New arrangement for reciprocal enforcement of cross-border judgments to aid IP enforcement in China

This article was initially published by World Trademark Review.

With effect from 29 January 2024, most judgments given in civil and commercial matters will become reciprocally enforceable between the Mainland of China and Hong Kong. Any applicable final judgment given on or after that date will be enforceable.

For IP owners this opens up new possibilities for enforcement of most IP rights – including trademarks, but excluding patents – particularly against cross-border infringers that have, to date, been able to avoid liability because judgments have not been enforceable against Mainland entities that have infringed in Hong Kong or Hong Kong entities that infringe in Mainland China.

For example, many Mainland Chinese companies and individuals sell infringing products online to Hong Kong. Until now, little could be done about this. From 29 January, it will be possible to bring an action in Hong Kong seeking damages. On the other hand, a number of Hong Kong entities manufacture infringing products in Mainland China but commit no infringing acts in Hong Kong. It will now be possible to enforce a damages award in Mainland China in Hong Kong.

Legal provisions

On 29 January 2024 the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region will come into force. The arrangement was signed between the Supreme People’s Court and the Hong Kong Government in January 2019.

The arrangement adopts many of the provisions found in the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the Hague Judgment Convention), which was concluded on 2 July 2019 at the Hague. China was an active participant in the negotiation of the Civil Judgment Convention, although it has not yet joined as a party. The convention had, in draft form, included provisions on the enforcement of IP judgments, but intellectual property was ultimately excluded from the convention because it was not possible to reach an agreement on the provisions.

Hong Kong has enacted the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance to provide mechanisms for enforcing Mainland judgments in Hong Kong. Judgments will be enforceable by an application to the court to register the judgment. The defendant will have an opportunity to oppose, but if the judgment is registered, it can be enforced like a Hong Kong judgment.

The Hong Kong Department of Justice has stated that Mainland China will issue a judicial interpretation to implement the arrangement. This is expected to be promulgated soon.

Judgments relating to IP Rights

The arrangement has a number of provisions relating to IP rights. The table at the end of this article summarises the provisions. There are a number of important exclusions that mean the enforcement of IP rights between the two jurisdictions will not be as strong as it could be. The exclusions are as follows:

• Interim relief of any kind is not enforceable.
• Final injunctions are not enforceable in IP cases; however, final injunctions will be enforceable in trade secret cases.
• Patent infringement cases are excluded entirely. This includes Hong Kong short-term patents and Chinese utility models.
• Standard essential patent (SEP) licensing rate determinations are excluded.

The exclusion of interim relief is also found in the Hague Judgments Convention. For the enforcement of Mainland judgments in Hong Kong, interim relief will, in any event, be available at least for asset freezing purposes. Section 21M of the High Court Ordinance allows a party to apply for interim relief in support of foreign proceedings that will result in a judgment enforceable in Hong Kong.

Punitive and exemplary damages enforceable

The arrangement allows for the enforcement of punitive and exemplary damages. This could be quite impactful, because Mainland courts have in recent years ordered substantial punitive damages. Hong Kong courts also have the power to order punitive or exemplary damages, although this is rarer.

The arrangement is broader than the Hague Judgment Convention, in which Article 10 allows a court to refuse enforcement of punitive or exemplary damages. (Article 45 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) provides for “pre-established” damage, or what is generally called ‘statutory damages’, which are sometimes argued to be punitive or exemplary.)

Definition of ‘IP right’

‘IP rights’ are defined in Article 5 of the arrangement by reference to Article 1(2) of the TRIPS Agreement. This defines ‘intellectual property’ as all categories of intellectual property that are the subject of Sections 1 to 7 of Part II. (These rights are also set out in the definition section in Section 2(1) of the ordinance.) Those categories are:

• Section 1 – copyright and related rights;
• Section 2 – trademarks;
• Section 3 – geographical indications (GIs);
• Section 4 – industrial designs;
• Section 5 – patents;
• Section 6 – layout-designs (topographies) of integrated circuits; and
• Section 7 – protection of undisclosed information.

In addition, the arrangement provides for protection of plant varieties by reference to Paragraph 123(7) of the China Civil Code and the Plant Varieties Protection Ordinance, both of which protect new plant varieties.

Passing off and acts of unfair competition under Article 6 of the China Anti-unfair Competition Law are also covered by the arrangement by specific reference to these causes of action in the operative provision relating to IP rights, Article 17.

Article 6 of the China Anti-unfair Competition Law provides protection for rights similar to passing off, including engaging in acts that mislead a person into believing that the products or services of one person are connected to those of another. This includes through the use of:

• labels;
• packaging;
• names;
• enterprise names; or
• domain names.

Any other IP rights are explicitly stated in Article 5 not to be covered.

Decisions relating to validity of IP rights

The arrangement excludes the recognition and enforcement of a judgment relating to the validity of an IP right. However, if a judgment, for example, finds a design right valid and infringed, and orders damages be paid, those damages may be enforced. (Article 15 of the arrangement provides that a ruling on liability based on a finding that an IP right is valid may be enforced. Section 15(3) of the ordinance provides for the enforcement of Mainland judgments in Hong Kong.)

