Reviewing the 2017 SPC Report on IPR Judicial Protection: The Generalities and the Exceptions

There have been a number of empirical reports in recent weeks on China’s IP system. In this blog, I look at the annual Supreme People’s Court 2017 Report on the Situation Regarding Judicial Enforcement of IPR in China  (中国法院知识产权司法保护状况) which was released during IP week (the “Report”).

According to the Report, 2017 saw a major increase in IP litigation in China.  There were a total of 237,242 cases filed and 225,678 cases concluded, with an increase of 33.50% and 31.43%, respectively, compared to 2016.

First instance cases increased by 47.24% to 201,039.  Patent cases increased 29.56% to 16,010.  Other increases were in trademarks (37,946 cases/39.58%); copyright (137,267/57.80%); competition-related cases (including civil antitrust cases of 114) (2,543/11.24%).  Two counter-cyclical numbers stand out:  technology contract cases dropped by 12.62% to 2,098, and second instance cases increased by only 4.92% or 21,818 cases. Note that disaggregated numbers for civil trade secret cases are not disclosed in the Report, but are presumably included under “competition” cases.

Comparing dockets with the United States, in 2017 United States courts heard 4,057 cases patent cases, 3,781 trademark cases, and 1,019 copyright cases, according to Lex Machina.  The biggest margin of difference between the US and China was clearly in copyright cases.  Chinese courts heard 134.7 times more cases than the United States. However, Chinese copyright cases are less likely to be consolidated amongst different titles, claims or causes of actions, which can inflate the statistics  — although I doubt to a 100 or more fold level.

Administrative cases, the majority of which are constituted by appeals from the patent and trademark offices, showed an overall increase while patent validity cases decreased.  Administrative patent appeals dropped 22.35% to 872 cases, while administrative trademark cases increased to 7,931 cases, or by about 32.40%.  The drop in administrative patent cases is particularly notable in light of the increased activity in patent prosecution and patent licensing.  By comparison the numbers of Inter Partes Reviews undertaken by the USPTO during 2017, according to Lex Machina, were 1,723, in addition to 9 cases involving covered business method patents.

The SPC did not offer disaggregated reversal rates of the PRB and TRAB in its data; combined patent and trademark cases included 964 cases involved  affirming the administrative agency decisions; 150 involving a change in the administrative decision; 5 cases involved a remand for further review; and 24 cases were withdrawn.

Criminal IP cases have also continued to decline.  There were 3,621 first instance criminal IP cases in 2017, a decline of 4.69%.  Among those 3,425 involved trademarks (-3.93%) and 169 involved copyrights (-13.33%).  There was also a decline of 35% in adjudication of criminal trade secret cases to only 26 cases.  The decline in criminal cases since 2012 (when cases totaled over 13,000) especially in copyrights and trade secrets is odd as Chinese leadership has in fact recognized the need for deterrent civil damages, including punitive damages and criminal trade secret remedies.

The five provinces that receive the most IP cases continued to grow in influence. Beijing, Shanghai, Jiangsu, Zhejiang and Guangdong saw an aggregate increase of 56.63% in IP cases, to 167,613 and now constitute 70.65% of all IP cases filed in China (p. 6).  Guangdong alone saw an increase of 84.7% to 58,000 cases and Beijing trailed behind at 25,932 cases with an increase of 49.2 percent.  Other less popular destinations also saw dramatic increases.  Jilin province had an increase of 210 percent, while Hunan and Fujian each saw increases of 73.8% and 73.14%.

Settlement and case withdrawal rates also changed in 2017.  Shanghai had the highest reported rate of the big five at 76.31%, while the inland province of Ningxia had an overall rate of 88.46%, including a 100 percent rate where litigants accepted judgments without appealing  服判息诉 (!).

The SPC also reported supporting 11 cross-district IP tribunals in Nanjing, Suzhou, Wuhan, Chengdu, Hangzhou, Ningbo, Hefei, Fuzhou, Jinan, Qingdao and Shenzhen.  In addition, 10 provinces or autonomous cities established a system of combining civil, criminal and administrative jurisdiction over IP cases in their IP tribunals in the first half of 2017.  As noted however, despite this change in judicial structure, there was a decline in criminal enforcement and in some administrative appeals in 2017 overall (p.11).

