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Tips for avoiding horror stories in China

Dan Plane of Simone Intellectual Property Services Asia yesterday gave INTA Annual Meeting attendees the latest advice on protecting brands in China, during the “A Passage out of China – Is It Any Easier?” session.

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Things have changed greatly since. The most dramatic shift is the growth in online sales. Customs seizures are down. Massive physical markets where counterfeit products sold are less of an issue. Plane said there has also been a step up in the aggressiveness of pirates. “Now pirates will steal a trademark, record it with customs and demand a payoff from the brand owner,” he said.Plane compared today’s situation of dealing with pirating to 2001. “Raids were the order of the day back then,” he said. “It was a big problem but companies felt like they were making progress.” He added that civil litigation was very rare back then – “it really wasn’t seen as worthwhile.”

China session at INTA 17
Dan Plane, second from right, speaking on the “A Passage out of China – Is It Any Easier?” session
Plane noted an increase in grey market products, where fake products are mixed with genuine products. “There is a growing tendency by counterfeiters to mix fakes in with real products,” he said. They are priced like genuine products and often authentically proven by forged export documents and overseas receipts. Plane said regular online surveys and trap purchases are required to combat this.

Investigators gone wild

China also has a challenging investigation system. Investigators in China come from a range of different professions and backgrounds. Many of them work through stringers. The result, said Plane, is that the investigation is essentially being wholly subcontracted to a third party who is unknown to the brand owner and outside the control of the investigation company.

Plane gave a couple of examples of “horror stories” out of China.

One is fishing, where fakes are ordered for a given brand from a factory by one investigator then a raid is set up by another. In one case in Zhejiang two individuals were arrested and charged with offenses relating to the counterfeiting of registered trademarks. They had arranged trap purchases with a local company, and then used the local Administration for Industry and Commerce (AIC) to seize the infringing goods through their colleagues so they could collect an anti-counterfeiting award.

In another horror story, the case of ABB v CUIPPC, a large Chinese investigation company was actively trading in counterfeits of its client’s products in Dubai while it was supposed to be conducting enforcement actions on behalf of the brand owner. “We all like to see that someone has paid a price for wrongdoing and in China that means a criminal case,” said Plane.

Investigate the investigators

One tip for dealing with this this threat was: audit randomly and as often as possible and without any real notice to the investigators. Another was: make agreements laying out ground rules for the client/investigator relationship, including anti-corruption prohibitions and a stipulation of no subcontracting.

Notarized investigations prior to raid actions are becoming very important in China. “Administrative raids are more and more a thing of the past so these investigations can help secure one,” said Plane.

Tips for enforcement plans include rapidly moving to lobby higher-level AICs to persuade them to order the lower level officials to act or take over handling of the case themselves, and the issuance of a civil suit as soon as it is clear that it’s unlikely an AIC decision is forthcoming.

“It is very easy for AIC to say this is too tough, you should do a civil action,” said Plane. “And they are increasingly doing so.”

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