E-Commerce Law Up for Public Comment

The National People’s Congress announced this week that it has released a draft of the E-Commerce Law for public comment.  The public comment period began December 27, 2016 with comments due by January 26, 2016.  Although focused on the overall development and regulation of e-commerce, the draft also contains provisions regarding IP protection by platforms and their responsibilities, in order to preserve market order and fair competition 市场秩序与公平竞争.  The draft in Chinese is attached here, with relevant provisions and machine translations below.  I hope to provide more detailed comments later – I am particularly interested in how this draft relates to provisions in the tort law, IP laws and civil laws regarding online liability, as well as how enforcement authority over infringements for online operators will be amended and divided up amongst the various IP agencies if this draft is implemented into law.

Article 53 provides:

第五十三条   电子商务经营主体应当依法保护知识产权,建立知识产权保护规则。电子商务第三方平台明知平台内电子商务经营者侵犯知识产权的,应当依法采取删除、屏蔽、断开链接、终止交易和服务等必要措施。         

Article 53 The electronic commerce business principal operator shall protect intellectual property rights in accordance with the law and establish rules for the protection of intellectual property rights. If the e-commerce operator infringes the intellectual property rights within the platform, it shall take the necessary measures such as deleting, shielding, breaking the link, terminating the transaction and service according to law.

Article 54 provides:

第五十四条   电子商务第三方平台接到知识产权权利人发出的平台内经营者实施知识产权侵权行为通知的,应当及时将该通知转送平台内经营者,并依法采取必要措施。知识产权权利人因通知错误给平台内经营者造成损失的,依法承担民事责任。   

平台内经营者接到转送的通知后,向电子商务第三方平台提交声明保证不存在侵权行为的,电子商务第三方平台应当及时终止所采取的措施,将该经营者的声明转送发出通知的知识产权权利人,并告知该权利人可以向有关行政部门投诉或者向人民法院起诉。   

电子商务第三方平台应当及时公示收到的通知、声明及处理结果.

Article 54 Where a third-party platform for e-commerce receives a notice from a platform operator of intellectual property rights issued by the owner of the platform for intellectual property infringement, it shall promptly transmit the notice to the operators within the platform and take the necessary measures according to law. If the intellectual property right owner causes any loss to the operator of the platform due to the wrong notification, he shall bear civil liability according to law.
If the platform operator submits a declaration to the e-commerce third-party platform to ensure that there is no infringement, the third-party platform shall promptly terminate the measures taken and forward the statement of the operator to the notification Property rights, and inform the right person to the relevant administrative departments of complaints or to the people ‘s court.
E-commerce third-party platform shall promptly publicize the received notice, statement and processing results.

Article 88 provides:

第八十八条   电子商务第三方平台违反本法第五十三条的规定,明知平台内经营者实施侵犯知识产权行为未采取必要措施的,由各级人民政府有关部门责令限期改正;逾期不改正的,责令停业整顿,并处以三万元以上十万元以下的罚款;情节严重的,吊销营业执照,并处以十万元以上五十万元以下的罚款。         

Article 88 If a third-party platform for e-commerce violates the provisions of Article 53 of this Law and knows that the operator of the platform does not take the necessary measures for infringement of intellectual property rights, the relevant departments of the people’s governments at various levels shall order it to make corrections within a prescribed time limit; If the circumstances are serious, the business license shall be revoked and a fine of not less than 100,000 yuan but not more than 500,000 yuan shall be imposed.

 

 

Book Review on Report on Development of Intellectual Property Development in China (2015)

The Report on Development of Intellectual Property Development in China 2015 中国知识产权发展报告 (IP Teaching and Research Center of Renmin University of China / IP Academy of Renmin University) (Tsinghua University Press, 2016) (320 pp., 98 RMB) (http://tup.com.cn/booksCenter/book_06886601.html) (the “Report”), is a bilingual Chinese-English report prepared by Renmin University and commissioned by the Ministry of Education.   The book presents a comprehensive summary of developments and challenges in IP protection and enforcement in China, with a particularly strong focus on legislative developments, the role of national plans, the history of IP in China, government funded R&D, education and training-related issues, and the pressing needs of market and legal reforms.

