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First in the Series: Upcoming Webinar on Pharmaceutical IP Issues in China

On May 27, 2020, Berkeley Law will be hosting the first in a seven-part series on Chinese IP.  The series will provide CLE credit.  Attendees are also eligible for a certificate upon completion of the series.  You can choose to attend individual classes without the certificate, or the series ($50.00/$299.00).  Here is the information on the pharma program:

Session 1: May 27, 2020 – Pharmaceutical IP Issues / 4:30 P.M. (PT) – 90 min.

Pharmaceutical IP protection was a big “winner” in the Phase 1 Trade Agreement. How is China planning on implementing its commitments to improve protection for innovative chemical compounds and biologics? 

Speakers:

  • Chief Judge Randall Rader (ret.)
  • He Jing, Anjie Law Firm
  • Zhao Xu, East China University of Politics and Law
  • Tony Chen, Jones Day
  • Karen Guo, Novo Nordisk
  • Moderator: Mark Cohen, Berkeley Law

$50 single session registration fee
Register here

There will also be a separate round-table scheduled for June 8 on patent linkage in conjunction with this event (no additional fee).  Details to be announced on Wednesday.

The Webinar series will cover some of the “hottest” topics in China IP issues including trade secret protection, abusive trademark registrations, developments in copyright law, pharmaceutical IP developments, enforcement issues, licensing and antitrust, trade secrets, and the emerging different in patent prosecution practices in AI, software-enabled inventions and diagnostics.  Speakers include faculty from Berkeley Law and other institutions, former Chief Judges Rader and Michel, former USPTO Director Kappos, along with many other experts.    

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RIPPLES IN STILL WATER: RECENT DEVELOPMENTS ON IP IN CHINA


Ripple in still water / When there is no pebble tossed / Nor wind to blow  (Robert Hunter)

The Chinese IP environment continues to pursue its own domestic needs-driven agenda.  Criminalization of trade secret matters, while an area of concern to the United States, is also important to China’s development of an innovative economy.  Certain improvements in China’s criminal trade secret regime are also contemplated in the coming year, including a lowering of criminal thresholds, as required  by the Phase 1 Trade Agreement (Art. 1.7) and  the SPC’s judicial interpretation plans for the year.   

It is not surprising, then, that a recent Nanshan (Shenzhen)  criminal trade secret case involving employee misappropriation of 5G-related technology from ZTE has caught the attention of the media, including Aaron Wininger and Jacob  Schindler (behind a paywall), as well as the Chinese press.   As Western reporters have noted, how much is such a case a harbinger of changes to come?

There are three significant concerns with reading this case as an example of criminal trade secret reform in China: (a) it took place in Shenzhen; (b) it involved an SOE as a victim (ZTE); and (c) it involved an important technology to China (5G).

Shenzhen has long been a center of criminal trade secret litigation, with a typical scenario involving a well-connected local Chinese company suing its ex-employees for theft of trade secrets.   I recall a meeting I had with the Shenzhen police department many years ago, where their case statistics suggested that they may have investigated as many as one fourth of the total number of criminal trade secret cases in China that year.  My back of the napkin calculation at that time seems to have been accurate.  For example,  during the period from mid-2013 to -2014, Shenzhen courts heard 23 criminal trade secret cases involving 25 people.  By comparison, in 2017, the total number of criminal trade secret cases handled nationwide by the courts was 26. 

Whatever the current number, the police department from Shenzhen is proactive in that area.  It has brought several cases on behalf of local companies.  The Shenzhen police even polls companies on how they manage trade secret concerns.  Moreover, as with the recent cases, and  China’s administrative enforcement mechanisms for trade secrets, defendants are typically SME’s or individuals.  

Concerns have also been expressed in the past about excessive criminalization of trade secret cases in China.  If there are high damages where there is adequate proof or other measures to compel evidence (such as under recent revisions to the Anti-Unfair Competition Law), civil cases should also be brought, and might thereafter be referred to criminal prosecution by the civil judge as suggested by Prof. Huang Wushuang 黄武双 . Prof. Huang is a leading Chinese academic in this area;  34 of his recent lectures on trade secretion protection in Chinese are found here.  . 

How much of a “ripple in still water,” without any durable impact, is this recent case? One important test will be whether a foreign victim of trade secret theft involving a priority technology for the Chinese government would have similar access to criminal trade secret enforcement resources, particularly if the defendant is an important local Chinese company. 

