Enforcing trademarks in China...Enforcing trademarks in China The myth •Foreign companies always...

Kasper FrahmAttorney-at-law, LL.M., Partner

11 October 2016

Enforcing trademarks in China


The myth

• Foreign companies always lose the battle with Chinese companies.

The reality

• There are challenges, but if you have a registered trademark in the right (sub)class there are several different actions available for enforcing trademarks and you can be successful.

11 October 20162 Enforcing trademarks in China


Pros and cons of enforcing trademarks in China

• Pros

• Costs are manageable.

• Action through local AICs is cheaper and faster than a normal trial

• Trials are at least as fast than in Denmark.

• Lawyers and judges are competent.

• Cons

• Very high standard of evidence, while disclosure and evidence gathering is difficult.

• Inconsistency in judgments due to the size of the country.

• Difficult to enforce due to the size of the country.


First things first

Register your trademark in the relevant (sub)class!

11 October 2016 Enforcing trademarks in China4

If you do not have a registered trademark

The Body Shop store in London:

Store in Fujan:

(From enterthepanda.com)


If you do not have a registered trademark

Toni&Guy hair salon in London:

England Hair Design Salon in Beijing:

(From enterthepanda.com)


If you do have a registered trademark

Jordan and Qiaodan


How can you enforce trademarks in China?

Standing on the shoulders of giants

http://www.china-iprhelpdesk.eu/


Enforcement options

(A) Civil litigation

(B) Complaints filed with the AIC

(C) Complaints filed with the QTSB

(D) Customs

(E) Negotiations

(F) Criminal proceedings

(G) Notice and take down procedures –online infringement




• Remedies

• Injunctions, delivery up and destruction of tools for infringement and infringing products.

• Damages; normally calculated as statutory damages, which can go up to RMB 3,000,000.

• Preliminary injunctions.




• Time frame

• 8-16 months from proceedings are issued to final judgment

• Trial is normally preceded and followed by negotiations that are mediated by the judge.




• Proving infringement

• Sample purchase or Evidence Preservation Order (EPO)

• Sample purchase

• You must prove that infringing products are either sold or offered for sale.

• Evidence must be notarized!

• If you only notarize one sample purchase, then only one infringing sale is proven, and worthwhile damages will be difficult to obtain.




• Evidence Preservation Order (EPO)

• The court either seals or documents infringing products at the defendant's premises.

• May require a bond of RMB 20,000 –1,000,000

• Can be used to obtain evidence of mass manufacture




• Ensuring that a judgment can be enforced

• Asset Preservation Order (APO)

• Court freezes defendant's bank accounts and/or assets.

• Normally, only when claimant has suffered, or is likely to suffer, significant losses and there is a risk that it will be difficult to enforce a judgment in the claimant's favor.




• Jurisdiction

• As in Denmark: Home of defendant or place where infringement occurred.

• Specialized IP courts

• Beijing, Shanghai and Guangzhou.

• Consider making sample purchase within one of these jurisdictions.



(A)Civil litigation

LVMH v two Chinese drinks companies

"French Cognac Brandy: Hanlissy"

"French Cognac Brandy: Henglishi"



(Picture from McCourtesy.com)

(Picture from eurobiz.com.cn)



Starbucks v XingBake

(2006)

(Pictures from enterthepanda.com)



(Picture from funnyjunk.com)

(Picture from enterthepanda.com)



Filing a complaint with AIC

• AIC - Administration for Industry and Commerce (charged with enforcing Trademark Law and Unfair Competition Law)

• The AIC can:

• Raid infringers' premises, seize and destroy infringing items.

• Impose injunctions to force the infringing party to desist.

• Levy fines on the infringing party for infringement.

• Up to 5 times the value of the infringing business or RMB 250,000.




• Costs

• RMB 20,000 – 50,000

• Requirements

• Rightholder must file evidence of existing rights, Powers of Attorney to lawyer, and evidence of infringement.




• Procedure

• Rightholder files complaint.

• Short complaint

• Details of registered trademarks

• Photos of infringing goods

• AIC raid, not uncommon within 1 day of receiving the complaint!

• Here, the AIC may decide to seize any infringing products.

