Criminal Methods of Protecting Trademarks in China

Criminal way may be the last method that trademark owners will think of for protecting their trademarks. Some people think the criminal procedure is hard to be initiated and focuses on punishment rather than compensation which the trademark owners want most. Those thoughts are right, in principle, but in some certain situations which one of our clients experienced, criminal way is necessary and will bring surprising results.

Things are like that. One of our clients owns a world famous trademark registered in China, and he found in a shopping mall, his trademark was used on counterfeits without his approval. He wanted to stop the infringement instantly and get remedy, and also wanted to stop other infringers he hadn’t fount yet. Per as the client’s purpose, I recommended the criminal way which is quickest to stop the infringement and has a wide spread warning function. Tips and process of the criminal procedure are as follow.

1. Report to the police station which has the right of jurisdiction. In this step, you need to prepare a reporting letter involving the suspect’s identification, address, cause of action, basic facts and your claims. The documents which prove your identification and your right to the infringed trademark are also needed. If you have already collected some evidence, give them to the police and that will make them quicker to file the case.

2. During the investigation process, policemen may need your cooperation and support. You, as a trademark owner, shall provide a verification report to prove that the goods sold by the suspect are counterfeits. For calculating the amount of loss you suffered from the trademark infringement, you’d better provide some evidence on how and how much you are damaged, including tangible and intangible loss.

3. After close of the investigation, the case will be sent to the prosecutor and then to the court by the prosecutor. During this process, you are in the dominant position to the suspects and you have a chance to get compensation sufficiently and quickly. According to Chinese criminal law, if the suspect admits his guilty, compensate the damaged party and get the forgiveness, the penalty will be reduced. So in this process, you should take advantage of the situation and get some compensation in this phase.

4. If you don’t get any enough compensation before the case is put in court, you can issue a claim for damages in the criminal procedure and your claim will be judged at the same time with the criminal accusation and by the same judge. Or you can choose to issue a new civil claim and that claim will be judged separately with the criminal one.

By Mike

Published by Mike Wang on May 20th, 2016 tagged Uncategorized | Comment now »

Wanna a Prize up to 300,000RMB? Try to Apply the Well-known Trademark of Shanghai Municipality

According to a notice issued by Shanghai Municipal Administration of Industry and Commerce (Shanghai Municipal AIC), applications for recognition as a Well-known Trademark within Shanghai of 2016 started on April 1st. The annual meeting of the Shanghai Trademark Association was held on April 25th 2016. Of course Lehman Lee and Xu, as a long time member of the Shanghai Trademark Association attended the meeting. Our lawyers loved the change to review the new policy on applications to be recognized as a Well-known Trademark with Shanghai.

According to the Measures of Shanghai Municipality for the Recognition and Protection of Well-Known Trademarks, and other related regulations, the purpose of Well-Known Trademarks is to protect the legitimate rights and interests of the owners, users and consumers of well-known trademarks.

Any trademark which has been recognized as a Well-Known Trademark within Shanghai will be granted additional protections within the city. For example the mark will be listed in Shanghai’s Catalogue of Protected Well-known Trademarks. Local authorities will make extra efforts to investigate and punish activities potentially infringing on the right to exclusive use of registered Well-known Trademarks. If the infringement occurs in another administrative area in China, the trademark owner may petition the Shanghai AIC to coordinate with the local AIC where infringing activities are occurring. To be recognized as a Well-Known Trademark within Shanghai is also strong supporting evidence when applying to be recognized as a Well-known trademark within China.

Any trademark which has been recognized as Well-Known Trademarks within Shanghai is able to earn a prize from the local government of up to RMB 100,000. In Jiading District and Jingshan District of Shanghai, the prize award may reach RMB 300,000!

Becoming a Well-Known Trademark in Shanghai offers many benefits, but they don’t pass these around to just anybody. An application must demonstrate meeting at least 14 criteria, including requirements as to market share, sales volume, and the profit margin over the past 3 years.

Want your Trademark to be recognized as Well-Known? Want to earn that RMB 300,000 prize? Contact our Shanghai lawyers and we’ll help you out!

