Spring Time for IPR Case Law in China?

Guidingcase.jpgRecently, there have been two important developments involving IP-related guiding cases and precedent that shed light on these different approaches of the Supreme People’s Court, which is in charge of guiding cases, and the Beijing IP Court, which is looking at the role of precedent in China’s court system.  But first some background:

One of the most important continuing efforts on guiding cases is the Stanford Guiding Cases Project (SGCP), which is under the able, enthusiastic and collaborative leadership of Dr. Mei Gechlik.  The SGCP recently hosted a lively seminar at American University to discuss the latest developments, with a keynote by Judge Sidney Stein of the Southern District of New York (picture above).  In addition to the Stanford project, Susan Finder has written about guiding cases in her excellent blog and other postings, Jeremy Daum wrote an excellent recent article on the actual use of guiding cases, and of course there is this blog and others, in addition to  academic articles and recent  SGCP research.

Another significant development in exploring a system of case precedent is the research base established with the approval of the Supreme People’s Court at the Beijing IP Court.  The ecosystem evolving around that research base appears to me to be more practice oriented than theoretical.  As an example of this practice-oriented approach, the IP court is looking at the role of amicus briefs to ensure the interests of non-parties are heard, or en banc rehearings to reverse prior precedent.  A small, but important step in soliciting third party opinions has already been undertaken by the Beijing IP Court in a case involving trademark agents.

Among the two contrasting recent developments  Regarding the guiding cases project, on March 9, the Supreme People’s Court released 10 IP-specific guiding cases; nine of these are civil and one is criminal. The cases span all relevant IP laws, including copyright, trademarks,patents, plant varieties and antitrust.  Here is a link to a Chinese summary of the cases, and a  machine translation of these summaries (source: IPRdaily.cn, google translate).  I assume that the SGCP will do a professional translation of these in due course.  According to the SPC press conference, IPR-related guiding cases now constitute 23% of the total number of guiding cases.

Nonetheless, recent citation data  suggest that there has been little uptake of guiding cases in actual case decisions, as Jeremy Daum’s article points out in his posting:

“Guiding Cases are almost never referenced: Over a five-year period, Stanford found a total of 181 subsequent cases, and PKU found 241. To provide a frame of reference, Chinese courts complete trial of well upwards of 10,000,000 cases per year…

50% of the guiding cases were never referred to at all

Almost half of the references found were to a single case; GC #24. …That case concerns traffic  accidents,…”

If one compared the nationwide references to guiding cases using, as an example, the 561 opinions referencing a guiding case out of 8,723,182 cases on the China Judgments Online website for 2016 (using a simple keyword search to “guiding case”), the citation rate would be about  0.0006%.

These developments on IP related case law at the SPC might be compared to the data in the January 10, 2017 report of Beijing IP Court.  The Beijing IP court cited 279 case precedents in 168 cases since the time the precedent base was established in 2016 until October 2016.  Cases were cited 121 times by parties, and judges undertook their own effort to cite cases in 47 instances.  In total, 117 cases relied on precedent in their decisions.  Of the 168 cases, there were 51 instances where cases were not relied upon due to a difference in facts.  There was no instance where a reversal was obtained of an earlier precedent.  Of the cases cited, 31 were from the SPC, 132 from High Courts (including 117 from Beijing), and others were from local courts.  If this data was further compared to the 8,111 cases concluded by the Beijing IP Court in calendar year 2016, the citation rate was a minimum of 2.1% based on the data provided through October, which is considerably higher than the guiding cases effort.

My impressions: the data from the Beijing IP Court suggests that the bar is using cases in its briefs, and the court is looking at these cases and exploring how to handle them as part of an overall system including amicus briefs, en banc review and other mechanisms.  The SPC’s guiding cases project is a more intensely curated project that also addresses a much larger national challenge in introducing a new way of developing law to civil law educated judges and the bar.  The comparisons between the two experiments are inexact as the Beijing IP court sits in one of China’s wealthiest cities, with a well-educated bench and bar, a sophisticated IP environment and considerable foreign (including American) interaction.  It is not surprising that nationwide uptake of a precedent system using a limited number of  guiding cases for a vast judicial system is more theoretical and slower than the one taking place at the Beijing IP Court using the 100,000 plus IPR cases that are adjudicated nationwide each year.

springtimeindc

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.

