Despite China’s prominence on the world’s political and economic stage, the country’s current laws regarding the protection of intellectual property rights leave a lot to be desired. Cases of intellectual piracy abound in China, where the market for imitated products and fakes flourish. But what happens if you find yourself in the crossfire of such a piracy case? What if someone has stolen your product or idea? Below are some tips, illustrated through a real-life case, that can help you prepare for that dreaded day at the courts.

The first step in protecting your intellectual property in China is registration. But what is the second step? In my opinion it is preparing the evidence properly in case you need to go to court.

This is illustrated by a decision of the Beijing No. 1 Intermediate People’s Court dated December 10, 2010 and posted online on January 29th   (see http://bjgy.chinacourt.org/public/paperview.php?id=488168). The plaintiff was a Taiwanese company that had a trade-mark, ZHENGLIN & Design, that it used in Taiwan. In the early nineties the principal of the Taiwanese company Lin Ken, incorporated a company called Lanzhou Zhenglin Land Reclamation Food Co., Ltd. (兰州正林农垦食品有限公司) (“Lanzhou Zhenglin”) with some local partners in Gansu Province, a poor province in the north west along the route of the old silk road, in order the develop supplies for export and for the PRC market. The PRC company registered the mark in China.

There was a falling out and in August of 2007 the principal of the Taiwanese company, Lin Ken, was removed as President. He disputed that decision and refused to hand over the corporate seal. In China, the corporate seal or “chop” is a very important indicator of the authority of the corporation, unlike in North America.

The plaintiff then claimed that the PRC company Lanzhou Zhenglin, should not continue to use the marks. The plaintiff claimed that the right of Lanzhou Zhenglin to register the marks in the PRC was based on an “authorisation letter” and trademark license and renewal letters dated 1993, 1999, 2004 and 2008. He presented copies of the letters to the court. But he lost.

Article 49 of a Supreme People’s Court rules on evidence of 2001 states that the other party has the right to demand that the original document be submitted. But all Mr. Ken submitted was a photocopy notarised by a law firm in Taiwan in 2008. The Taiwanese law firm carefully limited its authentication to the signature and seal. It did not say that it had compared the copy to the original and that they were the same. It did not talk about the dates on the letters. Interestingly, the letters were also stamped with the seal of Lanzhou Zhenglin. The seal that Lin Ken had refused to hand over in 2007.

The Plaintiff claimed that the originals of the letters were in the office of Lanzhou Zhenglin, to which he had no access. In the PRC courts there is no discovery as there is in North America and the defendant was under no obligation to produce evidence to help the plaintiff. The plaintiff also claimed that a copy was in his home in Lanzhou (the capital of Gansu Province), but the documents there had been seized by the police as part of an action against him regarding misappropriation of the assets of Lanzhou Zhenglin. Interestingly, the police records did not show that such letters were among the items seized.

Article 69(4) of the SPC rules on evidence states that photocopies may not be used as evidence if they cannot be verified against the original. Mr. Ken lost his claim for the trademarks in the PRC.

Did such authorization letters ever exist? Certainly it is not uncommon for business people to forget about such details when setting up a company that they control. But even if the letter existed, the plaintiff did not take the necessary steps at the time that the letters were written to ensure that they would be effective evidence in court.

Remember that in China, as in many other civil law jurisdictions, there is no discovery in litigation. You have to collect your own evidence, usually before you start the lawsuit.

So when agreements are entered into, the parties should have them notarized in China. They should be careful to ensure that the “legal representative” (法定代表人) signs on behalf of the Chinese company. The legal representative can be held personally responsible for the actions of the corporation. There is no similar concept in North America. And use a seal. If your company does not have one – buy one. Finally trademark licenses and other IP licenses should be registered. That was obviously not done in this case.

In China, litigation generally is all (or at least mostly) about the evidence. The court rely more on documents than they do on oral testimony. And the rules of evidence and the courts are stricter about documentary evidence than in North America. And there is no discovery to help you out. So the major rule in Chinese litigation is: “be prepared.”

To summarise:

1) Register your intellectual property
2) Make sure you buy a company seal
3) Keep all your original documents and make sure that any photocopies can be verified against the original
4) Notarise any agreements immediately in China
5) All licenses such as trade mark licenses should be registered
6) When entering an agreement with a Chinese company, make sure the legal representative signs on behalf of the Chinese company
7) Keep your documents organized, notarised and up-to-date so that they can be used as evidence during a lawsuit.
 

Paul Jones   钟 保 禄   Пол  Джоунс
Barrister , Solicitor & Trade-mark Agent
 

Related links
Chinese Business Practices – 3 of the Biggest Cultural Differences
Fapiao Frenzy: Why You Need Those Pesky Pieces of Paper
Top 10 Shanzhai Phenomena in 2009

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Keywords: tips for litigation case China how to protect your intellectual property China Intellectual property rights China