Tudou Encounters a “Hot Potato” In Distributing A “Bite of China”

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From April this year, the Supreme Court launched started releasing “model cases” (典型案例) in order to assist the courts and public to better interpret the law.

On June 23, 2014 the Supreme People’s Court released five “model cases” decided by the lower courts, which for the first time included an IP-related case, CCTV International [央视国际网络有限公司] vs. Shanghai TuDou Network Technology Co., Ltd. [上海全土豆文化传播有限公司]. These model cases, as I have previously blogged are an effort to instruct the lower courts and the public on how IP cases are adjudicated, and are an effort to establish a kind of “case law with Chinese characteristics.”  The case has been briefly discussed by Jerry Fang at the Supreme People’s Court Observer website.

 “A Bite of China” is a food documentary.  It was filmed by CCTV. It was first broadcast in May 2012. One week after broadcast Tudou.com offered a link to watch the video on-line. CCTV thereafter sued Tudou for damages and reasonable costs.

The Shanghai Minhang District People’s Court determined that the action of the defendant constituted infringement of the right of communication through information networks (the “making available right” in other jurisdictions).   In particular, the court relied on Article 3 of the 2012  Judicial Interpretation on on-line infringement [The Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in Hearing Civil Dispute Cases Involving Infringement of the Right of Dissemination on Information Networks]. In this case, the defendant provided the online on-demand service of the infringed work to the public and allowed users to watch the asserted work in their personal selected time.

Tudou (which means potato in Chinese) argued that it only provided space storage services and that the asserted work were uploaded by the network users.  However, it was not able to provide evidence to illustrate who was the actual person to upload the videos, so the court did not find this argument to be credible. In regard to the economic loss claimed by the plaintiff, since the plaintiff couldn’t submit the evidence about benefits from the infringement of the actual loss suffered by the defendant, the court considered the popularity of the asserted work, that the defendant directly provided the asserted work to view online, that the subjective fault of the defendant was large, and the infringement was occurred during the “hot” [热播] broadcast period for the TV show. The court also looked to Tudou’s business size, business model, and the nature of the its website to demonstrate the effect of the infringement.

According to the judgment of the first instance CCTV International filed a lawsuit after it obtained notarized evidence of the infringement. Thereafter, Tudou deleted the asserted video on its website. It appears that CCTV International did not give an opportunity to give Tudou time to take down the video before filing the lawsuit.  The court instead relied upon the fact that Tudou, a sophisticated company, uploaded the content itself, and that the content was “hot”. Under Article 10 of the 2012 Judicial Interpretation on on-line liability, where there is such “hot” content, knowledge of infringement can be imputed:

Article 10    Where a web service provider, when providing web services, by establishing charts, catalogues, indexes, descriptive paragraphs or brief introductions or other ways, recommends hot movie and television programs which can be downloaded or browsed or are otherwise accessible by the public on its webpage, the people’s court may decide that it should have know that its web users are infringing upon the right of dissemination through information networks.

第十条网络服务提供者在提供网络服务时,对热播影视作品等以设置榜单、目录、索引、描述性段落、内容简介等方式进行推荐,且公众可以在其网页上直接以下载、浏览或者其他方式获得的,人民法院可以认定其应知网络用户侵害信息网络传播权。

This case appears to be directed to the application of what constitutes “hot” content according to the 2012 Judicial interpretation, as well as related issues involving application of the JI.  It may also be timed to coincide with the current comment period for the recently released draft of the State Council Legislative Affairs Office of the proposed revisions of the Copyright Law.  Article 73 of that draft outlines addresses “actual” or “constructive” knowledge of infringement which can result in liability for an ISP, without specific reference to any “hot” content.

After some searching, it appears that this case is not yet available on line in its second instance decision.   This blog has therefore relied on the press release and first instance decision.  If a reader has a copy, please post it or email me at chinaipr@yahoo.com. 

These cases show that China is laudably utilizing its extensive IP case adjudication experience to guide the judiciary and is therefore evolving its own approach towards case law.  However, if the cases are to have an  even greater impact, it is also important for the case to be published or made readily available at least by the time it is listed as a model case.

Choice of Law in IP Contracts with China: A Sleeper Issue?

