An Overview of the IP Enforcement System in China

Wu Yuhe

For more than two decades after the Trademark Law of the People's Republic of China entered into force in 1983, China has formulated a series of IP-related laws and regulations, including among other things, the Patent Law, Trademark Law, Copyright Law and Unfair Competition Law. Besides, it has acceded to many international IP treaties and established an adequate system for IP protection. In particular, China has drawn more on the mature practices of the Western countries with respect to the conditions and requirements for grant of the intellectual property rights, which has made the legal system for the protection of the intellectual property rights in China readily understandable and acceptable to foreign interested parties. By contrast, China has mostly followed the existing civil, administrative and criminal liability system in its construction of the IP-related enforcement system, thus rendering it more "characteristic of China". In fact, this "unique" system provides interested parties with more opportunities and approaches for them to enforce their rights.

Approaches and Choices for IP Protection

In general, there are three categories of liabilities for IP infringement in China: civil, administrative and criminal, Correspondingly, the approaches to imposing the liabilities vary. In the judicial system, the civil tribunal of a court is responsible for establishing and imposing the civil liability, and the criminal tribunal for establishing and imposing the criminal liability. While the administrative authorities are concerned with the matter of civil liability to same extent, their concern is more focused on the administrative "administration" and protection of the public interests, and imposes administrative liability mainly for violation of the administrative laws and regulations. An interested party 's requests made to seek legal relieves are no more than (1) cessation of an infringement, (2) compensation of damages and (3) punishment of the infringer. Then, it/he may choose the civil judicial approach, the administrative approach or the criminal judicial approach to protect its/his intellectual property right.

1. Civil Judicial Approach

The organ having the jurisdiction over lawsuits instituted through the civil judicial approach is the court, which has the power to issue preliminary injunction, permanent injunction, and to determine the amount of damages.

The court civil procedure is initiated entirely at the request of an interested party. What are to be heard therein are confined to the lawful part of its/his litigant claims. In the course of fact finding, the court generally takes, as legal facts for deciding a case, the facts proved with the filed evidence after cross-examination. There is no discovery system in China, and the parties shall produce the evidence to support their assertion and claims, the party may request the court for evidence preservation/collection under certain circumstances.

In China, there are four levels of courts: county, intermediate, higher and supreme. Since the intellectual property rights are of a special or complicated character, civil disputes arising from IP infringement in China are under the first-instance jurisdiction of the intermediate courts situated in the capital cities of the provinces, autonomous regions and municipalities directly under the central government and a few specially authorised intermediate courts and county courts. These disputes are under the second-instance jurisdiction of the court at a higher level. In all, there are now quite a few county courts, near 50 intermediate courts and over 30 higher courts and the supreme court that have the jurisdiction over IP-related civil disputes.

Since the courts in different places and at different levels are different in experience and in practice, an interested party that is going to resort to the court civil procedure to resolve a dispute arising from IP infringement should be cautious in its/his choice of a court having the jurisdiction. As a case in point, it/he may choose a court located in a economically developed region which is likely to be more experienced, a court outside the region where the first defendant has its domicile; or a higher court as the first instance court when the case is of special importance, so that the supreme court will be in a position to directly intervene in the second-instance trial.

2. Administrative Approach

The administrative authorities are the main organs to handle cases of complaints filed through the administrative approach. The basic function of the authorities is to "administrate". When the administration is relatively efficient, the administrative authorities may make investigation, ex officio, or at the request of an interested party on the basis of the prima facie evidence furnished thereby, and make a corresponding administrative decision in a relatively short period of time.

An administrative authority, when reviewing evidence or information presented by an interested party and preliminarily finding the likelihood of an IP infringement, may conduct an on-site inspection or a raid action to find out the facts and scale of the infringement. It may preserve or detain suspected articles if found on site.

If a dispute exists between the interested parties over the potential infringement, however, the administrative authority usually does not issue the preliminary injunction, nor does it have the power to decide on the amount of damages for the infringement unless the interested parties voluntarily request it to mediate on the amount of damages.

