Over a decade ago, Sika AG, a specialty chemicals company with global prominence in the building industry, was actively expanding its business into the Chinese markets; however, they were also troubled by emerging copycats and counterfeit products in the markets. It would have been costly and unrealistic to sue all the infringers before the courts. In this context, starting in 2009, Mr. Hong ZHENG designed a series of feasible strategies to combat the counterfeits, i.e., resorting to the local AMRs (Administration for Market Regulation)to enforce Sika’s trademark rights against both the retailers distributing counterfeits in the markets and the factories which were the source manufacturers of the fake products. Through sustained AMR enforcement actions, Sika has finally removed most of the fake products from the markets.
When business entities find their IPRs (Intellectual Property Rights) being infringed upon in China, they may not necessarily file civil actions before the courts, since seeking protections from the Chinese AMRs may be an alternative means to have their IPRs enforced. Every year there are a considerable number of IPR owners removing a variety of infringing acts through AMR actions. The Chinese AMRs have been playing an important role in enforcing IPRs in China. Statistically, Chinese AMRs initiated around 31,900 trademark cases in 2019, up 2.24% over the previous year; 709 of these cases were escalated into criminal cases.
What are the AMRs, and how can they effectively protect your IPRs in China? This article is intended to shed some light on this mechanism peculiar to China so that it might help save your resources in your IPRs protection in China.
1.The structure of the AMRs and their responsibilities
Chinese AMRs are institutionally divided into four levels from the top to the bottom, namely, state, province, municipal and district. Under each district AMR there are several AMR stations which are not independent but are the branches of the district AMRs. These AMR stations assist the district AMRs in regulating some specific markets in the name of the competent district AMRs.
The State Administration for Market Regulation (SAMR) is China’s highest market regulating authority directly under the State Council. It undertakes a variety of responsibilities, including market entities registration, market competition, anti-monopoly, intellectual property, supervision of industrial products, food safety, drug safety, special equipment safety, product testing, certification and standards, etc. The SAMR was formed in March 2018 under the Chinese government restructuring initiatives, consolidating the State Administration for Industry and Commerce (SAIC), China Food and Drug Administration (CFDA) and General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). The SAMR also oversees the National Medical Product Administration and China National Intellectual Property Administration (CNIPA).
Below the SAMR are provincial AMRs and municipal AMRs, which are responsible for market regulating in their respective provinces and cities. However, in practice, both the SAMR and the lower provincial AMRs and municipal AMRs are distanced from specific IPRs enforcement cases because they are generally responsible for market regulation from policy and administration perspectives and will not directly handle specific cases except those which are extremely influential at the national or local levels. It is the district AMRs and their branch stations that actually play a pivotal role in enforcing and protecting specific IPRs. When your IP rights are infringed, and if you wish to resort to administrative protection instead of civil action, your priority and feasible choices are to file complaints before the district AMRs where the infringers are located or the infringing activities take place.
2.Major types of IP cases that the AMRs handle
Among all the types of IP cases, the AMRs handle the largest number of trademark cases. If IPR owners wish to seek AMR actions against the acts infringing upon their registered trademarks in China, the AMRs can investigate and take raid actions against the manufacturers who produce the infringing products, the retailers distributing the infringing products in the markets, and the contributory infringers who help store and transport the infringing products. It will be relatively easy to seek AMR protection if the trademarks are granted registrations in China.
However, if the trade signs are not granted registrations in China, the owners may have to seek protection under PRC Anti-Unfair Competition Law. The commonly seen unfair competition acts include imitating trade signs such as commodity names, trade dresses and company names, making misleading and deceiving representations in terms of quality, function, performance of the products, and the acts infringing upon trade secrets.
By and large, unfair competition cases are much more complicated than trademark infringement cases. For instance, in order to have the trade signs protected by PRC Anti-Unfair Competition Law, the owners have to collect and present a large volume of evidence to prove that the trade signs have been extensively used and promoted in China such that they have gained a high reputation among Chinese consumers. Without the reputation evidence in mainland China, it will be unlikely to have the trade signs protected by PRC Anti-Unfair Competition Law in that there is no likelihood of confusion with the trade signs with no or little reputation.
In addition to trademark infringement and unfair competition acts which are the most common IP cases, the AMRs also enforce against the acts in violation of PRC Product Quality Law and PRC Advertisement Law such as false indication of a manufacturer’s name, address, product qualification certificates and ingredients on the products, misleading and deceiving advertisement, etc.
3.Why choose AMR protection
Compared with civil actions before the courts, administrative enforcement by the AMRs has the following evident advantages:
First, the AMRs have very strong investigation and enforcement powers which are beyond the capacities of either the courts or the IPR owners. While in civil actions the courts shall not collect infringing evidence under normal circumstances, the AMRs are entitled to take the initiative to inspect, investigate and collect infringing evidence in accordance with Article 62 of PRC Trademark Law. This Article gives the AMRs authority to question the suspected infringers, investigate the infringing acts, review and duplicate the financial books, inspect the sites where the reported infringing acts occur, and seize and seal up the articles in relation to the infringing acts. As you can see, these administrative powers conferred by the laws are strong and decisive to ensure that the AMRs can remove and punish the infringing acts.
