On April 20, Quality Brands Protection Committee of China Association of Enterprises with Foreign Investment (QBPC) held the April General Membership Meeting online. QBPC Chair Michael Ding delivered opening speech to nearly 200 member representatives and guests. The meeting featured two panels targeting on hot issues concerned by QBPC members. Internet Committee Vice Chair Annick Wang moderated the first panel, in which the representatives of law enforcement agencies and e-commerce platforms shared the latest practice of online infringements and counterfeits governance. Best Practices/Enforcement Committee Chair Conan Chen hosted a tripartite discussion on public and private collaboration against IP crimes among representatives from the prosecution, the police, and the brand owners on Panel Two.
Opening Remarks by QBPC Chair
Michael Ding, Chair of QBPC, thanked the member representatives and guests for their support to QBPC while giving his regards to members in Shanghai and other areas suffering from the pandemics.
In his speech, Michael shared the vision of QBPC in 2022. He said that as a professional intellectual property association, QBPC would focus on four dimensions. Firstly, to keep up with the changes of IP-related laws, regulations and practical operations, provide professional opinions and suggestions, promote the improvement of China's IP framework and business environment. Secondly, to maintain and strengthen exchanges with relevant central and local government agencies, understand their work priorities and directions, learn of the thoughts of right holders, and provide an effective communication channel through the QBPC. Thirdly, to boost the sharing and learning among members. For instance, the reviewing and selection of Top Ten Cases provides members with such an opportunity. Fourthly, to act as a bridge for international exchanges, conveying the progress and efforts of China's IP protection to members’ headquarters as well as bringing back their opinions and feedbacks to relevant government agencies in order to realize the objective of "China Depth and Global Breadth".
Michael encouraged members to put forward good ideas and projects in line with the above four dimensions. He said that QBPC valued the opinions and suggestions of members and always reacted swiftly to members’ concerns. The Internet Committee was newly established to meet members’ needs for effective communications with e-commerce and social media platforms. Finally, Michael expressed his expectations towards the general membership meeting and the top ten cases review meeting. He hoped that the participants would fully exchange ideas and gain useful knowledge and experiences.
Panel 1: New Practices of Online Infringements & Counterfeits Governance
Felix Zhang, Internet Committee Chair, gave a brief introduction of the new committee. He said that the upsurging of digital economy and the rising attention to online brand protection led to the establishment of the Internet Committee. Since being assembled at the end of February, the four-member team had connected with Industry Working Groups (IWGs), Committees, major internet platforms and relevant law enforcement agencies, learned of various problems, suggestions, and experiences, which would benefit their future work. On behalf of the Committee, Felix thanked all for their help and hoped to continually receive opinions and ideas from all parties.
Ding Xiaowei, Squadron Captain of the Patrol Special Police Brigade of Pinghu Public Security Bureau shared his experience in an illegal sales of drug case. In recent years, the prevailing sales of unsupervised or unapproved new drugs endangered people’s life and health. Cases of selling prescription drugs without license became prominent. Criminal chains and interest circles were formed and severely hindered the drug management order. The public security organs had to intensify the attacks on those illegal deeds in the field of food and medicine. In this case, a bunch of criminals conducted illegal sales of a kind of unapproved hormone patch via the WeChat platform in China. The patches sold were a mix of genuine and sham. The case involved 23 cities and a large number of victims in different provinces across the country. Pinghu PSB quickly set up a joint task force and conducted on-site investigation with the procuratorial and administrative organs as well as the right owner. They finally figured out the criminal structure and arrested 9 suspects. The case had been transferred to the people's court.
Ding pointed out the four features of the case. First, the selling of the hormone patch was a niche market, and the information was pushed only to a specific group, which made it difficult for the police to find the lead. Second, there were multiple sales channels involved, including Taobao, Weibo, WeChat, WeChat Store and more. Though multi-channel sales could provide data support for the investigation, it caused difficulties in calculating the accurate amount of illegal income. Third, the case covered a grey zone industrial chain. Since certain certificates were required in drug imports, most of the disqualified agents illegally rented the licenses. To crack down on this grey zone industrial chain would need cooperation with the Customs and multiple agencies. Fourth, the high profit margin of the business attracted increasing number of WeChat merchants, purchasing agents, live-streamers, etc., which complicated the situation.