The Report also notes that the SPC is actively supporting research on establishing a national specialized appellate IP Court (p. 10).   The SPC also actively participated in the providing comments on other draft laws, and devoted some effort to the revisions of the Anti-Unfair Competition law, including meeting three times with the legal affairs committee of the NPC, as well as numerous phone calls   According to the Report, the “majority of the opinions proposed were adopted into law” which leaves the question of what was not adopted.  One possibility may be the removal of a specific provision treating employees as “undertakings” under the revised AUCL.  In fact, I have heard that some NPC legislators are continuing to push for a stand-alone trade secret to further improve upon the revised AUCL.

The Report also points to several research projects undertaken by provincial courts.  Amongst those of interest are: a research project on disclosure of trade secret information in litigation in Jiangsu; a report on using market guidance for damages compensation of Guangdong Province; a report on standards essential patents in Hubei; and a research project of the Beijing IP Court on judicial protection of IP in international competition.

Regarding transparency, the Report notes that the SPC has published all of its cases on the Internet, however similar data is not provided for other sub-SPC courts (p. 16).

In international affairs, the Report notes that the SPC has participated in the discussions on the proposed treaty on recognition and enforcement of foreign civil judgments (p. 17), in the China-European IP dialogue, and has sent people to the annual meeting of INTA, amongst other activities.  No mention is made of US government engagements (p. 17).  This omission may be due to current political sensitivities.  Nonetheless, due to the increasing number of cross-border disputes and the need for better understanding of both our judicial systems, I believe judicial engagement with Chinese courts would continue to be a fruitful enterprise.  Indeed, Berkeley hopes to host a program on cross-border IP litigation with Tsinghua University Law School later this year.

Finally, while we are on the subject of the courts, I commend Susan Finder’s recent blog on how to translate court terminology.   I hope I have not departed too far here from her excellent suggestions!

December 2017 Update

 

Here are some updates on IP developments in China from this past December 2017:

1.  Xi Jinping: China must accelerate implementation of big data strategy (English) 习近平:实施国家大数据战略加快建设数字中国 (Chinese).  Xi Jinping, during a collective study session of the Politburo on December 8th, has urged the country to accelerate implementation of its big data strategy to better serve social and economic development and improve people’s lives. Xi said efforts should be made to advance national big data strategy, improve digital infrastructure, promote integration and sharing of digital resources, and safeguard data security.

2.  Legal Daily on December 5, 2017 notes that leakage of private data from government  websites is getting attention, all local governments start rectification and protection mechanism  政府网站泄露隐私问题受关注,各地整改升级保护机制 (Chinese)

3.  Ministry of Education, Department of Human Resources and Social Security, and Ministry of Finance regulated information disclosure of private information 教育部人社部财政部三部委规范信息公开 保隐私信息安全自查工作要不留死角(Chinese).  This appears to be related to the developments described in the Legal Daily article described above.  Note that unauthorized disclosure of confidential information of foreigners had been a concern during prior meetings of the bilateral Joint Commission on Commerce and Trade.   Compare 2014 and 2016 U.S.-China Joint Commission on Commerce and Trade (JCCT).   From 2014 JCTT: The United States and China confirm that trade secrets submitted to the government in administrative or regulatory proceedings are to be protected from improper disclosure to the public and only disclosed to government officials in connection with their official duties in accordance with law.  Each side will further study how to optimize its respective relevant administrative and regulatory procedures within its legal system, where appropriate, including by strengthening confidentiality protection measures, limiting the scope of government personnel having access to trade secrets, limiting the information required from companies to include only information reasonably necessary for satisfying regulatory purposes, and stipulating that any requirements on government agencies to publicly disclose information appropriately allow for the withholding of trade secrets.  Government officials who illegally disclose companies’ trade secrets are to be subject to administrative or legal liability according to law.  The United States and China agree to exchange information on the scope of protection of trade secrets and confidential business information under their respective legal systems.  China acknowledges that it is to conduct a legislative study of a revised law on trade secrets.  The United States acknowledges that draft legislation proposing a Federal civil cause of action for trade secrets misappropriation has been introduced in the U.S. Congress.  From 2016 JCCT: Both sides confirm that, in those cases in which a judicial or administrative enforcement authority requests the submission of confidential information in conjunction with a trade secret enforcement matter, such requests will be narrowly tailored to avoid putting at risk sensitive business information and will be subject to appropriate protective orders to control additional disclosure and ensure that information is not further misappropriated and that any decision that is made publicly available in conjunction with a trade secret enforcement matter will have all confidential information appropriately redacted. The United States and China confirm that trade secret investigations are conducted in a prudent and cautious manner.

