Upcoming Fordham Program on Asian Antitrust

 

antitrustprogram.jpg

Antitrust agency heads from the Federal Trade Commission, Department of Justice, Competition Markets Authority, and EU Commission will deliver keynote remarks at this 43rd annual event.  Panel discussions will address topics such as  antitrust and intellectual property in Asia,  international antitrust cooperation in today’s multicultural environment, and antitrust enforcement in China. The conference concludes with an in-house counsel roundtable, “The China Challenge.”  The program will be held September 22 – 23 at Fordham University.

I will be on a panel on September 22 from 11:20 a.m.–12:35 p.m. speaking in my academic capacity on “Antitrust and Intellectual Property in Asia: Convergence? ” with H. Stephen Harris Jr., Partner, Winston & Strawn  moderating.  Other panelists include  Dina Kallay, Director, Intellectual Property and Competition, Ericsson, Inc.; and Joshua Wright, Senior Of Counsel, Wilson Sonsini Goodrich & Rosati.

Additional information can be found at: http://www.fordham.edu/info/20689/competition_law_institute

Comments on Draft Guidelines on Disgorgement and Fines in AML Matters

Attached are comments of the ABA Sections of Antitrust and International Law  (ABA) and the George Mason University Global Antitrust Institute (GAI) on the draft guidelines of the National Development and Reform Commission on Disgorgement and Fines in Antimonopoly Law matters. The ABA comments are bilingual and have the complete text of the draft guidelines included in the package that is being made available here.  The guidelines were published for public consultation on June 17, 2016.

The two sets of comments offer two slightly nuanced approaches in their understanding of the final drafting responsibilities for these guidelines.  The ABA comments are nominally  directed to the Antimonopoly Commission of the State Council, while the GAI’s Comments are more directed to the National Development and Reform Commission which released this draft for eventual adoption by the Antimonopoly Commission.  The relationship between these drafts and an official adoption by the AMC is not clear to me, as the NDRC announcement of the draft states that the drafting of the guidelines are in the work plan of the Antimonopoly Commission, and that NDRC undertook the research and drafting (根据国务院反垄断委员会的工作计划,我们研究起草了《关于认定经营者垄断行为违法所得和确定罚款的指南》(征求意见稿),现面向社会公开征求意见.). It does not explicitly say that this research and  drafting was undertaken on behalf of the AMC.  Moreover, comments are to be delivered to the Pricing Bureau of NDRC, not the NDRC itself, which may suggest that this is indeed a research project (发送到国家发展改革委(价监局).  It is my view that considering the continuing battle of drafting responsibility by Antimonopoly enforcement agencies + SIPO,  in the IP Abuse guidelines, which the State Council has recently said is the responsibility of these four agencies and the State Council Legislative Affairs Office, final drafting  responsibility for an interagency antimonopoly law guideline may not be easily assumed at this time.  If others in the antitrust community have more specific information, I welcome them posting it here.

Regardless of which agency is the lead, the sharing of drafts with this website and others helps to increase our understanding of the overall process through sharing of different commenters’ positions, for which I am grateful.  I hope that over time Chinese agencies will also make all non-confidential comments publicly available.

GAI’s recommendations include that the Draft Guidelines be revised to limit the application of disgorgement (or the confiscating of illegal gain) and punitive fines to matters in which: (1) the antitrust violation is clear (i.e., if measured at the time the conduct is undertaken, and based on existing laws, rules, and regulations, a reasonable party should expect that the conduct at issue would likely be found to be illegal) and without any plausible efficiency justifications; (2) it is feasible to articulate and calculate the harm caused by the violation; (3) the measure of harm calculated is the basis for any fines or penalties imposed; and (4) there are no alternative remedies that would adequately deter future violations of the law.  In the alternative, and at the very least, the NDRC should expand the circumstances under which the Anti-Monopoly Enforcement Agencies (AMEAs) will not seek punitive sanctions such as disgorgement or fines to include two conduct categories that are widely recognized as having efficiency justifications: unilateral conduct such as refusals to deal and discriminatory dealing and vertical restraints such as exclusive dealing, tying and bundling, and resale price maintenance.

