Filing IP Customs recordals in China can be a useful tool for companies to protect their intellectual property from counterfeiting. However, it can be difficult to predict the practical benefit and enforcement value of Customs patent protection.
According to China Customs’ statistics released in April 2022, more than 94% seizures were based on trade mark recordals and only around 4.3% seizures were based on patent rights. Even with Customs recordals in place, the likelihood of Chinese Customs intercepting patent infringing shipments and stopping them at the border is low. However, it is important to understand how the local Customs offices have the capability to enforce patent rights and the steps involved to ensure that any Customs regime is effective.
Though China Customs has the power to make seizures on the basis of recordals of design patents, utility model patents and invention patents, they do not have the capability to detect patent infringing goods via their ex officio inspection. In most cases, it requires the patent owner to provide specific shipping information, as well as preliminary proof of infringement so to trigger a Customs seizure:
A typical Customs patent seizure takes place as below:
- Filing patent rights with China Customs.
- An investigation to obtain shipping information, including container number, departure port, where and how the infringing goods are loaded inside the container.
- Applying for interception with departure port Customs by submitting shipment information and preliminary proof of patent infringement.
- Paying a bond equal to the shipment’s declared value if Customs approves the interception application.
- On-site verification by the patent owner or its patent attorney to confirm the infringement of the intercepted goods.
- Customs detains the goods and issues an official notice requiring the patent owner to file a court action within 20 working days, otherwise the goods will be released on the 21st working date.
- If the exporter submits counter bond applying for release, in most case, Customs will pick up at least one set of samples and release the rest of the goods.
- If a court action is filed in a timely manner and a court injunction order is rendered before the goods are released, Customs will hand over the goods to court or continue detaining the goods upon court order.
- Once a court action has been filed, Customs will close the case file.
In practice, Customs patent seizures are functional as an effective preliminary injunction to preserve evidence of patent infringement. The patent owner must take legal action or reach a settlement with the infringer to resolve the dispute. The goods will be released upon a counter-bond, although a sample and counter bond may be kept to support a court action.
Considering the huge challenges the patent owner may face in obtaining a preliminary injunction order from court in a patent dispute, especially when the infringing goods are not distributed in China market, a Customs Patent seizure does bring benefits in preserving evidence.
The Customs seizure also provides a 20 working-day period for the patent owner to decide on either filling a court action or settling the matter, as well as an advantaged position and stronger bargain power in negotiation.
In viewing the efforts that are needed to collect shipping information to seize the infringing goods. The decision to employ a Customs regime to protect patent right should be made after careful consideration of the risks, benefits and costs.
Patent owners may consider Customs actions under the below scenarios:
- Collecting infringing evidence against the infringer, especially when the infringing scale is large and no evidence can be obtained in the China market.
- Using Customs seizures as part of a litigation or negotiation strategy between two parties,
- Imposing the deterrent effects against a repeated offender;
- Catching dishonest licensees and reaching a favourable settlement without having to file a court action.
Unlike a trade mark Customs recordal, patent owners cannot rely on Customs’ taking the initiative to intercept patent infringing shipments. Significant effort and costs are required to collect shipping details to make a seizure happen. Customs patent seizures brings value which other enforcement methods or evidence preservation methods can hardly achieve when the seizure is well prepared and well planned against the infringer.