2017 Opens with More Positive Trademark Developments

The SAIC has announced that it has  amended its TM review and examination standards (“Trademark Review and Examination Standards”).  The revised standards, with a date of December 2016, are available here. The revisions incorporate revisions to Articles 19, 50, 15.2, 1and 10 of the Trademark Law.

In addition, the Supreme People’s Court published a judicial interpretation on Certain Issues Related to Trials of Administrative Cases Involving the Grant and Confirmation of Trademark Rights 最高人民法院关于审理商标授权确权行政案件若干问题的规定.  A public comment draft of the JI was circulated as early as 2014; the final version was released at a press conference on January 11, 2017.   The JI clarifies the application of “adverse influence” in Article 10(1)8 and “other improper means” in Article 44(1) of trademark law and provides details on prior rights of Article 32  including copyright, naming right, trade name,  amongst other provisions.   The Financial Times has suggested that the JI is linked to the Qiaodan case , although as the Chinese media as noted, Qiaodan may also be seen as one of a series of cases providing more expansive relief against abusive registrations and recognizing more extensive related rights, such as naming rights and even merchandising rights.  In an unrelated development, the SPC on January 7, 2017 listed the Qiaodan case  as one of the top 10 civil and administrative cases for 2016.

 The 2016 JCCT obligated China to “take further efforts to address bad faith trademark filings”, according to the recently released Joint Fact Sheet. The amended examination guidleines, JI, and related case developments, including the development of case law in IP,  should help implement this commitment. 

Book Review on Report on Development of Intellectual Property Development in China (2015)

The Report on Development of Intellectual Property Development in China 2015 中国知识产权发展报告 (IP Teaching and Research Center of Renmin University of China / IP Academy of Renmin University) (Tsinghua University Press, 2016) (320 pp., 98 RMB) (http://tup.com.cn/booksCenter/book_06886601.html) (the “Report”), is a bilingual Chinese-English report prepared by Renmin University and commissioned by the Ministry of Education.   The book presents a comprehensive summary of developments and challenges in IP protection and enforcement in China, with a particularly strong focus on legislative developments, the role of national plans, the history of IP in China, government funded R&D, education and training-related issues, and the pressing needs of market and legal reforms.

After a general overview (Part I), where the authors discuss various national plans, and general legislation, such as the Civil Law and the Law to Counter Unfair Competition, the authors discuss patents and innovation (Part II).  The Report notes that quality needs to be improved in life science patents, most of which come from small inventors (such as in TCM).  The report also candidly references critiques of SIPO’s performance (p. 150), as well as the low quality of university patent applications and suggests that there should be additional attention paid to university IP commercialization, including the many restrictions that apply to state-owned assets, a matter that was litigated in the Infineon case here in the United States many years ago.  The report also criticizes unrestricted subsidies and other incentives for patent applications, which has led to “the amount of patent applications to be falsely huge” and has given rise the problem of “rubbish patents.” (p. 163).  Regarding China’s extraordinary growth in patent filings, the authors conclude, as I have often in this blog, that “the motivational role of the market should be strengthened” in lieu of such incentives.

Regarding the proposed Patent Law amendments, the authors also argue that judicial decisions on patent validity should be final and not be subject to a final decision by an administrative agency, and that there should be appropriate limitations on administrative enforcement involving patent infringements (pp. 166-167).  The authors also seek to limit the abusive assertion of unexamined utility models and designs, including by authorizing the courts to consider the abusive assertion of patent rights a matter of unfair competition (p. 173).

In discussing trademarks, the authors similarly note that despite the huge numbers of trademark filings, Chinese companies play an undersized role in lists of global brands.  The authors identify problems in “rush registration of trademarks” involving grabbing a trademark previously used by others, particularly where a mark has international popularity, where there are fictional figures and titles of movies and television hits, and in the case of celebrity names (p. 183).   The authors suggest that where a trademark is not being used, there should be no compensation given to the infringer, as one step to address rush registrations – a practice that apparently is already being used in Shanghai and perhaps other courts.  The authors also suggest that in the case of foreign rights owners, the courts should take into account the popularity of the brand enjoyed outside of China and the subjective malice on the person conducting the registration.   As with low quality patents, the author see a useful role for courts in adjudicating these rush registrations as acts of unfair competition (pp. 186-187).

These themes of addressing proposed legislation, adopting new legislation to new circumstances, more effectively insuring that markets rather than government fiat direct IP commercialization and protection,  and using unfair competition law to address abuse of IP rights play an important role in other chapters of the book, including the chapters on Copyright Law (Part IV), Competition law (Part V), IP protection by the Judiciary (Part VI), IP Education (Part VII), developments in Shenzhen City and Jiangsu Province (Part VIII), and other issues, such as free trade agreements (Part IX).