Published by Bonnie Zhang on May 19th, 2016 tagged Uncategorized | Comment now »

Best, fastest, most, greatest… Superlatives in China

March 24, a southern newspaper reported that because of the words “Hangzhou’s best fried snack shop” on bags for sugar coated chestnuts, the Xihu District Market Supervisory Authority decided that the advertisement violated the Chinese Advertising Law. The sugar coated chestnut shop’s boss was fined 元200,000. The punishment sparked controversy.

A common view is that such a small advertising signs on the packaging of many commodities and shops is a relatively common means of advertising and self-promotion. Additionally, it really does not mislead consumers, because it is what many Westerners would refer to as mere puffery, to which consumers have become immune. Some view puffery as not constituting unfair competition or misleading advertisements and that the punishments for such behaviour are unreasonable.

However, law enforcement agencies are punishing such advertisements on a legal basis. The “Advertising Law” Article 9 states: Advertising shall [not] have the following characteristics:

(iii) Using the ‘national’, ‘most advanced’, ‘the best’ and other [superlative] terms.
A fine of元200,000 is the lowest level of the punishment in the “Advertising Law” provisions.

No matter what citizen or law enforcement officials think of such laws, once the law implemented, it must be unconditionally implemented. Of course, laws are often flawed – they are after all create by men. However, the legislature has the power to amend laws, though this offers cold comfort to those who have already fallen foul of such laws (and have been fined). This is a situation that law enforcement officials and citizens should accept. So, perhaps we can only view the story of the Tangchaolizi boss as a cautionary tale and use this example to alert other businesses that advertisements can no longer be made without regard to the law.

With the utmost respect for existing laws, we still want to talk about some technical legal issues. Legislators prior to the development of Article 9, probably knew that a large number of small traders use similar superlatives which probably do not mislead consumers. If lawmakers think that this type of advertising puffery by small traders does not need to be punished, they could substitute the words with in Article 9 with something along the lines of “using words that may mislead consumers,” with an attached purpose statement to aid interpretation. This would give law enforcement a certain degree of interpretation and discretion. If lawmakers think the type of ad behaviour discussed should be punished, a wider range of penalties could be used so that small traders are not so seriously affected.

What we have at present is a very mechanical prohibition clause; there is no scope for interpretation. Lawmakers may consider a multi-layered approach: giving law enforcement some room for interpretation and discretion but not too much. If too much discretion were given the law could be misinterpreted or it could be applied excessively and capriciously. This is indeed a dilemma.

We cannot change the law and can only abide by it. Under the new “Advertising Law”, the taboos greatly increase the risk of advertising. Advertisers and publishers have increased responsibilities. A lawyer can be useful to consult in advance of posting advertisements to avoid legal compliance risks. Once published, advertising is difficult to withdraw and can also easily lead to complaints from competitors. As Pasteur said, ‘prevention is better than cure.’

Published by Christopher Fung on May 18th, 2016 tagged Uncategorized | Comment now »

IPHONE® is not always a “smartphone”

Now, being one of the well-known smartphones, iPhone possesses high market share in China. Almost everyone considers that as a trademark, “IPHONE” should particularly belong to Apple. However, a recent administrative judgment broke up Apple’s monopoly plan with regard to their ownership of “IPHONE” series trademarks.

On March 31, 2016, the Beijing Municipal High People’s Court ruled in favor of Trademark Review Adjudication Board and Xintong Tiandi Technology (Beijing) Co., Ltd. (hereinafter referred to as “Xintong Tiandi”) against Apple. Thus Apple was defeated by Xintong Tiandi in the “IPHONE” trademark war in China, and Apple cannot prevent Xintong Tiandi from using the trademark “IPHONE” on their products under the 18th Class designated for leather, leather wallet, leather rope and other goods.

Two fatal reasons caused Apple’s failure in the “IPHONE” trademark fight.

1. Apple failed in providing any evidence to prove that their reference “IPHONE” trademark had already become a well-known mark in China before the registration of the disputed trademark. Therefore, Apple’s claim based on Article 13(2) of the Trademark Law (2001) cannot be supported by the Court.

Article 13(2) of the Trademark Law (2001)

Where a trademark in respect of which the application for registration is filed for use for non-identical or dissimilar goods is a reproduction, imitation or translation of the well-known mark of another person that has been registered in China, misleads the public and is likely to create prejudice to the interests of the well-known mark registrant, it shall be rejected for registration and prohibited from use.

2. Apple did not register all the relevant trademarks for their series products under different trademark classifications.