4.  Overview of China’s intellectual property protection: 32000 suspected criminal cases have been transferred since 2011.  中国知识产权保护状况全景式展示  2011年以来移送涉嫌犯罪案件3.2万起(Chinese).  Note: This is data on referrals from administrative to criminal enforcement. The transfer from admin to criminal seems like part of overall efforts that China took to improve IP protection. The article mentioned that three agencies: National Copyright Administration, SAIC and SIPO, all enhanced IP protection enforcement. For instance, National Copyright Administration, through “Jian Wang” (Swordnet) project, investigated 5560 infringement cases over the past 13 years; SAIC investigated 19,400 trademark infringement cases from Jan to Oct 2017; and SIPO and other IP protection agencies investigated 189,000 all kinds of infringement and counterfeiting cases in 2016.Related background information: State Council Opinion on Improving Administrative/Criminal IPR Enforcement Coordination.

5.  China Intellectual Property Development Alliance was established  中国知识产权发展联盟成立 (Chinese).   The focus of this alliance is to create a good environment for IP application and protection and to build an ecosystem for IP operation.

6.  Notice on establishing national intellectual property pilot parks.  关于确定国家知识产权试点园区的通知 (Chinese).  2017 new list of national intellectual property pilot parks 2017年新一批国家知识产权试点园区名单 (Chinese).  These pilot parks are established by local governments.  They will provide IP services, information sharing services, help incubate IP intensive industries, and provide supporting infrastructure. SIPO approves them, and will monitor pilot parks’ work progress and review document for renewal.

7.  The story behind of independent development of C919 (English); C919背后的自主研制之路 (Chinese).  The Chinese article describes the patents involved in the C919 aircraft project.

8.  China implemented the first national military standards of intellectual property management in the field of equipment construction 我国首部装备建设领域知识产权管理国家军用标准实施 (Chinese).

9.  China’s R&D investment hits a new high.  我国研发投入再创新高 (Chinese).   China’s total GDP in 2016 was $11 trillion and R&D investment is around $230 billion, which is about 2.15% of GDP. For US, R&D investment is estimated to be around 2.8% of GDP in 2016.

10. China’s invention patent applications exceed one million from Jan. to Oct. (English); 前10个月发明专利申请量超百万件 (Chinese).

11.WIPO Stats on Patent Application Filings Shows China Continuing to Lead the World (English);  China Tops Patent, Trademark, Design Filings in 2016 (English).

12,  “China Big Data Rule of Law Development Report 2017” released.   《中国大数据法治发展报告(2017)》发布 (Chinese).  Related:  Presentation on 2017 China Big Data Rule of Law Development Report 2017中国大数据法治发展报告(实录与PPT)(Chinese)

13.  China to boost competitiveness in AI (English) 产业三年行动计划提出在八大领域率先取得突破——人工智能服务渐入千家万户(Chinese).  The Ministry of Industry and Information Technology (MIIT) recently released an action plan to substantially improve the development of the AI industry. This plan set to make breakthroughs in eight areas, including smart cars, service robot, drone, AI medical diagnosis, facial recognition, voice recognition, smart translation and smart home product. The MIIT promised more policy support, including special funds, talent cultivation and a better business environment. Measures will also be rolled out to build industry clusters, set up key laboratories and encourage data sharing.

14.  Encourage indigenous innovation and build strong brands.  鼓励自主创新 聚力品牌经济 (Chinese).  The China Council for Brand Development is working with the National Development and Reform Commission to formulate “China’s Brand Development Strategy.” This program aims to cultivate 1000 well-known international brands in five years.