Overall the authors support the role of the courts as the principle vehicle for adjudicating IP disputes in a market-oriented economy, and that the IP laws should be revised to “attach importance to enhancing the leading and final role of the judicial protection of the intellectual property rights, limit and regulate intellectual property-related administrative enforcement …” (p. 240).  The authors also support the tendency to increase damages on IP disputes (P. 282), the role of specialized IP courts and the case law system, and deficiencies in administrative enforcement reform including problems of coordination among agencies.

In their summary, the authors note that “the sound operation of the IP system is not merely an issue of the IP law; it relies on an improved legal system and environment of the rule of law.  Only with innovation based on the market economy and driven by market interest is it possible to be the lasting, stable fore to drive the socio-economic development.” (pp. 315-316).  The book is a very useful summary of some of the hot issues now facing the Chinese IP system, with a focus on rule of law and market orientation.

I look forward to the 2016 edition.

Counterfeits in Microchannel Marketing … and Case Law

Amidst the escalating focus on online counterfeiting, piracy and patent infringement, online social media, such as WeChat are also becoming a source of infringing products, as documented in a Wall Street Journal article and other journals.  

James Luo (罗正红), a prominent IP lawyer in China, has been following these developments in his blog, where he recently reported on a Supreme People’s Court promoting of  ten model cases that promote “core socialist values” (最高人民法院关于弘扬社会主义核心价值观典型案例). One model case involved a couple that sold counterfeit goods through WeChat Moments, which was held to  constitute the crime of selling commodities bearing counterfeit registered trademarks 微信朋友圈销售假冒注册商标的商品案)。

The reason for the insertion of the case according to the court, was to promote “honesty in business.” As the court noted:

The case was a typical case of selling via microchannel marketing circle of friends, goods bearing counterfeit trademarks. …Compared with the traditional IPR criminal cases, the perpetrators of such crimes use relatively covert means, but the scope of their promotion and sale of counterfeit goods is broad with an adverse social impact.  …Currently, the “Consumer Protection Law” and the “Rules for Network Transaction Management” do not have specific provisions addressing microchannel shopping, and microchannel marketers do not have to register their business with the State Administration for Industry and Commerce.  The relevant laws and regulations need further improvement in this area. “

本案是一起通过微信朋友圈销售假冒注册商标的商品的典型案例。,利用微信朋友圈等新平台售假者也越来越多。与传统侵犯知识产权犯罪案件相比,这类犯罪作案手段相对隐蔽,但传播面广及推广速度快,销售假冒注册商标的商品涉及面广,社会影响恶劣。目前,消费者权益保护法和《网络交易管理办法》在微信购物方面还没有明文规定,而且微商没有经过工商注册登记,相关法律法规还需要进一步完善。

As the accused had intentionally sold a relatively large amount of counterfeit goods, the defendants were found guilty of the crime of selling commodities bearing counterfeit registered trademarks by the Shaoguan Zhengjiang District People’s Court of Guangdong Province.  Sentences were imposed of  6 – 7 months and a fine of RMB 15,000.

In my opinion, this case appears to be headed in the right direction in terms of addressing the use of social media to commit IP crimes.  The court suggests that the case was important to fill in the gaps in the current legislative regime based on technological changes – the way in which criminals do business online.  This is a typical evolution for IP-related case law in the United States, where courts have a record of using existing statutory provisions to address emerging technologies or ways of doing business.

Why this case was categorized as promoting core socialist values?  Perhaps it promotes socialist core values because it addresses problems in the market of unscrupulous unlicensed individuals who transact business without basic principles of good faith and fair dealing and is thus intended to send a policy signal to other courts and the legislative agencies.

How do these cases compare to other types of cases that the court is promoting?  In my opinion, China is paying more attention to cases to guide judicial decisions and create a more predictable legal environment, with 20,000,000 court cases available on line and new regulations on publishing cases in effect.  China is seeking  to develop a Chinese style system of precedent, and has elicited  much government and academic involvement, including scholarship in journals.  These cases need to be compared to the efforts to become more transparent, promote “model cases”, the system of guiding cases,  judicial interpretations, etc., which are all part of an evolving system intended to insure greater consistency of judicial decision making and address emerging issues.

Addendum of 1/1/2017: Here is a useful blog by Jeremy Daum  from 31 August 2016 on the Beijing IP Court’s experiment in precedent, which lines up nicely with the perspective in my blog.

Justice Tao Kaiyuan and the Role of the Judiciary

MadameTaoMichelleLee

Justice Tao Kaiyuan of the Supreme People’s Court, who had been to the United States in 2015 delivering important speeches on rule of law, has recently published an article on “Giving Full Play to the Leading Role of Judicial Protection of IP Rights“ 充分发挥司法保护知识产权的主导作用”(Dec. 31, 2015).  The article is receiving considerable attention in China, as it was published by Qiu Shi, 求是(“Seeking Truth”), a bimonthly political theory published by the Central Party School and the Central Committee of the Communist Party of China.  The publication of the article appears to be timed with the release of the recent draft of the Patent Law Amendments, comments for which were due the day after publication (January 1).  The proposed patent amendments would strengthen the role of administrative agencies in IP enforcement, to the possible detriment of the judiciary.

