Introduction
Strengthening intellectual property protection has become the main theme in China today.
With the increasing frequency of infringement of intellectual property rights, which way to protect intellectual property rights has become a problem that many right holders are considering.
While it has been a common practice that countries provide for both judicial and administrative means for protecting IP, practice has shown that the administrative IP protection have been particularly useful and effective in China because of China’s national conditions, i.e., a tradition of having an effective and all-encompassing government that dates back thousands of years and continues through today.
General description
General proceedings and responsible authorities of administrative IP protection are as follows:
In respect of patent infringement
Responsible authority
Local Administrations for Market Regulation (AMR) (市场监督管理局) have the jurisdiction over patent-related disputes and infringement after the function of the former local Intellectual Property Administration (知识产权局) was integrated into the AMR in the 2018 government re-organization. And due to its complexity and requirement of expertise, patent infringement cases are handled by intellectual property divisions/offices of the AMR at or above the municipality-level nowadays.
Proceedings: administrative adjudication
Article 65 of the Patent Law of China provides that, patent owners or relevant parties (stakeholder such as licensees) could request AMRs to handle patent infringement cases, as an alternative to filing a court action. And according to the regulation and guidelines promulgated by China National Intellectual Property Administration (CNIPA), a semi-judicial proceeding called administrative adjudication would be entered over the complained case.
An administrative adjudication proceeding has a lot in common with court proceedings. The parties in both proceedings get to examine and question each other’s evidence and advocate for themselves in oral or written form. On request, the handling authorities in both proceedings could take their own investigation and preserve evidence. And both authorities must decide on whether patent infringement is established and order prohibition once it is.
Measures the authorities are allowed to take when requested by the parties to investigate the case include questioning relevant individuals, inspecting the premises of allegedly infringing acts, and inspecting the allegedly infringing products. However, it should be noted that measures conventionally considered most forceful and interrupting for the infringers, such as inspecting and/or reproducing the relevant documents, and sealing up and/or seizing the allegedly infringing products, are not allowed in administrative adjudications.
In respect of other IP rights infringement
Proceedings: administrative enforcement
For other IP rights that do not concern complicated technological issues, infringement determination is comparatively simple and straightforward. Authorities usually could come up with their conclusion without hearing arguments from both sides. So, the Chinese laws and regulations does not provide for semi-judicial proceedings when the IP owners ask for administration protection.
When a trademark or copyright owner or a stakeholder suspects his IP rights are infringed upon, he can file a complaint before responsible authorities with preliminary evidence and ask for the authorities to investigate, and punish the infringer if the suspicion turn out to be true.
For the authorities’ part, they would evaluate the cases by reviewing the complainant’s documents and refuse those apparently non-infringing. If they decide to take the case, they can take all necessary measures prescribed by the laws in order to investigate, including inspecting and/or reproducing the relevant documents, and sealing up and/or seizing the allegedly infringing products. Once infringement is established, the authorities would impose on the infringer permanent injunction and economic punishment.
In addition, the authorities could also launch ex-officio actions against IP infringements. In such cases, the authorities would often contact the IP owner for verification and authentication, and the IP owners could then step in for following up.
Responsible authorities
Local district/county level AMRs are responsible for taking administrative enforcement actions with respect to trademark and anti-unfair competition matters, as they assumed the responsibility of the former Administration for Industry and Commerce (工商行政管理局) after the 2018 government re-organization.
Actions with respect to copyright matters are now taken by the local Bureau of Culture and Tourism (文化旅游局), usually by its tasked force of Law Enforcement on Cultural Market (LECM) (文化市场综合执法大队) at the district/county level.
Customs protection
Aside from the above authorities delegated by specific IP laws for handling administrative IP protection matters, the customs across the country provide IP protection at their end.
IP owners could record their IP with the General Administration of Customs of China. Local customs would then stop goods from importing or exporting over suspicion of IP infringement and contact the IP owner for notice of whether to detain or release the goods. In some cases where the IP owner is aware of an imminent import/export of infringing goods, a detailed request for detention can be filed to the local customs beforehand.
Upon receiving the IP owner’s request for detention, the customs would conduct their own investigation over the case and once they concluded the subject IP is infringed, they would confiscate the infringing goods and, in some cases, impose fines on the infringer.
