Why do right holders sometimes lose against infringers?

By Frank Liu, Tiantai Law Firm
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When safeguarding the IP rights, right holders will sometimes find their cases stagnating. There are situations where right holders initiate administrative complaints against infringing products only to find more and more fake goods after years of effort, or where the right holders take immediate action upon identification of the infringement, which helps tackle some small infringers but fails to yield overall victory, or where the distributors of the right holders replace key parts with cheap parts and sell them as genuine goods to make profit, and the right holders find it hard to hold such distributors liable.

More common frustrations are that the right holders are self-assured before the litigation, but as the trial unfolds, evidence against the right holders surfaces and the results are not as wished.

The right holders learn their lessons in these situations. Some attribute the loss of the case to inadequate judicial protection and combat against infringements, while some say there was inadequate evidence or insufficient grounds to support the claims. But people seldom observe and analyze the cases from an overall strategic point of view. If the right holders cannot grasp the true reasons, the same situation may well happen again.

Legal protection environment

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Frank Liu
Partner
Tiantai Law Firm

Many right holders tend to attribute the loss of the case to an unfavourable judicial environment and inadequate legal protection. But the reality is that such perceptions are based on media reports or other indirect information sources. The case experience of the right holders is limited, and they rarely conduct an objective and data-driven analysis of the precedents.

People who are long committed to settling the IP disputes, and have objectively analyzed the current legislation and judicial precedents, will come to the conclusion that IP rights is a legal sector where Chinese legislation and judicial practice are most consistent with international scenarios, although there is still room for improvement. To attribute the loss of the case merely to the legal environment is biased and does not help the right holders improve their practice.

It is noteworthy that IP squatting and infringements are still quite frequent, and the infringers are active, with more and more sophisticated methods in China. Because of the lack of a basic understanding of the situation in China, many foreign right holders are not fully prepared to tackle the issues, have no appropriate responses, and find themselves in a disadvantaged position in the later stages of disputes.

Response in a single case

To produce appropriate evidence, properly structured claims, clear and adequate facts and grounds in a timely, diligent and proactive manner are fundamental to preparations for a case. But in some cases, the right holder is not confronting one single entity, and there are several infringing companies or individuals who have division of labour, or who may even have legally separated from each other.

Infringements do not only happen in the circulation of goods, but they also manifest through IP squatting. Infringements may involve trademarks, patents, company names and domain names, and occur in domestic and foreign countries. In many cases, the confrontation against the infringer is across the board. The result of one single case is important, but without a holistic strategy the right holder might win a battle but lose the war.

A holistic strategy

Focusing on one single case is not enough to win in the combat against obstinate and experienced infringers. To effectively tackle the infringements, the right holder should act based on a comprehensive analysis of the basics of the rights squatted, the specific infringement behaviour, possible actions and appropriate timing.

Ineffective right protection efforts, as in the above-mentioned circumstances, are in many cases the result of a lack of comprehensive information, objective analysis and a holistic strategy that fits the situations. In many cases, the right holder focuses on one single case, or rushes into the combat.

The advantage of a holistic strategy is that it not only gives consideration to a single case, but casts more attention on how the actions in the disputes impact the overall business interests of the right holder. The goals of such a strategy are to defend and expand the market share of the right holder, and to improve the awareness of the products among the customers.

The means the available methods within the framework of a holistic strategy are not constrained to a lawyer’s letter, administrative complaint and litigation. Settlement or other commercial arrangement with the support of legal actions are more important to achieve the goals.

When there is a conflict between a single case and the overall goals, the overall goals should prevail, though efforts should be made to strike a balance. Through years of experience in handling sophisticated cases, the author believes that a holistic strategy can safeguard the commercial interests and IP rights of the client to a larger extent and at minimized reasonable cost, and can lead to effective results.

Against a backdrop where infringements are getting more and more sophisticated, if the right holder attributes the loss of a case merely to the legal environment, or focuses on one single case rather than establishing a holistic approach, it will become more and more difficult to gain any advantages when confronting experienced infringers. Only when the right holders timely and effectively collect and analyze evidence, and structure a tailor-made holistic strategy, can the right holders stand in a position of advantage in the combat and effective safeguarding of IP rights and commercial interests.

Frank Liu is a partner at Tiantai Law Firm.

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