Protecting Intellectual Property Rights with China Customs

Customs protection of intellectual property rights (IPR), also called border measures, refer to the act that the Customs prohibits the import and export of IPR infringing goods in accordance with law. As an important means of IPR protection, the role of customs protection has become more and more prominent with the growing globalization.

In China, the legal basis for customs protection of IPR includes the Customs Law, the Regulations on Customs Protection of Intellectual Property Rights, the Regulations on the Implementation of Customs Administrative Penalties, etc. Customs protection is mainly applicable to exclusive rights to use trademarks, copyrights and copyright-related rights, and patent rights which are related to the import and export of goods and protected by the laws and administrative regulations of China.

Customs protection can be divided into two kinds, according to the degree of obligation:

Ex-officio Action (proactive protection)

IPR recordation with the General Administration of China Customs (GACC) is a precondition for the Customs to proactively take protection measures. IPR holders may file an application for recordation of their IPR with the GAAC. Companies registered in China or citizens of China can apply to GACC directly or entrust an agent located in mainland China to handle the recordation. Companies without a registered China office or individuals who are not citizens of mainland China need to entrust an agent located in mainland China to handle the recordation. When applying for the IPR recordation with the GACC, it is required to submit information on IPR holders, intellectual property information and related supporting documents. See the table below for details.

The GACC will make a decision on whether to approve the IPR recordation within 30 working days from the date of receiving all the documents. The IPR recordation for customs protection shall be valid from the date on which the GACC approves the registration and shall be valid for a term of 10 years. Within six months prior to the expiration of the validity period, the IPR holder may apply to the GACC for renewal of the IPR recordation; each renewal of a recordation is valid for 10 years. If the IPR holder does not apply for renewal at the expiry of the validity period of the IPR recordation, or if the IPR is no longer protected by laws or administrative regulations, the IPR recordation for customs protection shall cease to be valid immediately. Where there is any change in a recorded IPR, the IPR holder shall, within 30 working days from the date of the change, go through the procedures for modification or cancellation of the IPR recordation with the GACC.

In the course of supervising imported and exported goods, if the Customs finds any imported or exported goods suspected of infringing on an IPR registered with the GACC, Customs will proactively suspend the clearance of such goods and notify the registered IPR holder or its/his agent in writing. Within a certain period of time, which is relatively short (usually three working days) and cannot be extended, the IPR holder has the right to request Customs to take detention measures and conduct an investigation. During this period, the IPR holder needs to contact Customs, inspect the goods, submit an application for action and provide a full guarantee (not more than CNY 200,000 (US$27,860).

Customs shall, within 30 working days after the detention of the suspected infringing goods, conduct an investigation and make a determination as to whether the goods infringe an IPR or not. During the process of investigation, the consignee or consignor may file a written objection and provide evidence, and the IPR holder has the right to make a response. Where the goods are confirmed to have infringed an IPR, the Customs shall have the right to confiscate the goods and impose administrative penalties on the consignee or consignor of the infringing goods; where the import or export of the infringing goods constitutes a crime, Customs shall transfer the case to a public security organ for handling. Where an infringement by the detained goods cannot be determined, the Customs will, in three working days, notify the IPR holder to apply to the court for judicial detention of such goods, and where Customs has not received any notification from the court for assistance in execution of an order and cannot determine through investigation that such goods have infringed the IPR within 50 working days from the date of the detention, Customs will release such goods.

Action upon request (passive protection)

Where an IPR holder finds that any suspected infringing goods are about to be imported or exported, they may, on the basis of a valid IPR, apply to Customs for protective measures, and Customs shall take measures to detain the suspected infringing goods. This application can be filed with Customs no matter whether the IPR has been recorded with the GACC, and as to goods suspected of infringing an IPR which is not recorded with the GACC, this is the only way for the IPR holder to seek customs protection.

When applying to Customs for detention of suspected infringing goods, the IPR holder shall provide the following information: 1) information on the IPR holder, such as the name, place of registration or nationality, etc. of the IPR holder; 2) information on the valid IPR, such as the title, contents and any other relevant information relating to the IPR, and customs recordation number of the IPR where the goods are suspected of infringing a recorded IPR; (3) information on the suspected infringing goods, such as the names of the consignee and consignor, and the names, specifications, etc. of the suspected infringing goods, the possible ports, time, means of transport, etc. related to the import or export of the suspected infringing goods. Corresponding evidence shall also be submitted (Refer to Table 1 for details). All the evidence shall prove the following facts: 1) the goods which the IPR holder requests Customs to detain are about to be imported or exported; and 2) an infringement on the IPR exists.

At the same time, the IPR holder is required to deposit a guaranty equal to the value of the goods with Customs within a specified period of time (the amount of the deposit may exceed the maximum amount of CNY 200,000 required for ex-officio protection), otherwise the application for detention will be rejected.

After detaining the suspected infringing goods upon request of the IPR holder, the Customs will notify the IPR holder in writing of the name, quantity and value of the goods, names of the consignee/consignor, import/export declaration date, and date of customs detention of the goods, but Customs is not empowered to carry out an investigation of the infringement of the goods. The IPR holder shall, within 20 days from the detention of the goods, file a lawsuit before a court of competent jurisdiction, asking the court to issue an order for collection of evidence and preservation of evidence and/or property and notify Customs to execute the order. The documents required for filing the lawsuit, such as the power of attorney and qualification certificate of the IPR holder, must be notarized and certified, so the time will be quite pressing. If the court fails to send any notification to Customs for assistance in seizing the goods within 20 working days from the detention of the goods by Customs, Customs will release the detained goods.

Where the consignee or consignor of the goods suspected of infringing a patent believes that their imported or exported goods have not infringed the patent, they may request Customs to release the goods after providing Customs with a guaranty equivalent to the value of such goods. If Customs releases the goods, it will notify the patentee. The patentee shall timely contact Customs, try to collect a sample of the goods when the goods are being released, and file a lawsuit with the court for patent infringement dispute arising therefrom. The patentee shall, within 30 working days from receipt of the written notification from the Customs, submit to Customs a copy of the Notice and Acknowledge of Receipt issued by the court. Where the court determines that the goods have infringed on the patent and orders compensation to the patentee, the patentee can request the court to take the guaranty deposited by the consignee or consignor as the compensation. Where the IPR holder fails to file a lawsuit before the court within a reasonable period of time, Customs shall refund the guaranty to the consignee or consignor.

In summary, IPR holders, especially those in need of international trade, should timely learn about the relevant provisions of customs protection of IPR, and make adequate preparations in advance so as to effectively safeguard their rights and resolve possible disputes within very tight timelines.

This article was first published in the August 2019 issue of Asia IP.