A Tale of Many Watersheds

Joseph Sternberg of the Wall Street Journal reported a few days ago that a European company, Ineos, has decided to bring a law suit against a Chinese State Owned Enterprise, Sinopec, for patent infringement involving its patents for manufacturing acrylonitrile, a product used to make carbon fiber. Sinopec is allegedly building unauthorized factories based on the technology. The article is entitled “A Watershed for Chinese Patent Theft – The first IP lawsuit by a foreign firm against a large state-owned enterprise tests Beijing’s reform mettle.”

While this case may be path-breaking, concerns about state owned enterprise or government supported infringement are not new. The 1995 MOU on Intellectual Property between the US and China for example, required that “public entities in both countries shall not use unauthorized copies of computer software in their computer systems and legitimate software will be used…[A]dequate resources shall be provided to permit the acquisition only of authorized computer software.” Legalization of government and SOE computers has been a theme in bilateral IP relations more or less since then. Concerns about state involvement and support of infringement are also found in the publishing sector, especially piracy of scientific and technological journals at Chinese universities and research organizations.

Chinese rightsholders also pursue cases against the government of China for copyright infringement. Perhaps the most notable instance was the piracy of five of the works of the late Professor Zheng Chengsi, one of China’s leading academics on intellectual property. These five works were compiled into a “Complete Book of Intellectual Property”, which was published by the Supreme People’s Procuracy (China’s attorney general) way back in 1992. Prof. Zheng’s efforts to secure royalties were unavailing.

Is the defining problem whether a company is foreign, or whether it is well-connected with the State? We have little data to compare how foreigners fare in Chinese court compared to Chinese entities. However, the analytical data for Shanghai, analyzed by Profs. Xin He and Su Yang , show that “When the litigants are classified by their organizational and social status, government agencies or government-related companies are the biggest winners.” In short, farmer’s don’t win cases – SOE’s do. However, this data gives little guidance to a foreign technology company. To me the data does, however, suggest that one might wish to avoid bringing a litigation against a large state owned enterprise where that enterprise is headquartered or enjoys significant “organizational and social status”, i.e.- don’t get ‘home-towned.”

Sternberg also notes that Beijing is also developing an especially strong “reputation among intellectual-property lawyers for fair handling of highly technical disputes between private parties, including foreigners suing Chinese firms”. I am personally awary of generalizations of this nature. It is unlikely to me that any particular venue in China is always the best for complex technology IP cases. For example, the CIELA database on civil IP litigation in China shows that Beijing is not one of the top 10 cities where one is most likely to win a patent case.  CIELA also reports that it was number 3 in average damages awarded, at about 180,000 RMB or 30,000 USD – hardly enough to pay a foreign lawyer’s complex patent litigation retainer. As for invention patents in the chemical and biological sector, CIELA reports only seven cases in Beijing, with damages being awarded that averaged 100,000 RMB, and a 100% incidence to date of a complete loss or partial loss for the plaintiff.

China has the laudable goal of developing innovative state-owned enterprises, private enterprises and research organizations. Understanding the relationship between China’s innovation policies, and the motivations it may provide for those tasked with developing new technologies to acquire needed foreign technology is likely be an increasingly critical issue. These state technology policies may give the litigants additional “social status” and thereby also tilt the balance of justice.

Will plaintiffs or defendants tasked with implementing China’s technology policies also become the “biggest winners” in IP battles in China in the future? To me, this is both an IP and rule of law “watershed issue.”

The Problem of “Mountain Stronghold” Teas

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How many corrupted officials have got their Ph.D. from corrupted Universities in China?”,  asks Sun Yifei, a professor of geography at Calstate Northridge, on the Google S&T and Innovation in China page.  The answer seems to be, as one blogger noted, that: “China is considered a big “mountain stronghold” country, even master’s degrees for officials, and the title of Ph.D. are counterfeit and substandard” 中国号称山寨大国,连官场上的硕士、博士头衔也大都是伪劣假冒。

This particular episode of false credentials may even have an IP angle.  It seems that a certain “DR. MA,… was just removed from the vice-governor position at Yunnan.  Beijing Normal University, one of China’s 211” and “985” Universities, was the one that gave the degree to him. The executive vice president of the University, SHI Peijun, a geographer, was his adviser for his research on PU-ER Tea. The University got more than 10 million contract/grants from Yunnan” (where this tea is grown).

What is “mountain stronghold” (shanzhai) culture, and how is it implicated in counterfeiting, substandard products and fake degrees?  Prof. Hennessey’s article “Deconstructing Shanzhai–China’s Copycat Counterculture: Catch Me If You Can” explains that “in popular slang in contemporary China, ‘to copy’ and ‘to parody’ as self-aware, casual, and public behavior by ordinary citizens is referred to as ‘shanzhai.’ The literal meaning of the word shanzhai is ‘mountain stronghold,’ which in traditional Chinese popular culture refers to the hideout of bandits and other outlaws”.

Puer tea is the subject of trademark and geographical indication protection in China and overseas.  The tea is distinctive in taste and history.  It has a peaty, fermented taste.  It was carried on the backs of horses through Tibet, and is sold in brick form.  As my brother, a tea connoisseur (picture below) notes, this tea is  particularly well-suited to this Year of the Horse.  Predictably the tea has also been the subject of counterfeiting and possibly abusive trademark registrations.  For example, at the USPTO website, a Canadian Chinese tried to claim the name in 2007 as his own trademark, but abandoned the mark.  The Yunnan Puer Tea Association now owns the mark in the United States, based on an application filed in 2011, which was granted in 2012 (see their trademark above). 

