China: Customs ups its game as counterfeiting continues to grow (Part One)
date: 2022-05-10Fiona ZhangRead by:
The state actively promotes legislation, facilitation of trademark branding and trademark registration, improvement of product quality and strengthening of IP protection, management and relative IP services.
In 2021, the government intensively revised and issued various IP policies and regulations, including:
Measures for the Construction and Management of National Geographical Indication Products Protection Demonstration Zones (trial implementation);
Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Civil Cases of IP Infringement (the Interpretation);
Provisions on Evidence in IP-related Civil Litigation, issued by the Supreme People’s Court;
Interpretation of the Supreme People’s Court on Issues on the Jurisdiction over and the Scope of the Application of Law in Trademark Cases;
2021 IP Protection Guidance, issued by the China National Intellectual Property Administration;
Opinions on Strengthening Cooperation and Protection on IP Protection, issued by the China National Intellectual Property Administration and the Public Security Bureau;
Guidance on Strengthening the Protection of Geographical Indications, issued by the China National Intellectual Property Administration and the State Marketing Inspection and Management Bureau;
Opinions on Several Issues Concerning the Specific Application of the Law in Handling Criminal Cases Regarding IP Infringement, issued by the Supreme People’s Court and the Supreme People’s Procuratorate;
Guidelines for Building a Powerful Country IP with IP rights (2021–2035), issued by the Central Committee of Communist Party of China and State Council;
Guidance of Trademark Examination Criteria, issued by the China National Intellectual Property Administration; and
Judging Criteria for Trademark Infringements, issued by China National Intellectual Property Administration.
With the booming development of e-business in China, many legitimate brand owners are expanding their businesses in the Chinese market. At the same time, numerous counterfeit goods are transacted in or exported from China. Below are a few tips regarding Chinese customs that IP holders should be aware of:
China inspects both imported and exported goods at its ports. Since exported goods can be stopped by customs officials, these inspections constitute a significant tool for battling counterfeits coming out of China.
There are two ways in which customs officials will detain goods for potential IP infringement:
Through ex officio action – customs officials act on their own to detain a shipment; or
through an application for detainment – an IP holder requests that a specific shipment be detained.
To improve the chance that customs officials will be able to oversee and catch infringing shipments, IP holders should record their IP rights with Customs. Such recordal is usually a quick, easy and cost-saving but efficient process against infringers.
Trademark, patent and copyright may be recorded and enforced through Customs; however, the majority of goods detained for suspected IP infringement are held based on trademark rights. Whether patent and copyright customs recordals are valuable will vary case by case and will depend on the likelihood that customs officials would be able to spot and confirm infringement.
There will be opportunities for IP holders to communicate with and train customs officials on better catching infringing products, this may be particularly helpful for patent-related cases. Taking opportunities to train and develop stronger relationships with customs officials will help IP holders optimise this protection tool.
Some bad faith trademark squatters may try to stop goods that are manufactured in China but shipped back to the home country of the brand holder. This may be done in an effort to harass and push negotiations.
The rapid development of cross border e-commerce and other emerging forms of trade increases the pressure and challenges that Customs’ protection of IP rights faces. In 2021, customs officials continued to strengthen the protection of IP rights and carried out in-depth actions related to the protection of IP rights. According to the database of the General Administration of Customs, from January to October 2021, Customs has detained 510,000 batches of suspected infringing goods, involving 51.06 million items, through various actions, including ‘Dragon Action 2020’, ‘Blue Network Action’ for IP protection of shipping channels and ‘Net Action’ for IP protection of export transhipment goods.
In recent years, Guangzhou Customs has continuously enriched and expanded cooperation between the Guangdong government, Hong Kong Customs and Macao Customs. This includes through joint enforcement, data sharing, information exchange and visitation exchanges. Guangzhou Customs has strengthened enforcement protection through expansion analysis and has focused on the crackdown of cross-border infringing goods. In the past two years, it has carried out six joint-enforcement actions and has seized more than 700,000 suspected infringing goods exported to or from Hong Kong and Macao.