Official data and the latest trend
Latest trend
Generally speaking, one of the most common reasons for IP owners choosing administrative actions over judicial ones for IP enforcement is that it is comparatively more convenient, efficient, and cost-effective, and the burden of proof for the IP owner is significantly lower. The above factors have long characterized the administrative actions as suitable for simple and straightforward cases only.
In recent years, however, CNIPA has issued numerous guidelines for the lower AMRs regarding the determination of trademark infringement, and the handling of enforcement/mediation of patent infringement cases, etc., aiming to uniform the administrative actions of AMRs across the country, and by adopting principles and views established in the judicial practice, to bring down the gap between judicial and administrative IP protection.
The moves signal the Chinese government’s efforts to keep improving the ability of its organs or agencies in dealing with non-straightforward, and complicated cases, and to build a comprehensive administrative IP protection system that will be equal to or more effective than those afforded by judicial authorities.
Official data
Government data released last month showcased the improving abilities of the administrative law enforcement authorities to tackle complicated cases, the rising caseload, and the significant overall economic volume involved in administrative IP protection. According to the CNIPA White Paper, during 2021:
Intellectual property divisions/offices of the AMRs have concluded over 49,800 administrative adjudications, an increase of 18.6% from the previous year. Among them, CNIPA handled 12 administrative adjudications on early resolution mechanisms for pharmaceutical patent disputes and 2 administrative adjudications on major patent infringement disputes.
Trademark- and unfair competition-wise, over 35,700 cases concerning trademark infringement have been concluded by the AMR, a year-on-year increase of 20.6%. The aggregated case volume reached RMB 945 million (about USD 141 million), a year-on-year increase of 23.5%.
In addition, AMRs have concluded 8,563 cases concerning unfair competition (passing-off, infringement on trade secret, etc.), imposing on the infringers fines totaled RMB 573 million (about USD 86 million).
As for copyright protection, the LECMs launched ad hoc campaigns such as Sword Net 2021 (剑网2021), cracking down on piracy and copyright infringement in relation to short video, online live streaming, sports events, online education, movies released on cinema, etc. During the year, 1,066 infringing and piracy websites/apps were closed. Over 1,197,000 infringing and piracy links were disposed of or deleted. Over 8,467,500 infringing links relating to online video, online live-streaming, e-commerce were cleaned up by service providers under the pressure of law enforcement authorities.
Chinese customs as a whole seized over 79,200 batches of goods suspected of IP infringement. Total pieces of goods seized reached 71.80 million.
Administrative action & criminal/civil actions
Administrative & criminal actions
Articles 213 to 220 of the Criminal Law of China list over a dozen types of IP infringement acts as constituting criminal offenses when the volume involved in each case reached certain levels, or the circumstances were considered serious. The acts do not cover patent infringement but include counterfeiting patents. Other than that, the list includes primarily acts infringing on trademarks, copyright, and trade secrets.
Regarding the acts enumerated by the Criminal Law, both the police, aka Public Security Bureaus (PBS), and administrative law enforcement authorities, i.e., AMR, LECM, and the customs, have the jurisdiction at the initial phase when the case volume is not clear. And once the investigation revealed the circumstances were so serious as to exceed the criminal standards, the case has to be handed over to PSB for further handling.
According to the CNIPA white paper, during 2021:
PSBs have successfully launched the ad hoc campaign Kun Lun 2021 (昆仑2021) to clamp down on IP infringement. Nationwide, the PSBs have cracked over 21,000 criminal cases of IP infringement and manufacturing/selling of counterfeits. More than 37,000 suspects have been detained.
AMR cases reaching criminal level and handed over to PSBs numbered 1,011.
It is possible for PSB and the administrative law enforcement authorities, usually AMR or LECM, to take investigation and raid actions jointly. The obvious advantage of such cooperation is that PSBs have more tools prescribed by law than AMR/LECM/customs, such as detaining individual infringers and raiding their residence.
However, such cooperation is relatively rare. Because the types of IP infringement that are potential for a criminal offence are limited, and in the initial phase where evidence does not guarantee or show a likelihood of a criminal offence, it is very difficult to persuade PSB to lend support. On the other hand, it should be noted that such cooperation is more common in the fields of food and drugs than in others because PSBs around the country often task the responsibilities of handling IP-infringement cases and handling food- and/or drugs-related cases to the same internal division, usually named Shiyaohuanzhi Dadui (食药环知大队), literally the division of food, drug, environment, and intellectual property.