Ding Xiaowei commented that the above-mentioned features led to many obstacles in the investigation. As it was a niche market and average consumers usually would not question the authenticity of drugs, these cases were difficult to be discovered. The patches were imported from abroad, and the criminals used overseas communication tools, which blocked the traceability of the whole case. As the hormone patch had not entered the Chinese market, there was no agency to identify its authenticity and the case was eventually solved through product composition identification. Tracing the capital chain was also made difficult as the payment was mainly collected through the logistics, and investigations against the logistic company would "stir the grass and startle the snake". The successful detection of the case relied heavily on the strong support of leaders, multi-party brainstorming and communication, evidence consolidation and the launch of a cluster campaign that expanded the victory.
Annick Wang commented that the use of illegally traded drugs may jeopardize people’s health so that there were severe concerns. The leads of the case were well covered, and the multi-channel sales added the obstables. Since online platforms became the main social media, they were used as additional channels to promote and sell counterfeits. Therefore, law enforcement agencies, online platforms and right holders should strengthen cooperation and crack down on these illegal acts and crimes together.
Zhang Nuo, Deputy Director of Brand Protection of Security and Investigation Department of JD, shared JD's recent moves on IP protection. She introduced JD's joint prevention & control mechanism over commodity criminal risks, JD’s co-construction & co-governance strategy with brand owners as well as their 2022 annual plan. After sorting and evaluating the criminal risks over commodity sales under various business modes, JD upgraded its brand protection scope from JD Retail to all sub business segments, especially the high-risk areas i.e., IP rights protection and the safety of food and drugs. After the upgrade, JD formed an authoritative, professional, accurate and efficient business governance scheme along with the joint prevention & control mechanism, risk detection, the establishment of data model and the follow-up attacks on criminal activities.
In terms of the co-governance and co-construction strategy with brand owners, JD encouraged the brands to actively participate in cooperation projects such as “Test Purchases” and “Brand Training”. JD also planned to invite members of QBPC to participate in the trial of the right holders' Online Cooperation System and provide opinions and suggestions. With the experience accumulated through its cooperation with brand owners and law enforcement agencies, JD established a Brand Protection Alliance to strengthen the linkage and communication among all parties. The alliance would operate through the industry groups, the integrity right holders protection mechanism and the membership meetings. In addition, Zhang Nuo shared the activity calendar of the industry groups in 2022 and expressed the willingness to keep in contact with the QBPC IWG coordinators for further cooperation.
Chen Shuru, Senior Legal Counsel of Tencent, introduced WeChat Brand Protection Platform to the audience. The platform was built to fix the bottleneck problem of instant messaging tools on infringement clue discovery and infringement identification. When WeChat users had a clue of counterfeits seller, they could submit it to the relevant brand owner through the platform for identification. WeChat team would then evaluate the seller’s personal account with the identification result and issue punishment accordingly
In addition to personal accounts, WeChat Brand Protection Platform had covered more scenes, including video accounts, WeChat groups and enterprise accounts. To improve the efficiency and experience of brand owners on the platform, WeChat published a Users’ Guide, and built ability modules such as the complaint fast track, frequently asked questions, and data analysis on filed complaints. WeChat also launched other protection mechanisms, e.g, the brand keyword protection mechanism, associated video account raid strategy, cooperating with law enforcement agencies to crack down on the publishment of counterfeit information and strengthening user education.
Alenko Yang, Brand Cooperation Director of Douyin E-Commerce IP Protection, explained the intellectual property protection on a new kind of e-commerce platform. Alenko Yang said that Douyin E-Commerce was “new” because its mechanism was different. Users were connected with commodities through content. Douyin E-Commerce showed three trends in 2021. Firstly, the overall industry maintained a high growth rate. Secondly, users, commodities and scenarios formed a sound eco-system and developed in scale. Thirdly, the consumers were used to finding and buying novel products on Douyin. These trends reflected the innovation of a new e-commerce model – inspire customers to have new interests. While traditional e-commerce platforms met the existing needs of the customers, Douyin E-Commerce or the interest e-commerce stimulated customers’ desire for new experience and new commodities. Through a short video or a live broadcast, customers would put themselves in the scenarios, get to know the products or the combination of products to fill their needs. In a scenario-based selling interaction, people would constantly nurture their interest in the products, which was then transformed into real transaction. As the scenarios kept expanding and changing, Douyin E-Commerce also needed to keep exploring new protection mechanisms.