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Practical Law (Thomson Reuters) has recently made available its analysis of a survey (free sign in required) on the use of governing law for China-related agreements which reveals trends in choice of law for foreign-related IT and IP contracts in China.

In my own experience, if you require enforcement in China, choosing a foreign court (other than arbitration) to resolve a dispute, or a non-Chinese law for a dispute in China, is often a mistake.  The survey data generally agrees: it shows that if local enforcement is going to be an issue for an IP or IT contract, the majority of respondents will choose Chinese law.

The Chinalawblog put the general proposition it this way: “China’s laws do technically allow for contracting parties [in transnational transactions] to make their own decisions regarding a contract’s governing language and law, but in the practical world of Chinese litigation, having an English language contract or a contract calling for foreign law is nearly always going to be a mistake.”

For intellectual property and information technology contracts, choice of PRC law remained significant (31% of respondents).  After Chinese law, New York law (21%) “blazed ahead” of Hong Kong (17%) and English law (10%). ‘Other’ jurisdictions accounted for 19% of responses.   The jurisdiction of enforcement was cited as an important factor by 86% of respondents, and the availability of certain remedies was cited by 80% of respondents

The global nature of information technology and IP transactions may also explain why respondents in this practice area are comparatively open to contracting under unfamiliar laws.   Only 69% of respondents cited familiarity with a body of law as an ‘important’ or ‘very important’ factor in this practice area, against 77% of respondents overall.

Generally speaking, for those lawyers negotiating commercial contracts who choose Chinese law, the key drivers were jurisdiction of enforcement (87%) or of performance (77%) and the location of the contracting entity (71%) or counterparty (63%). Fewer respondents who preferred China rated the neutrality of the legal system as “important” (52%).

I had previously encouraged readers of this blog to complete the survey, as I believe choice of law in IP and technology transfer contracts is a “sleeper” issue – i.e., one that is too infrequently considered for all its strategic implications.  There may be situations where foreign law is preferred for a Chinese contract, or when Chinese law is preferred for a contract to be implemented overseas, or where choice of Chinese law brings some unhappy surprises.  Those, however, are topics for another blog.

Unfortunately the response rate for this survey was relatively low.  In total 127 respondents answered the survey. In addition, the survey did not address choice of law considerations in international technology transfer agreements, where there are mandatory provisions of Chinese law that contracting parties may wish to avoid.

What has been your experience in technology transfer or IP contracts?

IP Discovery With “Chinese Characteristics”

Will China ultimately introduce civil procedures to guarantee that evidence not only won’t be manipulated or adulterated, but that it will also be produced to an adverse party? What would such procedures mean to the Chinese civil system that prides itself on a high degree of efficiency and depends upon each party unilaterally meeting both a burden of proof and a burden of production?

Mark Schroeder at Deloitte China has written an interesting blog “China’s potential future…eDiscovery and CJR [Civil Judicial Reform].”  Schroeder documents current Chinese experiments at expanding discovery and links it with the pervasive growth of electronically stored information in litigation.  He believes that “China … will ultimately begin to resemble and utilize similar common law mechanisms particularly in “discovery”. 

I agree.  I have discussed elsewhere here the possibility of increased administrative litigation discovery,  calls for increased discovery in civil litigation, and discussions on this topic at a highly successful program held at Renmin University on IP adjudication with over 200 Chinese judges in 2012, and in more recent engagements with the Chinese judiciary.

Interestingly, no one seems to be urging China to adopt the US system wholesale because of its potential for abuse.  However, greater production of evidentiary information in the hands of an adverse party would help in adjudicating cases, particularly in difficult cases such as software piracy or trade secret cases where proprietary information may be in the exclusive hands of a defendant.   These difficulties in “satisfying evidentiary burdens” have also been identified by the Chinese courts as a particular difficulty  in trade secret cases.  

I am less certain than Schroeder that a reason that introduction of discovery mechanisms has been delayed is the necessity of “forming safeguards mainly for security reasons.”  In fact, some courts, such as Jiangsu, have introduced model protective orders to provide for production of confidential information.  In addition, China’s more expansive use of preliminary or final evidence preservation orders can also serve a quasi-discovery function.    China has also introduced new provisions regarding civil procedures that also provide a greater role for the parties in producing and substantiating evidence

Schroeder (like me) also identifies Hague convention discovery as problematic.  According to Schroeder “The Hague “letter of request” process may require 6 months or more and will only retrieve data with a “direct and close connection with the subject matter of the litigation.”   Perhaps, as China permits more robust discovery type procedures and integrates more closely with other legal systems, these limitations may change.

