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Settlement of IP infringement and dispute resolution: Why court action is unpopular?

02

APR

2019

In Vietnam, the legal framework for resolving disputes and dealing with infringements of intellectual property (IP) includes both international and domestic laws. Vietnam is a signatory of a number of important international conventions such as the Berne Convention, the Rome Convention, TRIPs, the Paris Convention, the PCT, the Madrid Agreement and Protocol…etc, while relevant domestic laws comprise of the Civil Code, the Criminal Code, the IP Law, the Law on Administrative Sanctioning and their subordinate legal documents. Generally, an IP infringing act can be subjected to civil, administrative or criminal penalties, depending on the nature, extent and scope of the infringement itself.

Whenever an IP right owner having a reason to believe that his IP right is being infringed, he may take one of the following options to protect his legitimate rights and interests: (i) taking an informal action by sending a Cease and Desist letter to the suspected infringer, followed by negotiation for a possible amicable settlement; (ii) Taking a formal action, which may include an administrative, civil, or criminal action against the infringer

Practically speaking, taking an administrative action in the form of a sudden raid is the most common way against an IP infringement in Vietnam. Such an administrative action is often applied to all kind of IP infringements, of which software copyright, trademark and industrial design account for a majority of infringement cases. Infringers will be compelled to terminate their infringing acts and will be subject to the following remedies: warning, monetary fine, confiscation and/or destruction of IPRs-infringing goods and suspension of relevant business activities for a definite term or even permanent closure. It is noteworthy that acts of IP rights infringement causing damage to right holders, despite of being a civil nature, are also subject to administrative sanctions. Competent authorities for this includes: (i) Inspectorates under the Ministry of Science and Technology and under the Ministry of Culture, Sport and Tourism(ii) Market Management Department (MMD), (iii) Custom offices, (iv) Police agencies, (v) Border Defence Forces and (vi) the People’s Committees of all levels.

This paper summarizes the results over the past years with focus on resolving disputes in courts and provides some analysis of the status quo.

Administrative measures, during 2012-2015, the Inspectorate under the Ministry of Culture, Sport and Tourism inspected and dealt with 386 cases of copyright and related rights infringement and imposed a total monetary fine of over VND 9 billion in 384 cases. The Inspectorate under the Ministry of Science and Technology handled 473 cases against industrial property right infringements, in which they issued Caution against 66 cases and fined 264 cases with nearly VND 6 billion. The Market Management Department at provincial level (MMD) handled 22,441 cases of IP infringements and fined nearly VND53 billion. From 2015 to 2017, the MMD handled 11,794 cases and fined more thanVND84 billion; 67.8% of the infringements related to trademark counterfeit and GI goods, 17.3% to fake stamps, labels and packaging and the remaining 14.9% were the IP rights-infringing goods.

Civil court cases are limited in quantity. The Supreme People's Court’s statistics showed during 2006 - 2016 there were 182 IP dispute petitions filed to Courts (158 disputes over copyright and related rights and 24 disputes over industrial property) and the courts resolved 174 cases, including judgments (first instance and appellate), recognition of agreement between parties, suspension of hearings or transfer to another agency for settlement. The Courts also handled 200/235 trade-commercial disputes involving IP rights. Types of IP disputes handled by courts tend to increase in number as well as in nature, complexity and seriousness.

Regarding mediation or arbitration mechanism: It was reported that until now Trade Arbitration has not yet handled any IP infringement case.

Criminal cases against IP infringement have still been nominal in quantity. Under the old Criminal Code promulgated in 1999, amended and supplemented in 2009, the Courts during the period 2006-2016 handled at first instance 21 cases; brought to trial 13 cases of which 12 were accused of “infringing upon industrial property rights” pursuant to Article 171 of Criminal Code.

TRIPs, an Agreement administered by WTO requires its members to apply criminal procedures and penalties against willful trademark counterfeiting or copyright piracy on a commercial scale. As a signatory, in an effort to meet these "minimum standards", Vietnam introduced criminal penalties against willful infringement at a "commercial scale" in Article 170b (copyright) and in Article 171 (trademark and GI infringements) of the amended Criminal Code in 2009.

However, up to date, there is no interpretation nor clear explanation of "commercial scale" by competent authority in any subordinate legal document. As a result, very few criminal cases were prosecuted against IP infringement during this period.

Obviously, the number of IP infringement cases handled by both criminal and civil courts has been too modest. We do not have official statistics for recent years 2016-2017 even though the publicity of the courts’ verdicts and decisions is mandatory pursuant to Resolution of the Supreme People's Court in an attempt to clarify court proceedings. If we take into account all lawsuits filed to the courts but have not yet been heard or have been heard at the first instance but were appealed so not yet published on the court's website, then there are about 20 IP disputes cases brought to trial per year on average.

Under relevant Articles 170b and 171, section 1 (basic sanction) of the Criminal code, as amended in 2009, a request from the IP right holders is a prerequisite to initiate a criminal action against the infringer. From business perspective, this is another problem which discourages the IP right holders from co-operating with competent authority in a criminal action, due to the fact that the IP right holders, which in many cases are giant companies, are often afraid of potential damage to the company image caused by filing such a request (too aggressive, for example).