The IP protection work of Douyin E-Commerce started as soon as it became an independent business department in June of 2020. In 2021, Douyin E-Commerce had built up the basic IP protection framework, including complaint handling, brand cooperation, offline strikes, and proactive prevention. The intellectual property protection platform (IPPRO) was brought online in 2021 and was newly upgraded to cover all scenes of the e-commerce platform. The diversified and multi-dimensional transaction modes and governance scenarios posed new challenges to Douyin E-Commerce in terms of IP protection. The first challenge was secrecy and timeliness. In the scenario of live broadcast, the infringement information might not be revealed from the picture or the text. Instead it was broadcast orally by the live streamer, which is more difficult to be detected. The second challenge was the separation of the content and the goods. Live streamers often did not have their own stores but sold goods from third parties, which made it difficult to split and analyze the sales data. Douyin E-Commerce also faced new scenarios in content governance, which put forward new requirements for their rules.
To meet these challenges, Douyin E-Commerce had adopted a combined strategy of proactive prevention, prior interception, in-process monitoring and follow-up strikes. For the content creators, Douyin E-Commerce had implemented the credit system. By limiting the sharing function, the creators got warned or punished in case of violation. Douyin E-Commerce also valued the cooperation with other IPR protection parties, actively interacted with brands, communicated with government agencies, participated in association seminars, called on institutions and conducted research. IPR education on merchants and the public is also part of its protection framework.
In Q&A session, member representatives interacted with the speakers. Some member representatives looked forward to the cooperation between the platforms and QBPC Internet Committee and IWGs.
Panel 2: Public and Private Collaboration on IP Crimes
Miller WANG, Brand Protection Director of Asia Pacific from MCM, spoke first as the representative of the right holders. He introduced the challenges faced by brand owners against online sales of counterfeits. Miller said that online sales of counterfeits went through two evolutions from traditional platforms to social media APPs and then to live broadcasts. Counterfeits sales on traditional e-commerce platforms could be described as "endless". Right holders relied on link removal to curb the proliferation of counterfeits but could never exterminate it. The second generation i.e., social media APPs, were no longer open or easy to be retrieved as the traditional platforms. Instead, they were private and difficult to be discovered, monitored, or retrieveed, e.g. the WeChat Moments. The third generation featured online live broadcast platforms that had emerged and flourished in the pandemic era. Live streamers delivered message to the customers through oral broadcast or texts, images, animations before directing them to the social media platforms where real transactions were realized. Every step from the evidence fixation to the subject identification and the responsibility confirmation was difficult in the given circumstance.
To make things worse, the right holders were facing the coexistence of all three generations. The counterfeiters would take advantages of different platforms, using the traditional e-commerce platforms as the display window and the more private social media for concluding the transactions, which made it difficult for right holders to target the “big fish”. With the improvement of personal information protection system, it had become nearly impossible for rights holders to obtain information by means of private investigation on people, logistics or capital flow and had to rely on the support of e-commerce platforms and public security authorities. Citing the investigation of two international online transaction cases as an example, Miller Wang further explored the situation and concluded that even for small cases, right holders were forced to spend more money, manpower and time in fighting endless counterfeits with limited resources. He said that assistance and data support from the platforms and the police were crucial to right holders.
Conan Chen commented that in the fight against three generations of online counterfeits, public and private sectors should strengthen cooperation, establish a cross-platform IPR protection and governance mechanism, collect IP infringement data from all parties and build analysis models to improve the accuracy and effectiveness, strengthen multi-party linkage, and prevent the cross-platform crimes.
Gu Xiaojun, Director of the Fourth Procuratorate Department and Director of the Intellectual Property Office of Shanghai People’s Procuratorate introduced in-depth promotion of specialized and comprehensive judicial protection of IPR protection from the procuratorate's perspective. She firstly summarized the situation of IPR cases processed by Shanghai procuratorate in 2021. The total number of related criminal cases continued to rise, reflecting the increasing awareness of right holders and the intensified strikes from public security authorities. Among all cases, trademark infringement accounted for the largest portion, followed by copyright infringement. The rise of trade secret cases had drawn the attention of administrative and public security agencies and would also be one of the priorities for Shanghai procuratorial authorities in 2022. In terms of right holder protection, Shanghai procuratorial authorities insisted on equal protection for both domestic and foreign right holders, and the work to compensate for the loss of right holders was also effective. Since the implementation of pleading guilty and accepting punishment with leniency policy, Shanghai procuratorial authorities had practiced it in daily protection work. The application rate of pleading guilty and accepting punishment in intellectual property cases reached about 85% last year, compensated the economic losses of the right holders to a certain extent.
