Chinese Cross-Borders Measures for Brand Protection Come of Age

11 June 2009 Publication

Article

By Foley’s Song (Max) Lin and Wen (Jo) Xu

China started cross-border intellectual property protection, known as Border Measures, in the late 1990s. From 2004, when customs only accepted faxed or mailed seizure applications, to 2009, when verification can be done with pictures of the goods sent by customs e-mails, Border Measures in China have developed into a mature and reliable system for IP rights owners, especially for trademark owners. Five landmarks in the development of Border Measures include:

Systematic Border Measures in China
The first applicable regulations for China customs IP protection (2004 Regulation) were adopted by the State Council of the PRC. The regulations are a master guide to the Border Measures and specifically address how to protect IP rights in cross-border business. IP rights owners can request that China customs detain any goods that may infringe their IPR. To do so, IP rights owners need to provide a monetary guaranty of no less than the equivalent value of the goods to customs. The guaranty will cover warehouse fees and other logistics fees in advance and provide compensation to the alleged infringer if the detention of goods is inappropriate. After seizure, customs officials will notify the IP rights owner to examine the goods and issue a verification letter. Once the goods are confirmed as infringing, customs will issue the formal seizure report to the IP rights owner. Finally, the infringing goods will be confiscated, sold by auction, or donated by customs based on both the nature of goods and the request of the IP rights owners.

General Bond for Frequent Applicants
In order to protect trademark owners more efficiently, the General Administration of Customs (GAC) permits trademark owners to file an application to the GAC and post a general bond to detain the import and export of goods that are suspected of infringing the recorded trademark rights if, within a period that is normally less than one year, the trademark owner has filed multiple applications with different customs agencies nationwide. (See Generally, http://www.asianlii.org/cn/legis/cen/laws/tan312006otgaocoatggftcpoip1386/ ). Although the trademark owners still must pay the logistics fees separately, this provision has been welcomed by companies with significant counterfeit export problems.

IPR Black List for Potential Repeat Infringers
In 2007, GAC established the IPR Custom Protection and Enforcement System (System) and requested local customs bureaus to enter infringement information into the Enforcement System in a timely manner so that a nationwide infringement database can be shared by all local customs enforcers. Based on the information from the System, GAC further developed a list targeting the potential infringers, which is commonly called the IPR Black List. For those blacklisted companies, including trading companies and the owners of their goods, the local customs pay special attention to their goods; typically the IP protection examination rate will rise significantly against those targeted goods.

Standardizing Problematic Practical Issues
The infringing goods auction has been a problematic issue for China. Therefore, in 2007 GAC issued a public notice requiring that all infringing features be removed completely before the auction. If the infringing features cannot be removed or have not been removed for any reason, the goods shall be destroyed. Customs shall seek the applicable IP rights owner’s opinion before the auction.

In early 2008, the Measure of the Customs Enterprises Management made IPR infringement status one of the standards by which relevant enterprises will be graded. The trading company or goods sellers/buyers could be designated as “A-grade” entities only if no IPR infringement occurs within one year. This could result in more benefits in exporting and importing goods through China customs.  

Mature and Reliable Border Measures Procedure
In March 2009, a new Implemental Measures of the Regulation for China Customs IP Protection (New Measures) was issued by GAC. The New Measures summarized the best practices over the five-year implementation of the 2004 Regulation, and made some changes. For a foreign IP rights owner, one important change is that the owner now has to rely on a subsidiary or agent based in China to record its IPR to the GAC, compared with recording directly online in the past.

Although they have been in practice for a decade, in the past five years the China Border Measures have developed into a mature and reliable system for IP right owners, especially for trademark owners. Today, Border Measures are widely regarded as one of the most efficient and effective ways to protect IPR and should play an important role in the brand-protection strategy for foreign brands in China.

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