The author of the article is no less important than its contents.  Madame Tao knows patents.  She was the former Director General of the Guangdong Patent Office and therefor once had “vertical” reporting responsibility to SIPO (see picture above taken by me of Madame Tao [on the right] with USPTO Director Michelle Lee taken in 2015).  Although the article was authored in her name, many in China were speculating that the article was approved by higher authorities – perhaps Zhou Qiang, the President of the Supreme People’s Court, with Madame Tao serving as an appropriate messenger.

The concerns about this draft on patent law enforcement are not that different from those in the earlier (2012) draft when I blogged in “Why the Proposed Amendments to the Patent Law Really Matter … and Maybe Not Just For Patents” that “the changes strike me as a rather sudden about face in China’s march towards better civil protection of IP.” Madame Tao takes this several steps further.

Madame Tao’s article is divided into three parts: (1) The important meaning of giving full play to the leading role of the judicial protection of IP rights; (2) The key factors that constrain the leading use role of judicial protection of IP; and (3) Key measures in giving full play to the leading role of judicial protection of IP rights.   Here are some of the points she makes:

Madame Tao refers back to the National IP Strategy and related documents, such as the Third Plenum, the NPC’s decision to establish IP courts, and the Action Plan for the National IP Strategy to underscore the well-established, leading role of the courts in enforcing IP.

Her article compares certain key elements of judicial protection versus administrative protection.  In her view, judicial enforcement can curtail abuses of administrative enforcement.  It also has other advantages.  It has clear rules.  It is transparent.  It can help establish guidance for businesses by establishing clear standards for similar disputes (a possible nod to efforts at developing case law/guiding cases).  Moreover, civil enforcement comports with notions of private ownership and the development of markets and creation of a fair competitive environment in China.  Madame Tao especially underscores the role of the courts in supervising administrative agencies.  As I have noted, this is also an important part of the foreign IP docket in China.  Madame Tao states that the judiciary should also actively guide administrative law enforcement in investigation and review of evidence, and determination of infringements.

Madame Tao also calls for greater coordination in administrative and judicial roles in IP protection, noting that administrative enforcement played an important leading role in the beginning of China’s IP enforcement environment.  Administrative enforcement has “in a short time met the need for building effective IP protection.”  However, the “growing maturity” of the judicial system has caused increasing problems in the coordination process.

Madame Tao also calls for specific policy initiatives, many of which are already underway.  She calls for greater deterrent civil damages, including by revising patent, copyright and unfair competition laws based on experience of the trademark law revisions.   She also suggests that a discovery system should be considered.  Civil and criminal divisions in IP should be unified.  She suggests that a specialized national IP court should be researched and promoted, and she calls for the unification of technical appellate cases, perhaps like the CAFC.  She also notes that the division between infringement and validity determinations in the courts in patents and trademarks should be addressed, and calls for improvements in the availability of provisional measures.

She calls for greater improvements in judicial protective measures, including in obtaining evidence and the convenience and effectiveness of remedies.  Among other specific judicial reforms, she also suggests exploring intellectual property case law, improving judicial accountability and developing judicial professionalism.  Finally, Madame Tao also calls for expanding international awareness by IP judges to better protect national interests and to increase China’s IP influence.

Altogether, a tour de force.

Here’s what her speech looks like in a machine-translated wordcloud:taowordcloud

 

 

 

IPR Outcomes in the 26th JCCT

Here are the IP outcomes of the 26th Joint Commission on Commerce and Trade, concluded early in November 2015 in Guangzhou.  The IP-related outcomes appear primarily in three different places in the JCCT outcome document, under “Competition”, “Intellectual Property Rights” and “Cooperative Dialogues and Exchanges.”

I have repeated below the outcome language in full, without the annotation that appears in the US Department of Commerce release on the subject, followed by my own “references” on the outcome to compare the text with recent developments in these areas.

The Chinese government version of the outcomes follows the US outcomes.

COMPETITION

China’s anti-monopoly enforcement agencies are to conduct enforcement according to the Anti-monopoly Law and are to be free from intervention by other agencies.

China clarifies that commercial secrets obtained in the process of Anti-monopoly Law enforcement are protected as required under the Anti-monopoly Law and shall not be disclosed to other agencies or third parties, except with a waiver of confidentiality by the submitting party or under circumstances as defined by law.

