Navigating administrative actions for IP protection in China
Administrative actions are an important tool for IP protection in China. Zhang Bin and Yang Yifan of CCPIT Patent and Trademark Law Office discuss how they can be used in practice and what advantages they offer
The IP system plays an increasingly important role in protecting innovation and promoting economic and social development, due to the deepening of economic globalisation and the march of scientific and technological progress.
IP protection is a vital part of the development of the IP system. When the IP system was established, China provided for IP protection by both administrative and judicial means. Practice has shown that this is in line with China’s national conditions.
Administrative relief provides an effective way to protect IP. From the perspective of international rules, administrative procedures are also specifically stipulated among relief procedures in the Trade-Related Aspects of Intellectual Property (TRIPS) Agreement.
The administrative enforcement and judicial protection of IP are complementary and mutually reinforcing. Many countries are now adopting administrative enforcement in addition to judicial protection to strengthen IP protection.
In its White Paper on China’s Intellectual Property Rights in 2020, the China National Intellectual Property Administration (CNIPA) committed to establishing a comprehensive IP rights protection mechanism. In particular, it noted the importance of having:
the public security authorities (police) strengthen communication with various departments within the administrative authorities, e.g., intellectual property, market regulation, customs, copyright, medical products, tobacco, to improve collaboration system among them regarding sighting reports, case transfer, information sharing, and joint enforcement actions.
In the meantime, in recent years CNIPA has issued numerous guidelines for the lower authorities with regard to the determination of trademark infringement, the handling of enforcement/mediation of patent infringement cases, etc.
These moves by CNIPA and other authorities signal that the Chinese government is taking steps to empower the administrative authorities to be an equal or more effective force compared to the courts in resolving disputes related to, and in the protection of, IP rights.
General description and data
Different departments of the administrative branch of the Chinese government have responsibility for different aspects of IP protection. After the 2018 re-organisation of the Chinese government, the current demarcation is:
Copyright enforcement – usually the Law Enforcement on Cultural Market (LECM) within the local Bureau of Culture and Tourism;
Patent and trademark enforcement, unfair competition (passing-off, misleading representation, know-how protection, etc.) – local Administration of Market Regulation (AMR, succeeding both former local Administrations for Industry and Commerce and local Intellectual Property Administrations).
The following authorities also provide protection from different perspectives:
Customs – having authority to seize exporting and/or importing goods that are suspected of infringing IP rights.
Public Security Bureaus (PSBs) – responsible for investigating IP infringements should they reach a certain level and constitute criminal offences, and for supporting local procuratorate offices in prosecutions.
Combined, these law enforcement authorities have formed a formidable and multi-faceted force in combatting IP infringements in China. According to the CNIPA White Paper, during 2020 the above law enforcement authorities launched dozens of successful ad hoc campaigns to clamp down on IP infringement and to provide effective protection to IP rights owners. These included:
PSBs nationwide have cracked over 21,000 criminal cases of IP infringement and manufacture and sale of counterfeits and arrested more than 32,000 suspects. The aggregated volume involved in these actions reached RMB18 billion (approximately $2.85 billion).
AMRs around the country have conducted tens of thousands of enforcement actions against trademark infringement, patent infringement and/or unfair competition. The aggregated case volume reached over RMB3 billion and aggregated economic penalties over RMB1.1 billion.
The IP divisions within the AMR handled over 42,000 administrative adjudications related to patent infringement, an increase of 9.9% from the previous year.
Campaigns tackling piracy and copyright infringement such as Sword Next 2020 resulted in deletion/removal of around 3.24 million infringing links and closure of around 2,900 infringing websites/apps. The aggregated case volume reached RMB300 million.
Chinese customs as a whole seized around 56.18 million pieces of goods suspected of IP infringement, an increase of over 20% in both the amount of the seizures as well as the seized goods.
Among the above, roughly three cases opened by AMR/LECM were transferred to PSB each day. (During 2020, AMR transferred 811 cases in total to judicial authorities for prosecution, and the LECM transferred 177.)
Investigation of critical importance
Despite the success of the Chinese government in general in taking administrative actions against IP infringement, how well a specific administrative action can be carried out varies significantly depending on the circumstances of the case.
For cases initiated based on the IP rights owner’s complaint, having a careful investigation and collecting as much information as possible regarding the infringer is critically important for law enforcement authorities to launch a successful raid against the infringer.
“Administrative actions are a simple and powerful tool for foreign IP owners to combat infringement in China.”
On one hand, the administrative mechanisms and the public awareness of IP protection are both improving, leading to a heavier workload for local-level law enforcement officials, particularly those in coastal areas such as Guangdong, Jiangsu and Zhejiang.
It is understandable that these local-level officials do not have the time and resources to dig deep into every case and trace down the real culprit behind it. They rely on the IP owners to have investigations first and then present as much information as possible about the infringer when filing the complaint, so that they can take swift and effective action to end the infringement.
On the other hand, local-level officials are generally concerned about whether the case could lead them to a solid conclusion that will not backfire should the infringer file an administrative or judicial review of the penalty decision. Therefore, it is crucial for the IP owners to have concrete evidence and straightforward reasoning with regard to establishing IPR infringement before the law enforcement authorities so as to help reduce or even remove the potential risks for the handling officials.
