It seems that everyone is talking about Trademarks in China. What is the best way to file a trademark? Should we file in English and Chinese? What about transliteration? By far and away though, people are asking the age old question, is it really possible to enforce trademarks in China?
China is obviously a market with vast business potential, and almost infinite capitalization opportunities; however the answer to the seemingly complicated question about trademark enforcement usually tips the balance one way or the other. Lets look at the big picture here, and lets take a birds eye view at the options, issues, and potential problems with enforcing your trademark in China.
The possibilities are endless when it comes to trademark enforcement in China. While there are definitely traditional methods which are most often suggested, it takes a creative mind to determine the best course of action. Before considering the prudent avenue of enforcement, it is important to consider a variety of factors before proceeding:
- Resources: determining the resources available to combat the potential infringement.
- Location: where is the infringement taking place? Is the location rural or in one of China's larger cities?
- Goals: are you hoping to receive damages, or is an injunction the main goal?
- Nature: on what scale is the infringement occurring? Is this purely a domestic issue or are the infringing products turning up in different jurisdictions?
Very often people are inclined to quash any amount of trademark infringement with a vengeance. More often than not, however, a well thought out and refined strategy is all that is necessary to accomplish your enforcement goals.
Before any action should be taken it is imperative for a trademark owner to consider the resources at their disposal to enforce their mark. While litigation in China is not nearly as expensive as in the United States or Europe, still the costs can add up. A basic trademark litigation can cost as little at ,000 for a fairly simple matter, and upwards of 0,000 for a complicated and in-depth case. Often attorneys are very quick to suggest filing suit, but it is important to note that there are other cheaper and equally as effective options available.
Utilizing the Administration for Industry and Commerce (AIC) to combat trademark infringement is a quick and efficient avenue to enforce your right in China. The AIC handles small, localized instances of infringement, and the cost is often a fraction of what one might pay for litigation.
Considering the location(s) of the trademark infringement is one of the first questions any trademark owner should ask. The location of the potential infringement can lead to a variety of options and decisions in order to effectuate positive enforcement. Determining the actual location can bring rise to issues such as: local protectionism, venue questions, and the jurisdictional reach of the relevant enforcement body.
Local protectionism was a realistic and dreaded word five years ago, but not so today. While the notion of local courts and government bodies protecting local interests was a major concern in years past, the situation has improved dramatically in recent years. The Central Government has implemented a variety of programs and provided ample resources to local judges and agencies, to improve the understanding and respect for intellectual property rights. However while there has been significant change and progression, it is still highly encouraged to liaise with local counsel in any unfamiliar jurisdiction. Local Counsel understands their judiciary and have a working relationship with the relevant governing bodies in their jurisdiction.
If a local jurisdiction is indeed unfavorable, it is important to consider applying for a change of venue. Often Judges will grant venue to a more favorable jurisdiction if certain criteria are met such as, obvious bias and or the inability for a fair trial. Further, according to Chinese Law a Plaintiff may file suit where the defendant has a registered address, or where the sale, manufacture, seizure, or storage occurred. Often Plaintiffs avoid the potential local protectionism challenges by filing suit in a IP friendly Court. These Courts are often in China's larger cities, such as Beijing, Shanghai, and Shenzhen.
Finally with regard to the location of infringement it is imperative to consider the overall reach of the enforcement body. Chinese Courts can handle matters that are complicated in scope and that may have infringement occurring in multiple locations. A Court ruling has a greater and more prominent effect with often far reaching enforcement ramifications.
On the contrary while the AIC is a very quick and effective way to combat infringement, their influence is very localized. There are over 3000 AIC offices throughout China, and over 500,000 employees who are working to improve the intellectual property system in China. Their authority is often limited in scope and location however. An AIC action may be effective in their respective jurisdiction, but it has little influence in other locals.
Before you make the decision to enforce your trademark in China, it is important to determine what exactly you hope to achieve at the end of this process. Is your goal to merely stop the infringement outright, or will you pursue damages in attempt to "punish" the infringing party? While both options are certainly available in China, and can often been accomplished simultaneously, a trademark owner should understand the realities and potential for success in any given situation.
As a general rule, damages in China are very low compared to other jurisdictions around the world. Consistent with Chinese Trademark Law, Courts calculate and then ultimately determine damages based on either the illegal profit of the infringer or the economic loss suffered by the trademark owner due to the infringement. The burden of proof lies with the plaintiff, and due to the absence of discovery in the Chinese legal system, such empirical data is difficult to obtain. The law further states that, absent such data the Court has discretion to determine the amount of damages, however damages may not exceed 500,000 RMB. Realistically, in China's major cities, Courts have been reluctant to award damages for Trademark infringement, with only one third of Courts rendering judgments in exces s of 100,000 RMB.
In practice trademark owners have had a significantly more success pursuing an injunction to preserve evidence of the infringement and to stop the infringing activity. Accordingly to Chinese Law, if the plaintiff can prove that significant infringement has occurred and that the infringing activity has caused or is causing severe damage, then a Court will likely be inclined to issue an injunction against the infringer.
Additionally a trademark owner needs to consider how long they are willing to wait for the matter to be concluded. Utilizing the court system is certainly effective; however trademark litigation may take more than six months before a judgment is rendered. On the contrary the AIC is extremely fast acting and the agency generally concludes matters in weeks rather than months. As discussed above, however, using the AIC may not necessarily be an effective method for ever instance of trademark infringement.
Nature of the Infringement
At the very foundation of infringement is determining the scope and nature of the illegal activity. This provides clarity and a true understanding of what is actually occurring. Some of the important areas to focus on are:
- The type of goods or mark being infringed;
- The extent of the infringement;
- The market for the infringement;
- The potential impact of the infringement on the rights holder;
- The complexity of the network of infringement;
- Whether the infringing goods are being exported from China.
Initially you need to determine the type of goods being infringed as this may provide you with alternative options. The Chinese Government places significant emphasis on protecting products and markets that deal with China's security and the public's health and welfare. Taking this into consideration, if you are the owner of a pharmaceutical trademark, for example, and are experiencing infringement in China, you may be able to involve additional government bodies, such as the State Food and Drug Administration, to assist in enforcing your trademark.
Further it is always suggested to spend the time to analyze the complexity and scope of the infringement network. Counsel can assist in determining whether the infringement is small and localized or if infringement is running rampant through China. Moreover, through this analysis you will able to determine the size and business structure of the infringing operation. This intelligence will assist in making the informed and prudent decision when it comes to trademark enforcement.
The infringers market is another key aspect which should be closely scrutinized. It is advised to ascertain who the infringer is selling to, and where the sales are taking place. If the infringement is purely a localized domestic issue, then there are a variety of options available, however if the infringement is more international in scope then it may be necessary to involve multiple parties in this dispute.
Keeping with the notion of infringement with potential international ties, it will likely be imperative to record and enforce your right with Chinese Customs. Customs enforcement is a wonderfully effective method to prevent infringing goods from leaving China, and data certainly suggests the administration is efficient in their monitoring. The cost to record a registered trademark is very low, and the benefit will pay for itself multiple times over.
Trademark infringement in China can certainly be a frustrating situation to any trademark owner. Often confusion, anger, and a variety of other emotions are invoked at the first sign of infringing activity. With multiple options available and the ever improving Chinese intellectual property system there is little doubt that a rights holder will be able to enforce their trademark in China. So the next time the question is raised as to whether trademarks are enforceable in China, now a trademark owner can confidential say, "Absolutely."
This article first appeared in World Trademark Review magazine issue 45, published by The IP Media Group. To view the issue in full, please go to www.worldtrademarkreview.com.