Do you conduct business in or with China? Many companies are hesitant to enter the Chinese market due to valid concerns about loss of intellectual property (IP), but the lure of over a billion consumers can be particularly attractive despite the risks.
Did You Know?
In 2016 there were an estimated 19,500 Intellectual Property Right infringement cases in China, which included 17,400 shipments of good seized – totaling roughly 42,058,200 pieces of goods! 98.5% of those seizures were for trademark infringements.
Comparing that figure with the three previous years, you can see that, apart from a significant increase in 2014, there has been a steady decline in the number of IPR infringement cases, shipment seizures, and goods seizures. However, infringement of trademark exclusive and patent rights goods continued to increase dramatically over the 4-year period, with patent infringement cases increasing 87.8%.
| 2016 | 2015 | 2014 | 2013 | |
| No. of IP Cases | 19,500 | 25,000 | 27,000 | 23,600 |
| Shipment Seized | 17,400 | 23,000 | 24,000 | 24,464 |
| No. of Goods Seized | 42,058,200 | 70,000,000 | 92,000,000 | 76,000,000 |
Source: China Customs Administrative General – 2016 IP Protection Report / Rouse
While those figures are astonishing, there is encouraging news: the landscape for IP protection in China is improving. Since joining the World Trade Organization in 2001, China’s IP protection regime has developed rapidly. Beijing has been proactively taking steps to protect intellectual property rights (IPR) such as instituting the Customs Regulations for the Protection of IP, which prohibits the export and import of products that infringe IPR and grants China Customs the authority to detain any suspected infringing consignment of goods and to conduct investigations into such goods. While most countries only examine imported goods, China Customs also examine goods destined for exportation in order to prevent counterfeit versions of your goods from entering the international market. In fact, the majority of IP infringing goods detained by China Customs are exported (96.2% of shipments; 98.95% of goods).
Even though the Chinese government is actively taking steps to stop the export or import of infringing products, it is critical to the success of your business to adopt a strategic approach to protecting your IP.
Strategies for Protecting Your IP
- Register your patents, trademarks, and copyrights in the both the U.S. and China (or anywhere else you do business or are considering doing business). IP cannot be protected if it’s not registered. Consider defensive registration of house marks and key brands as trademarks and domain names in China. Remember that China follows a “first-to-file” jurisdiction. Remember to register the copyright in catalogs, packaging, and promotional materials as well.
- Record U.S.-registered trademarks and copyrights with U.S. Customs and Border Protection at apps.cbp.gov/e-recordations/
- Record Chinese registrations with GACC at http://202.127.48.148/
Note: In the past, the application submissions could be done in the form of a (hard copy) letter of authorization. New regulations require filings to be made electronically via the GACC’s website, which, unfortunately, is in only available in Chinese. However, the copyright holder’s representation office in China should be able to assist with the filing. If you do not have a representation office in China, consult your customs broker.
- Do not disclose any IP to anyone until it has been registered in China.
- Do not assume confidentiality, noncompetition, or nonsolicitation contracts will effectively protect against loss of IP or key employees in China.
- Before you talk to a foreign entity about a potential business relationship or attend an international trade show, work with IP legal counsel to develop an overall intellectual property rights protection strategy.
- Conduct due diligence activities on all potential foreign partners. Thoroughly vet each partner and continue to monitor them, even after a business relationship has been established. For assistance, visit the U.S. Foreign Commercial Service websites at export.gov or www.buyusa.com.
- At trade shows, strictly limit the amount of information you share. Do not discuss IP with attendees. Limit the number of samples displayed and do not post or share photos.
- Budget for active protection and litigation of your IP in China. Be prepared to take action and spend money if necessary.
- Regularly update the list of all your trustworthy Chinese distributors and authorized representatives (including names and contact information) in the GACC database. Those individuals will be contacted by Customs officials in the event of a suspected infringement. Be aware that agents or representatives must be duly authorized in order to interact with Customs on your behalf regarding notification, intervention, seizure, paying deposits, or submitting responses on your behalf. This is particularly important in order to avoid lengthy delays in the delivery of your goods or incurring financial losses in the event of a suspected infringement.
Frequently Asked Questions
- What IPR can seek Customs protection?
Only the following IPRs may be registered with the GACC: trademarks (excluding service trademarks), patents (including invention, utility models, and design patents), and copyrights.
- How do I file an application to protect my IPR?
In order to seek protection by China Customs against counterfeit goods, right holders are encouraged to record their IPRs with the General Administration of China Customs (GACC). Applications must be filed using the online registration system developed by the GACC located at http://202.127.48.148/.
- How much does it cost to file an application to protect my IPR?
There is no fee to file an application to protect your IPR in China.
- Who can file the application?
Only right holders (trademark registrant, patentee, copyright holders, and copyright-related right holders) or their authorized agents located in mainland China can apply for registration of IPR with the GACC. Right holders not located in mainland China must entrust a natural person, legal entity, or corporate office located in China to file the application with GACC on their behalf.
Please be aware that IPR holders must register users in advance of using the system.
- What information/documents/materials need to be submitted with the application?
- The name, address, and contact information of the right holder, including nationality
- The IP name and relevant information about the product, including a comprehensive description of the product, photos of the product and its packaging, list price, legal use of the product, and production locations
- An e-copy of the IP certificate (trademark certificate, patent certificate, copyright registration, or other document proving the copyright) and the current status of the license
- An e-copy of the identification certificate of the right holder (or a legal representative/agent, where necessary) including a translation in Chinese
- An e-copy of the Power of Attorney in the name of the agent responsible for the registration process, if one is used
- Contact details of importers, exporters, and distributors
- Import and export customs locations
- IP right holders may also register legal users of the IP rights, such as a manufacturer, distributor, or co-owner of the products
- How long will it take for my IPR application to be approved?
Within 30 days of receipt of the online application, the GACC will make a decision on whether to approve the application and will inform the applicant in writing.
- How long will my IPR be protected?
If the GACC approves the submission, the registration of IP is valid for the duration of the IP right or for a maximum period of ten years.
- How do I file a modification?
Any modification to the status of the right holder, agent, representative, attorney, or the IP itself must be communicated to the GACC via the registration system located at http://202.127.48.148/ within 30 days of the modification event. Failure to notify the GACC within the required timeframe may result in cancellation of the IP rights.
- If I have questions, how do I contact the GACC?
If you have questions or concerns, please contact the Intellectual Property Office of the Policy and Regulation Department of the General Administration of Customs via e-mail at ipr@customs.gov.cn
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Sources
- Rouse, The Magazine
- Nancy Kremers, Senior IPR Attache, US Patent & Trademark Office, US Embassy, Beijing, CHINA
- China IPR SME Helpdesk: Guide to Using Customs to Protect your IPR in China
