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Intellectual property protection not only concerns corporate interests but directly impacts survival and development in today¡¯s highly competitive business environment. Forms of IP such as trademark rights, patent rights and copyrights are crucial for corporate innovation and competition.

However, the rising incidence of IP crimes poses significant risks for their owners and companies. According to the 2019-2021 China Intellectual Property Criminal Case Study Report: ¡°From 2019 to 2021, of the criminal cases involving IP, trademark counterfeiting accounted for 46.4%, selling counterfeit trademarked goods accounted for 41.5%, and illegally manufacturing and selling counterfeit trademark labels accounted for 6.7%. Together, these three categories comprised 94.6% of the total cases.¡±

This indicates that IP criminal risks are mainly concentrated in unauthorised copying, imitation, manufacturing and sales. Piracy, infringement and counterfeiting not only cause economic losses but also damage brand reputation, and can lead to legal disputes and business halts.

Legal framework

Article 3 of the Criminal Law of China, titled Crimes Against the Order of the Socialist Market Economy, includes section 7, Crimes of Infringement of Intellectual Property Rights, which enumerates the following offences: Counterfeiting registered trademarks; selling counterfeit trademarked goods; illegally manufacturing and selling counterfeit trademark labels; copyright infringement; selling infringing copies; and counterfeiting patents.

On 8 January 2023, the National Prosecutors Conference noted that in 2022, 13,000 individuals were prosecuted for IP crimes, and 937 civil and administrative IP supervision cases were handled, with a 72.2% year-on-year increase.

The Supreme People¡¯s Procuratorate released 20 typical corporate compliance cases, including two involving IP crimes: a trademark counterfeiting case involving Shanghai J Intelligent Technology Company and controller Zhu; and a sale of counterfeit trademarked goods case involving Zhangjiagang S Hardware Electric and Chemical Products Trade Company and controller Ju.

Clearly, China will further strengthen criminal enforcement against IP violations, making IP crime-related compliance rectification a key focus for corporate criminal compliance. Overall, IP criminal offences not only damage legitimate corporate rights but also seriously threaten sustained development and stable operations. Therefore, strengthening corporate IP compliance management is vital for healthy corporate growth.

Key compliance measures

Identifying IP rights clearly. Companies should apply for or register IP according to the applicable legal framework. For trademark rights, they should register to ensure exclusive use rights for brand trademarks. For patent rights, companies should apply for patents to protect inventions and creations. Although copyright protection in China does not require registration, companies should still take measures to enhance protection, such as timely copyright registration.

Establishing and standardising of IP use and licensing management systems. Companies should establish and improve IP use and licensing management systems to ensure the legality of IP use and the standardisation of external licensing to avoid criminal risks. For example, regularly review and assess the use of IP in product and service advertisements to ensure non-infringement of others¡¯ rights. When licensing externally, clearly stipulate in contracts the usage conditions and payment terms, as well as the rights and obligations of both parties, to prevent misuse of rights.

Building IP monitoring and a professional rights protection framework. Companies can set up specialised personnel or hire professional agencies for IP monitoring and rights protection. This work includes but is not limited to IP search analyses, reading and screening IP documents, and collecting IP applications and authorisation information. Focused research on the company¡¯s industry can provide a timely understanding of industry-specific IP conditions. On discovering infringement, companies should take immediate legal action including evidence preservation, negotiation, administrative requests, civil litigation or criminal reporting to protect their rights.

Cultivating IP protection awareness and integrating with performance evaluations. Companies should enhance employees¡¯ IP protection awareness through internal training and incorporate IP management indicators into annual performance evaluations. This institutional approach strengthens employees¡¯ IP protection awareness and management capabilities, establishing a comprehensive self-protection system to prevent improper conduct.

Evaluating the company¡¯s internal IP compliance policies to ensure compliance. Companies should regularly review and assess internal IP management policies and systems for risk assessment, identifying and resolving loopholes and potential risks in the compliance management process. This includes evaluating the compliance of IP applications, use and licensing, as well as assessing the criminal risks of business decisions involving IP to ensure legality and safety.

Co-operating with professional IP lawyers. Companies should collaborate with professional IP lawyers for expert opinions and support. IP lawyers can provide professional services in IP registration, infringement litigation, and contract drafting. Co-operation between companies and IP lawyers ensures a comprehensive understanding of IP laws and the development of effective IP protection strategies to mitigate criminal risks.

By adopting these measures, companies can effectively avoid IP criminal risks and establish a compliant and legally sound IP management environment.

Ma Xueyan is an associate at Starrise Law Firm.