In recent years, China has improved the protection of intellectual property rights. It is no longer on the United States Trade Representative's `priority watch list' for infringements of international trade laws, although changes may be needed in future if it is to avoid trade sanctions.
Admittedly protection under the law is uneven. Patents, for example, enjoy relatively strong protection. New legislation, such as the Trademark Licensing Contract Recordal Procedures promulgated in August 1997, provides for greater enforcement of trademarks as long as they are officially registered with the relevant bureau of the State Administration of Industry and Commerce (SAIC); but penalties for trademark infringement remain inadequate.
Trademark infringements
Slow and inefficient resolution of disputes and poor enforcement remain the main problems. How best then to tackle various intellectual property problems that might arise? What if, for example, your Chinese registered (or well-known) trademark starts appearing on the products of a Chinese company?
The best solution is probably to launch a formal complaint about the trademark infringement with the SAIC in the locality where the infringement is taking place. By choosing administrative instead of judicial action, it is possible to avoid adverse publicity, and the administration is usually more experienced, flexible and speedy than the courts. Sufficient proof must be provided, however, before the SAIC will take administrative action. Several private investigation companies, both Chinese and foreign, will conduct investigations and assist in raid action. The SAIC can order the infringement to halt and the payment of damages; it can impose fines and has the power to remove trademarks from infringing goods and destroy them.
If a Chinese company registers your trademarks, or similar marks, you can file an opposition or apply for cancellation with the SAIC. If it uses names, packaging and decorations similar to your well-known brand name products to mislead buyers, you should also launch a complaint with copyright infringement involving a foreigner, such as a product map, schematic diagram, engineering or product design blueprint, or a description on a package or instructions for use, which has been copied. The copy-right owner should launch a formal complaint, although civil action is advisable if it wants compensation, as damages can only be awarded by the people's courts. However, assessment of losses or profits is often inappropriate, and evidence often rejected by the judges.
Criminal action for infringement of patents and copyright is the same as for trademarks.
the SAIC. In this case, though, damages can only be awarded through civil action. Either party to the infringement dispute can, within 15 days after receiving notice of the SAIC's decision, institute civil proceedings. Civil proceedings against the infringer can also be instituted without going through the SAIC dispute resolution mechanism. Since 1993, the people's courts in major Chinese cities have established special divisions for intellectual property matters. The courts have similar powers to the SAIC and they may also order interim injunctions. However, complaints are often made that damages awarded by the courts are inadequate.
As a last resort, you could threaten criminal proceedings. Under the revised Criminal Procedure Law (effective January 1997), it has become possible for owners of intellectual property rights to instigate criminal proceedings, in addition to reporting cases to the People's Procuratorate, which has full discretion in deciding whether or not to prosecute a trademark infringement. Only `serious' trademark infringements are considered crimes, but death penalties have been imposed in some provinces.
Alternative strategies
If goods infringing intellectual property rights are to be transported, Chinese Customs can be brought in to stop them. Under customs rules, owners of intellectual property rights must file them with the Customs General Administration and prove that they are duly registered and protected in China. Thereafter, they receive a certificate valid for seven years and the customs authorities may, on their own initiative or on request (after a monetary bond has been posted), seize and detain import or export goods suspected of infringement.
Pressure can also be put on the Chinese administration or the courts by involving diplomatic or consular missions in China and/or the press. China is eager to join the World Trade Organisation and any negative publicity ?implying that China is not up to the requirements under the TRIPS Agreement is unwanted at this stage.
Although intellectual property laws in China have their shortcomings, their future development looks promising. Xinhua news agency has recently announced that a revised Patent Law will be drafted by the end of this year to cover newly-developed industries such as microelectronics, software engineering and biological engineering. A revision of the Copyright Law will also be considered by the National People's Congress. Better understanding of intellectual property laws is also hoped for with the recent establishment of the State Intellectual Property Office, which runs a training centre for intellectual property professionals in China.
Patent and copyright
China's Patent Law provides protection for inventions, utility models and designs ?offering wide scope for infringement, including unlawfully incorporating or replicating an invention or passing off someone else's patent by counterfeiting an unpatented product as a patented one.
Foreign patent holders often prefer court procedures to administrative action. The Patent Administration Office has the power to order the immediate cessation of a patent infringement and to compensate the injured party for damages suffered. Alternatively, the injured party may proceed directly to filing an action in the people's court or, if dissatisfied with the decisions issued by the administrative body, seek a review of the decisions by the people's court in the region where the administrative body is located within three months of the receipt of notification.
The National Copyright Administration is the competent authority if there has been a Freshfields is an international law firm. Most of its offices throughout Asia, Europe and North America include China specialists. For further details, contact Matthew Cosans through its offices in Hong Kong (tel: +852 2846 3400) or Beijing (tel: +86 10 6410 6338) or by e-mail (mcosans @freshfields. corn).
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