An all too common reality is that intellectual property right (IPR) holders may be active in enforcement against counterfeit goods in a number of jurisdictions, but ultimately might find that such goods are being manufactured in China and exported to the rest of the world for sale.
While most countries only detain goods being imported into their country, the General Administration of Customs of China (GACC) has introduced a recordal system which empowers it to detain suspected infringing goods entering or leaving China.
The IPR holder can record various types of intellectual property with GACC, including trade marks registered in China, or international trade mark registrations extending to China, as well as designs, patents and copyright, although the bulk of goods detained are on the basis of trade marks, which are the easiest to recognise and recall. According to its statistics for 2014, GACC revealed that 96.5% of detentions related to goods being exported from China.
While specific documentation must accompany the application (such as a power of attorney, certificate of incorporation, registration certificates, colour photographs of genuine goods, details of authorised exporters, distributors and licensees), the overarching guideline is to provide GACC with as much information as possible to enable it to make a preliminary determination as to whether the goods infringe any recorded intellectual property right.
GACC will issue its written acceptance or rejection within thirty working days of receiving the application. If granted, the recordal is valid for a period of ten years, or until the expiration of the intellectual property right, whichever is shorter, and is renewable.
If GACC is of the view that goods being imported or exported may infringe an intellectual property right which has been recorded on its electronic database, it will suspend the clearance of the goods and inform the IPR holder. The IPR holder is required to confirm the authenticity of the goods, lodge a written application for detention as well as make payment of a bond (or submission of a bank guarantee), within three working days of being notified. If the IPR holder fails to comply with any of these requirements, the goods must be released, irrespective of their authenticity.
If the IPR holder has complied with the requirements, GACC will detain the goods, investigate and make a determination on the matter within thirty working days, failing which the case must be referred to Court, or the goods released. If it deems the goods to be infringing, depending on the nature thereof, the goods will either be donated once the infringing portion has been removed, sold to the IPR holder, sold on auction, or destroyed. The IPR holder is liable for storage and destruction costs. Fines are sometimes also imposed on the consignor, at GACC’s discretion.
It is recommended that IPR holders be mindful of the recordal, paying careful attention to any changes in the application which must be reported to GACC within thirty working days, failing which the recordal may be cancelled. GACC also invites training sessions to keep up to date with changes in the IPR holder’s rights, including the launch of new products or change in product packaging.
Since GACC is not obliged to detain any infringing goods unless a valid recordal is in place, this system could be a useful tool to IPR holders as part of their intellectual property enforcement strategy. The progressive initiative is a welcome tool in the crusade against counterfeit goods.