Practical tips for IP Enforcement in Hong Kong and China
It is estimated that legitimate businesses suffer annual losses of over US$250-750 billion in lost sales as a result of counterfeit and pirated goods from China and Hong Kong alone. Intellectual property enforcement is therefore critical to fostering innovation and protecting businesses from infringers and counterfeit activities.
As China and Hong Kong are separate jurisdictions with different sets of legal systems, the IP frameworks and the corresponding IP enforcement practices between the two jurisdictions differ. It is prudent for business owners to understand their positions and artilleries for enforcing their IP rights in these two jurisdictions. This article provides an overview on the various IP enforcement options and practical tips for effective enforcement in Hong Kong and China.
Enforcement of IP rights in Hong Kong
Issuing Cease and Desist letter
In essence, a Cease and Desist letter is a warning letter to warn the infringers to stop its infringing activities and / or take remedial action by a certain deadline, failing which the IP right owners may take legal action against the infringers.
This approach is particularly useful for trademark infringement in Hong Kong, given that both registered and unregistered trademarks are protected under the effect of the Trade Marks Ordinance and the common law position of passing off (misleading business reputation/goodwill) respectively under Hong Kong law.
This is an efﬁcient and low-cost means of enforcement since the IP right owners may protect their right in a timely manner without the burden of complex and expensive court proceedings. In addition, the issuance of a Cease and Desist letter is usually a pre-requisite for litigation, given that both parties must attempt to resolve their dispute amicably before commencing litigation, or else there might be cost consequences if the matter subsequently proceeds to court proceedings.
One must note that in relation to patent or registered design infringement in Hong Kong, special caution must be given when issuing a Cease and Desist letter since a groundless threat to bring proceeding for these types of infringement is prohibited by law. Therefore, IP right owners should beware of inadvertently making groundless threats or risk having to pay compensation, and only issue Cease and Desist letter when there is clear evidence showing that the infringement has occurred.
Hong Kong Customs Recordal
The Hong Kong Customs and Excise Department is responsible for enforcing the criminal aspects of infringement of IP rights and has extensive power of search and seizure against infringers. It assists IP right owners to enforce their rights through border enforcement and market investigation measures. It can seize counterfeit goods from anywhere in Hong Kong, not only in the harbour or border areas.
In order to enforce IP rights against infringers through Hong Kong Customs, the IP owners must (1) provide an afﬁdavit on copyright ownership (for copyright infringement) or a copy of the trademark registration certiﬁcate (for trademark infringement), (2) provide a sample of each of the genuine and infringing products, and (3) appoint a Qualiﬁed Examiner who can distinguish between counterfeits and genuine products. Once a Customs Recordal is complete (no ofﬁcial fee is
required), and that the Customs has veriﬁed the competence of the Qualiﬁed Examiner as a credible expert witness in future criminal prosecution court cases, the Customs will proceed to raid and administratively enforce against the infringers.
Commencing civil litigation in Hong Kong court
IP right owners may commence civil litigation proceedings against infringers. The courts in Hong Kong are sophisticated and well equipped to handle IP cases since there is an Intellectual Property Specialist List created in Hong Kong courts where all trials in relation to IP will be listed before judges specialized in the area.
The robust courts of Hong Kong are keen to grant injunctions to put a stop to infringement activities in a timely fashion. In addition, the damages awarded to the winning party is relatively high compared to other jurisdictions.
However, a typical court action in Hong Kong can take up to 3-5 years, and the legal costs incurred could be high. That said, the winning party would usually be awarded damages and portion of the legal costs. It is also not uncommon for both parties to reach settlement once an injunction is granted.
One should note that before commencing civil litigation in Hong Kong, both parties will be requested by the court to conduct a round of mediation, failing which there will be cost consequences.
Enforcement of IP rights in China
Unlike Hong Kong, unregistered IP rights are protected only by law on unfair competition and/or well-known trademarks, which are both very hard to prove under Chinese law. Hence, IP rights must be registered in China as a pre-requisite for any enforcement options in China. We highly recommend that the trademark owner or any company doing business in China, whether by way of manufacture, retail or trade in any other way to be registered as soon as possible to prevent other parties from registering the IP rights (including an identical or similar trademark).
