AML

Bureaucracy and Politics in Recent SAMR Legislation

USPTO Director Jon Dudas with Vice Minister Zhang Qiong of the State Council Legislative Affairs Office (2007). 

One of the challenges  in understanding the impact of Chinese legislative acts is determining the classification of the legislation according to China’s Law on Legislation (“LoL”)(中华人民共和国立法法 ).  Simply put, legislation that is not enacted at an appropriate level may not create a binding obligation.  Nominally, the LoL describes a descending hierarchy of Chinese legislative acts consisting of Laws (法律) passed by the NPC, Regulations (法规) enacted by the State Council, Local Regulations (地方性法规) passed by local people’s congresses and agencies, Rules enacted by national  agencies (部门规章), and Normative Documents (规范性文件). This nomenclature was also used by the Ministry of Commerce in describing China’s legislative system upon accession to the WTO. See the Working Party Report  on China’s WTO Accession (Para. 66). Among two of the more common problems with this hierarchy are that generally speaking only Laws and Regulations are to be cited by courts in civil matters. (SPC,  Provisions on Citation to Regulatory Legal Documents Including Laws and Regulations in Court Decisions , Nov. 4, 2009).  Furthermore, according to the LoL itself, Local Regulations are listed first and arguably superior to national Rules and Normative documents, and may thereby override these national legislative acts within the locality where they are enacted (see my exchange with Wei Changhao below).   A final problem is that bureaucracies that are interested in short-term results or even shirking responsibilities may enact legislation below the level necessary to accomplish a given task.

The creation of SAMR on March 17, 2018 changed the processes for enacting legislation by SAMR’s constituent agencies.  Some agencies, such as SIPO,  lost their former independence by being subsumed into the new agency.  For example, SIPO was once an independent agency, is now called CNIPA and is a constituent part of SAMR.  In its current role, it can no longer issue patent-related Rules in its own name.  The dominant role of the State Administration for Industry and Commerce in SAMR likely left previous procedures for SAIC divisions, such as the China Trademark Office or the division in charge of trade secrets, in place.  New members of the SAIC/SMAR family  may also now be more encumbered in drafting proposed Laws,  Regulations or Rules for consideration by the NPC or State Council, as it would require  support from SAMR. In fact, my research to date suggests that procedures for legislation that was formerly in the purview of SIPO appears to be more frequently enacted through new legislative channels than trademark and trade secret-related legislation.­­­­

Another factor affecting the legislative process has been higher level political pressure or support.  The week after SAMR was created, on March 22, 2018, USTR released its Section 301 report regarding technology transfer, intellectual property and innovation that formally launched the US-China trade war which later culminated in the signing of the Phase 1 Trade Agreement.  During the subsequent  two years, the pressure from the trade war and China’s domestic plans to become a strong IP economy  resulted in a “quantum leap”  in changes to legislative and enforcement practices,  which had also imposed significant legislative drafting burdens on numerous Chinese IP agencies. The result appears to have been a mixed set of legislative strategies to implement national commitments, including what appears to be “free rides” of  higher level policy enactments to support lower-level legislation. 

This chart sets out legislation enacted by SAMR’s IP agencies during the past two years, prepared with Qi Chuanyi, a 2L at Berkeley Law.  In many cases, I have had to make an educated guess about whether the legislative enactment is a Regulation, Rule, Normative Document, or is sui generis.  Here is a brief summary: 

  1. Significant, high-level policy  documents for new IP-related legislation in the past two years have been issued by SAMR, the Party, the NDRC, and an important issue of the Party journal Qiu Shi (求是) where Xi Jinping published an article (全面加强知识产权保护工作 激发创新活力推动构建新发展格局), as well as the Phase 1 Trade Agreement.  Much of the legislation required by these documents is in SAMR’s jurisdiction.
  2. Most of CNIPA’s patent-related legislative activity has been at the level of Normative Documents, not Rules.  In the case of patent linkage there is also a sui-generis rule making based on legislative authorization pursuant to Art.76 of the Patent Law which provides that “the drug regulatory department of the State Council, in conjunction with the patent administrative department of the State Council, shall formulate specific measures for the connection between the approval of drug marketing authorization and the resolution of patent disputes at the stage of drug marketing authorization application, which shall be implemented after the approval of the State Council.” ( 国务院药品监督管理部门会同国务院专利行政部门制定药品上市许可审批与药品上市许可申请阶段专利权纠纷解决的具体衔接办法,报国务院同意后实施.)  
  3. Trademark  and trade-secret legislation generally continues to follow more traditional legislative paths, including rulemaking by SAMR or publication for comment through the State Council or MOJ websites.  This phenomenon of SAMR maintaining  more SAIC procedures was also identified in antimonopoly law enforcement by Prof. Angela Zhang in her recent book “Chinese Antitrust Exceptionalism” (p. 46).
  4. Sui generis legislation in antitrust, especially through antitrust “guidelines,” continues.  When guidelines were enacted by or with the authority of the Anti-Monopoly Commission prior to SAMR’s incorporation of the three antitrust agencies into one, they approached the status of Regulations, since their passage was dependent on delegated legislated authority in Article 9 of the Antimonopoly Law, which provides that “the State Council … Anti-Monopoly Commission … is responsible for organizing, coordinating and guiding anti-monopoly work and performing the following duties: … (3) Formulating, Issuing anti-monopoly guidelines… ”( 国务院设立反垄断委员会,负责组织、协调、指导反垄断工作,履行下列职责:…(三)制定、发布反垄断指南…).  In the past, when I personally asked Chinese judges if guidelines issued by the AMC were Regulations, I was told that they might be considered in that way – although I believe the issue remains unclear.