Schroeder concludes that concurrently, common law jurisdictions in trying to contain discovery, have serendipitously legislated discovery rules that look similar to China’s proposed rules as they have promoted the courts control over the evidence gathering process. In light of these developments and the need to produce electronically stored information, Schroeder believes that China will ultimately develop a discovery system like a common law jurisdiction but “with Chinese Characteristics”.

China’s Upward Path In Innovating: What Global Patent Data Shows

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Thomson Reuters/Derwent has just published its 2014 State of Innovation Report. This report analyzes 12 key technology areas, and offers some interesting observations about China’s growing global role in patenting and innovation. Here are some results:

In most fields China did very well compared to other Asian economies. In some fields, China is a global leader. Many of these fields have also been a focus of China’s efforts to build a more innovative economy, or are considered a “strategic emerging industry.” In many cases, research institutions rather than companies continue to play a dominant, role.

In the Automotive Sector, there was no Chinese company amongst the top ten patent filers in Asia. The field was dominated by Japanese and Korean companies. Similarly, for Alternative Powered Vehicles, no Chinese company made the top 10 of Asia Pacific assignees. In Space Vehicles and Satellite technologies, seven Chinese institutions made the top 10 of Asia Pacific assignees.

The Computing and Peripherals technology area showed the most overall innovation of all sectors analyzed, with more than 300,000 unique inventions, more than twice as many inventions as Telecommunications, the next largest category. However, the subcategories reported didn’t reveal many Chinese stars. For example, In Smart Media, State Grid and Peking University made the top 10 of Asia Pacific assignees.   No mainland Chinese company made the Asia Pacific top 10 in Semiconductor materials and processes. In Mobile Telephony, Guangdong Oppos Mobile Telecommunications made the number six Asia Pacific slot.

Amongst Asia Pacific Kitchen invention assignees, Midea and Haier made the Asia Pacific top 10.  In the Beverage Fermentation area, SIPO Commissioner Shen’s alma mater, Dalian University of Technology, ranked number 5 among Asia Pacific assignees. China Petrochemical and South China University of Technology were also amongst the top 10.

China did shine in Petroleum & Gas Exploration, Drilling Production and Processing. Six Chinese companies or institutes were amongst the top 10 Asia Pacific assignees. China Petrochemical and Petro China took the first two slots, and were also in first place globally

China is also showing a growing role in biotechnology. In Cancer Treatment, there were several Chinese institutions amongst the top 10 Asia-Pacific assignees, including Peking, Fudan and Zhejiang Universities (Nos. 7, 8 and 9). In Surgery/Diagnosis.  There were no Chinese companies amongst the top 10 Asia Pacific assignees. In the Heterocyclic Pharmaceutical area, Nanjing, Fudan, Peking and Sichuan Universities, took the Asia Pacific 1, 7, 9 and 10 slots. Nanjing was in fact in first place globally, barely edging out European and US institutions. Dr Reddy’s Lab was the topped rank Indian company, with about 1/3 the number of inventions of Peking University.

China’s efforts in biotechnology, which is otherwise showing global declines, are in a sense doubly remarkable.Globally, in all fields except biotechnology inventions showed double digit growth. Globally, Biotechnology showed a decline of 3% from last year, with the biggest being Drug Discovery related innovation, which fell by 25%. The data suggests that China’s 12th Five Year Plan for biotechnology (十二五”生物技术发展规划) which has such goals as being number three in patents globally, and developing a series of new pharmaceutical compounds is well on its way.

 

 

New SAIC Draft of IP Abuse Rules to Be Released for Public Comment

According to press reports, SAIC is set to release on Wednesday June 11 a new draft of its SAIC Rules on Ceasing Abuse of Intellectual Property That Eliminate or Restrict Competition  (Draft for Public Comment)  工商行政管理机关禁止滥用知识产权排除、限制竞争行为的规定(征求意见稿).

