If you’ve registered your IP rights in China, and protected your IP using strong contracts, you will be well positioned to enforce your IP rights in China. Different enforcement actions will have different costs and benefits, and the most appropriate actions may differ for each IP owner’s situation. It is possible to take multiple different enforcement actions simultaneously. An experienced lawyer, IP attorney or investigation firm can guide you on how to use various enforcement options to enforce your IP rights in China.
Seek local legal advice before sending cease-and-desist letters. On the one hand, you may have a successful outcome from the issuing of a cease-and-desist letter. On the other hand, a cease-and-desist letter may tip-off infringers, and allow the other party to request a court to issue a declaratory judgement of non-infringement in China. Local legal advice will assist you to make a decision that results in the outcome you seek.
Administrative enforcement by local enforcement authorities can be useful in straightforward cases of IP infringement. Compared with court proceedings, an administrative action is generally faster and less expensive. An administrative enforcement action may also be useful to gather evidence for a further criminal or civil case. However, if you choose to file the civil case before the administrative decision has issued, the administrative agency will temporally suspend the administrative proceeding and wait for the judgment of the civil lawsuit.
The process for administrative enforcement starts by filing an IP infringement complaint with local authorities, along with evidence of your IP rights and the infringing activity. The authorities will then decide whether to carry out an investigation, which will determine whether infringement has taken place. If the infringement is not straightforward, local authorities may be reluctant to determine the activities are infringing, as courts are the appropriate place to determine complex cases.
If the authorities decide that infringement has occurred, they have the power to demand the infringer cease any infringing activities, conduct raids, and confiscate or destroy infringing products, as well as labels, brochures and manufacturing equipment.
Local authorities are also able to issue fines, which are paid to the local government. However, they are unable to order the infringer to pay damages or compensation to the IP owner.
If you are not satisfied with a decision of the local authorities, you can apply for administrative review or appeal to the courts.
IP owners can bring civil enforcement actions in the Chinese courts. Civil courts can issue injunctions to stop someone else misusing your IP, and award damages for infringement.
China has four levels of courts: Basic People’s Courts, Intermediate People’s Courts, High People’s Courts, and the Supreme People’s Court. In 2014, China established specialised IP courts in Beijing, Shanghai and Guangzhou, and has established some 18 IP tribunals since 2017. The IP Courts and IP tribunals all sit at the Intermediate People’s Court level, and deal exclusively with IP-related cases. Foreign-related cases are usually first heard at the Intermediate People’s Court level.
Since 1 January 2019, appeals from China’s Intermediate People's Courts (including the IP courts and IP tribunals) for administrative and civil cases involving technical IP matters are heard by the IP Court of the Supreme People’s Court. Appeals from non-technical cases (including trade mark cases) are heard by the relevant High People’s Court.
Courts can award compensation for economic loss from the infringing activities. The compensation will be determined in accordance with the actual losses suffered by you due to the infringement, the gains derived by the infringer from the infringement (if your actual losses are hard to prove) or the licensing fee when both the losses and the infringer's actual gains are difficult to prove. Where it is difficult to determine these factors, the courts will award statutory damages. Most IP civil cases result in award of statutory damages.
Chinese courts offer a relatively fast mechanism for IP rights enforcement compared with other courts around the world. The time to trial in China is usually about 12 months from the filing of the complaint. Costs are generally less than in Australia but can still be significant.
Chinese courts do not provide discovery (where the two sides of a legal dispute have to exchange information that is relevant to the case). Private investigations will be needed to produce evidence to prove infringement and resulting economic loss for court proceedings.
Criminal enforcement by local public security bureaus (police) will take some time and effort, but can be very effective in eliminating an infringer and deterring others.
Certain IP offences are punishable by up to three years imprisonment in serious circumstances, and up to seven years imprisonment in especially serious circumstances.
A judicial interpretation issued by the Supreme People’s Court set out the thresholds beyond which the infringing act becomes an offence or crime. The thresholds for criminal liability for using another person’s registered trade mark, selling counterfeit goods, or copyright infringement are generally an illegal business volume of more than 50,000 RMB (around AUD 10,500) or illegal gains of more than RMB 30,000 (around AUD 6,300).
‘Illegal business volume’ refers to the value of the products produced or sold by the infringer, usually calculated at the actual price used to label or sell the products, not the value of the legitimate product. ‘Illegal gains’ refers to the net profit made by the illegal act.
Chinese Customs can seize IP-infringing goods entering or leaving China's borders. This can be a powerful enforcement option for IP owners. You will need to record your IP rights with Chinese Customs, post bond for any seizures, and respond quickly to notices of suspected infringing shipments. See more at Customs seizure of goods.
China is the world’s largest e-commerce market, and a common method of sale for IP-infringing products. These can weaken genuine product sales, damage brand reputation and erode consumer trust. Any business selling products to China might benefit from developing and implementing an online brand protection strategy. See more at Tackling counterfeits on e-commerce platforms.
China has high formal evidence requirements. It is very important to seek local legal advice on how to collect and submit valid evidence in China, or else the evidence you collect may be challenged and rejected in court or other formal proceedings.
Evidence notarised by a Chinese notary public is generally the most robust form of evidence in Chinese civil procedures. Notary publics can be engaged to document sales or offers of sale, webpages, acts of manufacturing, and other infringing acts. Evidence that you collect without a notary will be much more vulnerable to challenge in court.
In order to have documents originating from Australia accepted as valid evidence in China, it may be necessary to have the material notarised by a notary public, legalised by the Australian Department of Foreign Affairs and Trade, then authenticated (legalised) by the Chinese Embassy or Consulates General in Australia. The Australian smartraveller website and the website of the Chinese embassy in Australia provide more information on these processes, and a lawyer who is familiar with the Chinese legal system can advise you further.