IP Enforcement Challenges in China Sophia Hou 7 April 2018

OUTLINE E-commerce in China 11/02/2018 OUTLINE E-commerce in China Challenges of online platform IP protection Key IP legislative development in China China IP court system and challenges

E-COMMERCE IN CHINA China has clearly emerged as the world leader in e-commerce 1.2 trillion dollars. That’s how much Chinese consumers are on track to spend online by the end of 2018 –half of the ecommerce market worldwide

ecommerce sales worldwide

Alibaba sales volume on 11.11

Other E-commerce platforms Major platforms Alibaba Group Other E-commerce platforms Social Media

2017 Alibaba IP protection annual report 11/02/2018 2017 Alibaba IP protection annual report Shutting down 240,000 infringing taobao stores 1606 online suspects arrested by police Police cracking 1328 counterfeit sites sourced from alibaba Total illegal business value from criminal action – RMB43 trillion ( USD6.8 trillion) --attack counterfeiters as attacking drunk-driving.

2017 Alibaba IP protection annual report 11/02/2018 2017 Alibaba IP protection annual report In 2017 , Alibaba as platform sued online cat food seller based on contract breach and infringing Alibaba’s good will Alibaba refused to settle and determined for a judgement First case of the kind Judge rewarded RMB120,000 (USD19,047) to Alibaba Online seller liability to platform established Top 10 civil litigation cases in 2017 in China

Platform ip protection challenges 11/02/2018 Platform ip protection challenges Taobao (domestic B2C & C2C) more difficult than other platforms within Alibaba group. More lenient rules for sellers. Grey market goods difficult to control. Taobao first line counterclaim reviewers are now also accepting very limited evidence in counter claims such as receipts to prove legitimate source. Sellers provide fake letters of authorization with fake chops Sellers use ‘keywords’ instead of TMs to avoid detection and takedown.

Platform ip protection challenges 11/02/2018 Platform ip protection challenges On Alibaba platforms, big and luxury brands get a lot of support. Less famous brands get very little help – e.g less online to offline support

wechat Wechat- a way of life in China 11/02/2018 wechat Wechat- a way of life in China March 2016, Wechat set up brand protection platform By March 2017, 350 brands registered 32000 infringing accounts were removed.

Challenges - wechat Challenges 11/02/2018 Challenges - wechat Challenges Individual accounts- have to be accepted to connection Infringers very cautious, not like public platforms Source only from consumers, no automatic screening by wechat Many reports by consumers not relevant to IP rights registered.

Key legislative development 11/02/2018 Key legislative development Draft of E-Commerce Law Legislative Affairs Commission of the Standing Committee of the National People’s Congress published the draft on 27 Dec.2016 for public consultation. Strengthen IP protection of IP online Introduction of an inspection and monitoring obligation for platform operators- from ‘ know’ to ‘should know' Challenges: specified guidance of the obligation for platform operators? Like screening for evidentt IPR infringement.

Key legislative development 11/02/2018 Key legislative development New Anti-Unfair Competition Law ( AUCL) Come into force as of 1 Jan.2018 ( from 1993 original AUCL) Enforcement authority is empowered to investigate and penalize Conduct of unfair competition. Bank accounts of infringers can be inspected. Lowered burden of evidence of establishing UC ( e.g. from well-known commodity standard to commodity enjoying substantial influence) Adding infringement of domain names, website names and webpages. Stipulating statutory civil damages up to RMB 3 million( USD 0.47 million) Challenges: implementation, especially in administrative enforcement.

Key legislative development 11/02/2018 Key legislative development Trade Mark Law ( 2013) TM application reviewing shortened to 9 months. Strengthened TM protection. Raising statutory damages to RMB 3 million (USD 0.48 million) Well-known TM : case-by-case and passive recognition based on facts; prohibition of using well-known TM in promotional activities. Keep up with the times - SAIC has just invited public opinion for a new round of amendment for the TM Law to be submitted by July 2018.

China ip courts/tribunal 3+15 11/02/2018 China ip courts/tribunal 3+15 In 2014, 3 IP courts established in Beijing, Shanghai and Guangzhou Up to now, 15 IP tribunals established in 15 cities of Xi’an, Ningbo, Zhengzhou, Hangzhou, hefei,Nanjing, Tianjing,Shenzhen, Qingdao,Changsha, Chengdu, Jinan, Suzhou and Fuzhou.

Beijing ip court Heavy Burden on IP courts 11/02/2018 Beijing ip court Heavy Burden on IP courts Beijing Intermediate Court in 1993 80 IP cases Beijing IP Court ( set up late 2014) 9,191 IP cases (2014-2015) 10,600 IP cases (2015 – 2016) 16,500 IP cases (2016-2017)

Some ip enforcement challenges 11/02/2018 Some ip enforcement challenges Copyright the current system for tackling online copyright piracy has limitations and deficiencies. Technical investigative capability of the police Evidentiary burden on IPR holders to demonstrate ownership of copyright More efficiency needed in attacking online copyright piracy against parties in multiple jurisdictions

11/02/2018 Any questions?

shou@rouse.com Tel: 86 13924157546