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Administrative route or civil action? How to make the best of China’s double track enforcement system?

Unlike most of other counties, China provides, besides the civil action, an administrative route (AIC action) to solve trademark infringement. When you have trademark enforcement issues, you need to compare the pros and cons of each of the solutions provided by Chinese law, and then deploy the most appropriate strategy to crack down on the infringers.

The AIC action:

The AIC action has been known for its simplicity and cost-efficiency.

Anyone, not necessarily a licensed lawyer, can represent the right owner to file a complaint. For straightforward counterfeit case, the AIC usually cooperates with the right owner and takes actions rather quickly. The AIC seizes the counterfeits and in exceptional circumstances the transaction records. A penalty (cease of infringement plus fine) will be issued within 2-3 months and the counterfeits will be destroyed afterwards.

If an infringer is punished two times for trademark infringement in 5 consecutive years, or three times for unfair competition in 2 consecutive years, the AIC can put him into a "black list" for special supervision.

It is, however, becoming more and more difficult to push the AIC to take action unless the case is a simple and straightforward counterfeiting case. This is due to a number of legal changes and administrative decisions. As a result, the official statistics show that the number of AIC actions is declining: 66,230 in 2012, 56,870 in 2013, 42,450 in 2014, and 34,000 in 2015.

The newly revised Trademark Law (2013) contains some of these changes. It sets up a short time limit for the examination of trademarks (9 months) and for opposition procedures (12 months). It further stipulates that in case of failure in the opposition, the trademark is immediately registered (article 35.2). Finally, and this is not something new, according to an SPC's judicial interpretation on the conflict with prior rights (2008), a registered trademark cannot sue another registered trademark.

The combination of the above rules explain why it is becoming difficult to motivate the AIC: if the target explains that it just filed a trademark, the AIC prefers to wait until the end of the examination period. Even if an opposition is pending, the AIC prefers to wait and make sure that it is not going to raid a trademark that would become automatically registered if the opposition fails.

Moreover, the AIC is now reluctant to take action against the distributor. According to the new Trademark Law (article 60.2), when the distributor has evidence to prove that he obtained the infringing goods through legitimate channels and indicate the name of the supplier, the seized product shall be returned with simple prohibition to sell.

Finally, since the right owner is not legally a party to the AIC procedure and cannot officially "push" the case, the efficiency of the action largely depend on the AIC motivation. And for the reasons below the AIC's motivation is not anymore what it was:

  • The central government's recent policy is to weaken the AIC's functions and powers in order to alleviate their interference on the market economy;
  • The AIC is merging with other enforcement agencies (TSB, FDA, etc.) into a Market Supervision Administration. Since the focus is food and drug security, the FDA is taking the lead on both manpower and resources.
  • The quota of fines is no more a factor of performance evaluation for the AIC.
  • The newly revised Administrative Procedure Law (2014) requires that, in case of administrative lawsuit against an administrative agency, the person in charge of said agency shall appear in court.

Even so, the AIC action remains the most cost efficient way to deal with straightforward counterfeit case.

Moreover, it can be used as well to preserve infringing evidence or get the sales records or other information about the supplier or counterfeiting chain in a combined litigation strategy.

The civil action:

The civil action is, of course, more expensive and time consuming than the AIC action. But it is the primary choice when you have to deal with complicated cases, like copy of trade name, imitation of trade dress, use of look-alike trademark (even already registered if you can prove your trademark is well-known) etc. and if you want to obtain damages.

First, the civil action is more flexible. Unlike the AIC action in which you only rely on the ex officio investigation, you can build your civil case, from the evidence collection to the forum of the case.

Second, the judges are usually well trained and more open-minded, and have a rich experience in dealing with complicated cases. You have better chance to get comprehensive protection in a civil action.

Last but not the least, the civil action is the only legal procedure that allows you to get damages. The new Trademark Law has raised the statuary damages up to RMB 3 million. The SPC is encouraging the judges to grant punitive damages against repeat offenders. You can also use the evidence preservation and property preservation measures to increase the chance to get as much damages as possible.


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