Evidence collection and enforcement challenges
Jenny Guo, IP head of Greater China at Danone, said that it’s not uncommon to have cases where infringers are operating across multiple locations, making it challenging to track them down. “We often see infringers producing the products in one location, packaging them in another location, and transporting them to another,” said Guo.
Even if infringing products are found, they need to meet a volume threshold, and dispersing them in multiple locations means it’s harder to reach this requirement. When infringing goods are in high volumes its important to determine the right time to do field investigations and take raid actions concurrently in different places. This requires conclusive evidence and good communication with local authorities.
As notarised evidence is required, trying to get evidence means collaborating with third parties to help shadow a suspected infringer. “We sometimes have to use third parties to pretend to do business with the infringer,” said Guo. Each case is different and there isn’t a one-size-fits-all approach so the strategy has to be tailored accordingly.
In tackling online infringers, one issue is that they send out both genuine and counterfeit goods, so doing test purchases is essential. “When trying to get infringers online, don’t use a tier one city address because infringers are more likely to send infringed goods to second or third tier cities,” said Guo. Even though the first purchase from an infringer may be genuine, the infringing products may be released on subsequent orders, so further purchases may be necessary.
Kai Peng, senior IP counsel at Philips, said that evidence collection in patent infringement cases causes headaches for in-house counsel and that getting the real sample is a challenge. “If a product is only for export or if the sample is a business-to-business industrial product, it’s hard to get it from the public domain.” “It may be possible to get evidence preservation from the court, but before that happens, don’t wake up the infringer or the case will be even more difficult.”
Trying to get high enough damages to justify the amount of costs being invested in a case is something in-house counsel have to grapple with. “The more well-known a trademark is, the more likely that damages will be higher, so it is important to show this aspect as well as the investments that have been made into the specific trademark,” said Guo.
Another tip to keep in mind is to work closely with online platforms to get as much information as possible in case infringers refuse to provide the sales data to online platforms by saying that there are a lot of returned products and that they are not real transactions.
Proposed patent changes
China is discussing the fourth amendments to the existing Patent Law. According to Chunbo Ran, head of patents, China at Unilever, Article 6 of the proposed changes, on service invention in China, is problematic because it is aimed at incentivising employee inventors. If passed, it will allow inventors to sue their company for failing to compensate them for their inventions, which is quite harsh on businesses, especially for small and medium enterprises. Rather than relying on specifications in the patent law, more flexibility should be given through contracts; written contracts are needed to avoid disputes.
Simon Xia, IP counsel, Asia at Otis, a US headquartered elevator manufacturer, explained that Article 72, on proposed increased damages, is a good step, but the definition of wilful infringement is unclear. The scope of the maximum fine for statutory damages being raised to RMB5 million ($726,000) is a positive step but the lower range of RMB100,000 is still too low. Collection of evidence is essential for IP owners to help increase damages but this is easier said than done. Further clarity is also needed when it comes to freedom-to-operate assessments, such as when exactly these need to be done by IP owners and whether a third party auditor is needed to verify the assessment, which can be very costly for smaller businesses.
Effective trade secret strategies
Revisions to China’s Anti-Unfair Competition Law were made in April 2019 to extend the scope of infringers, increase damages, and decrease evidentiary burden on trade secret owners. While there has been a gradual increase in the number of trade secret cases, they only make up 3% of all IP cases in China, with only 9.27% being successful, according to Li Mi, principal and director at law firm Rouse.
Companies are facing increasing information leakages through cyber attacks, employee trade secret theft and a lack of a system to preserve evidence. According to Sherry Zhong, senior director, IP department at Shanghai MicroPort Medical, management of trade secrets should involve a good strategy, including understanding by staff, alignment between departments, accountability and implementation. Cross-department collaboration, especially on IT and data protection, is essential.
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