China Customs Recordal
China Customs is responsible for prohibiting the export and import of goods from and to China that infringe IP rights, and IP rights can be recorded with them. Once an IP right is recorded, if the Customs ﬁnd suspected
infringing goods on record during their routine check, Customs will suspend the goods and notify the relevant IP right holder of the suspected infringement. If the IP right holder conﬁrms the infringement, applies for detainment of the goods and pays the requisite deposit as a guarantee, Customs will formally detain the goods pending further investigation. Once it is proven that the detained goods are indeed counterfeits, Customs may conﬁscate the infringing products and impose penalties on the consignor or consignee.
Alternatively, if IP right owners discovers that the goods to be imported or exported are counterfeits, they may also apply to the Customs for the detainment of the goods. To do so, IP right owners should provide evidence showing the goods are indeed counterfeits and deposit a guarantee equivalent to the value of the detained goods.
China Customs Recordal is very timely and cost effective with the ofﬁcial fee for ﬁling Custom Recordal to be RMB 800 (approximately US$100). Unlike Hong Kong Customs, there is no requirement for an appointment of Qualiﬁed Examiner in China, and all the application and submission of evidence can be done entirely through the web. Therefore, China Customs Recordal is one of the most effective IP enforcement methods in China.
The key Chinese administrative bodies are the Intellectual Property Ofﬁces (IPOs) for patent cases, the Administrations for Industry and Commerce (AICs) for trademark cases, and the Copyright Ofﬁce for copyright cases.
These administrative bodies are empowered with a wide range of enforcement powers against infringers, such as raiding infringers’ premises, seizing and destroying infringing goods, imposing injunctions and issuing ﬁnes against the infringers.
Administrative actions are relatively speedy and costeffective, but IP right owners will need to instruct legal representatives to ﬁle the application with supporting evidence of ownership of the IP right, as well as evidence of the infringement.
Online take down notices
Under Chinese law, internet providers are liable for IP infringement if they are notiﬁed of the infringement activities and fail to take down the links to the relevant
website. Therefore, most internet providers in China have their own set of policies in place for such kind of take down notices.
Generally, they require the provision of (1) evidence showing the complainant is the IP right holder, (2) the links to the infringing activities, and (3) business license of the IP right holder.
Online take down notice is a very cheap and efﬁcient way to tackle online infringements in China as the procedures are relatively straight-forward.
Commencing civil litigation in Chinese courts
There are IP courts in China in Beijing, Shanghai and Guangzhou respectively that are specialized in handling IP cases. The usual remedies sought are wide-ranging and can include injunctions, destruction of infringing goods, damages and order for delivery up. In addition, a typical IP action would take place in the span of 1 to 1.5 years in general, from the issuance of proceedings to the handing down of judgment, which is relatively quick as compared to its Hong Kong counterpart.
To prove IP infringement in court proceedings in China, all the evidence in support must be notarized by a notary public. In practice, this means the process of obtaining the evidence, including the test purchase of the infringing items, must be witnessed by a notary public. This will add difﬁculties to providing sufﬁcient notarized evidence to satisfy the burden of proof in Chinese court proceedings.
Moreover, many of the local court judges and juries in China are often not sophisticated in IP law, and a fair result may only be obtained once the cases are appealed to a higher or even top level courts (most notably the Michael Jordan case, where the US basketball player Michael Jordan successfully obtained favorable results against a long-lasting trade mark squatter in China only when the case had been appealed to the Supreme Court of China).
In conclusion, business owners who are carrying business in Hong Kong and in China must ensure to register all their IP rights in both of these jurisdictions since the legal system are independent from each other. In Hong Kong, this would be for trade marks, patents and registered designs (no copyright registration is available). In China, this would be for patents, trademarks, and speciﬁcally including copyright.
About the Author:
Apart from founding Ella Cheong & Alan Chiu, Solicitors & Notaries (formerly known as Ella Cheong Law Oﬃce), Ella Cheong also founded Ella Cheong (Hong Kong & Beijing) and additionally, at the invitation of the Singapore government, the Singapore ﬁrm of Ella Cheong LLC and a supporting oﬃce of Ella Cheong IP Services Sdn Bhd in Malaysia. She regularly gives talks on all aspects of IP. She has also authored many articles on IP issues. Ella was inducted into the Global Hall of Fame (IAM) in 2018. The latest edition of World Trademark Review 2019 identiﬁed her as an IP Legend and a luminaire.