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Talking business: Upping the stakes in the battle against Chinese fakes

With the rapid growth in e-shopping, many Chinese consumers nowadays use the various high street retail stores as shopping windows before buying the product they seek online. This is bad news for retail brands that hope to make the most of an increasingly affluent Chinese market: China boasts of having the largest number of ecommerce users, but unfortunately is also known as a marketplace where counterfeit goods may be bought.

It is not the case that there is no law to prevent the manufacture and sale of fake goods in China. The country does have laws that seek to restrict the sale of counterfeit products, and Chinese officials regularly promise to take action to limit their sale and production.

However, the problem is the impracticality of enforcement action. Once you have sued one factory pumping out fake goods, another will spring up, and then another. Worse still, if you haven’t taken steps to protect your brand by registering the relevant patents and trademarks, you may find your own trademarks registered by a Chinese company and used against you. Most recently, Apple discovered that failing to register the trademark of “iPhone” in relation to leather goods and handbags led them to lose a trademark claim against Chinese firm Xintong Tiandi Technology, which produces a range of iPhone-branded leather products.

You may find your own trademarks registered by a Chinese company and used against you

Since being put in the spotlight by a number of threatened and actual infringement claims by western owners of luxury brands, various Chinese online shopping platforms have stepped up their efforts to shut down stores that sell replicas on their platforms. However, combating the fakes is proving a difficult task.

Can the flood of fakes ever be stopped? Taobao, also known as Chinese eBay, has recently tightened controls on sales of luxury goods further by requiring sellers to show proof of authenticity. The effect of that has yet to be seen, but this is probably a direct response to a campaign run by the State Administration for Industry and Commerce (the Chinese governmental authority that governs businesses) from May to November this year, in which the SAIC promised to hand out harsher punishments for trademark infringements and counterfeit products in the ecommerce industry.

However, this is still just the very tip of the iceberg and, with China’s economy faltering, making affordable fakes more appealing to many consumers, this could be a problem that will never go away.

Paul Haswell is a partner based in Pinsent Masons’ Hong Kong office. He was assisted by Francois Tung, solicitor

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