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Introduction to customs protection in China (sponsored discussion)

Zheng Peng and Zy Jia of Liu, Shen & Associates provide a guide to Customs protection for IP rights in China, and how rights owners can take advantage of the options available.

Customs protection of Intellectual Property is one of the administrative measures to protect IP rights, and it is one of the main duties of China Customs. In the current environment of international economy and trade, trading of commodities is spreading widely and fast from one country to another. As a result, protecting intellectual property in both import and export channels becomes crucial for right owners. In this regard, relevant international conventions and laws of different countries have stipulated measures for Customs protection. Customs’ role in the protection of intellectual property originates in the TRIPS Agreement, which put forward detailed requirements for all members in respect of obligations to be undertaken and measures to be adopted. In accordance with the spirit and requirements of the TRIPS Agreement, China formulates a systematized Customs protection of intellectual property via laws and regulations such as the Customs Law and the Regulations on the Customs Protection of Intellectual Property.

What kinds of intellectual property can be protected by China Customs?

Intellectual Property protected by Customs in China include registered trademark rights, patents, copyright and related rights. Olympic symbols and World EXPO logos are also protected by Customs. Other rights such as layout designs of integrated circuits, new varieties of plants, trade secrets and unregistered marks are not protected by Customs.

How do you record an IP right with China Customs, what documents are required for recordals and how do recordals proceed?

An IP right owner can file for the recordal of an IP right with the General Customs by itself or through an agent. Foreign right owners must have an address for service in China, which can be their Chinese IP agent, their own office in China or the sales representative in China. The documents with the application should include: certificates of incorporation, certificates of the intellectual property to be protected and information about licensing of the intellectual property, names of goods legally imported and exported through Customs, channels of imports and exports, information concerning exporters of known infringing goods and other related information if available.

Customs will examine the recordal application and decide whether to approve the application within 30 working days of receipt of the application documents. If approved, the Customs authority will instantly start the protective measures. The time frame of protection will the term of validity of the corresponding IP right. In other words, the protection period is the same as the validity period of the subject IP rights. For trademarks due to renewal, the right owners should re-file recordal applications before Customs after renewal of the mark is completed. In addition, if the status of a recorded IP right changes, the right owners shall record the change with the General Administration of Customs formalities within 30 working days from the date when the change happens.

What kinds of protective measures are covered by Customs protection of intellectual property? What are the details of each?

The measures are protection ex officio and protection per application.

Protection ex officio means the Customs authority takes action on its own initiative to detain goods suspected of infringing a recorded IP right during their regular supervision of importing and exporting goods. Under this mode of protection, the Customs authority has rights to actively take measures to prevent the import and export of suspicious infringing goods. Hence, protection ex officio is also called active protection.

Protection per application means the Customs authority detains suspected infringing goods according to the application of IP right owners. The protection per application mode is consistent with the regulation of Suspension of Release by Customs of TRIPS. As in the mode of protection, the Customs authority will not initiatively restrain the importing and exporting of infringing goods. Protection per application is also called passive protection.

What are the features of protection ex officio?

1) If the Customs authority discovers suspected importing and exporting goods infringing a recorded IP right, they will suspend release the goods and immediately notify the recorded domestic contact of the right owner in writing.

2) If detainment of the suspected infringing goods is requested, the right owner shall submit a written application, within three working days, to the Customs authority which issued the notification of detention of suspected infringing goods, and remit the required amount of the bail bond to the Customs authority.

3) The Customs authority has the right to conduct investigation of the suspected infringing goods. For those determined to be infringing goods, Customs will confiscate them, and at the same time may also impose administrative penalties on the consignee or consignor. When finding that the matter is serious and falls into suspected criminal acts, the Customs authority shall transmit the matter to the judicial organs for criminal investigation.

4) The Customs authority has the right to dispose of the confiscated infringing goods according to relevant laws and regulations.

5) For those goods that cannot be determined as infringing goods, Customs shall notify the IP right owner of its decision. If the right owner is dissatisfied with the determination of the Customs authority, it can lodge a civil lawsuit against the consignee or consignor before the people’s court. And the court shall issue a writ fieri facias.

