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Li Qunying |
On October 1 1995, when the Regulations of Customs Protection of Intellectual Property Rights of People's Republic of China (the Customs Regulations) came into force, China Customs was able to establish a centralized recordation system for IP. This Customs Protective Recordation system enables rights holders to enjoy stronger protection from Customs at more than Chinese 300 ports.
Benefits
According to the Customs Regulations, there are two circumstances in which an IP owner can apply for goods to be detained pending import or export in cases where they suspect them of infringing their rights. The first is when the IP owner has knowledge of the impending import or export, and the second is when they are notified of the shipment by Customs.
In the first situation, IP owners are not obliged to record their rights with the General Administration of Customs (GAC) in Beijing if they are able to provide specific information about the suspected infringing goods and prove to Customs that they own the IP rights. However, in the second situation, it is far more important that IP owners record their rights with the GAC, especially when the rights relate to trade marks and copyright.
Recording IP rights with Customs as a matter of course gives IP owners time to prepare the documents they need to prove that they own the rights, rather than having to do so under time pressure when goods are waiting at the port. But it also has additional benefits:
IP owners can enjoy protection at all of China's ports. Of course, IP owners can go to every port and lodge an application for detaining infringing goods pending import or export, but it is impractical for them to do so. It requires them to employ private investigators to trace the infringing goods, which may flow to any of the 300 ports. IP owners would also need to choose very carefully when to lodge the application, so as not to alert the infringers by filing too early. Conversely, filing the application too late would make it impossible for Customs to detain the goods before they left the port. By recording the rights with Customs beforehand and allowing them to take ex-officio action, it generally makes Customs responsible for monitoring shipments and informing the rights holder if they discover potentially infringing goods. But before Customs can take this kind of action, IP owners must record their rights with the GAC.
Recording IP also allows IP owners to pay a lower bond. Article 15 of the Rules for Implementing the Customs Regulations (enacted on April 22 2004) says that IP owners must deposit a security equivalent to the value of the goods with Customs if they ask them to detain infringing goods that they themselves have discovered. In an ex-officio action, however, Article 22 of the same Rules says that IP owners need to deposit a security of up to Rmb100,000 ($12,500).
Procedure
Recording IP rights with the GAC is very easy. IP owners need to apply to GAC and mail their application to the IPR Division, Department of Law & Regulation, General Administration of Customs, No. 6, Jian Guo Men Nei, Beijing, China 100730. The application must attach the following documents:
A photocopy of the applicant's business licence, ID card or similar documents that can identify the applicant;
A photocopy of the IP registration certificate;
List of any licensees in China (if any);
A power of attorney in cases where a foreign applicant entrusts a law firm or licensee in China to apply for recordation on his behalf;
Any other information about the goods that will help Customs identify infringements (for example, particular characteristics of genuine and fake products, packaging details, samples or photos, and information about known infringers and traders);
Recordation fee of Rmb800 for each application.
Since 2005, IP owners have been able to get more information about the application process on the GAC website at http://www.customs.gov.cn.
Who can record?
Although the Customs Regulations permit the "right holder" to lodge applications for both recording IP rights with GAC and detaining suspected infringing goods at the port, the definition of a "right holder" is limited only to the "trademark registrant", the "owners of a copyright or copyright-related rights" and a "patentee", as set out in the Trademark Law, Copyright Law and Patent Law. Licensees cannot apply for recordation, even though their licence agreement may give them an exclusive right to use the intellectual property in China.
In spite of this, the GAC does not prevent an IP owner's agent from lodging applications for both recording IP rights or from applying for ports to detain goods.
What can be recorded?
Article 2 of the Customs Regulations says that IP owners can record their trade marks, copyrights and patents with the GAC.
Trade marks
Generally, trade mark owners must provide the certificate of trade mark registration issued by the Chinese Trademark Office. The application will not be accepted if a registration expired more than six months earlier.
For international marks registered through the Madrid system, the applicant needs to provide a letter of confirmation from the Trademark Office proving that protection has been extended to China. The trade mark owner needs to record each class of registration in a separate application.
Copyright
Since China is a member of Paris Convention and because copyrights and their related rights are not required to be registered, copyright owners are not obliged to provide copyright registration certificates when they apply to record their copyrights with GAC. However, the copyright owner must provide sufficient evidence to prove that they own the rights. The best evidence is a certificate of voluntary copyright registration issued by the copyright registration authority, and any final court judgment which shows that the applicant owns the copyright in question.
