Action Preservation

Crossing the River by Feeling the IP Stones: How China’s Civil Procedure System Benefits from Reforms Made in IP Civil Litigation

On Aug 31st 2012, the NPC passed the revised Civil Procedure Law.  This is th e third time that the CPL has been amended since it was first enacted in 1991.  The new law will go into effect on January 1, 2013.  The CPL is only starting to get the attention in the English language IP media (See He Jing’s article and Mondaq).

Although civil IP litigation is but a small part of total civil litigation in China, civil IP practice has  frequently led legal reform in other areas through such steps as: providing for preliminary injunctions, evidence and asset preservation measures; developing expert courts; experimenting in combining civil/criminal and administrative courts; extensive international exchanges; and development of judicially made doctrines such as “doctrine of equivalents” or “estoppel” in patent litigation.

With the CPL amendments, Chinese civil legal system is beginning to see the benefits of some of those experiments – particularly in the area of provisional remedies, which will now be available for all civil claims, including IP-related claims such as breach of a licensing contract, trade secrets, trade dress infringement, and plant variety protection.  Previously, only asset preservation measures were available for all civil matters on a preliminary basis (Arts. 92, 93).  Overall, this is welcome news and advances civil rule of law generally in China.

Some of the amendments, however, may have mixed impacts on IP-related litigation.  For example, the CPL attempts to alter the relationship between litigation and mediation by seeking a coordinated approach with the mediation law (People’s Mediation Law, issued in 08/28/2010, NPC).  According to Article 122 of the CPL, the parties must first try to mediate before filing an action with the courts.  If the parties do not agree to mediate, they may commence an action.   This provision does not elaborate however on the relationship between mediation and the need for preliminary evidence, asset or injunctive relief, particularly on an ex parte basis.  If the parties are instead compelled to seek mediation before filing a case, it could result in harm to their claim, by giving advance notice to an adversary or reducing the value of time sensitive interim or preliminary relief.

The case acceptance procedure has been discussed elsewhere on this blog. According to Article 123 of the CPL, a court must now issue a written ruling within seven days should it decline to accept a case.  The ruling may now be appealed.  The written ruling requirement is new, and should provide greater transparency.  Also of great importance is that the CPL now obliges courts to make their judgments and rulings publicly available, except if there are issues involving privacy, state secrets or trade secrets (Article 134).   It is hoped that the courts will provide “cleaned” versions of rulings in those instances without trade secrets included, in order to enable rights holders to become more familiar with how these disputes are adjudicated.  These transparency provisions have been a long-desired ask of the Chinese government in IP cases, including in matters involving provisional relief, and are a positive step.

For American IP litigants who have been surprised in the past by the formalities of Chinese IP litigation, the new provisions on requiring a witness’ testimony at trial also brings Chinese civil practice a step closer to US practice and could help reduce surprises.   The rules are intended to facilitate a witness appearing in person at trial, absent excusing circumstances.  In addition, under the new rules, the parties may apply for and jointly appoint qualified experts to authenticate evidence; under the old rules only the court can do this.  This should also help improve the perception of the courts as fair administrators of justice.

The CPL also strengthens the role of the Procuratorate in supervising civil adjudication, including enforcement of judgments.   The Procuratorate can also recommend that an appellate court retry a case if it believes a judgment or mediation is false.

The full scope of the impact of the CPL on IP will need to be judged in conjunction with pending changes to the trademark, copyright and patent laws.  Much as the older IP laws opened the door to provisional remedies for China’s civil system, new IPR laws under consideration are expected to provide more extensive discovery-type procedures, including mandatory exchange of relevant evidentiary documents.  Enhanced damages, including treble damages, are also likely to be part of the new crop of IP law reforms.

It is likely, as China gains more experience with these new IP laws that in several years, these reforms may once again be introduced into China’s general civil law system, and will thereby help in establishing fairer procedures for effective adjudication of civil disputes for all.

The Chinese civil judiciary is pursuing reform and gaining experience, as Deng Xiaoping noted, by crossing the river by feeling the stones. A disproportionate part of that judicial experience is also being gained from the relatively small numbers of IP cases in the Chinese courts.

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