Three New Reports Proposing Policies for China Engagement

Three reports were recently released on Chinese law, Chinese science cooperation and US-Chinese relations with recommendations for the incoming administration. Here is a summary:

The Brookings Institution’s report “The Future of US Policy Toward China – Recommendations for the Biden administration” has a chapter on “Revitalizing Law and Governance Collaboration with China”  written by Jamie Horsley. 

Ms. Horsley urges the renewal of legal engagement with China.   She draws heavily on IP engagement for her suggestions.  She notes that “the U.S. Patent and Trademark Office hosted its first Chinese delegation [in 1979] and explained the American patent system to officials working on China’s first laws governing intellectual property (IP). U.S.-China IP law exchanges helped promote the establishment of specialized IP courts, introduced the practice of amicus briefs in IP proceedings, and supported China’s development of a form of case precedent to enhance uniformity of court judgments. All of these developments were informed by U.S. law and practice and are contributing to a procedurally and substantively fairer system of IP law in China.”  This cooperation, she further notes, has “promoted more professional and accessible courts and specialized intellectual property tribunals in which foreign plaintiffs are winning a majority of their patent infringement cases.”

As a further example of successful cooperation, Ms. Horsley points out that “the U.S. Department of Justice joined with Commerce in 2016 to hold the first high-level U.S.-China Judicial Dialogue, which brought officials and judges from both countries to discuss case management, alternative dispute resolution, precedent, and evidence in civil and commercial cases.” In fact, a principal focus of this program was also, IP. In preparation for those meetings the USPTO reached out to several prominent Chinese IP judges, including Justice Tao Kaiyuan of the SPC, the former President of the Beijing IP Court (Su Chi), Chief Judge He Zhonglin of the International Cooperation Division at the SPC and formerly of the SPC IP Tribunal, and former Deputy Chief Judge Wang Chuang of the SPC IP Tribunal (now with the SPC’s national appellate IP court).  These four judges are in the picture above, taken at the 2016 meetings. 

The second report, “Meeting the China Challenge: A new American Strategy for Technology Competition” was prepared by  the Working Group on Science and Technology in US-China Relations under the leadership of University of California San Diego Prof. Peter Cowhey. I was part of that Working Group.

IP issues play a role in many of the recommendations of the report.  The report criticizes a prior ban on US participation in standards setting activities with Huawei as counterproductive.  It also views NIST support for IP rights in standards setting processes as helpful to new market entrants in standards setting.  It expresses concern over Chinese efforts to dominate standards essential patents (SEPs) in 5G.  However it is agnostic over the quality of Chinese SEPs, noting that “the purpose of this Working Group is not to settle debates about the significance of the total number of patents in 5G standards versus an emphasis on the technological significance of specific patents. This group agrees that China has set a policy goal of being the overall leader in setting global 5G standards. The question for us is how to respond.”

The report also urges oversight of China’s pharmaceutical-related IP reforms in implementing the Phase 1 Trade Agreement. It also urges greater strengthening of IP protection in the pharma sector in the United States through “reform[ing] [US] interpretation of the intellectual property (IP) laws to allow important new forms of biotechnology eligible for patenting by aligning its practices with those of the European Union and China.”

Regarding “IP Theft”, the report states that “[t]e U.S. government and private and public research laboratories should cooperate in criminal investigations and support active monitoring of patent filings, ‘shadow labs,’ and research publications to alert U.S. entities of patent fraud and IP theft….”  “Patent fraud” refers to  instances where patents may have been filed in China in violation of the rightsholder. The patents may be filed with requests for anonymity when published to avoid revealing the theft.

The third report, “The Elements of the China Challenge” was prepared by the Policy Planning Staff of the State Department.  Despite the limited focus on IP, this report shares many similar recommendations to the other reports.

One of the common recommendations involves training.  The State Department report argues that the US needs to train and develop  “a new generation of public servants — in diplomacy, military affairs, finance, economics, science and technology, and other fields — and public policy thinkers who not only attain fluency in Chinese and acquire extensive knowledge of China’s culture and history.”   Horsley’s report is more specific on consequences of untrained officials: “better understanding [of Chinese law is needed to] facilitate more effective resolution of bilateral disagreements and help ensure that bilateral agreements are enforceable under Chinese law.” She also points to “misunderstanding concerning the binding force of various Chinese documents.” This is a phenomenon I have also observed.    

Other common recommendations are to “use diplomacy to coordinate with other allies and like-minded countries” (UCSD report), and to “strengthen…at home” (Brookings).    The UCSD report particularly underscores the need for a range of technological self-strengthening steps. Importantly, the reports all recognize that the United States “must promote American interests by looking for opportunities to cooperate with Beijing subject to norms of fairness and reciprocity” (State Department).  I agree that confrontation or collaboration  is a false dichotomy in our complex engagements with China.

