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

Action against Counterfeits

 

Background

Secto Design Oy, a Finnish SME established in 1995, specializes in designing and producing wooden lamps. Its lighting collection presently comprises more than 25 models featuring varying shapes created with form-pressed Finnish birch wooden slats. Secto Design obtained specific design protection for its lamps in the EU and the US, while its intellectual property portfolio also encompasses trademarks, copyrights and trade secrets. More than 94% of Secto Design’s products are exported, its main markets being Europe and the United States.

 

Problem

As Secto Design didn’t plan to market its product in China, the SME initially didn’t register its intellectual property rights in China. Yet, at a certain point it found that over 90% of the products infringing their IP rights originated from China. Most of the infringing goods were found on e-commerce websites, including western websites like Amazon, as well as Chinese e-commerce platforms like Alibaba.

 

Action undertaken

Facing these large scale infringements, Secto Design developed an active IP enforcement strategy for China even though China is not its key market. This first required Secto Design to register its intellectual property in China. The SME was able to obtain design patents for their new design solutions in China, but the older designs which take up the lion’s share of the product portfolio, didn’t meet the absolute novelty requirement under China’s design patent law. Therefore, Secto Design is mainly relying on trademark protection (for which it registered its trademark in China) and copyright protection (for which it obtained a voluntary copyright registration certificate) to take action against the sale of counterfeit goods.

In China, Secto Design’s enforcement policy is currently focusing on removing e-commerce listings and more recently on restricting the export-import of IP infringing goods with the help of the customs. It has tried to take civil action against manufacturers and other infringers in China, but for an SME it found this doesn’t provide a cost-effective solution. The main reason is the high costs of litigating and notarizing evidence (which, when including an appeal, could cost tens of thousands of Euros). Another reason is that manufacturers are difficult to track down and are very sophisticated in their infringing activities. For example, an infringing company bankrupted itself and reformed itself into another company as a result of which the evidence collected became useless. Nowadays, Secto Design aims to hold owners and management personally liable to avoid similar tricks in the future. In civil litigation cases, the company has always received a favorable decision against the infringers and continues this practice as the long-term strategy. Nevertheless, taking into account cost considerations, focusing on removing e-commerce listings remains the SME’s core strategy.  

 

Result

To more effectively enforce its intellectual property rights, Secto Design moved from manually monitoring 3-4 e-commerce sites to using a third party service provider to monitor infringements on over 72 e-commerce platforms. The success rate in takedowns is around 90% on approx. 10,000 reported listings, while the most of the remaining 10% are in general removed by the seller on a voluntary or other basis.

By adopting an IP enforcement strategy and actively monitoring and tackling IP infringements in China, Secto Design managed to decrease the number of total infringement cases. By removing the listings of IP infringing products on e-commerce websites, the SME succeeds in preventing European and North American retailers from purchasing and further distributing the counterfeit lamps in Secto Design’s key markets. While Secto Design’s enforcement strategy has achieved tangible results, it underlines that high costs can be an obstacle for SMEs in tackling IP infringements in China. Apart from the actual enforcement costs, China’s requirements to have all evidence and documents notarized, including the supporting evidence of cease and desist letters notarized, is making enforcement costs higher than in other countries. Despite the costs involved, Secto Design remains determined to take an active IP enforcement strategy as this enables them to effectively fight infringements and protect their brand reputation. They also hope that by focusing more on customs enforcement in China, by recording trade mark, copyright and design rights with the China customs authorities, even more infringing products could be stopped.

 

Lessons learned

  • Due diligence before launching any products is important: before making a new design public make sure that your intellectual property rights are registered
  • Although China may not be a market for your products, consider registering your IP in China as this is the only way you can tackle infringements in China, especially as many counterfeits still originate from China
  • An active IP enforcement strategy for China is essential in decreasing the level of IP infringements, but it is not cheap and requires SMEs to invest in it
  • The success rate of take downs on e-commerce platforms in China is relatively high
  • Targeting IP infringements on e-commerce platforms rather than going after the manufacturer is a cost-effective way for SMEs to prevent counterfeit goods from entering the SME’s key markets. 
  • Chinese customs also have the authority to stop the export of infringing goods out of China. It is thus useful to record your IP such as trade mark, copyrights and design rights with the customs to benefit from the customs protection.