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Tackling online infringement in China (sponsored discussion)

With the explosion of online commerce in China, rights holders have to adapt their enforcement strategies. Celia Y. Li and Aaron D. Hurvitz of Kangxin provide insights on how to tackle this growing challenge

China chartWhat avenues can brand holders take to go after online infringers?

Online monitoring

Celia Y Li: Through daily online monitoring on Taobao, Tmall, Alibaba, Baidu, etc., the largest and most popular online B to C or B to B transaction platforms and search tools in China, the brand holder can get preliminary information about the suspected infringement in China as well as dig out potential infringers and the big manufacturers behind those online counterfeiters.

Aaron D Hurvitz: It is essential to understand and to monitor the online market in China. Every day a large number of online retailers open their doors and attempt to sell counterfeit and infringing goods. With diligent and persistent online monitoring you will be able to paint an accurate picture of the problem, and have the information necessary to make an informed decision on how best to proceed.

Online IP protection application

Li: Besides daily online monitoring, brand holders can also work with Alibaba and Taobao to protect their IP rights. After establishing a cooperative working relationship, Alibaba and Taobao can inform the brand holders if they find infringement in their marketplaces, which is a similar procedure to Custom records. These procedures are still in the trial phase without specific implementation up to now. The relevant procedure of which is listed as follows:

Hurvitz: Additionally it is essential to establish an early and solid connection with the IP enforcement bodies from the relevant online website. Alibaba and Taobao receive hundreds, if not thousands, of applications daily, and often times the IP departments are either behind in their work load or forced to prioritize which applications they want to process. By creating the appropriate foothold you can assure that your matter will be heard, and given the proper attention necessary to effectuate positive enforcement.

Online and onsite investigation

Li: If the brand holders need to discover the detailed information of the online infringers, preliminary online investigation will be helpful, which is often conducted through official websites, online databases and other systems.

Furthermore, if the brand holders want to find out further information about the online infringers, such as whether there is factory of the online shop, the source of the infringing products, the sales channels or the scale of infringing products, onsite investigation should be conducted. Through onsite investigation, from our experience, the brand holders can dig out valuable clues and gather sufficient infringing materials, some of which could be served as solid evidence in the follow-up legal actions by notarization.

Hurvitz: Moreover, it is essential to determine which online sellers you ultimately wish to target in an enforcement campaign. Most online sellers are merely small individuals who are attempting to make a small profit from the sale of infringing products. Usually small online retailers do not keep a large stockpile of products and use genuine pictures to attract interest in the product. Once a seller purchases the infringing good, only then does the small retailer go out and make or acquire the respective product.

As a corollary there are indeed large and established manufacturers that are actively producing and then selling infringing products online. These should be the true targets of major IP enforcement campaigns, and these manufacturers should be the targets of onsite investigation and notarized purchase. Attempting to investigate and acquire a notarized purchase from a smaller online retailer many be a futile expenditure of time and resources.

A detailed and thorough company search before the Administration for Industry and Commerce (AIC) can determine the ultimate size and caliber of the online retailer, by examining stated capitalization, physical address and number of employees.

Domain name dispute complaint

Li: For digging out the online infringer, domain name dispute complaints with the Domain Name Dispute Resolution Center of the China International Economic and Trade Arbitration Commission are another useful tool. Brand holders can file domain name complaints to take down infringing domain names or to transfer the disputed domain name back to their rightful owners. If either party is not satisfied with the decision, it can file civil litigation through which the relevant information about the infringer will be made clear.

Please note that the domain name complaint should be filed within two years after the domain name is registered.

Hurvitz: While this is a very useful, efficient and cost effective tool to resolve a domain name dispute, it is essential that such action is filed within the two year statute of limitations. It is suggested that brand owners, or their legal counsel, diligently search for and monitor domain names that may cause a potential issue.

Private domain name service agents

Li: Besides the official channels, another good option to consider is private domain name service agents. Through these agents, the brand holders can file applications to shut down infringing websites and links by providing rights certifications and business license/incorporation certifications. The service is actually free if the infringing contents are not successfully deleted and finished within 30 working days. Furthermore, it will be free if the same infringing content appeared on the same website within three months after they are successfully deleted.

