A recent wave of successful lawsuits for foreign companies could be part of China’s continued attempt to portray itself as a country that respects intellectual property (IP) rights.
The propaganda is important to China because of the growing international furor over Beijing’s flagrant disregard for IP, whether through its mass manufacturing of knockoffs (China is where most of the world’s counterfeits originate); state-sponsored economic espionage through hacking Western companies; systematically acquiring Western tech firms to obtain technology critical to the Chinese regime; and the multiple court indictments in the United States alleging that Chinese nationals have conspired to steal data, files, and documents from U.S. companies.
On Nov. 5, Danish toymaker Lego announced that it won a major case against Chinese imitators. A Chinese court ruled that the knockoff companies would have to stop producing the counterfeit toys and pay Lego 4.5 million yuan (about $643,000) in damages.
A month earlier, British luxury brand Alfred Dunhill announced it won its court battle against Chinese menswear brand Danhouli for infringing on its iconic logo, which features elongated lettering. Alfred Dunhill was awarded 10 million yuan ($1.45 million) by the Foshan Intermediate People’s Court, an unusually large sum compared to past Chinese court litigation.
As with much of what happens in China, court rulings have political ramifications.
But the Chinese regime likely has an ulterior motive for its sudden embrace of intellectual property rights: amid increasing scrutiny of China’s IP theft practices, it wants to create an international perception of China as a country that is cracking down on IP infringement.
This is evident in Chinese leader Xi Jinping’s most recent public comments made in the lead-up to his upcoming trade negotiations with U.S. President Donald Trump at the G-20 summit. China’s IP theft is the chief reason the U.S. administration has cited for enacting punitive tariffs on Chinese imports worth $250 billion.
While visiting Spain to secure trade deals on Nov. 28, Xi Jinping said, “We will make efforts to streamline access to markets in the areas of investment and protect intellectual property.”
Earlier in November, Xi also talked up the need to enforce punitive laws for IP infringement, during a speech at the Shanghai import expo, an event that itself was seen as a propaganda stunt to quell growing international concern over China’s predatory trade practices.
Can Foreign Companies Win?
Many legal experts on Chinese IP who have crunched the numbers on Chinese court cases say the win rate for foreign plaintiffs is actually quite high for trademark, copyright, and patent infringement lawsuits. But the data is actually incomplete, owing to the opacity of the Chinese court system.
China did not provide public information on litigation until 2014, when the Chinese court system unveiled a public online docket to search pending cases. Little is known about how Chinese courts ruled in IP-related cases prior to 2014.
Law firm Rouse told The Wall Street Journal in a July 2016 article that the high win rate is likely due to the fact that foreign firms only sue in China if they are confident they can win.
In an annual assessment of global IP practices released this February, the U.S. Chamber of Commerce pointed to continued widespread trademark infringement and barriers in China’s legal system that make it difficult for foreign companies to protect their designs.
“The system tends to favor local entities at the expense of multinational rights holders,” the report said. “Incidences of bad faith trademark filing appear to be worsening and a backlog still exists of decades of abusive filings,” despite some recent lawsuit wins for foreign multinationals, according to the report.
