The Real Mischief of Tianjin’s Patenting Police Chief

Many media, including the Wall Street Journal, have reported on Tianjin  police chief, Wu Changshun 武長順, who seems to be following in the footsteps of Chengdu police chief Wang Lijun, 王立军 as a police officer/inventor who also ran afoul of Chinese law.

The story of Wu Changshun however seems to be a bit more complicated than simply being a police chief who scammed China’s innovation system. Wang Lijun, as I blogged before, may have been profiting off of patent subsidies to file low quality patents.  He had 150 patents to his name, and likely used a widespread subsidy mechanism to generate revenue and appear innovative.  It is unclear if he commercialized these patents.

As reported by SIPO’s newspaper, Wu seems to be of another stripe – the “scholar official”  or the “inventor official.”  In fact 34 of the 35 patents he obtained were transportation-related.  Wu worked in 18 institutes of higher education and research institutions, including as an adjunct professor and researcher.  He has credentials as an advanced engineer and he has a Ph.D.  Indeed, he was developing inventions that at first glance might be useful to him in his police work – precisely the type of employee/inventor that China wants to encourage.

The real trouble this may be elsewhere than in lower quality patents.  For example, of the four inventions in which he is listed as the sole inventor, three involve a paneled traffic light.  This paneled light has become a bit of an annoyance to Tianjin residents and out of town drivers, perhaps because as this picture shows, it had a unique design and functionality.   The problem of Wu was not only in what he invented, but in how he commercialized his inventions.  He apparently held power on certifying products for safety, standardization, as well as government procurement and through these efforts made it impossible for others to compete on Tianjin public road procurement projects where he had a personal stake.

Wang abused China’s petty patent system.  Many of these patents lapse after one year, because they are never commercialized.   Wu, however, seems to have showed considerable creativity in how to abuse the system for commercialization of patents.  His story may underscore the need for more transparent and competitive technical standards, open government procurement and clearer employer ownership/inventor rewards systems, without reference to where a product was innovated.

Funny, those are some of the issues that foreigners would like to see China focus on as well….

Further Developments in Specialized IP Courts

According to a recent article by Harry Yang (杨成) at http://npc.people.com.cn/n/2014/0825/c14576-25535722.html, the NPC is discussing establishing specialized IP courts in Beijing, Shanghai and Guangzhou, based on a draft submitted by the Supreme People’s Court (SPC).

The specialized IP courts are proposed to have cross-regional jurisdiction over civil and administrative IP cases related to patents, plant varieties, integrated circuit layout designstechnical secrets” (which is not a term in the anti-unfair competition law), and “other” intellectual property rights.   The SPC will enact a rule to divide the jurisdiction for each specialized IP court.

The specialized IP courts will also have jurisdiction over the appeals of first instance copyright and trademark civil verdicts, as well as appeals for administrative decisions made by the local courts where the specialized IP courts are located.

The Beijing IP Court will have jurisdiction over administrative IP cases decided against any administrative decision made by departments of the State Council, thus retaining – if not enhancing – their combined administrative/civil jurisdiction.

Regarding appeals of the first instance verdict made by the specialized IP courts, the local People’s High Courts will have jurisdiction.

The goals of the courts appear to be to strengthen IPR protection,  provide greater uniformity in adjudication (much like the reasons for the CAFC) and to mitigate local protectionism.  The experts took note that amongst the 90,000 IP cases of last year, there were several thousands that were more difficult.  These difficult cases generally involved high technology, and  were also a concern of the international community.   The article also notes that certain jurisdiction issues need to be resolved involving appeals from local courts to the specialized IP courts.

The article does not address outstanding subject matter jurisdiction issues – such as jurisdiction over antimonopoly law cases, or non-technical trade secrets by the specialized IP courts.

SPECIALIZED IP COURTS ABOUT TO LAUNCH IN THREE CITIES – AND ARE THEY GOOD FOR FOREIGNERS?

Recent Chinese efforts at developing specialized IP courts and in promoting greater judicial independence suggest that the system may significantly improve in the years ahead. According to press reports, some of these efforts may take final form at the 10th meeting of the 27th Session of the Chairman’s Council of the 12 Session of NPC Standing Committee which will be held on August 25 through 30. At that meeting, the NPC Standing Committee will review the bill submitted by the Supreme People’s Court which is the Draft Resolution of SPC to Establish IPR Courts in Beijing, Shanghai and Guangzhou.