After a general overview (Part I), where the authors discuss various national plans, and general legislation, such as the Civil Law and the Law to Counter Unfair Competition, the authors discuss patents and innovation (Part II).  The Report notes that quality needs to be improved in life science patents, most of which come from small inventors (such as in TCM).  The report also candidly references critiques of SIPO’s performance (p. 150), as well as the low quality of university patent applications and suggests that there should be additional attention paid to university IP commercialization, including the many restrictions that apply to state-owned assets, a matter that was litigated in the Infineon case here in the United States many years ago.  The report also criticizes unrestricted subsidies and other incentives for patent applications, which has led to “the amount of patent applications to be falsely huge” and has given rise the problem of “rubbish patents.” (p. 163).  Regarding China’s extraordinary growth in patent filings, the authors conclude, as I have often in this blog, that “the motivational role of the market should be strengthened” in lieu of such incentives.

Regarding the proposed Patent Law amendments, the authors also argue that judicial decisions on patent validity should be final and not be subject to a final decision by an administrative agency, and that there should be appropriate limitations on administrative enforcement involving patent infringements (pp. 166-167).  The authors also seek to limit the abusive assertion of unexamined utility models and designs, including by authorizing the courts to consider the abusive assertion of patent rights a matter of unfair competition (p. 173).

In discussing trademarks, the authors similarly note that despite the huge numbers of trademark filings, Chinese companies play an undersized role in lists of global brands.  The authors identify problems in “rush registration of trademarks” involving grabbing a trademark previously used by others, particularly where a mark has international popularity, where there are fictional figures and titles of movies and television hits, and in the case of celebrity names (p. 183).   The authors suggest that where a trademark is not being used, there should be no compensation given to the infringer, as one step to address rush registrations – a practice that apparently is already being used in Shanghai and perhaps other courts.  The authors also suggest that in the case of foreign rights owners, the courts should take into account the popularity of the brand enjoyed outside of China and the subjective malice on the person conducting the registration.   As with low quality patents, the author see a useful role for courts in adjudicating these rush registrations as acts of unfair competition (pp. 186-187).

These themes of addressing proposed legislation, adopting new legislation to new circumstances, more effectively insuring that markets rather than government fiat direct IP commercialization and protection,  and using unfair competition law to address abuse of IP rights play an important role in other chapters of the book, including the chapters on Copyright Law (Part IV), Competition law (Part V), IP protection by the Judiciary (Part VI), IP Education (Part VII), developments in Shenzhen City and Jiangsu Province (Part VIII), and other issues, such as free trade agreements (Part IX).

Overall the authors support the role of the courts as the principle vehicle for adjudicating IP disputes in a market-oriented economy, and that the IP laws should be revised to “attach importance to enhancing the leading and final role of the judicial protection of the intellectual property rights, limit and regulate intellectual property-related administrative enforcement …” (p. 240).  The authors also support the tendency to increase damages on IP disputes (P. 282), the role of specialized IP courts and the case law system, and deficiencies in administrative enforcement reform including problems of coordination among agencies.

In their summary, the authors note that “the sound operation of the IP system is not merely an issue of the IP law; it relies on an improved legal system and environment of the rule of law.  Only with innovation based on the market economy and driven by market interest is it possible to be the lasting, stable fore to drive the socio-economic development.” (pp. 315-316).  The book is a very useful summary of some of the hot issues now facing the Chinese IP system, with a focus on rule of law and market orientation.

I look forward to the 2016 edition.

China IPR Xmas in NYC: Peace, Joy, and Counterfeits

It has been four years since I last posted about China IP developments in New York City, and especially my home town, Flushing, New York.  Now let’s turn to Chinatown, Manhattan, one of the few places that is alive  with activity on Christmas Day, 2016.    For visitors familiar with Chinese culture, there are any number of physical knock-offs. 

The Heping (Peace) Hotel (Heping Fandian), a Shanghai Landmark, appears to have a counterpart (in Chinese) on Mott Street, even if the English calls itself a restaurant.

 Heping.jpg

Is Amy Tan’s Joy Luck Club, an inspiration for the Joy Luck Palace?  Curious, as the characters  are the name of a region in Hong Kong, Choi Fook…  joyluck.jpg

Still, people do want the real thing when they pay for it:  a Tenren Tea shop tells its customers in Chinese that it “directly sells products from  the true place where it was produced.” tenren.jpg

But the real story continues to be that the busy streets and the hawkers who are out there trying to selling their (too often) counterfeit goods.   They are sold in plain view by street touts with catalogues of merchandise printed on laminated paper.  New York’s Village Voice reported  on the business of counterfeit sales on Canal Street in New York earlier in 2016 which they disclosed as including a pimp turned counterfeiter, police who use their badge to bargain down prices, merchants of various nationalities, and the problem of competition from the internet that has brought the business into decline.

