Many a time, a European company is faced with Chinese companies that infringe its intellectual property rights in China. High costs of litigation, the complexity of navigating a different legal system, and China not being their core market are commonly cited as reasons for foreign companies not ensuring their rights are enforced. In most cases the ‘copycats’ are then left to continue their infringing activities, despite the foreign company knowing about it. This sets a dangerous precedent; especially considering the difficulty of the above ‘obstacles’ is sometimes over-estimated.Through this post, we encourage you to resist doom and gloom and instead consider the situation carefully before taking the decision to enforce your rights or not!
The argument that the companies’ core market is not directly hurt is valid, but hazardous at the same time: it is easier to stop a small number of infringers that are just starting to invest in their counterfeit activities, than multiple, well-established production facilities a few years down the line – to prevent is better than to cure.
Although court and lawyer fees in China are considerably lower than in most Western jurisdictions, filing a lawsuit in China can indeed be costly. The (complexity of) evidence preparation could come with high initial costs, if you want to be fully armed in court. Nevertheless, the options available to you are more diverse than simply litigation: cease and desist letters, negotiation talks, administrative (local) action, customs seizures, and police or local authority involvement may be more economical and are often available prior to or in support of litigation.
The strategic approach we recently produced for one foreign client, displays the opportunities at hand to ‘clean’ a market full of infringers within a few months and without breaking the bank.
This well-known manufacturer of a specific type of doorknobs was coming across more and more identical ‘copycat’ products in the US and European markets. Research showed that all the products were manufactured in China. Since the company had planned ahead well, they were the holder of the patents worldwide, including China, and therefore had the power to act against the multiple infringers. Not an easy task though, since small modifications of the doorknobs could have easily convinced a judge that the products were not similar. Furthermore, the situation was complex because the infringers ranged from large sales networks to small online traders. Asked to provide a strategy that was quick and direct but cost-effective, we suggested a top-down strategy:
- FIRST, the client needed to appoint a coordinator/investigator in China for providing information about infringers. The more information available, the better we as lawyers can do our job;
- SECOND, the small number of big infringers were brought to court in a civil lawsuit. Immediate actions were imposed including freezing of bank accounts, and in the end we won or positively settled all these actions;
- THRID, medium-sized infringers were scared off by informing them of the results of the lawsuit, and simultaneously administrative actions were initiated by using local authorities to put extra pressure on them;
- FOURTH, the remaining infringers received a cease-and-desist letter informing them of the consequences that the above mentioned infringers had encountered. We also coordinated with Alibaba, China’s King of E-commerce, to have their online stores removed.
As a result, the market was cleaned in a period of about 2 years, which has had a direct impact on our client’s sales in Europe and the US. So far, no large-scale infringers have re-entered the market.
What does this show? Every case is different and many are manageable; don’t assume it is impossible to protect OR enforce your rights in China. Take your time to sit down and discuss a strategy that could work to either ‘clean’ your market, or to mitigate the consequences of IP infringers. The right, cost-conscious approach could lead to results above your expectations. If that maintains the momentum of your business, surely it’s worth exploring.
Let me know what you think!