According to the Organisation for Economic Cooperation and Development (OECD) and the European Union’s Intellectual Property Office (EUIPO) China is the world’s biggest producer of fake goods. We had the chance to talk to Daniel De Prado, foreign legal counsel and intellectual property law specialist at HFG Law & Intellectual Property in Shanghai.

 

IISW: China is frequently blamed to be the main global source for counterfeit products. Is this still true and do you maybe have some indications about the volume and the structure/mechanisms?

De Prado: It is hard for us to talk in terms of volume of counterfeit goods production in China. Still, it is clear that this country remains one of the main markets for counterfeit goods production. However, it is our perception that this situation has changed considerably.
It must be pointed out that nowadays the Chinese government is taking this problem quite seriously. To this extent, the new regulations as well as enforcement actions which were approved and implemented to protect and defend the IP owners’ rights are more effective now than in the past. Additionally, public governmental bodies (especially Chinese trademark and patent offices) have been instructed to apply stricter measures in order to prevent counterfeiters from obtaining the rights to use famous foreign trademarks in China just to offer them for sale.
Proceedings to obtain IP rights nowadays are more exhaustive than they were in the past. Also, private companies such as the most famous e-commerce platforms in China offer their own systems for users to complain about counterfeiters selling goods on these platforms.

IISW: What are the possibilities for IP owners to fight counterfeiting legally?

De Prado: It turns out to be almost impossible to define the exact measure that IP owners can apply in general terms as the range of actions that can be taken differs significally depending on the specific case.
However, when we go to the EU or the US and talk to our colleagues we notice that the perception concerning the IP owners’ possibilities and legal tools to defend their rights and fight counterfeiters in China, is much worse than the situation actually is. Obviously, in many cases it is not easy for an IP owner whose products are being copied and commercialized in China to take legal measure against the counterfeiter. Nonetheless, the chances of success are normally higher than expected or believed.
In this regard, we believe that it is essential to work with experts who know the market well and have great experience in the field. This is crucial in order to be successful.

IISW: What are the main sectors in which you work?

De Prado: Our clients focus on a broad variety of sectors but we are mainly active in the fashion, automotive and food & beverage sector.

IISW: Where do your clients come from?

De Prado: Considering that 70% of our clients are foreign companies, we are actually a very internationally oriented Chinese law firm. Predominantly, we work with European companies (especially from Italy, France and the UK) and we also have some clients from the US and Canada.

IISW: Direct ordering of European customers via Asian online-portals and/or producers and drop shipping has become a trend over the recent months and years. How does this affect your business?

De Prado: We also noted this development, however, we are more focused on the commercial activities carried out by foreign or domestic companies in China.

IISW: Where do you see legal gaps in the international context that make the fight against counterfeiting so difficult?

De Prado: As most of the rights provided by laws, IP rights are territorial. This means application and enforceability are limited by the laws and regulations of each individual country. As usual, international cooperation for any matter requires political will and this case is not different. Each country defines its own priorities, regulations and enforceability options, so it is not easy to find common points sometimes.
We believe that international cooperation works sometimes more efficiently when it comes to fighting large international criminal organizations involved in counterfeiting activities. However, that leaves aside most of the damages and common infringement actions suffered by the companies, since no criminal liability is involved. Therefore, international cooperation in this regard does not help much.

IISW: How can the problem be tackled more effectively – what would be the incentive (positive or negative motivation) for the Chinese government to fight counterfeiting seriously?

De Prado: As said above, the Chinese government has been taking this problem quite seriously in the recent years. They are aware of China’s reputation in this area and how that also affects international investment in some sectors of the economy. Therefore, as already mentioned, diverse steps are taken to act against the counterfeiting market.
Besides, it is important to remark that the Chinese government keeps encouraging Chinese companies to invest in R&D activities. Legal and economic measures have been implemented to create large technological companies which can serve as the base of the country in the future. Therefore, the business model has dramatically changed, evolving from a labor-intensive model of “Made-in-China” to an innovation-driven model of “Created-in-China”. As a result, China has emerged as a driving force of global innovation.
Obviously, innovation needs a strong legal system to succeed and allow companies to grow on that basis. Protection of IP is essential to achieve this target, otherwise there would be no return for the companies if they cannot effectively protect the results of their innovation activities. Thus, that fact makes it necessary to reinforce the rule of law which is also a motivation for Chinese authorities to improve the IP system.

IISW: Thank you very much!