Taking into account the pro-competitive effects of intellectual property, China attaches great importance to maintaining coherence in the rules related to IPR in the context of the Anti-monopoly Law. China clarifies that any State Council Anti-monopoly Law Commission guidelines will apply to the three anti-monopoly law enforcement agencies.

The Chinese side clarifies that in the process of formulating guidance related to intellectual property rights in the context of anti-monopoly law, it will solicit comments from relevant parties, including the public, in accordance with law and policy.

References: SAIC’s IP Abuse rules, NDRC’s draft IP Abuse rules. Importantly, this outcome specifically recognizes the pro-competitive nature of promoting IP. As I said in my comments on the NDRC’s IP abuse guideline questionnaire, “Rather than seek to minimize IP rights through euphemisms such as “balance” perhaps a better approach would be how to optimize the patent system to foster long term innovation and competition and insure that the competition system supports and does not retard such development.”

INTELLECTUAL PROPERTY RIGHTS

Standards and Intellectual Property

The United States and China affirm the beneficial role of standards in promoting innovation, efficiency, and public health and safety, and the need to strike an appropriate balance of interests of multiple stakeholders.

The United States and China commit that licensing commitments for patents in voluntary standards are made voluntarily and without government involvement in negotiations over such commitments, except as otherwise provided by legally binding measures.

The United States confirms that Chinese firms participate in the setting of voluntary consensus standards in the United States on a non-discriminatory basis, consistent with the rules and procedures of the relevant standards organizations. China welcomes U.S.-invested firms in China to participate in the development of national recommendatory and social organization standards in China on a non-discriminatory basis.

With a view to enhance mutual understanding and trust, the United States and China agree to hold dialogues over issues under this topic.

Here are some other blogs on this important topic.

Trade Secrets

The United States and China are committed to providing a strong trade secrets protection regime that promotes innovation and encourages fair competition.  China clarifies it is in the process of amending the Anti-Unfair Competition Law; intends to issue model or guiding court cases; and intends to clarify rules on preliminary injunctions, evidence preservation orders and damages. The United States confirms that draft legislation proposed to establish a federal civil cause of action for trade secrets misappropriation has been introduced in relevant committees. Both sides confirm that IP-related investigations, including on trade secrets, are conducted in a prudent and cautious manner.  The United States and China agree to jointly share experiences and practices in the areas of protecting trade secrets from disclosure during investigations and in court proceedings, and identify practices that companies may undertake to protect trade secrets from misappropriation in accordance with respective laws.

References: Note that the reference in the trade secret provision to a degree mirrors that of the Competition outcome, regarding protecting confidential information in administrative proceedings. Proposed revisions to the AUCL were previously discussed here.

Geographical Indications (GIs)

The United States and China will continue our dialogue on GIs. Both sides reaffirmed the importance of the 2014 JCCT commitment on GIs and confirmed that this commitment applies to all GIs, including those protected pursuant to international agreements. China will publish in draft form for public comment, and expects to do so by the end of 2016, procedures that provide the opportunity for a third party to cancel already-granted GIs.

Reference: This commitment builds on the 2014 GI commitment in the JCCT. An important case involving enforcement of a trademark based GI for scotch whisky is discussed here.

Sports Broadcasts

The United States and China agree to protect original recordings of the images, or sound and images, of live events, including sports broadcasts, against acts of unauthorized exploitation, including the unauthorized retransmission of such broadcasts over computer networks, in accordance with their respective laws and regulations.  The United States and China agree to discuss copyright protection for sports broadcasts and further cooperate on this issue in the JCCT IPR Working Group and other appropriate bilateral fora.

References: Copyright protection for sports broadcasting has been discussed elsewhere in this blog, and is of increasing important to China as it prepares to host the Winter Olympics and wants to develop its sports leagues. In addition US courts have granted copyright protection to Chinese sports broadcasts in a recent case. Tencent has also signed an important licensing deal with the NBA to make content available online.

Enhanced Enforcement Against Media Boxes and Unauthorized Content Providers

Noting the challenges posed by new technologies to the protection of copyright, China and the United States will continue discussions and share respective experiences and practices on combating the unauthorized online distribution of audiovisual content made possible by media boxes.  China clarifies it is to enhance enforcement against such media boxes and the providers of unauthorized content in accordance with its laws and regulations.

Reference: A recent US media box case involving Chinese content is discussed here.

Online Enforcement

In order to address the civil, administrative and criminal enforcement challenges caused by the rapid development of e-commerce, as part of the JCCT IPR Working Group, China and the United States will enhance engagement and exchanges between U.S. and Chinese government IPR policy and enforcement officials, IP right holders, business representatives and online sales-platform operators, among other relevant stakeholders.  This engagement will cover current and anticipated challenges in protecting and enforcing IPR online by sharing respective practices, discussing possible improvements in each country’s systems, facilitating information exchange and training between our two countries, and increasing cooperation on cross-border enforcement.  The goal of this effort is to enhance existing legal and cooperative regimes among businesses, rights holders and governments in civil, administrative and criminal online IPR enforcement.  Appropriate criminal matters will be referred, if necessary, to law enforcement agencies through the Joint Liaison Group (JLG) IP Criminal Enforcement Working Group or domestic law enforcement officials.

