China: Is a good anti-counterfeiting strategy possible in China?

Finding, catching and stopping counterfeiters in China might seem an impossible task given the country’s sheer size, the fact that this crime is new and unfamiliar to many and the amount of counterfeit goods moving through the country. However, while the threat of counterfeits can be daunting, rest assured that with some advance planning, thorough information gathering and smart and swift legal action, a legitimate anti-counterfeiting strategy can be developed and counterfeiters can be beaten in China.

Finding, catching and stopping counterfeiters in China might seem an impossible task given the country’s sheer size, but strategies do exist to tackle the issue

Picture: testing/Shutterstock.com

Back to basics

Starting with the trademark basics in China gives you the foundation you need to fight the counterfeiters of which you are aware – as well as those which may enter the picture in the future. The first thing to look at is registering your rights or recovering these from bad players. This step is worth considering even for those that do not sell – or even plan to sell – their brands in China. Remember that China is a first to file country – in other words, those that file a trademark first will generally have the right to use it. For this reason, it is vital to figure out which marks are important from a China perspective and register these as soon as possible. Once you have a granted trademark in hand, it is much easier to stop counterfeiters through China’s dual enforcement system. Alternatively, if your marks have already been registered by third parties, you will need to look at recovering these rights as soon as possible. You can start by looking at options such as non-use cancellation, invalidation and negotiation for assignment. Generally, it is recommended to take more than one route in parallel in order to resolve the issue as quickly as possible. In the meantime, the prevalence of trademark squatting should be a reminder to register your marks in classes not already taken and review what other trademarks you should register.

Getting ahead

If you have a counterfeiting problem on your hands already, things will be easier if you have collected information to better understand the situation and the counterfeiter. It is critical to utilise local, trustworthy investigators who can work independently or in conjunction with your own in-house team. Some questions you need to answer include the following:

• Who is the counterfeiter?
• Are there multiple parties?
• What is the scope of the activity?
• Where are the parties located and how are they operating?
• Are the goods staying in China or going international?

While getting a better understanding of your situation is crucial, it is also important to collect admissible evidence which can be used in potential legal action. Make sure that your investigators are prepared to do this and know that it may be necessary to involve a notary.

On the other hand, if you do not currently have a counterfeiting problem, but instead want to forestall future issues, it is important to begin watching out for bad players. This can be done by keeping an eye out for parties filing new trademark applications which are identical or similar to your own. This will not only give you an idea of who is watching your brand, but also give you an opportunity to oppose such applications and try to stop these parties at an early stage. Another important step is to set up a customs watch by recording your registered trademarks with customs officials. This will allow them to keep an eye out for counterfeits being imported or exported from Chinese ports and make it easier for you to seek assistance from Customs when you become aware of counterfeit shipments. This is critical for brand owners which have discovered counterfeits in cities around the globe and are trying to stop the flow at the source.

Legal action

Once you have gathered some information about potential counterfeiters, it is time to look at taking legal action. As mentioned above, China has a dual enforcement system. Administrative action is the most common enforcement route, as it is faster and costs less. Administrative action for trademarks is usually sought through the administrations of industry and commerce, but there are potentially other authorities you can look to for assistance, depending on the situation. Another important administrative option is customs action, which allows you to stop counterfeit goods at Chinese ports. Once counterfeit shipments have been detained and confirmed, Customs can destroy them.

Judicial action offers more remedies – although going through the courts is more expensive and time consuming. To determine whether judicial or administrative action is best, its helps to look at what you are trying to achieve. If monetary damages are most important, then going to court is the best option. However, if time is the most crucial factor, it may be advisable to go down the administrative route. Typically, time is of the essence in counterfeiting cases, which is why administrative actions are more popular. While civil action is more common, criminal charges can also be sought under certain circumstances, based on seriousness and the volume of counterfeiting.

These legal actions can be taken while also negotiating with the opposing party to end the infringing activity. The threat of legal action (eg, administrative penalties, litigation damages and criminal punishment) can motivate a party to cease its infringing behaviour and make certain concessions to ensure that this will not be an issue in future.

Extra protection

In addition to registering your rights, investigating counterfeiters and taking legal action, there are other steps you can take to protect against potential counterfeiters. Solid China-focused contracts with built-in IP protection can help to prevent or more easily combat infringement by related parties. Higher budgets for IP filings can save money over the longer term by protecting rights early, rather than having to spend more to recover rights. Adjustments to business practices (eg, manufacturing processes) can help to ensure that few or no outside parties have the knowledge or ability to create counterfeit products or share this information with others. IP education with a China focus within the company can ensure that your employees do not misstep and open the door to infringement. A line of communication with online platforms (eg, Taobao and Alibaba) can help to streamline takedowns of counterfeit goods. Further, communications with various government organs will allow you to educate officials about your brand, lobby for the strengthening of IP and legal protections, and seek clearer information on how best to seek protection under existing regulations.

At the end of the day, while China can be difficult to navigate, a variety of options are available to brand owners, provided that they familiarise themselves with the market, regulations and specific strategies which work best. Above all, it is vital to plan ahead by filing trademarks and setting up watches in order to be prepared and able to eliminate problems as quickly as possible.

Brandy E Baker
Foreign counsel
[email protected]

Brandy Baker obtained her bachelor’s degree from Arizona State University and her JD from the John Marshal Law School in Chicago. Ms Baker’s experience in intellectual property began in Singapore, where she studied international IP law at the National University of Singapore and was an intern within the IP department of a large Singaporean law firm. Ms Baker assists the firm’s international clients on a wide range of IP issues. Much of her work is focused on establishing IP and business strategies for both large and small entities which enter the Chinese market, and providing advice on ongoing enforcement matters.