China’s Plan for Copyright Creativity

copyright

China’s National Copyright Administration released it plans for the 13th Five Year Plan regarding copyright (the “Plan”), attached here (including machine translation).  The plan comes on the back of the State Council’s 13th Five Year Plan for the Protection and Enforcement of Intellectual Property (January 16, 2017), which has further elevated IP in China’s state planning hierarchy.

The Plan reflects the State Council’s decision on China becoming a “Strong IP Country” and includes much of what one might expect from a state planning document on copyright.  For example, it notes that China will complete its revision of the much delated copyright law reforms, as well as related implementing regulations and ministerial rules.  The plan also emphasizes improvement of administrative enforcement, including criminal/administrative coordination, and working with the National IPR Leading Group and other agencies, rather than civil enforcement/remedies/injunctive relief, etc.  The draft also reflects the regrettable tendencies of the patent system of focusing on IP quantity as opposed to quality, with goals of increasing copyright registrations to 2,780,000 and software registrations to 600,000 by 2020, as well as creating additional demonstration cities and other copyright promotion projects.

The plan laudably calls for increased cooperation with foreign countries including “cooperative strategic MOU’s” with the United States and other countries, as well as  “working on more programs with international associations based in Beijing” , and resolution of bilateral issues in a “win-win” environment.

The draft also recognizes that “infringement of copyright is still relatively common, and the copyright environment in reality still needs to take steps forward to improve.”  However the report also notes that China is a “developing country” and it needs to avoid “excessive protection and abusive protection.”

Despite China having a huge copyright civil docket (over 60,000 cases in 2015), the report focuses exclusively on public enforcement and supervision mechanisms, including various interagency efforts, with commitments to:

Further strengthen copyright enforcement coordination mechanisms and promote improvement culture at all levels of law enforcement agencies implementation of the copyright law enforcement mechanisms, effective copyright enforcement in cultural market administrative law enforcement functions, use “anti-piracy and pornography” work organization and coordination mechanisms to strengthen Public security, Industry and Commerce, MIIT, Network Security and other departments, to cooperate and form collaborative copyright enforcement efforts. Strengthening the convergence of copyright administrative law enforcement and criminal justice, actively participate in the construction and use of national action against Counterfeit and Substandard goods enforcement and criminal justice information sharing platform for convergence of, and further information in copyright enforcement cases. Better play an oversight role for local law enforcement supervision and social rights, the establishment of local copyright law enforcement cooperation mechanisms cooperation with corporations, associations and copyright law enforcement mechanisms. [the link inserted is my own addition]

进一步强化版权执法协作机制,推动完善各级文化综合执法机构落实版权执法任务的工作机制,有效发挥文化市场行政综合执法中的版权执法职能,充分运用“扫黄打非”工作组织协调机制,加强与公安、工商、工信、网信等部门的配合、协作,形成版权执法合力。加强版权行政执法与刑事司法的衔接,积极参与建设和使用全国打击侵权假冒工作行政执法与刑事司法衔接工作信息共享平台,进一步推进版权执法案件的信息公开。更好发挥地方执法监管和社会维权监督作用,建立地方版权执法协作机制及版权执法部门与企业、协会合作机制

The government management approach to copyright is also reflected in a call for increased government subventions for copyright creation through “seeking financial support and preferential policies, and increasing the intensity of support for copyright.” This approach could result in further distortions of China’s IP environment, much as has occurred in the High and New Technology Enterprise program.

 

Note: Wordcloud at the beginning of this blog is from the machine translation of the Plan.

US-China Entertainment Law Conference Highlights Business and Legal Developments

huayi

(From a presentation by Lisa Wang, General Counsel, Huayi Brothers Media Corporation)

The following is a readout of the US-China Entertainment Law Conference held at Loyola Law School of Los Angeles on November 2, 2016.  A list of the speakers is found at the end of the blog.  The program was co-hosted by USPTO and Loyola Law School.

Industry Trends:

 Although there have been several notable legal developments in entertainment law in China, the most dramatic changes have been in the market.  China is now the world’s second largest market for theatrical films, after the United States.  While box office revenue and attendance are down in the United States for motion pictures, China has experience incredible growth, with box office revenue nearly 50% in 2015 compared to 2014.   China will likely experience slower growth in 2016, and may enter a more sustainable rate of growth thereafter.   The industry is adapt to the increased importance of China through changing content to have wider appeal and including China in marketing and business development plans.   