GAI also urges the NDRC to clarify how the total penalty, including disgorgement and fines, relate to the specific harm at issue and the theoretical optimal penalty.  According to GAI, economic analysis should determine the total optimal penalties, which includes any disgorgement and fines.  When fines are calculated consistent with the optimal penalty framework, disgorgement should be a component of the total fine as opposed to an additional penalty on top of an optimal fine.  If disgorgement is an additional penalty, then any fines should be reduced relative to the optimal penalty.

Finally, GAI recommends that the Anti-Monopoly Enforcement Agencies (AMEAs) rely on economic analysis to determine the harm caused by any violation.  When using proxies for the harm caused by the violation, such as using the illegal gains from the violations as the basis for fines or disgorgement, such calculations should be limited to those costs and revenues that are directly attributable to a clear violation.  This should be done in order to ensure that the resulting fines or disgorgement track the harms caused by the violation.  To that end, GAI recommends that the Draft Guidelines explicitly state that the AMEAs will use economic analysis to determine the but-for world, and will rely wherever possible on relevant market data.  When the calculation of illegal gain is unclear due to lack of relevant information, GAI strongly recommends that the AMEAs refrain from seeking disgorgement.

These comments are broader than IP-related antitrust.  One common theme they share with IP damage issues is the low utilization of economic calculations to determine damages, and unclear sensibility of when damages are adequate, deterrent or punitive.

The comments also do not address the relationship, if any, between low IP damages and high antitrust damages for IP abuse, except in the broadest sense that excessive damages may create over deterrence.  The Chinese government and academics are also increasingly focused on the problem of low IP damages, including possibilities of providing for punitive damages and higher compensatory damages,  the availability of discovery for damage calculations, such as in the trademark law and with experiments in increasing statutory damages or relying on alternative calculations such as actual or implied royalties such as occurred last year in Jiangsu (See 江苏固丰管桩集团有限公司诉宿迁华顺建筑预制构件有限公司侵害发明)专利权纠纷一案[(2015)苏知民终字第00038]), where an implied royalty was used for perhaps the first time in a patent case. The issue is also actively being discussed by academics. See, e.g., 刘自钦 , 著作权惩罚性赔偿制度在中国大陆的具体运用, Macau Law Review, No. 10, at p. 123 (Liu Zichen, Substantial Application of the Punitive Compensation System for Copyright in Chinese Mainland – Based on American Experience and the Chinese Reality).

­The current reality is that IP damages remain too low and non-deterrent.  To me this suggests a possible issue of disproportionality between IP protection and antitrust enforcement for IP abuse, or as I have often said one cannot have IP ‘abuse’ without having IP ‘use.’   On June 7, 2016 I had the pleasure in my official capacity of testifying before the House Judiciary Committee, where I discussed the issue of the large disparity between high antitrust damages and low patent infringement damages.   My testimony is also on the PTO website.  I recently calculated that the current ratio of average patent damages as determined on the www.ciela.cn database and the Qualcomm damage imposed by NDRC is about 50,000 to 1 (18,000 USD to 975 million USD); it is only somewhat lower if other databases are used.  As I noted in my testimony, antitrust damages and patent damages address different issues and thus may not always be directly comparable.  However, if the ratio is wildly disproportionate the ecosystem for innovation and technology transfer could erode.  Many companies already do not want to transfer technology to China, for fear that their IP will not be adequately protected.  As I have noted, the data already suggests that China is an under-licensed market.  Some companies may also now be avoiding China because damages are too low and/or antitrust risks are too high.  If antitrust damages become be too high in relationship to the actual value of a patent, incentives to disclose patentable inventions may erode – which itself may erode competition in the long run.  Moreover, China will suffer as it may not be able to obtain leading-edge technology.  I personally believe that antitrust and IP damages should not be wildly disproportionate, which should be another factor in antitrust damages, IP damages and in China’s efforts to become an IP “strong country.”

This blog remains my academic, personal and non-official observations and should not be construed as the opinion of the US government, or any former client or third party or even any academic institution with which I am affiliated.  Corrects and comments in English or Chinese are most welcome!