Hurvitz: Domain Name Service Agents work exceptionally hard to shut down infringing websites, and certainly may be a useful tool for websites that are exceedingly difficult to terminate.

Litigation against all suspicious entities

Li: For discovering the real operator of an infringing website or online storefront, if the entity’s information on the ISP/ICP recordal system, domain name registration system and website are all different, filing litigation against all the suspected entities is a good choice. This way, you can use the process to push the entities to provide the relevant evidence to prove that they are not the infringers and the real infringer will come out.

Hurvitz: It is essential to conduct as much research as possible as to the identity of the true infringers before filing a lawsuit. Oftentimes companies are hidden and protected by a variety of different entities and individuals posing as owners and operators. In order to have real impact, naming as many parties as feasible is suggested.

How do the strategies used in going after online infringers differ from those for going after infringers in physical locations such as marketplaces?

Li: First, it is critical to distinguish online infringers from physical infringers and develop efficient strategies tailored to fight against them.

For example, online infringers often tracked down and stopped through online communication, online investigation, and it is usually hard to find the infringer’s physical location. Meanwhile physical infringers are often caught through communication with the suspected infringer through face-to-face meetings as well as onsite visits.

Per the different final purpose of the brand holder, the online investigation is often combined with an onsite investigation. Considering that online shops often make profits through the price difference between wholesale and retail, it is common for several different online infringing shops to use the same supplier. For finding out more information about the online infringer, such as the scale of its sales and the source and sales channel of the infringing products, the brand holders must conduct an onsite investigation against them after locating their entity store through online investigation. This combination of online and off-line infringement can be very helpful in thoroughly stopping the infringing activities.

Hurvitz: Additionally, oftentimes manufacturers are producing a large variety of different infringing brands. Multiple brand owners have found recent success through collaboration and cost sharing to shut down or sue a given infringing producer. Additionally, said collaboration creates a significant amount of pressure on the infringer, backing it into a corner, and hopefully creating a situation where positive and lasting resolution can be achieved.

What tips do you have for working with the online marketplaces themselves such as Taobao?

Li: As mentioned above, it is critical for the rights holder to file online complaints in a timely fashion and to cooperate with Taobao and Alibaba closely to fight against online infringement in the most effective way.

Also, it is important to remember that online sales amounts will be taken into account by the local Administration for Industry and Commerce (AIC) when making administrative decisions regarding penalties against infringers. In order to increase the penalty, the rights owner can file for the AIC raid and the online complaint at the same time. That way, the AIC will make a decision about the infringement which might also include fines. Also, the latter action will also close the infringing website.

Per Taobao’s recent feedback after their disputes with the State Administration for Industry & Commerce, the company has promised to cooperate with AICs to take initiative in fighting against infringement on their website. Though it is still a trial method without specific details about how this cooperation will be implemented up to now, it is a great approach to beat down the counterfeiter by the government with the support of the online platform provider.

What tips do you have for working with private investigators when doing online enforcement?

Li: Investigation instructions should be addressed to the private investigator very clearly to cover all of the investigation purposes due to the low educational level of most of the private investigators. During the investigation, the IP attorney should keep close communication with the investigator to provide legal guideline for the ongoing investigation, according to which the private investigation might timely adjust their investigation strategy to achieve the best results.

Hurvitz: Further it is very important to KNOW your investigator. Private investigation is big business in China, and there are many overnight companies who sell their services without the requisite experience. Private investigators have been known to “create” infringing stockpiles or to “locate” infringing manufacturers, even falsifying pictures – all to get a new client or a new assignment. When working with private investigators it is essential to ask for references and to follow up with past clients who have used their services before.

Li: Kangxin has professional in-house investigators with rich experience, many with a legal education background and several former police officers. Besides our long cooperation with AICs and notary offices, the backgrounds of our investigation team means that we can secure high success rates of investigation and build up the strongest evidence for potential legal actions.

Hurvitz: Kangxin has always used our own in-house investigators to gather evidence for our clients. Our investigators have been with the firm for a number of years and have a wealth of knowledge about the counterfeit industry, and how to find and gather the evidence necessary to achieve positive enforcement.

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