Among the major China players, Wanda is now the largest owner of theatres in the world.  It acquired Legendary Pictures in a $3.5 billion media deal.  Tencent is the world’s largest purveyor of of videogames, with 4.2 billion USD in global revenues in 2015.  It is also the first ranked publisher on IOS and Apple app stores.  The Chinese market had 489.2 million video game users in the first half of 2016, with a growth rate of 30.1 percent compared to the first half of 2015.   Importantly, Chinese consumers now accept paying a fee for using online videogames.

 The investment trends for films from China include more direct investment in the United States and Europe, more collaborative production, and more local financing, especially for shows and including both television production and online productions.   Box office revenue will likely continue to grow, and online video will continue to disrupt ticket prices.  

Prof. Seagull Song of Loyola noted that in 2015, foreign films captured five of the top ten grossing films in China.  Market access restrictions are still impeding the market, and that the China market is still underperforming for its size.  However, with respect to market access restrictions, the dean of the Beijing Film Academy predicted that the current quota on foreign films is also likely to be relaxed, but that this relaxation is not likely to have much impact due to the preference of the public for locally made films.  

Regarding the on-line environment for content, Prof. Robert Merges of UC-Berkeley suggested that as platforms affect the distribution of content and provide increasing vertical integration, maintaining competition among the limited number of platforms is likely to become more difficult.  With vertical integration, Merges predicted that copyright is likely to become less important in China.  Branding will instead become more important to develop loyalty to a platform that provides a variety of content and services.   In addition, the development and ownership of data originating from platform services will become critical to platform success.

Taking a different approach, Prof. Eric Priest of the University of Oregon addressed the question of what happens when copyright is harder to enforce such as in the online environment.  With changing technologies, copyright allows its owners and creators to access new markets as they are created, providing them with some leverage with intermediary platforms, and helps stabilize the market for content creation by creating multiple revenue streams.  LeTV is an example of a company in China that began driving new copyright norms by investing in licensing of copyrighted content around 2009 and 2010.   The theme of a diversity of licensing revenue streams in addressing new markets and new technologies was later underscored by Shira Perlmutter of USPTO, who also look at trademark rights derived from copyrighted content in her key note speech, while also underscoring many of the continuing enforcement challenges foreign rights holders face.

As an example of the competitive challenges faced by copyright owners, Priest cited the example of ring back tones for music.  Seventy percent of China’s huge netizen population consume music.  However, most are not paying for this music – except for cell phone ring back tones.  Gross revenues received by mobile cell companies for ring back tones were nearly as high as gross revenue for the music industry in the United States.  However, the music industry received a paltry 105 million USD for its content from Chinese cell service providers compared to the 4 billion that was generated.  Thus, Priest’s discussion to a degree validated Merges’ discussion regarding how competition and integration were becoming increasing concerns.

IP Challenges:

Prof. Song gave a brief presentation on some of the top entertainment cases in areas such as defamation, ideas/expression dichotomy, merchandising rights, and first look rights of publishers.

In trademark, several speakers discussed the Kung Fu Panda / merchandising right case, which has also appeared in this blog.  Not all speakers were in favor of this modest trend of creating a new “merchandising right.”  In the United States, the issue was first addressed by our courts and later adopted into amendments in the Lanham Act which look at likelihood of confusion based on misleading endorsement or sponsorship of a product or service. (Trademark Law Revision Act of 1988 – concept of “confusion as to the sponsorship”), as well as the Federal Trademark Dilution Act of 1995 (protecting famous marks against either the blurring of their distinctiveness or the tarnishment of their reputation caused by unauthorized uses of identical or similar marks not solely on related goods but also on unrelated goods.)  In the United States case law requires a case by case analysis, particularly for unrelated goods and services, where the plaintiff can show a likelihood of confusion as to “sponsorship.”  Cynthia Henderson of USPTO underscored that in China, there may be a greater need for a merchandising right because of rampant bad faith filings,  lack of flexibility under China’s first to file system, lack of protection for lesser known marks, and difficulties in addressing infringements for protection across different classes of goods and services.

Prof. Zhang Ping. from Peking University, discussed the various possibilities for protecting the title of a work under Chinese law, including trademark protection, copyright protection and unfair competition.  Trademark protection in her view, could be deficient since  “in [the] real world, one does not pursue trademark protection for the title of a work until this work gains certain commercial value.”  In such instances, unfair-competition protection might be pursued as a supplemental remedy.   Prof. Zhang gave the example of the famous Wahaha mark (1989), which was originally the title of a popular song (1954).  A court determined that the creator of the song did not enjoy copyright protection in the title.  Unfair competition and merchandising rights may help in addressing these issues .