Why specialized IP courts? On August 12, 2014, Deputy Chief Judge Jin Kesheng (金克胜), of the third civil (IPR) division of the Supreme People’s Court, said: “In recently years, the speed of increasing IP court was grow slow smoothly, however, there are more and more the new style cases and complicated cases involving foreign parties so that these cases were difficult to judge and the attention from the public to these cases were enhanced. The number of case filed at the Supreme Court was increasing, especially in patent cases with more complicated technology and huge market value and interest. Additionally, the administrative cases are growing rapidly, the proportion of cases involving the fields of medicine, electronic, telecommunication patents are increasing. The proportion of cases in competition cases involving network technology and new business models is large, business secrets and counterfeiting cases continue to increase, and the Supreme People’s Court is hearing antimonopoly cases for the first time… Therefore, this year the Central Committee of the Party and some related departments did some investigations with regard to establishing a specialized IP courts…”

 China has had specialized IP tribunals (ting 庭), beginning with an initial experiment in 1993 in Beijing. Currently there are about 3,000 judges in sit these tribunals. In addition, there are 560 tribunals throughout the country, including basic, level, intermediate, high court and supreme people’s court tribunals or divisions.   In recent years, China has been experimenting with more basic courts (e.g. Yi Wu People’s Court and Kun Shan People’s Court) hearing IP cases including patent cases. Historically, these tribunals had sometimes been called “No. 3 Civil Tribunals” (e.g. No.3 Civil Tribunal of Shanghai Higher People’s Court, No.3 Civil Tribunal of Pudong District People’s Court), “No. 5 Civil Tribunals” (No.5 Civil Tribunal of Shanghai No.1 Intermediate People’s Court, No.5 Civil Tribunal of Shanghai No.2 Intermediate People’s Court) or IP Tribunals (IP Tribunal of Zhuhai People’s Court). Increasingly these tribunals may combine civil IP jurisdiction with administrative review and criminal jurisdiction (“three in one tribunals”).

 As civil enforcement is the lion’s share of judicial IP litigation, the civil experience of these judges has in a sense helped also to develop the capacity of China’s judiciary to handle criminal and administrative litigation. In addition, by combining civil, criminal and administrative jurisdiction there is a greater likelihood of consistent handling of matters that may cross jurisdictional boundaries such as use of administrative evidence in civil cases, providing civil compensation in criminal matters, referring administrative or civil matters to criminal litigation, or handling patent and trademark validity matters in conjunction with an ongoing civil case. Today all of these matters may be handled in one tribunal.

 What prior work has been done in this area by the Chinese government? While specialized IPR courts have been talked about for some time, institutional improvements in the IPR tribunals were set forth as a national goal in the Outline of the National IP Strategy (2008) which was coordinated by SIPO. The NIPS stated “Studies need to be carried out on establishing special tribunals to handle civil, administrative or criminal cases involving intellectual property”. The SPC took an important step in this direction in July 2009, when it directed the civil IP tribunals in the Beijing No. 1 Intermediate Court to handle validity matters on appeal from China’s patent and trademark offices. (最高人民法院关于专利、商标等授权确权类知识产权行政案件审理分类的规定).

 The impetus to develop specialized IP courts in China took an even greater leap forward back on November 12, 2013, at the Third Plenum Session of Eleventh Communist Party Central Committee (the “Third Plenum”). The Third Plenum set as a goal to “explore the establishment of intellectual property court(s).” Since that time, Beijing, Shanghai, Guangzhou, Nanjing, Chengdu, Zhengzhou had started to apply for establishing the IP court with the Supreme Court. On March 10, 2014, Zhou Qiang(周强), the President of the SPC discussed the work schedule of 2014 and said that the Supreme Court would promote to establish the specialized IP court. On July 9, 2014, the Supreme Court at its press conference outlining judicial reforms for the Supreme Court (2014-2018) discussed establishing Specialized IP courts at places where IP cases are concentrated. Professor Tao Xinliang (陶鑫良) had proposed establishing the IP Intermediate Court at some places where IP cases concentrated to judge the civil IP cases and administrative IP cases of the first instance and the civil IP cases, administrative IP cases of the second instance and some criminal IP cases. (Prof. Tao Xinliang 陶鑫良<Some thoughts on Establishment of Specialized IP Court建立知识产权法院的若干思考> Madame Tao Kaiyuan (陶凯元) , a Vice President of the Supreme Court, and a former Director General of the Guangdong IP Bureau (where she likely worked with Vice Premier Wang Yang(汪洋)) has also said that the SPC should continue to promote three-in-one IP tribunals.