 I will discuss a few other potential “ripples in still water” in forthcoming blogs…

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Resources for the Week of May 18, 2020

On May 20, 2020 (4:30 PM PST), Berkeley will be hosting the next in our China series: Following the Data: What the Latest Research Says about China’s Legal and IP Environment. The webinar will cover data-driven research on Chinese legal developments and how these tools can provide strategic insights.  The speakers include: Benjamin Liebman, Columbia University; Tobias Smith, UC Berkeley; Melissa Schneider, Darts IP; Robert Merges, UC Berkeley; and Fei Deng, Charles River Associates.  I will be moderating.

On May 13, Berkeley hosted a book warming for Mara Hvistendahl’s The Scientist and the Spy: A True Story of China, the FBI and Industrial Espionage concerning a Chinese economic espionage case involving hybrid corn seed.  We had a lively discussion among the author, the former FBI agent in charge of the case (Mark Betten), the Dupont IP lawyer representing the victim (Jennifer Johnson), Jim Pooley, and myself involving IP and competition issues, racial profiling, criminalization of trade secrets issues and other issues. Here is the link to the recording.

Attendees are also invited to attend a series of webinars on IP-related issues in China which will include such topics as pharmaceutical IP matters, trade secret issues, licensing and antitrust, ‘101 issues in China, and abusive trademark registrations.  Please consult the website for fees for further information on the program, CLE credit, and the possibility of earning a certificate from Berkeley Law after completion.  We begin on May 25 with a discussion on the important pharma-related IP developments in China, many of which were agreed to in the Phase 1 Trade Agreement, and will include several speakers from the US and China who have been tirelessly working on these issues.

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Some China IP Resources While Sheltering in Place

An unofficial translation of the proposed Copyright Law amendments that have been made available for public comment, is available here.  Thanks to Prof. Jiarui Liu for sharing his translation! All translations are unofficial and are being provided for the convenience of non-Chinese readers, with no representations and warranties whatsoever.

The next event in our series of webinars is with Mara Hvistendahl, author of The Scientist and the Spy: A True Story of China, the FBI, and Industrial Espionage. Although Ms. Hvistendahl has already appeared in several interviews,  this one promises to offer different perspectives on the book.  She will be joined in this webinar by Mark Betten, an FBI agent who is chronicled in the book, Jennifer Johnson, DuPont’s attorney who was also involved in the investigation, as well as Jim Pooley, who teaches trade secrets at Berkeley Law and me.   The webinar will be held on May 13, 2020, at 10:30 AM (PST).   The registration page is here.

A video recording of our successful May 6  webinar, with Amb. Craig Allen, Wendy Cutler and Warren H. Maruyama on The Phase 1 Agreement and its Implementation is also now available here.

All of the above are being provided free of charge.

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Draft Copyright Law Up for Public Comment

The National People’s Congress released a draft of the Copyright Law for public comment.  Comments are due by June 13, 2020.  The NPC comments on the draft are found here.  The NPC Observer’s concise summary of the legislative history is here.   I had discussed the earlier draft, along with the NPC observer predictions regarding consideration in late 2019, here.  The draft will likely be reviewed again near the end of this year and could pass in late 2020 or 2021.

There have already been some reactions to this draft.  Aaron Wininger pointed out in a recent article the provisions regarding quintuple damages, increased statutory damages, shifting of the burden of proof, and improvement in digital rights management.  He also briefly discusses some other changes, such as the change from “audiovisual works” to “cinematographic works.”  On first glance, the draft does appear to have expanded provisions on technological protection measures and anti-circumvention of technological protection measures, although further study is necessary to determine their consistency with prior laws, regulations, China’s commitments under the WIPO Internet Treaties, etc. (See Art. 48).

“Quintuple damages” and burden-shifting appear to be the “new normal” in revisions to Chinese IP laws. These changes predate the current trade war and are part of a mounting effort to increase civil deterrence.  It remains to be seen how they will be implemented in judicial interpretations and how observable they will be in judicial practice through the publishing of relevant cases.