China’s Explosion in Administrative IP Appeals and Its Impact on the New Beijing Specialized IP Court

 As I have previously blogged here, China’s specialized IP courts are in fact a kind of misnomer: their jurisdictional bases are directed more towards technology-related IP (patents, technical secrets, plant varieties, semiconductor layout designs, software copyright).  “Softer” IP (trademarks, copyright) is not their focus.  In addition, they will provide a more professional appeals court from China’s patent and trademark office.

Surprisingly, one of the most active areas of this court will be trademark administrative appeals, and not in the technology-related matters that is their raison d’etre.

On October 30, 2014, the Beijing Higher People’s Court published a report on patent and trademark administrative appeals for the first nine months of 2014, which underscores the kind of docket that this new court will face.  Trademark administrative cases increased drastically, from 2139 for all of 2013, to 7749 for the first nine months of 2014.  If these 7749 cases were annualized, the total would be 10332 — a five-fold increase for 2014.  Moreover, in 2013, about 50% of this docket involved foreigners.  This court will be of key interest for foreigners.

Patent administrative cases by comparison have been relatively stable and fewer.  The data for 2013 also shows that about 35% of the cases involved foreigners.  Chen Jinchuan (陈锦川) of Beijing Higher People’s Court also noted in a conference, that most foreign patentees are from the United States, Japan, and Germany, and that most of these cases involve invention patents.

The two charts below are drawn from a 2014 article and a 2013 article .  Data in the charts for 2014 is not annualized and may therefore understate the growth in the docket.

Chart one: Trademark Cases From 2013-2014

Screen Shot 2014-12-30 at 10.43.12 AM

Chart two: Patent Cases From 2013-2014

test 2

According to the Beijing Intellectual Property Office, cases of review of refused trademark administrative cases, involve two parties (the Trademark Review and Adjudication Board of SAIC and the applicant), are relatively stable and thus easy for the court to handle.  But other administrative cases involve three parties (SAIC, and the two parties contesting the right) and are more difficult for the court to handle.   SAIC also reported that there was a big increase in TRAB activity in early 2014 in anticipation of trademark law reforms that went into effect this year.   In fact, the cases filed in the courts in the first quarter in 2014 (2160) exceeded all cases for 2013.

Is it worth foreigners’ filing cases to challenge the TRAB in the courts?  The TRAB reported that its first instance success rate in the court was 82.8%.  In other words, there is about a one-in-five chance of winning on appeal in the courts.

The initial data shows that this new specialized IP court will continue to be highly important to foreigners.  The court will be quite busy with trademark administrative matters, in addition to the smaller quantity of patent cases.  Both of these cases will be very important to the foreign business community
.

What the Supreme People’s Court’s Data For 2013 Shows

During this past week, when world IP day is celebrated (April 26), the Supreme People’s Court once again released its white paper on Intellectual Property Protection by the Courts, available on line at the website of former Chief Judge Jiang Zhipei: http://www.chinaiprlaw.cn/file/2014042732499.html (English) and http://www.chinaiprlaw.cn/file/2014042732497.html (Chinese).

The data shows some interesting developments.

Growth Has Slowed Down And Foreigners Continue to Play a Relatively Small Role.  The increase in the number of first instance civil cases received by all the local people’s courts have fell from the previous year’s growth rate of 45.99% to 1.33%, to about 90,000 cases.   Newly received first instance administrative and criminal cases have also seen a changed trend, from prior year increases of 20.35% and 129.61%, to a decrease of 1.43% and 28%.  Despite these trends, the number of first instance civil cases of intellectual property disputes involving foreign parties has grown, with  a year-on-year increase of 18.75%. This still amounted to only a slight increase in the percentage of foreign related IP cases in the Chinese courts dockets, or 1,697 out of 88,286, a growth to 1.9% of the civil docket from last year’s 1.6%.

