Lusheng Briefing – Legal Framework For Evidence Gathering Activities In Respect Of Intellectual Property Infringements
Lusheng Press Editor
28 Aug 2023
This Briefing is a summary of a more detailed Memo that is available for clients of the firm. The Briefing and Memo have been updated to April 28th 2023 may be used as general guidance on legality of evidence gathering methods that are typically used in China to investigate IPR infringement. This Briefing does not constitute legal advice. It is important that you check with us for any legislative changes that may have occurred since the date of this Briefing, and seek legal advice in relation to any specific evidence gathering activities you plan to conduct in China.
Key Takeaways in this Briefing:
- There is no regulation in China for private investigations, however it is an industry which operates the open. For evidence gathering of IP infringement, the use of private investigators is well known and tolerated by courts and law enforcement authorities.
- The fundamental methods of evidence gathering by investigators, namely, use of an alias, purchase of samples, covert audio and video recording, are all supported by legislation and precedential cases. However, certain equipment, such as tracking and listening devices, are banned, and investigators should not make use of these tools.
- Legislation provides that evidence can not be admitted if it seriously infringes the legitimate rights of others. In practice, this provision is not triggered by the use of ordinary investigative methods described above, including covert video and audio recording without permission, provided that there was no illegal means (ie trespass, coercion) used to obtain them.
- The practice of whistleblowing (ie, voluntary reporting of unlawful activity by someone within an organization) is protected and encouraged in China, regardless of whether the whistleblower is paid a reward.
- Another investigation method commonly used, especially in anti-counterfeiting, is paid informants – that is, investigators who aim to be hired by the target company to pinpoint acts of infringement. While companies that are found to be engaging in IP infringement do not enjoy legal protection for their infringing acts, informants and IP owners who engage them must operate within certain boundaries to avoid potential legal risk.
1.Background - Private Investigations In China
For cases of IPR infringement in China, it is commonplace for the IP owner (or its law firm) to engage investigators to gather evidence of infringement. This evidence may be the basis for filing a complaint to administrative or criminal authorities, or to file a civil lawsuit. While all of these enforcement bodies have powers to search for evidence, the IP owner typically has to make its own efforts to collect evidence in order to file a case.
China does not have a standalone law of evidence, which means that the legal boundaries for lawful and admissible evidence must be found in other legislation, as explained below. Neither is there any legal recognition or regulatory framework for the conduct of private investigations. Self-collection of evidence by IP owners is the norm, and widely accepted. However, there are some explicit prohibitions on certain forms of information gathering, as detailed below.
For IP infringement cases, the typical activities that investigators engage in to collect evidence of infringement include:
- Undercover approach to a target using an alias and business pretext;
- Covert audio and video recording, which may include notarization of the recording;
- Sample purchase, which may include notarization of the purchase;
- Surveillance of people or premises;
- Working with whistleblowers or informants.
We cover each of those activities in more detail below.
2.Legal Framework For Evidence Gathering
Firstly, the Civil Procedure Law sets out general principles for evidence, but does not provide guidance specifically on investigations.
A more relevant item of legislation is the Interpretations of the Supreme People's Court on Application of the Civil Procedure Law of the People's Republic of China” ("Civil Procedure Interpretations”) which state, in Art.106, that evidence shall not be admitted if it seriously infringes upon the legitimate rights and interests of others, violates prohibitive provisions of the law, or is against public order.
There are also “Several Provisions of the Supreme People’s Court on Evidence for Civil Actions” (Revised 2019) (“Civil Evidence Provisions”). These Provisions do not contain much of direct relevance to evidence gathering, although they contain some articles relating to audio-visual evidence which is discussed further below.
The Civil Evidence Provisions also establish that evidence properly notarized can be taken as true unless the other litigant has evidence to rebut its accuracy. While notarization does not per se prove that the evidence has been lawfully obtained, it provides a high level of legitimacy. Notarization of video and audio recording, or of purchase of a sample, is therefore a core competency of investigators.
The most directly relevant piece of legislation for investigations in IP cases is found in another set of SPC Provisions: “Several Provisions of Supreme People's Court on Evidence for Civil Lawsuits Involving Intellectual Property” (2020) (“IP Evidence Provisions”). Art.7 of these IP Evidence Provisions, states:
“The physical objects, receipts, etc. obtained by the rights owner from the accused infringer by himself or by entrusting others to purchase the infringing articles in the name of an ordinary purchaser for the purpose of discovering or proving intellectual property infringement may be taken as evidence to sue the accused infringer for infringement.”
We discuss below how these provisions affect the methods used by investigators.