Prof. Liu Chuntian, a friend and colleague from Renmin University, has written an insightful quick response article regarding the draft on weixin (Chinese language only).  Prof. Liu participated in the drafting of the PRC’s first copyright law.  His principle concerns with the draft include:

  1. The concept of “audiovisual works” replaces the expression “movies and works obtained by methods similar to filming.’ This change in definition will provide protection for video games regardless of the technology that it employs.   It may also have implications for expanded protection of live webcasting of sporting events, which has been a continual problem under Chinese copyright law.   Liu suggests that China’s drafters consider borrowing from the practice of other countries, notably Brazil, which expand copyright protection using the concept of “audiovisual works” regardless of the technology.  This can mitigate the possibility of continuing the conflict in Chinese IP law (and the law of other jurisdictions) between “cinematographic works” and “audiovisual works” which have provided uncertain protections depending on the technology employed.  At the same time, according to Prof. Liu, as the new law stipulates that the right owner in an AV work belongs to the producer, it will also be important to clarify the rights of authors and composers whose works are incorporated into AV works. He suggests that the new law should clearly stipulate that the rights in these works should be controlled by the copyright holder.
  2. Liu agrees on the importance of the improvements to the civil system, including increased damages and rights to demand production of evidence.
  3. Liu generally opposes the expansion of copyright administrative authorities to the county (xian) level, noting that it would lead to the creation of over 3,000 copyright offices in China – more than the rest of the world combined. He also takes issue, as do I, with the expansion of administrative enforcement power in the copyright law, and notes that as a private property right the civil system should be the principal vehicle for enforcement. This also appears to be a “new normal” in Chinese IP legislation, which has also been urged on in recent years by US demands for enforcement campaigns and increased punishment, including increased online enforcement for copyright in the Phase 1 Trade Agreement (Arts. 1.13, 1.14).
  4. Liu also notes that it is important that copyright is considered an aspect of civil law, and that it is guided by civil law principles, including tort and contract law, as well as the on-going drafting of the Civil Code. He notes that currently there is no IP chapter in the Civil Code and it is therefore even more important for the civil law and the copyright law to be integrated.  Consistent with China’s civil law tradition and his desire to ensure that copyright is protected as a private civil right, Prof. Liu places the primacy of the creator of the work as the first subject of protection. He notes “[t]he rights of other people are all rights that come from, are obtained through legal acts, through contracts or authorization mechanisms, and regulate the rights of the acts passed on.  This is the task of other laws.”

I hope to be able to post a translation of the draft soon.  Once a translation is available, Berkeley Law hopes to convene a roundtable discussion on the amendments to exchange views and assist in providing informed comments.  Please also post your comments or corrections to this posting and send us any translation you have prepared or comments you have submitted so that I may include them in a future blog.

 

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Trade Wars: A New Beginning?

Why is this year’s  Special 301 Report (the “Report”) from USTR (April 29, 2019) different from prior reports?  In prior years, this report often repeated materials found elsewhere, such as in the  National Trade Estimate Report (March 2020).  This year’s Report reflects the Phase 1 Trade Agreement (January 15, 2020) (the “Agreement”) and the subsequent Chinese Action Plan (April 20, 2020). More importantly, it also suggests how the US might wish to see the implementation of the Agreement and negotiate a Phase 2 Agreement. There are a number of welcome surprises that suggest a new beginning.

Most importantly, the Report demonstrates a renewed commitment to the rule of law and the role of markets in protecting IP.  As noted in many of the postings of this blog, these were areas that I found seriously deficient in the Agreement.  The Agreement revitalized administrative campaigns and enforcement mechanisms and encouraged punitive mechanisms.  It generally underemphasized compensatory damages and other civil remedies, including appropriate civil procedures, and did not adequately emphasize the need to let market mechanisms govern IP creation and commercialization.

The Report addresses issues that the Phase 1 Agreement war did not, such as “poor quality patents”, “the presence of competition law concepts in the patent law” and challenges faced in trademark prosecution.  The Report also notes that  there are “obstacles in establishing actual damages in civil proceedings,” including a lack of “preliminary injunctive relief.”  These are useful statements, but even more important are the references to judicial procedures.

The Report states that “Chinese judicial authorities continue to demonstrate a lack of transparency”, including publishing only “selected decisions rather than all preliminary injunctions and final decisions.”  In addition, “administrative enforcement authorities fail to provide rights holders with information.” The issue of transparency has been repeatedly reported on in this blog as key to effective oversight of the Agreement.  The Report also notes that “[a] truly independent judiciary is critical to promote the rule of law and to protect IP rights.”  The Report mentions the need for transparency in China’s IP system five separate times.  By comparison, Chapter 1 of the Agreement mentions transparency once (with respect to Geographical Indications),  and not once with respect to judicial or administrative proceedings.

