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Manage your Intellectual Property in Mainland China, HongKong, Macao and Taiwan

Prevention and Enforcement

When licensing technology to China what steps should I take to protect my intellectual property (IP) before I enter the market?

You should be aware of and take the following steps to ensure intellectual property protection before entering the market:

  1. Ensure your intellectual property rights (patent, utility model, design and trade mark) are registered in China. You should also be aware of the fact that remittance of royalties to a licensor (for example yourself) is often very difficult where the rights in question are not registered in China, or the license agreement in question has not been submitted for official recordal.
  2. Check into your Chinese partner. You should consider conducting due diligence into your potential licensee to learn about their track record for observing intellectual property rights, or infringement if any, and if the licensee is actually who they represents themself to be. This will contribute to upholding any distribution and/or confidentiality agreements you enter into.
  3. Develop a well thought out and robust licensing agreement – note that Chinese laws & regulations apply. This is a complex area and should be undertaken by a competent lawyer. Ensure you can end the agreement without losing your market.  It is important to keep in mind that the licensing partner can become a future potential competitor and/or infringer if not considered appropriately.
  4. Keep the most important know-how to yourself. Often the licensing partner does not need to know all the details of your product. It is imperative that you keep the most important information to yourself (if possible).

What are the differences between taking action against an infringer based on ‘Intellectual Property’ regulations and ‘unfair competition’ regulations in China? Which is most effective?

In China, an action against unfair competition may offer protection in situations which are not specifically covered by the laws protecting intellectual property.
An action against an infringer based on intellectual property regulations requires proof of relevant rights and infringement whereas a claim for unfair competition may not require proof of registered rights in China.
For instance, trade mark infringement may be limited to situations where an infringer uses a trade mark identical or similar to another registered trade mark without authorisation from the trade mark registrant. Whereas, in an unfair competition claim, use of an unregistered trade mark, or using names, packaging, or decoration similar to a well-known mark, enterprise or name on a product may be actionable under unfair competition, even if not necessarily actionable under intellectual property laws. Having said that, the level of proof required to show that a trade mark is well-known in China is high.
Unfortunately unlike in many European jurisdictions, the availability of unfair competition actions is much narrower. Typically where you have already registered intellectual property rights in China, you would take action under the intellectual property regulations. Where the activity at issue is not actionable under the intellectual property regulations (e.g. trade secret theft), or you do not have relevant intellectual property rights in China (e.g. in the case of unregistered trade marks) you should consider whether unfair competition actions are available.

Unfair competition covers misappropriation of trade secrets, false advertising, tie-in sales, disseminating misinformation with the aim of damaging the goodwill of a competitor or its products etc. Therefore, the relative effectiveness of intellectual property and unfair competition claims would depend on what activity is at issue and whether or not you have registered rights in China.

What is unfair competition?

Unfair competition can be defined as any dishonest and deceptive practice that unduly hinders competition, such as using, without authorisation, the name, packaging or decoration similar to well-known goods so to mislead consumers about the origin of such goods.
In order to use the protection afforded by the unfair competition law, you will have to prove that your goods are well-known in China, your name, packaging or decoration is unique to you  and that the use of your well-known name, packaging or decoration by another person is likely to cause confusion.

Passing off the registered trade mark of another person is also considered an act of unfair competition.

If I become aware of a competitor infringing my intellectual property rights (IPR), am I obliged to take action?

As in most European jurisdictions, there is a two-year  ‘statute of limitations’  for bringing claims of intellectual property infringement. This means that you have to take action within two years from the time you knew or should have known about the infringement. This means that you not only knew of the infringing product or act, but also the identity of the party responsible for the infringement. You do not ‘lose’ your intellectual property rights if you fail to initiate an enforcement action during the two years. However, your ability to take an enforcement action against the same act of infringement may be forfeited – it operates basically like a waiver of your right to take action against the infringement in question. Where the infringement is on-going, enforcement action can still be taken. You should however, expect the infringer to dispute the level of damages that should be awarded to you

It is likely that you may not be able to recover damages which are older than the two-year period immediately preceding the date action is taken.