• If infringement is confirmed, the AIC will normally issue a punishment decision within 3-4 months of AIC raid.



Civil litigation compared to filing a complaint with the AIC

• 90% of all trademark infringement cases are handled before the AIC.

• Comparative benefits from filing a complaint with the AIC

• More cost effective.

• Infringing products can be seized almost immediately.

• Sometimes a lower burden of proof.

• A punishment decision can be used as evidence in subsequent civil litigation.



Civil litigation compared to filing a complaint with the AIC

• Comparative benefits of Civil litigation

• Specialised, more sophisticated courts

• Damages and thus a bigger deterrent effect

• There has been criticism that some local AICs are subject to local protectionism, corruption or lack of ressources

• Conclusion

• For most cases, the AIC will be sufficient.

• If case is complex, you intend to receive large damages, or wish to send a strong signal of enforcement go for civil litigation.



Case study – a hybrid approach

• Louis Vuitton v. Carrefour

• Facts

• A Carrefour supermarket sold counterfeit Louis Vuitton hand bags.

• First, an employee made a sample purchase of one bag.

• Next day, Louis Vuitton made a sample purchase of two bags, with a notary present.

• Then, Louis Vuitton filed a complaint with the Local AIC, which confiscated 37 handbags on the same day as the second sample purchase.



Case study – a hybrid approach

• Louis Vuitton v. Carrefour

• Louis Vuitton argued that damages should be RMB 600,000.

• The court ordered Louis Vuitton damages of RMB 300,000.



Moncler v. Nuoyakate

• Facts

• Nuoyakate sold counterfeit Monclerdown jackets.

• Nuoyakate also registered several trademarks and domain names, including MOCKNER.



Moncler v. Nuoyakate

• Ruling

• Nouyakate was ordered to stop infringement and use of domain name mockner.com.

• Moncler was awarded maximum statutory damages - RMB 3,000,000.



Prada, Chanel, etc. v. Silk Street Market

• Facts

• Prada, Chanel and 3 other major luxury brands sued the landlord of the Silk Street Market for facilitating trademark infringements.

• The rightholders claimed RMB 500,000 in damages each.

• Ruling

• The found that the landlord had infringed the rightholders trademark rights, and granted damages of RMB 20,000 to each.



Other ways of enforcement -(C) Complaints filed with the QTSB

• QTSBs – Quality and Technical Supervision Bureaus (charged with enforcing Trademark Law and Unfair Competition Law)

• QTSBs can:

• Impound products on the grounds of breaching quality or safety standards, including falsely claiming origin of the goods and misleading labelling)

• Issue fines.

• Requirements and procedure

• Much like with the AIC.



(C) Complaints filed with the QTSB

• QTSB can be relevant as an alternative to complaints before the AIC

• Pros:

• Consumer safety deemed more important than trademark protection

• Company representatives can file a complaint themselves



Other ways of enforcement –(D) Customs

• Chinese customs controls imports and exports.

• Many Chinese customs authorities will proactively enforce trademarks registered with them.

• Can be used

• To confiscate infringing goods and impose fines on infringers.

• As strong evidence of extensive infringement, which can be used in a claim for high damages.



(D) Customs

• File trademarks with the General Administration of Customs (GAC)

• Filing trademarks with GAC

• Ordinary proof of rights and identity.

• Separate application for each trademark in each class.

• RMB 800 per application.



(D) Customs

• Going the extra mile

• If possible, also provide customs with

• pictures and samples of your products.

• a list of suspected infringers

• a list of legitimate licensees

• Many local ports are also open to "training seminars"



(D) Customs

• If customs find any suspected infringing products:

• Consignee/consignor will be asked to provide a declaration on the goods.

• If no such declaration if provided, the rightholder will have 3 days to file an application for the detention of the goods.

• Rightholder must also pay a bond to ensure that customs' costs are covered.

• Bond is equal to the value of the seized goods but is capped at RMB 100,000

• The customs authorities will make a decision within 30 days on whether the seized good are indeed infringements.



Using customs

• If customs conclude that seized products are infringements:

• Destruction of products

• Fine of up to 30% of the value of the infringing goods

• Fine up to RMB 50,000 for not truthfully declaring goods.

