Welcome to the intellectual property blog by CHINABRAND CONSULTING. Follow us for the latest news in the area of intellectual property and other economical relevant topics in regard to China. CHINABRAND CONSULTING is a Master Service Provider specialized in intellectual property, holistic premium-quality market and competitor analysis, and advanced business development.
The GDPR is supposed to make data protection easier and to provide extra protection for EU citizens. In some aspects the GDPR has fulfilled its purpose; in other areas the GDPR makes the protection of those same EU citizens as customers much more difficult.
With the GDPR it is a lot more difficult to fight cybercrime including online trade with counterfeit goods. This is due to the blackout of the domain owners’ information in the WHOIS database. It is not compliant with GDPR if personal information, e.g. e-mail addresses or names are publicly displayed.
Not being able to access the information of domain owners hampers efforts to stop cybercrime, for example identifying an individual behind the website selling infringing products. It allows criminals to hide behind their websites.
For purposes of brand protection, it is in most cases still possible to find relevant information on the infringing websites and then conduct investigations in order to get further information. However, that means a lot more manual work and not every brand owner might be able to afford that.
Less than half a year later, the first International Commercial Courts (CICC) have already been launched in Shenzhen and Xi’an. This is another example of the breathtaking speed of the new Silk Road developments showing that this multi-billion project of the Chinese government will change not only the infrastructural, but also the legal and social landscape along the Road.
The Supreme People’s Court has already issued “Provisions on Several Issues regarding the Establishment of International Commercial Courts”, that will govern the scope of responsibilities and the operations of the new courts.
The CICC is placed at the same level as the Supreme People’s Court in China’s judicial system. Its first instance judgements are final and not subject to appeal. The Courts will primarily handle international commercial cases with claims over 300 Mio RMB as well as cases of “nationwide significance”. Cases with no actual connection to China will not fall within the scope of CICC operations.
Eight SPC judges were named for the CICC disputes. The judges will not be permanently based in Shenzhen or Xi’an but rather travel for hearings. A Committee of International Business Experts will consult the judges on applicable foreign laws. The hearings can be held in Chinese or English language.
These new courts will be further supported by a comprehensive electronic system, e.g. for evidence submissions, payment of fees or even online hearings. A notable development here is that foreign evidences do not require notarization or translation into Chinese – they will be examined directly at hearings. Another interesting feature is that the Commercial Courts will unite mediation, arbitration and litigation within one court. By now it is not clear whether foreign arbitration institutions will be included in this system, which would be a big change for the legal practice in China.
Many questions and issues regarding the practical effects of these changes are still open. What is clear is that China has taken a new huge step in shaping an international economic and social system. Western companies that plan to take part in and benefit from the giant New Silk Road projects should definitely invest some time to understand its implications.
Picture: Ambassador Zhangqian’s Visit to the Western Regions, year 138 BC; Source: Chinadiscovery
Chinese counterfeiters are not only targeting foreign brands. Quite the contrary, as Chinese brands gain in popularity and their value is rising steadily, Chinese counterfeiters do not shy away from copying products of their fellow countrymen.
China Weekly reports that Chinese courts have concluded 200,000 cases in 2017 related to IP rights with the number of cases rising an astonishing 40% per year. Even more remarkable is the fact that according to studies from Tongji University, 98% of these disputes took place between Chinese companies.
Some Chinese companies, for example Moutai, a famous brand for spirits, took the opportunity of the national congress last March to air their views on the problem of domestic counterfeiting to the authorities. They also directly addressed the counterfeiters reminding them that counterfeiting only brings short term benefits but long term harm to customer confidence in Chinese products.
Xi Jinping’s statements at the BOAO Forum in April indicate that China is aware of IPR issues: “Strengthening the protection of intellectual property rights is the most important issue in improving the system of property rights protection. It is also the biggest incentive to improve China’s economic competitiveness.”