The year 2021 is the first year of the 14th Five-Year Plan and the 100th anniversary of the founding of the Chinese Communist Party (CPC). It is also a year of continuous effort and in-depth advancement in the crackdown on counterfeiting.
Among various actions, criminal prosecution is one powerful measure that is used to crack down on trademark infringement. If an act of manufacturing or selling fake products constitutes a crime, the Public Security Bureau will investigate, and the authority will initiate public prosecution.
According to the annual report on IP crimes in the first half of 2021 issued by the Procuratorial Organ, the Procuratorial Organ is prosecuting approximately 6,017 persons for crimes against IP rights. This number has increased by 12.6% year-on-year. The prosecution rate is 91.8%, which is 6.2 percentage points higher than the overall criminal rate and is the highest rate in the past five years. This indicates that the Procuratorial Organ’s efforts to crack down on crimes against IP rights are constantly strengthening. The cases reflected the following characteristics:
The crimes are very concentrated, and most cases concern the crimes of copying others’ registered marks and selling counterfeits that infringe others’ registered trademarks. Of the 2,676 people being investigated in all cases, 2,138 people are prosecuted for the aforesaid crimes, accounting for 80% of the total number of prosecution cases.
The places where the cases were appearing were concentrated (ie, mainly in the economically developed areas of southeast China). In the report, 1,463 people were prosecuted in Guangdong, 987 in Shanghai, 416 in Zhejiang, 371 in Henan and 341 in Jiangsu. Those figures equate to 59.5% of the total prosecution cases in China.
The infringements combine both online and offline methods, and the sales channels are increasingly diversified. In 2017, trademark infringement crimes were carried out both online and offline, with online e-commerce platforms and offline mobile booths as the mainstays. With the gradual development of the internet, since 2019, online sales platforms have spread from e-commerce platforms to circles of friends, small programs, social medias and live streaming, while offline channels have spread to physical shopping malls, canteens, supermarkets, etc.
Infringers have strengthened their connection with foreign countries. To avoid investigation, criminals even directly set up factories for counterfeit goods outside China or transport counterfeit goods to overseas markets for sale to lower the legal risks.
The investigation of trademark crimes should be conducted by the public security bureau. The main points of an investigation are as follows:
examination of the case report and verification of the trademark holders’ basic information (including the goods approved for use under the trademark and the ownership and transfer or licensing of the mark);
investigation into the time, place, company or individual involved with the counterfeit goods, including the timely collection of the counterfeit goods, signs and other evidence, as well as verification of the authenticity of the goods or signs, generally issued by the rights holder of the identification report;
detention of sealing of relevant items, including products or sales documents and other information, while maintaining control of the relevant personnel on the scene; and
appraisal of the value of the products involved in the case to determine the extent of the crime committed.
The investigation will be concluded and transferred to prosecution when verifying the factual and legal basis. When examining a case, the procuratorate will interrogate the suspected criminal and listen to the opinions of both the victim and suspected criminal. The procuratorate will then decide whether to initiate prosecution.
If one of the following circumstances occurs, a lighter punishment may be given:
admission of guilt and acceptance of punishment;
obtention of understanding from the rights holder; and
display of repentance.
To further strengthen criminal protection of IP rights, the Supreme People’s Court and the Supreme People’s Procuratorate issued the Interpretation of Several Issues concerning the Specific Application of Laws in Handling Criminal Cases of Infringement of IP Rights (III), which came into effect in 2020. In addition, the Standing Committee of the National People’s Congress issued the 11th Amendment to the Criminal Law, which came into effect on 1 March 2021. The new regulations will have a novel impact on IP crimes.
For more information, please click at https://www.worldtrademarkreview.com/global-guide/anti-counterfeiting-and-online-brand-enforcement/2022/article/china