References: there have been numerous Chinese domestic efforts to deal with on-line infringement, including copyright-related campaigns, and an important role for Chinese Customs.

COOPERATIVE DIALOGUES AND EXCHANGES

Searchable Database for Intellectual Property (IP) Cases

The United States welcomes that the Supreme People’s Court has established a database for searching intellectual property-related court decisions.  In order to increase the understanding of each other’s legal systems, the United States and China agree to dialogue and to share experiences on their respective databases containing IP cases.

References: Whether or not China is developing “case law with Chinese characteristics,” understanding how Chinese courts handle cases can help guide sound business decisions.

Bad Faith Trademark Filings

Given the importance of addressing bad faith trademark filings, both sides agree to continue to prioritize the issue of bad faith trademark filings, and to strengthen communication and exchange on this issue through existing channels.

References: This is a continuation of earlier efforts.

Copyright Legislation

The United States and China are to continue exchanges on the development of their respective copyright laws.  China clarifies that its Copyright Law is in the process of amendment and useful principles and interpretative guidance from the Supreme People Court’s 2012 Judicial Interpretation on Internet Intermediary Liability will be considered in the law, if appropriate and feasible.

The final judicial interpretation is available here. Here is a blog on the 2014 State Council draft of the Copyright Law revision, and a blog on a 2012 NCA draft.

Exchange on Intellectual Property Rights Legislation

Recognizing the success and experience of recent exchanges on IP legislation through the JCCT IPR Working Group, programs under the Cooperation Framework Agreement and other fora, as well as the desire of the United States and China to further understand recent developments in this area, the United States and China agree to exchange views on their legislative developments in IP and innovation including on pending reforms in copyright law, patent law, trade secret law (anti-unfair competition law), science and technology achievement law, etc., with relevant legislative bodies.

References: This is a broad commitment, with much legislative activity planned in China in areas such as trade secrets, copyright, patents and related regulations.

Protection of New Plant Varieties

The United States and China agree to hold exchanges on the protection of new plant varieties through bilateral meetings and other means to be determined.

References: China and Switzerland agreed to extend plant variety protections in the Swiss-China FTA.

Here are the outcomes involving IP fromon the Chinese side, from the MofCOM website(http://www.mofcom.gov.cn/article/i/jyjl/l/201512/20151201200026.shtml).  I have translated the title of the outcome only.

“特别301”报告 SPECIAL 301 REPORT

美方重申其承诺,将在“特别301报告”中客观、公正、善意地评价包括中国在内的外国政府,在知识产权保护和执法方面付出的努力。美方欢迎旨在加强中国知识产权保护的改革和行动,并承诺在2016年“特别301报告”中将强调中国政府在知识产权保护和执法方面采取的积极行动。

 恶名市场 NOTORIOUS MARKETS

美方重申其承诺,如果适当,将在“恶名市场”名单中客观、公正、善意地评估和认可外国实体,包括中国实体,在知识产权保护和执法方面付出的努力和取得的成绩。美方计划在2016年通过将利益相关方的异议期延长一倍,继续增加程序的透明度。美方将继续与中方就此事项进行讨论。

 

知识产权有效和平衡保护 EFFECTIVE AND BALANCED IP PROTECTION

考虑到《与贸易有关的知识产权协定》的原则和目标,美方和中方将继续就诸如有助于保护创新者免于恶意诉讼的相关政策进行交流和沟通,为创新行为提供积极环境。

 

知识产权合作 IP COOPERATION

中美双方确认知识产权保护在中美双边经贸关系中的关键作用。双方承认合作的益处,并认可合作构成了双方知识产权交流的基础,承诺进一步加强重要领域的深入合作,包括:

进一步加强中美商贸联委会知识产权工作组作为牵头协调知识产权问题双边论坛的作用。

继续高度重视中美知识产权合作框架协议的工作,包括2016年司法交流和将在中国举办的一项培训项目;在完成并对现有承诺项目进行审查后,在预算允许的前提下,考虑在框架协议下增加其他项目。

支持中国商务部在2016年第一季度举办的技术许可联合研讨会。

其他项目将根据个案原则进行组织。双方认识到中美双方,特别是美方,与一系列从事知识产权培训和技术交流的机构和私人组织合作,实施了广泛的项目策划工作。

 

