Protection of trademarks against counterfeiting in China
What are the basic laws and regulations governing anti-counterfeiting in China?
Presently the laws and regulations governing anti-counterfeiting in China are as follows:
The Trademark Law (2001) and the Implementing Regulations of the Trademark Law (2002); the Anti-unfair Competition Law (1993);
the Copyright Law (2001) and the Implementing Regulations of the Copyright Law (2002); and
the Criminal Law (2009).
Supreme Court interpretations of the laws include:
The Interpretation of the Supreme Court on Several Issues on the Application of Law in the Trial of Trademark Civil Disputes (2002);
the Interpretation of the Supreme Court on Several Issues on the Application of Law in the Trial of Civil Disputes concerning the Protection of Well-Known Trademarks (2009);
the Interpretation of the Supreme Court on Relevant Issues on the Scope of Jurisdiction and the Application of Law for Trial of Trademark Cases (2002);
the Interpretation of the Supreme Court on the Application of Law concerning Pre-trial Suspension of Trademark Infringement and Evidence Preservation (2002);
the Interpretation of the Supreme Court on Several Issues on the Application of Law in the Trial of Civil Cases concerning Unfair Competition (2007);
the Interpretation of the Supreme Court and the Supreme Procuratorate on Issues concerning the Application of Law in Handling Criminal Cases of Infringement of IP Rights (2004);
the Interpretation of the Supreme Court on the Application of Law in the Trial of Civil Disputes over Copyright (2002); and
the Interpretation of the Supreme Court on the Application of Law in the Trial of Civil Disputes over Domain Names (2001).
What are the major border measures against counterfeiting in China?
Customs can conduct enforcement either ex officio or by application.
How to conduct enforcement ex officio?
The prerequisite for enforcement ex officio is that the trademark right be recorded with Customs. Thereafter, where Customs finds that suspected counterfeit goods are entering or leaving China, it will seize the goods and notify the rights holder. The rights holder has three working days from receiving notification to apply for detainment of the goods and post a bond with Customs (the amount will depend on the value of the goods); otherwise, Customs will release the goods. If, upon investigating the detained goods, Customs determines that they are counterfeit, the goods will be confiscated and a fine will be imposed. If Customs makes no decision or decides that the goods are not counterfeit, it will notify the rights holder to apply to court for a preliminary injunction or seizure of the infringing goods. If Customs receives no notice from the court within 50 working days of the date of detention, it will release the goods.
How to enforce by application?
If the rights holder has not recorded its trademark with Customs, it can file an application with Customs for the detention of suspected counterfeit goods which are found to be entering or leaving China, but there must be sufficient evidence to demonstrate infringement to Customs. After detaining the goods, Customs is not responsible for investigating or deciding on infringement. Instead, the rights holder must apply to court for seizure of the infringing goods or a preliminary injunction. If Customs receives no notice from the court within 20 working days of the detention, the goods will be released.
Is there any other administrative action against counterfeiting in China?
The Administration of Industry and Commerce (AIC) can also take enforcement action according to Article 53 of the Trademark Law, which states: “Where any party has committed any of such acts to infringe the exclusive right to use a registered trademark as provided for in Article 52 of this Law and has caused a dispute, the interested parties shall resolve the dispute through consultation; where they are reluctant to resolve the matter through consultation or the consultation fails, the trademark registrant or interested party may institute legal proceedings in the People’s Court or request the administrative authority for industry and commerce for actions.”
What is the procedure for an AIC action?
The procedure for an AIC action is as follows:
The rights holder identifies the counterfeiter and the location where the counterfeits are stored.
It then submits a written complaint and relevant evidence to the AIC office.
The AIC officials conduct a raid and seize all counterfeits on site.
The AIC issues a penalty decision to the counterfeiter within six months of the raid.
What is the advantage of AIC actions?
AIC actions have the following advantages:
The materials and evidence required for an AIC action are less complex than those required for civil litigation.
The AIC can take immediate action after accepting the complaint.
All infringing products will be seized on site and confiscated, and the counterfeiter will be issued with a penalty fine.
An AIC action is less costly than litigation.
How is a civil enforcement conducted?
Article 52 of the Trademark Law provides that the following acts constitute an infringement of the exclusive right to use a registered trademark:
to use a mark that is identical or similar to a registered trademark in respect of identical or similar goods without the authorization of the rights holder;
to sell goods in the knowledge that they bear a counterfeit trademark;
to counterfeit, or to make without authorization, representations of a registered trademark, or to sell such representations;
to replace a registered trademark and re-sell the goods without the authorization of the rights holder; or
to cause, in other respects, prejudice to the exclusive right of another person to use a registered trademark.
