Is It In There – CNIPA’s “Phase 1” IP Action Plan?

CNIPA released on April 20, 2020, its  2020-2021 Implementation of the “Opinions on Strengthening the Protection of Intellectual Property” Promotion Plan” (2020—2021年贯彻落实《关于强化知识产权保护的意见》推进计划) (the “Promotion Plan”).  Attached are a copy of the Promotion Plan from the CNIPA website and a machine translation, as well as a bilingual translation provided by the USPTO. All translations are provided for readers’ convenience only, are unofficial and do not carry any representations as to accuracy.  Please review them carefully before commiting to any course of action based on the translation, and please bring any errors to our attention.  We greatly appreciate USPTO,  China Law Translate, and the numerous trade associations and law firms that have made translations publicly available over the years.

The Promotion Plan specifically references and appears to be a further implementation of the CPC/State Council  Opinion on Strengthening the Protection of Intellectual Property, released in November 2019 (关于强化知识产权保护的意见) (CPC/State Council Opinion), which I blogged about here. In November I described this CPC/State Council Opinion as going “part way” in addressing US concerns about IP theft that were being raised by the Trump Administration. This Promotion Plan issued by CNIPA is more comprehensive and more directly reflects the Phase 1 Trade Agreement between the US and China that the CPC/State Council Opinion, including setting specific timetables and interagency responsibilities. However, it is being promulgated at a considerably lower level of governmental authority than the CPC/SC Opinion. CNIPA is a division within a ministry-level agency (SAMR) and is arguably weaker and less independent today than when SIPO was a separate agency. In this respect, the Promotion Plan is also weaker than previous action plans promulgated under MofCOM’s leadership. MofCOM and its predecessor agencies were ministries. In a sense, it harkens back to action plans from the 1990s.  The IPR Leading Group was chaired in the 1990s often by a Vice Minister, including Wu Yi, who later became Vice Premier. One may wonder: is this “déjà vu all over again”?.

Some caution also needs to be maintained in approaching this document. First and foremost, are all the Phase 1 commitments, in the words of a once famous  commercial for spaghetti sauce – “in there”? Please write to me with your observatinons.  A second issue involves CNIPA’s authority. Although this document sets out plans for the courts, procuracy, and legislative branches, Chinese state council government agencies do not have the authority to bind these other branches of government.  Nonetheless, these agencies often coordinate their activities together, including through national and local leading groups and coordinating bodies. The puzzle deepens further, however, as the Promotion Plan itself does not indicate the authority by which it has been enacted. Rumor had been that the Promotion Plan was delayed because NPC approval was needed.

To an experienced reader, this Promotion Plan also has the “look” and “feel” of the National IP Strategy Implementation Plan (NIPS Implementation Plan) with its extensive, specific commitments. I  blogged about the NIPS Implementation Plan here.  The NIPS Implementation Plan has a statutory basis in the China Science and Technology Promotion Law (2007). Moreover, the NIPS Implementation Plan similarly has a focus on China becoming a “strong” IP country.

One difference between a NIPS Implementation Plan and an implementation plan from MofCOM in the past is that a NIPS Implementation Plan would have likely needed more local coordinating entities to be implemented nationwide. MofCOM had such authority through its coordination of the former State Council leading groups on IP.  While serving in the Embassy (2004-2008), I visited many of the local IP coordination offices to discuss local IP coordination and enforcement issues. This plan, if it is to be rolled out locally through new mechanisms, will need the support of the CPC and State Council, or local CNIPA offices, or through other local structures.

Several friends have been asking me this morning if this is the Chinese IPR “Action Plan” as required by the Phase 1 Agreement.  The Phase 1 Agreement provided that “Within 30 working days after the date of entry into force of this Agreement, China will promulgate an Action Plan to strengthen intellectual property protection aimed at promoting its high-quality growth. This Action Plan shall include, but not be limited to, measures that China will take to implement its obligations under this Chapter and the date by which each measure will go into effect.”

On the first review,  this Promotion Plan appears to directly reflect the commitments made by China in the Phase 1 Agreement. What the US has called “high-quality growth” might be its misapprehension of China’s recent mantra of building a “strong IP economy.” There are many action items in the Promotion Plan that are focused on strengthening China’s IP resources. Considering the current pandemic, the timing for the release of the Promotion Plan is also about right. Moreover, it makes sense for China to release this document as part of the flurry of announcements surrounding April 26 (World IP Day). CNIPA releasing this document also does not contradict any explicit commitment in the Phase 1 Agreement. The negotiators of the Phase 1 Agreement did not apparently agree to nominate which Chinese agency would issue the Action Plan.