Generally speaking, information and evidence that is helpful for the law enforcement officials to take raid actions includes:
Evidence on the complainant’s title in respect of the IP rights (certificate or licence);
Identity, location, and/or contact number of the suspected infringer;
Sample of the alleged infringing products, or pictures thereof; and
Comparison between the two parties’ products if necessary.
Overall enforcement strategy
After proper investigation is made and sufficient information and evidence is collected, administrative actions are not the only option available to IP rights owners to enforce their rights. They must be contemplated on the basis of the evidence and as a part of an overall strategy, which may comprise both administrative and court actions.
Compared to court actions, administrative actions have the following pros and cons that IP rights owners should take notice of in formulating strategies:
Pros of administrative actions
Low time (usually three-to-four months) and hence low costs;
Case records eligible for court’s admission as evidence to prove infringement;
Most law enforcement authorities have incentive mechanisms in place for officials to take administrative actions.
Cons of administrative actions
No compensation can be obtained from such actions without a parallel agreement with the infringers;
Most local law enforcement officials tend not to accept cases involving legal ambiguity or complexity.
A good enforcement action for an IP right in China would carefully consider these pros and cons to make the most of administrative actions. Factors that should be taken into consideration include:
The aim of the IPR owner: law enforcement authorities do not have the authority to award compensation to the complainant. If there is no parallel settlement agreement reached between the complainant and the complained-about party, the costs of administrative action could not be recovered.
Therefore, whether to file administrative actions or not largely depends on the IP owner’s aim. If the aim is to stop the infringing acts as soon as possible and not ask for compensation, administrative actions are highly advisable.
The complexity of establishing IPR infringement: law enforcement officials, especially those at local level, are not as highly qualified as judges. And their administrative decision is subject to review by higher administrative authorities or competent courts. This results in the law enforcement officials being careful when handling complaints.
Therefore, if the facts on the alleged infringement are simple and straightforward, the administrative action can be carried out swiftly and effectively. However, if the facts are complex, or involve legal ambiguity, or the fact ascertaining requires the local officials to have professional knowledge or skill, filing administrative actions would not be as swift and effective as expected.
Timing: firstly, administrative action is the preferrable course of action when the alleged infringement is at an early stage. Under those circumstances, it is probably hard for the IP owners to obtain evidence on the infringer’s profits and its own losses. Collecting evidence on the infringer’s bad faith or living from the infringement could be hard as well, and the establishment of such facts is crucial to obtain punitive damages in the court proceeding. Filing an administrative action complaint is therefore preferred over filing a court action, which is unlikely to produce much compensation for the IP owner in such cases.
Secondly, the right timing means that the law enforcement authorities would put extra attention and resource into the case. For example, according to CNIPA’s 2022 National Intellectual Property Administrative Protection Work Plan (2022 年全国知识产权行政保护工作方案), nationwide law enforcement authorities are required to “develop work plans, establish emergency response mechanisms, and strengthen IPR protection” around the important dates of the year, such as May Day, the Mid-Autumn Festival and National Day.
Coordination with court proceedings: in some cases when the infringement is severe, an administrative action can be filed as a pre-lawsuit step to obtain an administrative order, enjoining the infringer from continuing its infringement. The evidence preserved through the administrative action can also be used in the following court proceedings against the infringer.
In order to determine the volume of the case, law enforcement authorities have the right to check the records of the infringer, which is usually not available to the IP owners. If the numbers so obtained are indicated in the official penalty decision, it could effectively expand the factual basis on which the compensation could be claimed during the court proceedings.
Only based on properly preserved evidence and the analysis above could an administrative action be a sound course of action in enforcing IP rights and produce a favourable outcome.
Administrative actions are a simple and powerful tool for foreign IP owners to combat infringement in China. However, as the Master Sun Tzu said in The Art of War: “Plan before you move” (谋定而后动).
Using this tool and using it well require IP owners to consult with experienced lawyers or private investigators in respect of factual and legal grounds, as well as other factors that may affect the implementation.
CCPIT Patent and Trademark Law Office
T: +86 10 6604 6266
Zhang Bin is deputy director of the legal department of CCPIT Patent and Trademark Law Office. He graduated from Wuhan University with an bachelor’s degree in international law in 1989 and obtained his master’s degree in IP law from UNH School of Law in the US in 2003.
Since joining the firm in 1989, Zhang has successfully handled many IP cases covering trademark, copyright, licensing, unfair competition, customs protection, trade name and cybersquatting through litigation, administration or negotiation.
CCPIT Patent and Trademark Law Office
T: +86 10 6604 6008
Yang Yifan is a trademark attorney at CCPIT Patent and Trademark Law Office in Beijing. He joined the firm after graduating from University of International Business and Economics, where he obtained a master’s degree.
Yang specialises in handling trademark infringement and unfair competition cases. His expertise also includes copyright infringement, domain name disputes, legal advice on IP licences and other IP-related contracts.