In the event of such infringement the rights holder can file a trademark infringement suit before the court.
In general, trademark infringement cases are heard at first instance by the intermediate courts at city level, except in some big cities where the district courts have jurisdiction to hear cases involving trademark disputes. At second instance they are heard by the high courts at the provincial level.
Is there any rule in the criminal law against counterfeiting in China?
Pursuant to Articles 213, 214 and 215 of the Criminal Law of the People’s Republic of China, it is a crime to:
use a mark that is identical to a registered trademark for the same goods without the permission of the rights holder;
knowingly sell goods bearing a counterfeit trademark; or
sell forged representations of a registered trademark.
Such crimes are punishable by imprisonment for up to three years or a fine, or both in serious cases. In very serious cases the court will sentence the counterfeiter to between three and seven years’ imprisonment and impose a fine.
How is a criminal proceeding initiated?
Criminal proceedings can be initiated by both the public prosecution authority and the rights holder.
During customs detainment of counterfeit goods or an AIC action, if it is found that the level of counterfeiting meets the criminal threshold, Customs or the AIC office will transfer the case to the police office for further investigation and the police office will transfer the case to the public prosecution authority to bring a criminal procedure. The police office may also conduct an investigation upon being informed of the counterfeiting by the rights holder or others and transfer the case to the public prosecution authority to bring a criminal procedure after the investigation is concluded.
The rights holder may directly bring a criminal charge against the counterfeiter before the court with sufficient evidence.
What measures a trademark owner may take to protect its trademarks against counterfeiting in China?
Basically the measures a trademark owner may take are criminal prosecution, civil enforcement, border measures, and other administrative measures.
How are the border measures conducted?
The Chinese Customs can conduct enforcement against counterfeit goods both entering and leaving China in two forms: enforcement by application and enforcement ex officio.
What is enforcement ex officio?
Enforcement ex officio requires the recordation of a registered trademark (ie, Customs Protective Recordation of IP Rights) with the General Administration of Customs, and permits Customs to seize suspected counterfeit goods and investigate their authenticity.
The general steps of an ex officio enforcement action are as follows:
On discovering suspected counterfeiting goods, Customs will suspend their release and notify the trademark owner. The trademark owner may apply to Customs within three working days to continue detention of the goods.
Customs will require a security from the trademark owner. The amount of security equals the amount of value of the goods if the value is less than Rmb20,000; or the security may range from a minimum of Rmb20,000 up to a maximum of Rmb100,000 (calculated as 50% of the value of the detained goods) if the goods are valued from Rmb20,000 to Rmb100,000. Alternatively, the trademark owner can provide a one-time general security (which is no less than Rmb200,000) instead of paying a security payment each time a detention is conducted by Customs. The one-time general security covers the expense of the safe storage of the goods for the previous year.
.Customs officials may investigate whether the detained goods have infringed a registered trademark. This involves comparing the suspected goods with the genuine goods of the trademark owner. If Customs concludes that the detained goods infringe a registered trademark, it can confiscate the infringing goods and issue a fine of not more than 30% of their value.
Where infringement reaches a criminal threshold, Customs will transfer the case to the police authorities (see "Criminal prosecution" below).
Customs may dispose of the confiscated goods at this time.
If Customs does not make a decision regarding infringement or decides that the goods do not infringe a registered trademark, it will notify the trademark owner to apply to the People's Court for a preliminary injunction or an order for preservation of property, requesting that Customs assist with detention of the suspected goods.
If the trademark owner fails to receive a notice from the People's Court to assist with detention of the suspected goods within 20 days of the date of detention, Customs may release the goods.
After execution of the order for preliminary injunction or preservation of property, Customs will wait until it receives notice of final judgment from the civil proceeding and then act accordingly.
Customs refunds the trademark owner's security after disposal of the goods has been completed and the relevant expenses have been settled.
What is enforcement by application?
The owner of an unregistered well-known mark, or the owner of a registered mark with no recordation with Customs, can file an application with Customs to detain specific shipments that are believed to contain counterfeit goods. The procedure for customs enforcement by application is as follows:
An application is filed with customs officials at the port where the goods will be imported or from which they will be exported. The trademark owner must provide sufficient evidence proving infringement.
The trademark owner deposits a security, the amount of which is similar to the amount mentioned above at "Enforcement ex officio".
After the detention of the suspected infringing goods by Customs, the trademark owner should apply to the court for an order for preservation of property, or a preliminary injunction. If Customs does not receive notice from a court requesting assistance with detention within 50 days, the goods are released.
