The Widening Impact of China’s Publication of IP Cases

I recently had the opportunity at the Fordham IP Conference to discuss the potential impact of the continuing publication of court decisions by China’s courts since 2014, including their wide-ranging impact on legal research, China IP strategies, and trade.  China’s publication of court cases has had a dramatic impact on political science, legal research and IP strategy.  Here is an extended version of my presentation:

A good starting point for understanding these developments is the important paper of Profs. Benjamin Liebman, Margaret Roberts, Rachel Stern, and Alice Wang on the China Judgements Online Database (CJO) entitled Mass Digitization of Chinese Court Decisions: How to Use Text as Data in the Field of Chinese Law (June 13, 2017) (21st Century China Center Research Paper No. 2017-01; Columbia Public Law Research Paper No. 14-55).  This team looked at 20,321 land use administrative court judgments in Henan Province. The authors critical approach to CJO is summarized below:

First, it is critical to take missing cases into account, rather than succumbing to the temptation to treat even a very large sample as an accurate reflection of reality. … Second, viewing millions of court decisions provides an unparalleled wide-angle perspective on courts’ daily activity, and exposes underlying patterns… Scholars must remember that court judgments provide only one, often limited, view of actual practice. Third, a migration toward treating text as data in the field of Chinese law will require a multi-method approach that combines expertise and insights from law, the social sciences, and computer science.

Their article also discusses motivations for transparency (including reducing corruption), and motivations for individual courts to disclose cases. They note as well that an “incentive bias” now exists which includes making judicial decisions available at the end of the calendar quarter before court evaluations (p. 16).

Moving from the use of the CJO to look at legal issues generally to IP, an important recent study on foreign participation in China’s IP system has also recently been-published by Berkeley JSD Candidate Bian Renjun. Her provocatively-entitled articleMany Things You Know About Patent Infringement in China are Wrong  is scheduled to appear in the Berkeley Technology Law Journal. Ms. Bian uses CJO to analyze 1,663 patent infringement judgments decided by local courts in 2014. Her research provides a much-need supplement to the scholarship of Brian Love, Xuan Thao Nguyen, as well as this blog, about foreign “win” rates in the Chinese courts.

Ms. Bian observes that foreigners asserting invention patents are not underrepresented in the courts. The proportion of invention patents granted by SIPO to foreigners was roughly equivalent to the proportion of foreign invention patent cases decided to overall invention patent cases in court (7.16%/6.92%). The gross number of decisions however was only 115 cases. During that year foreign win rates were higher compared to domestic litigants (84.35%/79.84%), as were injunction rates (92.78%/90.05%) and damages (201,620.45 RMB/66,217.93 RMB).  In sum, Ms. Bian provides a more compelling narrative of the probability that foreigners win in patent litigation in China than predecessors such as Brian Love. However, she does not address how to consider issues involving validity in overall success rates, as has been attempted by such databases as Darts IP, nor does she include metrics to assess any differences in the quality of the patents being asserted, for which additional research would be required.

The third article to look at judicial practices in IP, including the IP databases is Max Goldberg’s promising paper Enclave of Ingenuity: The Plan and Promise of the Beijing Intellectual Property Court (May 2017). Mr. Goldberg is a 2017 graduate of Yale College. His paper won an award as the best student paper in East Asian Studies during the year he graduated.

Mr. Goldberg draws from the work of Martin Dimitrov in suggesting that China’s administrative enforcement system is more politically reactive and less independent. He shares the view of this author and others that the Guiding Cases System of the Supreme People’s Court has had limited uptake by the courts, while the precedent system of the Beijing IP court (BJIPC) appears to have been more widely adopted by judges and practitioners of that court in part due to the releative ease of introducing this system into one highly trained court in an affluent city. Mr. Goldberg offers a reply to the concerns of Benjamin Liebman et al. over the large number of “missingness’” in court cases, by noting that while “the phenomenon of sensitive cases’ omission from government databases in China is well documented, lapses of this size are “much more likely the result of a lack of attention and resources than deliberate censorship.” He bases this part on the more comprehensive reporting rate of IP House at 94.25% based on the docketed numbers of cases at the BJIPC, while CJO had only about 50% of the cases from the same period in 2015.

Mr. Goldberg also focuses on specific judicial policy developments, many of which have been little noticed in the West. For example, he notes that “BJIPC opinions are 40-50% shorter than the decisions of more traditional IP tribunals, despite the fact that the BJIPC jurisdiction specifically includes the most technical cases.” He also notes that the court is also interested in soliciting the opinions of third parties, in a manner akin to an amicus brief. Amicus briefs have been advocated for some time by the US-China IP Cooperation Dialogue, with some important experiments, of which this author is a member. Mr. Goldberg also notes that the Beijing IP Court permits dissenting opinions and that the courts have held open “adjudication committee” meetings, which is an important new innovation. Finally, he notes, that the courts are more actively engaged in use of precedent. The court also had an administrative decision revocation rate of administrative decisions of 17% and a withdrawal rate (where complainant withdraws a case before final decision) of only 7%, which suggests the court is acting to reverse administrative decisions and that litigants have enough confidence in the court that they are willing to pursue cases to their final determination.   Many of these innovations were described in an IP House report previously discussed on this blog, but Mr. Goldberg adds a useful gloss to these developments.