 

 

 

 

New State Council Decision on Intellectual Property Strategy For China as a Strong IP Country

Statecouncilwordlcoud.PNG

On July 18, 2016, the State Council issued a new policy document,国务院关于新形势下加快知识产权强国建设的 若干意见-重点任务分工方案  — the “Opinion of the State Council on Accelerating the Construction of Intellectual Property Powers for China as an Intellectual Property Strong Country under the New Situation –Division of Tasks.”  Here’s a link to this action plan (docketed as State Council  Working Office No. 66)  , and a link to the machine translation, from which the world cloud above is drawn.   The action plan itself is drawn from a State Council document issued in 2015 on accelerating the establishment of a strong IP country in the context of a new situation.  This 2015 document identified such problems as China being a big country for IP, but not a strong country, protection was not adequately strict, infringement was easy and pervasive, and that these factors were affecting industry’s efforts to innovate.

As I discussed previously, the idea of China needing to become a strong IP country appears in the 2014-2020, National IPR Strategy Action Plan, which has the goal of “Striving to Build A Strong IPR Country”  (努力建设知识产权强国). While China indeed has become “big” on most scales: invention patent filings, trademark, utility models and design patents, intellectual property litigation, criminal IP litigation and administrative litigation, to name a few, “strong” suggests quality, which is much harder to judge.

Here are a few specific observations about this action plan:

  1. Much of the action plan repeats existing efforts, through the MofCOM IPR Leading Group and SIPO’s National IP Strategy Office, and their current efforts at analyzing and coordinating IP effort, as well as cooperative activities (Arts. 1, 3, 13, 15, 18, 21, 22, 25, 30, 44, 88, etc.).
  2. There are greater efforts to incorporate IP into macroeconomic strategies, such as in calculations regarding the national economy and national social welfare (Art. 9), as well as credit reporting (Art. 23).
  3. Increasing compensatory  and punitive damages are a focus (Arts. 14), which have also been an effort of China’s IP courts.  This is one of the key civil-law reform proposals in this plan.   There continues to be an undue emphasis on speed, which I assume is focused on patent administrative enforcement as a more rapid remedy (Art. 16).  China is already a fast moving IP environment.
  4. International cooperation in criminal enforcement is underscored (Arts. 19, 21, 22).
  5. Regarding trade secret protection, the focus is on revising trade secret laws, and protecting IP when employees change jobs (Art. 24).  Changes to China’s discovery regime and other appropriate measures which would greatly assist trade secret claimants, are not discussed.
  6. Geographical indications are a focus, including drafting a stand-alone GI law at “the appropriate time” (Art. 32), increasing the role of trademarks in promoting farmer prosperity (Art. 58), and promoting GI products (Art. 90).
  7. Regarding the long-delayed IP Abuse Guidelines, NDRC, MofCOM, SAIC and the State Council Legislative Affairs Office are all listed as being responsible for drafting “according to their responsibilities” (Art. 36).  Rules on standard essential patents that are based on FRAND licensing and “stopping infringement” are also noted (Art. 38), with the involvement of AQSIQ, SIPO, MIIT, and the Supreme People’s Court).  Encouraging standardization of Chinese patents also remains a priority (Arts. 61, 71).
  8. Service Invention Regulations, an area of some controversy are not specifically noted as a priority.  Encouragement is to be given to enterprises to set up appropriate invention recognition and reward programs in accordance with law (Art. 45), and research is to be undertaken in giving compensation for new scientific achievements (Art. 46).  The language may suggest that more flexibility will be given contractual arrangements and the market, as was agreed to bilaterally between China and the United States.   Relevant agencies involved in these efforts include SIPO, MoST, Ministry of Education, Ministry of Finance, Ministry of Agriculture, SASAC, Chinese Academy of Sciences, MIIT, Ministry of Defense, etc.
  9. Chinese universities are also encouraged to become more actively engaged in commercialization of technology, through establishment of technology transfer offices (Art. 53) and other efforts.
  10. The impact of US efforts to study IP-intensive industries in the US economy is also apparent in this plan in terms of the government’s efforts to investigate promoting IP intensive industries in the Chinese economy, government procurement of products from IP intensive industries, and developing model districts for IP intensive industries (Arts. 55-56).  Interestingly, there is no specific reference to engaging economists on any of these efforts, despite the role of foreign economists in similar efforts, some of who have also directly engaged China on how to determine IP-intensity in an economy.
  11. There is discussion of using tax and financial policies to promote IP creation in China (Arts. 98, 99).  There is no explicit discussion of harmonization with OECD guidelines regarding patent boxes and other forms of international tax avoidance.
  12. The report discusses a number of strategies and plans to reduce overseas IP risks facing Chinese companies, including assisting Chinese companies in strategic planning, patenting and licensing (Arts. 72-76), developing information resources on risks and cases (Arts. 78-79), and – rather ominously – developing policies for countering large intellectual property cases overseas (with the support of MofCOM, Customs, SAIC, AQSIQ, NCA, and the China Council for the Promotion of International Trade – “CCPIT”).   There is no discussion on any changes to current technology import regulations which impose onerous indemnity and non-grant back requirements on foreign licensors.
  13. The report directs research to be conducted of placing IP officials overseas in important countries, region and IP organizations.  Although China’s current IP attaché in the United States is a MofCOM employee, the responsible agencies for this effort include SIPO, NCA, SAIC, and CCPIT (Art. 85).  The first Chinese IP attaché was dispatched to the United States pursuant to a bilateral commitment of the  2005 Joint Commission on Commerce and Trade.
  14. The report notes that China will become more involved in promoting a more “fair and reasonable” international IP regime, through support of the Doha amendments to the TRIPS Agreement, the Convention on Biodiversity and various IP conventions.  The Hague Convention on Industrial Designs is noted, but not UPOV 1991.  Promotion of intangible heritage and folklore are also noted (Arts. 59. 87).
  15. IP talent creation and training are also key elements of the plan (103-105).

