Chinese authorities are on a mission to drastically clamp down on counterfeit goods and reduce intellectual property rights infringement.
To do so, the country has restructured the State Intellectual Property Office to strengthen law enforcement, and IPR cases will now be heard by the Supreme People’s Court.
“Setting up a Supreme Court intellectual property rights court is an important decision by the Communist Party of China,” Deputy Chief Justice Luo Dongchuan said at a news conference. “It is a major step to strengthen the legal protection of intellectual property rights, and will have a major impact at home and abroad.”
In December, police in China raided two manufacturing centers and arrested 36 people accused of making and selling fake products being passed off as manufactured by British technology company Dyson.
Officers seized 400 counterfeit Dyson hairdryers, 1,500 half-finished products and 200,000 components in a joint operation carried out by police in Shanghai, and in Guangdong and Fujian provinces.
It is believed that the suspects bought genuine Dyson appliances and hired workers to dismantle and analyze them before making the forgeries on a production line.
It was determined the fakes were not only harmful to hair, but posed a serious fire risk.
Jamie Rowlands, partner at the China office of international law firm Gowling WLG, said, “The Chinese government seems genuinely committed to improving IP protection, both for domestic and foreign parties.”
During the past seven years, Gowling WLG has been involved in at least 300 cases in China at all levels of the judicial system.
According to the National Intellectual Property Administration, the number of administrative cases connected to patent issues in 2018 rose year-on-year by 15.9 percent. A total of 43,000 cases connected to counterfeiting patented items were investigated, a rise of 10.9 percent from the previous year.
Officials also looked into 31,000 trademark violations, worth a total of 550 million yuan ($80.9 million).
Since Jan 1, IPR cases have been heard in the nation’s first IP courts, which were established by the Supreme People’s Court. They handle appeals in civil and administrative cases, such as those involving patents, copyright, design of integrated circuit layouts, and monopolies.
Litigants who disagree with rulings made in intermediate people’s courts at city-prefecture-level, or those made by specialized IPR courts, can now appeal to the top court directly by going to the new ones, instead of first appealing to provincial high people’s courts.
Three IPR courts have been set up on the Chinese mainland — in Beijing, Shanghai and Guangzhou, capital of Guangdong. These courts were followed by the introduction of special judicial bodies at 15 intermediate courts — in Nanjing and Suzhou, Jiangsu province; Wuhan, Hubei province; Xi’an, Shaanxi province; and other cities. These bodies will handle cross-regional IPR cases, including those related to patents.
According to the 2017 Situation Report on Counterfeiting and Piracy in the European Union, produced by Europol — the European Union’s law enforcement agency — and the EU Intellectual Property Office, counterfeit goods from China represented 72 percent of all fake merchandise in the EU, Japan and the United States.
The report said Chinese counterfeit exports seized in the EU, Japan and the US were valued at more than 1.08 billion euros ($1.23 billion) in 2015.
It added that the Chinese mainland and the Hong Kong Special Administrative Region together were the source of 86 percent of global counterfeit goods — items valued at $396.5 billion.
Although progress has been made, countries such as the US and some European nations urged China to improve the efficiency of its law enforcement efforts in relation to IPR protection.
IPR remains a key issue in Sino-US trade frictions, with US President Donald Trump citing widespread theft, a claim Beijing vehemently denies, as an excuse to beef up tariffs levied on exported goods from China.
But Luo, the deputy chief justice, rejects suggestions that US concerns over IPR protection had any impact on the decision to strengthen the legal framework.
“China has, for many years, followed international regulations and international treaties to protect intellectual property rights,” Luo told Hong Kong newspaper the South China Morning Post. “So, it’s not because of the demands by foreign countries that we’ve stepped up protection efforts. This is an integral part of our own development.”
Luke Hughes, a furniture designer in London, has produced pieces including dining chairs crafted in solid European oak for Churchill College, Cambridge, oak tables and chairs for The Berrow Foundation Building at Lincoln College, Oxford, as well as furniture for the Keystone Academy library in Beijing.
He said he has concerns over IP protection in China, but believes solutions lie in fostering relationships with companies.
“There are many honorable Chinese companies who fully recognize the value of design, not only to improve their own standards but also to enable them to approach new markets and even existing ones,” he said. “So, you can throw the law at them if you’re prepared to pay a lot for lawyers, but isn’t it more sensible to build up long-term relationships?”
He said China is not the only nation capable of IP infringements — he has had problems with US companies stealing his designs.
Foreign companies, though, have had many recent successes in litigating against those from China that have infringed upon patents or trademarks, a sign of the increased clampdown by judicial authorities on IP violations.
Recent court victories for basketball star Michael Jordan, sports brand New Balance and luxury retailer Alfred Dunhill in trademark disputes against copycat Chinese brands have been viewed as a sign that Beijing is taking the issue seriously.
In 2016, US sportswear company New Balance won a case after three Chinese shoemakers were found to have infringed on its logo.
Last year, a Chinese court awarded United Kingdom luxury company Alfred Dunhill 10 million yuan (nearly $1.5 million) after Chinese brand Danhuoli was found guilty of both trademark infringement and unfair competition.
The trademark infringement centered around Danhuoli’s illegal imitation of Dunhill’s globally recognized logo.
At the time, Luke Minford, global CEO of international IP consultancy Rouse, said, “The decision should reinforce to other brand owners that China is finally getting serious about protection.”
While intellectual property enforcement has improved in China in recent years, Rowlands, of Gowling WLG, said the battle is not over.
“The feeling that China is the ‘Wild West’ when it comes to IP protection, has subsided, although a lot of people still believe that to be the case,” he said. “That said, there is still work to be done,” he added, referring to existing counterfeiting and copycat products on the market.
Rowlands added that enforcing successful judgments in China remains challenging.
“China is a first-to-file country,” he said, which means whoever registers first for a trademark owns it. “So, third parties often register IP, especially trademarks, in bad faith. Damages are generally low — although improving — recovery of legal costs is rare, as are preliminary injunctions.”
He advises foreign businesses to register their IP claims early and to do robust due diligence work on Chinese entities.
According to the World Intellectual Property Organization, a specialized agency of the UN, China received 1.38 million patent applications in 2017, the largest number globally. Trademark applications in the country the same year numbered 5.7 million.
Francis Gurry, WIPO director-general, said, “In just a few decades, China has constructed an IP system, encouraged homegrown innovation, joined the ranks of the world’s IP leaders, and is now driving worldwide growth in IP filings.”