Authored Articles & Publications Feb 21, 2017

Best in Law: How You Can Combat Chinese Counterfeits

IP Tips from BB&K Partner Henry Welles in the Riverside Press-Enterprise

Best in Law: How You Can Combat Chinese Counterfeits

By G. Henry Welles

Counterfeit products can create significant problems for businesses. Chinese counterfeiting costs foreign businesses billions of dollars a year in lost profits, according to an ABC News report last year. Counterfeiting operations are notoriously difficult to address, but there are steps that can be taken to address trademark rights protection.

Register trademarks in China
The first step in combating counterfeits is to obtain trademark registrations in China for products and business names that need to be protected. This can be done by filing directly with the Chinese trademark office. The entire process can take 12 months or more, and as a result, trademark registrations should be sought in advance of product launches.
You can also file for trademark registration in China through the World Intellectual Property Organization. The advantage to this is that if you already have a trademark registration in the U.S., or have filed for registration, you can file one application form with WIPO to obtain international protection in multiple countries.
Notably, China is a first-to-file system, unlike the United States, which is a first-to-use system. Having a longstanding U.S. or other foreign trademark does not establish trademark rights in China. Another entity could gain rights to your trademark in China if they file for registration first.
Enforcement of rights
Various steps may be taken to enforce trademark rights once registration is obtained. Some are more costly and more effective than others.
Registration with customs
Once a Chinese trademark registration is obtained, it should be registered with Chinese Customs. This will allow Chinese Customs to seize counterfeit products being exported. Customs will contact you if they discover a shipment of possibly infringing goods. The goods may be seized, inspected and ultimately destroyed if found to be infringing. Registration with Customs can take three to five months.
You should also register your U.S. trademark registrations with U.S. Customs and Border Protection. This will allow infringing goods to be seized at the point of entry to the U.S. if they are not caught by Chinese Customs officers.
Administrative actions
If you can locate a store or warehouse in China with counterfeit goods, you can file a complaint for administrative action with the local Administration for Industry and Commerce, or other applicable agency. The AIC will evaluate and investigate the claim. If the evidence is sufficient, the local AIC may conduct a raid to seize the counterfeit goods, order a halt to production, and levy a fine. This process is generally faster and more cost effective than pursuing litigation through the courts. The outcome of the administrative action by the AIC may be appealed in court, however.
The administrative action approach may not be always be the best option because the AIC may not wish to devote resources to a smaller case or, conversely, may not want to pursue an extremely large case where the outcome may be overturned by a court. In addition, sometimes the fines levied by the AIC are small and not a sufficient deterrent.
Court proceedings
A company seeking to protect its trademarks may sue infringers in the Chinese courts. If a civil complaint is brought and infringement is found, the judge may award money damages and injunctive relief, stopping the infringement. The courts have the ability to award greater penalties than the AIC and this may present a more significant deterrent to infringers. The courts are more costly and time-consuming than administrative proceedings, however, and may be less desirable in some cases.
Online complaints
Counterfeit products are often sold through online channels. One example is the global trade platform, and its companion Chinese platform Alibaba has adopted an intellectual property rights complaint process that is generally effective in honoring the requests of trademark holders.

The Alibaba Intellectual Property Rights complaint system is initially stringent in its requirements for registration, including the need to submit proof of identity, such as copy of a certificate of incorporation and certified copies of the Chinese trademark registrations involved. Once registration is complete, complaints may be filed and offending product links removed. Other online sellers have similar procedures.
Originally published in the Feb. 19, 2017 edition of the Press-Enterprise. Republished with permission.

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