Foreign Investment Law Implementing Regs Open For Public Comment: Administrative and Punitive Enforcement Ascends Again

The Ministry of Justice had published a draft of the Foreign Investment Law Implementing Regulations for public comment.  Chinalawtranslate has prepared an English translation of the proposed regulations and of the law itself.   The due date for submitting comments is December 1.  The US-China Business Council has graciously already made its comments available in English and Chinese to the public.  The Foreign Investment Law was one of several laws enacted earlier in 2019 that appear to be responsive to US concerns and pressure.

The primary provisions addressing IP are Articles 24 and 25, which state:

Article 24: The state is to establish a punitive compensation system for violations of intellectual property rights, promote the establishment of rapid collaborative protection mechanisms for intellectual property rights, complete diversified dispute resolution mechanisms for intellectual property rights disputes and mechanisms for assistance in protecting intellectual property rights, to increase the force of protections for foreign investors’ and foreign-invested enterprises’ intellectual property rights.

The intellectual property rights of foreign investors and foreign-invested enterprises shall be equally protected in the drafting of standards in accordance with law, and where foreign investors’ or foreign-invested enterprises’ patents are involved, it shall be handled in accordance with the relevant management provisions of state standards involving patents.

Article 25: Administrative organs and their staffs must not use the performance of administrative management duties such as handling registration, approvals or filings for investment projects, and administrative permits, as well as implementing oversight inspections, administrative punishments, or administrative compulsion, to compel or covertly compel foreign investors or foreign-invested enterprises to transfer technology.

(chinalawtranslate translation).

The language in the first paragraph of Article 24 appears to track trade war pressures, including demands for punitive compensation.   As I have argued repeatedly, a better focus might be on deterrent civil damages, and/or the basic structure set forth in the WTO of having adequate and effective civil remedies with criminal remedies as an adjunct for willful, commercial-scale harm.  In this scheme, there is little place for administrative remedies, as was noted in DS362 (the IP enforcement case at the WTO).  The WTO panel, in that case, noted that “neither party [the US nor China] to the dispute argues that administrative enforcement may fulfil the obligations on criminal procedures and remedies set out in Article 61 of the TRIPS Agreement. Therefore, the Panel does not consider this issue.”  There have also been numerous academic studies on the challenges of creating a sui generis administrative IP enforcement system in China.  The language in Article 24 is also highly repetitive of the November 21, 2018 special Memorandum of Understanding/campaign mechanisms involving 38 government agencies to address six types of faithless IP conduct, about which I previously blogged.

What is notably absent from these commitments is an obligation to increase transparency, which is especially concerning due to an apparent slowdown in the publication of foreign IP-related court cases since the trade war began.   I will be blogging more about this soon, but here is what the decline in published US cases looks like based on IPHouse data, with a flatlining since January 1, 2018:

iphouse

See also my slides from the recent Berkeley transnational IP litigation conference available here.

The language regarding standards in the second paragraph repeats long-standing concerns about foreigners being excluded from standards-setting processes, as was addressed in the 2015 JCCT.  It does not set forth commitments about fairness or equal treatment which have been raised before in industrial policy drafting (as was addressed in the 26th JCCT on semiconductor policy), antitrust investigations, patent prosecution or litigation (for which there is a wealth of empirical data).

Article 25 also appears trade responsive.  It would be useful at this time to determine the current magnitude of forced technology transfer in foreign direct investment, and to determine how it subsists and whether it has measurably decreased since the trade war began, including whether legitimate licensing transactions have stepped in to provide increased revenue for technology licensors as a result of these and other reforms, including revision of the Administration of Technology Import/Export Regulations.

 

 

 

Beijing IP Court Rules on Copyright Protection for Sports Broadcasts

jordan

According to a recent posting on the Weixin account of IPHouse (结案信息 ┃ 北京知识产权法院审结涉及体育赛事节目的两起著作权侵权纠纷案, March 30, 2018), the Beijing IP Court has now decided the second instance appeals of two cases involving online piracy of sports broadcasts, an issue that is important to the development of China’s professional sports, as well as Olympic broadcasters and foreign leagues with large Chinese audiences, such as the National Basketball Association.

Most Chinese academics have been in agreement that live broadcasts (including webcasts) of professional sports broadcasts need to have some form of IP-related protection, whether under the Anti-unfair Competition Law, as a subject of the Copyright Law, or as a form of “neighboring rights” under China’s Europe-inspired copyright system.   During the 2008 Beijing Olympics, the broadcasts of the Olympic games also enjoyed a form of sui generis protection against piracy – an issue that I had been involved with along with rightsholders at that time.  The controversies surrounding the consequences of each form of possible protection were detailed in an article in 2010 by Prof. Seagull Song,  as well as a more article by Wei Liu and  Jiarui Liu (“Copyright Protection of Sports Programs in China,” 63 Journal of the Copyright Society of the USA (2017)).  It has also been the subject of meetings and conferences hosted by the United States and others, experts dialogues and numerous blogs posted here, including a blog on the lower court case posted on here.

