Action Plan for Further Implementation of the National IP Strategy (2014-2020) Approved

According to a Chinese Government website, on  December 29, the State Council reviewed and approved the Action Plan for Further Implementation of the National IP Strategy (2014-2020) (Action Plan). The Outline of the National IP Strategy (NIPS) had been implemented for 6 years.  Premier Li Keqiang, and SIPO Commissioner Shen are quoted in the this brief summary.

Chinese authorities have pointed to three key aspects of the NIPS Action Plan:

A.  First, to “Strive to Build A Strong IPR Country”  (努力建设知识产权强国).

B.  To improve IP utilization and protection (知识产权运用和保护).

C.  Practical new steps are to be announced, including plans to promote the development of IP intensive industries (知识产权密集型产业发展).  This  includes greater coordination amongst various branches of national and local government.  Interestingly, and perhaps of greater concern, it also includes “strengthening patent pilot projects,  joint utilization of patents and collective management of patents… to strengthen the competitive advantages of industries.” (强化专利导航、专利协同运用、专利集群管理等工作…增强产业竞争优势).

Here is how I read the tea leaves on this announcement:

First, the references to China becoming an IP “strong country” , and not merely an IP “big country” is a new concept in the NIPS, and likely reflects the observations and approaches of former Commissioner Tian Lipu.  In fact, many observers believe that too much patenting, particularly patenting of a low quality, can be harmful to innovation. I have often noted in this blog that patent quality is a continuing negative side effect of China’s metric-driven approaches to innovation.  In addition, innovation is largely a local phenomenon – China’s efforts to become a strong innovative country this time will also include programs to make strong IP provinces and cities in China.

Second, the reference to IP utilization directly quotes the negotiated language of the Third Plenum and its commitment to “Strengthen the Utilization and Protection of IP” (加 强知识产权的运用和保护).  This was also something that former Commissioner Tian discussed as a positive outcome of that meeting.

Third, the reference to IP intensive industries is new to China’s strategic planning, and, as noted by Commissioner Shen, reflects the influence of the influential US government  2012 report on Intellectual Property and the US Economy.   Reference is also made by Commissioner Shen to IP intensive industries being low on resource demands and low polluting.

The legislative basis for the National IP Strategy is the China Science and Technology Promotion Law (Dec 2007).  Article 7 of that law provides that China will establish a NIPS, in order to promote innovation, encourage indigenous innovation (激励自主创新), and raise the utilization protection and management of IP.  This 2007 law was famous for codifying the concept of indigenous innovation, which elicited considerable concern at the time over potential discrimination against the foreign technology community.  This Action Plan introduces several new and useful concepts which, if implemented fairly, will benefit foreign and domestic investors alike.

 

 

Changing Times in China’s Hundred Acre Wood

The Walt Disney Company continues to zealously protect its various brands, including Winnie the Pooh.   China Daily reported last month that Disney won a law suit against an apparent trademark squatter.    The mark was reportedly for Winnie the Pooh 威尼熊., registered on garments by Lingxiu Hongri Knitting Garment Factory in Shishi City, Fujian Province.  The Beijing No. 1 Intermediate Court sustained the revocation of the disputed mark by the Trademark Review and Adjudication Board, which viewed this mark as similar to Disney’s “WINNIE THE POOH”.

Disney and Winnie have had a tough time in China over the years. At the same time by protecting its many valuable rights in a variety of media, Disney has also helped advance the law in many areas, including by bringing cases that have helped pioneer many aspects of copyright and entertainment law.

As Disney gets ready to open a theme park in Shanghai, Disney’s family-oriented brands become even more important.  Imagine if some of the early counterfeiting and piracy had gone unchecked?  One example: for the past decade I used an apparently unauthorized picture of Winnie holding a beer mug in an advertisement for a pub in Beijing to show how harmful counterfeiting can be to a family oriented brand such as Disney.  I am glad to see in Winnie being property protected.

