Vietnam - New Decree promotes administrative enforcement

On September 21, 2010, the Government of Vietnam issued Decree No. 97/2010/ND-CP on Sanctioning Administrative Violations in the field of Industrial Property (as one of the regulations for implementation of the Law on Intellectual Property, most recently amended and supplemented in October 2009). This Decree comes into force today, November 9, 2010 and replaces Decree No. 106/2006/ND-CP, dated September 22, 2006, on the same issue.  

Background:

The IP Law of Vietnam was introduced in 2005 (the IP Law 2005) with a view that more and more IP infringements would be brought to the civil courts rather than being handled administratively by Government authorities. However, four years after the implementation of the Law, the Court system was not yet able to handle IP cases effectively. Meanwhile, deficiencies in the Law made it difficult for IP rights owners and Government authorities to take administrative actions against infringements. The amendments to the IP Law were passed in June 2009 with an aim to rectify these deficiencies and facilitate actions through administrative procedure, which remains the most common route for IP rights enforcement in Vietnam. However, there are still issues in the amended IP Law 2009 that need to be clarified to ensure effective enforcement by administrative measures.

Decree No.97/2010/ND-CP has been introduced to address these issues. It brings important changes to administrative enforcement of IP rights in Vietnam. Key changes are summarized below:

Conditions for taking administrative raid action:

Under the IP Law 2005, sufficient warning of the infringement must be made in advance of any administrative action against infringements that do not involve “counterfeit branded goods”. However, in cases where infringers deny infringement and refuse to provide the requested undertaking, it would be difficult to take action against them as they would have enough time to disperse the infringing goods or move the production activities under ground.

Under the amended IP Law 2009, the requirement to make sufficient warning is removed and administrative action will be carried out if the IP rights owners can prove that the infringement “causes damage to consumers, society, or the IP rights owners”. It is, however, unclear as to when an infringement will be viewed as “causing damage”, whether actual loss needs to be proved or whether a likelihood of causing loss is sufficient. This uncertainty makes it difficult for IP rights owners to request administrative actions by the authorities.

The new Decree takes the approach that any infringement will be viewed as “causing damage to consumers, society and the IP rights owner” and accordingly, proof of “causing damage” is no longer a condition for taking administrative action against infringements.

The National Office of Intellectual Property (NOIP) continues to provide expert opinions on infringements:

Where infringements do not involve “counterfeit branded goods”, the enforcement authorities often require a confirmation on the infringement before taking action. In the past, IP rights owners could request the NOIP to provide such a confirmation in the form of an expert opinion because the NOIP is viewed as the most knowledgeable authority in the field of IP, and their opinions are reliable to the enforcement authorities.

After the IP Law 2005 came into force, the NOIP stopped providing expert opinions on infringements to IP rights owners. The IP Law 2005 required that assessment conclusions on IP infringements could only be issued by independent IP assessment agencies (until now, the Vietnam Intellectual Property Research Institute (VIPRI) is the only IP assessment agency licensed under the 2005 IP Law and not until July 2009 did it start providing assessment conclusions on IP infringements).

By interpreting the provisions in the amended IP Law 2009, Decree No.97/2010/ND-CP now makes it clear that as an alternative to seeking assessment conclusion from IP assessment agencies, IP rights owners can also request the Government authorities administering IP field, including the NOIP, to provide expert opinions on the infringements.

Administrative remedies:

Decree No. 97/2010/ND-CP introduces a “detailed penalty bracket” with different levels of financial penalties to be applied depending on the value of the infringing goods and the nature of the infringements with the maximum level up to VND500,000,000 (approx. USD 25,000). In case it is impossible to determine the value of the infringing goods, the financial penalty shall be determined based on the nature and the seriousness of the infringement but not higher than VND90,000,000 (approx. USD 4,500).

The new Decree also provides for the “recovery to the State budget the unjust gain” from conducting the infringement as one of the additional remedies. Clarification is required as to whether “unjust gain” refers to the revenue received or whether it refers only to the “illegal profit” earned by the infringer from the infringing activity, which may be more difficult to prove.

Power to handle infringements:

Currently in Vietnam, various authorities are competent to carry out administrative actions against IP rights infringements and in many cases, IP rights owners are confused as to whom they should file a complaint for action. The new Decree makes a clear division of power between the authorities in handling different types of IP infringements. Accordingly, the Science and Technology Inspectorate is competent to handle all types of infringements, including patent infringements. The Market Management Bureau will focus on taking actions against trade, transport or distribution of infringing or counterfeit goods on the market. Meanwhile, the police will only undertake cases involving counterfeit goods.

It is encouraging that the Decree now sets out clearly the power of the Science and Technology Inspectorate to take action against cybersquatting. In case it decides that the domain names in dispute must be revoked, the registrars and/or Vietnam Internet Network Information Center (VNNIC), the authority managing .vn domain names, shall have to comply with its decision. It is, however, uncertain if this provision is welcome by the Ministry of Information and Communication (MIC). They have indicated that it is inconsistent with the provisions of the IT Law according to which, the registrars/VNNIC would only comply with a court decision, an arbitration decision or an agreement between the parties concerning the domain names in dispute. It is hoped that the Ministry of Science and Technology and the MIC will work together to issue an interministrial Circular to provide a clear guidance for implementation of the new provision.

Conclusion:

Decree No. 97/2010/ND-CP has been introduced with an intention to clarify uncertainties and deficiencies in the current IP Law which have caused difficulties for taking administrative actions against IP rights infringements. It is hoped that after its entry into force, administrative enforcement will be improved in practice. However, there are still concerns about the lengthy process for conducting administrative actions. On the other hand, the determination of financial penalties based on the value of the infringing goods remains a great concern to IP rights owners. The seriousness of the infringement is not always proportional to the value of the infringing goods. More often than not, it is inversely proportional to the value of the infringing goods. In many cases, because the value of the infringing goods discovered is small, the corresponding financial penalty is too low to deter future infringements.