• If customs concludes not an infringement, or if customs cannot make a final conclusion:

• Right holder will have 20 days to file a civil claim

Picture from: http://www.dailymail.co.uk/news/article-2324959/Chinese-police-destroy-21million-counterfeit-designer-goods-just-20BILLION-go.html



(E) Negotiations

• Enter negotiations with the infringer to stop infringements

• May very well be cheaper (and faster) than enforcing through litigation or administrative actions, if main goal is to prevent future infringements.

• If you wish to enter into negotiations:

• Collect evidence before contacting the infringer

• Communicate in Chinese

• Suggest license agreement?



(F) Criminal proceedings

• Trademark infringement are a criminal offense, if

• The manufacture or sale of counterfeits is "serious" or "exceptionally serious".

• The punishment is jail time of up to 7 years, and payment of a fine.

• Criminal proceedings can be commenced if

• Rightholders, the AIC, or customs bring infringements to the PSB's (Public Safety Bureau) attention, or

• Rightholders file a criminal suit against infringers.



(G) Notice and Takedown – online infringement

• ISP's are liable for an infringement, if

1. they receive written notice and don't take down infringing material, or

2. they knew or should have known about the infringement.

• Several e-Commerce sites have created their own procedures to aid the take-down notice process.




• Remedies

• Depending on the ISP, the product listing can be removed (e.g. from Alibaba) or a website can be removed.

• ISPs can't fine infringers or grant compensation to rightholders.




• General requirements to a take down notice:

• It must be in writing

• It must contain

• Proof of registered right

• Proof of identity

• Links to infringement

• Individual ISPs may have some other requirements as well.



Notice and takedown – case study Alibaba

• Facts

• Ali Baba Group is:

• Owner of several of the world's largest online B2B (e.g. Alibaba.cn) and B2C (e.g.Taobao) services.

• Subject to several lawsuits (e.g. twice by Kering).




• Counterfeits are plenty

• Between January 2015 and August 2015, 80,000,000 counterfeit product listings were removed.




• Alibaba's notice and takedown system

• The process is as follows

1. Rightholder sends takedown notice

2. Infringer can accept takedown or object

3. If infringer objects, Rightholder can accept, or submit the case to Alibaba

4. Alibaba will then decide, if listing is to be removed




• Alibaba's point system

• Alibaba distinguishes between:

• General infringements (e.g. mentioning trademarks on vendors' ministries)

• Serious infringements (e.g. selling counterfeit goods)

• Less tolerance for serious infringements.

• Repeat takedowns leads to a complete block of minisite.




• Alibaba's Good-faith takedown program

• Good faith rigtholders are rightholders that have:

• a takedown rate of at least 90%

• less than 1,5% counter-notifications

• Undisputed proof of IP

• Signed a declaration of good faith

• For good faith users

• Requests will be handled within 1-3 working days




• Alibaba's Good-faith takedown program

• As of 1 July 2016, 700 brands are part of the good-faith takedown program.

• Including adidas, Apple, and Mars.

• Finally, Alibaba has extended it's good faith program to include Alibaba monitoring its sites and informing good faith members of potential infringements.


Does it work?

(Picture from wholeheartedhuman.com)


How does it work?


(Screen dump from fritzhansen.com)



(Picture from fritzhansen.com)


Remember these practicalities

Remember the practicalities

1. Have the right counsel in China

2. Have a brand strategy

3. Have available counterfeit identification tools ready for customs and for enforcement

4. Monitor the market

5. Find the right company information on infringer before starting actions

6. Check if infringer has also registered trademarks

7. Collect evidence before starting action

And most importantly…


Remember the practicalities


Questions?


PlesnerPlesner Law FirmAmerika Plads 37DK-2100 CopenhagenDenmarkPhone: +45 33 12 11 33VAT-No.: 42 93 85 13www.plesner.com

The contents of this presentation is made available to the public for informational purposes and are

not intended as and cannot replace legal advice. Plesner shall not be held liable for any use of the

information contained in the presentation. If you need legal advice, you are very welcome to

contact Plesner.

Enforcing trademarks in China...Enforcing trademarks in China The myth •Foreign companies always...

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