What are the features of protection per application?

If the IP rights are not recorded with the General Administration of Customs before hand,

1) The Customs authority is not responsible for regular supervision of suspected infringing goods.

2) The IP right owner, when discovered by itself, can directly apply for detainment of suspected infringing goods with the competent Customs authority at the shipping ports.

3) The right owner shall provide with the Customs authority a bail bond equal to the price of the suspected infringing goods.

4) The Customs authority does not have the right to examine the status of the suspected infringing goods. When they are detained by the Customs authority, the right owner shall immediately apply for an interim attachment of the suspected infringing goods with the court, who will issue the writ and notify the Customs authority. If the Customs authority does not receive the writ of attachment of the suspected infringing goods from the court within 20 working days from the detainment of goods by the Customs authority, the Customs authority shall release the detained goods.

What are the special features in Customs protection for patent protection?

Assessing infringement of a patent is not as easy as doing so for a trademark or copyright, as it needs technical background and relevant technology, so the Customs authority cannot directly make a determination whether the patent right is infringed by the detained suspected infringing goods. Accordingly, when the patent right owner is notified of suspicious infringement by the Customs authority, it shall judge the goods by itself. If it confirms, it shall apply with the Customs authority for detainment of the goods with the required bail bond and shall instantly lodge a lawsuit with the court. If Customs does not receive the writ attachment of the suspected infringing goods from the court, the Customs authority shall release the goods and return the bail bond to the right owner.

If the consignees or consignors of the goods suspected of infringing patent rights think their goods do not infringe the patent right, they can provide a bail bond equal to the value of the goods and the Customs authority shall release the goods upon receipt of the bail bond.

How do the Customs handle the detained goods infringing intellectual property?

For goods that are determined as infringing after investigation, the Customs authority will confiscate the goods.

After confiscation of infringing goods, the Customs authority will notify the right owner of the intellectual property in writing.

Where the confiscated goods found can be used for public welfare, the Customs authority shall transfer the goods to the relevant public welfare organizations to be used for public welfare. If the owner of the IP rights wishes to acquire the goods, the Customs authority may transfer the goods to the owner of the IP rights for a reasonable consideration. Where the confiscated goods that have infringed IP rights cannot be used for public welfare and the owner of the IP rights does not wish to acquire the goods, the Customs authority may auction off the goods according to law after removing the infringing characteristics. Where the infringing characteristics cannot be removed, the Customs authority shall destroy the goods.

For importing goods bearing counterfeit trademarks, except for special situations, the goods cannot be allowed to enter into commerce by merely removing the trademark symbols.

During the detainment of the suspected infringing goods, is the right owner allowed to reach an accommodation with the importer or exporter of the goods?

The right owner and the importer or exporter of the goods can come to an accommodation according to their own interest. When the accommodation is reached, a written application shall be filed with the Customs authority as well as relevant contracts or agreements, requesting the Customs authority to release the detained suspected infringing goods. After examination, unless the goods are suspected of involving crimes, Customs will usually stop investigation and release the detained suspected goods.

What if the right owner cannot prove that the detained goods infringe their intellectual ­property?

If the right owner cannot prove the detained goods infringe their intellectual property, the Customs authority shall release the goods. The loss thus incurred to the importer or exporter, and also the fees for the storage, custody and disposal of the goods after detainment, shall all be borne by the right owner.

What should the right owner immediately do after filing an application for detaining suspected infringing goods?

The right owner should:

• prepare necessary documents for lodging a lawsuit with the court, in case the Customs cannot determine them as infringing goods;

• first consider filing a lawsuit with the court, when it finds the amount of suspected infringing goods are huge;

• conduct an infringement investigation on the consignee and consignor to find out the source of the infringing goods and detailed infringing status according to the information on the goods detained;

• based on the information of the source of the infringing goods, file a request for administrative enforcement before the local administrative authority, or lodge a lawsuit with the court, in order to prohibit infringement from the source, and fight against the infringer through administrative penalties and civil compensation.

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