There is a matter of choice of jurisdiction in dealing with a case through the administrative approach. An interested party may choose from one of the following thousands of administrative authorities/offices in the various localities and at different levels depending on the nature of an IP infringement to deal with the matter of infringement: (1) an administration for industry and commerce (AIC), (2) a copyright administration bureau (CAB), (3) an intellectual property office (a former patent administration bureau (PAB)), (4) an administration for quality and technology supervision bureau (TSB), and (5) a food and drug administration (FDA). This shows that a more complicated choice of jurisdiction is involved in the administrative approach than in the civil judicial approach. In handling a case, the administrative authority, applies its regional administrative regulations and its internal administrative rules in addition to the national laws. Therefore, when choosing the administrative approach, an interested party should choose the jurisdiction in its/his favour according to a specific case.

An interested party dissatisfied with the administrative decision made by an administrative authority may request the court for judicial review. The court will review the legality and dueness of an administrative decision and rule to sustain or cancel the administrative decision made by the administrative authority.

3. Criminal Judicial Approach

The jurisdiction over lawsuits instituted through the criminal judicial approach rests with the court. The county court conducts the first-instance trial of IP cases, and the intermediate court hears such cases of the second instance.

Imposition of criminal liabilities is divided into private prosecution and public prosecution. Most criminal lawsuits are instituted in the court by the public prosecutor. If an administrative authority finds, in the course of handling an IP-related case, that the case is of such serious circumstances that the suspect possibly needs to bear criminal liabilities; or that a defendant repeatedly commits offenses so that he would violate the criminal law, the authority should transfer the case to the public security bureau (PSB) for criminal investigation, and then the procuratorate bureau (PP) institutes public action in the court. For a case of IP infringement with serious circumstances (for example, the subject matter of a case of a person's trademark infringement amounts to RMB 100,000 yuan or more or that of a case of an entity's trademark infringement amounts to RMB 500,000 yuan or more), the interested party may directly report to the public security bureau (PSB) and assist it or the PP in its criminal investigation and public prosecution. Where the PP holds that a case is not serious enough and decides not to institute the public prosecution, and if the interested party insists on imposition of criminal liability on the suspect, the latter may consider instituting criminal proceedings for private prosecution in the court.

Evidence and Evidence Collection

Whichever approach it/he chooses to impose legal liabilities on an IP infringer, an interested party should present evidence to the authority handling the case, including evidence attesting to the validity of the intellectual property right (right evidence) and evidence showing the infringement of the intellectual property right (infringement evidence).

1. Right Evidence

The right evidence an interested party furnishes normally should attest to the case to the extent that (1) the interested party is the owner or party interested in the right involved: it/he is a legitimate plaintiff or complainant; and (2) the intellectual property right is lawfully existent, valid and enforceable according to law in China.

For example, as for the trademark right, the right evidence may be a trademark registration certificate, trademark renewal certificate or trademark bulletin; if an international trademark registration is involved, a copy authenticated by the State Trademark Office showing that the international registration is valid in China. As regards the patent right, the right evidence may be a patent certificate, annual payment receipt, a patent register issued by the Patent Office, the description and/or claims of the patent; in case of a patent for utility model, it is better to make a search report available that is issued by the State Intellectual Property Office and can prove the patentability of the utility model.

2. Infringement Evidence

It is desirable that the infringement evidence an interested party presents can prove a case to the extent that the defendant has executed or is executing an alleged infringing act. The evidence includes, among other things, the defendant's promotional material, product samples, product sales contract or sales slips. Besides, information on the internet may be used as evidence, but it is desirable for it to be notarised (certified). A witness testimony may also serve as evidence, but the witness is required to be cross-examined before court to enhance the evidential authenticity and acceptability.

When it is made difficult or impossible, for some objective reasons, for an interested party to obtain evidence, it/he may request the court to collect evidence; when evidence is likely to be lost or destroyed, it/he may apply for evidence preservation. An interested party that applies to the court for evidence collection and preservation needs to inform the court of the title and place of the evidence and the name and place of the evidence holder.

3. Burden of Proof and Reversal Thereof

An interested party is under the burden of proof in connection with facts claimed thereby. That is, it/he is under the burden of proof with regard to the right it/he claims and the existence of an alleged infringement. If the interested party claims for damages, it/he should also adduce evidence to the effect.

Following is an exception to the principle of sharing the burden of proof in the form of "one who claims is under the burden of proof". When an infringement dispute involves a process for making a new product, the defendant needs to furnish evidence to show that its/his process for making its/his product is different from a patented process, otherwise it/he must bear the legal consequence for failure to meet its/his burden of proof.

