Thursday, 21 September 2017 Sydney
RSS
Connect
Newsletter

TOOTHLESS TIGER TO ROARING DRAGON:::

TRENDS IN CHINESE INTELLECTUAL PROPERTY BRAND PROTECTION AND ENFORCEMENT

Effective acquisition, maintenance and enforcement of Australian intellectual property rights in China are of critical importance to Australian businesses as trade between the two nations continues to grow, writes Shannon Platt.

Recent reforms in China have striven to establish a cohesive intellectual property and brand protection system in a complex cultural and legal landscape.

 

Combating counterfeiting
In recent times Chinese Authorities have taken steps to impose more effective mechanisms to prevent, investigate and stop intellectual property infringement (particularly trade marks) and counterfeiting in China. This has included increased efficiency in the national trade mark registration system which, in turn, has resulted in a 76 per cent increase of trademarks registered in China since 2006 (1).

In September 2012, the Australian Competition and Consumer Commission (ACCC) and Chinese State Administration for Industry and Commerce (AIC) signed a Memorandum of Understanding aimed at increasing cooperation between the nations on a range of competition and consumer protection issues and, relevantly, on the regulation of online sales and related services. 

This has huge advantages for Australian businesses, especially those relying on manufacturing in China.

Targeting ISPs and Third-Party Platforms

Of particular concern to Australian businesses is infringement online; a lot of which seems to emanate from China. Businesses have seen a proliferation of websites offering counterfeit goods for sale, and infringing the trade mark rights of brand owners in doing so. Manyof these sites are either hosted in China or are operated by Chinese entities. 

Recently brand owners have had more success in having infringing content removed by the ISP hosting these types of websites. This has proved particularly effective where the identity of the infringer is unknown and difficult to ascertain, as is often the case. 

Today many ISPs have ‘take down’ policies. The willingness of ISPs to cooperate has been influenced by the United States Digital Millennium Copyright Act (DMCA) and corresponding European Union Directives, which have given rise to increased accountability for site content. This legislation imposes obligations upon ISPs to act expeditiously to remove or disable access to infringing content where the ISPs possess actual knowledge of infringement, or an awareness of facts or circumstances from which infringement is apparent. This is a useful and important tool for brand owners battling online infringement. 

Brand owners have also recently had success in the US, which bights directly on infringing activity in China. In January 2013 the New Jersey District Court found in favour of the American Bridal and Prom Industry Association (and others) to assist brand owners to stop online counterfeiting (2) and granted an injunction, not only against the entities engaging in counterfeiting activity, but also against online payment platforms, including PayPal, American Express, MasterCard and Visa. The effect of this injunction is that it prevents e-commerce transactions between consumers and website owners engaging in infringing conduct, by stopping the transfer of funds at the source. 

The practical repercussions of decisions such as that of the New Jersey District Court is that Chinese infringers trading using an online presence are no longer able to utilise the services of these key financial institutions, and are forced to request payment by way of direct electronic funds transfer – an unappealing option for many consumers who are (rightly) hesitant to make such payments without the security and accountably provided by third-party platforms.

The armoury of Intellectual Property rights and brand protection in China

It is critical that Australian businesses take a proactive and comprehensive approach to brand protection in China in order to avoid costly legal proceedings down the track. There are several tools available to Australian businesses to bolster their armoury of intellectual property protection in China, which we set out below. 

Trade marks

To register a trade mark in China, an application is made with the Chinese Trade Mark Office (CTO). The application is then examined and, if it meets the requirements, it will be accepted for registration. Although enforcement action cannot be taken until the trade mark is registered, brand owners will have retrospective rights from the date which the application was filed.

Due to the economic significance of the manufacturing industry in China, it is imperative that Australian businesses that manufacture goods in China for export, also register their trade marks in China. This is because in accordance with international and Chinese trade mark law, if another party has registered or registers a mark in China before an Australian business does for their goods, and their goods are manufactured under the same mark in China purely for export and sale overseas, the business risks infringing the Chinese mark, and possibly having their goods seized by Chinese Customs. Australian businesses registering their trade mark in China first will prevent opportunists and counterfeiters (‘trademark squatters’) from applying for and registering the same mark before they do.

Chinese character trade marks

Australian businesses should apply for their trade marks in English, in Chinese characters and in transliteration. Not only will this protect brands from the perils of trade mark squatters, but Chinese 
consumers will more readily identify with a Chinese character mark(or transliteration) than a non-Chinese trade mark.

Further, the Chinese Standard Spoken and Written Chinese Language Law and related regulations provide that trade marks used on signage and product packaging in Mainland China must also appear in Simplified Chinese characters. 

Copyright

Australian businesses should also consider registering their copyright works in China with the China Copyright Protection Centre (CCPC). Whilst copyright registration is not a pre-requisite for copyright protection in China, registration with the CCPC is prima facie evidence of the subsistence of copyright. As such registration is highly recommended for effective copyright enforcement in China, and is particularly useful when taking action against Chinese counterfeiters.  

Customs notices 

Once trade mark and/or copyright registrations have been obtained, the next step for Australian businesses to bolster their intellectual property armoury is to notify the Chinese Customs Agency of the trade mark and/or copyright registrations to ensure pirated goods are not exported illegally.

The final frontier

There are a number of ways that Australian businesses can stop infringing conduct in China. We set these out below. However, the Armoury of Intellectual Property Rights will be the most cost-effective way for Australian business to protect their rights in China. 

Trade mark cancellation proceedings

Where infringement is already occurring and Australian businesses have not sought to register their trade marks/brands with the CTO, trade mark cancellations may be available to recover and/or reinstate brand rights to the true owner (Trade Mark Cancellation Proceedings). There are also avenues of appeal against decisions of the CTO via the Trademark Review and Adjudication Board (TRAB), with a right of final appeal to the Beijing People’s Court. 

Misleading and deceptive conduct

In contrast, where trade mark squatters are passing off as their own, trade marks/brands that belong to another, or are using unauthorised packaging or trade dress so to mislead buyers into believing that they are actually buying a different product, misleading and deceptive conduct proceedings may be commenced with the AIC under the Chinese Anti-Unfair Competition Law (AIC Proceedings). 

The AIC is one of the most significant intellectual property enforcement agencies in China as it performs both administrative and judicial functions. The AIC can order that unlawful activities cease, can conduct raids without the need to show cause, can investigate alleged infringers, can impound and destroy infringing materials, impose fines and can order the trade mark squatters pay compensation. 

The combined effect of the Trade Mark Cancellation Proceedings and AIC Proceedings is to reinstate trade mark registrations to the true owner and prevent trade mark squatters from continuing to represent an association with the owner of the trade mark/brand. 

Of course, like the Trade Mark Cancellation Proceedings, AIC proceedings are both costly and complex and should be avoided by Australian businesses wherever possible by availing themselves of the Armoury of IP Rights measures discussed above. 


Types of intellenctual property rights and their enforcement in China

toothless tiger2

(1) Geboers, K. Best Practice for Brand Expansion in China, Thomson Reuters (2013) 
(2) American Bridal & Prom Industry Association, Inc et al. v Moncherybridal.com, et al., United States District Court of New Jersey, 7 January 2013

Shannon Platt is a Partner & National Head of Intellectual Property at Sparke Helmore Lawyers The information in this article is intended to provide a general guide as to the subject matter. 
shannon.platt@sparke.com.au

copyright Australia China Trade & Investment