An administrative mechanism enables a party to seek the release of detained goods by providing financial security to the customs authorities during an intellectual property dispute. This article 23 counter-bond procedure is established under the regulations of the People’s Republic of China on customs protection of intellectual property rights. It allows an importer or exporter whose goods have been seized on suspicion of patent infringement to post a guarantee equivalent to the value of the shipment to regain control of the property.
The provision applies specifically to cases involving alleged patent infringement, distinguishing them from trademark or copyright cases where detention is usually absolute until a final determination. Customs authorities hold the funds while the patentee decides whether to initiate a lawsuit or request administrative adjudication. If the patentee fails to act within the statutory timeframe, the goods are released and the bond is returned to the owner.
This system balances the rights of intellectual property holders with the operational needs of commercial entities to maintain their supply chains. It prevents a claimant from using customs detention as a tool to permanently block a competitor’s trade without pursuing a formal legal remedy.
Security for the release of detained goods must be provided in a form that is acceptable to the General Administration of Customs and covers the full value of the cargo. When a party applies for an article 23 counter-bond, they typically submit a cash deposit or a bank guarantee to the local customs office where the goods are held. This financial instrument ensures that if the goods are later found to be infringing, there is a pool of assets available to satisfy any future court judgment or administrative fine.
The amount is strictly calculated based on the declared value of the shipment plus any potential storage costs incurred during the detention period. This requirement prevents importers from undervaluing goods to reduce their security obligations. Banks providing the guarantee must be domestic institutions or recognized foreign banks with a presence in the jurisdiction to ensure the funds can be accessed quickly.
The use of a bond instead of cash is often preferred by large enterprises to maintain liquidity while resolving the dispute. This mechanism protects the interests of the government and the patent holder by securing the potential liability of the importer. It also reflects the procedural requirement that a party seeking to release goods must prove they have the means to cover the damage if their products are eventually proven to be illegal.
Application for the return of property must be submitted in writing to the customs house that issued the detention notice. Upon receiving a valid article 23 counter-bond, the customs officers verify the authenticity of the financial instrument and the authority of the signatory. The customs office then notifies the patent holder that a counter-guarantee has been posted and that the goods will be released unless a court order for further detention is received.
This notice triggers a short window for the patentee to file a lawsuit and seek a preliminary injunction from the people’s court. If the patentee does not provide evidence of a court-ordered asset preservation within the specified time, the customs authority proceeds with the release. The physical handover of the goods occurs after all administrative fees and storage charges have been settled by the owner.
This procedure ensures that the flow of trade is not indefinitely halted by an unproven allegation of patent infringement. It places the burden of further action on the patent holder, who must transition the dispute from an administrative detention to a formal judicial proceeding. The speed of this process is critical for companies dealing with perishable items or products with short market lifecycles.
Strategic considerations regarding the use of financial guarantees involve assessing the likelihood of a successful defense against the infringement claim. An importer who posts an article 23 counter-bond risks the loss of the entire sum if a court eventually determines that the goods violate the rights of the patentee. The bond serves as a ready source of compensation for the plaintiff, which may simplify the enforcement of a judgment against a foreign entity.
However, the ability to release the goods allows the company to fulfill existing contracts and avoid penalties for late delivery or breach of supply agreements. The patent holder also faces a risk, as they must decide whether to commit to a costly litigation within a very tight deadline. If they choose not to sue, they lose the leverage provided by the customs detention and the goods enter the market.
This choice is often influenced by the strength of the patent and the commercial value of the infringing goods. The administrative system thus creates a set of incentives that encourage both parties to reach a settlement or proceed to a quick legal resolution. This balance maintains the efficiency of the port operations while respecting the statutory rights of inventors.
The final disposition of the bond is determined by the outcome of the underlying patent dispute.
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