Administrative & civil actions
Difference and Linkage between administrative adjudications and civil actions
As aforesaid, administrative adjudications on patent infringement cases are themselves a semi-judicial proceeding. Major differences between the two proceedings are that:
Administrative adjudications are a lot faster. CNIPA guidelines stipulate that AMR administrative adjudications must be concluded in 3 months. In exceptional cases, the time limit could be extended for one month only.
Economic liabilities of the infringers are not subject to administrative adjudications.
Patent owners or relevant parties could seek compensation in a separate court action or ask the AMR to mediate between the parties on that issue after the AMR administrative adjudication is concluded and confirmed the patents are indeed infringed.
This is also different from administrative enforcement actions where fines will be imposed on the infringer once the infringement is established.
Administrative adjudication decisions become effective instantly and rely on the court for compulsory enforcement
Unlike the judicial decisions of the courts, AMR’s administrative adjudication decisions come into force immediately. Though the dissatisfied party could file for judicial review, the enforcement of the AMR decision would not be suspended, unless the laws provided otherwise or the court/AMR so ordered.
However, AMR does not have the authority to enforce its decision compulsorily. Should the dissatisfied party fail to perform accordingly nor file for judicial review, the other party has to file a request before the local court for compulsory enforcement of the AMR decision.
Difference and Linkage between administrative enforcement and civil actions
Administrative enforcements deal with the administrative liabilities arising from an IP infringement but not the civil ones, which are the centerpiece of civil actions. The IP owners or stakeholders could take the two proceedings alternatively or simultaneously.
Compared to civil actions, administrative enforcement has the following pros and cons for the IP owners or stakeholders:
Pros:
Less time-consuming (usually three-to-four months) and hence lower costs;
Casting instant interruptive effect on the infringer and seizing or sealing up of the infringing products;
Most law enforcement authorities have incentive mechanisms in place for officials to take administrative actions.
Cons:
No compensation can be obtained from such actions without a parallel agreement with the infringers;
Most local law enforcement officials tend not to accept cases involving legal ambiguity or complexity.
In some cases when the infringement is severe, an administrative action can be filed as a pre-lawsuit step to obtain an administrative order, enjoining the infringer from continuing its infringement. The evidence preserved through the administrative action can also be used in the following court proceedings against the infringer.
Tips on taking administrative actions
How, when, and whether to take administrative actions at all must be contemplated carefully as a part of an overall strategy of IP protection based on factors including but not limited to the following:
The aim. Administrative authorities do not have the authority to award damages. If there is no parallel settlement/mediation agreement reached between the parties, the costs incurred therein by the IP owner and stakeholder cannot be recovered. So, whether to file administrative actions or not largely depends on the IP owner’s aim. If the priority is to urgently stop the infringing acts not to ask for compensation, administrative actions are highly advisable.
The complexity. Even things are improving day by day, the administrative law enforcement officials, especially those at local level, are not as highly qualified as judges. And their administrative decision is subject to review by higher administrative authorities or competent courts, leading to the officials being extra careful when handling the cases.
Therefore, if the facts on the alleged infringement are simple and straightforward, the administrative action can be carried out swiftly and effectively. However, if the facts are complex, or involve legal ambiguity, or require the local officials to have professional knowledge or skill to ascertain, filing administrative actions would not be as swift and effective as expected.
Timing. For administrative actions, the right timing sometimes could translate into extra attention and resources from the handling officials. For example, according to CNIPA’s 2022 Work Plan, law enforcement authorities nationwide are required to “develop work plans, establish emergency response mechanisms, and strengthen IP protection” around the important dates of the year, such as May Day, the Mid-Autumn Festival and National Day.
Last but not least, coordination with civil/criminal actions must be taken into consideration beforehand.
Administrative actions are a simple and powerful tool for IP owners or stakeholders to combat infringement. However, using it and using it well require consultation with experienced lawyers and private investigators so as to formulate a well-perceived strategy.
As the Master Sun Tzu said in The Art of War: “Plan before you move”. Only based on properly preserved evidence and careful moves could an administrative action produce a favorable outcome.
Already published on IAM