Trademark Cases, Licensing Cases and AML Cases Showed Growth. There were 9,195 patent cases, 5.01% lower than 2012; 23,272 trademark cases, 17.45% higher; 51,351 copyright cases, 4.64% lower; 949 cases involving technology agreements, 27.21% higher; 1,302 cases involving unfair competition (of which, 72 were first instance civil cases involving monopoly disputes), 15.94% higher.  No data was released on civil trade secret cases.  The decline in patent disputes and increase in technology transfer cases is somewhat surprising, as one would expect growth in both areas in light of the rapid growth in China’s patent office and in China’s desires to become more innovative.

Provisional measures still are rarely granted.  The courts accepted 11 cases involving application for preliminary injunction relating to intellectual property disputes; 77.78% were granted approvals.  One hundred and seventy three applications for pre-trial preservation of evidence were accepted, and 97.63% were granted approval, and 47 applications for pre-trial preservation of property were accepted, and 96.97% approved.

Of course, one might ask if approval rates for provisional measures are so high, why then are applications for preliminary injunctions only about .01% of the total of disposed cases? The answer seems to be that cases are being rejected in the Case Filing Division of the courts, as I have previously discussed (https://chinaipr.com/2012/03/24/case-filing-in-chinas-courts-and-their-impact-on-ip-cases/).   Still there have been some positive signs: the Civil Procedure Law amendments provide for a more expanded role for the courts, the courts granted provisional measures in trade secret cases, and Beijing’s newly established in Beijing Third Intermediate Court, which has jurisdiction over the Beijing headquarters of many multinationals and a large foreign docket, may also play an active role.

Foreigners Continue to Play an Active Role in Administrative Litigation.  In 2013, the local courts accepted 2,886 intellectual property-related administrative cases of first instance, which was basically no change from last year. Of those accepted, the breakdown by intellectual property branch and percentage change compared to last year is as follows: 697 patent cases, 8.29% lower; 2161 trademark cases, 0.51% higher;  3 copyright cases, no change from last year; 25 cases of other categories, 66.67% higher.   Among the disposed first instance cases, those involving foreign parties or Hong Kong, Macao or Taiwan parties were 45.23% of the concluded intellectual property-related first instance administrative cases (1,312).

Criminal Cases Continue to Decline, Trade Secret Cases Are Relatively Few.  In 2013, new filings for intellectual property-related criminal cases of first instance handled by local courts, were reduced by 28.79% to 9,331 cases.   Trademark and trademark-related cases dominated amongst the disposed cases (4,957).  Amongst the non-trademark cases, 1,499 cases involved copyright infringement, and 50 cases involved infringement of trade secrets, or about 1% of disposed cases.

Transparency In Published Decisions Is On the Increase.  As at end 2013, 61,368 legally effective written judgments for intellectual property disputes issued by the people’s courts of all levels have been published.  By comparison the CIELA.CN database has analyzed about 25,877 cases as of today.

The SPC is Also Actively Participating in Trade Talks.  The SPC has sent representatives to participate in intellectual property work groups meetings between China and the United States, Europe, Russia and Switzerland, as well as in international meetings on negotiations of China-Switzerland and China-Korea free trade agreements.

China IP Time and The New York Minute

China’s rapidly growing economy and equally rapidly evolving IP regime shows how different concepts of “time” can be from the United States. Continue reading

Understanding China’s New Environment for Intellectual Property

On April 11th, Fordham Law School held its first China focused IP Conference, “Understanding China’s New Environment for Intellectual Property”.  The program covered a range of issues, from patenting trends, to challenges in design protection, and intellectual property protection challenges for cloud computing in China, with mixed panels of academics, practitioners, judges and government officials from both countries. Continue reading