Several speakers addressed problems in copyright protection for live television entertainment, including but not limited to, live sports broadcasting.  Rebecca Borden of CBS noted that the scope of content that has uncertain protection under current Chinese copyright law incudes live broadcasts of sporting events (about which I have previously blogged), but also includes award shows, games shows, annual galas, etc.  Award shows have many similarities to sporting events, including filming of live reactions to awards/unexpected reactions, driving viewership in conjunction with unique performances or achievements, etc.  Prof. Jiarui Liu of the University of San Francisco noted that recognizing the creation of a professionally produced live sports broadcast as a creative work would likely provide the most stable protection for the investment in these works.

The video gaming industry also faces a number of IP challenges, as noted by Zhang Xin of Tencent and Song Haining of the Junhe Law firm.   Haidian District Court has been the epicenter of litigation involving onine gaming IP issues.  Total  adjudicated cases in 2014-2015 involving copyright were 183; trademarks 17, and unfair competition 9.  Courts have been willing to impose progressively higher damages, including damages based on actual or implied revenues attributable to the copyrightable infringement.  Due to the large amounts at stake, some cases will also satisfy criminal thresholds, and the public security agencies have been supportive.  See, eg., WeMade v. Xiaoxian (2016), which involves potentially billions of RMB in damages.

Charles Feng of East & Concord Partners gave an excellent presentation on preliminary injunction (PI) practice in China, an issue I have covered elsewhere on this blog.   Mr. Feng gave permission for me to post his ppt here.

In Mr. Feng’s view, the likelihood of prevailing on the merits is based on a calculation of the “certainty to prevail” minus “opposing evidence.”  If there is sufficient evidence and clear facts, which do not involve complicated comparison or necessitate judicial verification, a plaintiff is more likely to prevail.  PI’s are also rare in invention patent or software infringement cases.  The case should also not involve disputable or controversial issues, such as those involving the originality of a work, the doctrine of equivalents,  a prior-art defense, the similarity of marks  or goods, the well-known status of a mark, etc.  

In assessing the public interest, the court also looks at issues such as the necessity of intervening against fake and shoddy goods, supporting the security of people’s life, environmental conservation, etc. Generally, preliminary injunctions are rejected in case of a pharmaceutical products related patent and SEP’s.

Among the cases he cited: Telpa v. Media Plus(灿星)(Voice of China case), where  the defendant may have used trademarks completely incorporating plaintiff’s registered mark, and there was also trade name infringement.  A contrary case example is HBSA v. General Administration of Sport, involving the  跤王 “Wrestling King” mark in in Cl. 41 covering.  The General Administration of Sport organized games called “China Wrestling King Competition”. During the litigation, the defendant claimed the fair use defense. The Beijing No.2 Intermediate Ct.  noted that “Given the alleged mark of Wrestling King is a generic name, which may not be registered as a mark, and that the Trademark Review Adjudication Board has accepted the application for invalidation, the court does not believe that there is likelihood of prevailing on the merits.”

The concluding panel, which was moderated by me, included a lively discussion over IP, rule of law, the importance of the Chinese market, the role of the Chinese government, and the future direction of “entertainment law” in China.   Monique Joe highlighted the differences and unpredictability in the way the TM law is applied to address infringement and squatting issues.  Joshua Grode noted that he thought IP issues were not a major factor in deals.  Sheri Jeffrey noted that many deals do not contemplate the full scope of rights that may be licensed or created, including rights

Prof. Ma Yide refuted assertions that China is not protecting IP or that there were regulatory risks in China that made investment unattractive, noting that the growth in the market was likely the single biggest attractive force for foreign investor. Regulatory uncertainty was noted as a major factor in driving investors away from co-productions, despite a higher revenue share (47%) for coproduction versus an imported film.  The lack of certainty also dries down liquidity.  Putting together Robert Merges’ comments, the deal makers on the last panel, and the concerns about over the uncertainty of copyright protection in certain areas, several speakers questioned whether copyright was becoming the “chopped liver” of the entertainment sector – beautiful to look at, but rarely exploited in the proper way, which was a somewhat negative way to end an otherwise very positive and forward- looking program.

The preceding are my personal observations only.