Does counterfeiting hurt China? The answer seems obvious in the case of puer tea.  Adequately defining what is the puer geographical region helps Chinese farmers and agricultural regions, as well as benefitting the IP system and consumers.  Officials with knock-off diplomas, knock-off trademarks and knock off products for the same region help no one.  Ultimately, the injury from “mountain stronghold” counterfeiting reaches deep into the Lancang mountain region where this delicious tea originates.

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Source: http://kenneth-cohen.blogspot.com/2013_05_01_archive.html

SIPO Amends Exam Guidelines to Provide Design Patent Protection For GUI’s

As I previously blogged, SIPO was considering amending its patent examination guidelines to permit design patent protection for graphical user interfaces (GUI’s). The new examination guidelines were promulgated by SIPO on March 12, 2014, with an effective date of  May 1, 2014.

The revised examination guidelines remove the earlier  (and antiquated) blanket prohibition against design patent protection for electrified screen designs.  They also provide protection for dynamic (animated) graphical user interfaces. Designs which are unrelated to human-machine interaction or product function also remain unprotected under the revised examination guidelines.  These excluded designs include video game interfaces,  wallpaper,  start-up and shut-down screens or graphic compositions in a web page. 游戏界面以及与人机交互无关或者与实现产品功能无关的产品显示装置所显示的图案,例如,电子屏幕壁纸、开关机画面、网站网页的图文排版。

Lines go into effect May 1, 2014: http://www.sipo.gov.cn/zwgg/jl/201403/t20140314_916952.html.

USPTO China Team Attorney-Advisor Position Opens

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USPTO has announced a position for US citizens on the China team.  Here is the link: http://www.usajobs.gov/GetJob/ViewDetails/364794400 .  The position requires US citizenship, a law degree, knowledge and experience in intellectual property and the ability to conduct research in Chinese. The position requires a minimum of three years general legal experience and one year specialized legal experience in intellectual property.

USPTO was recognized as the best federal agency to work for in 2013.

 

 

Oklahoma Attorney General Sues Chinese Company For Use of PIrated Software

On Thursday March 13, Oklahoma joined the expanding list of US states that are utilizing their state competition laws to address products sold in their markets that enjoy an unfair competitive advantage by reason of the use in their operations of pirated software.  According to the press release of the Oklahoma Attorney General this case is “a lawsuit against a Chinese oil equipment supplier for selling equipment in Oklahoma at artificially low prices, gaining an unfair competitive advantage over lawfully licensed Oklahoma companies in violation of the state’s antitrust laws.”  The press release further claims that “Chinese manufacturer Neway Valve Company stole manufacturing process related software that is used by several Oklahoma companies, including longtime oil equipment company, Kimray, then used the pirated technology to sell its competing equipment in Oklahoma at a lower price.”  The lawsuit seeks penalties and an injunction against Neway for creating an unfair market and violating Oklahoma’s Antitrust Reform Act and Oklahoma common law.  The complaint alleges significant under-licensing of Microsoft software products based on an investigation of the company alleged to be using pirated software, which is being distributed through a Texas subsidiary The Attorney General’s office has posted the complaint on its website

For some history of these efforts at using state competition laws to address piracy, see my earlier blog from February 2012.

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SAIC Announces Beginning of Revision Process to Anti-Unfair Competition Law

SAIC has announced on its website that it has “formally” begun the topic of revision the Anti-Unfair Competition Law (which includes trade secrets): http://www.saic.gov.cn/fldyfbzdjz/gzdt/201403/t20140303_142680.html. (《反不正当竞争法》修法课题正式启动).

According to this press report, the SAIC Competition Enforcement Bureau held a meeting on February 28.  Beijing University, Renmin University, China University of Politics and Law and other schools participated, along with Jiangsu, Zhejiang, Shanghai, Guangdong, Sichuan, Heilongjiang, Hubei, provincial and municipal AIC’s.  The purpose of the meeting was to discus the framework for revision, topics to be covered, coordination and separation of work, etc.

SPC President’s Report on Adjudication Highlights Some Key IPR Judicial Developments

SPC President Zhou Qiang spelled out some key IPR judicial developments in report to the National People’s Congress and Chinese People’s Consultative Congress on March 10.  A full text of the report is found on the excellent website of former SPC Chief IPR Judge Jiang Zhipei (picture below).  Here are some excerpts:

As a general matter litigation of all types increased in China in 2013, with case filings at local courts increasing at 7.4% or 14,217,000 cases of first instance in China during 2013.   By comparison, Zhou Qiang reported total IP cases at approximately 100,000.  If this number reflects civil, criminal and administrative cases, as well as IPR-related cases, such as antimonopoly law or crimes involving fake and shoddy goods, it would suggest that there has been no significant increase in IP litigation.  If this number is based on civil cases only, then there has been an increase in the civil IP docket, from about 83,350 in 2013.

Total foreign-related commercial cases numbered only 5,364, out of 3,957,000 commercial cases.   It is humbling to think that in 2012, the last date for which we have comprehensive data, there were only 1,429 and 1,349 civil and administrative foreign related IPR cases, respectively.   Foreign-related IPR cases of all types likely remain a small fraction of the Chinese court docket.

In terms of overall transparency, the court continues its effort to increase judicial transparency, as I have previously noted.  In his report, SPC President Zhou Qiang noted that 3,858 SPC decisions have been placed on line, as have 1,646,000 local court decisions.

The court also notes that one of its goals for 2014 is to promote the establishment of IP court(s), and that it is looking at how to experiment in managing resources for courts below the provincial level, in order to create a degree of  “suitable separation” from local administrative influence to improve the management system of judicial personnel.    Such efforts, if successful, could reduce the amount of local protectionism.Image

Chief Judge Jiang Zhipei, Former USPTO Acting Director Teresa Rea, Mark Cohen (the author) and Shi Lan.