The Biden agency review teams would be well served by reviewing these reports to implement pragmatic approaches to better manage U.S. interests in our IP and other relations with China.  

Treating the “Foreign” Differently in Trade Secret Enforcement

Chinalawtranslate has translated the second reading of the Criminal Law amendments (XI) 中华人民共和国刑法修正案(十一), including proposed changes to the trade secret provisions of the Criminal Law.  The Chinese is available here.  The NPC Observer is tracking the passage of these amendments here.  Comments were due by November 19, 2020.  The second reading provisions on trade secrets did not change from the first reading, which I discussed here.

Both the proposed amendments to the Criminal Law and the administrative rules on trade secret enforcement establish differential treatment for trade secret enforcement when a foreign element is involved. The proposed Criminal Law provisions provide enhanced penalties when a trade secret theft is undertaken on behalf of a foreigner.  Article 3 of SAMR’s  draft proposed trade secret enforcement rules offer administrative enforcement only for Chinese trade secrets.

For readers’ convenience, here are the excerpts from Chinalawtranslate:

“17. Amend Article 219 of the Criminal Law to read:

Where any of the following acts violating commercial secrets are committed and the circumstances are serious, a sentence of up to three years imprisonment or short-term detention is to be given, and/or a fine; and where circumstances are especially serious a sentence of between three and ten years imprisonment is to be given and a concurrent fine.

(1) Obtaining commercial secrets by theft, enticement, fraud, intimidation, electronic trespass, or other improper tactics;

(2) Disclosing, using, or allowing others to use a rights holders’ commercial secrets acquired by tactics provided for in the previous item;

(3) Disclosing, using, or allowing others to use commercial secrets in their possession, in violation of confidentiality obligations or the rights holders’ demands for preserving commercial secrets.

Where one clearly knows or should know of acts listed in the preceding paragraph, but obtains, leaks, uses or allows others to use commercial secrets, it is viewed as infringements of the commercial secrets.

The Rights-holder as used to in this article refers to the owners of commercial secrets and those permitted to use commercial secrets by the owner.

18. Add one article after Article 219 of the Criminal Law to be Article 219-1:

Where commercial secrets are stolen, spied upon, sold, or illegally provided to overseas institutions, organizations, or persons, a sentence of up to 5 years imprisonment or short-term detention is given, and/or a fine; and where the circumstances are serious, the sentence is to be 5 years or more imprisonment and a concurrent fine.”

Former SIPO DG Yin Xintian Has Passed Away

Several sources in China have told me that Yin Xintian 尹新天 , the former Director General of the Law and Treaty Department of the State Intellectual Property Office, passed away this week. 

I have known DG Yin for approximately 20 years.  We worked closely when I was IP Attaché at the US Embassy in Beijing (2004-2008), and later when I was in private practice and teaching.  He was most recently associated with the IP policy consulting arm of the Wanhuida law firm.

There were several matters that we worked on together.  DG Yin was the first Chinese official to talk to me about proposals for a national IP strategy, which I believe was an idea that he actively promoted and perhaps first proposed.  We talked at length at a conference in Kunming on IP and development, about the national IP strategies of various nations, and how much he believed that a National IP Strategy would help China’s development.  This was about 15 years ago.  He later invited me to speak twice before the National Strategy Office (NIPSO): once as a foreign diplomat, and a second time as an IP expert. 

I also vividly recall a dinner with Judge Rader during those years at SIPO, at which time DG Yin spoke at length with Judge Rader about the significance of recent CAFC opinions, including dissenting opinions and even footnotes.

When I discussed foreign concerns in the proposed 2008 patent law, DG Yin was also quick to suggest that his office, the US Embassy and the Quality Brands Protection Committee host a joint discussion around the various issues of concern.  The subsequent meeting was highly successful.   His guide to the earlier revisions to the patent law, 新专利法详解, was an important resource on this topic.

Although I  disagreed with DG Yin from time to time, he never took ill-informed or indefensible positions.  It was for this reason that I also thoroughly supported the choice of DG Yin as the first patent expert on the Chinese side of the­­­ US-China IP Cooperation Dialogue, which was proposed by me and continues to be run by the US Chamber of Commerce.  He was succeeded by his former colleague, former SIPO Commissioner Gao Lulin, who still serves in that role.

My condolences to his family, his colleagues at Wanhuida, his former colleagues at SIPO, and the many friends and students he has left behind.  May his memory be a blessing.

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