Understanding China’s New Environment for Intellectual Property

On April 11th, Fordham Law School held its first China focused IP Conference, “Understanding China’s New Environment for Intellectual Property”.  The program covered a range of issues, from patenting trends, to challenges in design protection, and intellectual property protection challenges for cloud computing in China, with mixed panels of academics, practitioners, judges and government officials from both countries.

Panel 1 addressed “Will China become an IP and creativity superpower?” The overarching theme of this panel was the role of market forces in China’s drive to innovate.   Pete Suttemeir of the University of Oregon noted that as the central and local government takes leading roles in developing the IP strategy, China’s IPR legal developments are belied by the state’s role in its interests in the domestic development and economy.  Bill Hennessey from the University of New Hampshire School of Law, Franklin Pierce Center for Intellectual Property, analyzed the “Shanzhai” culture in China – the Chinese imitation and pirated brands and goods particularly in consumer electronics – and made the distinction between indigenous and grassroots innovation, arguing that certain forms of “Me too!” copying and copycat culture are outside of government control. Professor Hennessey states that this is a cultural phenomenon rather than a legal one; moreover it is the culture that must be changed.  He also noted how the absence of   anti-dilution provisions in Chinese trademark law contributes to this. Professor John Orcutt, also from the University of New Hampshire School of Law, Franklin Pierce Center for Intellectual Property, talked generally about university technology commercialization and the ability of Chinese universities to serve as a rich domestic source for technological innovations. Specifically, Professor Orcutt focused on SIPO’s foreign patent application subsidy program and explored its role in supporting university technology commercialization. Professor Orcutt suggested that SIPO’s foreign patent application subsidy program could help to promote valuable technology commercialization by Chinese universities if SIPO is able to make wise allocation decisions on which patents to subsidize. Professor Orcutt is not convinced that such wise allocation decisions are being made currently. He offered a potential valuation solution that SIPO could employ that would greatly facilitate its allocation decisions and improve the likelihood that the subsidy program improves technology commercialization.   Professor Peter Yu from Drake University School of Law also reviewed the “Shanzhai” culture.  According to Prof. Yu, the bad news, for the US, may be that as China’s IP regulatory landscape continues to advance, China will gain a competitive edge in innovation against the US, and the effect on the US economy may be a reversal of fortune. The United States should focus on education and innovation and work toward complementary economic development.  When probed by the moderators, Prof. Mark Cohen and Chen Wang of DuPont, the general consensus was that in the emerging innovation environment, China needed to be more market oriented to succeed, while the United States needed to recognize technology as a subject needing greater government intervention and support.


Session 2 – How china is managing creativity and how US companies can engage

He Jing, from ZY Partners in Beijing, discussed recent legislative and judicial developments.  Amendments of copyright law and trademark law are now pending for approval by the legislature. Proposals are also being made to amend criminal procedure law and the criminal code regarding IP rights protection and punitive damages for willful infringement. The burden of proof will be raised against infringers, which makes it easier for IP rights owners to go after infringers.   Tom Moga of Shook, Hardy & Bacon and Jasmine Chambers, Deputy Administrator for External Affairs of the USPTO talked about utility models and designs and the challenge of managing patent quality in the absence of substantive examination.   Ms. Chambers’ noted that a large percentage of design patents is in the D14 class, which includes “Recording, Communication, or Information Retrieval Equipment” (4,000 out of 30,000 design patent filings are under the D14 class, comprising of about 15%).   Director Wang Meifang of SIPO gave an introduction on the design patents in China. The Chinese government has taken measures to inspire domestic innovation, and to shift the economy from “Made in China” to “Designed in China”.   Yin Xintian of Wanhuida Law Office in China and former General Counsel of SIPO noted that design patent subject matter regarding graphical user interfaces in Chinese patent law in his view is too narrow and needs to be updated.      Heinz Goddar from the audience discussed the utility of doing double filings in China to provide extended protection of patent filings, which was useful for both designs and utility model protections. The session was moderated by Elaine Wu, who serves as the team leader on China for the USPTO.


Session 3 – Creating an IP system for the information age.

