Upcoming Fordham Program on Discovery and Investigations in China

Fordham University, in conjunction with the Chinese Business Lawyers Association, the Asian American Bar Association of New York and Consilio, is hosting a program on discovery and compliance with investigations in China, Navigating the Complexities of US Litigation Abroad on Tuesday, January 24.

As I have repeatedly noted, discovery, (or lack thereof) has proven to be a crucial factor affecting IP litigation strategies.  This looks a valuable program on this important topic.  As Consilio’s website on this conference notes:

“Document collection and discovery has become an increasingly important and fraught issue in China. U.S. litigations often require the collection and review of documents in China in ways that conflict with Chinese laws, such as laws on state secrecy and financial privacy. How can discovery be conducted in China while avoiding legal financial, and ethical problems? And what about internal investigations, which often require reviews of sensitive documents and materials, which may also implicate Chinese laws and regulations? Our panels will discuss the challenges and solutions in both internal investigations in China and also document discovery in China as part of U.S. litigations.”

Sino Legend Saga Ends at US Supreme Court

The future ain’t what it used to be. (Yogi Berra)

Earlier this January, 2017, Sino Legend lost its long battle to have an ITC decision excluding its products form the US market reversed by a Supreme Court denial of its cert petition.

As I noted previously, the case presented an unusual set of circumstances, where Chinese courts had found that there had been no trade secret theft occurring in China, the USITC had found that there was trade secret infringement in an exhaustive opinion, China’s Ministry of Commerce sought a rehearing en banc after Sino Legend lost on appeal at the Federal Circuit, and a petition for certiorari was lodged by Sino Legend to the Supreme Court.  Attached are some of the US Supreme Court legal documents, including:  the petition for certiorari  (September 30, 2016); the amicus brief   of the Ministry of Commerce (Nov. 2016); the brief of   USITC in opposition (Dec 6, 2016);  brief of party respondent SI Group in opposition (Dec 6, 2016); reply of petitioners (December 20, 2016); and the Supreme Court’s denial of cert (Jan 9, 2017).

In its cert petition, MofCOM sought a reversal not only of the Sino Legend case but ultimately of the legal principle underlying the Tianrui decision.    The Chinese parties noted that in Sino Legend there a determination that there was no infringement in the case as litigated in China for facts arising in China.  As MofCOM’s brief notes:

[MofCOM] is disappointed by recent actions of the ITC. In wrongly interpreting Section 337 of the Tariff Act to allow the ITC to bar imports into the United States based on alleged actions conducted, and adjudicated, wholly within the borders of China, the ITC has impugned the sovereignty of China and refused to accord the comity expected of a trade partner.

MofCOM’s amicus brief further states:

The displeasure of [MofCOM] with what has unfolded in this, and other, recent ITC cases involving alleged trade secret violations should not go unnoticed. In this matter, there is no dispute that the alleged actions occurred entirely within China, by Chinese citizens, while working at Chinese companies. The alleged acts of misappropriation  were first raised by Complainant’s Chinese subsidiary in China. Both criminal and civil proceedings were instituted in China for these alleged misdeeds. The alleged conduct and actors in question were ultimately vindicated. However, Complainant, unhappy with the failure of proof in China, sought institution of a Section 337 proceeding in the United States based on the same conduct already adjudicated in China. The ITC conducted an investigation, ignored the rulings in China to the contrary, and determined that not only could the ITC bar products based on this conduct, but also that some of Complainant’s justify a limited exclusion order of Petitioner’s product.

The Chinese media had regrettably inaccurately described this case when it was decided at the ITC as a big victory for China involving a finding of no infringement in the US and China; rather a limited exclusion order was granted by the ITC in lieu of a general exclusion order.  China’s Supreme Court had also picked up on this inaccurate description when it regrettably determined that was one of the top 10 IP cases for 2014.  This recognition was troubling also as the complainant in the Sino Legend 337 case had sought a retrial of its case in China, which was denied by China’s Supreme People’s Court two  years later, in 2016.

