (地方知识产权局) for patents, the Local Administrations for Industry and Commerce (工商局) for trademarks, and the Culture Bureau (文化局) together with the Urban Management (城管) for copyrights.
Administrative actions are relatively cheap and are effective, especially as to trademark infringement. The turn-around time is also relatively short, which is approximately three to four months. Before reporting infringement to and requesting administrative actions from the agencies, you should conduct a preliminary investigation and collect evidence on infringement. A preliminary investigation costs from $2,000 to over $10,000. The Chinese government does not charge for reporting infringement. A law firm usually charges $3000-$5000 for representation during an administrative action. Once received an infringement report, the agencies will locate and notify the alleged infringer, and verify the existence and extent of the infringement.
The administrative agencies are authorized to issue injunctions, impose fines, and confiscate infringing products. The agencies, however, lack authorities to issue monetary damages. If the right holder or the alleged infringer disagrees with the administrative orders, either party can file a lawsuit with the court. The evidence verified and obtained by the agencies during the administrative actions can be admitted in a civil litigation.
The fourth option is recordal of your IP rights with the China Customs. Unlike customs in most countries which only inspect imports, China Customs inspect both imports and exports. If goods are suspected of infringing recorded IP rights, China Customs will notify the consignee or consignor of the goods and may suspend the clearance process of the goods and initiate its own investigation.
The last common option is civil or criminal litigation. China law imposes criminal liability against trademark and copyright infringement. As to civil litigation, China IP civil litigation can be expensive and time-consuming, but is far less so than its U.S. counterpart. A China IP civil litigation usually costs approximately $200,000 to $300,000, and lasts about a year for one trial level of litigation. [1]
The China courts do not have a separate federal court system parallel to state courts. IP cases are heard by intellectual property courts established in Beijing, Shanghai, and Guangzhou or otherwise by collegial panels (合议庭) specialized in IP cases established in some intermediate people’s courts. Because there was no discovery, the actual damages are difficult to determine due to the lack of information on sales and profits. As a result, statutory damages are often granted, the maximum of which is ¥3 million (approximately $438,000) for trademark infringement or ¥1 million (approximately $146,000) for patent infringement. Because this amount is relatively insignificant, the purpose of litigation is not to recover monetary damages but to seek a court order of injunction and establish a model case against other infringers. Note, the Chinese government and legal system have been working on improving the procedures in determining damages and have proposed increase in statutory damages to ¥5 million for patent infringement. Courts have also started to award damages other than statutory damages.
Take-Home Messages:
– Obtain China IP rights;
– Obtain evidence of IP infringement and affix it by notarization to protect yourself from potential liability for abusing IP rights;
– Consider administrative actions.
Acknowledgement: Many thanks to Mr. Martin Rui Meng at Tian Tai Law Firm, Beijing, China and Mr. Hui Yan at Yuzhang Law Firm, Nanchang, China for providing information on China IP law and factual review of this article.
[1] Under the China legal system, trial has two levels called the first trial and the second trial.