The New Swiss-China FTA: What It May Mean for IPR in China

China signed its first FTA with a European country, Switzerland on July 6, 2013.  The FTA is a significant advance in China’s trade diplomacy with the West since China’s FTA with New Zealand (2008).   Although Switzerland is not a member of the EU, its close legal, economic and cultural relationships with the EU and its participation in the European Patent Convention, could have a positive impact on harmonizing Chinese practices with European practices in certain areas.  Based on the still skeletal outline provided by the news release from the Swiss government (the release follows the post and the full text has now been release), the FTA seems to advance several important IP interests of Switzerland.  Here are some highlights:

1.  The Swiss government and China commit to deepening their bilateral dialogue with China, rather than setting up a new framework.

2.  Acoustic trademarks are required to be protected.  Biotechnological inventions will be patentable in the same manner as under the European Patent Convention. Disclosure of genetic resources may be required for patent filings.  Note: there is no mention in this press release of any changes in biotech or pharmaceutical examination practice which have been of concern to some companies, such as enablement standards at the Chinese patent office.

3.  China agrees to extend geographical indications to all products.   It is unclear to me from the text if China’s “extension” of GI’s includes both China’s trademarks and its sui generis system.

4.  The FTA has several provisions that bear on plant variety protections which are protected by the UPOV agreement and are important to Switzerland’s bio tech industry.  Importantly, China did not commit to joining the latest version of UPOV (1991), although it has been long discussed in China in favorable terms.  However UPOV protection is extended to exports and China has agreed to give consideration to plant varieties of concern to the Swiss government in its 2016 revision to its UPOV list.

5.  Another important area is design protection for Swiss luxury good companies.  China has apparently reinforced its commitment to protect designs at the border.  Again, this is a commitment where the “devil may be in the details.”  Improving protection is generally a good thing.  However, designs are not subject to substantive examination, as they are in many other parts of the world.  Importantly, they can be registered with full knowledge that the patent is invalid, and thereafter asserted for abusive purposes with limited consequences.  The most well-known case in this area is Xu v. Xueqiang (Zhejiang High Court), involving an abusive assertion of a patent for a woven bamboo mat (presumably a tatami mat) which caused considerable harm to legitimate exporters until the patent was invalidated.  The case is discussed in Tao Xinliang, “Case Study: Liability for Counter-Damages against Misuse of Patent Infringement Litigation” China Patents and Trademarks, No. 2 at 8, 10 (2008).

6.  There may also have been certain areas, which are more difficult to negotiate and indeed may be a repeat of China’s TRIPS commitments.  For example, the Swiss government summary notes that data exclusivity (DE) is (once again) provided for six years.  We will need to see the text of the FTA to see how much DE will now be made more available.  China also agreed to provide for provisional measures in litigation.  That was also a TRIPS commitment which has been further extended through recent amendments to China’s Civil Procedure Law.  However, provisional measures are still relatively rare.    Improvements and additional pressure in this area could also bring benefits to many countries under ‘most favored nation’ principles.  Of course, there may be other provisions of the deal that could have impacts for IP intensive products or services.

The FTA may have other positive impacts for Switzerland.  The deal should be a big plus in overall bilateral relations between the two countries, which can be a significant plus for business people.  Chinese premier Li Keqiang described the importance of the FTA as counterbalance to the US-EU FTA discussions, noting that Switzerland would be disadvantaged in the competition with the European Union (EU) if the EU and the United States reached an FTA deal.

Overall this agreement has important Swiss – Chinese “characteristics” or  tese (特色) and has more extensive IP provisions than the China-New Zealand FTA.  Back in the early days of China’s opening up, certain Swiss companies had been pioneers in commercial law, which later benefited others.  I personally hope that the text of this FTA will have a positive impact on IP relationships for all trading partners.

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Excerpt from the News Release on the FTA

Protection of Intellectual Property Rights

As regards the protection for intellectual property the Parties commit to apply high level international standards in accordance with the principles of MFN and national treatment. The Parties undertake to deepen their cooperation within the framework of the institutionalized bilateral dialogue on intellectual property which was initiated in 2007.

Compared to the multilateral standards of the TRIPS Agreement4, the level of protection in various areas is specified more precisely or enhanced. In the area of copyright e.g., the rights applicable to audio media under the WIPO Agreement5 are extended to audio-visual media (video, DVD, etc.). Protection must be provided for acoustic trademarks as a new category of trademark. In the field of patents, the patentability of biotechnological inventions is specified in accordance with the European Patent Convention. Furthermore, the Parties may require in case a patent application is filed and the invention is based on genetic materials or traditional knowledge, such materials and knowledge are indicated. The confidentiality of test data in relation of marketing approval procedures for pharmaceutical and agro-chemical products must be protected for at least six years. The level of protection for geographical indications for wines and spirits under article 23 TRIPS is extended to all products. Goods and services must be protect-ed from misleading indications of origin, and country names, national flags and coats-of-arms of the Parties must be protected from misleading use and registration as company or brand names. Compared to the UPOV6 Convention (1978 version, of which China is a signatory) the protection for new varieties of plants is extended to the exportation of such varieties. Further-more, in the 2016 revision of the national list of protectable varieties China declares that it is prepared to give priority to certain plant varieties which are important to Swiss industry.

With regard to legal enforcement, the FTA provides that measures taken by customs authorities to combat counterfeiting and piracy are to be applied not only at import of goods but at export as well. The seizure of suspect products (on an ex officio basis or at the request of the rights holder), as well as the possibility to analyze samples and specimens of retained goods is foreseen. The measures shall apply in the event of infringement of trademarks and copyrights, as well as of patents and protected designs. In addition, civil and criminal proceedings for the prosecution of breaches of the law and for claiming compensation have to be made available, with the possibility to order precautionary measures as well as immediate provisional measures. In civil proceedings measures both against infringing goods and materials and tools which were used for the production of such goods must be available (including confiscation and destruction). Finally, the agreement contains general and specific review clauses (e.g. in the case of protection for plant varieties) with a view to further improvements in protection.

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