The exclusion of recognition and enforcement of the validity of IP rights is, in itself, not objectionable. This reflects the fact that IP rights are territorial and their validity should be determined by domestic courts. It does, however, leave a lacuna in the law. Often, a party will incur and be awarded substantial costs in Hong Kong when challenging the IP rights of a party from Mainland China. These costs are often unrecoverable because the Mainland party does not have assets in Hong Kong. The arrangement does not provide a mechanism for recovering these costs in Mainland China.

Territorial and subject matter jurisdiction of original court

For infringements, only judgments in relation to acts that occur in the territorial jurisdiction of the requesting court in relation to rights registered or otherwise protected in the original jurisdiction can be enforced (see Article 11(4) of the arrangement and Sections 21(a)(1) and (2) of the ordinance).

For disputes over commercial contracts, the original court will be considered to have jurisdiction if, among other things, any of the following requirements are met:

• The defendant was a resident or registered in some way (eg, as a branch) within its jurisdiction.
• The place of the performance of the contract was within its jurisdiction.
• The parties have not objected to jurisdiction (see Article 4(1) of the arrangement).

This provision adopts some of the criteria for enforcement in Article 5 of the Hague Judgment Convention.

Default judgments may be enforced

Article 8(4) of the arrangement specifically provides that default judgments may also be enforced where there is a document certifying that the person has been legally summoned or that the judgment itself states this.

Res judicata or issue estoppel not overridden in Hong Kong

Section 28(4) of the ordinance provides that a Hong Kong court may continue to recognise any matter of law or fact that would have been recognised at common law. Therefore, for example, findings on the validity of IP rights made between the same parties may be recognised under principles of issue estoppel or res judicata.

What can and cannot be enforced?

The following table summarises what can and cannot be enforced by reference to the arrangement (referred to by article number) and the ordinance (referred to by section number).

Types of action	Damages	Punitive / exemplary damages	Injunctions	Costs
Infringement of:trademarkscopyrightGIsdesignslayout designs Passing off / Article 6 of the Anti-unfair Competition Law	Yes, Article 17(1), but only for infringing acts that occurred in the requesting place and where an IP right is the subject of protection in the requesting place; Article 11(4); Section 16	Yes, Article 17(1), same proviso as for damages; Section 16; Section 18(c)(i)	No, Article 17(1); Section 16	Unclear, Article 4(1) and Section 18 allow for costs; Article 17(1) and Section 16 appear to exclude them. See below.
Infringement of patents (including short-term patents)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(a) and (2)(a)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(a) and (2)(a)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(a) and (2)(a)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(a) and (2)(a)
Trade secrets	Yes, Article 17(2)	Yes, Article 17(2), Section 18(c)(ii)	Final: Yes, Article 17(2)Interim: No, Article 4(1); Section 16(1)(b)(i); Section 2(1) definition of ‘Hong Kong judgment’ and ‘Mainland judgment’	Yes, Article 4(1)
Breach of commercial licence	No, Article 3(2), Section 5(1)(c); Sections 7(1)(b) and (2)(b)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(b) and (2)(b)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(b) and (2)(b)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(b) and (2)(b)
SEP FRAND licence rates	No, Article 3(2), Section 5(1)(c); Sections 7(1)(b) and (2)(b)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(b) and (2)(b)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(b) and (2)(b)	No, Article 3(2), Section 5(1)(c); Sections 7(1)(b) and (2)(b)
Anti-suit injunction (interim or final)	N/A	N/A	No, Article 4(1), Section 2(1) definition of ‘Hong Kong judgment’	N/A
Validity of rights determined by court directly or on appeal from trademarks or patents registries	N/A, Article 15; Section 15	N/A, Article 15; Section 15	N/A, Article 15; Section 15	N/A, Article 15; Section 15

For IP infringement actions covered by the arrangement, there is a conflict in the provisions as to whether costs can be enforced. Under Article 4(1) of the arrangement, a ‘judgment’ is stated to include any order or allocator. An ‘allocator’ is an order issued after taxation of costs setting out the costs to be paid. Section 18(2)(b) of the ordinance also provides that a judgment must be registered in Hong Kong for “any costs duly certified by the original mainland court”. However, Article 17 provides that for IP infringement, reciprocal enforcement is confined to relief for monetary damages.

While this seems to have been drafted to provide that injunctions will not be enforceable, it arguably also cover costs. Section 16 of the ordinance, in relation to enforcement of IP judgments in Hong Kong, specifically states that ‘excluded relief’ is everything other than “monetary damages”. This could be argued to exclude costs. Costs are not monetary damages, but an indemnity for costs incurred in bringing the action. On the other hand, it could be argued that orders for costs are not ‘relief’ in themselves but only a consequential payment to be made from losing a case.

Far-reaching impact

The arrangement is likely to have a far-reaching impact on cross-border legal disputes. The limitations on enforcement in relation to patents will limit the impact for patentees. However, parties whose trademarks, copyright or other non-patent rights are infringed by cross-border infringers now have a new weapon to enforce damages awards in the infringer’s home jurisdiction.

Douglas Clark and Monique Woo

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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication. This article was last updated on 14 March 2024.