 

Standards and IP – December Updates

cellphones

Nearly every week there is a new development somewhere in the world on IP and standards.  China has been no exception.  I already blogged about several of them of them, including EIPC MIIT’s recent program in Beijing, EIPC MIIT’s Template for IP Policies in Industry Standards Organizations,. and most recently the JCCT in Chicago.   The JCCT covered many standards-related issues, including licensing, antimonopoly law, and judicial practices in IP.  The fact sheet for the JCCT described the specific bilateral commitment on standards and IPR as follows:

China and the United States recognize that standards setting can promote innovation, competition and consumer welfare.  They also reaffirm that IPR protection and enforcement is critical to promote innovation, including when companies voluntarily agree to incorporate patents protecting technologies into a standard.  Both sides recognize that specific concerns may exist relating to the licensing of standard essential patents that are subject to licensing agreements.  China and the United States commit to continue engaging in discussion of these issues.

We might expect continuing interest by MofCOM on these important topics of standards and IP, as Dr. ZHANG Xiangchen, who currently serves as Assistant Minister and principal negotiating partner on the JCCT with DOC and USTR, also played an active role in the debates over standards and IP when he was Director General in charge of WTO affairs in Geneva. Those debates date back to at least as early as 2005, when China proposed that the WTO TBT Committee look at the issues posed by IP in standardization.

What else is new?

On December 15, the Information Technology and Innovation Foundation released a report: The Middle Kingdom Galapagos Island Syndrome: The Cul-De-Sac of Chinese Technology Standards, by Stephen J. Ezell and Robert D. Atkinson. This document is the latest in several reports over the years that have highlighted China’s “techno-nationalist” approach to standards and IP. The central thesis of this report is that China’s focus on the development of indigenous technology standards, particularly for ICT products, risks engendering a “Galapagos Island” effect, isolating its ICT technologies and markets from global norms and creating a recipe for failure. Taking a page from similar Japanese efforts and recent Chinese failures in the ICT sector (p. 15), the report argues that even the size of China’s domestic market by itself will not achieve the economies of global scale that are necessary to survive in today’s integrated global ICT economy. This report also identifies the important linkage of these policies with China’s IP plans. As the report notes, “a core component of China’s strategy is to remove or change key portions of international standards for the purpose of creating China-unique standards. Why does China do this? … The answer in many cases is that China is essentially trying to strip others intellectual property from these standards in order to avoid paying royalties.” (p. 14).

Meanwhile on December 15, China’s Caixin published a revealing article on the waste incurred by these “galapagos standards.”  The article, “China Mobile’s Dead End on the 3G Highway,” describes a wasted effort involving about 2 billion RMB to develop TD-SCDMA.
In the continuing SEP litigation wars, China’s Xiaomi in December was reportedly banned from selling its smart phones in India after a court issued an injunction in favor of Ericcson by reason of Xiaomi’s unwillingness to take a license for Ericsson’s standards essential patents.   Ericcson’s spokesperson described this as a classic patent hold out situation:

It is unfair for Xiaomi to benefit from our substantial R&D investment without paying a reasonable licensee fee for our technology. After more than 3 years of attempts to engage in a licensing conversation in good faith, for products compliant with the GSM, EDGE, and UMTS/WCDMA standards Xiaomi continues to refuse to respond in any way regarding a fair license to Ericsson’s intellectual property on fair, reasonable and non-discriminatory (FRAND) terms. Ericsson, as a last resort, had to take legal action”

Of course there are also other battles brewing. Most notably, NDRC’s investigation of Qualcomm, according to various press reports, appears to be continuing.

It will certainly be a busy 2015 in this important area.

galapagos island

Update: For an update on Xiaomi’s patent portfolio in 2016, see this  article from December 9, 2016 in IP Analytics.

