A Basic IPR Law for China?

Is China now considering the adoption of an integrated Basic IPR Law? And what would that mean to existing legislative efforts?

The idea of a basic law on IP has been under consideration for some years, including discussed by NPC delegates.  The late Prof. Zheng Chengsi also urged incorporation of an IP chapter into a civil code.  However, it appears now in Commissioner Shen’s speeches and policy papers, including a speech of January 17 where he stated that SIPO would “forcefully promote the construction of the patent regulation system, put all efforts into promoting the work of revising the patent law and the implementing regulations, increase the level of punitive fines for patent infringement, promote the revision work of the Patent Agents Regulations, promote the work of enactment of the Service Invention Regulations, and initiate  research for the feasibility of a basic law for intellectual property, and for patent protection and promotion. “  

This project seems as if it is still in the early stage.  Japan, it should be noted,  has had a Basic Law for Intellectual Property for over a decade, which may be a basis for SIPO’s research effort. 

Interestingly, Commissioner Shen also points out in the above speech that the legislative efforts to revise the Patent Law and to enact Service Invention Regulations, which were initiated during the time of his predecessor, are not on hold during his tenure.

Two Early US Presidents and Chinese IP

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Today is President’s Day in the United States, named after George Washington and Abraham Lincoln and I pay a brief tribute to the role of these two presidents in bilateral IP issues.

Probably no president had more of an indirect stake in IP and traditional Chinese medicine in China that George Washington, our founding father. Washington was likely involved in the profitable ginseng trade, which was an important part of the first trade between the newly independent United States and China. In 1784, the Empress of China set sail from the United States to China, carrying 30 tons of the herb. About the same time George Washington (1732-1799) recorded it in his diary, “I met numbers of Persons & Pack horses going in with Ginseng: & for salt & other articles at the Market Below.”

The President’s portrait was also the subject of considerable copyright piracy. Gilbert Stuart sued one merchant, John Swords, who had one of his famous portraits of Washington, copied onto glass in Guangzhou (see: http://www.artnews.com/2009/10/01/the-many-faces-of-george-washington/).

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Abraham Lincoln, the sole US president to have been granted a patent, had little contact with China. However, contemporaneous rebellions consisting of the Civil War in the United States (1861-65) and the Taiping Rebellion in China (1850-1864) were remarkable for the limited role that patents would play in the rebel cause. The Confederate States of American quickly established a patent office upon their secession from the North. One of the important patent inventions at that office was for an iron-class naval vessel, an important technological breakthrough in naval warfare. At about the same time, in 1859, Hong Rengan tried to establish a patent system in China for the areas under control of the Taiping’s. Although US expatriates, including Union loyalists, played an active role in China during the Taiping Rebellion (see http://opinionator.blogs.nytimes.com/2012/05/04/a-little-trouble-in-big-china/ ) , there is no indication that US mercenaries or technology were the inspiration for this initial Chinese effort at developing a patent system. It might, instead, be surmised that both rebel causes, in the United States and China, saw an IP system as affording them a potential technological edge in their efforts to achieve victory.

China’s Patent Maintenance Crisis

“He conquers, who endures.” – Persius

Does the growth of China’s patent office mean that China is “out-innovating” the West, as some commentators would suggest?

Patent applications, patent grants, and analyses of patent quality in commercially significant fields are certainly indicators of innovative activity.  However, since the Chinese government typically subsidizes patent applications, patent applications in particular may be a distorted metric for benchmarking innovation.  Because subsidies may be less available to maintain an invention patent throughout its 20 year useful life, maintenance rates are also useful indicia of whether commercial meaningful inventions are being patented.

