China: Civil Action For Trademark Infringement In China---Experience And Advice From The Front Line

Last Updated: 7 August 2019
Article by Gang Hu

The Chinese government has established the protection of intellectual property rights as an important aspect in shaping a good business environment. It has vowed to strengthen the punishment to intellectual property infringement conducts, so that the infringers will pay a heavy price. This is really encouraging news for intellectual property right holders, including foreign intellectual property right holders with significant commercial interests in China. There is no doubt that the trademark infringement has been the focus of attention in the field of intellectual property protection in China. It is essential for the foreign trademark holders to have a deep understanding of and make a good preparation for the following aspects, so as to smoothly carry out the trademark infringement litigation and obtain favorable results in China.

 Investigation of tort facts

Foreign trademark holders are generally informed of trademark infringement information from two channels: 1) website surfing on their own side; 2) feedback from Chinese subsidiaries or partners. After obtaining the infringement clues, it is necessary to carefully investigate the infringement conducts and to exactly lock the evidence that can be used to initiate the infringement litigation. The two-track system can be adopted in the investigation. On the one hand, foreign trademark holders can entrust the local professional investigation companies to inquire about the background information and conduct the field investigation, so as to learn the actual scale, mode and scope of the production, use and sale of the infringer. On the other hand, Chinese subsidiaries or partners can assist with collecting and sorting out the dynamics of the infringement products in the sensitive market, especially whether there exists actual confusion in the market. It should be mentioned that the judicial period of the foreign trademark infringement is usually longer, during which the infringer can easily transfer or conceal his property. Therefore, if the trademark holder can pay attention to the infringer's property situation in the investigation, it will be beneficial to apply for property preservation measures for the future litigation. In addition, the investigation and evidence collection at this stage have not disturbed the infringer, so they should be as complete as possible so as to withstand the cross-examination in the future trademark infringement litigation and become credible evidence to win the litigation.

 Assessment of the Prospects of Litigation

In practice, the plaintiff often owns more than one identical or similar trademarks which are earlier registered on identical or similar goods as the trademark accused of infringement. These earlier registered trademarks may be different in classes, registration dates and logos. Therefore, appropriate trademarks should be selected according to the specific circumstances of the case.

Firstly, it would be wise to select the prior trademarks which are identical with the accused infringing trademarks and used on the same goods. In this situation, the infringer often faces the risk of criminal offence and may be willing to discuss the issues of reconciliation and compensation with foreign trademark holders before or during the litigation. In this way we can achieve the litigation effect of defeating others without fighting. During the selection of the appropriate trademarks, the stability of the earlier registered trademark (i.e. whether it is widely used in the Chinese market) should also be considered. If the earlier registered trademark has not been used in the Chinese market by the plaintiff or its licensee, the plaintiff is likely to lose the trademark right in the non-use cancellation initiated by the other party.

Secondly, the prior trademarks selected as the basis of rights should have strong inherent distinctiveness, so as to effectively counteract the other party's defense of reasonable use in the trademark infringement litigation. It should also be noted that even if the infringer holds the registered trademark of the alleged infringement on the goods he uses, it does not necessarily mean that the infringement does not constitute infringement. According to Chinese law and the judicial practice, if the plaintiff's earlier registered trademark constitutes a well-known trademark, even if it is registered on the same or similar goods/services, the plaintiff can also sue the infringer for prohibiting the use of the similar trademarks. In addition, if the accused infringing trademark is not used on the designated goods/services, or not used in the form as registered (such as mixing with other trademarks, changing its distinctiveness, etc.), it may still constitute trademark infringement.

To make a meaningful assessment of the litigation prospects, we should not only have a thorough understanding of relevant laws and regulations, but also search the judicial database for similar precedent cases. Although China is not a case-law country, the exploration and implementation of "case guidance system" or "precedent judgment guidance system" have increasingly influenced the way of judgment at the local courts. For example, according to the data of Beijing Intellectual Property Court, 1034 cases were cited in the judgment from the beginning of 2015 to the end of 2017. According to the judicial spirit of category judgments, if the trademark holder takes the initiative to submit the high-level judgments on the similar precedents, the court is more inclined to confirm the nature of tort and even to confirm the rationality of high-level compensation.

