China IPR

Some Additional Possible TRIPS Claims

I received several emails about my recent blog on possible TRIPS claims involving China.  There are three additional WTO claims that have since come to mind.  Each of them would also require further research. I have numbered them as supplements to the prior blog.

C.1. National Treatment – in enforcement of IP Rights:  Article 270 of China’s Civil Procedure Law discriminates against foreigners by suspending the six-month time period for a first instance IP trial that otherwise applies to domestic-only IP cases.  This provision allows judges flexibility in scheduling cases involving foreigners.  It is not drafted in the least restrictive manner necessary to minimize its potential for disadvantaging a foreign litigant but instead provides a potential strategic weapon by a Chinese litigant to advance or delay a litigation as it sees fit.  

The potential for abuse of Article 270 has grown with increases in parallel global IP litigation.  Chinese courts can undercut a previously filed patent litigation overseas by a foreigner by accelerating a case brought in China against that foreigner in order to render a judgment in advance of the overseas litigation. A near-automatic final injunction against the manufacturing of the infringing product in China can then be used to compel a settlement against a foreign company whose business operations are based in China.  Allegations of strategic timing by Chinese courts involving foreigners have arisen from time to time; these cases would need to be verified to see if an as such (de facto) case can be made out as well.

E.1 Other “national treatment use” claims:  The TIER and DSU Although the United States has filed a case on the Administration of Technology Import/Export Regulations (the “TIER”) (DS542), no claim has been made with respect to the ownership of patents by Chinese researchers that were obtained in violation of technology transfer agreements, including bilateral science agreements, by reason of the TIER provisions that granted mandatory ownership of improvements to the Chinese licensee.  The usual WTO rule is that remedies are only granted prospectively.  The twenty-year grant period of a patent raises the possibility of an on-going harm through the continuing ownership of a patent granted in violation of a TRIPS requirement.  As far as I can tell, the filings made with respect to the TIER in DS542 did not raise the possibility that previously granted patents would be invalidated or that ownership of these rights might be transferred in an equitable manner.  To  the extent that such patent misappropriation can be identified by the US government, a remedy might be sought for patents that were not granted to the proper owner.

G.1: Trade Secrets: Art. 39 –  “Members shall protect”/Paris Convention 10bis “act of competition contrary to honest practices in industrial or commercial matters”/Preamble “private right”. The February 1, 1986 “Rule Concerning Chinese Students Overseas Applying for Patents who Complete Inventions Overseas” “关于我国学者在国外完成的发明创造申请专利的规定” (China Patent Office, Ministry of Foreign Affairs, National Science and Technology Commission) raises serious concerns regarding ownership of patent rights jointly developed between US and Chinese researchers, including the confidentiality of pre-patent disclosures.  Under this Rule, the rights to an invention completed in the United States or another foreign destination, including inventions created pursuant to bilateral science cooperation, belong to the Chinese work unit of the person completing the invention unless the work is a “service (employee) invention” of the foreign research entity.  If it is “obviously” a “non-service invention”, the researcher needs to consult with the Chinese embassy overseas to develop a patent strategy. 

This Rule is just plain-old bad.  By operation of US law, research organizations will generally look to whether a student or researchers used university funds, resources or facilities to complete the invention, and not merely whether the individual is an employee of a research organization.  It thereby obliges Chinese researchers in the United States to violate US law by disclosing the technology to the Embassy and filing for it in violation of local obligations.  It is in violation of “honest practices” in industrial property matters (Paris Convention) by compelling violation of US domestic law, including possible civil or criminal trade secret law.  This is further compounded by provisions in China’s patent examination guidelines which permit the Chinese inventor to file his patent anonymously before the Chinese patent office, thereby minimizing risk of discovery by his collaborators (Examination Guidelines 4.1.2).  This has been an issue in the US courts.  See litigation involving Virginia Tech and patents for tagatose.  Disclosure of the invention may also risk loss of novelty for the invention and/or misappropriation by competitors. The rule also undermines expectations of bilateral science and technology collaboration regarding joint ownership or management of invention.  Most research organizations that I have spoken with are unaware of this rule and have not thereby developed policies to counter it. As with the other two claims, the US government would need to identify actual cases where this has occurred to substantiate  “as applied” claims. In addition, to the extent that such patent misappropriation can be identified by the US government, a remedy might be sought for patents that were not granted to the proper owner in a manner similar to the prior claim.

Categories: China IPR

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