IP owners do not necessarily have to register their copyright with the Chinese Copyright Office. The GAC will also accept registration certificates issued by the copyright authorities in other Paris Convention member states. The certificate should include an image of the works sealed by the copyright registration authority. This is because port Customs rely more heavily on the image than any written description when they try and identify infringing goods.
Patents
Invention, utility model and design patents can be recorded with the GAC. In addition to supplying the registration certificate, the GAC must fulfill other special requirements for recording patent rights:
When a patent owner applies for recordation and his patent was granted more than one year earlier, he should also supply a copy of the Duplicate of Patent Register, which is issued by the Patent Office within six months. This is to ensure that the patent has not been invalidated because the patentee failed to pay fees to maintain its validity.
When a patentee applies to record a utility model, he needs to provide a photocopy of the search report. If the patent owner applies for a preliminary injunction (as Customs requires him to do in certain circumstances) he would need to supply a search report to the court. However, this would usually take longer to obtain from the Patent Office than the 20-day deadline that the Customs Regulations gives the patent owner to apply for an injunction. As a result, he must supply it to Customs as part of the recordal process.
When applying to record a design, the patentee needs to submit a photocopy of the design as it appeared in the Patent Office's Patent Bulletin. Port Customs will use this image when examining potentially infringing products.
Targeting counterfeiters
As outlined above, there are a number of advantages to recording IP rights with GAC and allowing them to check goods on their own initiative. It is useful for IP owners to understand how Customs officers go about this task.
Although officials at the port Customs have the power to check any cargo shipment, travellers' luggage and mailed parcels that are going in or out of the country, that does not mean, of course, that Customs can check every one of them. The rapid growth in in-bound and out-bound trade and tourism has put China's Customs under increasing pressure. For example, in Shanghai's Waigang port, China's largest container port, it is estimated that each Customs officer must process 800 container shipments each year. Only around 4% of the products entering or leaving China can be physically checked. This means that of every 100 containers processed by Customs, officials can only examine four. Beyond this number, the port would be in a jam. The rate of physical checks on exports is lower because many of them are exempt from customs duty.
Given the logistical restrictions on the number of examinations Customs can carry out, it is not easy for Customs officers at the ports to detect counterfeits, let alone patent infringement. The key to finding more counterfeits while minimizing disruption to legitimate trade is to gather more information and apply risk analysis techniques. I am afraid that IP owners have more work to do than simply recording their rights with the GAC and waiting for Customs officers to discover counterfeits. Customs officials depend on information and IP owners may possess much of the information they need. This includes:
The names of counterfeiters and traders and the date that they plan to export or import the infringing products.
Information about the routes that counterfeiters use and details of seizures in countries where the goods originated, or if they were destined for China.
Characteristics of the genuine products and their counterfeit versions that will help Customs distinguish them.
Although the Customs Regulations do not oblige IP owners to report information about counterfeits to Customs, IP owners and their agents should file these reports if they want to obtain stronger Customs protection. Some IP owners even offer rewards to people who provide information to Customs about counterfeits.
Imports and exports are usually declared in an electronic data clearance system. Customs also uses this system to monitor shipments for counterfeits. A monitoring control is generally entered into the system for a period of between a few days to three months. If no counterfeits are discovered within this period, the control order is cancelled. As a result, IP owners need to check their information before they send it to Customs.
To secure a control successfully, and to minimize delays to the clearance of legal goods, Custom officers must target shipments very carefully. For example, when Customs officers at a port plan to target an export shipment of counterfeit Nike sports shoes, they can choose a number of different sectors to target: shoes, countries of destination, exporters, ports of export and period of control. If they choose to target shipments marked "shoes", then there is a strong chance that they will find counterfeits, but it will also inconvenience a large number of legitimate exporters of shoes. Conversely, if Customs only targets very specific shipments, such as those exporting shoes to Turkey from Guangdong-based companies through Waigang port on April 10 2006, then they will create very little disruption to legitimate exporters, but the chances of finding fakes is also very low – unless Customs uses very accurate information.
Help Customs and help yourself
Although Customs have applied many techniques to try and stop the trade in counterfeits, most seizures were made after the shipments were physically examined by Customs officers. As a result, spending more resources on Customs officers is an effective way of discovering infringements. But what do they need to do their job?
