[Jian Xu] A primer for intellectual property enforcement in China

Now that China is the second biggest economy in the world, very few companies can resist its lure. This has resulted in foreign businesses clambering over each other to get a foothold in what is a rapidly expanding market. However, the Chinese landscape is difficult to navigate and poses a number of problems; none more so than intellectual property (IP). Foreign companies must pay special attention to the IP protection and enforcement regime in China. Failure to do so can be extremely damaging to your business.

Contrary to popular belief, it is possible to enforce IP rights in China. There are three main enforcement options: administrative enforcement, civil litigation and criminal prosecution.

The main bodies responsible for conducting administrative enforcement are:

• Administration for Industry and Commerce (AIC) - trade mark and unfair competition matters;
• Intellectual Property Office (IPO) - patent issues; and 
• Copyright Office - copyright infringement.

Administrative proceedings are usually quick and inexpensive. IPO and Copyright Office actions, particularly in the more developed cities, can also be an effective means of enforcement. In areas with a high level of foreign investment, Chinese authorities may be more willing to take action in order to encourage further foreign investment. These types of proceedings can be a useful means of obtaining evidence for use in subsequent civil litigation.

Judges in China are becoming more IP savvy. Although most litigation in the civil courts is between Chinese companies, foreign companies are beginning to engage with the system. Claimant win rates in Guangzhou, Shenzhen, Nanjing, Shanghai and Beijing are encouraging and although damages awards are not on the same scale as in the UK and Europe, there are instances where high awards have been made. For example, a Beijing Court awarded a British kettle component maker RMB 9.1 million in damages from Chinese kettle components makers for making and selling patent infringing kettles. Assuming the thresholds for criminal action are met, the sanctions for such offences have a very good deterrent value.

It is possible to record IP rights centrally with the General Administration of Customs. This is relatively inexpensive and it is recommended that rights are recorded as Customs have a valuable role to play in enforcement, particularly in relation to clear-cut cases of infringement.

In conclusion, with a burgeoning middle class with money to spend, China provides exciting opportunities for foreign companies looking to invest or distribute in the Far East. Nonetheless, since China operates a "first to file" system for trade marks and patents, it is important that foreign companies take adequate steps to maximise IP protection in China. Most importantly, foreign companies should apply to register their IP before entering the Chinese market and, if the need arises, be prepared to enforce these rights.