15.  More than 2000 clues have been received for the “Suyuan” campaign against trademark infringement.  打击商标侵权“溯源”行动已收到2000余条案件线索 (Chinese)  SAIC started a campaign called “Suyuan” against trademark infringement in September 2017. Until the end of November, more than 2000 clues on cases have been reported.

16.  Shenzhen IP court and Shenzhen Finance court were established 深圳知识产权法庭和深圳金融法庭同时揭牌办公 (Chinese).   A new Shenzhen IP court was opened on December 26, 2017. This court will handle intellectual property cases which were under the jurisdiction of the Shenzhen Intermediate People’s Court.

17,. Wang Jinshan was appointed as the Chief Judge of Beijing IP Court.  王金山被任命为为北京知识产权法院院长 (Chinese).  Wang replaces Chief Judge Su Chi, who has guided the court since it was first launched and implemented numerous reform projects. We wish him well. Judge Wang graduated from Peking University with a major in Law. He was the party secretary of Beijing IP Court since May 2017. Judge Wang also previously worked at Beijing Intermediate People’s Court.

18.  China’s software copyright registration exceeds 700,000 in 2017.  2017年我国软件著作权登记量突破70万件  http://www.nipso.cn/onews.asp?id=39313 (Chinese).

We hope to be providing more updates in the year ahead from the Berkeley Center for Law and Technology.

As usual the information contained herein does not necessarily represent the opinion of any government agency, company, individual or the University of California.

By Berkeley staff.

Should the NPC also consider Criminal Copyright Reform when it considers Copyright Reform?

Lamacchia.JPG

At this month’s National People’s Congress, an NPC spokesman noted that this year the NPC intends to address reform of the copyright law, which has been long delayed. However, reform of the substantive copyright law will not typically address the need to reform the criminal copyright law and to address the relationship between civil and criminal copyright law. This point was raised in the Weixin platform Zhichanli (知产力), which addressed the key issues of criminal copyright law reform in a lively “cartoon” format (see above):

The four issues from the perspectives of the author of that blog are:

1.       Article 217 of the criminal code, mandates having a “profit motivation” in order for criminality to attach.Should the “profit motivation” requirement be removed from the criminal code?

2.       Whether to criminalize the Internet related right of “communication over information networks”?

3.       How to address secondary and principal liability of internet platforms?

4.       Three separate specific issues, including:

a)       How to criminalize destruction of technological protection measures?

b)      How to criminalize commercial scale use of piratical software?

c)       What are the thresholds to deal with online criminal enforcement?

In my view, these are all important issues, which should be considered in the context of copyright reform.    Many of these  issues were raised in DS/362, the WTO enforcement case which the United States brought against China.    Of particular note was that the United States raised the history of  amending US laws to address willful copyright infringement that caused large scale harm without necessarily causing commercial gain (the LaMacchia case, in the cartoon above).  In addition, the United States also recognized that thresholds based on the numbers of copies would not capture the harm caused by technological changes which permitted large digital quantities to be distributed on line or in compressed formats.   One of the current thresholds involves 500 “flat articles”  ( 500 ) (typically used for CD’s or flat pieces of paper), which the WTO panel called “copies, for the sake of simplicity” and is an awkward determinant for infringement in rapidly moving technologies.

Also of note is that criminal IP enforcement has become more important in China. This was brought to my attention by a Chinese judge who mentioned that while China opposed the WTO case, it was now widely recognized that criminal IP is an important part of an IP enforcement system. In a sense, the US may have lost the 2007 battle over criminal IP at the WTO, but clearly won the war. The data bears this out. When the WTO was filed against China, there were only about 904 criminal IP  infringement cases in China (2007).   In 2013, by comparison there were 7,804 infringement cases – an increase of about 8 times, not including increases in other provisions of the criminal code that also can address IP infringement, such as crimes involving illegal business operations or fake and shoddy goods.