Mr. Goldberg’s article is another important indicator of how China is “crossing the rule of law river by feeling the IP stones.”  Importantly, Mr. Goldberg focuses less on whether foreigners’ win and more on whether procedures compatible with an advanced legal system are being put in place.

Adela Hurtado, one of my former students at Fordham law School has also recently written a useful note in the Fordham Intellectual Property Law Journal that, like Mr. Goldberg’s article, looks at the use of judicial and administrative remedies, including criminal procedures, in addressing rampant infringement. Ms. Hurtado believes that reactive, politically motivated administrative enforcement brings few sustainable results. In her view, foreign companies should consider using the civil system, with its relatively high win rates (as reflected in the new databases) and look to models of successful law enforcement campaigns in the United States which provide for more interagency coordination and sustained efforts to address specific problems. She uses data drawn from Walt Disney’s use of civil and administrative campaigns, comparing Disney’s actions in China with its use of civil remedies in the United States to suggest that Chinese IP enforcement campaigns by Disney should similarly return to greater reliance on civil remedies. Ms. Hurtado may be the first author to look at company specific behavior in different markets by using both Chinese and US databases and thereby highlights another future area of inquiry.

There have been several other efforts that look to China’s legal databases as analytical and research tools. Among other recent scholarship, Susan Finder has also recently written an excellent article on the evolving system of precedent in China in the Tsinghua China Law Review. For those individuals and scholars craving analytics, IP House has also begun publishing important analytic studies on trends in the courts. Topics covered include patent and health, motion picture and television industry and analyses of the decisions of the Beijing IP Court.  Another important application of China’s new databases is in development of course materials on China’s IP system.  In this respect, Profs. Merges and Seagull Song’s forthcoming book on Transnational Intellectual Property Law Text and Cases  (April 2018), comparing US, Chinese and European cases in the full range of IP law with a view towards their importance in developing global strategies, is also a promising step towards incorporating Chinese jurisprudence into the global discussions of IP issues.

China’s decisions to make cases more widely available  also has important consequences for trade-related discussions on IP. Approximately 13 years ago, a TRIPS “Article 63.3” transparency request was made by the United States, Japan and Switzerland at the WTO of China. This request demanded “clarifications regarding specific cases of IPR enforcement that China has identified for years 2001 through 2004, and other relevant cases.” The US delegation, of which I was a part, requested the cases to better analyze developments in China’s IP environment since WTO accession and to prepare for a forthcoming dispute. China refused to produce these cases either in the response to the request or during the dispute.  During the ensuring IP enforcement dispute (DS/362), the WTO itself refused to demand that China produce cases relevant to the outcomes of two claims – one involving copyright, and the other involving criminal thresholds. Indeed, rather than make an adverse inference from China’s unwillingness to produce cases, the WTO panel found that the United States failed to make out a prima facie case with respect to a claim that Chinese criminal thresholds failed to satisfy WTO requirements.

With the benefit of hindsight, one could argue that the WTO established a lower standard in DS/362 for analytical research on Chinese case law than China has since established. Additionally, DS/362 may also stand for the proposition that certain cases may be ahead of their time, particularly in light of China’s own commitments to innovation and development of its IP system.  But that is a topic for another blog….

 

Forecasting the Impact of the Third Plenum on IP Adjudication

What are the impacts of the resolution and spirits of the recent Third Plenum of the 18th Communist Party on rule of law in China, particularly commercial rule of law and IP? 

The morning of December 11, from 10:00 to 11:30, George Washington University Law School will be hosting its third annual China IP Program to discuss what China’s recent rule of law developments mean.    I will attend this program along with Don Clarke  of GWU, Xuan-Thao Nguyen (Southern Methodist University), Chief Judge Rader of the CAFC and others.   By my reckoning there have been three important streams of change affecting IP and rule of law in the past few months. 

One of the important developments is administrative transparency and accountability.  As previously reported,  Premier Li Keqiang is seeking to establish greater transparency in administrative enforcement decisions, through the State Council’s enactment of an “Opinion on Making Publicly Available According to Law Information on Administrative Penalties Concerning the Production and Sale of Fake, Counterfeit and Sub-standard Goods and Intellectual Property Rights Infringement” (关于依法公开制售假冒伪劣商品和侵犯知识产权行政处罚案件信息的意见).  At a conference this past December 5 sponsored by MofCOM, we were told that this regulation is likely to be made public available in the near future.  Moreover, as many as 300,000 cases each year involving IP infringements and fake and shoddy goods are likely to be affected.   