Based on a quick read, this Promotion Plan also appears to share the same weaknesses of the Phase 1 Agreement, with its selective focus, under-emphasis on the courts, lack of clarity around “patent linkage” (including “artificial infringement” determinations by the courts), continuing emphasis on ministry action plans and administrative enforcement, lack of historical context or data to ensure that the Promotion Plan actually delivers results, “old wine in a new bottle” commitments in Customs, criminal thresholdsd and other areas, and lack of any commitment to increasing administrative and judicial transparency.  The lack of strong commitments to increasing judicial and administrative transparency remains the most troubling of all and makes the agreement difficult for governments and rightsholders to adequately apprehend, including making sure that concrete improvements are not only “in there” but being fully implemented.  If the Phase 1 commitments implemented in the 133 action items of the Promotion Plan are the “Action Plan” it is a further indication that any forthcoming changes in China’s IP regime that arose from the trade war are likely to be significant, but not necessarily the kind of  “structural change” that would dramatically mandate more market reform through less government intervention in China’s IP regime.

A Statistical Snapshot of IP Prosecution, Admin. Enforcement and Monetization for 2018

As reported by zhichanli, CNIPA (the new agency formed from SIPO, SAIC and AQSIQ’s – IP authorities within the State Administration for Market Regulation) held a news conference on January 10 to report on statistical developments for 2018.  Here are some of the highlights:

Explosive Patent Growth Continues: 1,542,5000 invention patent applications were received by CNIPA, an increase from 2017 when it was 1,381,594.  432,000 patents were granted.  Of these 346,000 were domestic patent applications (2017: 326,970).  This leaves 86,000 foreign applications for 2018 (2017: 93,174).  There was therefore an increase of  5.8% to 19,030 in Chinese domestic patent grants in 2018, while foreign grants appear to have dropped by 7.7% to 7,174.  Any drop in a growing economy and IP system can be indicative of a problem of some type.

In total 93.3% of the domestic invention patents were service inventions, which is one indicator of possibly increasing quality.    Huawei remained the lead domestic filer with 3,369 invention patent applications.

CNIPA had a busy year examining 808,000 invention patents, 1,874,000 utility model patents (an increase from 1,687,593), and 667,000 design patents (an increase from 420,144).  The PRB heard 38,000 cases, resolved 28,000 and invalidated 5,000 patents.

Comparative data on 2017 is drawn from this report.

Trademarks Too, on Overdrive: CNIPA received 7,337,1000 trademark applications (2017: 5,748,00) and registered 5,000,7000.  Of these, 4,797,000 were domestic applicants.  In aggregate, there were 18,049,000 trademarks registered in China (2017: 14,920,000).  The good news is that the rapid growth in TM applications is slowing.  In 2017, there had been a year-on-year increase of 55.7% in trademark applications. In 2018, the increase was “only” 31.8%.

Patent Administrative Enforcement Continues to Be the Focus:  CNIPA reported 77,000 administrative patent cases, with an increase of 15.9% over the previous year.  35,000 cases involved patents disputes, of which 34,000 involved infringement (an increase of 22.8%).  43,000 cases involved counterfeit patents, with an increase of 10.9%.  There were also 31,000 cases involving illegal trademark activities.  This was an increase from approximately 30,000 the year before, which was itself a decrease of 5.1% from the prior year.  The apparent administrative enforcement realignment to patents thus continues, despite recent moves to improve the civil patent system, including the establishment of a specialized IP court at the SPC level, and the relatively high historic utilization of the administrative trademark system by foreigners.

Another odd development: 2018 marked the launch of the first administrative case involving infringement of a registered semiconductor layout design.

TM’s Remain Number 1 in Geographical Indications: There were 67 sui generis GI registrations approved, presumably under the former AQSIQ system, and 961 GI trademarks registered.   The trademark-based GI system thus appears to be occupying a dominant role.

Cross-border Trade In IP – is it Growing:  CNIPA also reported that “usage fees” for IP rights in cross border trade increased to 35 billion USD.  Comparative data to prior years and breakout data with individual countries would be especially useful, in order to do year-on-year comparisons and to also compare with US data on licensing revenue.  As reported in an earlier blog, according to official Chinese statistics for 2013, technology import contracts into China were reported at 41 billion dollars, with patent licensing contracts constituting 15.4% of that total.  I don’t have comprehensive data to make even preliminary comparisons at this time – and such data would be highly useful.

Summary: Altogether, the report shows a rapidly growing huge IP system, with active government involvement, encouragement and planning.  The report also suggests that there may be a diminishing foreign role, relative and/or absolute, in certain areas.  Finally, this report is the first hint of how the combined CNIPA may report on its joint activities in patents, trademarks, semiconductor layout designs, GI’s and administrative enforcement.  Additional data is usually released around IP Week of each year (April 26).