Our retail multinational clients often ask if there is an effective way of protecting intellectual property rights (“IPR”) in China. While traditional enforcement remedies in China have been ineffective in the past, customs border protection schemes in recent years have provided a cost effective tool to protect the IPR of brand owners in the retail industry.
There are generally two customs IPR border protection schemes available in China: (i) the ex-officio or active protection scheme, and (ii) the passive protection scheme.
The precondition for active protection from China Customs is recording the IPR with the General Administration of Customs of China (“GACC”). Potential advantages for brand owners include the customs authorities monitoring for suspicious activities, inspecting import and export shipments, and working with the brand owners to identify infringing goods. If a specific shipment of goods is suspected of infringing a recorded IPR, China Customs has the ability to suspend the clearance of the goods, detain the goods upon the request of the brand owner after posting a deposit, and investigate the suspected infringement. If infringement cannot be determined, the brand owner can still pursue the case in court.
If a brand owner has not yet actively registered its IPR with the GACC, the passive protection scheme would apply. China Customs generally would not initiate an investigation on the detained shipments in the passive protection scheme. However, a brand owner may request the customs authority to detain a suspected shipment by providing evidence to prove the existence of infringement and a deposit equivalent to the value of the goods. The brand owner would then need to file a lawsuit in court within 20 working days or the customs authority would release the goods.
Around 50,000 valid IPR registrations have been recorded with the GACC up to September 2019. China Customs took over 49,700 border protection measures in 2018, resulting in seizures of over 47,200 shipments of goods suspected of IPR infringement. In 2018, 97% of the seizures were based on customs’ ex-officio actions, while only around 3% was initiated by brand owners under passive protection scheme.
Registration of IPR with GACC has been FREE since 2015, so a brand owner has no reason not to register. To make customs IPR protection even more effective, a brand owner should maintain close contact with China Customs and offer product identification training sessions to customs officials located at ports where infringing products are most likely to enter or exit China. The more awareness a brand owner can bring to its products and potential infringement, the more effective border enforcement actions will be.