Can I combine administrative, civil and criminal action when an infringement of my intellectual property (IP) occurs?

All types of actions can be combined: for example an administrative raid, followed by a civil litigation and a negotiation 'stimulated' by the threat of a criminal action.

What is administrative action?

Administrative actions are actions carried out by government agencies like, for example, the State Administration for Industry and Commerce (SAIC) for trade marks infringements or customs, without the involvement of courts.
Although administrative actions do not give the same deterrent value as criminal actions or civil lawsuits and you will not be awarded damages, they are a quick and effective way of protecting your rights.

If you find that a third party has infringed upon your China registered trade mark or other intellectual property (IP) right, you can then decide, based on the circumstances, whether to enforce your registered IP right thought an administrative action by lodging a complaint to the local branch of the authority responsible for the infringed right.

What government agency should I contact to launch administrative action?

What government agency you should contact mainly depends on the intellectual property (IP) in question.

Trade Marks
Administrative actions are a very common means of enforcing trade mark rights. The local bureau of the Administration for Industry and Commerce (AIC) is the competent authority for the location where the infringement is taking place and has the power, on its own motion (ex officio) or upon the request of the right owner to investigate the premises where an infringement is commit­ted (only commercial premises, not private premises), confiscate infringing goods, interrogate the parties involved in the infringement, examine and confiscate documents that may be deemed evidence of the infringement such as invoices and accounting books.
AIC, at the end of its investigation, and having received confirmation of the nature of the infringing goods by the right owner or its authorised agent, also has the power to impose fines, up to triple the value of the ‘illegal business’ (that usually refers to the value of products ) or, if theamount cannot be determined, up to RMB 100.000.
Normally, the AIC will intervene only in cases involving straightforward trade mark infringements (i.e. identical mark used on the same goods as the registered trade mark).
The Quality and Technical Supervision Bureau has basically the same powers (of) as the AIC and it can impose higher fines (up to five times the value of the ‘illegal business’) but it will take the case only if there are issues related to the sub-standard quality of the products involved ( usually involving  IP infringements or passing off).

Patents
Administrative enforcement is less suitable for invention patent infringements, due to their technical nature; it is however more suitable for design patent infringements. The patentee may lodge a complaint with a local Intellectual Property Office (IPO) that has the power to investigate, collect relevant evidence, order the infringers to stop the infringing activities and impose administrative penalties. The IPO also has the right to start an action to investigate and collect evidence without a reuest from the right holder (ex officio).

Copyrights
The administrative route is also available for copyright infringements, when a public interest issue is involved, by lodging a complaint with local administrations of the National Copyright Administration of China (NCAC). Also in this case, the local administrations have the right to interrogate the parties involved in the infringement, stop infringement of copyright and confiscate illegal income, confiscate and destroy pirated reproductions and impose an administrative penalty.

Intellectual Property protection upon import or export
Providing that your IP rights have been registered with the General Administration of Customs (GAC), local customs will, on their own initiative (ex-officio), preliminarily seize suspicious goods that are found to be imported/exported into/from Mainland China. After seizure, customs will request a confirmation from you (through your registered Chinese customs agent) on the nature of the infringing goods and commence an investigation to confirm whether or not the goods are actually infringing. Once the investigation is concluded and the goods assessed to be counterfeits, the local customs has the right to destroy the infringing items and impose an administrative fine on the infringer.
In addition to this ex-officio  procedure (where goods are seized on the initiative of GAC), if you become aware of a potential shipment of infringing goods, you can apply directly to GAC for seizure of that particular shipment, even if your rights have not previously been recorded with GAC.

What is civil action?

Civil litigation means that you sue the infringer of your intellectual property in a civil court. This type of action is recommended in cases where the issues are complex and when you are set on claiming damages. In civil litigation, the amount of damages can be a serious deterrent for the counterfeiter. Very often, the courts push for mediation and the settlement obtained can be significant, and immediately paid (which avoids the time and uncertainty of enforcement of the judgement).

