Significance of implementing customs protection of intellectual property rights in PRC

image_pdfimage_print

 

Introduction

China Customs has established a well-rounded system to facilitate the recordal and enforcement of intellectual property rights (“IPR”) over goods entering and leaving China in recent years. However, many IPR owners neglected the importance of applying for customs protection in China, which would easily give IPR trespassers the opportunity to take advantage of IPR owners.

PRC General Administration of Customs (“GAC”) would cooperate with customs of other countries to tackle infringement actions. For instance, it cooperated with the Russian customs during March to June 2018 targeting at counterfeits infringing the trademarks owned by FIFA and its sponsors. The customs authority detained more than 190,000 shipments of suspected counterfeits in 2017.

Case study – Advanced Micro-Fabrication Equipment Inc. (“AMEC”)

AMEC is a PRC enterprise specialising in research and development of micro-fabrication products and semiconductors for high-technology sectors. In July 2017, AMEC brought an action against a subsidiary company of Veeco, alleging that its equipment had infringed AMEC’s patent, seeking for a ban on the products and claiming damages. In response, in November 2017, the subsidiary of VEECO filed a patent invalidation application against AMEC’s semiconductor patent with the PRC State Intellectual Property Office. The Patent Re-examination Board rejected this application and confirmed that AMEC’s semiconductor patent as valid. In December 2017, the Fujian Higher People’s Court ruled that the subsidiary of Veeco indeed infringed one of the patent rights owned by AMEC, and restricted such company from trading, producing and selling all related products.

Since the Court ruled AMEC’s patent as the lawful patent in the PRC, AMEC then filed its IPR with the GAC. Later, AMEC was notified that suspected infringing goods from Veeco would be imported through the Shanghai Pudong International Airport. It then reported the findings to the Shanghai Customs, which immediately enforce its customs protection procedures and detained the suspected infringing goods. The infringing goods were worth RMB 34 million. While the goods were seized, Veeco initiated settlement negotiations with AMEC. In February 2018, the parties reached an international mutual agreement in relation to all unsettled disputes.

Implications

This case illustrates the mutual recognition between China Customs and the courts. The Shanghai Customs acknowledged the court’s ruling on IPR ownership and protect AMEC’s rights in a timely manner. Also, the custom seizure emphasized the strict measures taken by China Customs and triggered Veeco to initiate settlement between the parties. The case shows that enforcement actions by the customs provide stronger protection for IPR holders. It also serves as a warning and deterrent for companies to respect the IPR established in China.

When does China Customs take action?

China Customs’ enforcement rights are provided under the Regulations of the PRC on the Protection of Intellectual Property by Customs. It has the right to detain or seize imported or exported goods under two circumstances: (1) based on previous IPR recordal by IPR holder and (2) based on petition of IPR holder, which is also regarded as active and passive protections.

Where IPR holder is aware of imports or exports of infringing goods, or received the written notice from China Customs if the IPR have been recorded with them, such IPR holder can make a request for the customs to detain such goods by paying guarantee of the equivalent value of the detained goods. China Customs will then conduct investigations on the suspected goods. During this period, IPR holders are encouraged to provide relevant information to support China Customs.

What to do for greater protection?

Once you have registered your IPR with the China Trade Mark Office (“CTMO”) or relevant authorities, you are strongly advised to record your IPR with China Customs immediately. Otherwise, your position would be vulnerable to squatters who could well make use of the recordal system to seek for the Customs’ protection as a shield, by using such system to block the rightful IPR owner’s goods from entering in or out of China. Without IPR recordal, the GAC does not have authority to search and examine goods. The recordal is therefore the most reliable method to ensure customs official proactively inspect and detain infringing goods. Recordal is available for the following types of intellectual property:

  1. Trademarks registered in respect of goods in China;
  2. Any copyright subject matter; and
  3. Patents issued by the State Intellectual Property Office (including design, invention and utility models).

Conclusion

Since IPR holders themselves will face difficulty and incur substantial costs in discovering all infringing goods in and out of China, it is encouraged to utilize the well-established mechanism of Chinese Customs to protect and enforce their IPR against unscrupulous traders.

 

For enquiries, please contact our Intellectual Property & Technology Department:
E: ip@onc.hk                                                                        T: (852) 2810 1212

W: www.onc.hk                                                                    F: (852) 2804 6311

19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.
Published by ONC Lawyers © 2018