JCCT 2014 Winds Up – Joint Fact Sheets Now Released

JCCT2014

The 2014 JCCT was hosted by the US government in Chicago, Illinois this year. Here is a link to the updated English  fact sheet (released Dec. 29) (Chinese:第25届中美商贸联委会联合成果清单)  that is now a joint fact sheet.    Here is a summary of the IP accomplishments of this year’s JCCT according to the joint fact sheet:

One significant outcome involved “technology localization” which is the practice whereby China grants tax preferences based on where IP is owned or R&D is undertaken.  Here is what the fact sheet says about the outcome in this area:

The United States and China commit to ensure that both countries treat intellectual property rights owned or developed in other countries the same as domestically owned or developed intellectual property rights.  ..Both China and the United States confirm that the government is entitled to take measures to encourage enterprises to engage in research and development and the creation and protection of intellectual property rights. 

In my personal estimation, the significance of this outcome is that China committed to not discriminating in awarding tax preferences based on where IP is owned.  To a degree this reflects footnote 3 of the TRIPS Agreement, which prohibits discrimination in “protection” of IP, which includes “matters affecting the use of intellectual property.”

Regarding service invention compensation, which has been important to readers of this blog, the JCCT commitment reflected the accomplishments of the 2014 Innovation Dialogue regarding freedom of contract:

The United States and China commit to protect the legal rights of inventors in respect of their inventions and creations, in accordance with their respective domestic laws and regulations, and in line with their domestic laws, commit to respect the legitimate rules and regulations developed by employers and legitimate contracts between employers and inventors concerning inventor remuneration and awards.

Another JCCT outcome involved protection of trade secrets in government regulatory proceedings:

The United States and China confirm that trade secrets submitted to the government in administrative or regulatory proceedings are to be protected from improper disclosure to the public and only disclosed to government officials in connection with their official duties in accordance with law…

The rather “hot” issue of geographical indications was also the subject of an “outcome” involving not extending GI’s to generic terms and establishing procedures to object to and cancel the registration of the GI.

There were also a number of cooperative commitments which will likely be a focus of various bilateral discussions and programs, including on technology licensing, bad faith trademark registrations, judicial best practices, data supplementation for pharmaceutical patents, IP in standards setting, sale of IP-intensive goods and services, and addressing on-line infringement.

The revised joint fact sheet also includes a joint commitment on abusive litigation:

Patent Protection and Bad Faith Litigations

  • The U.S. and China remain committed to promoting a robust intellectual property system that will incentivize future innovation and economic growth in both countries. Both parties are to strengthen cooperation to protect innovators from bad faith litigations, including to hold a joint seminar on IP licensing, so as to create positive conditions for innovation.

 

 

There were also outcomes that weren’t focused on IP but have significant IP implications.  One involved medical device and pharmaceutical market access, where China committed to accelerate approval procedures, which has long been hampered by inadequate resources at China’s Food and Drug Administration.  Another involved clarifying standards for antimonopoly law enforcement, including providing for greater due process and law firm access.  Still another commitment involved collaboration on law firm market access, which certainly affects foreign IP lawyers practicing in China.

In my personal experience, this 25th JCCT might equally be labeled JCCT v. 3.0.  The JCCT has changed to accommodate the growing complexity and importance of US-China trade.  In its first version (1983 to approximately 2001), the JCCT was as often a rather sleepy technical exchange mechanism.  I remember attending an early JCCT dealing with the enforcement of arbitration awards.  Another iteration (v 2.0) was under the leadership of Vice Premier Wu Yi after China’s WTO accession.  The JCCT then became a mechanism for negotiating trade issues with the Vice Premier chairing on the Chinese side and the Secretary of Commerce and US Trade Representative as formal co-chairs, but with an important added role for the Secretary of Agriculture.  Version 3.0 includes the same leadership structure, but with more involvement by industry and the host locality through various programs and symposia, joint fact sheets, and commitments to move negotiations changes in the negotiating calendar, including “a year of continuous work to address important issues facing our two nations.”

The above are my personal, non-official observations.