Intellectual Property Enforcement in China

With offices in the United States as well as Beijing and Shanghai, Wang & Wang helps clients enforce their intellectual property rights in the People's Republic of China.  In most cases, an intellectual property rights holder starts enforcing his rights with an investigation.  An investigation can determine the scope and level of infringement, and provide evidence for filing a complaint.  Investigations help to determine the following:  (1) whether the infringer manufactures and/or sells the goods; (2) the volume of infringing goods produced/sold; (3) the possible location of these goods.  Any evidence revealed during these investigations helps the rights holder to determine whether to proceed with raid actions, file a lawsuit, or issue Cease and Desist letters.

Cease and Desist Letters

The first step in a low-key, low-cost enforcement program is to issue a cease and desist ("CD") letter to the infringer.  A CD letter demands that infringers immediately stop the production and sale of any and all infringing goods already produced or distributed.  It also seeks an undertaking not to infringe in the future, an agreed amount of liquidated damages if breached, and compensation for past infringement.  We allow two weeks for a target to respond.  If Wang & Wang does not receive word during that time, it issues a second and final CD letter, accompanied by follow-up phone calls.  The primary goal of the CD letter (beyond the immediate cessation of infringing activity) is to identify the manufacturer and/or distributor of the unauthorized goods. The secondary goal is deterrence.

Depending on the response received from the CD letters, the rights holder can either pursue a settlement arrangement -- typically consisting of monetary compensation and the publication of an apology advertisement in a major metropolitan newspaper -- or begin preparing evidence, which could be used to file a criminal suit against the infringer.  In cases where protracted negotiations are required, costs will exceed this estimate.

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Raids and Administrative Procedures

In China, a law enforcement force consisting of the State Administration for Market Regulation (SAMR), the Public Security Bureau, the Copyright Office and Sipo Intellectual Property Office is designated to separately or jointly enforce intellectual property rights, depending on the complexity of the case.  Because there is no meaningful discovery procedure in China, the amount and quality of evidence the rights holder presents during litigation has a direct bearing on our chances of success.  Legal services to review the investigations, draft the complaint, coordinate the raid, meet with the law enforcement officials and conduct the raid are billed at hourly rates.  After evaluating the amount and value of goods seized during a raid, the rights holder will be in a position to determine whether to pursue administrative procedures, litigation, or settlement.

In China, if the rights holder identifies production of counterfeit products, he can request that China's customs officers monitor exports of such products in an effort to prevent their export.  To apply for border action by Customs, the rights holder must file a recordation of copyrights and trademarks with the Customs General Office.  The recordation can be filed either prior to the application for the border action or concurrently with the application itself.  Following a raid in China, law enforcement will hold administrative proceedings.  The proceedings usually last two to three months.  Hearings are not public.

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Civil Action

In China, a claim for damages or injunction should be issued by the civil courts.  A plaintiff institutes a suit by filing a written complaint with the local court of the appropriate level.  The evidence at trial may be presented either by the parties to the action or by the court itself.  A trial is conducted as a series of hearings usually occurring over three to six months.  Appeals are conducted by the next higher level of court, as a trial de novo.

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Criminal Action

If the rights holder seeks criminal remedies against infringers, we recommend that a complaint be filed directly with the public prosecutor's office.  The prosecutor has discretion to initiate a raid or may do so upon a rights holder's request.  Following a raid, the prosecutor will hold a set of hearings.  The proceedings usually last two to three months before the Prosecutor files an indictment.  The criminal penalties with respect to counterfeiting are as follows:  (a) for use or sale resulting in substantial gains, not more than three years imprisonment and/or fine; (b) for use or sales where illegal income is enormous, not less than three years or more than seven years imprisonment and fine.  All kinds of appropriate evidence discovered in inspections or searches that may be used to prove the guilt or innocence of a defendant may be seized.  Products other than those named in a warrant may be seized at the discretion of law enforcement officials.

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An intellectual property rights holder is entitled to an injunction that is reasonable to deter infringement in China.  Under certain situations, the rights holder may apply to the court for preliminary injunction against infringement before a lawsuit is filed.  The rights holder must submit sufficient evidence showing its intellectual property rights and existence of infringement or threatened infringement.  The rights holder must provide security for the preliminary injunction.  Once the preliminary injunction order is granted by the court, the rights holder must file a lawsuit with the court within 15 days.

The Court has the authority to order prompt and effective preliminary execution against infringing goods in order to stop the infringement, remove the obstacle and eliminate danger. The Court has broad discretion to take provisional measures.  However, the rights holder is liable for any damages due to a wrongful preliminary measure not limited to the amount of a bond.  The court will consider various factors in determining the amount of bond, such as sales revenue of goods involved, storage fees, potential damages or losses as a result of the order, and so on.

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