Copyright protection would afford address interactive streaming over the internet, while neighboring rights protection affords rights to broadcasters.  Many believed that unfair competition was too vague and could create difficulties in licensing internationally.  These issues were raised in the context of the long-overdue, proposed amendments to China’s Copyright Law.  For these reasons, the 2013 US-China Experts Dialogue, in particular, made the following recommendation:

“4.3 Live Sports Programming and Non-interactive Streaming

The experts unanimously agreed that when the production of live sports programming involves creativity and originality, it shall be protected under current China Copyright Law.  The experts supported the provisions of the latest available amendment of the Copyright Law which provides a bifurcated approach – the adoption of “broadcast rights” to give protection to non-interactive streaming media and the right of communication through information networks to protect interactive streaming media. This approach should provide greater flexibility and depth to the protection of the copyright.”

Delays in resolving these two cases were understandable in light of the uncertainty around the proposed amendments to the copyright law, the significance of these issues to numerous rightsholders and sporting events, the increasing importance of licensing revenue in the China market using international copyright standards,  the impact on Chinese rightsholders that may be pursuing cases overseas where copyright protection is more secure, and the role of copyright protection in providing a foundation for a diversity of revenue streams in order to provide greater stability to the beneficiaries of the system (see the “Jordan” store that has recently opened up in Beijing, above).

In the Sina case, which was the subject of my previous blog, the lower court had determined after some exhaustive analysis that the live broadcast of a sporting event constituted a cinematographic “work” under China’s copyright law.  The Beijing High Court reversed noting that cinematographic works have to be fixed/stable and creative.  In the case in suit, the production had not been stable and fixed in a material form and therefore did not constitute a cinematographic work.  Moreover, as Sina did not pursue the anti-unfair competition claim on appeal, the Court had no basis to adjudicate that claim to provide an alternative avenue of relief for it.

In the companion case involving CCTV and its recorded broadcasts of the Brazilian World Cup (2014), CCTV had advocated that the broadcast constituted either a cinematographic work or an audiovisual recording (entitled to neighboring rights protection).  The lower court had determined that it was entitled to be considered an AV recording and had awarded 670,000 RMB in damages.  The Beijing IP Court confirmed that it was also entitled to protection as an AV recording which is protected over information networks in part because it was stable and fixed on a physical medium and, as with the prior case, it was not sufficiently creative to be a cinematographic work.  The court however increased the damage award to 4,000,000 RMB.

Based on this summary, the cases seem to leave open the question of whether AV recording protection afforded as a “neighboring right” to a broadcaster, also permits the broadcast to claim infringement for a live/interactive retransmission of the broadcast over the internet, which was not a fact at issue in this case.  Broadcasting organizations do enjoy neighboring rights protection under Article 44 of the Copyright Law.   However, this neighboring rights protection most directly addresses wired and wireless retransmission of the signal, rather than interactive communication over the Internet (See article by Seagull Song, and quote above).  Moreover, this was exactly the problem that was faced by the Beijing Copyright Administration in the 2008 Olympics when it enacted short-term, sui generis rules to address this problem.  I hope that the full case will explain this further.

Article 41 of the PRC Copyright Law grants the owner of video recordings the right to distribute the recordings over an information network.  The court could have resolved the issue of the stability/fixation of the broadcasts in both cases by acknowledging any momentary delay in broadcasting and consequent fixation in real time broadcasting as a “recording” (see video of editing at an NFL game, below).  Moreover, the level of creativity being required of a cinematographic work seems unduly high, particularly when compared to comparably lower levels of creativity required of photographic works, as well as the professional editing, narration and script line that goes into any professional broadcast, along with the copyright attributable to various elements of the broadcast, such as the narration, mid-game performances, etc.  Thus, these cases do not fully address protection for the less controversial creative aspects of professional sports broadcasts.  Due to the temporal value of a live sports broadcast, it is also important that rights are clearly defined in advance, a task for which local case law developments are ill-suited under China’s system, and that must apparently wait until legislative reform.  The Beijing IP Court did use the tool of enhancing damages to help address the need for greater deterrence, however it appears on the substance of copyrightability, its hands were tied by current legislation.

I welcome any further analyses, and postings of the Chinese and/or English texts of the case that may help further clarify these decisions and their impact.

 

Upcoming PTO Program on Sports Broadcasting

USPTO and China’s National Copyright Administration are co-sponsoring a program on IP (copyright) protection for sports broadcasts, an issue that has been under discussion at least since the Beijing Olympics (2008).  Here is the  announcement and a draft agenda.

The program will be held June 23, 2017 in Beijing.  Contact jia.liu@trade.gov for further information and registration.