Click below for an audio recording of negotiations to buy counterfeit  Louis Vuitton, Rolex and other branded products  in Chinatown, NY in 2016:

IPHouse And IP Litigation Strategies

cases-at-ip-court

  (IPHouse data on foreign-related IP cases at the Beijing IP court)

A Chinese judge recently told me that amongst the most important developments in the Chinese judiciary in recent years has been the increasing transparency of the courts.  I agree.  The increased transparency of the courts has also been noted by Susan Finder in her excellent blog.

One of the significant developments this year has been in the availability of value-added database services that utilize the underlying case data. IPHouse is a new database, set up this year, which provides comprehensive search capabilities for over 200,000 IP-related cases in China to date. It is operated under the guidance of former SIPO Commissioner Gao Lulin, a partner at the Beijing East IP  law firm.

IPHouse has prepared a 110 page English language statistical analysis of the work of the Beijing IP Court in 2015, available here.   IPHouse has told me that the report is prepared at the request of the Beijing IP court as part of its statistical review of the court’s activities.  It includes extensive data on types of cases, practices of individual judges and foreign-related activities, and summaries of cases.

As another sample of their work, regarding the important role of the Beijing IP Court in reviewing Chinese Trademark administrative decisions, IPHouse also prepared a brief report that shows from 2011 – 2015, there are 5,121 cases involved plaintiffs from foreign countries and Hong Kong, Macao, and Taiwan regions, where 1,010 administrative decision were reversed by the courts, accounts for 44.81% of all reversed cases. The rate of reversing cases involving foreign and Hong Kong, Macao, and Taiwan region plaintiffs is 19.72%. This is 1.89% higher than the average reversal rate.  IPHouse’s snapshot data of overall foreign IP cases shows a foreign plaintiff success rate in the courts of 70%.    Together these data suggest that foreigners have are faring well in the courts in China.  Finally, IPHouse has also prepared a short statistical summary of patent and trademark administrative decisions adjudicated at the IP Court, available here.

For US and Chinese counsel seeking to more accurately assess litigation risks and opportunities, IPNow builds on the existing IPHouse database. It provides search results in five different categories – courts, judges, agencies, attorneys, and parties. The search results are presented in various graphical charts depending on the search criteria, as follows:

  1. Courts – Collects judgments from over 800 courts across the country

–          Provides historical cases, length of trial, support rate of claimed damages, etc.

  1. Judges – Collects over 9,000 judges’ opinions

–          Provides the number of cases tried, case decisions, rate of support of claimed damages, etc.

  1. Agencies – Collects from over 29,000 intellectual property agencies

–          Provides winning rate from historical data.

–          Each agent can be compared with other agencies in more than 20 different selections.

  1. Attorneys – Collects from over 100,000 attorneys’ information

–          Provides winning rate from historical data, result of cases represented, and adversary party’s statistics.

  1. Parties – Collects over 148,000 parties

–          Provides party who filed the cases, the agency and agents hired, winning rate, and support from the court for the claimed damages.

Please contact IPHouse directly for further information.

Notorious Markets, Alibaba and the JSP

alibabastock

At the end of 2016, a trio of reports are being released by the US government all of which reflect upon the IP environment in China

The first one to be released was the Joint Strategic Plan of the IP Enforcement Coordinator at the White House for the years 2017-2019 (released Dec. 12, 2016) (152 pp).  The second is the Notorious Markets Report of the US Trade Representative, was released yesterday, December 21, 2016 (22 pp).  A third report on China’s WTO compliance, hearings for which were held earlier in 2016.  This annual report is due shortly.  The last report focuses on WTO issues (including IP), while the first two focus on IP issues (including China).

The Joint Strategic Plan singles out China’s “weak protection of intellectual property” (p. 4), relying upon a variety of sources of data, including USTR reports, US Customs seizures, “massive online and physical markets” , business survey data, antitrust concerns, and other sources.    The report also notes China’s legislative efforts to reform its IP laws, the positive role of the National Leading Group, and the “welcome” development of the specialized IP court pilot project.   