First, they need training. Many people agree that Customs officers should receive training on identifying cocaine and cultural relics. Few think that they need training on how to identify a genuine Nike shoe. But they are wrong. With China exporting growing quantities of brand name products manufactured in China, Customs officers working in the field have to be very confident that they have found fakes before they suspend clearance of any shipment. They cannot simply halt a shipment when they see a famous brand on products. IP owners need to tell them which kinds of shipments are more likely to contain counterfeits and share with them their methods for identifying infringements.
IP owners are usually very generous when it comes to training Customs officers, but some of the training that they provide does not take into account real-life practice. For example, I once listened to a presentation given by a representative of a computer mouse manufacturer on ways of identifying fake products. She took a fake mouse, opened it with screwdriver and showed trainee Customs officers the difference in the circuitry in a genuine and a counterfeit product. I cannot imagine field officers being willing to take a mouse and compare its circuit board to that of a real computer mouse when the container is sitting in the port awaiting clearance. That method is more appropriate for a Customs laboratory. Conversely, I was impressed by a presentation given by Nike. Their representative reminded Customs officers that Nike products are never transported in the same container as Adidas ones because they are business rivals. But because counterfeiters do not care, then if Customs staff find containers that are full of both companies' products, they can be sure that they have found fakes. This kind of training is very useful.
Second, Customs officers need IP owners to respond quickly to their requests. If Customs cannot decide whether a shipment of goods is counterfeit, they usually invite IP owners to help them identify the products. One would assume that IP owners would be pleased to help. However, this is not always the case. Customs officials once found a suspicious shipment in the port at Qingdao, in Shandong province, at eight o'clock at night. They immediately informed the IP owner's representative. He refused to help check whether the export was legal on the grounds that he could not re-enter office outside working hours. When he confirmed that the shipment was legal next morning, it was too late for the goods to be loaded onto the ship. This is not an isolated example. In most Chinese ports, Customs officers work 24 hours a day, seven days a week. Many counterfeit goods are exported at night or over the weekend and it can be difficult to find IP owners in time.
Sometimes IP owners ask Customs to send them photographs of the labels and packaging by email. When only a small quantity of goods is suspected of being fake, it is sometime difficult to persuade IP owners to take an interest. They usually refuse to go to Customs to check, even though a small quantity of counterfeit products could yield clues that could be used to make a larger seizure in the future.
In our experience, few international companies have an integrated system of licensing management. So when Customs requests help in confirming whether goods destined to an area such as South Africa or South America are genuine, it is not unusual for representatives of IP owners to take a long time to check – because they need to check with colleagues in other regions.
Business people should understand that Customs officers are always under pressure and that higher trade volumes increase their workload. Legitimate exporters will be very unhappy if there are unreasonable delays to their shipments. The IP owners have a duty to provide more help so that Customs officers can seize suspected fakes with more confidence.
Agents
Article 2 of the Rules for Implementing the Customs Regulations says that foreign IP owners (including those from Hong Kong, Macao and Taiwan) must entrust an agent who is established in mainland China to lodge any application for recording IP rights with the GAC or detaining suspected infringing goods. "An agent which is established in mainland China" means that the agent must be a legal or natural person who is able to perform the relevant operations and bear corresponding liability for the performance in mainland China.
The GAC does not require an agent to have any additional qualifications. Any organization or natural person can serve as an agent on behalf of an IP owner if he can produce a power of attorney issued by the IP owner. In practice, agents are usually law firms, trade mark or patent agents and companies authorized to use the IP rights in mainland China.
The agent must provide the GAC with a name, telephone and fax number, email and mobile telephone number. The agent is responsible for informing the GAC of any change of contact details. When Customs officers at a port suspect they have found a shipment of counterfeit goods, they need to consult the IP owner before they decide whether to detain or release the goods. In many cases, Customs officers have to give export clearance within hours and have no time to contact foreign IP owners. In these cases, the GAC will notify the agent instead of the IP owner. So any failure on their part to notify Customs of a change to their contact information will prevent Customs from detaining the shipment. To make matters worse, if Customs officers find it difficult to contact the IP owner or its agent, it will make them more reluctant to notify the IP owner of discoveries in the future.
Li Qunying is chief of the IPR Division in the Department of Law & Regulations at the General Administration of Customs of China.