Another situation involves the burden of proof in connection with the amount of damages. The plaintiff may calculate the damages on the basis of one of the following: the plaintiff's losses, the defendant's benefits, multiplication of the reasonable license fees (royalties) and the statutory amount of damages not exceeding RMB 500,000 yuan. In practice, since the plaintiff sometimes finds it difficult to prove the amounts of the first three choices, it/he may then request for the statutory damages to apply and insist on requesting the largest possible amount of damages. What the defendant can do is to present evidence (of the volume of production and sales, for example) to repudiate the amount of damages claimed by the plaintiff.

Warning, Business Interference, Calumny and Non-infringement Declaration

In addition to filing request with the judicial or administrative authority for official legal action directed to an IP infringement, an interested party may directly warn the infringement suspect and/or alert the end users to the product infringement, or do so through the agent appointed thereby. This used to be the relatively efficient way to deal with an infringement dispute.

In several recent cases of IP infringement disputes, since one interested party is suspected of business interference and calumny against the other party, which has made the case complicated to such an extent that the Supreme Court has rendered several rulings in writing, the essential spirit of which goes as follows: if two interested parties are involved in an infringement dispute which is not resolved within a reasonable period of time through consultation, or the rightholder abuses its/his right and carry on business interference and calumny against the other party, the alleged infringer may request the court to make a non-infringement declaration.

Thus, if an interested party chooses to resolve a dispute by communication with the defendant when dealing with an infringement dispute with the defendant, it/he should be very cautious about the wording of its/his letter of warning, and should not distribute to the end users the infringement information before the dispute is resolved. By doing so it/he can keep itself/himself away from the "non-infringement declaration" procedure, in which the defendant may choose the jurisdiction in its/his favour.

Customs Recordation and Protection of Intellectual Property Right

Besides the above approaches to resolving IP infringement disputes by a court and an administrative authority and through consultation between interested parties, the customs IP protection is also one of the desirable measures.

There are active (investigation and handling by the customs ex officio) and passive (detailing and handling suspected goods at the request of an interested party) customs protection of the intellectual property right in China. In May 2004, the General Customs Administration passed the amended Regulations for Customs Protection of Intellectual Property Right, whereby the active customs protection of the intellectual property right has been enhanced in China, with the specific procedure going as follows. The customs take initiative to check the random samples of import or export goods. When it finds that an import or export goods is likely to infringe an intellectual property right recorded with the customs, it informs both interested parties (including the importer/or exporter of the goods and the intellectual property right owner), finds and determines the facts of infringement according to law, and then handles the matter accordingly. Besides, upon report by a rightholder, the customs may also detain suspected import and export goods if the rigthholder places guaranty (surety or letter of guarantee from a bank), and invites an interested party to present opinions about whether the suspected goods have infringe the intellectual property right. In that case, the customs often does not determine the infringement of the intellectual property right, but handle the case in the following ways: where both parties agree on the facts of infringement of the intellectual property right with the detained goods, the customs will decide, at the request of an interested party, on how to deal with the detained goods according to the law and the agreed facts of infringement; if the parties disagree on the infringement, the interested parties have to go to an administrative authority or a court concerned for resolution of the infringement dispute within 20 days, and the customs will transfer the goods detained to the judicial organ. When an interested party does not initiate the administrative or judicial procedure within the prescribed time to have the dispute resolved, the customs will release the suspected goods detained.

In general, the Regulations for Customs Protection of Intellectual Property Right have been amended substantially more in favour of the rightholders since they have, on the one hand, enhanced the active protection by the customs, and, on the other, made things more convenient for the rightholders to request the customs to take the border protection measures. For example, under the amended Regulations, the intellectual property right recordation with the customs is no longer a precondition for according the passive protection, with lower amount of guaranty required and more ways of guaranty available.

In a nutshell, when its/his intellectual property right is infringed in China, a rightholder should, first of all, make sure that its/his intellectual property right is valid in China, and then collect evidence or evidence clue of the infringement of its/his right. With the evidence and information collected, the appointed professional attorney will assist the interested party to decide on the necessity, possibility and jurisdiction of the legal action to be initiated according to the specific circumstances of a case, including, among other things, the class and nature of the right, category and scale of the infringing act, the background information of the infringer, and the purpose of the action.

The author: Attorney-at-law and Patent Attorney of the China Patent Agent (H.K.) Ltd.