Second, AMR actions are both time- and cost-efficient. There are no express provisions regarding the timeframe for AMR enforcement actions. In most cases the AMRs can handle and complete an IP complaint in around one to three months, except for those complicated cases involving time-consuming investigation. Some AMRs even can initiate raid actions against the infringers shortly after they receive a petition from an IPR owner. For instance, upon receipt of complaints from SIKA, the AMRs in Xi’an city can take raids against the infringers in less than a week on average from accepting the petitions to taking raid actions. AMR protection is also cost-friendly: IPR owners may spend around USD4000-7000 for an ordinary AMR case, while a common trademark civil lawsuit may involve several times the expenditure of an AMR action.
In spite of the attractive advantages, IPR owners cannot directly claim damages in AMR actions, unless the infringers are willing to pay the compensation on their own in order to seek friendly and amicable settlements with the IPR owners. The AMRs can make penalty decisions and impose fines on the infringers, but the fines shall be turned over to the national treasury instead of to the IPR owners.
Strategically, if a trademark owner simply wishes to stop infringement as soon as possible, AMR action is highly recommended since it can stop the infringing acts in a time- and cost-efficient manner. However, if the trademark owner wishes to pursue damages, a civil lawsuit would be advisable since no compensation can be obtained via AMR actions. According to our experience, it is recommended to seek AMR protection against small infringers to solve the disputes quickly, but to file civil actions before the courts against large-scale infringers in order to claim damages.
4.How to initiate AMR actions
When IPR owners identify infringing acts, either on their own or having been reported by their distributors or business associates, they may have to take the following steps to initiate AMR actions:
In spite of the strong investigation power of the AMRs as mentioned above, it is still necessary for the IPR owners to conduct preliminary or in-depth investigations before they file complaints before the AMRs, mostly because the AMRs have limited resources, including staff officers, for in-depth investigations especially into the manufacturers of the infringing products, and partly because the AMRs may have no knowledge as to how to recognize the infringing products.
Prior to filing complaints before the AMRs, the IPR owners should make a preliminary investigation so as to find out where the infringing acts are actually taking place. This is essential for AMR complaints because in many cases the addresses alleged by the infringers are quite different from the actual business premises. If the AMR officers inspect the alleged premises but fail to locate the infringing acts, this may alert the infringers, making the subsequent AMR investigation much more difficult since the infringers may have destroyed or hidden the evidence. Therefore, accurate infringement clues will greatly facilitate the AMR enforcement actions. With respect to the manufacturers of infringing products, it will be essential for IPR owners to conduct in-depth investigations to ascertain the production sites, location of warehouses, quantity of inventory, rules for transporting fake products, etc. so that the AMR officers can effectively and accurately arrange raid actions in accordance with the infringement clues from the IPR owners.
(2). Filing complaints before the AMRs
With accurate infringement clues from the investigations, the IPR owners should prepare a complaint together with the certificates of the IPRs, procedural documents and preliminary infringing evidence, and file the complaint before the AMRs where the infringers are located or the infringing acts occur. For complicated cases, the IPR owners or the attorneys may have to travel to the AMRs and have face-to-face meetings with the AMR officers in charge. Under many circumstances, face-to-face communications with the AMR officers in charge would help expedite the complaints.
(3). AMR raid actions
After the AMR officers in charge review the complaints and determine that the reported acts infringe upon the claimed IPRs, they will decide on a date, depending on their internal schedule, on which to raid on the infringers. A crew of AMR officers will go to the sites where the infringers are located or infringing acts are taking place to conduct inquiries on the infringers, inspect the sites, review, check and duplicate financial books, calculate the quantity of infringing products, seize the infringing products including the equipment earmarked for the infringing acts, and make inquiry records and issue seizure lists. This infringing evidence, financial books in particular, collected by the AMR officers on the spot, can become very important and convincing evidence in the subsequent civil lawsuits if the IPR owners opt to further pursue damages before the courts after the AMR actions.
In around three months following the raid actions, the AMRs will issue written penalty decisions ordering the infringers to stop infringing acts and will impose fines on them, though in most circumstances the infringers may have stopped their infringing acts at the moment the AMR officers inspected the sites.
The merits of AMR actions have made this peculiar mechanism the prime choice for many IPR owners in combating infringing acts in China. Over the years, the team of Tee & Howe, headed by Mr. Hong ZHENG, has successfully handled over one hundred AMR cases, not only helping settle a large number of IP disputes in a timely manner, but also saving a considerable amount of financial resources for its clients. If you run across IPR infringement issues in China or have any questions regarding AMR protection, please feel free to contact Mr. Hong ZHENG at firstname.lastname@example.org.
Author: Hong Zheng