BCKGROUND OF THE CASE:

Spain INDAL S.L. (hereinafter referred to as “INDAL”) is a famous European company which mainly engages in the design, manufacture, and sale of all kinds of lamps. Most of its products are designed in Europe and then INDAL commissions some Chinese companies to manufacture them (this is called as OEM model). All the OEM products are manufactured for exports and none is sold in China. Meanwhile, INDAL has applied for design patents for most lamps in both Europe and China. In 2010, during the visit to China Import and Export Fair (hereinafter referred to as “Canton Fair”), INDAL found out that a Chinese company (Company A) based in Yuyao, Ningbo City had copied its lamps and even displayed and sold the counterfeits on Canton Fair. The issue is how INDAL should do in order to protect its IP rights and stop the infringement. STRATEGIC ANALYSIS:

As INDAL doesn’t sell products in China, at the beginning INDAL always turns a deaf ear to the copycats appearing on the Chinese market. But when it discovered that Company A displayed and sold counterfeits on Canton Fair (a worldwide and famous fair and most visitors are foreigners), INDAL realized that the counterfeits may be exported to the foreign markets and then threaten its European business. Therefore, INDAL came to realize that it is necessary to stop Company A’s infringement and had determined to take the legal actions against it.

TACTIC ANALYSIS:

1. Choosing the remedy model

2. It is known to many foreign companies that in China, except bringing the case to a court, there are some other methods to initiate legal actions in China, such as filing a complaint to the Intellectual Property Administration, the Administration for Industry and Commerce, and the Administration for Copyrights. These administrations can execute administrative penalty, which is kind of fine to infringers, but no compensation to the plaintiffs (IP owners). The administrative remedy model is a kind of special solutions to IP infringements with China characteristic due to the huge amount of IP infringement cases. According to my experience, generally speaking the administrative complaining procedure is effective in cases like trademark counterfeits and pirated software, while it is less effective in dealing with patent or trade secret infringement. For the latter cases, filing a complaint to the court is the most effective way against the infringement rather than administrative model.

As for the infringement appearing on the exhibitions, the easiest and most direct way is to file complaint to the organizers of such exhibitions. Currently, there will be special organizations set up by the exhibitions organizers and composed of the local administrative authorities of patent, trademark and copyright for dealing with the IPR complaints. However, the best result of these complaints would be the removal of infringed products out of the exhibitions without no penalty or compensation, which is not enough for the IP plaintiffs. If the infringing company is registered and located outside the place where the exhibition is held, the administration located in the exhibition has no authority to go outside to deal with the manufacturers. In our case, because Company A is not registered in the place where the exhibition is held, INDAL decided to bring the case before the court, expecting to obtain the official court decision to stop Company A’s infringement.

3. Evidence notarization

After making the decision to take the legal actions, it is in urgent need to fix the evidence of the infringed products on the exhibition. And the most common method is notarization. In China, notarization should be done by the public notary office. Usually, attorneys always have various connections with notary offices and will request a notary office to take photos and videos of the exhibitions, namely the display of the exhibition stands and infringed products. According to my experience, it requires the purchase of at least one infringed product from the exhibition stand and requires the notary to notarize the whole process, including the purchased infringed product, promotion brochures, business card and the sale invoice and so on. The purchase of the counterfeits on the exhibitions would have great impact upon the jurisdiction of courts and compensation amount in the judgment. That’s because the act of exhibition is only an act of offer for sale in law. The existence of sales shall be proved through the purchase of the infringed products. Sale and offer for sale are two different infringing activities.

Except the notarization of the sales on the exhibition, the plaintiff shall always notarize the web pages of the defendant’s website, the introduction or advertisement of the infringed products appearing on other websites such as Alibaba. The notarization will be very useful to prove the intention of infringement and the scope of the sales. If the plaintiff only provides the infringement evidence on the exhibition, it would be easily considered as imminent infringement, which would result in very limited compensation amount. For example, most Shanghai courts will only rule the compensation for the plaintiff’s reasonable costs to stop the infringement but would exclude any business or profit loss arisen from the defendant’s infringement. Hence, it is of great importance to notarize the relevant web pages of the defendant.

4. Preservation

Under Chinese laws and regulations, the plaintiff may apply to the court for preservation and freezing on defendant’s bank account, cars and other assets (“Property Preservation”). Also the plaintiff may petition for preservation on the infringing products, equipment, sale invoices, and books and records related to the infringement “Evidence Preservation”). However, according to our experience, the actual effect of Evidence Preservation is relatively limited, because the executing judge on site would just make a transcript of interrogation instead of actively searching for counterfeit products in the defendant’s production line or barn and maybe most judges are not familiar with the counterfeit products as well. So we do not place high expectation on the evidence preservation. In view of the property preservation, it sometimes works very well. Once the account of the defendant is frozen, the defendant’s normal business will be more or less affected, which will force the defendant to settle the problem with the plaintiff as earlier as possible. As a result, the property preservation has become an important tactic adopted by foreign plaintiffs for initiating IP litigation in China.