David Jones, the director of IP policy of Microsoft gave an introduction of the ongoing transition to cloud computing, which uses software provided as service on the Internet instead of as a physical product. He discussed the importance of design patent protection for graphical user interfaces. He believes that protection should be the same as tangible products. He noted that this issue has importance beyond the software sector. With the growing importance of e-commerce and online interaction with customers, companies making only tangible products are increasingly using cloud services and applications to enhance competitiveness, and screen design protection would allow stronger differentiation and would facilitate innovation in this area. Professor Mark Janis of Indiana University Maurer School of Law discussed the co-evolution of designs and technology since the first U.S. design patent law in 1842. With regard to cloud computing, the so-called “graphical user interfaces” (GUIs) have been held to be patent eligible subject matter.   Charles Mauro, a Certified Human Factors Engineering Professional CHFP / BPCE, whose book Usability: the Bottom Line, is forthcoming, focused his talk on the trends and factors impacting design protection. In terms of the new worldview of product design, he quoted Steve Jobs’ famous statement: “Design is not just what it looks and feels like, design is how it works.” He noted that recent cases are focusing on total user experience of a product covering several dimensions of innovation rather than a single design or feature. He also noted that more filings combine both hard and software innovations, as there is a virtual migration of 3D products to screen-based 2D forms. Thus, patent litigation with design patents is getting more complex. Robert Katz from Banner & Witcoff noted that the U.S., Canada, Mexico, Brazil, Argentina, Korea and Japan permit the protection of some screen designs, India, Australia, and Russian can register screen designs, whereas mainland China and Taiwan currently have no protection for screen designs.  Michael Schlesinger of Mitchell Silberberg & Knupp discussed design in the context of copyright protection. Traditionally, GUIs have not been found to be protectable. In Shenzhen TP-LINK Technologies Co., Ltd v. Shenzhen Tenda Technology Co., Ltd and Zhang Yabo, the Shenzhen court found that there is no copyright protection under the current copyright law when the GUI includes only universal design and “general expression of user friendly ideas”. In BSA v. Ministry of Culture, a Czech Republic case for which questions were heard by the European Court of Justice, the ECJ found that a GUI can be protected by copyright under the Information Society Directive if it meets the criterion of originality.

Session 4:

This panel involved three sitting appellate judges: Zhu Li (Supreme Peoples Court), Chief Judge Randall Rader (CAFC) and Denny Chin (2nd circuit), who discussed the role of foreign and non-traditional IP laws in adjudicating cases.  Zhu Li highlighted a specific intellectual property case dealing with K-35 gel pens.  When the patent for the design was not maintained, Plaintiff M & G’s intellectual property interest is protected under unfair competition laws and also anti-unfair competition laws. Denny Chin discussed Authors Guild v. Google, Inc., 770 F. Supp. 2d 666 (S.D.N.Y. 2011) (“Google Books”) which is now pending in his court, including the potential global impact of this case evidenced by the submissions from overseas authors and their representatives.  Hon. Randall Rader, the Chief Judge of the U.S. Court of Appeals for the Federal Circuit distinguished between the role of foreign law in adjudicating IP cases from constitutional law issues. In the IP arena, he thinks there is a greater need to look at foreign developments because of patent law harmonization and borderless technology flows. In his view, it could be irresponsible as a judge to ignore foreign law regarding new technologies and markets. Fuli Chen, the IP attaché of the Chinese Embassy discussed challenges and activities in cyberspace, Cyberspace, Chen opined, is the emerging fifth territory of one nation, besides: land, sea, sky, and outer space.  Benjamin Bai of Allen & Overy noted that empirical data suggests that plaintiffs win most IP cases.  However, real data is hard to get – a problem that has been discussed on the blog before. Statistics show that current IP landscape in China is generally plaintiff friendly, and foreigners are not discriminated against.

During the final discussion session, Jim Brookshire of the Federal Circuit Bar Association discussed the forthcoming bench and bar program of the FCBA with the China Law Society in Beijing.  Jasemine Chambers talked about on-going cooperation programs with USPTO. Bill Hennessey and Mark Cohen discussed the pressing need for increased education of Americans on Chinese IP issues, a viewpoint that was echoed by Lucy Nichols of Nokia and others.  The discussion was joined by Kira Alvarez.

For the closing comments, David Kappos, Director of USPTO, summarized PTO and the administration’s efforts in China, including pressing needs for software legalization.  The speech as it was prepared has been made available by USPTO.

Conference post-date: Shortly after our conference, Netease has alleged that Tencent has plagiarized the layout and design of its mobile app. Our panel highlighted the pertinence of these issues by pointing out that increasingly business are utilizing technological development by offering these interactive user experiences; consequently GUIs and the surrounding IP issues will continue to be a hot topic.

Note: conference materials are available here.

Here is a Chinese link that discusses the Conference.

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