The differences in final results in the US and Chinese decisions may also be due in part to disparate emphases in trade secret adjudication, with Chinese courts emphasizing similarities of technology between the parties, and the US courts relying more on unfair access to the technology by the alleged misappropriator.  One lesson of this saga is that comity may be more challenging to apply in trade secret litigation, which remains a relatively unharmonized area of IP law among various countries, and which is further weakened by differences in civil procedure including the limited availability of pre-trial discovery in China and many other countries.

Economics and IP Position At AIT/Taiwan

The American Institute in Taiwan has posted a position for an economic specialist in Taipei.  This is a local-hire position (for those ordinarily resident in Taiwan, and others). In addition to knowledge of Chinese and English, the position requires a Master’s degree in business, engineering, economics or law or related field.  The position entails, among other things,  “researching and drafting cables and other reports on policy, legal, and business developments in the high-tech, digital economy, cybersecurity, intellectual property rights (IPR), and labor sectors.”   The application deadline is February 12, 2017.

2017 Opens with More Positive Trademark Developments

The SAIC has announced that it has  amended its TM review and examination standards (“Trademark Review and Examination Standards”).  The revised standards, with a date of December 2016, are available here. The revisions incorporate revisions to Articles 19, 50, 15.2, 1and 10 of the Trademark Law.

In addition, the Supreme People’s Court published a judicial interpretation on Certain Issues Related to Trials of Administrative Cases Involving the Grant and Confirmation of Trademark Rights 最高人民法院关于审理商标授权确权行政案件若干问题的规定.  A public comment draft of the JI was circulated as early as 2014; the final version was released at a press conference on January 11, 2017.   The JI clarifies the application of “adverse influence” in Article 10(1)8 and “other improper means” in Article 44(1) of trademark law and provides details on prior rights of Article 32  including copyright, naming right, trade name,  amongst other provisions.   The Financial Times has suggested that the JI is linked to the Qiaodan case , although as the Chinese media as noted, Qiaodan may also be seen as one of a series of cases providing more expansive relief against abusive registrations and recognizing more extensive related rights, such as naming rights and even merchandising rights.  In an unrelated development, the SPC on January 7, 2017 listed the Qiaodan case  as one of the top 10 civil and administrative cases for 2016.

 The 2016 JCCT obligated China to “take further efforts to address bad faith trademark filings”, according to the recently released Joint Fact Sheet. The amended examination guidleines, JI, and related case developments, including the development of case law in IP,  should help implement this commitment. 

Chinese IP: the Graduating Class of Officials

There have been several Chinese officials with authority over IP over the past few years who have been promoted. In December, the Ministry of Commerce recently reported that DG Li Chengang was promoted to Assistant Minister in December 2016, with authority over law and treaties (which includes trade-related IP).  His predecessor, Assistant Minister Tong Dao-chi, was also promoted and now serves as Vice Governor of Hubei as of December 2016. Across the straits, in July 2016, Madame Wang Mei-hua, who was formerly in charge of TIPO was promoted to Vice Minister of Economic Affairs.

The most prominent of the Chinese officials with deep IP experience who saw their career advance due to IP involvement in recent years is Madame Tao Kaiyuan the former DG in charge of Guangdong’s IP Department, who has served as one of the justices on China’s Supreme People’s Court since 2013, and has been a key advocate for judicial reforms and promoting rule of law.  Several other Chinese IP judges have also seen promotions in the recent years (Madame Tao and several current and former IP judges are pictured below).  Another official with deep IP experience,  Chen Fuli of MofCOM also was promoted from his former position as IP Attaché in Washington, DC and Director at MofCOM, where he oversaw IP engagement with the United States to his current position of Deputy Director General.

Also of note, former Chief Judge Randall Rader is reported to be under consideration to become the next Director of the USPTO under the incoming Trump Administration. Rader has noted that “Yes, several senators have sent my name to the Trump team for the position of director of the USPTO,” and that “The best way to protect U.S. jobs is to protect worldwide the IP that creates and guarantees those jobs.” China has also been quick to recognize Judge Rader’s accomplishments.n December 2016, he was awarded an Honorary Professorship by the President of Tsinghua University.

