China has a dual enforcement system to deal with trade mark infringement; an administrative (generally AIC and Customs) approach and a judicial (court) approach. Most trade mark infringement cases are handled administratively as this route is effective, quicker and cheaper in comparison with court actions. The local Administration for Industry and Commerce (AIC) office can conduct raids, confiscate infringing goods, issue preliminary injunctions, order the destruction of infringing goods, and levy fines, provided that the trade mark to be enforced is already registered in the China Trade Mark Office and the questioned mark is identical or almost identical in wording or design and being used on goods similar to those covered by the owner's registration according to the local classification.
In order to initiate an AIC raid, the owner needs to file a written complaint to the appropriate AIC presenting the proof of the ownership of trade mark rights and providing information and any materials regarding the infringement, such as the owner's (legalised) certificate of incorporation, (legalised) power of attorney, trade mark registration certificate, a sample of the infringing products or package, the (notarised) tax invoice of a purchase proving that the product was provided by the infringer, a statement that the product was counterfeit, any information regarding the locations of the infringer's business and warehouse, etc., and a (legalised) warranty undertaking that the owner would compensate the other party for loss if the complaint is found groundless. In most cases if all is in order, then the AIC would conduct the raid within about one to two weeks and issue a decision within one to two months. The AIC may also impose a fine on the infringer. An AIC action typically costs US$5000-15000. In addition, a field investigation against the infringer is usually necessary in order to collect useful information. Many foreign brand owners have been impressed with the speed and reliability of the AICs in providing rapid seizures against counterfeits and infringing items over the last two decades.
The AICs in Beijing and Shanghai are relatively strict in requiring that all documents produced outside China to be originals that are legalised before accepting the cases. This can take time and expense. However, AICs in Guangzhou, Zhejiang and Hainan provinces are much more relaxed with respect to the required documentation. As there is some variation, it is best to check the local office’s requirements before submitting any requests.
China Customs can stop infringing products from either entering or leaving China, and is best for identical or almost identical marks. In order to initiate the Customs monitoring procedure, owners should usually record their Chinese trade mark registration before the Customs (now available online). While recording the trade mark rights, the owner may provide respective lists of authorised users and potential infringers as well as pictures of the packages of trademarked goods to affiliate the Customs’ monitoring, including any information regarding who is shipping infringing items, or where they are being shipped to/from.
Usually the most effective Customs enforcement is when the trade mark owner knows that shippers are using a specific point of entry, (for example, Shanghai’s port), and so they go to the relevant Customs Office to show a genuine mark, what to look for in an counterfeit, who the typical shippers are, along with a written request of detaining the suspicious shipment. Once a Customs Office discovers a shipment containing counterfeit marks , then the trade mark owner has three working days after receipt of the Customs’ notice to decide whether or not to pay a bond to hold the items. Then, within one to two weeks the trade mark owner must initiate court proceedings to make the confiscation permanent. If the Customs Office fails to receive the Court’s notice within 20 working days, then the Customs Office will release the goods.
In the event that Customs seize the goods of their own initiative, then after receipt of the bond of the trade mark owner the Customs shall investigate the case and conclude whether there is infringement within 30 working days. If it concludes there is, the Customs Office shall confiscate the infringing goods. The trade mark owner may simultaneously initiate a court proceeding at the Court against the infringer for recovery of loss and claiming damages.
Generally more serious and less clear-cut cases go to the Judicial Courts, where there is a greater dispute as to the circumstances of the alleged infringement (for example, if the marks are not identical or if there are questions over ownership of rights) and/or the value of the goods involved is higher. A court action takes longer and is much more expensive. A first instance court proceeding often costs US$30,000 up and may take six to nine months to conclude. However, the Court may award damages to the owner if the infringement is found.
Because there is essentially no “US-style discovery” in China, a plaintiff must have all evidence in-hand at the time of filing a court lawsuit. It should also be noted that evidence preserved in an AIC or Customs action may be (often is) used in lawsuits as well. Last but not the least, as China is largely a first-to-file country in terms of trade mark protection, the premise of initiating any action against trade mark counterfeiting in China is that the owner has secured its trade mark rights in China through registration.