IP protection has become a very important component rooted in the compliance management of Chinese companies when conducting international trade, which is not only reflected in the strong awareness of IP protection and risk prevention developed from the experience and lessons learned from IP disputes, but also in higher and more challenging requirements for enterprises’ IP compliance management as a result of the continuous upgrade of the conception of protection reflected in Chinese judicial practices. In this regard, I’d like to avail myself of this opportunity to share my observations and thoughts with the distinguished participants from the following aspects.
First of all, in terms of the awareness of IP protection in cross-border trade, Chinese companies have changed from the past practice of merely responding passively to IP claims arising out of cross-border trade to proactively seeking prevention against the potential risks. Terms regarding IP protection is the key point of review when lawyers provide legal service in international trade to their clients. As a common practice, where a client is the purchaser of exported products, it will clearly inform the seller of the regions where the products to be exported and sold, and require seller’s representation of non-infringement of any third-party patent, copyright, trademark, trade secret or other forms of IP rights in the importing country, as well as the obligations of assistance and relief measures in the event of any third-party IP claim. Meanwhile, prior to exporting of certain products, the company will on its own, engage special agencies to search and examine the risk factors including such as patents or trademarks in the destination country, to avoid or reduce the risk of infringement. Likewise, in international economic and trade cooperation and outbound investment activities, the inquiry into IP information of the counterparties has been incorporated as basic contents and procedures in due diligence process, like the proof of rights obtainment and disclosure of existing or potential disputes.
On the other hand, export enterprises also attach great importance to initiative acts for IP protection as one of the two-aspect risk prevention measures, for example, to effectively protect their own IP, the companies will register trademarks for export products under the Madrid Agreement Concerning the International Registration of Marks, and taking Chinese patents as priority, apply for international patents through PCT.
While in recent years, cross-border data flow compliance has also been included in the compliance management of cross-border trade. For example, article 37 of Cybersecurity Law provides that the operator of a critical information infrastructure shall store, within the territory of the China, personal information and important data collected and generated during its operation within the territory of China, and where such information and data have to be provided abroad for business purpose, security assessment shall be conducted. In articles 36 and 37 of the newly published Measures for the Administration of the Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone in this August, the security assessment on cross-border data flows on a pilot-program basis has been specifically required to established in the special area, as well as data security management mechanisms for cross-border data circulation, transaction risk assessment, etc. It also stipulates that a pilot program of international cooperation rules shall be launched to strengthen protection of the interests and data in patents, copyrights, trade secrets and other rights. As such, it is expected that IP compliance management in cross-border trade will reflect new requirement in the era of data economy.
As I mentioned before, the judicial thinking of Chinese courts also presents a very positive and rigorous perception, conducing to improve IP protection standards and guidelines for cross-border trade of Chinese companies. For example, whether OEM constitutes infringement of trademark. According to the past judicial practice experience, OEM only involves physical attaching activities and the processed products are not circulated within China, which cannot be deemed as an act of using trademark. Therefore, OEM factories should not be held liable. Yet recently, a retrial judgment on an OEM trademark infringement case rendered by the Supreme People's Court of China changed the stereotyped view in these kinds of cases.
According to view of the judgment made by the Supreme People’s Court, under the situation of deepening globalization of economic development, increasingly complex division of labor and economic and trade cooperation in international trade, in the trial of trademark infringement cases involving export-related OEM, it shall taken the overall situation of domestic and international economic development into full consideration, a specific analysis shall be made with respect to trademark infringement disputes in a specific period, market and transaction form and the law shall be accurately applied. OEM is an important mode of China's foreign trade. With the transformation of China's economic development models, people's understanding and dispute resolution of trademark infringement in OEM has also been in the dynamic of constant changing and deepening. When coming down to the judicial settlement of disputes, to maintain the unity of the legal system in terms of the application of laws, it must be clarified and emphasized that a certain trade mode (such as the export-related OEM in this case) cannot be simply solidified as the exception of non-infringement of trademarks. As an IP right, trademark is of regional nature. Even if it is legally registered in a foreign country, a trademark not registered in China does not enjoy the “exclusive right to use” in China. Accordingly, the so-called "trademark use authorization" obtained by the civil entities in China shall not be deemed as a legal right of trademarks protected under the Trademark Law of China, and thus cannot be used as a pleading for non-infringement of trademark rights.
The above judicial opinions reflect the objective and rigorous analytical thinking of Chinese courts in the practice of IP trial, and set up clear guidelines for the trademark compliance management of OEM trade.
Finally, please allow me to make a summary: as for the compliance management of cross-border trade, the import and export companies per se, need to sort out, examine and effectively implement risk management measures, yet a clear and unified idea and guideline set up by the administrative authorities and judiciary, will be a more effective guarantee to create a good legal order for the fair, just and sustainable development of cross-border trade.