In China, diversified intellectual property rights infringement settlement mechanisms generally include cease and desist (C&D) letters, administrative means, civil litigation, arbitration settlement and criminal charges, etc. The right holder can choose the best way according to his/her own needs and the characteristics of various reliefs. This paper will comprehensively discuss the measures often used in practice to deal with intellectual property infringement. 

Cease and desist letter 

Approaching the infringers directly, usually with a C&D letter, is the least time-consuming and most economical way of IPR enforcement. However, the results of this approach often depend on the attitude of the infringer.  

If the infringer is bona fide and trustworthy, sending C&D letters could, to a certain extent, achieve the results of stopping the infringement, or at least establish a channel for further communication and final dispute resolution.  

If the infringer is, on the other hand, of malicious intent, any letter or warning from the IPR owner is likely going to be ignored and the infringement continued as the way it was. However, the IPR owner can use this ignorance and continuation as a factual basis to prove the bad faith of the infringer part and claim punitive damages in subsequent civil litigations. 

Administrative protection 

Administrative protection has been proved particularly useful and effective in China in light of China’s national conditions, i.e., having a strong, effective, and encompassing-all-aspects-of-life government. However, the obvious downside of this approach is that it does not address the issue of compensation. IPR owners must negotiate with the infringer separately or file a lawsuit if he/she wishes to recover losses resulting from the infringement.  

Specific proceedings vary depending on the IP rights sought for protection, with the patent-related infringement cases singled out due to its complexity and involvement of technical expertise. 

Patents: Administrative adjudication 

Article 65 of the Patent Law of China provides that, patent owners or relevant parties (such as licensees) could request the local patent law enforcement authorities (i.e., Administration for Market Regulation or AMRs) to handle patent infringement, as an alternative to filing a court action. And according to the regulation and guidelines promulgated by the China National Intellectual Property Administration (CNIPA) in 2019, a semi-judicial proceeding called administrative adjudication would be entered over the complained case. 

An administrative adjudication proceeding has a lot in common with civil litigations. The parties in both proceedings get to examine and question each other’s evidence, advocate for themselves in oral or written form, and ask experts to testify for them. 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 issue prohibition orders once it is.  

It should be noted though, AMR investigation measures include only questioning relevant individuals, inspecting the premises of allegedly infringing acts, and inspecting the allegedly infringing products. Reproducing relevant documents of the infringer and sealing up/ seizing the allegedly infringing products, measures regarded as the most compulsory and effective, are not available in administrative adjudications. 

Non-technical IP rights 

For other IP rights that do not relate to complex technological issues, infringement determination is comparatively simple and straightforward. Law enforcement authorities usually could come up with their conclusion without hearing arguments from both sides. So, the Chinese laws and regulations do not provide for semi-judicial proceedings when the IP owners ask for administration protection. 

For example, when a trademark or copyright owner (or a relevant party) suspects her IP rights are being infringed upon, she can draw the matter and preliminary evidence to local law enforcement authorities (AMRs for trademarks, Bureau of Culture and Tourism for copyright) by filing a complaint and asking the authorities to investigate and punish the infringer once IPR infringement is established.  

For the authorities’ part, they would review the complainant’s documents and refuse taking those apparently non-infringing cases. 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. 

Civil litigation 

Compared with the first two approaches, civil litigation is the most expensive and time-consuming. But the preliminary reliefs provided by the Chinese courts make that up to some extent. On the other hand, compared with the administrative law enforcement authorities, the courts are more flexible and tend to be more lenient in practice when determining the establishment of IPR infringement, which could result in better chances of success for IPR owners to obtain protection.  

IPR owners can obtain damages and have the infringers bear the reasonable expense in enforcing the IPR, which is not available or very difficult to get under the first two approaches. 

Venues and jurisdiction 

Like the administrative IP enforcement actions, there have also put into place the differences as to which level of courts could hear what type of cases depending on the IP right sought for protection.  

Depending on the real-time local circumstances, the Supreme People’s Court of China (SPC) has, over the years, adjusted the Chinese courts’ jurisdiction over IP-related cases from time to time. Though accommodated the need of the regional reality, it had caused some confusion among IPR owners as to venue choosing and further strategy formulating. In May 2022, the SPC redrew the jurisdiction map once again and published the standards on a national basis, allowing IPR owners to easily figure out possible venues. 

See the chart below for the up-to-date jurisdiction demarcation of the Chinese courts on IP-related cases. 

