The Enforcement Gap refers to the difference between legal theory on anti-counterfeiting; that is how the laws purport to prevent such illegal activities and the practical outcomes. This is the third contribution in a series of articles which examines the Enforcement Gap. Our first piece covered the Enforcement Gap in Thailand, following with Russia as the second area to be explored. We have also explored other key markets including the Enforcement Gap in Thailand, Russia, Philippines, Indonesia, Cambodia, UAE, Vietnam and Hong Kong.
The Enforcement Gap in China
Raids have been somehow commoditized with the emergence of small local actors, yet it is still very rare to find a trustworthy anti-counterfeiting partner with strategic thinking, holistic solutions and strict compliance standards.
In the last two years, China has been putting further efforts into improving its legal and enforcement framework of IP protection. Revision of the “Trademark Law”, the “Patent Law” and the “Copyright Law”, promulgation of the “Trademark Infringement Judgement Standard” and the “Opinions on Strengthening the Protection of Intellectual Property Rights” by the State Council all demonstrate China’s efforts to answer to international pressure on IP protection.
For all of China’s progress in IP protection in terms of law, there are other factors that continue to have a major influence towards application in practice, especially considering the geographic and demographic dimension of the country itself. In fact, the gap between different regional jurisdictions is noticeably reflected in courts’ legal interpretations depending on their location, exponentiated by an unbalanced economic development and stages of legal maturity, for example in the IP-related experience of Judges. All things considered, local protectionism exists and still has enough influence to make China a challenging place for IP enforcement in some cases, namely for right holders who are used to jurisdictions with different standards, culture, and transparency of public authorities.
When confronted with infringements against their rights, IP holders usually turn to either administrative enforcement (through the Market Supervision Administration (‘MSA’), the Police and Customs) or judicial enforcement (through courts). The challenges are present in both types of enforcement, but on different levels.
While administrative authorities in different levels are all progressing to becoming more protective of IP holders against infringing counterfeit products, the same does not apply for unfair competition cases. The MSA in particular, still holds a conservative approach towards unfair competition cases, mainly due to the relatively weak legal IP knowledge of the officers responsible. Unfortunately, this reluctance can be seen across mainland China, even in some tier one cities like Shanghai and Guangzhou.
In order to increase deterrence, many IP right holders turned to leverage Police enforcement power by filing criminal cases. This, however, can still be met with some obstacles, as transfer of administrative cases from the MSA to the Police are faced with ambiguous procedures. An example of such complications is the situation where the Police decides not to pursue a case without notifying the IP right holders, which is not an unusual practice.
Within the Police sphere, IP holders need to be aware that each regional jurisdiction has defined different priorities, which influence officials’ internal evaluation. This being said, when filling for criminal enforcement, it is necessary to know which are the focus activities of the different jurisdictions in order to present the case to the right one. An experienced legal advisor keeps in mind that it is essential to ensure IP criminal cases are handled by a regional Police with IP related issues in their priority list. Moreover, to constitute a criminal case, on-the-ground support is vital in gathering supporting proof, making it almost mandatory to work with a local agency or law firm with evidence collection capability that is compliant with international anti-bribery and corruption legislation.
In regard to judicial enforcement, looking at the last few years, it is encouraging to witness positive changes have and continue to take place. The Chinese Supreme Court has been encouraging pro-IP judgements and there is an increase in high-profile litigations (including some handled by Lusheng/Rouse) that have been settled or given a verdict with record compensations awarded (exceeding 10 million RMB) for various kinds of IP infringement (including trade mark, unfair competition and patent). Furthermore, newly formed IP specialised courts in tier one cities, such as Guangzhou, Beijing and Hangzhou, are regarded as the courts’ new IP enforcement backbone.
One of the silver linings of China’s path on IP protection is the steps taken on the online commerce legislation. Pressured by the “E-commerce Law”, online platforms are also taking measures to detect and eliminate infringing links upon complaints, enlisting them as the third enforcement channel for IP right holders. With the rapid development of new social media, such as live streaming and flash sale apps, infringement issues are becoming faster moving every day, meaning constant vigilance is required to keep up in the world’s biggest e-commerce market by sales revenue. Alongside this, Chinese legislation leaves space for platforms to produce their own regulations, hence there isn’t a unified IP protection policy and practice across the various platforms, which all differ in their sophistication. To be successful in online enforcement, IP holders should look to combine legal expertise with creativity to deal with the different e-commerce platforms regulations and the constant online evolution of infringements. Rather than trying to “take down everything”, rightsholder need to focus their limited resources on pain points: top content and listings on top platforms that are causing the most harm.