The current situation for Chinese IP officials contrasts with the experience of only a few years ago when it appeared that many Chinese IP agencies and officials were riding China’s new Antimonopoly Law, and not IP, to advance their agencies or careers. Officials such as DG Shang Ming moved from law and treaties in MofCOM to antitrust. At that time, China’s IP courts also picked up civil antitrust jurisdiction and the unfair competition bureau of SAIC also picked up antitrust authority.During those years, several officials also privately complained to me that their career advancement had been stymied by focusing too much on IP issues or engagement with foreigners. Some may also have seen former Vice Premier Wu Yi’s retirement in 2008 as tied to the filing of a WTO on IPR against China, which she appeared to take as a personal loss and that he had promised to fight vigorously against

As far as I know, the most dramatic and unusual employment engagement of an IP-knowledgeable official was made by another ardent IP supporter, Abraham Lincoln, when he appointed Edwin Stanton as Secretary of War due, in part, to his experience of working with him on a patent litigation when Lincoln was a private lawyer.

When officials who believe in IP are promoted to positions of higher authority it is a good sign of political support for protecting IP. This is true of both the United States and China.

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Identical vs. Similar Trademarks in Criminal and Civil Adjudication

Both Judge Bao WenkJiong 包文炯 in Zhichanli, and James Luo on his blog, have recently  published  summaries of a 2014 case in Wuxi (无锡滨湖法院(2014)锡滨知刑初字第0002号刑事判决书) involving the definition an “identical” mark under China’s criminal trademark law.

This case raises the important question of the differing roles and standards for civil and criminal prosecution of trademark infringement – an issue that is especially important in light of the many different manners of enforcing IP in China, which also includes an extensive administrative punishment system.

Judge Bao noted that the court held that attention should be paid to avoiding excessive application of the “trademark similarity” standard of civil trademark cases to criminal cases.  More specifically, the case held that a counterfeit “identical trademark” in the criminal law means one that is identical with the registered trademark or not visually different from the registered trademark and therefor is enough to mislead the public.   Where, however, there is a slight difference between the accused counterfeit trademark and the registered trademark, the close similarity is sufficient to cause the relevant public to be confused and it should also be regarded as an “identical trademark.”

The requirement of an “identical trademark” derives from Article 213 of China’s Criminal Code, which provides:

“Whoever, without permission from the owner of a registered trademark, uses a trademark which is identical with the registered trademark on the same kind of commodities shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall also, or shall only, be fined; if the circumstances are especially serious, the offender shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years and shall also be fined.”

A 2004 judicial interpretation on criminal IP matters (关于办理侵犯知识产权刑事案件具体应用法律若干问题的解释 (2004)) further clarified what constituted an “identical trademark” for purposes of China’s criminal IP laws:

“Article 8: An ‘identical trademark’ as provided for in Article 213 of the Criminal Law refers to the same trademark as the counterfeited registered trademark, or one that is substantially visually indistinguishable from the counterfeited registered trademark, and is sufficient to mislead the public.”

“第八条 刑法第二百一十三条规定的“相同的商标”,是指与被假冒的注册商标完全相同,或者与被假冒的注册商标在视觉上基本无差别、足以对公众产生误导的商标.”

Why should a higher degree of similarity of trademarks be required in criminal trademark cases but not for civil cases?    The critical test, to my mind, should be whether the infringement is willful, and not whether a cunning counterfeiter designed a mark that is insufficiently identical but nonetheless potentially confusing to a segment of the consuming population.  From a policy perspective, public criminal enforcement of the trademark laws can and should protect public interests greater than the legitimate trademark itself, including such interests as purchases by innocent consumers, protecting investment in brand creation and deterring brand dilution, and addressing the confusion of third parties who may be harmed by using these products.  These policies suggest that more liberal construction of what constitutes an “identical” trademark could be useful.   Indeed some courts in the United States have used civil standards to determine when a trademark is counterfeit (United States v. Petrosian , 126 F.3d 1232, 1234 (9th Cir. 1997).  Nonethelesss, even if prosecutors declined to prosecute an “identical” trademark case, the rights owner may still be free to bring a civil case under the “similar trademark” civil standard.