In practice, when we provide legal advices to our clients who propose to enter Chinese markets to compete with others, we always suggest them to firstly select attractive Chinese trade names and will assist them to register their trademarks in China under different classifications in order to better promote and to well protect their products.

Imagine how Apple wishes the trademark used on their iPhone’s leather cover was theirs. Oops, their dream suddenly shattered into pieces. If Apple noticed the importance of trademark registration under different classifications in an earlier stage during their march towards Chinese market, they would have easily avoided today’s tragedy. Now, apart from the 60 million USD paid for getting back the “IPAD”, losing “IPHONE” should become another severe lesson for Apple. We learnt from it and will endeavor to keep our clients away from such tragedy.

Published by Crys Zheng on May 10th, 2016 tagged Uncategorized | Comment now »

Regulation Needed for Bidding of Baidu

Bidding of Baidu has recently been bitterly condemned, especially after the death of Wei Zexi, who was cheated by an irresponsible hospital whose ads are listed on the top of the searching engine of Baidu.

The so called bidding refers to that you can pay a competitive price to make your information (most are ads) on the top of each page of the searching engine of Baidu which means if one user searches some certain information by Baidu, he isn’t provided with the most useful or popular one, but the ads.

It is innocuous to put ads winning the bidding on top if the ads’ contents don’t relate to the fatal interests of people, after all, the searching service is free and Baidu needs to make a profit. Nevertheless, some ads which affect people’s health and lives such as medical service, drugs, health food and so on shouldn’t be imposed on the users.

The evil of the bidding has been talked much, and in this article I want to say how to regulate it. It’s unwise and lazy to prohibit all forms of bidding in searching engine, we need to formulate a more sophisticated system to regulate it.

First, all the ads appeared in a searching engine should be marked. In that way, users will know what they see first are ads or useful information, that will save time of users and will lower risks of being cheated by the ads.

Second, the classification of ads is needed. Some ads like medical service and drugs, according to current regulations, need to be examined and approved before publicizing. At present, such ads, however, if they choose to appear in a searching engine, they escape from the examination. So, we must pull these ads back under examination and only if they can pass the examination, they will appear in a searching engine.

Third, the company of a searching engine, like Baidu, should take responsibility as an ads releaser, which means the company has a liability of maintaining the authenticity of ads and making compensation to the injured person if he was cheated by the ads.

Finally, we should give rewards to users who report deceptive ads to motivate the public to supervise the advertiser and releaser. The money of rewards should be paid by the advertiser and releaser of the defective ads. That will solve the problem of bureaucracy and get an effective result.

We look forward to new regulations on this matter, and hope the said advices will be useful.

Published by Mike Wang on May 6th, 2016 tagged Uncategorized | Comment now »

Increasingly Strict Law Enforcement in IP Protection in China

Recently, General Administration of Customs of PRC published ten typical cases regarding infringement of trademark rights, proudly to say, two of which were represented by our law firm. The publication of these cases is a signal of enhancing trademark protection by China’s government, not only for domestic brands, but also for foreign brands.

Trademark protection, however, does not influence our life directly. What I really want to talk about is the continuously enhanced copyright protection in China. Several years ago and even now, Chinese people get used to enjoying free music, films and books online, and like to buy pirates for their extremely low price. We have access to this free and endless treasure and ignore the great effort and high cost of creating them. We almost take them for granted. Nevertheless, things are changing these years, slowly at first, and then quicker and quicker. If we want to download some music online, we must pay for it, and if we want to see some movies, they are not free anymore. One of my friends used to operate a website which provides American episodes for free. He got the sources from an international online pirate base and made a profit by publishing other companies’ advertisements on his website. He consulted me many times and I advised him to stop, for that may not only incur civil liability on him, but also the criminal result. He had luck psychology at first and ran his illegal business for years, for despite of the civil and criminal laws on copyright protection, the law enforcement is not strict anymore. Last year, however, he stopped his business actively, even without my advice, for many websites like his were punished by a huge amount of penalty and some operators of the websites were punished by an imprisonment. I am happy for his wise choice, because if he hadn’t stopped, he wouldn’t have escaped from legal liability.

