Anti-counterfeiting and enforcement

Types of proceedings

What types of legal or administrative proceedings are available to enforce against infringing products?

Generally, for small enterprises that may only have slight influence, it will be cost efficient to send a cease and desist (C&D) letter before going into any legal proceedings. The C&D letter should clarify the right owner’s intellectual property (IP) rights; the infringer’s activities; and request the infringer to stop the infringing activities immediately. It is suggested that this letter be sent after the notarisations are done for the purchase process and the infringing websites, since, given the relatively weak legal force of a C&D letter in China, the suspected infringer may choose to ignore the C&D letter and continue their infringement more covertly, which will make evidence collection difficult in the future. The C&D letter should be prepared carefully to avoid any unnecessary groundless threat issues.

If the infringer refuses to stop the infringement, the right holders could institute trademark infringement or unfair competition lawsuit against the infringers before the court. Apart from stopping the infringement immediately, a favourable judgment will grant a certain amount of compensation to the right holders.

And the right holders could also file an Administration for Market Regulation (AMR) action based on the evidence obtained. An AMR action is a unique and effective tool in the Chinese trademark enforcement system. If the AMR accepts the complaint, a raid action will be conducted against infringers, whereby all infringing products will be confiscated and destroyed, and the infringers may be issued with a fine. Compared with other enforcement measures, the AMR action is a time- and cost-efficient way to enforce the IP rights against infringing activities.

Where the case is of a nature serious enough to constitute a crime, the case shall be investigated in accordance with Chinese criminal law. Pursuant to article 213 of the Criminal Law, the penalty for use of an identical trademark on identical goods or services without the permission of the registered mark owner is a fine or a term of imprisonment up to a maximum of three years with a fine. However, if the circumstances are extremely serious, a penalty of imprisonment of three to 10 years (with a fine) will apply.

According to an interpretation issued by the Supreme Court and the Supreme Procuratorate, the following circumstances are deemed to be serious enough to be investigated in accordance with criminal law:

the turnover from the illegal conduct is no less than 50,000 yuan, or the amount of illegal profit is no less than 30,000 yuan;

the infringer has counterfeited two or more registered marks, with the turnover from the illegal business operations amounting to no less than 30,000 yuan, or the amount of illegal profit gained is no less than 20,000 yuan; and

other circumstances the consequences of which are serious.

From the above provisions and interpretations, it is clear that only acts of counterfeiting can constitute a criminal offence. Therefore, only when the infringer uses a trademark identical to the registered mark on the same type of goods will a criminal offence be committed. An identical trademark used on similar goods or a similar mark used on the same type of goods are not seen as criminal offences.

In a case where a counterfeiter shall bear criminal liability, the Public Security Bureau (PSB) will be involved in the investigation and the counterfeiter will be prosecuted by public prosecutors before a criminal court.

According to the Supreme Court’s judicial interpretations, a trademark owner cannot initiate civil litigation collateral to criminal proceeding concurrently, but it can initiate civil litigation for damages separately after the criminal judicial reform takes place. The trademark owner is allowed to recover damages through reaching a criminal settlement agreement with the defendant during the criminal trial. If the trademark infringement does not constitute a crime, the PSB will return the case to the AMR, and the AMR will decide on the punishment after investigation.

Remedies

What are the available remedies for infringement?

Compensation will be issued to the right holders by the court if the court considers that the activities constitute trademark infringement. The amount of damages for trademark infringement will be determined according to the actual losses suffered by the right holder from the infringement. Where it is difficult to determine the amount of actual losses, the amount of damages may be determined according to the benefits acquired by the infringer from the infringement. Where it is difficult to determine the right holder’s losses or the benefits acquired by the infringer, the amount of damages may be a reasonable multiple of the royalties. If the infringement is committed in bad faith with serious circumstances, the amount of damages shall be the amount, but not more than five times the amount, determined in the aforesaid methods. The amount of damages shall include reasonable expenses of the right holder for stopping the infringement.

