China’s IP system is sometimes perceived by brand owners as opaque and intimidating. This “China angst” is often furthered by the lack of information available to many on the realities of trademark enforcement and the stories from others highlighting the troubles that can come with protecting your brand. However, the truth is that the enforcement of trademark rights in China is absolutely possible. In fact, the bulk of the negative China stories are coming from those brand owners who were late to registering their rights and fighting parties who have beaten them to the punch in China’s first-to-file system (a discussion we will save for another time). Nevertheless, trademark owners do have a number of enforcement options and can certainly join the long list of brand owners who have found success in China’s growing market. Here, I aim to provide you with a lighted path through China’s seemingly hazy system, with a step by step outline of what should be considered and the action should be taken once infringement is detected.
Step 1 – Fact gathering and finding counsel
If you’ve discovered an infringer in China, the first thing you should do is take a deep breath and then collect all the information you already have and contact a local attorney in China. You should be prepared to answer the following questions for your Chinese attorneys:
- What registered trademarks or trademark applications do you already have in China? Have your records and certificates available.
- How did you discover the infringement?
- What do you know about the infringer’s activities to date?
- What type of goods and what trademarks are being infringed upon, that you know of?
- What impact is this having on your business?
- Do you know the actual identity of the infringer, location of production or sales of infringing goods, if the infringing goods are being exported, or anything else about sales/distribution of the infringing goods?
- Have you licensed your trademark in China? Or do you work with or have you worked with any manufacturers, distributors, or other partners in China? Have information/documentation available.
- What kind of time and financial commitments are you are willing and able to make in order to enforce your rights in China?
Many ask whether they can work with their current firm from their home country who has an office in China, and the answer is yes. But it should be noted that foreign firms will have a local Chinese firm that they work with, so I always recommend to get more information about the Chinese attorneys also assisting with your case and clarifying how things will work between you and all the attorneys working on your case.
Lastly, I am often asked whether a cease and desist letter (C&D letter) can or should be sent to the infringer as a first step. Understandably, this is often a low cost and quick solution used by brand owners in other countries, however, sending a C&D letter is not always the best initial step for infringement in China. This is because a C&D letter may be completely ignored and thus a waste of time and money, and/or it can give notice to an infringer who may try to hide assets or evidence of infringement. Generally, it all depends on the specific case at hand, but hold off on sending that letter until you’ve discussed things further with counsel who has experience in these situations.
Step 2 – Investigations and evidence collection
After you have gathered the information you have on hand and hired local counsel, the next step is to conduct an investigation. It is critical to have a full understanding of the situation, and be able to gather evidence that can be used in action against the infringer and an investigation can help you obtain these things. During the investigation you can conduct a notarized purchase of infringing products, document infringing websites, recording the infringers activities occurring on-site (or at multiple infringement sites), collecting brochures or other marketing materials being used by infringers, finding information about the individuals involved, and collecting any other evidence an information that could give you a better understanding of the circumstances and be useful in action against the infringer.
Step 3 – Developing a strategy
Now you are able to look at the big picture which means you are in a good place to decide the best route to stop the infringement. In China, note that there are two paths towards enforcement – administrative and judicial.
Generally, administrative action tends to be the more common route due to the quick turnaround and the lower cost. However, keep in mind that via administrative actions, a trademark owner cannot collect damages and the authorities may refuse to take on more complicated cases or get involved in cases of widespread infringement. For administrative action, trademark owners usually turn to local AIC (administration of industry and commerce) offices where infringement is occurring who can conduct a raid and from there, order immediate cessation of infringement, confiscate and destroy goods and tools, and impose a fine. There are other administrative authorities that can assist in certain situations, for example, where food products or pharmaceuticals are at issue, the AQSIQ (administration of quality supervision, inspection, and quarantine) is also a resource, or where infringement is detected at a port, Customs can seize shipments.