The report also singles out US engagement with China on cyber theft as well as US efforts more generally to “mitigate the theft of US trade secrets.” As I have pointed out elsewhere, trade secret misappropriation is a complicated area, where civil, criminal and administrative remedies can be improved and there can be close links to industrial policy.

The Notorious Markets report has gotten the most attention because Alibaba’s Taobao has now been placed back on this list. Taobao is not the only market with a Chinese link.  Other sites included Gongchangcom, which reportedly sells counterfeits, including counterfeit security acts to attach to counterfeit merchandise; Nanjing Imperiosus Technology Co., Ltd (also operating as Domainerschoice.com), which provides services to illegal online pharmacies;  and several physical markets.  These markets include the Baiyun Leather Goods Market (Guangzhou), Jing Long Pan Foreign Trade Garment Market (Guangzhou), Chenghai District Market (Shantou), Wu Ai Market (Shenyang), Cheng Huang Cheng Intenraitonal Auto Parts Market (Beijing), and the Silk Market (in Beijing).

The reports notes that Alibaba’s leadership has underscored the efforts it is taking to address counterfeits but that Taobao “is an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods.” Alibaba was previously on the notorious markets list four years ago. Taobao is among the 15 top sites globally, and among the top 5 in China and was the subject of numerous notorious market submissions by industry.  Some US companies had been questioning why Taobao had been dropped from the list (see my blog from a program at Cardozo law school).  Alibaba’s President, Michael Evans, in response to the relisting of Taobao, noted that the decision “leads us to question whether the USTR acted based on the actual facts or was influenced by the current political climate.”  A press release of the American Apparel and Footwear Association supporting USTR’s decision to list Taobao is found here.

The Notorious Markets Report was released in the afternoon of December 21, 2016; it remains to be seen how much affect (if any) the report has on shares being traded in the United States (see chart above).  Alibaba did overcome other counterfeiting-related legal hurdles this year.  Alibaba had been the subject of several US law suits involving its alleged involvement in counterfeiting activities. A racketeering claim was dismissed in August of this year.  In June of 2016, Alibaba reported that seven securities class actions law suits against Alibaba were dismissed that involved allegations that Alibaba failed to disclose a “white paper” issued by the State Administration for Industry and Commerce before its US public offering.  The white paper was reportedly critical of Alibaba’s IP protection policies.   Attached are two of the recent US court decisions involving the shareholder law suits.

These are personal, non-official opinions.

USPTO Issues Guidance on Unauthorized Trademark Prosecution Practice (In Chinese)

HereThe USPTO recently took the unusual step of addressing the unauthorized practice of trademark law before it by posting up Chinese language websites detailing the legal requirement to represent a client before the Trademark Office and the consequences of such unauthorized practice.

Here is the English version of the PTO’s guidance on registration to practice trademark law, and on applicants and registrants
that are excluded from practice.  Here are the Chinese language versions of the first and second documents.  The Show Cause and Exclusion orders that are linked to the second document demonstrate the extent of the problem and the PTO guidance discusses the consequences of unauthorized practice to rightsholders. 

In one case, a Ms. Emilie Bo of Kunshan, Jiangsu is alleged to been involved in more than 1,000 trademark applications or registrations without being a properly licensed attorney or authorized signatory.  A Ms. Richel lee of Hangzhou is similarly alleged to be associated with more than 350 registrations or applications.  It would be interesting to determine if individuals involved in the unauthorized practice of a large quantity of trademark applications before the United States have also engaged in similar unethical activities, such as trademark squatting, in China.

USPTO’s rules on practicing before it permit both US attorneys and designated signatories (such as officers of a company) to prosecute trademark applications.  Restrictions on the practice of law in China including the specific restrictions that apply to the practice of IP law are discussed in an article I wrote in the Fordham Law Review on international law firms in China (see text at footnotes 18 and 19) and  have generally been more restrictive.  Market access restrictions for lawyers and restrictions on their attending hearings or meetings in conjunction with Chinese counsel have also been the subject of JCCT discussions and outcomes, including in the AML context.

Update November 18, 2016: Here are some of the PTO documents, including two orders to show cause and the exclusion order, discussed above.