China is serious about stopping the flow of counterfeit goods

We are frequently challenged about the risk of counterfeiting in China, and how non-Chinese companies can organise and manage their IP to mitigate what many see as an endemic problem in that region of the world.

We frequently respond that it’s all about getting IP protection in place, ensuring the legal requirements for a robust agreement are followed and, as is the case everywhere, being vigilant and proactive in the market.

We also say that the Chinese government is keenly aware of the issue and very actively addressing it. Many clients are skeptical.

Here’s some more evidence of how the Chinese market is changing.

China’s General Administration of Customs acts to stop exports

Unlike in most markets, which focus on anti-counterfeiting measures for imported goods, in China it is possible to also lodge custom notices for exported goods.

By central government directive, as part of its efforts to prevent the export and import of goods that infringe intellectual property rights, China’s General Administration of Customs (GACC) has conducted various special campaigns to investigate shipments and seize infringing goods.

On 1 September 2017, the GACC launched a campaign called ‘Longteng’, also known as ‘Soaring Dragon’.  The focus of the campaign was to prevent goods that infringed the intellectual property rights of Chinese companies from being exported to foreign markets. The campaign concluded at the end of November 2017 and has resulted in the seizure of more than 1 million infringing products in 46 consignments.

In a report[1] published by the GACC on 20 April 2017, the GACC stated that its customs officers had seized more than 42 million infringing goods in 2016.

Unlike in Australia, which only allows IP owners to record trade marks and copyright with Australian Customs, IP owners can record patents, trade marks and copyright with the GACC. This being said, 98.56% of the goods seized by the GACC in 2016 were based on trade mark infringement. This is not surprising given it is generally easier for customs officers to visually detect goods that infringe trade marks than copyright or patents.

Interestingly, the total number of goods seized by the GACC increased by 33.6% in 2016 from 2015. Given GACC’s apparent strong stance against the export and import of infringing goods, Chinese manufacturers are increasingly unlikely to have the freedom to export infringing goods that they may have enjoyed in the past. If the above trend continues, the number of counterfeit products that flood foreign shores will inevitably decrease over time.

What to do if you are operating in China

In order to protect its IP rights in China, an IP owner should, as a bare minimum:

  1. register its IP rights with the Chinese IP authorities. In particular, trade mark owners must consider registering trade marks in Chinese characters, not just as a transliteration, but also potentially as a translation using characters that convey brand characteristics ; and
  2. take advantage of the procedures available with the GACC and record their IP rights with customs once the IP right has been registered with the relevant IP office.

The application to record an IP right with the GACC can be filed by a Chinese attorney or directly by a company if it is a registered company in China. There is an official fee for each recordal with the GACC.

Once the IP right has been recorded with the GACC, it lasts for the duration of the IP right or 10 years (whichever is shorter). To assist the GACC to inspect shipments and seize infringing goods, an IP owner should also provide additional information to the GACC, including pictures or samples of genuine product, details of authorised importers or exporters, and details of any known or suspected infringers or infringing products.

If you would like further information and advice, please contact your attorney or IP lawyer.   We can not only help you register your rights, but also identify and clear appropriate Chinese language branding, put in place GACC procedures and follow up infringers if counterfeit goods are identified.

[1] GACC website, http://www.customs.gov.cn/publish/portal0/tab49564/info846639.htm, accessed on 11 December 2017.

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