On July 18, 2016, the State Council issued a new policy document,国务院关于新形势下加快知识产权强国建设的 若干意见-重点任务分工方案 — the “Opinion of the State Council on Accelerating the Construction of Intellectual Property Powers for China as an Intellectual Property Strong Country under the New Situation –Division of Tasks.” Here’s a link to this action plan (docketed as State Council Working Office No. 66) , and a link to the machine translation, from which the world cloud above is drawn. The action plan itself is drawn from a State Council document issued in 2015 on accelerating the establishment of a strong IP country in the context of a new situation. This 2015 document identified such problems as China being a big country for IP, but not a strong country, protection was not adequately strict, infringement was easy and pervasive, and that these factors were affecting industry’s efforts to innovate.
As I discussed previously, the idea of China needing to become a strong IP country appears in the 2014-2020, National IPR Strategy Action Plan, which has the goal of “Striving to Build A Strong IPR Country” (努力建设知识产权强国). While China indeed has become “big” on most scales: invention patent filings, trademark, utility models and design patents, intellectual property litigation, criminal IP litigation and administrative litigation, to name a few, “strong” suggests quality, which is much harder to judge.
Here are a few specific observations about this action plan:
- Much of the action plan repeats existing efforts, through the MofCOM IPR Leading Group and SIPO’s National IP Strategy Office, and their current efforts at analyzing and coordinating IP effort, as well as cooperative activities (Arts. 1, 3, 13, 15, 18, 21, 22, 25, 30, 44, 88, etc.).
- There are greater efforts to incorporate IP into macroeconomic strategies, such as in calculations regarding the national economy and national social welfare (Art. 9), as well as credit reporting (Art. 23).
- Increasing compensatory and punitive damages are a focus (Arts. 14), which have also been an effort of China’s IP courts. This is one of the key civil-law reform proposals in this plan. There continues to be an undue emphasis on speed, which I assume is focused on patent administrative enforcement as a more rapid remedy (Art. 16). China is already a fast moving IP environment.
- International cooperation in criminal enforcement is underscored (Arts. 19, 21, 22).
- Regarding trade secret protection, the focus is on revising trade secret laws, and protecting IP when employees change jobs (Art. 24). Changes to China’s discovery regime and other appropriate measures which would greatly assist trade secret claimants, are not discussed.
- Geographical indications are a focus, including drafting a stand-alone GI law at “the appropriate time” (Art. 32), increasing the role of trademarks in promoting farmer prosperity (Art. 58), and promoting GI products (Art. 90).
- Regarding the long-delayed IP Abuse Guidelines, NDRC, MofCOM, SAIC and the State Council Legislative Affairs Office are all listed as being responsible for drafting “according to their responsibilities” (Art. 36). Rules on standard essential patents that are based on FRAND licensing and “stopping infringement” are also noted (Art. 38), with the involvement of AQSIQ, SIPO, MIIT, and the Supreme People’s Court). Encouraging standardization of Chinese patents also remains a priority (Arts. 61, 71).
- Service Invention Regulations, an area of some controversy are not specifically noted as a priority. Encouragement is to be given to enterprises to set up appropriate invention recognition and reward programs in accordance with law (Art. 45), and research is to be undertaken in giving compensation for new scientific achievements (Art. 46). The language may suggest that more flexibility will be given contractual arrangements and the market, as was agreed to bilaterally between China and the United States. Relevant agencies involved in these efforts include SIPO, MoST, Ministry of Education, Ministry of Finance, Ministry of Agriculture, SASAC, Chinese Academy of Sciences, MIIT, Ministry of Defense, etc.
- Chinese universities are also encouraged to become more actively engaged in commercialization of technology, through establishment of technology transfer offices (Art. 53) and other efforts.
- The impact of US efforts to study IP-intensive industries in the US economy is also apparent in this plan in terms of the government’s efforts to investigate promoting IP intensive industries in the Chinese economy, government procurement of products from IP intensive industries, and developing model districts for IP intensive industries (Arts. 55-56). Interestingly, there is no specific reference to engaging economists on any of these efforts, despite the role of foreign economists in similar efforts, some of who have also directly engaged China on how to determine IP-intensity in an economy.
- There is discussion of using tax and financial policies to promote IP creation in China (Arts. 98, 99). There is no explicit discussion of harmonization with OECD guidelines regarding patent boxes and other forms of international tax avoidance.
- The report discusses a number of strategies and plans to reduce overseas IP risks facing Chinese companies, including assisting Chinese companies in strategic planning, patenting and licensing (Arts. 72-76), developing information resources on risks and cases (Arts. 78-79), and – rather ominously – developing policies for countering large intellectual property cases overseas (with the support of MofCOM, Customs, SAIC, AQSIQ, NCA, and the China Council for the Promotion of International Trade – “CCPIT”). There is no discussion on any changes to current technology import regulations which impose onerous indemnity and non-grant back requirements on foreign licensors.
- The report directs research to be conducted of placing IP officials overseas in important countries, region and IP organizations. Although China’s current IP attaché in the United States is a MofCOM employee, the responsible agencies for this effort include SIPO, NCA, SAIC, and CCPIT (Art. 85). The first Chinese IP attaché was dispatched to the United States pursuant to a bilateral commitment of the 2005 Joint Commission on Commerce and Trade.
- The report notes that China will become more involved in promoting a more “fair and reasonable” international IP regime, through support of the Doha amendments to the TRIPS Agreement, the Convention on Biodiversity and various IP conventions. The Hague Convention on Industrial Designs is noted, but not UPOV 1991. Promotion of intangible heritage and folklore are also noted (Arts. 59. 87).
- IP talent creation and training are also key elements of the plan (103-105).
Often in looking at plans like these, it is also equally important to ask what is not being covered. The plan does not focus enough on a China where there is greater scientific collaboration with foreign scientists and engineers, which are also result in an increasingly large number of co-invented patents. Similarly, increasing Chinese investment in IP-intensive industries in the United States means that many Chinese companies will own substantial IP interests and may be less inclined to view IP issues as “us” vs “them.” The relative under-emphasis on civil remedies for IP issues in this plan is also troubling, as the availability of adequate civil remedies is what drives IP commercialization.
The report also does not suggest increasing the role of economists in IP and antitrust agencies, despite a clear focus on increasing the IP-intensity of the Chinese economy. Gaps in Chinese law, such as denial of copyright protection for sports broadcasting, weak protection for trade dress, and “circular” litigation between the patent and trademark offices and the courts which may delay final adjudication on matters, controlling trademark squatting and subsidies for unexamined patents are not discussed.
Although there are many positive aspects of this plan, I believe that focusing on issues like compulsory licensing, the Doha Declaration and folklore, or what appears to be political solutions to overseas infringement may also not deliver as much value to the Chinese economy and China’s scientists, engineers, artists and entrepreneurs, as returning to core IP concepts which let the market govern IP creation and enforcement through such measures as improving the scope of rights that are protected under Chinese law, limiting government intervention, increasing the role of the civil judicial system, and promoting increased collaboration.