加强在打击网络盗版方面的合作  STRENGTHENED COOPERATION IN DEALING WITH ONLINE PIRACY

为应对在美国涉嫌网络盗版刑事侵权案件影响中国权利人的情况,中美执法联合联络小组下设的知识产权刑事执法合作工作组在美国驻华使馆的联系人将负责接收中方行政部门转交的此类信息。

 

通过中美双边合作加强知识产权在企业中的利用和保护 USING BILATERAL COOPERATION TO STRENGTHEN IP UTILIZATION AND PROTECTION IN ENTERPRISES

认识到双边贸易与投资持续增长的情况,中美双方同意加强合作与交流,就各自国家知识产权保护和利用有关的经验数据进行研究,并在此领域采取具体行动或举办项目,以协助中美关于鼓励创新的决策,并帮助中美创新者、创造者和企业家更好地理解如何在各自国家创造、保护和利用知识产权。

 

深化和加强中美知识产权刑事执法合作 DEEPENING CRIMINAL ENFORCEMENT COOPERATION IN IP

在中美执法联合联络小组下设的知识产权刑事执法合作工作组机制项下,中美将继续就跨国知识产权调查开展合作。双方将确定共同合作的重点案件,就此类案件保持定期沟通和信息分享,并探索在共同感兴趣的领域开展技术交流的机会。

 …

中美共同打击网络销售假药 JOINT SINO-US COMBATTING OF ONLINE COUNTERFEIT MEDICINE SALES

中美两国政府都非常重视打击网络销售假药以保障公共的用药安全和健康。两国食品药品监管机构之间已就打击网络销售假药开展合作,并承诺未来继续开展合作。这种合作包括分享信息、分享提高公众对网络销售药品认知的最佳实践以及加强在现有国际组织活动中的沟通与协调。

Updated: December 2 and 3,  2015

 

IPR Model Cases: Part of the Long Journey towards IPR Case Law with “Chinese Characteristics”?

Image

Late last month the SPC published a list of eight model cases (Dianxing Anli,典型案例).  The cases highlight some important new trends in the court, and also suggest directions that the court is headed in with regarding to publishing cases.  Here are the cases and our analysis:

1.  Eli Lilly v. Huang Mengwei (黄孟炜) – preliminary injunction order for theft of trade secrets (Shanghai).  This case adopted provisions in the Civil Procedure Law Revision (effect Jan 1, 2013) making preliminary injunction orders available for all civil remedies.  The case involved the misappropriation of trade secret documents by a departing employee of Eli Lilly.  This summary is especially important as the case may not otherwise be available to the public due to its containing confidential information.  As noted elsewhere in this blog, the US-China Business Council, as well as other organizations and governments have placed pressure on China to improve its trade secret regime, including making provisional remedies available, as they are in other IP-related cases.  The Supreme People’s Court also issued a useful study on this topic. By disseminating this case, the court has assisted the public in understanding the basis of preliminary injunction order in trade secret matters and helped to address foreign complaints.

2.   Foshan Haitian Flavoring & Food Co., Ltd. (佛山市海天调味食品股份有限公司) v. Foshan Gaoming Weiji Flavoring & Food Co., Ltd. (佛山市高明威极调味食品有限公司) – trademark and unfair competition case. This case in Foshan, Guangdong involved misappropriation of the brand of the Haitian company, “Weiji” (威极).  Weiji Company, the infringer, used industrial brine in the production of soy source.  When this scandal was exposed, sales of Haitian Company, a household manufacturer of soy source and the lawful holder of the Weiji trademark, dropped dramatically. Weiji Company’s action was determined to be illegal under the unfair competition law and Weiji was obliged to change its company name.  Although Haitian failed to prove direct losses, the Court held the infringer to be liable for Haitian’s advertisement fee and other expenditures for eliminating negative effect of the scandal to minimize Haitian’s loss.  As in other IP-related cases, an exacerbating factor seems to have been consumer harm.  In addition, the case appears to be addressing problems of unfair competition/company name misappropriation, which has often been a difficult area in China’s IP regime.

3.  BMW v. Guangzhou Shiji Baochi Apparels Ltd.(广州世纪宝驰服饰实业有限公司) – trademark and unfair competition. According to Article 56 of the PRC Trademark Law, when the exact amount of the infringer’s benefits derived from the infringement and that of the loss caused by such infringement are hard to determine, the current ceiling for the compensation to the trademark owner is 500,000 RMB. However, in the BMW case, the Beijing High People’s Court upheld an award of 2,000,000 RMB in TM infringement damages due to the infringer’s apparent bad faith, the length and benefit of infringement, BMW’s renowned reputation and BMW’s efforts to eliminate the negative effect of this infringement. Moreover, the Court also punished the infringer with a 100,000 RMB civil sanction and gave a judicial suggestion to SAIC (State Administration for Industry and Commerce) for a nation-wide investigation of this infringement. This case is significant in part because of a more active role by the court to address willful infringement, which has been incorporated into China’s newly revised Trademark Law.  Moreover, the court is seeking to integrate both civil remedies and administrative/criminal remedies.  China’s courts have the authority, which is rarely used and which I have long advocated for, to refer matters to criminal investigation in appropriate circumstances.  This case may anticipate a more active role for the courts in addressing willful infringement.

