Over the past 20 years, China has promulgated IP laws that generally adhere to international standards. But when facing infringing products, the administrative enforcement was of limited or no deterrent value. There was also little criminal enforcement, mainly due to high liability thresholds, and a bureaucratic reluctance to involve the police force, which itself is understaffed and overwhelmed by other more pressing priorities. But a number of recent cases have signalled a promising shift from the old practice to a more responsible and determined image of China on fighting IP infringement.
A Chinese Court recently sentenced a counterfeiter to life imprisonment and confiscation of all personal properties for producing and distributing counterfeit products. Meanwhile his accomplices received 7 to 10 years imprisonment and RMB500,000.00 to 800,000.00 (about GBP50,000 to 80,000) penalties respectively. According to local media, the counterfeiters rented a warehouse in a remote area and purchased tools and raw materials to produce counterfeit products of the well-known French brand “Hermes”. When the authority raided their “factory”, it found out that the counterfeiters have manufactured over 3,000 infringing products, and the overall market value reached RMB100 million (about GBP10 million).
The action on IP infringement is also directed to the low level street distributors: a local distributor was also arrested, charged and sentenced in north China. The distributor was selling the counterfeit bags, belts, wallets of some of the most famous brands such as Louis Vuitton, Prada, Burberry, etc. in a local market, and she was later sentenced to 3 years imprisonment.
There are two primary ways in which a brand owner can seek to assert its IP rights in China: through an administrative procedure or through a criminal or civil judicial procedure. The administrative procedure is the most commonly used method for asserting IP rights in China, especially for trademark and copyright matters. If an IP right owner finds its right is infringed, it may lodge the complaint before local administrative authority, and the authority will conduct raids to confiscate illegal goods and equipment and to gather more evidence for further punishment or initiate criminal proceeding, it will also issue an order requiring the infringer to cease production.
With respect to the civil procedures for protecting IP rights, over the past few years, a positive trend in civil enforcement of intellectual property rights in China has emerged, and it has since been backed by judicial interpretations released by the PRC Supreme Court, which are meant to guide lower courts in handling IP disputes. In general, these guidelines are aimed at producing a more sophisticated and professional judiciary, as well as significantly raising the cost and penalties for infringers facing civil charges. Indeed, several high-profile cases have demonstrated that this trend is more than mere aspirations contained in policy speeches, but real and significant change in how IP rights are treated in Chinese courts.
Official statistics show that the Chinese courts accepted a total of over 30,000 civil IP cases in each of the past 3 years, and the number is still increasing. This suggests that more or more companies choosing to take infringers to court where they can receive more satisfactory results compared with the past. Combined with the administrative actions and criminal procedures, the process of building serious IP protection in China appears much more promising than ever.
This article was written by Jun Yang, a partner at Jade & Fountain. Jade & Fountain is one of the leading Chinese law firms with offices in both Shanghai and Beijing.