 

Often in looking at plans like these, it is also equally important to ask what is not being covered.   The plan does not focus enough on a China where there is greater scientific collaboration with foreign scientists and engineers, which are also result in an increasingly large number of co-invented patents.  Similarly, increasing Chinese investment in IP-intensive industries in the United States means that many Chinese companies will own substantial IP interests and may be less inclined to view IP issues as “us” vs “them.”  The relative under-emphasis on civil remedies for IP issues in this plan is also troubling, as the availability of adequate civil remedies is what drives IP commercialization.

The report also does not suggest increasing the role of economists in IP and antitrust agencies, despite a clear focus on increasing the IP-intensity of the Chinese economy. Gaps in Chinese law, such as denial of copyright protection for sports broadcasting, weak protection for trade dress, and “circular” litigation between the patent and trademark offices and the courts which may delay final adjudication on matters, controlling trademark squatting and subsidies for unexamined patents are not discussed.

Although there are many positive aspects of this plan, I believe that focusing on issues like compulsory licensing, the Doha Declaration and folklore, or what appears to be political solutions to overseas infringement may also not deliver as much value to the Chinese economy and China’s scientists, engineers, artists and entrepreneurs, as returning to core IP concepts which let the market govern IP creation and enforcement through such measures as improving the scope of rights that are protected under Chinese law, limiting government intervention, increasing the role of the civil judicial system, and promoting increased collaboration.

USPTO Beijing Position Opens

USPTO has announced a vacancy in its Beijing Office at the US Embassy.  The vacancy announcement number is  N78: 1905-058.  This position is open to those who are legally resident in China with the requisite qualifications.  The position closes  June 21, 2016.   Here is an excerpt of the announcement – contact the US Embassy HR Section (see below) for further details.

       Legal Advisor

       Foreign Commercial Services/

       U.S. Patent & Trademark Office

            06/08/2016

       Non-Sensitive

This position is advertised under the Locally Employed (LE) Staff Program of the United States Mission in China.  All applicants must already have relevant documentation to legally reside and work for the U.S. Government in China to be eligible for consideration. 

POSITION:                Legal Advisor (FCS/USPTO) 

WORK HOURS:        Full-time; 40 hours/week

 GRADE:                     Not-Ordinarily Resident:  FP-04 USD 63,632 p.a.