4.  Zhuhai Geli Electrical Co., Ltd. (珠海格力电器股份有限公司) v. Guangdong Meidi Refrigeration Equipment Co., Ltd. (广东美的制冷设备有限公司) – presumption of infringement in invention patent litigation.  In this case, both parties are renowned Chinese electrical appliance enterprises. Geli claimed that the technological solutions applied in four types of Meidi air conditioners infringed its invention patent. There was no dispute that one of the four types of air condition infringed Geli’s IP right. The defendant failed to distinguish the remaining products with the infringing one.  The Guangdong High People’s Court shifted the burden of proof to Meidi and held the remaining three types of Meidi products to be infringing.

5.  Ashland Licensing and Intellectual Property LLC  (亚什兰许可和知识产权有限公司) v. Beijing  Ruishibang Fine Chemistry Technology Co., Ltd.(北京瑞仕邦精细化工技术有限公司) and Wei Xingguang – infringement of manufacturing process. While it is hard to prove infringement of a manufacturing process, Ashland, the patent owner, and its Chinese licensee secured 15,000,000 and 7, 000,000 RMB compensation respectively under the Court-hosted mediation.  In this case the patented manufacturing process is a method to produce a certain industrial chemical that has a specific customer group and is impossible to obtain from the open market.  The plaintiff had no access to defendants’ manufacturing process. However, considering that the main technical and management staff of defendant companies had had access to the patented manufacturing process as the licensee company’s former employees, Suzhou Intermediate People’s Court determined that the defendants production of that certain chemical constituted infringement based on a burden of proof reversal.

6.  Beijing Ruibang Yonghe Technology and Trading Ltd. (北京锐邦涌和科贸有限公司, Ruibang) v. Johnson & Johnson Medical (Shanghai) Ltd. and Johnson & Johnson Medical (China) Ltd.  As many observers know, many local IPR tribunals and the SPC IPR Tribunal are also authorized to handle antitrust cases.  This minimum resale price maintenance case is highlighted as the first anti-monopoly case under Chinese AML where plaintiff won and the first case in China that involved a vertical monopoly agreement. The plaintiff, a former distributor of J&J, won a bid at a price lower than the minimum resale price fixed by J&J in the distribution agreement. In response to plaintiff’s breach of contract, J&J terminated plaintiff’s distribution rights, cut further supply and refused to renew the distribution agreement. Plaintiff claimed that such price fixing provision violated the AML in respect of a vertical monopoly agreement. The Shanghai High People’s Court held J&J liable for the distributor’s normal revenue losses, 530,000 RMB.  The Count held that J&J’s minimum resale price provision excluded or at least restricted competition in relevant market, and that J&J’s actions were monopolistic in nature.  For watchers of how American companies fare in litigation in China, this case along with Huawei/Interdigital suggest that foreign companies may be a focus on AML investigations.  However the Eli Lilly and Ashland cases, amongst others, also demonstrate increasing success in IPR-related litigation by the same tribunals that hear IPR cases.

7.  Jiangxi Yibai Electronic Technology Co., Ltd. (江西亿铂电子科技有限公司) , Yu Zhihong, and others  – criminal trade secret case.  A 37,000,000 RMB penalty made this case the largest business information trade secret criminal case in China, and may be a harbinger of harsher punishment in this area. In 2011, one the defendants established a manufacturing company called Yibai along with several sales companies. These companies sold $7,659,235.72 of competing products based on misappropriated information from Saina Technology Co., Ltd. The prices and sales channels of these products were all set on the basis of Saina’s operational information that the four defendants obtained through their previous employment at Saina in violation of their non-disclosure duty. Zhuhai Intermediate People’s Court sent the four individual defendants into jail.  This case was also marked as a model for Guangdong province’s pilot program of intellectual property cases “three tribunals in one”, where civil, administrative and criminal IP jurisdiction are combined.

8.   Zong Liangui and Huang Li’an  and 26 other individual defendants – criminal trademark counterfeiting case.  In November 2007, the defendants founded a factory to manufacture and sell fake cooking oil with registered trademarks “Jin Long Yu”(金龙鱼) and “Lu Hua”(鲁花). Meanwhile, the factory was also involved in trafficking of counterfeit “Jin Long Yu” and “Luhua” labels. The remaining defendants included workers of this factory, who participated in such production knowingly and obtained illegal earnings, and retailers of the fake cooking oil.  [d2] This case in the Henan High People’s Court resulted in a total penalty of 27,040,000 RMB. The case also highlights the importance of piercing the corporate veil in criminal IPR matters, as well as the role of the combined civil/criminal/administrative IP tribunals in the courts.

