China IPR

Future Motion vs Changzhou First Int’l Trade Co: Defendant Fails In its Effort to Recover Security and Attorneys Fees at CES

Back in January 2016, a Chinese exhibitor at the Consumer Electronics Show (Changzhou Int’l Trade Co.) was reportedly raided for patent infringement by US marshals, after a US court in Nevada issued a Temporary Restraining Order.  That order was based upon a ex-parte motion of plaintiff Future Motion involving claims of infringement of a design patent and a utility patent and (reportedly) a seven minute court hearing where the defendant did not participate.  The case attracted some attention at CES, although few seemed to notice when the plaintiff dropped its case shortly thereafter.  On October 3 of this month another shoe in the case fell, when  Judge Miranda Du determined that the court did have jurisdiction over the issues of Changzhou’s requests for attorneys fees and recovery of the $10,000 security posted, but nonetheless issued an order  denying Changzhou’s motion to recover the security bond and attorneys fees for plantiff’s initation of this case.  According to Changzhou, it incurred $217,628.21 in attorney’s fees in this matter.

The case illustrates the difficulties for both plaintiffs and defendants in enforcing rights and defending rights at trade shows.  Trade shows are short-term events which typically involve exhibitors who might not otherwise be subject to the jurisdiction of the courts where the trade show is held.  It may be difficult for a plaintiff to act quickly, unless it has advance word of who is exhibiting and what products will be offered for sale.  Trade show exhibitors may also be showcasing their most recent products, which may then be used by infringers who develop copycat products.  Trade show exhibitors may come from foreign countries, such as China, with limited knowledge of the local legal regime.  If large scale infringing sales are booked, considerable harm can be caused to legitimate rights holders.  Plaintiffs may also be motivated to bring cases for improper purposes, as defendants may have little incentive to defend their case during the short term of the exhibition.

China has undertaken several efforts in China and in Europe to protect IP at trade shows.  The Blue Sky effort of China of 2007, to increase IP protection at trade shows,  was intended to “chase after cases of high attention by IPR holders for breakthroughs and special progress.”  At that time – in an era where e-commerce was less dominant, there was considerable focus on the Canton Trade Fair, among other venues, as places for display and distribution of counterfeit goods.    ABRO, an Indiana-based company that had had problems at trade fairs in China, reported in 2010 of its experience with trade fair enforcement in Guangdong “several companies were cited for selling counterfeit ABRO products and they were quickly dealt with by local Chinese authorities. These companies are now facing severe government repercussions for their illegal activities.”   Private investigators, lawyers and even foreign government officials often attend these fairs to help companies protect their rights.  When I was IP attaché at the US Embassy in Beijing, I often went to trade shows to see how IP booths were staffed, if English language information was available,  and to determine how often foreign companies used these facilities and with what results.  Often  when enforcement actions were undertaken, first and second time infringers were left off with just a warning. 

China has also worked with the European Commission to protect IP at trade shows in Europe by setting up information desks.  The success of these centers, which apparently also serve to mediate disputes and facilitate coordination with local enforcement, had also been separately evaluated, in a report prepared for the European Commission.

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