It is seemingly that IP protection does no good to our common people’s life, for it increases our cost for spiritual entertainment. According to my observation, however, Chinese people from different communities really support this trend. With economic growth and education improvement, Chinese people can afford the money for intellectual property and we also learn to respect the labor and effort of IP creators. Besides, the key reason is quite simple, if we get free works now, we probably can’t get good works in the future.

Published by Mike Wang on April 29th, 2016 tagged Uncategorized | Comment now »

It’s that time again!

Lehman, Lee & Xu is proud to announce that in May this year the firm will be sending a delegation to the 138th INTA in Orlando, Florida.

In regards to the conference, Edward Lehman has the following to say:

Attending INTA is something that I have done every year since before I qualified as a lawyer. It is a wonderful opportunity to learn and to network with Trademark lawyers from around the world. Attending INTA gives me the opportunity to meet with all the leading IP lawyers in the world, many of whom are old friends, at a single venue.

Additionally, it is a valuable investment in the continued education of my team, who can learn about new practices from around the world and also show their abilities as leaders in their fields. I feel that if I invest in others, I will always get a good return.

INTA is a global association of trademark owners and professionals dedicated to IP protection to protect consumers and to promote innovation. According to INTA:

INTA’s members are more than 6,700 organizations from 190 countries. INTA members collectively contribute almost US $12 trillion / €8.8 trillion / ¥73 trillion to global GDP annually. For comparison, the 2014 annual GDP of the top three markets was $10.4 trillion (China), $18.5 trillion (European Union) and $17.4 trillion (United States).

Lehman, Lee & Xu is proud to be a member of INTA. We will provide you with updates during the conference.

Published by admin on April 27th, 2016 tagged Uncategorized | Comment now »

Criminal Responsibilities of Mental Patients In Criminal Cases

A criminal case occurred in Sichuan Normal University recently has been the focus of attention not only because an undergraduate has been killed by one of his roommate in a very cruel way, but also because the suspect’s mother claimed that her son has mental disease and used to commit suicide for twice, which according to the Criminal Law of China, may make the suspect free from the criminal responsibilities.  A juvenile who commits a crime may not bear the criminal responsibilities or may be given a lesser punishment or a mitigated punishment has been accepted by most people. However, a mental patient also may not bear the criminal responsibility or be given a lesser punishment or a mitigated punishment in the criminal case has not been widely accepted in China.

Most people, just as the older brother of the deceased, are worried about that mental disease may be taken advantage by the suspect as an excuse to avoid criminal responsibility. And some people have a misunderstanding that once the suspect was a mental patient, he or she will definitely and absolutely not bear any criminal responsibility. I guess that’s why this campus criminal case attracted public attention.

Therefore, I want to make an explanation of the relevant legal provisions in the Criminal Law. Actually, the special provisions about criminal responsibilities on the juveniles and mental patients lie on the base that they both are persons limited in disposing capacity or with no disposing capacity, who are unable to recognize or control his or her own conduct just as an ordinary adult. And the provisions in the Criminal Law are specific to different circumstances as below:

A mentally ill person who causes dangerous consequences when he/she is unable to recognize or unable to control his/her own conduct shall not bear criminal responsibility after being established through accreditation of legal procedures; but his/her family or guardian shall be ordered to subject him/her to strict surveillance and arrange for his/her medical treatment. When necessary, he/she will be given compulsory medical treatment by the government.
A person whose mental illness is of an intermittent nature shall bear criminal responsibility if he commits a crime during a period of mental normality.
A mentally ill person who commits a crime when he/she has not yet completely lost his ability to recognize or control his/her own conduct shall bear criminal responsibility but he/she may be given a lesser or a mitigated punishment.

These provisions mean that not every the mental patient will definitely and absolutely bear no criminal responsibilities for the crime he or she commits. The decisive factor is the mental status of the mental patient at the time he or she commits the crime, instead of that of before or after. And even the mental patient commits the crime when he or she is mentally disabled, he or she will not bear criminal responsibilities on condition that he or she was totally unable to recognize or unable to control his/her own conduct.

According to the relevant provisions, the suspect’s family and defender could apply for accreditation for the mental status of the suspect, and the investigation organization, the procuratorate and the court is entitled to start the accreditation for the suspect or defendant under provided circumstances. The accreditation will be proceeded by qualified professionals from hospitals appointed by government at provincial level. And the accreditation report shall be presented in court and cross-examined during the court hearings. During these procedures re-accreditation will be started by the aforementioned parties and the victim or his or her family or agent of lawsuit if necessary.