2.1 Prohibited Investigation Methods & Equipment
There are various pieces of legislation banning the use of “specialized” equipment for detective work, such as signal interception devices, pinhole cameras and tracking devices. Not surprisingly, impersonation of law enforcement or other government agencies, trespassing, forced entry, circumvention of digital or physical security controls, coercion, bribery, or other means of obtaining information by force are also unlawful. In addition, there is criminal liability for illegally gathering, selling or buying personal information.
However, making covert audio or video recording per se is not prohibited, as explained further below. Provided they are not using prohibited equipment, private investigators can make audio or video recordings using ordinary smartphones.
2.2 Use of Aliases
It is normal practice that investigator will use an alias, such as a fictitious or real company, to pose as a potential customer of the target company to obtain information from the suspected infringer. The use of an alias to collect evidence of IP infringement is permitted under the IP Evidence Provisions set out above.
Indeed, the SPC has supported the use of undercover aliases for over sixteen years, dating back to a precedent known as the “Founder” case, published in the SPC Gazette in 2006, in which the plaintiff, Founder, a Chinese software company, arranged for an undercover purchase of a hardware device on which infringing software was loaded at the point of purchase, which was the normal mode of sale by the infringer. The SPC ruled that there was nothing that prohibited this form of evidence gathering, nor did it harm public interest or the legitimate interests of the defendant.
Art. 7 of the IP Evidence Provisions were tested again in a 2021 appeal before the SPC of a patent infringement suit during which the patentee had conducted a notarized purchase of an infringing product using an alias. The defendant challenged the use of an alias, but the SPC found that there was nothing unlawful about this method to obtain the evidence.
2.3 Sample Purchase
The legal authority for sample purchase is the same as that for use of aliases, namely, Art.7 of the IP Evidence Provisions. The Founder case is also authority here – it was not deemed inducement for the plaintiff to have the infringing software loaded onto a device at the point of purchase, because that was consistent with the way the defendant normally sold the infringing software to other customers.
An important point to note, however, is that the infringer must have been engaged in the selling of the infringing items prior to the investigator’s purchase, and was not induced to infringe when it otherwise would not have done (ie, the investigator must not act as an agent provocateur).
2.4 Covert Video & Audio Recording & Surveillance
The Civil Procedure Law and the Civil Evidence Provisions specifically provide for digital audio and video recording to be admitted as evidence, provided that the medium in which it is fixed can be verified as true. Digital notarization tools are an admissible form of evidence capture, and now commonly used. Such recording must also meet the provisions of the Civil Procedure Interpretations, Art. 106, requiring that the collection method not be specifically prohibited (see 2.1 above) and not “seriously harm the legitimate interests” of the other party.
One of these “legitimate interests” may be the right to privacy, enshrined in the Civil Code Art.1032, which provides that “no organization or individual may infringe upon any other’s right of privacy by spying, intrusion, divulging, public disclosure or other means”.
These provisions are broad, so does “serious harm to the legitimate interests” in Art. 106 of the Civil Procedure Interpretations include violation of the right of privacy in Art. 1032 of the Civil Code? In practice, covert recordings do not appear to cause much difficulty for investigations. There are several cases in various courts around China (not IP-related) that have supported the plaintiff’s use of covert recordings against challenges by the defendant. These cases indicate that where the investigator may be conducting recording to gather evidence of infringement - for instance during a meeting at the invitation of the subject - no serious harm to the legitimate interests of the subject would be found. Moreover, use of such material in court proceedings would not be deemed public disclosure.
The same principle would apply to surveillance (ie, following the movement of personnel, vehicles etc at a target’s premises), which is is also a commonly used method of investigation, particularly for anti-counterfeiting. While we have found no published precedents, we believe such activities would be treated similarly covert video and audio recording.
Investigators should be very cautious, however, about any activity, whether recorded or not, that involves observation of individuals at a residential property, as this is more likely to be treated as an invasion of privacy.
2.5 The Personal Information Protection Law
The new Personal Information Protection Law (“PIPL”) which entered into force in November 2021 requires that, where personal information is to be gathered, there is a requirement for the subject to give consent. However, the PIPL is not intended to inhibit the ordinary conduct of business, and where the subject themselves provides their contact information to the investigator, or it is provided by their employer, this would either not be considered “personal”, or fall within the exceptions for obtaining express consent (Art.13). This scenario should apply equally to an investigator using a business pretext as it does to a genuine business transaction. Nevertheless, it is advisable for IP owners to take advice on compliance with the PIPL in respect of (a) any information gathered that may be deemed personal and (b) export of personal information overseas.
