Effectively applying a comprehensive IP strategy requires tailoring according to each specific case. This article examines preliminary IP strategy based on a common issue in recent IP infringement cases.
A familiar case: An online shop opened on an internet trading platform selling products infringing IP rights (IPR) including trademarks, copyrights or business names. The infringer was investigated with corresponding infringement evidence established, but the sales volume of infringing products on the online shop was not large enough.
In this case, it is relatively easy to take action to combat infringement and win. However, the rights holder may hope to achieve several objectives at the same time:
- Effectively stop the infringement at minimal cost;
- Recover costs incurred;
- Obtain more substantial compensation; and
- Promote the company, facilitating market development.
But in practice, this is not easy and it is necessary to analyse the feasibility of these objectives from the perspective of IP strategy.
In practice, where there is evidence of infringement, it is possible to stop it at the lowest possible cost by sending a lawyer’s letter or filing a complaint with the online trading platform. However, infringers can react very differently to these measures.
Therefore, while a low-cost action plan is feasible, the effectiveness of the action varies from infringer to infringer, and it isn’t easy to ensure achieving the objective in every case.
If the infringer does not cease infringement after receiving a lawyer’s letter, or opens a new shop under a different name after receiving a complaint from the platform, the rights holder should respond with a backup action plan.
If no backup plan is prepared due to cost considerations, it would likely encourage the infringer’s blatancy and cause other infringers to follow suit. Insistence on low costs may, therefore, have a negative effect.
A comprehensive strategy with a backup plan is appropriate to move forward. If not, it may be in the rights holder’s best interests to hold off for the time being and seek a better opportunity against a stubborn infringer.
COSTS AND COMPENSATION
Although the law supports compensating rights holders for reasonable costs incurred in defending their rights, in judicial practice the relatively high cost is still hardly fully supported.
As a result, rights holders risk either losing their cases if they opt for cheap services, or failing to recover the full cost of defending their rights if they pay too much. There are, of course, isolated cases where higher costs have been awarded, but these are not yet universal.
Second, although infringement is established, evidence relating to the scale of the infringement and the other party’s profits, or damages to the rights holder, may be relatively limited.
It would therefore be difficult to obtain a high award based on the existing evidence alone. Obtaining a higher award may require more expenditure on investigations, evidence and lawyers to continue consolidating the evidence in respect of damages.
From the perspective of IP strategy, therefore, the follow-up plan requires careful consideration of the objectives and value of actions. If the primary objective is to stop infringement and deter potential infringers to protect the market share of the rights holder’s product, then regardless of the cost of the action and whether it can be recovered, it is necessary to move forward with the collection of evidence to achieve a high level of compensation.
However, if the rights holder cares more about the input-output ratio, and does not want to bear more costs, it may be more appropriate to choose an action with less or no further input.
In the IP field, a successful court judgment or administrative penalty decision can potentially enhance trademark brand awareness. Judicial decisions are publicly accessible, which may not only deter potential infringers but also indirectly promote corporate brand reputation.
However, rights holders may be at a higher risk of goodwill infringement if they publicise their defending actions for commercial purposes without seeking legal advice.
The trend of this rising risk can be seen in commercial defamation cases in recent years. Therefore, indirect promotion of a company’s brand through combating infringement is not unfeasible, but needs to be approached with caution.
In summary, the author suggests that rights holders consider defending actions from a perspective of overall strategy to exert their supporting effects, rather than focusing on the costs and benefits of individual actions.
Importantly, avoid rushing into action without a backup plan and abandoning it halfway, which may expose unfavourable situations.
In addition, strategic objectives should be set – with more consideration for brand awareness and product market share – as these are essential to the rights holder’s interests. Only focusing on parts of the issue may leave the rights holder passive when faced with a well-planned infringement.
Of course, IP infringement issues vary in different industries. Therefore, from the perspective of a comprehensive IP strategy, a tailored approach to each specific case with reasonable targets is more effective in dealing with all types of infringements.
Frank Liu is a partner at Shanghai Pacific Legal
Room 2709, 27/F, Plaza 66 II
1266 Nanjing Road West
Shanghai 200040, China
Tel: +86 21 6086 0199
Fax: +86 21 6086 0111