The Chinese summary of the case notes that the Jiangsu IP courts, where this case was held, play a role in delineating the role of the civil and criminal IP systems, as these courts have combined civil, criminal and administrative case adjudication in one tribunal.  I hope that these courts can play an even greater role in clarifying addressing the public policy needs behind different standards of IP protection under China’s civil, criminal and administrative enforcement regimes.

GPNE vs Apple: The Multi-Year Saga

Hawaii-based NPE, GPNE Corp.,  has  requested damages in a patent law suit related to GPRS standards of 900 million RMB in Shenzhen (about 129 million USD) against Apple as well as other related parties (Foxconn et al),  according to various news reports.  This is a significant increase over original damages request of 95 million and 1 million RMB, respectively.  The request was made in a hearing before the Shenzhen Intermediate Court in November 2016.

The case appears to have been filed as early as January 28, 2013.   Apple had reportedly previously filed three invalidations in China against the GPNE patents.  The high damages request has been noted by the media as the largest damage claim in Chinese IP history to date.  Apple had also successfully won a federal circuit appeal involving GPNE’s claims of infringement in August 2016.

The Apple/GPNE case is one of several global IP disputes, which include China as an important venue, and where damages, discovery, availability of injunctions, an increasingly hospitable Chinese legal environment to global patent litigation and likelihood of success all appear to be playing important roles.  The increase in damages may a reaction in part to Apple seeking to use evidence obtained in its successful defense against a GPNE law suit in California in the Shenzhen case.  In 2014, Apple argued that due to lack of discovery in China and differing methods of calculating damages, Apple requires discovery of GPNE’s licensing practices from the US court, pursuant to 28 USC Sec. 1782.  Apple noted in its motion that “the limited discovery sought by Apple is important to the China litigation, and will allow Apple to present the probative evidence regarding the value of GPNE’s patents and its history of granting licenses.” Apple substantiated its motion by pointing to the limitations on Chinese damage calculations and on limited discovery as supporting the relevance of its request:

GPNE also introduced evidence intended to support an “illegal gains” damages model. Under Chinese law, a claim for “illegal gains” may be chosen by the patentee if a claim for “lost profits” is difficult to determine. Although Chinese courts typically start the damages analysis with plaintiff’s chosen damages model, Chinese law allows for different damages models, and GPNE may be constrained in the damages it can seek by its licensing practices.

However, under Chinese law, there is no discovery process in civil litigation proceedings similar to that in the United States. Accordingly, GPNE may not be subject to any legal liability if it refuses to submit the relevant license agreements to the Shenzhen Court. Id. To the extent Apple intends to argue to the Shenzhen Court that GPNE’s licensing practices should inform any damages model, it will be necessary for Apple to produce GPNE’s licenses to the court. After the parties have provided the necessary evidence, Apple expects that the Shenzhen Court will weigh the evidentiary submissions and arguments and, should the court find Apple liable, may make a damages determination.

This case is also one of several IP law suits that have been filed in China against Apple over the years, including design patent, invention patent and trademark litigation, Apple has also been filing more patents in China, ranking number seven in utility model patents in 2014 amongst all foreign companies. Although an earlier report I posted on is no longer available on the SIPO website, earlier data showed that Apple had been increasing its invention patent applications in China,

GPNE’s website notes that it holds “more than 30 patents worldwide in the field of wireless and wired data communications”  and that it has entered into various forms of licensing agreements with Microsoft, Huawei, Sony and others.   The Company’s name is an abbreviation of  the four founders of the company, G – Gabriel Wong, P – Po-Sing Tsui, N – and E – Edwin Wong, but also possibly standing for “Garage Pioneer of New Electronics” as noted on its website.

The above are my personal opinions only.  Please post any factual corrections, or any differences of opinion that you may have. Please consult counsel for any legal guidance on matters discussed in this blog.