On the other hand, trademark owners can seek enforcement through the courts if they wish to seek compensation from the infringers or where a trial judges’ IP knowledge and legal expertise can offer a better resolution or be the only option due to a more complicated dispute. However, it should be noted that judicial action requires more time and money to be invested. There may be a number of courts within China in which a trademark infringement case can be filed. Those courts at the defendant’s registered address and where the infringing products’ have been manufactured, sold, stored, or seized all have jurisdiction over the trademark infringement case. It is important to carefully choose the best venue to file your case to prevent local protectionism, utilize a court having richer experience in adjudicating trademark infringement cases, find a venue with a more positive view of your specific legal issue, or strategically increase the litigation costs of the defendant.
To determine the best avenue for your case, you’ll need to first determine whether the administrative or judicial action is best by deciding whether the collection of damages is important, whether a quicker timeframe is critical, or your case particularly complicated, etc. Moreover, based on the investigation, which courts or local administrative offices can you file your case with? Once you’ve decided the exact courts or offices that are available to review your case you should determine whether local protectionism may be an issue at any of the options and cross these off the list. While China’s system has improved greatly, and the authorities in larger cities like Beijing, Shanghai, Tianjin, Shenzhen, etc are well poised to impartially handle trademark infringement issues, unfortunately, it is possible to still encounter issues of bias in smaller cities. Moreover, you should look at each of your options and see what the legal trends are based on past decisions. Different authorities may have opposing views on certain legal issues, and thus depending on your case, it may be best to avoid adjudicating your issue in places not ideal for your specific case. For both local protectionism and adverse legal trends, your local Chinese counsel should be able to give you advise on which places to avoid.
Lastly, it should be noted that in additional to the more common routes of enforcement above, depending on the overall situation, it may make sense to negotiate directly with the infringers to find a solution. Furthermore, criminal action may be available and sought by working with the public security bureau and the courts. In general, it is important to develop a full and creative strategy when attacking infringement in China.
Step 4 – Taking Action
Upon deciding where to file your case, you’ll need to prepare your filing documents and submit evidence.
Note that evidentiary requirements will differ between administrative authorities and the courts. For administrative action, you will need to submit enough evidence to convince the authorities that a raid should be conducted, then during the raid, the authorities will be able to obtain additional evidence of infringement to decide what penalties are appropriate. On the other hand, more evidence will need to be submitted to the courts at the time or soon after filing your case. Further, the courts have stricter requirements for evidence and authorization of documents. All evidence and documents will need to be notarized and/or legalized and form a complete chain of evidence. Note that the legalization process, can take up to a few weeks so it is important to start this process as soon as possible. While you can request the courts to assist in the discovery of evidence under certain circumstances, the parties are largely responsible for collecting evidence on their own to prove their case.
As mentioned above, the time frame for administrative action is much quicker than judicial action with it taking anywhere from a couple weeks to a few months for the authorities to conduct a raid and from there issue an order to cease infringing activity, confiscate and destroy goods and tools, and impose a fine. On the other hand, for a typical foreign-related trademark civil action, it will take the courts about six to twelve months to issue a decision, with an appeal taking another three to six months.
Alternatively, you’ll need to work with your attorney to determine the best way to approach the opposing party for negotiations. It’s highly recommended that you conduct negotiations through a local Chinese attorney rather than engaging with the other side directly.
Step 5 – Preventing Future Problems
In addition to handling any current issues of infringement, remember to take this opportunity to look at your overall trademark situation and making sure that you have the protection necessary to avoid, as best as possible, any future issues. You may even wish to take this step earlier in the process, possibly at the same time as completing investigations on the known infringer. Some additional protections you may want to consider include the following:
- File any additional trademarks or IP applications necessary to have broad protection in China
- File trademarks in Hong Kong, Macau, or Taiwan in addition to Mainland China
- Record your trademarks and other IP with China Customs to have them regularly looking for infringing goods being imported/exported
- Set up a trademark watch to detect further infringement
- Re-examine your internal systems to ensure records and information related to your trademarks and other IP is preserved, well organized, and accessible when needed
- Be prepared to conduct due diligence on future potential partners in China who could impact or even infringe your trademark rights
- Tighten up your China agreements to further protect IP
With the above in mind, remember that there are indeed options for enforcing your trademark rights in China, but it is critical to develop a smart strategy based on your specific situation with experienced counsel. By being informed and prepared, you may find it far easier to navigate China’s enforcement system than expected.