Preliminary reliefs 

Much like the administrative protection actions, the courts, on motion, could preserve the allegedly infringing products or the relevant documents of the infringer for case investigation. Further than that, the courts could also provide preliminary reliefs to IPR owners before trial/judgement.  

Depending on in rem or in persona, the preliminary orders can be classified as acts preservation order (行为保全), where the court would order temporary performance or prohibition of certain acts on a party’s part; or property preservation order (财产保全) where a party’s assets would be temporarily frozen by the court. Depending on whether the preservation orders are applied for before or during the course of litigation, they could also be classified as pre-suit and in-suit preservation. 

Though it has become gradually prevalent for the last decade that the Chinese courts grant in-suit property preservation orders to the IPR owner so as to freeze the infringer’s assets and guarantee successful compensation, Chinese courts are still cautious about pre-suit preservation or acts preservation. For pre-suit property preservation, IPR owners are legally required to provide the courts a bond equivalent to the amount they requested for preservation. For acts preservation on the other hand, in addition to requiring a bond whose amount would be set by the court’s discretion, the court would also hold a hearing to hear arguments from both sides before issuing its decision on the acts preservation.  

According to the judicial interpretations of the SPC, the following factors must be taken into consideration when reviewing acts preservation applications: 

• The stability of the applicant’s rights; 

• Whether the absence of an injunction will cause irreparable damages to the applicant or cause difficulties in the enforcement of the judgment, or cause other damage; 

• The balance of interests, i.e, whether the damage caused to the applicant without the injunction exceeds the damages to the respondent with the injunction; 

• Whether the injunction would harm public interests; and 

• Other factors that shall be considered. 

Damages 

In a civil litigation, the courts apply one of the following three methods when determining the amount of damages:  

• Statutory: In practice, when IPR owners were unable to submit evidence on either their own losses or the infringer’s profits, they would apply for the statutory damages and leave the determination of the damages completely under the court’s discretion, which is no more than Rmb5 million RMB (about US$741,500). 

• Evidence proved: With sufficient evidence on their own losses or the infringer’s profit, the IPR owners could apply for higher damages on the basis of evidence proof. 

• Punitive: Punitive damages can be applied when there is sufficient evidence proving the infringer’s bad faith and the serious circumstances of the infringement. The punitive damages could be one to five times how much the IPR owner’s losses or how much the infringer’s profit is, provided that the IPR owners can prove the same by evidence. 

Other options 

Apart from the three most taken approaches, IPR owners can enforce their rights through other means: 

Customs protection 

IPR owners could record their IPRs 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 IPR owner for confirmation of whether they could detain the goods or let them through. Once they detained the goods and established infringement, they would confiscate the infringing goods and, in some cases, impose fines on the infringer. 

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. 

Criminal action 

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 list includes primarily acts infringing on trademarks, copyright, and trade secrets. Patents counterfeiting, rather than patent infringement, is included in the list. Such criminal offenders would face punishments of fines and imprisonment of up to ten years. 

Arbitration and mediation 

Under the Chinese legal system, disputes relating to IP infringements could be referred to either arbitration commissions or mediation organizations, upon the consent of the IPR owner and the infringer. Decisions of both proceedings are enforceable. 

Arbitration proceedings, as an alternative to court actions, are incompatible with civil litigations. Once the parties entered into the arbitration agreements, the parties were locked in from seeking court actions. And the mediation proceedings, on the other hand, are only supplementary to civil litigation. It does not stop the parties from terminating the mediation and resorting to litigation before the courts.  

Accordingly, an arbitration award issued by a competent arbitration commission inside China would suffice for the court’s compulsory enforcement of the award, while the agreements brokered by the mediation organizations need to be confirmed first by the courts before applying for the courts’ compulsory enforcement. After all, the courts have the final say, and the power, to enforce the arbitration/mediation decisions. 

Conclusion 

Combined, the above actions form a comprehensive toolbox for IPR owners battling infringement. During the course of time, the Chinese courts and law enforcement authorities themselves are also developing and innovating new ways and normal in IPR protection. For instance, the application of in-suit property preservation order has become popular since only the last decade. The Covid-19 pandemic has made the Chinese court proceedings largely go online, providing IPR owners with more convenience. And the nationwide jump in the courts’ workload has made possible the judicial recognition of non-governmental mediation in protecting IPRs.  

The willingness and determination of the Chinese government to improve IPR protection and create an innovation-friendly environment is obviously clear. With the continuing modernization, professionalization, standardization and sophistication of the Chinese IP protection system, IPR owners around the world can be confident that, with sufficient evidence and proper counsel with local attorneys, their rights and interests will be protected under Chinese law.