                                   (starting salary, final grade will be determined by Washington    

                                   Ordinarily Resident: FSN-11 RMB 313,235 p.a.

                                   (starting salary includes allowance and bonus)

LOCATION:               The incumbent may be assigned to work at the Embassy or one of the Embassy’s off-compound facilities in Beijing.

 The U.S. Embassy in Beijing is seeking an eligible and qualified applicant for the position of Legal Advisor with the Foreign Commercial Services/U.S. Patent & Trademark Office.

 Note: Only candidates selected for an interview will be contacted.

 ALL ORDINARILY RESIDENT (OR) APPLICANTS MUST HAVE THE REQUIRED WORK AND/OR RESIDENCY PERMITS TO BE ELIGIBLE FOR CONSIDERATION. 

 BASIC FUNCTION OF POSITION

The Legal Advisor will be responsible for advising, monitoring, analyzing and reporting on specified intellectual property rights (IPR) matters at China’s national level and within U.S. Mission’s Beijing and Shenyang consular districts.  Using their understanding of complex IPR matters, the Legal Advisor will evaluate and prioritize IPR developments by determining which IPR developments are most likely to affect U.S. interests and help propose, develop, and implement policy engagement strategies.  The incumbent will be expected to think and act proactively by identifying emerging IP-related issues, gathering and reporting information, and proposing solutions for consideration by the Embassy’s IP Attaché.  The position requires a law degree, and should have knowledge of complex principles governing protection and enforcement of IPR, with a particular emphasis on patents and/or trademarks.

A copy of the complete position description listing all duties and responsibilities is available in the Office of Human Resources (x4500).

QUALIFICATIONS REQUIRED

All applicants must address each selection criterion detailed below with specific and comprehensive information supporting each item.  Applicants who fail to do so, or who do not meet the position’s required qualifications, will not be considered for this position.

Education:

·         University degree in Law, Foreign Relations, and Business Administration is required.

Experience:

·         At least 5 years of progressively responsible experience of working in the area of intellectual property is required.

 Language:

  • Level IV (Fluent) speaking/reading/writing in English is required. (This will be tested.)
  • Level IV (Fluent) speaking/reading/writing in Chinese is required.

 Knowledge:

  • Must have knowledge of the complex principles governing protection and enforcement of IPR, including patents, trademarks, copyrights and trade secrets, in China. 

 Abilities and skills:

  • Must have the ability to develop and maintain an extensive range of mid to high level contacts in the host government and private sector that will aid the incumbent identify emerging IP-related issues and to propose and carry-out strategies to effectuate improvements to China’s IPR systems.
  • Must be able to develop and implement above projects from start to finish with minimal supervision and to propose creative solutions to IPR issues that impact U.S. IPR owners looking to operate in China, including medium- and long-term strategies.

HOW TO APPLY:  Applicants must submit the following documents to be considered:  

1.    Universal Application for Employment (UAE) (Form DS-0174); and  

2.    Any additional documentation that supports or addresses the requirements listed above (e.g. transcripts, degrees, etc.) 

SUBMIT APPLICATION TO

Human Resources Office

American Embassy Beijing, China

No.55 An Jia Lou, Beijing 100600

Email: USEmbassyBJHR@state.gov

(Please specify the position title in the subject line.)

Fax: 86-10-8531-4545

Website: http://beijing.usembassy-china.org.cn

 

Huawei Sues Samsung in California, Shenzhen

Huawei has recently sued Samsung for patent infringement in Shenzhen, China and in California.   Samsung also announced it would countersue Huawei.  A copy of the California complaint is attached here

Huawei sued T-Mobile in the ED of Texas earlier in the year, and of course there was the earlier, much reported case against ZTE in Europe previously.  The ED Texas case seemed to be following the case of T-Mobile vs. Huawei, in Washington State, which was a theft of trade secrets matter.  In addition, the litigation against Samsung follows quickly on the recent news that Apple is now paying Huawei patent royalties.  There were also media reports earlier this year that Huawei and Ericcson renewed their patent license agreement.  