Where the right holder has made its best efforts to adduce evidence but the account books and materials related to infringement are mainly in the possession of the infringer, to determine the amount of damages, the court may order the infringer to provide the account books and materials; if the infringer refuses to provide them or provides false ones, the court may determine the amount of damages by reference to the claims of and the evidence provided by the right holder.

Where it is difficult to determine the actual losses suffered by the right holder from the infringement, the profits acquired by the infringer from the infringement, or the royalties of the registered trademark, the court may award damages of not more than 5 million yuan according to the circumstances of the infringement.

If the infringing act causes certain harm to the reputation of the right holders, the court will also consider demanding the infringer to publish a statement to eliminate the impact.

Border enforcement

What border enforcement measures are available to halt the import and export of infringing goods?

According to the Customs Protection Regulations of Intellectual Property Right of the People’s Republic of China, an owner of intellectual property (IP) rights can record his or her registered trademark rights in the Customs IP Recordal System, and then Customs will monitor the goods in transit and investigate whether they infringe the owner’s IP rights recorded before Customs.

After a proprietor records his or her IP rights in the Customs system, there are generally four steps after any suspected infringing goods are discovered:

Customs will notify the proprietor when they discover any suspected goods that may infringe a recorded IP right.

The proprietor then can submit a response to the Customs within three working days to inform Customs whether they wish to detain these goods or not. If the proprietor decides to detain the goods, it must pay the necessary bond requested by Customs at the same time.

Customs will detain these suspected goods after they receive the request and bond.

Customs will investigate whether these goods infringe the proprietor’s IP rights within 60 days, and then make a final decision. When Customs determines that the suspected infringing goods in detention are infringing goods, the goods shall be confiscated. Meanwhile, if an investigation by Customs has eliminated any suspicion of infringement, the proprietor can file trademark infringement litigation before the court; otherwise, the goods will be released.

Online pharmacy regulation

What rules are in place to govern online pharmacies?

Pharmacy distributors shall abide by the relevant provisions of the Pharmaceutical Administration Law on drug marketing when they sell drugs through the internet. Specific administrative measures shall be formulated by the pharmaceutical supervisory and administrative department under the State Council in conjunction with the competent health department under the State Council and other departments. Vaccines, blood products, narcotic drugs, psychotropic drugs, toxic drugs for medical use, radioactive drugs, precursor chemicals in the pharmaceutical category and other drugs under special administration of the state cannot be sold online.

The third-party platform for online drug trading shall be recorded before the relevant governmental drug regulatory department. The third-party platform providers shall, in accordance with the law, examine and verify the qualifications of the drug marketing licence holders and drug distributors that apply to enter the platform to ensure that they meet the statutory requirements, and manage the drug marketing activities occurring on the platform. If a third-party platform provider finds that they have committed any act in violation of the provisions of this law, it shall stop such act without delay and report it to the drug regulatory department of the local people’s government at county level; where a serious illegal act is found, the online trading platform shall be stopped immediately.

Furthermore, Regulations for the Supervision and Administration of Drug Trade (exposure draft) issued by AMR, Regulations for Supervision and Administration of Online Drug Sales issued by the National Medical Products Administration (exposure draft), are open to public comment. These regulations will be officially promulgated and executed in the future.

Recent cases

What are the most notable recent cases regarding the enforcement of pharmaceutical marks?

There was a trademark infringement case involving the sale of counterfeit drugs, and the defendants began selling fake Angong Niuhuang pills from Beijing Tong Ren Tang in early 2013, purchasing them at 35 yuan per pill and selling them at 70 to 80 yuan per pill. In 2014, the defendants were arrested by Guangzhou police during the transaction, and the value of the seized bezoar pills totalled more than 2.07 million yuan. Beijing Tongrentang filed a trademark infringement lawsuit and claimed compensation of 3 million yuan.

The Guangzhou Intellectual Property Court concluded the case, saying that counterfeiting the Tongrentang trademark not only concerns the economic interests of the company, but also concerns the vital interests of the public and drug safety. Finally, the judge ordered the infringer to compensate Tongrentang 1 million yuan.