Sophia Hou, Belinda Yang
Rouse
shou@iprights.com; byang@iprights.com

The Administration of Industry and Commerce (AIC) has the power to investigate the infringement and punish the infringer by imposing a fine and confiscating goods

Counterfeiting and infringement of similar trademarks has traditionally been two of the major problems faced by brand owners entering the market in China. Initially, the most significant threat was the counterfeiting of established marks. Now, it is the repeated infringement of similar trademarks.

While counterfeiting continues to be rampant, the infringement of similar trademarks has increased more significantly. Traders who have been found to be infringing a trademark will often make a slight alteration to the mark and continue using it in the market. Their aim is the same as before: to copy the original trademark and cause confusion among consumers. This type of repeat infringement, regardless of the degree of similarity of the marks, is characterised by blatant bad faith on the infringer’s behalf. Strong counter measures should be taken against it, both to put an end to the infringement and to deter potential infringers.

The major counter measures available to trademark owners are described below.

Sending a warning letter

A written warning letter, indicating that the brand owner is aware of the infringement and threatening action, can be sent to the repeat infringer. In the event of a positive response from the infringer, and a written undertaking to cease infringing, this can be a cost-effective means of achieving a result. In the case of repeat infringers, however, who have experience of such warnings and have the intention to continue infringing, it is unlikely to be effective.

Making a complaint to the local AIC

The trademark owner may seek administrative action against the repeat infringer. The Administration of Industry and Commerce (AIC) has the power to investigate the infringement and punish the infringer by imposing a fine and confiscating goods. This approach can result in a low-cost, speedy resolution of the matter. There are, however, clear disadvantages, especially when dealing with repeat infringers. These include the following:

1) The penalty may not be sufficiently strong to put an end to the infringement. In fact, many repeat infringers have already been punished for their first infringement by the AIC. The fact that they are repeat infringers demonstrates that they have not been deterred by the AIC’s punishment. The AIC will not necessarily aggravate the punishment even if the repeat infringer possesses clear bad faith.

2) The decision of the AIC is delivered only to the parties involved; generally it is not published. Such a decision will, therefore, have little impact on the social profile of the infringer and little deterrent value.

3) More importantly, the AIC tends to be more and more cautious and conservative in establishing infringement, even where there is a high degree of similarity between the marks in question.

Initiating civil action against the repeat infringer

In many cases, the most effective means of dealing with repeat infringers will be by way of civil action. This is particularly so if the case can be filed with a court in developed regions like Shanghai, Beijing, Guangzhou and other courts where the judges are sufficiently trained. Although such action is time-consuming, due to complicated procedures, and costly, it has a number of advantages.

1) In determining whether or not there has been infringement, the judge is likely to take a more informed, and less conservative, approach than the AIC.

2) In the event of a finding of infringement, the Court can award damages. The amount of damages awarded by a Court is likely to be much higher than a fine imposed by the AIC and, therefore, more likely to act as a deterrent. The trademark owner may also recover a certain proportion of costs in a Court action, whereas this will not be possible where action is taken by the AIC.

3) The infringer’s previous infringement will serve as evidence of bad faith, which will give the judge solid grounds to establish repeat infringement and a persuasive basis for awarding more damages to the rights owner.

4) The fact that the judgment may be published means that details of the infringement can be disclosed to the public. This may serve as a deterrent to future infringement.

Civil action is a powerful tool to fight repeat infringers and protect trademark rights. Given the attention that the courts are now paying on the role of damages in infringement sanctions, and particularly the appropriateness of aggravated damages in cases involving repeat and malicious infringement, civil action will often be the most effective way of putting an end to repeat infringement.