Lessons from Zespri's Chinese victory

While China has the legal apparatus in place to protect intellectual property (IP) rights, infringements are frequent and enforcement is sometimes difficult.

This is why a successful court case by Zespri against packaging counterfeiters is so important.

Zespri general counsel, Murray Denyer, says Zespri fruit sells in China at a 10-times price premium.

So there is a great incentive for people to take local, or perhaps Chilean-grown, fruit and pass it off as the genuine article.

“This Znishio case involved large volumes: tens of thousands of trays,” says Denyer.

“[They] were unfairly piggybacking on our brand, duping consumers into buying inferior products and therefore damaging the Zespri brand.

“Many Chinese customers do not read English so can easily mistake counterfeit packaging for the genuine article.

DIY monitoring

Warwick Downing is NZTE’s sector manager specialised manufacturing in Tauranga.

He says NZTE staff go unidentified into markets monitoring and noting counterfeit packaging.

“If you are serious about preserving the integrity of a brand in China, you have to actively manage it yourself, rather than rely on Chinese authorities,” he says.

“With the Zespri case, our staff knew what to look for and performed a valuable service.

“Zespri is serious about its brand and its willingness to back it up reassures customers.”

Denyer says Zespri has a very good relationship with New Zealand Trade and Enterprise (NZTE) in Beijing, Shanghai and Guangzhou.

“Its people have been in the market regularly, monitoring our brand and conducting general market intelligence for us.

“Our distributors and customers also keep us informed.”

Zespri’s lawyers on the ground in China – Rouse and Co – worked with local enforcement officers to raid the perpetrator’s establishments.

Packaging and fruit were seized as evidence and a case taken in the lower court in Shanghai was successful.

Nantong Xishu Fruit Trade Company, the company behind the Znishio branded kiwifruit, appealed.

But in late November the Shanghai High Court upheld the lower court’s original judgment.

The company has been ordered to destroy all infringing packaging and labels and to pay NZ$80,000 in compensation.

Denyer says this is a great result.

“The ruling covers our costs: which is good.

“But even better is the wide publicity in the Chinese media which is a real deterrent.”

Three issues

Luke Minford is head of China operations for Rouse.

He says a New Zealand company attempting to protect its intellectual property in China needs a local representative.

“Doing it from New Zealand won’t work,” he says.

There are three factors to take into account:

First, China is a civil jurisdiction, not a common law one.

This means trade marks, patents and other IP must be registered before they can be enforced.