It is important to note that when an infringement takes place there are a number of courses of action you can take including administrative action.  It is advisable to speak to a lawyer to discuss the best course of action to take for your case.

What is criminal action?

In cases where the 'criminal threshold' is reached it is possible to file a complaint directly to the Public Security Bureau (Police). As much information as possible needs to be gathered beforehand.

Criminal prosecution is then overseen and supervised by the Procuratorate, (or Prosecutor, who represents the State in the procedure) which may lead, in successful cases, to severe punishments and fines by the criminal court, but not to financial compensation.

If I discover an infringement while my patent is pending, what options are available to me?

Patent infringement can only be claimed after a patent is granted in China. For all three types of patents the applicant must wait until the patent is granted before they can take action against an infringing party.
For utility models and design patents, owners may only sue the infringing party for infringing acts that have occurred after the patent grant.
For invention patents, after the grant of a patent, a party may request damages for any infringement that has occurred from the date of publication of an application in the Patent Gazette, nevertheless the legal action may be started only after patent has been granted. Invention patents are published in the Patent Gazette 18 months after the initial applications. However, there may be a significant time period before the invention patent is granted after substantive examination.

The applicant has limited options regarding pre‐grant patent infringement. They may consider collecting as much evidence as possible regarding the infringer and the supply chain of the infringing goods. This will allow the identification of infringers and relevant evidence to be quickly used in any post‐grant patent infringement litigation.

What damages are available to a party who has had their intellectual property (IP) infringed by breach of a technology transfer agreement?

The following measures for evaluating damages are available for intellectual property infringement:
• the illegal profits gained by the infringer
• loss of profits to the rights‐holder
• in the case of patent rights, reasonable royalties (in practice you will have to be able to show a Court the level of licensing revenue derived from comparable licensing arrangements, preferably in China)
• reasonable attorney fees and expenses
• statutory damages (not exceeding RMB 500,000)
Additionally, the following damages are available for breach of contract (relevant here as technology transfer agreements / licences are basically contractual arrangements):
• liquidated (pre‐estimated) damages provisions in contracts are allowed and enforceable in China, especially if actual damages are difficult to determine. Courts will only adjust the liquidated damages amounts if the party that has to pay the damages can show that the amounts specified are significantly higher than the actual damages.
• The actual losses suffered by the party to be compensated (these do not include those that were not foreseeable at the time of contracting).
• The amount varies depending on the evidence of loss (whether you can prove the amount), not by the type of technology transferred.

Are there intellectual property (IP) complaint centres set up at Chinese trade fairs?

The law on Measures for the Protection of Intellectual Property Rights during Exhibitions (2006) calls upon organisers of trade fairs/exhibitions lasting three days or longer to set up IP complaint centres.

Before signing up as an exhibitor at an exhibition, you should check with the exhibition organisers whether there will be an intellectual property complaint centre and with administrative departments (for example, those dealing with patents, trade mark, etc.) invited to attend. If the event lasts only a day or two, you can check whether local enforcement authorities such as the Administration for Industry and Commerce (AIC), the Public Security Bureau (PSB) or the Technical Supervision Bureau (TSB) will be present. If not, the organiser should be able to provide you with a contact (that can be addressed) in case of infringement.
In practice, more and more exhibition organisers are establishing such complaint centres in order to raise the exhibitions’ profiles, irrespective of the length of the event.
A company whose products are being infringed at the fair can contact both the intellectual property (IP) complaint centre at the fair and the local AIC. However, at trade fairs the usual practice is to visit the IP complaint centre first. Both the IP complaint centre and the local AIC can order exhibitor to remove any allegedly infringing products but they will not confiscate goods or issue punishment decisions.

How efficient are the intellectual property (IP) complaint centres at Chinese trade fairs?