The IP-5, consisting of the US, European, Japanese, Korean and Chinese patent offices publish a useful compendium of statistical data regarding their offices’ operations (http://www.fiveipoffices.org/statistics/statisticsreports/statisticsreport2012edition/chapter4.pdf -as of July 22, 2014) .  The chart below which reflects 2012 data shows that over 50% of Japanese patents are maintained through their 17th year, 50% of US patents are maintained through their 16th year, and only 50% of Chinese patents are maintained through their sixth year.  Differences in maintenance rates may be attributable to requirements to maintain annual maintenance fees, or the date of collection of maintenance fees.  The US collects a maintenance fee at 11.5 years after date of grant, and does not collect  a fee thereafter.

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SIPO’s Report on Patent Strength, which I have previmaintenancechartously blogged about (https://chinaipr.com/2013/04/29/sipos-2012-report-on-the-situation-regarding-national-patent-strength/), reports on patent maintenance rates.  This repot documents that maintenance rates have dropped for Chinese patents – from about 55% in 2011 to 52% in 2012.  Only Beijing showed an increase in patent maintenance rates during this period.

SIPO has broadly identified the problem of low quality patent applications by linking them to numerical goals of local governments, which have tended to focus on quantitative measurement of patent applications, rather than qualitative goals, and  with recent policy changes it is expected that future metrics on patent strength will include efforts to deal with “abnormal” patents, including abuses from patent financial subsidies and patent awards, which SIPO has said will not support long term growth.  See:  http://www.sipo.gov.cn/zcfg/zcjd/201401/t20140121_899716.html;
www.sipo.gov.cn/ztzl/ywzt/qgzlsyfzzltjgz/noticeps/201401/t20140121_899710.html

The data reveals that the rapid increase in patent applications over the past few years is also accompanied by declining maintenance rates – in effect demonstrating a soft underbelly of China’s evolving patent “strength.”  I believe the solution to the patent maintenance problem is in strengthening patent enforcement and improving market opportunities for commercializing patents, not in subsidies, awards or other “top-down” regulatory efforts.

Photo below taken at New Oriental Plaza in Beijing 2013, advertising sporting goods accompanied by a larger than life reproduction of an expired US patent.

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Survey on Choice of Governing Law in China-Related Contracts

This is from Susan Finder via the Chinalaw listserve:

Practical Law China has prepared a brief survey on choice of governing law in China-related contracts.  Practical Law China would be very grateful if you could take a bit of time to complete the survey. It will share the results of the survey.  Here is a direct link to the survey http://practicallaw.chinagoverninglaw.sgizmo.com/s3/.

 

My take: This is one of the issues that I think is under-studied involving IP and tech transfer to China.  It has been my suspicion that many foreign licensors of technology may choose foreign law in order to avoid onerous provisions of China’s tech transfer regime that restrict grant backs of improvements and mandate access to foreign markets.  In addition, it appears that Chinese courts may not always honor foreign choice of law contracts.  This is an initial step in further understanding how choice of law issues are handled.

By the way, Susan also hosts the Supreme People’s Court blog – http://supremepeoplescourtmonitor.com/, which is an excellent resource.

 

The Back Story on the Third Plenum IPR Language

Former SIPO Commissioner Tian Lipu recently revealed the “legislative history” of the language in the Third Plenum regarding IP, as reflected by former Chief Judge Jiang Zhipei in his chinaiprlaw.cn blog (http://www.chinaiprlaw.cn/file/2014020731400.html).

The original language being discussed was that China would “Implement the National IP Strategy and Strengthen IP Protection.”(“实施知识产权战略,加强知识产权保护”).  This was, indeed the language circulated in August 2013, and did not reflect much change from prior years.  A proposed change in language at that time was “Deepen the National IP Strategy,  Strengthen the Practical Protection of IP.” (“深入实施知识产权战略,切实加强知识产权保护”).

Ultimately, the final language was “Strengthen the Utilization and Protection of IP, Investigate Establishing a Specialized IP Court” (“加 强知识产权的运用和保护,探索建立知识产权法院”).   In the words of former Commissioner Tian, the placement of “utilization” as the first priority was a new development. The language regarding specialized IP courts was inspired by the National IP Strategy (2008) which had originally taken up this issue, and promoted it to reduce local influence and improve national coordination.  However this new language on the courts, according to Tian, supports a next stage of concrete implementation of this proposal.