Gu Xiaojun then talked about the characteristics and highlights of IPR cases in 2021. The first was “handle innovation cases”. Shanghai procuratorial authorities handled the first copyright infringement case on "treating video games as audiovisual works" in China, which changed the single protection mode of identifying video games as static art works and realized all-round protection of the overall dynamic images of video games. The second was "handling cases promptly ". Shanghai procuratorial authorities followed closely the legislative changes, took the initiatives and fully performed its duties, actively introduced case standards and conducted clue research and judgment to handle cases promptly. The third was "handle cases well". In order to adapt to the new economy and new business mode, Shanghai procuratorial authorities responded to right holders’ demands of rights protection on the innovative platforms, tackled the problems in attacking, finding, and obtaining evidence on live broadcast platforms. In addition to the strikes on counterfeiters, Shanghai procuratorate also required the platforms to strengthen their supervision over live broadcast enterprises to ensure the healthy development of the live broadcast economy.
The third aspect was the centralized and unified implementation of the pilot work of intellectual property procuratorial functions in Shanghai. Since last year, Shanghai had implemented a three-in-one working mechanism, establishing an intellectual property procuratorial office that integrated criminal, civil and administrative functions. On this basis, Shanghai Intellectual Property Office promoted institutional specialization, team specialization and functional integration. During the process, the Shanghai procuratorial authorities actively focused on the improvement of the mechanism, collaborated with all parties to make efforts in improving and refining criminal prosecution, deepened and consolidated the civil and administrative prosecution, promoted the integration of the three major prosecution functions, and explored public interest litigation prosecution in due course. In addition, Shanghai procuratorial authorities had contributed in strengthening innovative work initiatives and extending the reach of IPR protection, including leading enterprises in IPR compliance pilot, promoting industry governance with case handling, formulating type review norms, and unifying the interface between execution and punishment and judicial adjudication standards, etc. The Shanghai procuratorial authorities also paid great attention to strengthening theoretical research and practice in IPR protection, and discussing cutting-edge hot issues. GU Xiaojun expressed the hope to further clarify the directions of the procuratorial organs through theoretical discussion and face-to-face communication with QBPC members. If any member needed assistance from Shanghai procuratorial authorities, they could ask for it through the QBPC. The Shanghai IPR prosecutors would continue to provide service and protection during the pandemic.
Conan commented that the formulation of rules for substantive participation by right holders in criminal proceedings, the improvement of compensation mechanism based on pleading guilty and accepting punishment with leniency rule, and working with relevant agencies on the opinions regarding bridging administrative and criminal enforcements were all interesting topics for QBPC members. He looked forward to further discussion with the Shanghai Municipal Procuratorate in future.
The third speaker was Yu Meng, Head of Food, Drug & Environmental Crime Investigation Division of Shanghai Public Security Bureau. He firstly introduced the overview of Shanghai Public Security's work in combating IPR crimes in 2021, explained the situation and framework. He then talked about the sources of case clues. Currently, the key case clues were mainly from independent data mining and information provided by the right holders. Independent data mining meant that the public security departments collected data from administrative departments, industry associations and e-commerce platforms, then compared it with PSB’s own internal resources, such as bank data, transaction data and logistics data, and identified case clues through analysis. Another source of case clues was the right holders. When an infringement case occurred, customers would complain to the right holder, so that the right holder could obtain infringement-related information.
As to the content of police-enterprise cooperation, Yu Meng mentioned three aspects, namely information sharing, clue reflecting and assistance after the arrest of suspects. According to internal requirements of Shanghai PSB, the hidden dangers in the society should be cleared dynamically. It would be very helpful if the right holders have strong awareness, make rapid response and provide information promptly to the police. Yu Meng reminded that before providing a case clue to the police, the right holders should do the test purchases in advance and provide logistics and account information obtained. The police would then follow up and retrieve further information. After the suspects were arrested, the right holder could assist with the preparation of supporting documents and the storage of case-related objects.
Yu Meng also pointed out that though the upper limit of the IP criminal sentence was raised to 10 years, the punishment was still light for suspects in general cases and for auxiliary crimes. There would be a rise of IP infringement cases in the near future, especially after the pandemic, given its huge profit margin. He hoped that all parties could strengthen cooperation, help each other, and make contributions to IPR protection.
In the Q&A session, GU Xiaojun and YU Meng answered questions raised by QBPC members on how to effectively collect and fix infringement evidence for online counterfeiting cases and the rules for the substantive participation of IP right holders in criminal proceedings.