The effectiveness of intellectual property (IP) complaint centres at major exhibitions depends to a large extent on two factors:

- the representatives of the administrative enforcement departments available at the exhibition
- how prepared you are
One common problem which arises for enforcement at exhibitions is that there may be many complaints, but insufficient administrative officials /enforcement staff. A recent trend towards law firms operating IP complaint centres at trade fairs rather than administrative officials means that it may not be possible to take enforcement actions during the fair itself. Another equally common problem is the lack of preparation of rights-holders who may discover infringers for the first time at an exhibition (see: Trade fair Handbook). If you do not have the required documents, while you may not be able to take specific enforcement action at the fair, you may still take pro-active steps, for example, by making notarised purchases.

Injunctions are theoretically available at exhibitions but difficult to put into effect unless the identity of the infringer who will be exhibiting at the exhibition and nature of the infringement is known with certainty well in advance. In addition, the level of evidence required for injunctions is very high. In practice, a complaint initiating legal action must be made at the same time an application is made for an injunction. This, combined with the fact that the duration of exhibitions is short, renders injunctions at exhibitions impractical, except in situations where you have already made preparations to file civil litigation, and the exhibition in question happens to take place once those preparations are complete.

What issues are usually considered and acted upon by the complaint centres at trade fairs/exhibitions?

In China, the various intellectual property (IP) laws delegate enforcement to specified administrative authorities, such as the Administration for Industry and Commerce (AIC) for trade marks and unfair competition, Patent Administration Bureau (PAB) for invention patents utility model patents and design patents, and National Copyright Administration (NCA) for copyright. Additionally, the Quality and Technical Supervision Bureau is empowered under certain product quality laws to take action in certain circumstances.  A recent trend towards law firms operating IP complaint centres at trade fairs rather than administrative officials means that it may not be possible to take enforcement actions during the fair itself.

Trade mark infringement
Where trade marks are infringed, the AIC is empowered to take action by ordering an offending exhibitor to immediately cease the infringement activity, withdraw from display the offending items, and/or confiscate and destroy publicity materials. If the infringement constitutes trade mark ‘counterfeiting’ (i.e. identical copies of the trade mark in question) then both the AIC and the Quality and Technical Supervision Bureau are competent to take action because the act of counterfeiting a trade mark is also considered to be actionable under relevant product quality laws.

Patent infringement
The Patent Administration Board (PAB) is the administrative authority empowered under the Patent Law. However under the current Patent Law, the PAB has limited enforcement powers – it can inspect allegedly infringing products and can make a determination of infringement. With the exception of the Province of Guangdong, the PAB is, however, not empowered to seize infringing products, seize documents or other materials, or indeed able to impose any penalties or fines. Thus the PAB’s role at exhibitions is usually that of a mediator or negotiator between the rights-holder and the infringer.

The situation is slightly different in Guangdong where the Guangdong Patent Protection Regulation grants wider powers, which still do not allow the imposition of a fine, but at least empower the PAB to seize infringing goods.

Does my intellectual property (IP) need to be registered in China for me to take action at a trade fair?

Yes, your intellectual property (IP) right needs to be registered in China since registration certificates are required by the IP complaint centre (and the relevant administrative authorities) in order to take action. You will have to produce the relevant documentation as proof of your registration to take action at a trade fair.

Should I take enforcement action before or after the exhibition or trade fair?

First, and well in advance of the exhibition, you should decide (if you come across an infringement) whether you will want to take enforcement action during or after the exhibition takes place.

Taking immediate enforcement action at the exhibition may not always be the most strategic move. Whether to take immediate action will depend on many factors such as the potential losses you may suffer if action is delayed until after the fair, your short-term and long-term objectives, the nature of the rights infringed, the nature and strength of available evidence. The effect of an enforcement action at an exhibition may be limited as it addresses primarily the sales / potential sales resulting from the fair, and will not necessarily address the source of the problem or any longer-term challenges. Therefore, even though enforcement action may be available at exhibitions, such actions should form part of a broader enforcement strategy.  A recent trend towards law firms operating intellectual property complaint centres at trade fairs (rather than administrative officials) means that it may not be possible to take enforcement actions during the fair itself.

What is the process for taking action at a trade fair?

