Litigation Meets Innovation: A Glimpse at China’s Continuing Litigation Explosions

In recent lectures I have been fond of asking: if China were to have as meteoric a pace of growth in intellectual property acquisition and enforcement as it has had in gross domestic product, what would be the impact on foreign IP-intensive industries?   Will China’s growing role in IP lead to the same kind of economic dislocations that was involved in the shift to manufacturing in China? A first glimpse at 2012 enforcement data shows some important trends which foreign companies may wish to consider in this very rapidly growing IP market.    

In 2012, civil IP cases increased by 45.99% (87,419 cases accepted).  This is a 514% increase since 2006 when accepted cases were 14,219.  It is also the sixth straight year of double digit increases, with the last four years showing an increase in the rate of increase from 25.49% in 2009 to 45.99% in 2012.  Although the United States has seen some increases in IP litigation this year, particularly due to changes from the American Invents Act which imposes stricter joinder and consolidation requirements, it is likely that China continued to retain its position as the most litigious society for IP in the world.

Criminal cases also showed a more remarkable year on year increase.  This is likely due to such factors as improved rules on criminal thresholds and case referral, the role of the IPR Leading Group, and greater familiarity and understanding of the role of criminal IP enforcement.   The courts accepted 7,840 criminal IP cases in 2012, with verdicts rendered involving 9010 people.  This was an increase in 150.16% and 123.91% respectively over 2011.

One place which has not shown as much increase is in patent administrative appeals.  In 2012, appeals from SIPO to the Beijing Number One Intermediate Court numbered 700.    There were also 2113 trademark appeals from SAIC.   Appeals to the Beijing High Court of these cases numbered 353 and 1024, respectively.   By comparison in 2009 there were 625 patent administrative cases heard by the Beijing Number One Intermediate Court, and 1,364 Trademark administrative cases.  The relatively stable number of patent administrative cases despite a rapid increase in patent filings in China and overall growth in trademark cases may be due to difficulty of reversing SIPO on patent matters.

Of course, these data also beg the question of whether a “case” in China is the same as a “case” in the United States.  One might argue that the comparisons are imperfect because in civil matters less is at stake in China due to such factors as a shorter statute of limitations, lower damages, and difficulties in enforcing injunctions.  Moreover, China historically commingled criminal IPR cases with other quasi-IP cases (fake and shoddy goods, illegal business operations), making it hard to compare data with federal criminal IP prosecutions.   Because the United States does not bifurcate infringement and validity proceedings, and because China permits straw man patent validity cases, Chinese validity proceedings may also not be as closely related to infringement matters.   Nonetheless, the data is at least valuable to show the direction of domestic trends.

Another remarkable number involves the number of specialized IPR tribunals (420 and judicial personnel (2759) in IP litigation in China in 2012.   In addition, 5 high courts, 59 intermediate courts and 69 basic courts undertook the task of experimenting in combining civil, criminal and administrative IP jurisdiction.   The most rapid increase was in basic courts which could hear IP cases, which grew from 29 in 2009 to 69 in 2012.   There has been no change in the numbers of High Courts engaged in this experiment since 2009.  Combining civil, criminal and administrative cases will likely  help insure greater depth of IPR judges as well as consistency in adjudicating matters regardless of whether the matter is civil, criminal or administrative.

Committing more resources to the IP judiciary is a laudable task which can have a wide ranging impact on respect for intellectual property.  However, one might question whether the answer to China’s increasing IP docket involves more basic level courts adjudicating disputes.   This trend would result in more cases being heard by judges who may be more susceptible to local influence, with limited possibilities of appealing to a court that is not under local influence.   Establishing instead a nationwide appellate IP court would be one way to improve overall quality and consistency of adjudication and could also help minimize local influence on case adjudication.  The US Court of Appeals for the Federal Circuit is an example of an appellate patent court; Russia also recently instituted a national IP appellate court.

Source: Beijing IP Institute March 2013 Newsletter, and sources cited therein.

One thought on “Litigation Meets Innovation: A Glimpse at China’s Continuing Litigation Explosions

  1. Good questions. But I think we haven’t really confronted the question of whether the pattern of Chinese IPR development – especially with regard to patents – is helping or hindering the fulfillment of its innovation aspirations.

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