 The practical impact of this confusing legislative scheme is multifold:

  1. Organizations that comment on new IP legislation from SAMR should consider whether the legislation is being enacted at the most appropriate legislative level to accomplish intended goals and to minimize conflicts with other agencies.  A patent linkage Regulation, for example, would likely be more capable of addressing conflicts among different agencies and the courts, than a Rule. As another example, CNIPA’s recent efforts to control “abnormal” patent applications through reductions in subsidies are similarly likely to have limited effect on Local Regulations as they are enacted at the level of a Normative Document, although high-level policy support may nonetheless encourage some degree of local compliance.  Although national Normative Documents and Local Regulations can be harmonized through consideration by national agencies (See Art. 95 of the LoL), this may be an impractical approach to addressing policies that are widely implemented on a local level (such as patent subsidies, or tax support for high and new technology enterprises).
  2. Foreign governments and those committed to the development of China’s legal system may not wish to condone “free riding” on higher political statements.  High-level political support for reform is not a substitute for appropriate legislation under the LoL.  The “gold standard” for legal engagement with China should be transparent, authoritative and durable legislation at an appropriate level.  If, for example, a goal is to implement the Phase 1 Trade Agreement provisions on IP, Laws and Regulations are likely the appropriate vehicle to bind all relevant agencies including the courts to a particular course of action which has civil law consequences. However, the Phase 1 Trade Agreement, by its own terms, does not  resolve this issue. It merely states that  each Party  “shall determine the appropriate method of implementing the provisions of this Agreement within its own system and practice… “ (Art. 1.34).
  3. If a goal is to promote legal reform rather than to develop a nationally binding commitment, a different approach may be useful.  Low-level legislation can pioneer reforms.  Rules and Normative Documents may also be enacted on a faster legislative timetable than Regulations or Laws.  Moreover, these lower level documents can also promote public awareness and prepare the public for acceptance of higher-level documents.
  4. As the chart indicates, it is often difficult to ascertain how particular legislation, particularly in draft form, fits into the LoL hierarchy.  The Chinese name of a legislative act is often imprecise.  Additional clues are often necessary, including looking at the enacting agency, whether the document appears as a numbered legislative act with an accompanying ministry order (令), the categorization given by the enacting agency, and the history of the legislative process. Despite occasional uncertainties, the appropriate classification of legislation can be critical to understanding the impact of legislative acts and to developing realistic expectations about them. 

Please send me your comments on the chart.

May 3, 2021: Additional edits made to further clarify the role of harmonization procedures under the LoL (per comment of Wei Changhao, below), as well as some typographical corrections. May 11, 2021: Attached chart updated.

Photograph above by Mark Cohen. All rights reserved.

3 replies »

  1. Thanks for your interesting observation about the change in SAMR/CNIPA’s legislative process. I must point out that under article 95, para.1, item 2 of the Legislation Law, Local Regulations aren’t superior to agency Rules. The Law instead provides for an adjudication procedure under which the State Council or the NPCSC will decide which applies in the event of a conflict between a Local Regulation and an agency Rule. I’m not sure if this procedure has ever been used.

    The best way to tell if a document is a Rule or simply a Normative Document is to see whether it is promulgated by an order (令) of the relevant agency (e.g., 国家市场监督管理总局令). I agree that it is hard to tell when the document is still draft form because of the varied forms/names of agency Rules.

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    • Yes I agree that looking at an accompanying order (ling) is a way to determine if the document is a rule or a normative document. In some cases in the SAMR documents I reviewed, SAMR classified the document as a “rule”, which is also fairly persuasive :). In at least one case they classified a document as “special” or “sui generis” (I believe the phrase was 特别) . On the other hand there is rule making (norm? regulation?) making under the direct authority of State Council (patent linkage) and via the Antimonopoly Commission (“guidance”). Also there should be Regulations which should also have an accompanying order (I go back to the days of having to look through the 国务院公报)。 Then there are rules on the national government website, and some that are done through the MoJ process, and some that are listed or not listed on the legislative plan of SAMR. As for your second point regarding resolution of disputes between Local Regulations and Rules, I view this as a method of resolving disputes, not as a manner of establishing hierarchy. The hierarchy is as listed in the Law on Legislation, where Rules appear after Local Regulations. This question of hierarchy was also posed to the Chinese delegation at the WTO which similarly responded that the LoL provisions on harmonization of conflicting provisions should be “considered” (the inquiry was with respect to local trade secret rules). Of course this does not resolve the day to day problem – if – for example – you are a potential litigant in a Local Regulation enacted by a local People’s Congress that is in conflict with a national Rule applies, do you argue that local legislation should be ignored in favor of national Rules? Can you manage the harmonization process on your own? The concrete question raised at the WTO concerned differing local standards and a vague national rule requiring “reasonable compensation” for mandatory compensation upon termination of an employee where there is a non-compete agreement in force.

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  2. Hello Mr. Cohen,

    I wonder why you had nk entry under copyright, which I am sure you Ed ould agree that it is also an import and essential component of intellectual property component dimulsrvyonotents. I would like yo think that China has been a chronic and persistent infringer of copyright. You only need to seek the opinion of any major US publishers!

    So what is your view of China’s copyright adherence practices and would you be adding more contents to the last section your very impressive chart in terms of IP contents and details.

    Sincere ly,

    John Chu

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