Assuming that you have all documents in order and that the person signing the complaint at the exhibition is empowered to act (for example, the Power of Attorney), you can file a formal complaint with the intellectual property (IP) complaint centre with relevant evidence of your rights and the infringement (see: ‘IP Strategy for European SMEs at trade fairs in China’ Handbook). Officers of the relevant administrative authority will consider your complaint and if they decide that an inspection is justified, would accompany you to the infringer’s stall to mediate the removal of the offending products. Depending on the authority, it may also be empowered to seize the offending products and impose a penalty. Note that in Guangdong Province, the Patent Administration Bureau (PAB) has additional powers under the Guangdong Patent Protection Regulations, including the power to seize infringing goods. The power vested in the IP authorities at trade fairs in China varies between events and territory. Please contact the event organiser who can provide you with details of the jurisdiction of the IP authorities at the fair. A recent trend towards law firms operating intellectual property complaint centres at trade fairs (rather than administrative officials) means that it may not be possible to take enforcement actions during the fair itself.

What is the process for taking action after the trade fair?

If you choose not to take or are not able to take immediate enforcement action against an infringer at an exhibition, the exhibition provides a good opportunity to collect and/or formalise evidence by taking pictures of any potentially infringing products (photography is often permitted at Chinese exhibitions), collecting the target’s business cards and brochures, and recording the name and number of the target’s stall. At this point you should not confront the target. If the case is complex or the investigation looks like it will be quite difficult, you might consider hiring an investigator. In order to formalise the evidence collection, you may wish to consider whether you want a notary to be present during evidence collection, since the notarisation of evidence will:
- allow you to claim jurisdiction in the city where the exhibition took place
- make it difficult for the infringer to later argue in court that they were not present, they did not produce the product, or even that the evidence was fabricated.

After the exhibition, you or your local agent can then decide what actions to take, and can for example, send the infringer an initial warning letter. The exact nature of the claims in the warning letter will depend on the strength of the evidence collected, and of course on the strength of your rights. The evidence gathered at the exhibition can be used to initiate follow-up investigations into the infringer and then, if the combined evidence warrants it, you might then consider administrative enforcement action or civil litigation.

Is it possible to demand immediate action against infringers at a trade fair?

Immediate enforcement action at exhibitions against infringers is possible but the action depends on the intellectual property (IP) rights you own and the nature of the infringements. A recent trend towards law firms operating intellectual property complaint centres at trade fairs (rather than administrative officials) means that it may not be possible to take enforcement actions during the fair itself.

What options for taking action at a trade fair are available to a right holder if they are not present in China?

The following options may be available to you if you are not present in China:

- Acting through a local agent. You can contact a local agent to attend an exhibition on your behalf. In this case, you should provide your agent with notarised and legalised copies of your registered intellectual property rights in China (in the case of patents, you should also include receipts from the State Intellectual Property Office (SIPO) confirming payment of most recent annuities), and Power of Attorney (POAs);

- Acting through trade associations. Like a local agent, local trade associations may be able to assist you in a similar manner by visiting an exhibition on your behalf. However not all trade associations are able or prepared to do this. If a trade association is willing to act, then you should again provide its representative with notarised and legalised copies of your registered intellectual property rights and executed POAs.

What materials need to be submitted in order to file a complaint at a trade fair?

The required documents for filing a complaint at exhibitions are:

1. Registration certificates of relevant intellectual property (IP) rights (notarisation and legalisation is strongly recommended, and is in fact required by some administrative authorities):

- Patents: patent document,  confirmation of your rights over it and that it remains in force (i.e. receipts of annuity payments)
-Trade marks: trade mark certificates, confirmation of your rights therein and any renewals of the trade mark in question
-Copyright: certification of copyright, and confirmation of your rights over it 

2. Basic information about the suspected infringers (name or description sufficient to identify them at the fair, stall number etc.).
3. Explanation and evidence of the alleged infringement.
4. Notarised and legalised POA.

A recent trend towards law firms operating intellectual property complaint centres at trade fairs (rather than administrative officials) means that it may not be possible to take enforcement actions during the fair itself.

What is the procedure for following up on infringement matters after an exhibition has ended?

