Study on foreignrelated intellectual property cases in Guangdong Province

Dr.Xiuping OU | May 18, 2018

According to the territoriality principle, intellectual property rights can only obtain protection within the granted region/country. However, there are no regional boundaries for intellectual property transactions and IP-related trading for commodities and services. With global economic integration and the increasingly fierce competition in intellectual property, transnational intellectual property disputes continue to rise. Yet, different countries have different judicial systems and legal provisions. Here below I would reveal some facts about foreignrelated intellectual property lawsuits in Guangdong, China, and hope to call the attention of foreign enterprises litigating in China on some important issues, under the consideration of better protecting the intellectual property rights of enterprises, while avoiding infringement of other’s rights.
Briefings on foreign-related cases in Guangdong Province
In the last three years (2013-2015) the total number of first instance for foreign-related IP cases handled by Courts in Guangdong amounts to 875. Overleaf are the bar charts indicating the specific number of cases for some main countries related. Courts in Guangzhou, Shenzhen, Dongguan, and Shantou handled the majority of the foreign-related cases, as mentioned below.
Features of foreign-related cases in Guangdong Province
1.Cases are relatively concentrated in several regions. Foreign-related cases in Guangzhou, Shenzhen, Dongguan, Zhuhai, other District Courts in Pearl River Delta, and Shantou Court accounted for more than 90% of the total foreign-related cases in Guangdong Province; meanwhile, foreign-related intellectual property cases handled by the Courts in Guangzhou occupied for nearly 30% of those in the whole province.
2. Foreign parties are mostly plaintiffs, and the cases are usually with greater social impact, such as Apple Inc. and Yahoo! Inc. from the United States, Nestlé from Switzerland, Louis Vuitton from France, Hyundai IT Corporation from Korea, YKK Corporation from Japan, Nokia Corporation from Finland, and Dyson from the UK.
3. It becomes commonplace that the IP owners entrust agents to file batch of lawsuits. After detecting infringement actions, foreign parties generally authorize professional agents in China to collect evidence comprehensively and then file batch of lawsuits, such as the Microsoft Batch of Lawsuits in 2012.
4. Trademark disputes takes up 60% of the total cases.
5. Foreign parties have higher winning rate, which dominates about 70% to 80% of all cases.
6. Damages of foreign-related cases are comparatively higher. For example, in the case of trademark infringement and unfair competition between Louis Vuitton and Guangzhou Xuze Leather Products Co. Ltd. et al., the Courts ordered the defendants to pay 2 million RMB(about USD290,700) for discretionary damages and reasonable expenses on the basis of the statutory damages of 500 thousand RMB (about USD72,700).
7. Few foreign-related cases seek mediation to resolve disputes, which takes up about 10%-20%.
Landmark cases of foreign-related cases in Guangdong Province and relevant issues for application of laws
1. Right of action for the foreign parties
In some cases, when a foreign IP holder authorizes an agent within the territory of China for litigation, the agent can then proceed to file a petition with a valid Power of Attorney. However, the petition did not have the signature of the foreign IP holder, but solely the agent’s. Should the Courts accept the petition? Courts in Guangdong hold that, if the POA, after examination and confirmation of its factuality and legality, clearly indicates the foreign IP holder’s instruction, the petition shall be allowed to place on file, regardless of being signed by the IP holder or not.
2. Legal provisions for evidences in foreign-related cases
Article 264 of the Civil Procedure Law of The People’s Republic of China states the following:
“Where a foreign national, a stateless person or a foreign enterprise or organization without any residence within the territory of the People’s Republic of China needs to be represented by a lawyer or any other person of the People’s Republic of China in an action, the Power of Attorney posted or forwarded by other means from outside the territory of the People’s Republic of China is valid only after it has been notarized by a notary office in the home country and legalized by the Chinese embassy or consulate stationed in that country or has undergone the legalization formalities prescribed in the relevant treaty concluded by the People’s Republic of China and that country.” However, foreign-related intellectual property rights also have uniqueness. Take the case of foreign-related copyright disputes as an example, since copyright is automatically generated, its registration certificate does not need to be notarized and legalized.
3. Application of international treaties on foreign-related cases
The territoriality principle of intellectual property decides that IP right should be protected on the basis of specific national laws. But China, as a member of the TRIPS Agreement, should also reach the minimum requirements of the said Agreement. Therefore, it really matters on the application of the international treaty in order to meet the minimum requirements of safeguarding intellectual property rights. Take the case of copyright infringement between Tsuburaya Productions Co., Ltd. and Guangzhou Lianhe Technology Electronic Clock Factory as an example, the Guangdong Court applied Article 2.1 and Article 5.1 of the “Berne Convention” to make a decision that the image of “ULTRAMAN” should be protected, and ordered the defendant to stop infringement actions and to compensate loss.
4. OEM issues
The term Original Equipment Manufacture (OEM) refers to a trading model that the Chinese parties process goods with a specific trademark or brand for the foreign designators in accordance with an agreement, and then deliver all the goods to the designated parties, who pay processing fees accordingly.
There is no definite answer or clear reference in Chinese law and judicial interpretation concerning whether OEM constitutes trademark infringement or not. Thus, decisions differ from one and other in practice. Some stand for the ground that it constitutes trademark infringement because the designated parties do not get the permission from the registered trademark owner or the holder in China. Others argue that it is not liable for trademark infringement as long as the goods are solely exported and sold outside the Chinese market, which will neither mislead the public of goods or its origin, nor violate the trademark right of its ownership in China. The issue is still in discussion, where the outcome of it will directly affect the validity of such trading contract between foreign designators and Chinese processing parties and will also decide whether it is infringement or not. In view of this, the topic is worthwhile to be further explored.

In conclusion, although the total number of foreign-related cases is not that much among all intellectual property cases in China, the legal issues involved are fairly complicated and directly affect the intellectual property transactions as well as IP-related trading for commodities and services between Chinese and foreign enterprises, which shall arouse the attention of both parties.

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