At the same time, an equally important September 2012 decision that I previously reported on: the “Opinion Concerning How to Improve The Work of Coordinating Administrative and Criminal Enforcement in Striking at IP Infringements and the Manufacture and Sale of Fake and Shoddy Goods”  (关于做好打击侵犯知识产权和制售假冒伪劣商品工作中行政执法与刑事司法衔接的意见), remains non-public.  However, it appears that this effort at administrative coordination in criminal IP from September 2012 has now “migrated” to a higher level.  Improvements in administrative/criminal coordination were also discussed in the November 12, 2013 Resolution Concerning Some Major Issues in Comprehensively Deepening Reform, passed at the  Third Plenum (“CCP Resolution”) (Chinese language version is found here.  That Resolution called for China to “resolve issues of overlapping responsibilities and many-headed law enforcement, and establish administrative law enforcement systems with unified powers and high-efficiency authority” and to “perfect mechanisms to link administrative law enforcement with the criminal judiciary”.  China is once again “crossing the legal reform river by feeling the IP stones.”

Another important area is in general judicial transparency and reform.  SPC President Zhou Qiang discussed the importance of publishing court decisions involving intellectual property in an important exchange he had with Chief Judge Rader on October 16 of this year.  Since that time, according to press reports, the newly appointed SPC President has vowed to increase transparency in the judicial process in light of the spirit of the recently concluded Third Plenum. 

But transparency includes more than publications of decisions.  Chief Judge Rader has informed me that at the meeting between SPC President Zhou and Chief Judge Rader, Zhou inquired at length about the CAFC practice of publishing the verbatim version of arguments within minutes on the internet, a practice that Zhou might have compared with broadcasts made during the Bo Xilai trial.  In addition, Chief Judge Rader expressed praise for the civil procedure and trademark reforms, which have introduced greater transparency and accountability, including permitting a measure of compulsory discovery of adverse evidence held by an opposing party.  The transparency of judicial decisions generally was also raised in the CCP Resolution, which provided that China should:  “Move towards open trials and open prosecutions, record and maintain materials from the entire court process, strengthen the rationality of legal documents, and promote openness of valid court judgment documents.”

Another important judicial reform that could be significant for IP in the CCP Resolution involves “explor[ing] the establishment of judicial jurisdiction systems that are suitably separated from administrative areas, guarantee the uniform and correct implementation of State laws” and to “reform the trial committee system, perfect case handling responsibility systems for presiding judges and collegiate benches, let those hearing the case judge, and those judging the case be responsible.” The former, if fully implemented, would support greater independence of the courts from the local governments that fund them, and the latter would dilute influence from adjudication committees and return decision-making power to judges who hear cases.  As it is possible that a disproportionate number of foreign-related cases are decided by adjudication committees, this could be a significant development.

A third area of reform is in specialized IP courts.  The 2008 National IP Strategy stated that China would “study the jurisdictional issues for the appropriate concentration for adjudication of patent and other technologically complex cases, and will investigate establishing an appellate IP court.”  The CCP Resolution states that China would “explore the establishment of intellectual property rights courts.”

Compared to the National IP Strategy, the CCP Resolution is a higher political statement.  Moreover, its substance is not limited to appellate courts, nor constrained to “technologically complex cases”.  While in 2008 an appellate IP court had been considered necessary to provide protection from local influence, the CCP Resolution notes elsewhere and more generally that China should establish “judicial jurisdiction systems that are suitably separated from administrative areas”.   One conclusion: the necessity of having courts that are less tied to local influence has migrated from an IP-related topic in the 2008 National IP Strategy, to one involving general legal reform.

Several courts are already moving to establish specialized IP courts.  At a recent program I attended in Suzhou sponsored by Renmin University, the President of Jiangsu’s High Court noted that Jiangsu is actively preparing for establishing such a court.  Moreover, the media has noted that Guangdong is also conducting research efforts for its establishment. Both jurisdictions are pioneers in combining civil/criminal and administrative IP jurisdiction in one tribunal.  Beijing was the first jurisdiction to establish IP tribunals in its intermediate courts (1993), and is probably the most important place where greater improvements could assist both foreign and domestic rights holders, as it is the jurisdiction where appeals from the patent and trademark offices are held.  As I have noted in a prior blog,  foreign parties are involved in approximately 47% of that IP administrative appeal docket.   

Former Supreme People’s Court IPR Tribunal Chief Judge Jiang Zhipei has also been a strong advocate for specialized IP courts in Beijing because of its national and international influence.   I share the hope of my friend Chief Judge Jiang that the CCP Resolution will help accelerate the establishment of these specialized IP courts and even more importantly, improve the adjudication of all legal issues matters for Chinese and foreigners alike.

 

 

 

Here’s the flyer for the GW Program:GWU Dec 11 Program