These provisions show the progress of the criminal law in assurance of human rights, and of course, there are still efforts required to be made to improve the provisions and practice in criminal law area.

Published by Myra Kong on April 25th, 2016 tagged Uncategorized | Comment now »

Tips for Establishing a Foreign Owned Company in China

I am recently helping a client to establish a foreign owned corporation which manufactures and sells medical devices in Guangzhou. Things went smooth at first, but in the final step of AIC( Administration of Industry and Commerce) registration, I was really tortured by the rigid and unreasonable requirements of the department. That may sound ridiculers to an American, for establishing a company in America is quite an easy thing and can be completed within one week. But in China, in spite of reforms against the bureaucracy and policies of promoting foreign investment, there is still large room for improvement.

Before this situation is changed, we still need to learn lesson from it and adjust to the current regulations and requirements, thus to help our client save money and hit the target in most efficient way.

The first lesson from my experience is that an investor, if is an organization, must have a seal and the seal needs to be affixed on some of the required documents. I know many foreign companies are not using a seal, I also told that to the officials of AIC, but they did not think that’s a reason for exception. So if the investor does not have a seal, just make one.

The second lesson is the signature. There may be some differences between signatures from the same person, that’s normal, but may incur bad results in AIC registration. The officials have discretion to judge whether the signatures on the documents are from the same person, if they think there is a possibility that some signatures are fake, they can refuse to accept the application.  The officials don’t pay attention to this matter every time, but we do not want to take the risk.  So, we should remind the client of signing his name totally the same.

The third lesson is the scope of business in name application. In some jurisdiction, the scope of business in name application is not important for establishing, but in Guangzhou, you must select the right scope. For everything related to AIC registration are handled online, if the scope of business in name application and that in registration application are not the same, the officials can’t move forward to next step and have to refuse to accept your application, and the only solution is to cancel the old name application and file a new one.

The aforesaid lessons are not complete but I think those are quite useful for our clients to save twists and turns in establishing a company in Guangzhou. It is also a precious experience for me, after handling this case, I am confident in maneuvering a similar in a quicker, cheaper and better way.

By Mike

Published by Mike Wang on April 22nd, 2016 tagged Uncategorized | Comment now »

Watch Out! Don’t Let Your Company Find Itself on the List of Abnormal Enterprises.

We have been doing a lot of due diligence work recently where we investigate a target company for corporate compliance issues. In one recent example, we found that a subsidiary of our target company had been put on the State Enterprise Credit Information Public System’s (Public Credit System, or PCS) list of Abnormally Operating Enterprises, (We’ll call it the list of shame). After reviewing this with company management, it turned out the company didn’t know about the PCS and the company had not published its annual reports on the PCS since its establishment in 2014 as required by regulations.

In the past, each company was required to perform an annual inspection, and to submit its annual audit report to various Chinese authorities each year. This system was substantially changed in 2014, with the publication of the Interim Regulations on Enterprise Information Publicity (“the Interim Regulations”). With the publication of the Interim Regulations, the requirement to submit annual reports to multiple different authorities was canceled. Instead, going forward each company would be required by the Interim Regulations to perform an annual audit, submit the audit to the tax authorities, and publish the company’s annual report on the PCS. Companies have until June 30 of each year to publish their annual report on the PCS.

Based on our conversations with the company’s management it seems they were under the impression that the cancellation of the annual inspection had relieved them of all duties other than the audit and reporting to the tax bureau. Someone did not get the memo about the PCS.

What is the list of shame? Companies which find themselves on the list will find that this status is publicized by the PCS. Other government agencies may refuse to accept documentation or official applications submitted by a company on the list. Banks are likely to refuse to open new bank accounts for such a company or to approve a new loan.

If a company remains on the list of shame for 3 consecutive years, it will be demoted to the list of Enterprises in Serious Violation. Believe us when we say that is not where you want to be.

Not sure if your China company is in compliance? Send a message to our China Lawyers now and we can check that out for you. If you are unfortunate to find yourself on the list of shame, we can work with authorities to develop a compliance plan to get your company off the list as quickly as possible.

Published by Bonnie Zhang on April 21st, 2016 tagged Uncategorized | Comment now »