After execution of the preliminary injunction or order for preservation of property, Customs will wait until it receives a notice of final judgment in the civil proceeding and then act accordingly.
Customs refunds the trademark owner's security after disposal of the goods has been completed and the relevant expenses have been settled.
How is a criminal prosecution against counterfeiters conducted?
The criminal process is usually a measure of last resort for dealing with counterfeiters because the threshold for proving criminal liability is higher than that for showing trademark infringement. However, a trademark owner may sometimes have to resort to criminal prosecution when faced with an obstinate repeat offender or a large-scale counterfeiting operation. Both the People's Procuratorate and the trademark owner can initiate a criminal prosecution.
A criminal case can be commenced at any stage where counterfeiting constitutes a crime. Criminal proceedings may follow from an investigation by the police or the People's Procuratorate, or when an administrative action, a civil litigation procedure or an administrative litigation procedure reveals criminal levels of counterfeiting.
Pursuant to Article 213 of the Criminal Law of the People's Republic of China, the use of an identical trademark on the same goods without the permission of its registered owner shall, in cases of a serious nature, be punishable by up to three years' imprisonment and a fine, or a separately imposed fine; for cases of a more serious nature, the court will sentence the counterfeiter to three to seven years' imprisonment and order a fine.
What are the standards for determining that infringements are of a "serious nature?
The standards determining what infringements are considered of a "serious nature" are as follows.
(1) The volume of illegal business is more than Rmb50,000 or the volume of illegal gains is more than Rmb30,000;
(2) More than two registered trademarks are forged where the volume of illegal business is more than Rmb30,000 or the volume of illegal gains is more than Rmb20,000; or
(3) There are other circumstances of a serious nature.
The standards determining what constitutes an infringement of a more serious nature are as follows:
(1) The volume of illegal business is more than Rmb250,000 or the volume of illegal gains is more than Rmb150,000;
(2) More than two registered trademarks are forged where the volume of illegal business is more than Rmb150,000 or the volume of illegal gains is more than Rmb100,000; or
(3) There are other circumstances of an especially serious nature.
What are the usual civil enforcement measures against counterfeiters?
Civil proceedings for trademark infringement are generally initiated in the intermediate courts.
Preliminary injunctions and an order to preserve evidence are measures that a trademark owner may use as preliminary measures in civil litigation. However, preliminary injunctions are issued rarely and only in cases where there is clear evidence of infringement.
In circumstances where evidence may be destroyed, lost or too difficult to obtain later on, a litigant may apply to the People's Court for the preservation of evidence. The People's Court may also act on its own initiative to preserve such evidence. Although notarization is not required for most documents, it is recommended that the most important documentary evidence to be relied upon in civil proceedings be notarized. If the documentary evidence originates from outside China, it must be notarized by a local notary public and legalized before the Chinese embassy. A Chinese translation is also required if the documents are not in the Chinese language.
How is the civil litigation procedure conducted?
The procedure in civil litigation is as follows:
The plaintiff submits the civil complaint, copies of evidence, relevant materials and a litigation fee. If a preliminary injunction is requested, an order for preservation of property or of evidence is also needed. The appropriate application is filed at the same time as the complaint.
If the court finds that the complaint meets the requirements for acceptance, it places the case on the docket within seven days, notifies the parties concerned and sends a copy of the statement of complaint to the defendant.
The defendant may file a defense and submit supporting evidence, and also raise an objection to the jurisdiction of the court.
The court designates the time limit for submitting evidence and arranges the pre-litigation evidence.
The time, date and place of a hearing are publicly announced by the court.
At the hearing, the evidence and facts are cross-examined. When the case involves only Chinese clients, the court of first instance will usually pronounce judgment approximately six months after the case was docketed. (When a foreign party is involved, a decision will be issued in approximately one year.)
If a party refuses to accept a judgment of the first-instance court, pursuant to the Civil Procedure Law the parties have the right to appeal to the People's Court at the higher level within 15 days (30 days for foreign parties) of the date on which the written judgment was served. The second-instance court will usually issue a decision within three months (six months to one year for cases involving foreign parties) of the date the court accepts the case. If a party does not file an appeal within the statutory time limit, the first-instance judgment becomes effective.
How are the remedies calculated?
The Chinese law provides four ways to calculate damages:
(1) profits lost by the plaintiff due to infringement;
(2) profits gained by the defendant due to infringement;
(3) damages calculated by considering the relevant royalty fees set out in license agreements between the plaintiff and other parties in respect of the trademark(s);
(3) statutory damages up to a maximum of Rmb300,000 for regular cases and Rmb500,000 for cases with severe consequences or serious circumstances.