While these cases seem like continuing milestones in the patent smartphone wars, I believe there is another new development.  Press releases about Huawei asserting its patents in litigation and collecting royalties on its patents, also suggest that China’s stated plans to increase its IP royalty revenue have taken off.  It is not surprising that one of China’s leading overseas patent filers, Huawei, should be at the forefront of these efforts.

Interested in licensing?  Sign up for the forthcoming technology licensing program at USPTO with George Mason University on June 8.

IP Vacancy at USTR

USTR has recently posted a job announcement in its IP and Innovation office.  Knowledge of Chinese would be a helpful plus to a potential candidate.  The closing date is June 3, 2016.

Position:         Policy Analyst ( Trade)  

Grade level:     GS-13/14/15 

Opened:          Monday May 23, 2016

Closes:            Friday, June 3, 2016 at 11:59 pm EDT

 Please see below for links to each of the vacancy announcements for this position:

1)Announcement open to ALL sources / members of the public:  DE – https://www.usajobs.gov/GetJob/ViewDetails/439144600

2)  Announcement open ONLY to current or former Federal employees who have attained career status:   MP – https://www.usajobs.gov/GetJob/ViewDetails/439864400

Please note,  it is very important that those who wish to apply submit their application to the correct vacancy announcement, and that they submit all required information.  If a potential applicant is unsure which announcement is appropriate and the closing deadline is near, it would be safest to apply to both.

If anyone has any questions at all,  or needs any guidance,  contact the USTR Office of Human Resources at 202-395-7360.

Program on Trademark Strategy For Chinese Companies Investing Overseas

·         Location: Chengdu, Qingdao, Shenzhen, Tianjin and Wuhan

·         Dates: 01 Jun 2016 to 08 Jun 2016

IP Key (the European IP technical assistance/exchange program) is organising 5 half-day Trade Mark strategy seminars in Chengdu, Qingdao, Shenzhen, Tianjin and Wuhan between the 1st  – 8th June.  The following is from their news release:

The purpose of the trade mark IP strategy conference is to support Chinese companies and legal representatives on IP issues as they internationalise their business. Experts will discuss the importance of an IP strategy and the tools available to support its successful implementation. Two EU experts, Mr. Christophe Gimenez, EUIPO, IP Attaché for the EU Delegation to China and Mr. Martin Beckman, Project Manager, EUIPO will share their knowledge and expertise on how to create an IP strategy with the support of international databases.

 The seminars are a good opportunity for Chinese companies who are doing businesses abroad, or are planning for international expansion, as well as trade mark agencies and specialist to learn more about the international tools that can help them be more strategic in their approach to protect and register trade marks abroad.

Simultaneous Interpretation in English and Chinese will be available at the conferences.

Agenda for each city is available online on the IP Key website:    

http://www.ipkey.org/en/activities/upcoming-activities/item/3976-trade-mark-ip-strategy-conference

 To register for the seminar, email the partner in the corresponding city:

Date

Time

City

Venue

Contact Person

Email

June 1st 2016

13:30 – 17:30

Chengdu

The Jinjiang Room, 5/F Century City International Convention Center, Chengdu, China

Finja Zhang

finja_zhang@eupic.org.cn

June 3rd 2016

13:30 – 17:30

Qingdao

The Blue hall, Sino-German Ecopark, No. 2877 Tuanjie Road, Huangdao District, Qingdao 

DING Ling

zdzscqzx@163.com

June 6th 2016

8:30 – 12:30

Shenzhen

6/F Landmark Building, 4028 Jintian Road, Futian District, Shenzhen, China

CUI Can

cuican@szfetsc.com.cn

June 7th 2016

9:00-13:00

Tianjin

37/F Tianjin World Financial Center, Tianjin Tower

LI Yinghong

cft801@163.com

June 8th 2016

13:30-17:30

Wuhan

Wuhan International Cooperation Chamber of Commerce, 489 Zhongshan Road, Wuhan, China

Ellena Du

ellenadu@126.com

 For more information about this activity or for general information about IP Key, please contact Jaspal Channa jaspal.channa@ipkey.org