While many of these cases are of great interest in their own rights, there also remains the broader question of what is the significance of the courts publishing cases?  For some time there has been interest among academics and business people in the United States in a greater adherence in China to case law.  There appears to be some interest in the court as well in having their cases to gain greater legal significance, beyond that of adjudicating the case in dispute.  Back in 1981, the National People’s Congress formally delegated the authority to the SPC and the Supreme People’s Procuratorate to promulgate Judicial Interpretations (JI) – to interpret laws in the course of their work.  As in traditional civil systems, Chinese courts are not supposed to interpret law; JI’s provide a basis for the courts to interpret laws in the form of a statutory type document, typically based on actual judicial experience.  However the tribunals in the SPC have not confined themselves only to JI’s to guide lower courts and help insure greater predictability in decision-making.

United States interest in Chinese case law has manifested itself in the “China Guiding Cases Project” underway at Stanford University.  The SPC’s guiding cases are intended to guide the courts in judicial decision-making in all adjudicated areas.  The advisory board of Stanford’s project includes several IP notables – including Chief Judge Kong of the SPC IPR Tribunal and Chief Judge Rader of the Federal Circuit.  The American Intellectual Property Law Association has a similar interest in model cases, with its China Precedents Project, in which “significant Chinese IP cases will be selected, reviewed, translated, commented on, and posted in a database available to AIPLA members.”  However, the application of cases in China’s judicial system remains controversial in light of the limitations places on the court in interpreting the law.

It is clear that the use of precedents in China at this time is quite different from the United States.  Among the most obvious reasons are that these cases are a small group selected by the courts themselves.   In the usual practice of courts, they are not to be cited.  Moreover, they are inferior to Judicial Interpretations.  The context of the release of these cases may also be important.  For example, these cases were released around October 22, by IPR Deputy Chief Judge Jin Kesheng (金克胜) at a press conference.   These eight cases follow relatively closely on the heels of  model criminal IP cases announced by the Supreme People’s Procuratorate in September.  These cases may also be read to suggest that the SPC Civil IPR Tribunal is not to be outdone by the Procuratorate, particularly as they have shown the importance of higher civil damages and punishments, successful experiments in combining civil, administrative and criminal cases in lower level courts, improvements in civil procedures, an enhanced focus for trade secrets, the use of burden of proof reversals for patent protection[d3] , and other issues that are of timely, and even international importance.

There are many other types of instructional IPR cases that national and local courts issue have published, typically around the time of IP week (around April 26) each year – leading one to wonder what the relative value of these different kinds of cases are.  For example, SPC or its IPR Tribunal now publishes “innovative cases”, “big cases” and “typical cases.” Some local courts also publish similar cases.  And of course, there are the SPC’s guiding cases. According to relevant guidance “Senior Judges Chat about the Chinese Characteristics of China’s Case Guidance System” (大法官畅谈中国特色案例指导制度) on the SPC’s website, the legal power of these typical cases is different from that of guiding cases. It is at judges’ discretion to decide whether or not to follow these cases or to take them as reference in trial. These typical cases have no express binding power.  Nonetheless, these Senior Judges point out that China is evolving its own approach towards the role of cases in guiding its judiciary.

If these cases are intended to be instructional in nature, I also wonder if the case summaries indeed correspond to the actual facts of the case, or are the facts selected to make the point clearer in light of China’s current needs.  If so, the use of exemplary cases would follow a long tradition in Chinese society including model workers, model party members, and perhaps dating back to Confucius, who looked to “rectify names” () and believed that the proper use of names would improve society: “When punishments are not properly awarded, the people do not know how to move hand or foot. Therefore a superior man considers it necessary that the names he uses may be spoken appropriately and also that what he speaks may be carried out appropriately.” (Analects, Legge, trans.)

Apart from this positivistic value, the cases may also present an opportunity for particular agencies to spotlight on their own accomplishments, such as the role of combined civil, criminal and administrative tribunals in these cases in these “typical” cases.  In light of their positivistic value, the case summary and its instructional nature may be of greater precedential impact than the case itself.  If however, their primary function is not to bind other courts.  Indeed, if they are not binding, it may be some time before Chinese lawyers are arguing before a judge about whether a particular case is “on point”, or can be “distinguished” like a common law lawyer.

Photo: Moot court before the Court of Appeals for the Federal Circuit at US-China Joint Adjudication Conference, May 2012 at Renmin University, Beijing.  The attorney representing the USPTO at this joint moot court was former Solicitor, now Judge at the CAFC, Hon. Ray Chen.

(rev. Nov. 13, 2013, Jan. 18, 2016)