While China recognizes that criminal IP is enforcement it an important part of its enforcement system,  an equally important question concerns the role of the relatively small criminal IP enforcement system in light of China’s civil, administrative and customs enforcement (see chart below).  In addition to the increasing number of criminal IP prosecutions,  the increasing numbers of referrals from China’s administrative copyright enforcement to criminal copyright enforcement is an encouraging trend in this regard.  An even more encouraging sign would be consideration by the NPC of criminal copyright law reform at the same time as it considers substantive copyright law reform.  As criminal law reform goes through different procedures at the NPC, working on both issues simultaneously may entail some coordination, but would help ensure that any changes to China’s copyright regime is comprehensive and would set a good precedent for other IP legislative reforms coming up, such as in reform of the trade secret regime in the Antiunfair Competition Law.

 

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False Friends (形似神异): Comparing US and Chinese Administrative Patent Enforcement

The China Patents and Trademarks journal has now made publicly available the article I wrote late last year with former USPTO Director David Kappos and former Chief Judge Randall Rader (ret.)  “Faux Amis: China-US Administrative Enforcement Comparison”, in both  English, and Chinese (形似神异:中美专利行政执法制度对比).  Kevin Lu 吕行 of USPTO also assisted in researching the article.

The article discusses the differences between administrative enforcement of patents in the United States International Trade Commission (Section 337) and by SIPO in China and notes that the comparisons of China’s administrative patent system to the USITC system are misleading, as the two systems are different both qualitatively and quantitatively. 

The opinions in the article are of course strictly the authors’ own.

Identical vs. Similar Trademarks in Criminal and Civil Adjudication

Both Judge Bao WenkJiong 包文炯 in Zhichanli, and James Luo on his blog, have recently  published  summaries of a 2014 case in Wuxi (无锡滨湖法院(2014)锡滨知刑初字第0002号刑事判决书) involving the definition an “identical” mark under China’s criminal trademark law.

This case raises the important question of the differing roles and standards for civil and criminal prosecution of trademark infringement – an issue that is especially important in light of the many different manners of enforcing IP in China, which also includes an extensive administrative punishment system.

Judge Bao noted that the court held that attention should be paid to avoiding excessive application of the “trademark similarity” standard of civil trademark cases to criminal cases.  More specifically, the case held that a counterfeit “identical trademark” in the criminal law means one that is identical with the registered trademark or not visually different from the registered trademark and therefor is enough to mislead the public.   Where, however, there is a slight difference between the accused counterfeit trademark and the registered trademark, the close similarity is sufficient to cause the relevant public to be confused and it should also be regarded as an “identical trademark.”

The requirement of an “identical trademark” derives from Article 213 of China’s Criminal Code, which provides:

“Whoever, without permission from the owner of a registered trademark, uses a trademark which is identical with the registered trademark on the same kind of commodities shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall also, or shall only, be fined; if the circumstances are especially serious, the offender shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years and shall also be fined.”

A 2004 judicial interpretation on criminal IP matters (关于办理侵犯知识产权刑事案件具体应用法律若干问题的解释 (2004)) further clarified what constituted an “identical trademark” for purposes of China’s criminal IP laws:

“Article 8: An ‘identical trademark’ as provided for in Article 213 of the Criminal Law refers to the same trademark as the counterfeited registered trademark, or one that is substantially visually indistinguishable from the counterfeited registered trademark, and is sufficient to mislead the public.”

“第八条 刑法第二百一十三条规定的“相同的商标”,是指与被假冒的注册商标完全相同,或者与被假冒的注册商标在视觉上基本无差别、足以对公众产生误导的商标.”

Why should a higher degree of similarity of trademarks be required in criminal trademark cases but not for civil cases?    The critical test, to my mind, should be whether the infringement is willful, and not whether a cunning counterfeiter designed a mark that is insufficiently identical but nonetheless potentially confusing to a segment of the consuming population.  From a policy perspective, public criminal enforcement of the trademark laws can and should protect public interests greater than the legitimate trademark itself, including such interests as purchases by innocent consumers, protecting investment in brand creation and deterring brand dilution, and addressing the confusion of third parties who may be harmed by using these products.  These policies suggest that more liberal construction of what constitutes an “identical” trademark could be useful.   Indeed some courts in the United States have used civil standards to determine when a trademark is counterfeit (United States v. Petrosian , 126 F.3d 1232, 1234 (9th Cir. 1997).  Nonethelesss, even if prosecutors declined to prosecute an “identical” trademark case, the rights owner may still be free to bring a civil case under the “similar trademark” civil standard.

