PRC Revises Customs Enforcement of Intellectual Property Measures

In March 2009, the PRC revised itsImplementing Measures for Customs Protection of Intellectual Property, which enable intellectual property (IP) owners to settle disputes with consignors and consignees after the seizure but before the penalty decision in a case is issued. Because the resolution of IP infringement cases by Chinese customs can take months and even years and infringers are rarely willing to disclose the source of the goods, it is expected that the new settlement provisions will provide a helpful tool to IP rights holders to obtain information on the true identity of the sellers and buyers of the goods. 

The new rules allow IP holders to withdraw an IP rights enforcement complaint only when the owners submit to customs a copy of the settlement agreement and an application for the withdrawal of the complaint. Upon receipt of the settlement agreement, Chinese Customs will be able to terminate its investigation except in cases where a criminal offense is suspected. 

The new regulations adopt China's General Administration of Customs (GAC) and the Ministry of Public Security (MPS) rules that require transfer of suspected criminal cases to Chinese police (PSB). As stated by both China's Supreme People's Court and Supreme People's Procuratorate, counterfeiting may be deemed a criminal offense where the case value in question exceeds RMB50,000, or about $7,300. 

The updated regulations impose a 10-day deadline for the GAC to issue a decision on whether an application of customs recordal will be renewed, and permits the GAC to cancel recordals in cases whether an IP rights holder has failed to update its recordal in a timely fashion. 

Under the new notificaton provisions, Chinese Customs are no longer required to first notify the IP owner upon detecting a shipment suspected to infringe IP rights, and instead will have discretion to approach the consignor or consignee of the goods for proof that IP was used with the owner's permission. 

The new regulations also require Chinese Customs to obtain the IP rights holder's permission prior to auctioning off the infringing goods. 

Finally, the new regulations adopt the GAC's May 2006 provisions that permit the trademark owners experiencing high levels of infringement to provide to customs a renewable guarantee, calculated as the total costs of warehousing and handling fees paid for customs in the prior year, set at a minimum of RMB200,000, instead of paying a customs bonds in every case.