The Report comes down particularly hard in favor of legal process in its discussion on the social credit system, particularly the CNIPA/NDRC  et al, Memorandum of Cooperation on Joint Disciplinary Actions for Seriously Dishonest Subjects in the Field of Intellectual Property (Patent) 关于对知识产权（专利）领域严重失信主体开展联合惩戒的合作备忘录》(the “Dishonesty Measures”) (December 5, 2018) by noting that “these measure lack critical procedural safeguards, such as notice to the targeted entity, clear factors for determinations, or opportunities for appeal.” The Report further concludes that “The United States objects to any attempt to expand the ‘social credit system’ in the field of IP.”

This statement suggests a further distancing of the administration from rhetoric and outcomes of December 2018-May 2019 when the primary goal appeared to be strong legal commitments to punish IP infringement without explicit consideration of due process.  The Dishonesty Measures were likely enacted to appease US concerns on IP on the margins of the G-20 summit (November 30- December 1, 2018).  The concern then appeared to be that they were not sufficiently well-codified, not that they lacked due process.  Larry Kudlow said after the G-20 in 2019, that IP-related provisions (most likely the Dishonesty Measures) need to be “codified by law in China” and should not just be a “state council announcement.”

I am personally gratified to see the reintroduction of concerns over due process and rule of law into the Administration’s discourse of IP, although I believe the complexity of the relationship between IP protection and the social credit system may require further study.  I suspect that it may be difficult for rightsholders commercializing their rights or seeking to enforce judgments to completely distance themselves from the social credit system.

The Report also notes that the US had initiated dispute resolution proceedings against China at the WTO regarding China’s technology licensing regime and that China revised the measures the US had challenged in March 2019. The Report concludes that “[t]he significance of these revisions is under review.”  The Report does not note that the US had agreed to suspend the WTO case due to these legislative revisions, until May 1, 2020, at which time (the date of writing of this blog) it needs to decide whether or not to reinstate this case.  Perhaps USTR did not want to show its hand regarding what it would do effective May 1, 2020 – two days after the Report was issued.  Presumably, the United States will seek an extension of time in light of the continuing “review.”

Whatever decision is made at the WTO, the US team deserves credit for the legislative changes in licensing, forced tech transfer and trademarks that were made in the spring of 2019 and for re-emphasizing due process, the market, and rule of law, in the Report and in United States advocacy for better IP protection in China.

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A Potpourri of Online Programs

There some great online events involving Chinese IP taking place, including several hosted here at Berkeley.

At the top of my list are the webinar series here. If you missed the first event with Prof. Jerome A. Cohen, Susan Finder, Sean Randolph and myself, here is the link to the video.  Jerry Cohen launches the discussion with an overview of the past and future of Chinese legal engagement with China and his great contributions to the field.  The audience was very supportive of continued legal engagement with China. The next two programs are on US-China trade (May 6) and data-driven research on Chinese legal developments (May 20).

These China law programs are free of charge, carry CLE credit, and attendance can be applied towards receiving a certificate from the Berkeley Center for Law and Technology.  Intellectual property is an important part of the discussions in all of these events. Here are the links to the May 6 Session and May 20 Session.

In addition to these two upcoming programs, we will be hosting a non-CLE credit book warming for Mara Hvistendahl’s recent book The Scientist and the Spy: A True Story of China, the FBI and Industrial Espionage which delves into a Chinese economic espionage case that took place in the cornfields of Iowa.   We expect to have a lively discussion among some of the individuals involved in the case, including the former FBI agent (Mark Bitten) and a  Dupont IP lawyer (Jennifer Johnson).

There are also seven IP-focused webinars after these programs end. All of these IP-focused webinars will also provide CLE credit. The series costs $100.00, or $25.00 per session.  We have a great line-up of speakers including former Federal Circuit Chief Judges Rader and Michel, former PTO Director Kappos, my colleague Rob Merges, and leading practitioners and academics.   Participants who have registered and attend a minimum number of the scheduled programs will receive a certificate from the Berkeley Center for Law and Technology.

If you are tired of staring at a screen on zoom, you might consider listening to podcasts from IP Counsel Café.  I am interviewed by Thomas Chia of Via Licensing on the impact of the trade war and coronavirus including the role of IP in China supply chain disruptions. The podcasts are available here (Episode 4, two parts).

Another notable event: my former USPTO colleagues are joining the shutdown webinar bandwagon with a program on May 7 from 9-10:30 AM EST, with former Shanghai IP Attaché Mike Mangelson and current Beijing and Guangzhou IP Attachés Duncan Willson and Conrad Wong.  Information on this free event is available here.

I hope to hear from you or see you soon!