 Choice of an Appropriate Court

In China, foreign-related civil litigation cases are principally heard by the intermediate courts with jurisdiction. At the same time, it is stipulated that the courts in the places where the defendant lives, where the infringement is committed, or where the administrative organs deposit, detain or seize the infringing products, have jurisdiction over the infringement cases. The past practices show that most plaintiffs in foreign trademark infringement litigation will flexibly choose the place where the infringement occurs to determine the jurisdictional court. The intermediate courts in the economically developed areas such as Beijing, Shanghai, Guangzhou, Zhejiang, Fujian and Jiangsu are often chosen. This is because the judges in these areas are more experienced and competent, and moreover the courts in these areas would prefer to apply higher compensation fee in trademark infringement cases.

However, every advantage has its disadvantage. Statistically, the intellectual property civil lawsuits heard in Beijing, Shanghai, Jiangsu, Zhejiang and Guangdong accounts for 70.65% of all the previous cases of foreign trademark infringement. According to the Civil Procedure Law, no time limit is set for hearing foreign-related civil cases. Therefore, the big problem is the heavy case burden of the judges in some areas and the intolerable delays in the trial process. Therefore, when choosing the appropriate intermediate courts, the plaintiffs in foreign trademark infringement litigation should lend an ear to the suggestions of Chinese lawyers and make a favorable choice from the perspective of professionalism, timeliness and deterrence in the trials.

 Choice of the Right Defendant

Trademark infringement litigation often involves multiple infringement subjects. It would be impossible to bring all infringers to court, since the plaintiff cannot afford the time, money and energy. Moreover, if all the infringers are prosecuted, the infringers might form an alliance, thus increasing the difficulty and risk of the litigation. As a matter of experience, it would be wise to choose the defendants after the jurisdictional court has been determined. The choice of the right defendant should also include the choice of the right time to proceed against the defendant. Based on the specific infringement situation of different defendants, the trademark holder needs to consider when to prosecute, whether to issue a warning letter before prosecution, whether to negotiate before or after litigation, etc. Last but the most important is whether the effective judgment is easy to implement, whether the effective legal instrument and its enforcement results have a strong deterrent force for other infringers, whether it has a beneficial demonstration effect for other potential lawsuits. In practice, some infringers plan the transfer of property and the evasion of execution even before their infringement. In this situation, it is necessary to consider the feasibility of "piercing the corporate veil" in specific trademark infringement litigations, that is, the feasibility of increasing the number of natural persons such as legal representatives of companies as defendants jointly and severally liable for the infringement compensation.

 Enforcement of Judgments

At present, two kinds of judgments prevail in trademark infringement lawsuits in China: cessation of infringement and compensation for losses. The judgment of ceasing infringement may include: stopping the use of the accused logo, stopping the sale of goods with the accused logo, changing the name of the enterprise, etc. It is worth mentioning that the change of enterprise names varies considerably in the intellectual property judgments and in the ordinary civil judgments. That is to say, apart from the property execution, the execution of judgments also requires the cooperation of the Administration of Industry and Commerce to cancel the enterprise names. In the previous cases, when the infringer's enterprise name infringes the trademark right of the prior trademark holder and the infringer refuses to change the enterprise name although ordered by the court, it is compulsory to use the unified social credit code of the enterprise to replace its name in the national enterprise credit information publicity system. As for compensation for losses, it is not only a practical way to indemnify the trademark holder, but also a direct way to punish the infringer. To be frank, the implementation of compensation has been a long-standing implementation problem in China. However, since 2016 the Supreme People's Court of China has taken a series of measures to overcome the implementation difficulties, especially to limit the high consumption of the executed, including air travel, high-speed rail, star hotels and even high-end private schools for their children. The situation has been greatly improved since then.

 Summary

Trademark infringement litigation is a means of commercial competition. China's current legal system and judicial practice is ready to give strong support to foreign trademark holders, if they wish to obtain effective trademark protection in China and meanwhile can submit conclusive evidences. Besides, the protection of the intellectual property rights has wined initial success. Therefore, what the foreign trademark holders need to do is to entrust a reliable Chinese legal agency to maximize their commercial interests in the Chinese market from a rational commercial perspective and at the appropriate cost.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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