If action was taken at an exhibition, you should conduct follow up investigations to check if the infringer in question continues producing infringing products through, for instance, internet monitoring or by verifying the infringer’s activities in other trade fairs.

Once you have confirmed that a past infringer is going to attend other trade fairs you can evaluate whether to take action against him at these exhibitions, or whether he should be discouraged from infringing your rights in advance by sending warning letters before the exhibition/s take place.

If enforcement was not very effective at the exhibition (for example where mediation by the Patent Administration Board in the case of a patent infringement did not result in removal of the infringing products from the stand), or if there is reason to believe that the infringer is going to re-offend, then consider taking additional enforcement action. In any event, re-checking on known infringers, and if necessary, taking follow-up enforcement action is good practice.

Enforcement after the exhibition can be taken by contacting the appropriate enforcement authority, which may well be different from the authority that assisted at the exhibition, since the infringer is often domiciled in a different jurisdiction to where the exhibition took place.

What are the usual penalties for infringers of intellectual property (IP) at exhibitions?

Penalties for infringers are often modest, if imposed at all, and officials are often unable to confiscate infringing items. The aim of enforcement actions at exhibitions is largely to reduce the potential for infringing sales orders to take place. You need to manage your expectations, and should not expect to stop infringement solely through exhibition enforcement. Follow-up on evidence gathered at exhibitions may lead to opportunities for more effective enforcement action, and larger fines, especially where there is a larger (perhaps organised) infringement issue.

How do I choose the best court to decide my case?

The careful selection of the court (forum) where to bring your intellectual property (IP) litigation is an important aspect of (you) your IP enforcement strategy in China.
Courts in the most developed Chinese cities such as Beijing, Shanghai , Guangzhou, Shenzhen have a higher level of expertise in dealing with IP infringements while courts of more remote areas (especially lower courts) may be less prepared with this regard (especially when patent infringements are at stake).
Although the situation is rapidly improving, courts in more remote areas also may carry a higher risk of local protectionism.

The forum for your IP litigation needs to be carefully evaluated with your lawyer in order to take into account the various important aspects involved in lawsuits such as, average compensation awarded, the length of time before the case can be heard and so on.

What evidence do I need for taking a legal action?

The type of evidence that you would need in order to support your claims will depend on the type of infringement, the course of action, the damages claimed etc. Generally speaking, among the most important types of evidence, are those that prove the validity of your right.
Evidence of use of your right is important in many courses of action. For example, in relation to trade marks, such evidence of use would be: dated catalogues of goods bearing the trade mark, proof of investments in advertising, exhibitions, sales figures etc.
Evidence relating to the infringement itself, such as evidence of the sale/production of infringing goods (including online) is also important to collect. Evidence of the other party’s bad faith may also be helpful in supporting your arguments.
In order to enhance the validity of evidence originating from China, especially in civil lawsuit, it is highly advisable to have them duly notarised.
A notary public, who will certify the validity of the documentation collected, can be contacted through your local agent. The notary public fees vary depending on the type of notarisation to be performed (i.e. notarisation of website contents is normally cheaper than notarised purchase) and also from city to city.

Evidence originating from outside China will need to be notarised by the notary public of the relevant country and further legalised by the Chinese Embassy stationed in that country.

How can I collect evidence?

Evidence can be collected through various means. An important point to consider is not to wait for the action to be started and then collect evidence to support your rights and prove infringement. Sound evidence should always be prepared before the action is started.
Evidence can be collected though investigations, monitoring of trade fairs, monitoring of online infringements, liaising with administrative authorities for disclosing relevant information after an administrative action has been initiated or performing careful notarised purchases of the infringing goods.
In order to enhance the validity of evidence originating from China, especially in civil lawsuit, it is highly advisable to have it duly notarised.
A notary public, who will certify the validity of the documentation collected, can be contacted through your local agent. The notary public fees vary depending on the type of notarisation to be performed (i.e. notarisation of website contents is normally cheaper than notarised purchase) and also from city to city.

Evidence originating from outside China will need to be notarised by the notary public of the relevant country and further legalised by the Chinese Embassy stationed in that country.