Navigating China Guide (2012) - New Zealand Trade and Enterprise

Administrative enforcement
The main way to deal with infringements is to file a complaint
with one of the Chinese enforcement agencies that have specific
powers to enforce IP rights:
• for patents this is the State Intellectual Property Office
• trademarks – the Administration for Industry and Commerce
• copyright – the Copyright Administration.
Customs and other agencies such as the Technology
Supervision Bureau also have powers to deal with counterfeit
goods.
While their powers vary, these administrative agencies can
usually fine infringers, seize goods or equipment and issue
penalties. However, they do not have powers of arrest and
cannot award compensation.
While the administrative enforcement is usually very quick and
low cost – it does not require any court procedure – it can be a
limited deterrent and fines may be small. For complex IP cases,
you may need to use the courts and for very large cases, you
may want to try criminal prosecution (see below).
An administrative action can cost US$4,000–$8,000.
Civil litigation
Companies can take civil action through a local People’s
Court or an Intellectual Property Tribunal. The courts are
suitable where:
• you have a more complex case that cannot be handled
by administrative authorities
• you want to obtain damages, or send a strong message
to the infringer.
Civil litigation is more suitable where the infringer has assets
and has the ability to pay damages.
Though slower and more expensive than administrative action,
more and more companies are going down the litigation route.
Although damages awards for IP infringement are much lower
than you might expect in New Zealand, they have been rising in
recent years. You can consult the website www.ciela.cn which
gives useful statistics on IP cases in China’s civil courts.
You should try to bring your case in courts in larger cities, such
as Beijing, Shanghai or Guangzhou, rather than in local courts
which may have less IP expertise or which may be subject to
local bias.
Criminal prosecution
China’s criminal law allows for prosecution of serious cases of
piracy and counterfeiting. Only cases which are relatively large
scale, and where trademarks or copyright have been exactly
copied, are eligible. The threshold for prosecution is based on a
specific monetary value of the case, although valuing the case
(by the number of counterfeit goods sold or seized) can be
challenging. The police, as in many other countries, have limited
resources and may be reluctant to investigate cases which they
consider small scale.
Generally you need to prepare the details of the case in advance
and report to the police – they will not simply act on preliminary
leads. It is common for a case to be transferred from the
administrative authorities (see above) if it’s large enough.
Criminal cases require investment of time and resources to
investigate the leads and guide the case through the prosecution
process. Costs can range from US$ 20,000 – 40,000.
Cease and desist
Cease and desist (C&D) letters can be an effective way of
getting an infringer to stop, if you believe the infringer is too
small scale or not serious enough to merit spending a lot of
money. For example, traders on the internet are a suitable target
for C&D letters if you want to demand that they take down any
infringing products or logos online.
To be most effective, the letter should be written in Chinese,
sent by a Chinese law firm and followed up with calls. While
C&D letters are not likely to be effective against a hardened
counterfeiter, do not rule out the effect that a simple letter
can have in dealing with a problem.
KEY LEARNINGS
• Take steps as early as possible to protect your IP.
• Have a clear intellectual property plan and budget that
anticipates risks.
• Get expert support on the ground in China ahead
of market entry.
• Educate your own employees and partners about IP
and ensure your contracts fully protect you.
• Be prepared to act quickly and decisively regarding
enforcement.
(Source: Chris Bailey, Partner and Deputy Country Manager
China, Rouse and Co)
It is possible to combine administrative and civil action, so that
you can conduct an administrative ‘raid’ first and then file a civil
suit to claim compensation.
Costs for civil litigation can vary considerably depending on
the complexity of the case, but may vary from US$ 20,000 –
100,000.
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