China has a dual IPR enforcement system. IP rights in China, including trademarks and design patents can be enforced before a civil court (People’s Court) or a specialized administrative organ. Among the major differences between the two types of enforcement is the fact that economic damages derived from a trademark or a design patent infringement can only be claimed before a civil court. However, judicial enforcement is slow and expensive and injunctions difficult to obtain, while counterfeiters operate underground and if not caught at the right moment will be easily disappear and move elsewhere to continue their infringing activities.

Administrative raids

This explains why trademarks are normally enforced through administrative raids rather than civil judicial process. Administrative trademark enforcement is indeed the most used and common form of IPR enforcement used by foreign brand owners in China. It actually focuses on actual and continuous enforcement, ie hitting counterfeiters by having administrative, and to a lesser extent, criminal enforcement organs raid their factories and warehouses, in order to seize counterfeits, destroy manufacturing tools and, in case of criminal procedures, have the counterfeiters convicted and jailed.

These actions are also supposed to act as a deterrent on the infringers. This type of enforcement is normally realized through the cooperation of brand owners with a plethora of investigators which provide free sightings of counterfeiting activities ready to be raided.

Counterfeiting is on the rise

Statistical data show that the massive increase of administrative trademark enforcement in its most common form described above, along with more cooperative enforcement authorities, appear not to have any beneficial impact on counterfeiting in China. Short term administrative enforcement nonetheless, the counterfeiting business is objectively on the rise. Some experts even suggest that short term enforcement may be counterproductive and make the problem even worse.

Although this latter position may reflect indeed a perception many brand owners have when confronted with the frustration of seeing that all their efforts cannot in fact alone “eradicate” counterfeiting, it does not render justice to the real function of administrative enforcement of IP rights. In general, there is a tendency to give administrative trademark enforcement the function of eradicating counterfeiting. Consequently, the fact that counterfeiting is more rampant than ever, is attributed also and in good part to a failure of administrative enforcement of IP rights in China to achieve this target.

Reconsidering administrative trademark enforcement

In order to reduce the risk of wear of such an enforcement tool, which has almost no equals in the western countries, and to help brand owner better assess their brand protection goals and measure their success, we should probably reconsider the function and the context of administrative trademark enforcement in China. In particular, administrative trademark enforcement is a legal action allowed by a sovereign state to private individuals and companies (including foreigners) to protect mutually recognized private rights.

As such, administrative trademark enforcement has just a mere economic and legal function, whose implementation and success should be measured according to the same parameters we use to determine enforcement of other rights, like in case of contract violations or general tort. Therefore, administrative trademark enforcement should not be given the task of “eradicating” counterfeiting and should not be measured against that goal.

Such goal setting would be disproportionate to the legal and economic function of IP rights. The enforcement of IP rights against counterfeiters should not be therefore put at the same level of national legislations and IP policies and consequently should not be evaluated and measured according to whether or not it contributes to achieve the public policy goals of a sovereign State, ie the eradication of counterfeiting and the technological development of China.

Business strategy

Whether administrative trademark enforcement against counterfeiters is effective can therefore be determined only in terms of the economic benefits it may bring to the single brand owner with respect to its specific products, market and business strategy. In other words, daily IPR enforcement should not be loaded of too much political significance, and its efficacy as an IP management tool should be evaluated based on whether it helps or not brand owners to achieve their business strategy. The administrative enforcement of trademark rights in China against counterfeiters should be therefore conceived and organized in accordance with the company strategic IP management goals, which in turn must be functional to the overall brand business strategy of the right holder.

One fact is clear. Counterfeiting cannot be defeated by headlong all-round trademark enforcement alone. Overloading trademark administrative enforcement of political or salvific functions will lead to a short term erosion of company resources and frustration.