After the adoption of this proposal, Tian and SIPO were delighted with this language, as they had been concerned that the recent establishment of “too many” High and Intermediate IP tribunals would complicate matters and make it difficult to establish an IP court.  Now, according to Tian, development of a specialized IP court is a development direction for China as well as one that is increasingly recognized by other developing countries.

Commissioner Tian Lipu has made enormous contributions to the development of China’s IP and patent systems and has earned the respect and friendship of many IP officials throughout the globe. It now seems that even as he was preparing to retire, one of his visions for improvements to the IPR system is further down the road to success.

Legal “Choreography” and the Revised Draft TRAB Rules

Just as the due date for comments on the revised  Trademark Law Implementing Regulations expired on February 10, 2014, the State Council Legislative Affairs Office (SCLAO) simultaneously released proposed new Rules of the Trademark Review and Adjudication Board (TRAB) for public comment.  One translation of prior rules is found at the WIPO website.  The deadline for comments is March 11, 2014. 

Comments may be submitted to the SAIC website or the Chinese government law website for collecting comments on public comments on administrative rules.  This is a different website from the one the SCLAO maintains for public comments on State Council regulations, such as the Trademark Law Implementing Regulations.

There is some interesting legal “choreography” to all of this. 

First, the SCLAO is clearly following the order of the Law on Legislation (LoL) by soliciting comments after Trademark Law passage for the Implementing Regulations first, then the TRAB Rules.   The comments are also delivered to separate on-line accounts.    Although the close timing of the new drafts suggests that timing will be tight to comment on TRAB Rule changes that may be adopted based on new changes to the Trademark Law Implementing Regulations, it is nonetheless clear that the SCLAO and SAIC are coordinating closely to try to make the implementation of the new law as seamless as possible, thereby minimizing conflicts between inferior rules and superior regulations or the law itself.

In addition, the proposed TRAB rules, which will be implementing simultaneously with the new Trademark Law and Implementing Regulations, also seek to clarify in Article 54 when the revised rules should retroactively apply, in accordance with China’s LoL, particularly Article 84 (“Laws, administrative regulations, local regulations, autonomous regulations, separate regulations and rules shall not be retroactive, but the regulations formulated specially for the purpose of better protecting the rights and interests of citizens, legal persons and other organizations are excepted.”).  The principle of application of Article 84 to examination practices was also recently clarified by SIPO in its revised practices regarding “enablement.”   

Finally, there are some interesting developments regarding evidence that could reflect more general trends.  The TRAB is now considering electronic service including accepting electronic evidence and other materials (Art. 52).  There are also relatively extensive rules on the types of evidence that the TRAB will consider (Chapter IV: 证据规则). Considering the tight time frames for TRAB procedures, this will help in expediting case handling.  However there appears to be little consideration to the procedural formalities for evidence from overseas (legalization/consularization), which can disadvantage them when procedures have been so expedited (Art. 39).   The TRAB Rules also require Chinese language translation of documents and provide dispute resolution procedures if the parties disagree on translations (Art. 40).  Consideration is also given to whether the evidence submitted is a copy and the chain of custody for the evidence (for example, Arts. 41- 44). The TRAB will also constitute new panels on remand from the courts and new evidence can be accepted in the new panel.  This will provide an additional cross-check for more independent adjudication (Art. 35). Image

Happy Year of the Horse!

USPTO has the highest Asian-American  Pacific Islander workforce (26.2%) of any American government agency, so it wasn’t surprising that the PTO hosted a lion dance for Chinese New Year on Thursday, with the children from the PTO’s Innovation Station child care happily watching on.

Wishing all of our friends in China and overseas, a happy and successful year of the horse!  马到成功。

Mark Cohen

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