2.6 Evidence Gathering by Lawyers
It should be noted that China’s Lawyers Law gives lawyers the right to collect evidence from law enforcement or other government bodies or individuals who may have the relevant information, provided that they show their credentials. This is obviously not a covert evidence-gathering method, but can be useful as a supplemental means of legitimately obtaining information which is not available to the general public.
2.7 Whistleblowers and Paid Informants
IP investigations also frequently rely on information from whistleblowers or paid informants. “Whistleblowers”, as the term is commonly used, means individuals who voluntarily report information of unlawful activity, often within their own organization, whether for a reward or other motivation. “Informants”, in the context of IP investigations, usually refers to people who work on a professional basis to collect information from within target organizations.
A typical mode of operation is that the informant will aim to be employed (formally, or as casual labor) by the target company, and then report on any infringing activities he / she finds. This method is most often used in anti-counterfeiting cases where the infringer is operating very secretively and the only practical way to pinpoint counterfeit products is by having someone working on the inside. The informant may be working as a freelancer, contractor or employee of an investigation agency.
China’s Labor Contract Law, which governs employment relations, requires “good faith” as a basic principle for both parties to an employment relationship. However, the good faith principle is not breached where the employee reports wrongdoing by his or her employer.
Other provisions of the Labor Contract Law, relating to fraudulently obtaining employment, or dual employment, are not relevant to the typical situation of informants hired as casual labor, nor are they likely to apply in the case of an employer committing acts of infringement.
Equally, the Civil Code under the law of Torts (Book VII), where an informant discovers IP infringement at their employer and reports it, the employer would not have any right to claim that a tort had been committed against them.
Overall, Chinese judicial and enforcement bodies are well aware of the use of informants to uncover unlawful activities and appear to tolerate the practice. There are several anecdotal cases mentioned through news reports, although we have not found published judicial decisions specifically addressing the use of informants in the context of IP or other commercial disputes.
In relation to trade secrets, however, the IP owner making use of informant’s information should exercise some care. China’s Anti-Unfair Competition Law provides protection for trade secrets, including imposing liability both on the direct act of theft of trade secrets, and on a party that induces another to do so. In a typical situation, an informant is working as a manual labor in a production line or warehouse, and is not exposed to any confidential commercial information about the target organization. However, in the event that the informant has access to broader information about the employer’s business, collecting and passing on that information may open the informant and, ultimately, the IP owner, to liability for infringement of trade secrets. Of course, information is only eligible for protection as a trade secret where it meets China’s legal threshold for protection, and which it is itself lawfully created or obtained by the target. That threshold is not met where information is simply internal to a company, but not specifically protected, and is accessible to all employees. Nevertheless, the lack of legal merit would not stop an alleged infringer making a claim against the IP owner for tactical purposes. It is highly advisable that, the IP owner, its outside counsel and informant keep records to show the information gathering was focused on suspected acts of infringement and excluded any non-relevant commercial information. As a practical matter, informants are not likely to be discovered, as they generally do not provide formal evidence that would expose their identity.
The leeway afforded to “informants” in the IP infringement investigation context is also predicated on the assumption that the IP owner has reasonable suspicion or some actual evidence of infringement. If that reasonable suspicion proves to be unfounded, the informant should withdraw within a brief period of time. Provided that the IP owner has not made use of any commercial information obtained from the target not related to IP infringement, the target has not suffered any loss. Again, it is important that the IP owner and its outside counsel make use of informants within a properly managed compliance framework.
In short, Chinese law and practice provides explicit or implicit support for typical practices used by undercover investigators to discover IP infringement. These include using an alias and business pretext to purchase samples or gather relevant information provided by the target company, covertly recording business interactions and formalizing this evidence through notarization. Another common method, which is to make use of information from informants working within the target company, is also acceptable provided that it is conducted within certain boundaries.
It is important to bear in mind that, given that the profession is not regulated and has no recognized professional standards, the investigator, or informant, is limited to acting as a ”civilian sleuth”. They may use only ordinary tools such as a mobile phone to record audio and video, and rely on his or her wits to persuade the target to provide information itself, but must be careful to avoid using any equipment or tactics that are prohibited for civilian use. They should ensure that the scope of their investigations remain focused on the discovery of infringing activity, and avoid straying into the use of illegal methods, or engaging in information gathering beyond the scope of discovering IP infringement.
Ideally, IP investigations should be instructed and supervised by a Chinese qualified law firm, to ensure that the methods and scope of the investigation fall within this legal framework.
 (2006) Minsantizi No.1
 (2021) SPC Zhimin Zhong No. 776
 See (2006) Hugaominsan (Zhi) Zhongzi No. 92
China Litigation Group
28th April 2023.