Key components of the draft:

Refusing to license IP,  tying of intellectual property and unreasonable restrictions on IP may be deemed anticompetitive.

Certain conduct, such as are involved in patent pools, standards setting and standards implementation, collective management of copyright, and abusive mailing of IP infringement warning letters, can constitute monopolistic agreements, and/or abuse of dominance, but in most cases will be the latter.

Fines and bases for enforcement are also set forth in the draft.

This is another version of the draft of 2012 and was released for public comment on two separate occasions since 2013. The American Bar Association, as well as foreign governments and the Chinese public had all commented on prior drafts.

I hope to post more on this as further information develops.

Source: Sina.com (http://finance.sina.com.cn/china/20140610/191719370076.shtml), and other sources.

Jail House Inventors and Fake Jail Infringements

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Here’s another  IPR oddity: the jail house innovator.  Both China and the United States have them.

The Chinese government, like many other governments, has had policies for reducing criminal sentences for a variety of factors (age, health, behavior, restitution etc.).  Uniquely, however, it has also had an explicit policy encouraging innovation in the prisons.  The most recent version of that rule is the April 10 Rule of the Supreme People’s Court on Procedures for Review of Commutation and Parole Cases (最高人民法院关于减刑、假释案件审理程序的规定).  Article 5, states:

执行机关以罪犯有立功表现或重大立功表现为由提出减刑的,应当审查立功或重大立功表现是否属实。涉及发明创造、技术革新或者其他贡献的,应当审查该成果是否系罪犯在执行期间独立完成,并经有关主管机关确认

My translation: Agencies implementing sentences should consider the accuracy of whether the offender had rendered meritorious service or major meritorious grounds for commutation.   When such a request involves invention creations, technology innovations or other contributions, agencies shall examine whether these results were independently achieved while serving sentences, and if the relevant department has recognized that accomplishment.

This compassionate policy raises a host of interesting theoretical questions.  For example, are there  “service inventions” in the prison system of China? Will the convict keep the revenues from the invention?  Will local government provide subsidies to convicts?  Do IP agencies work with prisons in evaluating patents and innovations?  Are prisons themselves recognized as institutions promoting innovation?    If the prisoner had been convicted of an IP-related offense, such as counterfeiting a patent, is he or she really to be trusted?  Moreover, can the prisoner or his assignee bring a suit on his independent patent? 

Actually, prisons, inventors and patents have had an awkward relationship in both the United States and China.  In the United States, David Marshall “Carbine” Williams, served time for making moonshine and was held responsible for killing a federal officer.  He was helped in prison by a compassionate prison warden who enabled him to come up with some of this greatest ideas while in jail.  He later helped the US war effort after he left jail through his work on the M-1 rifle.  HIs life story was later made into a film, with Jimmy Stewart as the film’s star.  

Inventors have also served time in both our countries.  Jin Fuey Moy, the first Chinese inventor in the United States, served time a US jail, presumably while his patents were still in force.   In China, Wang Lijun, who handled public security under convicted Chongqing former government Bo Xilai,  held 150 patents.  He was sentenced to 15 years in prison in 2012 on corruption charges.    

Apart from this compassionate policy, China’s IP enforcement agencies had also, in the early stages of their development, an awkward understanding of their own responsibilities to stop IP infringement in their house.  In the past, for example, reeducation through labor camps were charged with the manufacture of counterfeit goods for export.  In those early days, China’s Supreme People’s Procuratorate had actually pirated a series of books on IP by the late scholar Zheng Chengsi,   As I have blogged about elsewhere, I believe the question is not really whether government agencies have infringed but how they prevent infringement, and how they behave after they discover the infringement (https://chinaipr.com/2013/10/14/software-piracy-by-sipo-a-tempest-in-the-tomato-garden/). 

Today, illegal counterfeiting operations may actually resemble prisons as they seek to hide their underground operations from law enforcement and engage in unsafe work practices.   How bad are the working conditions? In one particularly bizarre development, some ten years ago, a fake “prison” was in fact discovered in Sichuan that was making counterfeit cigarettes.  http://www.iol.co.za/news/world/chinese-police-snuff-out-fake-prison-1.121231.  One can only imagine what it was like to work there…