The Chinese summary of the case notes that the Jiangsu IP courts, where this case was held, play a role in delineating the role of the civil and criminal IP systems, as these courts have combined civil, criminal and administrative case adjudication in one tribunal.  I hope that these courts can play an even greater role in clarifying addressing the public policy needs behind different standards of IP protection under China’s civil, criminal and administrative enforcement regimes.

GAI and ABA Publish Their AUCL Comments

Attached are the comments of the American Bar Association Sections on International Law and Antitrust Law  on the proposed draft revisions of the Anti-Unfair Competition Law (AUCL)  as well as comments of the Global Antitrust Institute of George Mason University.

The ABA’s comments are comprehensive – addressing IP issues (including trade secret and trade dress), advertising law, competition law issues and commercial bribery.  GAI’s  comments are focused on the interface between the AUCL and the Antimonopoly Law.

Regarding the overlap with the AML, the GAI advocates that “any provisions in the AUCL that relate to conduct covered by traditional antitrust laws, or conduct covered by China’s Anti-Monopoly Law, be either omitted entirely or revised to limit liability to situations when there is substantial evidence of harm to competition.  … The AUCL should be implemented in a manner consistent with these objectives of competition policy.”  The same argument might be applied to other laws in China, such as Section 329 of the contract law, which deals with monopolization of technology.   In fact, China has a long history of industrial policy regulation of competition, much of which was enacted prior to China’s antimonopoly law.

Neither set of comments fully addresses a core concern of the proponents of this draft,  “that the administrative law enforcement is dispersed, that law enforcement standard is not unified, that the legal responsibility system is not perfect, and that the punishment is too lenient.”  Prior experience of administrative trade secret enforcement of the AUCL has shown that foreigners have not been a significant beneficiary, despite high level political attention paid to increased trade secret protection.   In the trademark context, SAIC’s foreign-related docket is several multiples of all foreign-related civil IP cases.  Increased administrative enforcement authorities raise several complicated concerns:  will these authorities be used fairly on behalf of Chinese and foreigners alike,  will trade secrets be protected by administrative agencies, are the courts better situated to adjudicate the various divergent issues,  what priority will AUCL enforcement assume in SAIC’s vast bureaucracy,  how will these expanded authorities be coordinated with criminal law enforcement and the courts, etc.

Update of March 16, 2017:  Attached are the  Comments of the American Intellectual Property Law Association.

 

 

Revised Patent Infringement Judicial Interpretation Released

The Supreme People’s Court published its revised judicial interpretation on patent infringement litigation.  I previously blogged about the early draft here.  Here is a Chinese language article on the press conference announcing the draft Judicial Interpretation, which was held on March 22, 2016.  The JI goes into effect April 1.

The drafting and timing of the JI seems to be drafted in part in response to perceived problems in enforcing patents in China, which have put pressure on the legislative bodies, courts and administrative agencies to seek appropriate reforms.  In particular, the JI may be perceived to be another policy initiative undertaken to address the continuing competition between the courts and administrative agencies over which agency should be the principle patent enforcing agency. Justice Tao Kaiyuan addressed this issue for the courts in an article earlier this year, while SIPO’s efforts to enhance its role were articulated in a draft SIPO revision of the patent law released for public comment by the State Council Legislative Affairs Office at about the same time as the draft law was released.

For those inclined to seek political motivations to legislative and policy actions particularly by competing agencies, the release of this JI is also proximate to the release by SIPO of its revised provisional guidelines for administrative enforcement earlier this month (March 2, 2016) (专利行政执法操作指南(试行).

The court’s press conference noted that the revision of the JI seeks to address concerns over patent litigation involving a high burden of proof, low damages and delay.

Who is winning in this competition – the courts, SIPO, the State or the patentee?  I hope to provide more detailed comments on the JI later.

Update April 3, 2016: : Song Haining has done a good summary of these recent developments in his blog, including an unofficial translation of the JI, available here.