Why might China be adding a new emphasis on a specialized IP court in additional to combined tribunals? A specialized IP court may promote and improve the civil judicial enforcement system by providing more resources, promote the independence of the judiciary, and provide for more training of judges, particularly on technical patent matters. The judges of a specialized IP court might be even more professional and autonomous. They might be better able to handle the administrative cases, criminal cases and civil cases at the same time. Like other specialized courts (e.g maritime, military, railway court), civil/criminal and administrative jurisdiction would also combined, reflecting the subject matter expertise of the judges in that court and likely reducing subject matter and venue conflicts for IP litigation.

 The SPC has not yet published the detailed program for implementation of specialized IP courts. In addition, we have heard little about important areas of the IP tribunals’ jurisdiction which are not as directly related to IP, such as antimonopoly law, unfair competition and licensing, and whether these areas will also remain within the specialized court jurisdiction. We assume they will be, and would actually hope that other IP-related areas could be specifically included (such as consumer protection, substandard products, and geographical indications). However, we have seen nothing to date discussing these areas.

Will a specialized IPR court be good for foreigners? Most foreign rights holders have continuing concern with local protectionism and political influence in IP adjudication. Beijing, which appears to be a focus for development of a specialized IP court is the jurisdiction that appears to hear the most foreign cases. As we have previously blogged, foreign parties are involved in approximately 47% of their administrative appeal docket (which is primarily based in Beijing); or about 1349 cases, nearly equal to the number of infringement cases in 2013 of 1429. Hopefully, giving the Beijing courts more independence and confirming their “three in one” approach will provide greater judicial autonomy for the Beijing courts.

One concern is whether specialized IP courts will indeed function in a more independent manner than IP tribunals. The US experience with our specialized national patent court, the Court of Appeals for the Federal Circuit, has generally been that the CAFC has some impact on correcting local biases at the trial court level, including possible anti-foreign jury bias. This is borne out by data which shows that in general, reversal rates in favor of foreigners is higher at the CAFC than reversal rates in favor of domestic entities.

 U.S.: Patent Infringement Civil Litigation Appellate Win Rates

 

Overall

Foreign Companies

Patent Owner Win Rate

25%

27%

Accused Infringer Win Rate

75%

78%

Source:Paul M. Janicke & LiLan Ren, Who Wins Patent Infringement Cases?, 34 AIPLA Q.J. 1 (2006).

However, according to data from the CIELA database (www.ciela.cn), second instance patent appeals in China generally show an inclination to support the Chinese domestic party against the foreigner.

China : Invention Patent Litigation Data

 

All Plaintiff

Foreign

Domestic

1st instance win rate

73%

78%

72%

2nd instance win rate

52%

40%

52%

Overturn rate

19%

30%

17%

Mean compensation

RMB 439,614

RMB 230,827

RMB 525,939

Medium compensation

RMB 100,000

RMB 125,000

RMB 100,000

Duration

8.2m

11.8m

6.9m

(Courtesy of Tim Smith of Rouse & Co. )

Why might appellate IP courts or tribunals behave differently in each country? First, the CAFC is a national court, not a regional or local court. In this sense, it may be more accountable to national law and reputation than local courts. The CAFC under former Chief Judge Rader had in fact been a leading global proponent of national specialized IP courts. Second, the CAFC has a different jurisdictional role. It does not retry cases, rather it hears appeals. In addition, it hears both patent validity and infringement matters in one court. Moreover, its decisions on matters of law are binding on lower courts. As such, it has more authority in deciding legal matters, and in instructing lower courts on proper adjudication. For example, the CAFC had taken an active role in addressing venue issues at the E.D Texas on patent litigation issues. A third reason is found in China’s political situation. In general, Chinese courts are much less independent than US courts. Local Chinese courts, particularly in remote areas, may also tend to be even less accountable to national law and policy. Second instance Chinese courts may be more susceptible to receiving national policy directives and may therefore be more susceptible to national political influence in adjudicating disputes. Moreover, local statutes enacted by local people congress are at a higher political hierarchy than national administrative rules (部门规章). The local political congresses that enact these statutes also appoint judges. When a second instance case is heard, for example, in a provincial high court, there may in fact be a problem of more direct political influence through political actors in the provincial capital.

The limited data available to date suggests to me that while specialized IP courts have promise, their potential impact will also be affected by national judicial reform efforts and may continue to be constrained by existing limitations in the political independence of the Chinese judicial structure. As Susan Finder has noted in her blog, there are several efforts under way to address some of these systemic issues in the Chinese judicial system, which may also bear promise for Chinese IP adjudication. In sum, specialized IP courts may not be the panacea that foreigners might otherwise seek in minimizing anti-foreign bias in local adjudication in China, but I do believe they offer some hope for a better and stronger judiciary.