Further strengthening of IPR protection in China will not only bring advantages for Chinese companies, foreign brands will profit from a harsher regime against counterfeiting, too. With information on Chinese companies getting more easily accessible, also due to the Social Credit System, and anti-counterfeiting getting more professional, it is a good time for companies to reinforce their IP protection in China and crack down on counterfeiters online as well as offline.
In the recent edition of the University of Strasbourg’s interview series for the Master of IP Law and Management program, Dr. Xiaopeng Zhao discussed four current matters that occupy IP legal specialists and practitioners today.
The topics discussed in the interview include:
Chinese government’s claim to global technological leadership
China’s patent strategy and its relevance for European companies
Enforceability of IP for European companies in China
China’s strategy: building own strong brands VS purchasing famous international brands
Please find the complete interview here, and feel free to share your thoughts on these current IP issues:
Foreign companies selling their products online in China will soon not only have to deal with the new regulations on cybersecurity but also comply with the upcoming law on e-commerce. The Chinese government released the second draft for public comments in November 2017. So far it is not known when the law will come into effect.
This will be the first comprehensive law on e-commerce in China. Article 10 gives a definition of the term e-commerce operator, which includes operators of own website with an online shop, e-commerce platform operators and shop owners on e-commerce platforms. The law stipulates respective duties for each of these groups. E-commerce platform operators for example have to clearly flag advertisements. More importantly, they have to block infringing offers and the respective online shop operators from their platform. Furthermore, companies will be made liable for false information about products, sales or fake customer reviews.
For foreign companies it is particularly important – and frustrating – that the new law supports the now effective regulations on foreign online trade: no foreign company is allowed to open an online shop in China. Selling goods online is only allowed on Chinese e-commerce platforms, unless you have a Chinese partner company or a subsidiary in China.
We expect that the final version of the law will defer from the now available second draft. What can be said by now is that relevant changes in take-down procedures and liability for e-commerce operators will take place. Western companies should keep a close eye on further developments.
A new study on Chinese Brands conducted by CompuMark shows that in just four years China has climbed up from number 10 in international filing volume of trademarks to number two. And it is very likely to outstrip the current number one, the US, in less than two years.
Since some years ago China manages to set up new trademark applications records every year, surprising the onlookers again and again with trademark application numbers rising with an unprecedented speed.
According to the study, the EU Intellectual Property Office (EUIPO) processed over 11.000 Chinese trademark applications in 2017, 55% more than the previous year. The German Trademark and Patent Office (DPMA) also recorded a significant rise in Chinese trademark applications in 2017. That is no big problem as long as Chinese companies or individuals stick to their own trademarks and do not register trademarks preemptive to occupy new territory (Go game) and hamper the market.
But trademark registrations can become a huge problem for domestic companies, as we already reported in December 2017 (https://en.blog.chinabrand.de/2018/05/30/loopholes-in-trademark-registration-procedure/) when they are bad faith registrations of trademarks similar to their own trademark, especially when they are registered in the EU. A European trademark certificate makes it easier for the Chinese company to import their fake products to Germany, can be used to hinder the German company from entering the Chinese market or registering trademarks there and serves to legitimate counterfeiting behavior in processes in Chinese courts.
One of the strategies of Chinese counterfeiters is the registration of a well known European trademark written in Chinese characters. That makes it nearly impossible for the concerned company to detect the infringing trademark and even standard tools for trademark monitoring will not be able to find this sort of infringement. As Chinese customers prefer to relate to companies and product names through their Chinese characters a bad faith trademark registration in Chinese characters can have a tremendous damage on the brand reputation and the company’s turnovers.
Another strategy, which is often seen, is to register trademarks in classes or sub-classes, which the original manufacturer did not cover. It might happen that a valve manufacturer with the trademark ABC suddenly finds a Chinese company with the same registered trademark offering maintenance or repair services or even an online shop for valves.
As such malicious trademark strategies will gain in importance worldwide. It is therefore highly advisable to search relevant data bases on trademark registrations on a regular basis, with a focus on figurative marks and trademarks in Chinese characters to avoid irrevocable damages.