Under the new Criminal Code which came into effect as of January 1, 2018, relevant Articles stipulate that an infringer is subject to criminal penalties based not only on the (vague) commercial scale, but also on other criteria such as illegal profit gain, or damage caused by the infringing act, or the value of the infringing goods, each equivalent to a specific amount of money. In addition to individuals, this is the first time commercial legal entities are also subjected to criminal procedures and penalties under the new law. It is expected that these changes will pave the way for more criminal cases against IP infringement in the future.

The factors listed below are the main reasons for the above situation:

a) With simple procedure, time and cost-effective option, administrative sudden raid remains the most common measure against IP infringements, notwithstanding this measure is deemed inappropriate because in nature IP rights are civil rights and thus, must be resolved primarily by civil means. Although administrative measures do not address the matters of civil damages, it is still a common and advisable option because in many cases, after the issuance of a Decision on administrative sanction, the right holders, via their IP attorneys, can follow-up with a negotiation and then reach an amicable settlement with the infringer and by so-doing, the right holders indemnify the infringer from possible court action on one hand, while manage to obtain a significant amount of compensation out of court on the other. Some cases go all the way to the Court before any amicable agreement can be concluded.

b) Unwillingness of aggrieved party to initiate a lawsuit: Initiating a lawsuit is often seen as the last resort by the aggrieved party. Main reason for this reluctance is that the petitioner is afraid of being "scandalous", “being discreditable” because he has to "go to court." In production and business activities, disclosure of goods or products subject to counterfeiting may cause nervous psychology and uneasy fear for consumers, resulting in reduced turnover, even loss of customers;

c) Time delay and dragging out by court in handling a case. This chronic weakness of the handling authorities has been the main factor that discouraged IPR owners to pursue court proceedings. The law stipulates the time limit for preparation for first-instance trial of a civil case is 4 months, for a commercial-commercial case is 2 months from the date the court receives the petition; if the case is complicated or due to objective obstacles, time limit may be extended, but not exceeding two months for civil cases and one month for business-commercial ones. In fact, the length of time for handling IPR disputes has always been long, for a variety of reasons, but largely due to shortage of IP knowledge of judges.

d) No IP specialized Court and insufficient human resource. Up to now, there is no IP specialized court in Vietnam. IP specialized court is viewed as the answer and solution to address various problems caused by insufficient human resource and judges with poor IP knowledge.

e) Unclear and controversial way of damage determination. The IP Law provides that damage caused by an IPR infringement includes: (i) Material damages, including property damage, loss of income, profits, business expenses, reasonable expenses for the prevention and remedy of losses, and (ii) Mental damages, including damages of honor, dignity and reputation, determined on the basis of the actual loss suffered by the IPR holder. However, due to the lack of detailed and feasible guidelines, the results of damage calculation have, in many cases, been rejected by the other party. Another reason leading to this situation is that plaintiffs often determine the value of damage on the basis of the value of genuine goods and services sold on the market, meanwhile the defendant tend to ask the court to set the value of the damage on the basis of his/her price list. Further, the law stipulates that if the plaintiff cannot determine the amount of compensation for material damage, the court, ased on the level of damage, will fix the damage but not exceeding VND500million (approx. US$22,000). In cases where the plaintiff can prove mental damage, he/she may request the court to decide compensation level within the range of VND5- 50 million and pay the reasonable expenses to hire a lawyer. This way of damage determination and damage fixation by court seems controversial and unconvincing.

f) IP assessment and professional opinion: In judging IPR disputes, IP assessment report and professional opinion constitute an important factor and is considered as source of evidence. The court may issue a decision to solicit expertise, in the form of IP assessment report, from the Institute of Intellectual Property (VIPRI) or seek professional opinion from the Office of Intellectual Property (NOIP) to support them in determining IPR infringing acts. Particularly, for settling the disputes relating to IP right opposition or invalidation of protection titles (for instance, patent or trademark registration) the court must acquire and rely on the conclusions of NOIP and VIPRI, even though the court itself can give its judgment based on the evidence provided by the parties. The overwhelming reliance on the said two agencies has led the court to temporarily suspend the cases for months, even a year in some cases. Furthermore, in case their opinions are different, the court is falling into an awkward situation and as a result, the case is dragged out again indefinitely.

g) Heavy workload at the Court: Many judges and court clerks have quit their jobs recently as a result of heavy workload at the Court. Statistic show that a judge in Ho Chi Minh City may have to handle 116 cases per year, which equivalent to 10 cases each month.

For such reasons, the tendency towards using administrative measures or reaching out- of court agreements against most types of IP infringements seems understandable, although administrative measures reveal a lot of weaknesses.

In conclusion, as the settlement of IPR disputes by civil measures proved to be popular and effective mechanism for IPR protection in most developed countries, sooner or later, Vietnam must follow that trend. The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) that Vietnam and the other 10 countries in the pacific rim including Chile, Japan, Australia, Brunei, Australia, Malaysia, Mexico, New Zealand, Peru, Singapore signed on March 9th 2018 in Santiago, Chile, will require IPRs to be protected under a higher, more stringent standard in order to improve the effectiveness of IPR enforcement. This eminent convergence would necessitate the setting up a specialized IP court as well as articulately clarifying the contents of IP right-infringing and counterfeit goods in Vietnam, in the near future.

About the Firm

Pham & Associates
Address No.8 Tran Hung Dao St, Hoan Kiem Dist, Hanoi, Vietnam
Tel 84-24-3824 4852
Fax 84-24-3824 4853
Email hanoi@pham.com.vn
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