 By Mark Cohen, with Ms. Yao Yao of Fordham Law School (LLM Candidate, 2015).

ABA Conference on 8th Draft of SAIC IP Abuse Rules in DC

This is from Yee Wah Chin via Don Clarke’s Chinalaw list-

SAIC’s 8th Draft AML/IP Rules

August 26, 2014

Noon-1:15PM Eastern

On June 11, 2014, China’s State Administration for Industry and Commerce (SAIC) released the 8th Draft of its Anti-Monopoly Law/IP Rules.  Panelists from the U.S. Federal Trade Commission, academia, and private practice will discuss controversial provisions of the 8th Draft—including the application of the essential facilities doctrine to intellectual property rights, liability for failure to disclose essential patents, and liability for failure to license patents found to be essential on FRAND terms—as well as possible implications, and the U.S. approach to such issues. 

Moderator

D. Daniel Sokol, Levin College of Law; Senior of Counsel, WSGR LLP

Panelists

Koren W. Wong-Ervin, FTC

Yee Wah Chin, Ingram Yuzek Gainen Carroll & Bertolotti LLP

H. Stephen Harris, Jr., Winston & Strawn LLP

Tad Lipsky, Latham & Watkins LLP

Location: Winston & Strawn LLP

1700 K. St. N.W. Washington D.C. 20006

To register, open this file:  ABA Program_SAIC’s 8th Draft IP Rules_August 2014.

The ABA’s comments were previously posted by me: ABA SAL-SIPL-SIL SAIC IP abuse rule comment final package.

Outcomes of the Fifth US-China Innovation Dialogue

The White House Office of Science and Technology Policy recently released a blog on the results of the bilateral Innovation Dialogue with China with the Ministry of Science and Technology and other agencies: http://www.whitehouse.gov/blog/2014/08/13/outcomes-fifth-us-china-innovation-dialogue.

Of particular note are the provisions regarding sanctity of contracts involving inventor compensation. According to the blog:

The United States and China resolved to protect the legal rights of inventors in accordance with their respective domestic laws and regulations, and in line with their domestic laws committed to respect the rules and policies developed by employers and/or legitimate contracts between employers and inventors concerning the awards and/or remuneration of inventors.

For further background see: https://chinaipr.com/2014/04/03/new-service-invention-draft-regulation-and-web-page/ .

MofCOM Hosts Annual IP Program Sept 12 in Washington, DC

MofCOM is hosting its annual IP exchange in the United States this September 12 at the Holiday Inn  on 2101 Wisconsin Avenue in Washington, DC.  There is no charge for attending, but seats are limited.  If you wish to attend, reserve by contacting Mr. Huangjie via huangjie@mofcom.gov.cn or 202-6253355.

Here is the draft agenda:

2014 China’s Overseas IPR Exchange Tour in the U.S.

 September 12, 2014   Simultaneous translation provided

08:30-09:00  Registration

09:00-09:05         Opening remarks by the Chinese side (Mr. Fuli Chen, China’s IP Attaché to the United States)

09:05-09:10         Opening remarks by the U.S. side

09:10-09:30         China’s efforts and achievements in combating IP infringement and piracy in 2014, presented by the Office of China’s National Leading Group on the Fight Against IPR Infringement and Counterfeiting. (Issues concerning trade secret protection will also be mentioned)

09:30-10:00         Ten typical IP cases in 2013, presented by China’s Supreme People’s Procuratorate

10:00-10:15         Q&A

10:15-10:30         Coffee Break

10:30-10:50         Highlights of the Regulations for the Implementation of the Trademark Law, presented by China’s Trademark Administration Bureau under the State Administration for Industry and Commerce

10:50-11:10         Latest development of China’s copyright protection, presented by the National Copyright Administration of China

11:10-11:30          Introduction to China’s GI protection system and the protection granted to Napa Valley Wine, presented by China’s General Administration of Quality Supervision, Inspection and Quarantine

11:30-11:50          Q&A

11:50-11:55          Closing remarks by the Chinese side

11:55-12:00         Closing remarks by the U.S. side

12:00-13:00         Lunch (Buffet)

14:00-16:00         Roundtable meeting (Moderator: Mr. Fuli Chen, China’s IP Attaché to the United States)

14:00-14:05         Opening remarks by the moderator

14:05-14:15         Self-introduction by members of the Chinese delegation (or by all the participants)

14:15-15:15         Comments and questions from U.S. enterprises

15:15-16:00         Q&A