German trademark registration procedure makes it easy to register malicious trademarks. When checking on an application for trademark registration the German Patent and Trademark Office (DPMA) does not conduct an in-depth research on similar registered trademarks. New trademarks are registered after only a formal examination. Chinese counterfeiters capitalize on that loophole: they register malicious trademarks, which are very similar or nearly identical to trademarks registered by European companies.
This strategy is used by Chinese counterfeiters to legitimate exporting their fakes to Germany. Back in China, they can use the trademark certificate issued by a German authority to justify their malicious trademark registrations in China. The German certificate makes it significant easier for the Chinese counterfeiter to defend himself against the original manufacturer in course of litigation at a Chinese court.
German trademark owners should be alert and regularly check relevant databases for suspicious trademark applications by Chinese companies. It is important to also check on figurative trademarks and trademarks consisting of Chinese characters, which could be a phonetical or analogous translation of a German trademark. Common monitoring tools often neglect these aspects or are simply not apt to conduct this kind of research.
Dr. Xiaopeng Zhao has spoken at the IP management master class MIPLM in Strasbourg on April 19, 2018. The main contents of the speech include the current developments of Chinese IP offensive, the possibilities of intellectual property competitive intelligence as well as risks but also chances of IP owners in China today.
Supreme People’s Court has launched an online platform for publishing information on credit defaulters, including those banned from purchasing tickets for planes and high-speed trains.
At the moment, there are already around 10.7 million credit defaulters published, both companies and private persons can be listed. In addition to the exact number of defaulters, their full name and partial ID numbers are also displayed in a rolling way. The system is accessible for everyone. One can easily search for those who for example did not pay the compensation ordered by a court – by name, ID number, or province.
According to the Supreme Court, the data on the platform is daily updated in exchange with databases of the courts and other databases for credit defaulters. The consequences for credit defaulters –“lao lai” in Chinese – are severe. Not only are they restricted from taking planes, trains, or carrying out real estate transactions. Their families are affected too – e.g., their children cannot be enrolled in private schools. Their bank accounts can be frozen; their pictures and names can be published by local police stations. Finally, general real-time statistics of cases handled by courts and number of new cases are also available on the platform.
Setting aside the implications of privacy issues for both citizens and companies in China, and the possible abuse of personal data, this platform can and should be used by Western companies for their due diligence activities. Before closing a contract with a new supplier or client, companies can use this reliable source of information for checking whether the new partner is trustworthy.
Source: Announcement of the Supreme People’s Court of the PRC
Modern technology, especially AI keeps changing the way we work. That applies also for IP experts. One example: monitoring trademarks, looking for similar trademarks, or checking on already registered trademarks is time consuming and exhausting. Increasing numbers of IP registrations make the field of registrations even more complex.
Today, AI can help us with these repetitive tasks. There are AIs which are fed the data of patent and trademark offices all over the world. They can monitor the status of certain trademarks, check on similar trademarks before registration and what’s most valuable, they can identify infringing registrations. Some can even calculate a degree of similarity of trademarks ranging from 50-100%. And the more often they do a task the better the results will get as they use machine learning to improve their accuracy. This does not only work for trademarks but also patents, design patents and copyrights.
Development in machine translation even accelerates this development as it is possible to use data from foreign countries without a human translating it beforehand.
There is no need to fear that IP experts will lose their jobs though, there is still enough to do for them. AI can only deliver data, but they cannot analyze the data in a way necessary to derive legally useful information. This is because patent law includes a lot of phrases that cannot be interpreted with mathematical logic only. Ethical and practical considerations are necessary to apply the law.
That’s where IP experts come into play. Freed from the time consuming task to monitor registrations, they can fully evolve their ability and expertise in filtering, analyzing and assessing the results. That will make IP experts’ work all over the world more efficient as they can focus on the more challenging tasks.
The above mentioned AIs will help IP experts to save time and focus on the essential to help their clients to develop efficient IP strategies and to crack down on counterfeiters.