SPEAKER LIST

Rebecca Borden Senior Vice President and Associate General Counsel, CBS
Mark Cohen Senior Counsel, United States Patent and Trademark Office
Jay Dougherty Professor, Loyola Law School, Los Angeles
Charles Feng Partner, East & Concord Partners
Neil Graham Attorney Advisor, Office of Policy and International Affairs,                                        United States Patent & Trademark Office
Josh Grode Partner, Irell & Manella LLP
Sheri Jeffery Partner, Hogan Lovells LLP
Monique Joe Head of Trademarks, Dreamworks Animation
LIU Chun-Tian  Dean,  Renmin University Intellectual Property Academy
LIU Jia-rui Assistant Professor, University of San Francisco School of Law
MA Yide President, Beijing Zhongguancun IP Research Institute
Robert Merges Professor, University of California Berkeley School of Law
Shira Perlmutter Chief Policy Officer, United States Patent & Trademark Office
Eric Priest Associate Professor, University of Oregon Law School
Bennett Pozil Executive Vice President and Head of Corporate Banking, East West Bank
SONG Hai-ning Partner, Junhe Law Firm
Seagull Song Professor, Loyola Law School, Los Angeles
Simon Sun Executive Vice President, Le Vision Pictures USA
Lisa Wang General Counsel, Huayi Brothers Media Corporation
Michael Waterstone Dean, Loyola Law School, Los Angeles
Martin Willhite Chief Operating Office and General Counsel, Legendary Pictures
WU Manfang Dean,  Beijing Film Academy School of Management
ZHANG Ping Professor, Peking University Law School
ZHANG Xin Legal Director, Tencent Interactive Entertainment

 

 

 

 

USPTO and Renmin University Copyright Protection Program Highlights Importance of Copyright Reform for China

revenuestreams

Last July 20, 2016,USPTO and Renimin University jointly hosted a program at Renmin University on Copyright Developments in China and the United States.  The program was covered by some of the specialty media.  Here’s a brief summary regarding some of the four key developments in China that I abstracted from the speakers at the conference:

  1. Building upon some of the path breaking work of Eric Priest and others, there appeared to be near unanimity amongst the speakers and audience of the importance of revenue diversity for China’s creative industries to thrive.  Amongst the areas highlighted, were the importance of public performance rights, of licensing for digitalization of content, of small claims procedures for copyright owners, the utility of collective management in certain contexts, and the importance of providing copyright protection for sports broadcasting (as opposed to using neighboring rights or antiunfair competition law).  The current copyright licensing environment in China uniquely supports one exclusive license, but even that revenue source is vulnerable to non-renewal if piracy erodes the value of buying legitimate content and may therefor not be sustainable in the face of “piratical” or free competition.  Musicians, as an example, are heavily dependent on public performances and secondary sources of revenue, such as DVD/CD/ streaming sales are thin.  Revenue diversity can also included non-copyright revenue streams, such as trademark rights, and perhaps merchandising rights.  Efforts have also been underway to increase pledging of copyrighted content, which can help with financing of copyrighted content.
  2. Many of the Chinese speakers spoke about increasingly creative enforcement approaches, such as the Sword Network Campaign,  enhanced administrative supervision over platforms (16 video sites/20 music sites/20 literary sites) and punitive damages.  Although they are still a minority of criminal IP cases, there is an increasing number of  criminal referrals from administrative cases (from 2005 to 2015, more than 450 cases were referred to criminal prosecution).  Article 287 of the newly amended Criminal Law, which provides for criminal liability by reason of providing computer services was noted as a potential area for expanded criminal copyright liability.
  3. Technology and globalization were making enforcement increasingly more difficult, while at the same opening up possibilities for more efficient enforcement techniques.  Audiovisual use of the internet was one of the most popular reasons in China to be online (73.2% of netizens view AV products in China). Music is a close second (72.8%), while literature was only 43.1%.     Copyright protections which did not extend to interactive (online) environments, were increasingly undercutting revenue streams.  China’s reservation under article 15(1) of the WIPO Performance and Phonograms Treaty was noted (“(1) Performers and producers of phonograms shall enjoy the right to a single equitable remuneration for the direct or indirect use of phonograms published for commercial purposes for broadcasting or for any communication to the public.”).  The increasing complexity of the copyright environment, including the environment for licensing was highlighted as a theme in both the United States and China.   Media box piracy was identified as a problem (see 湖南快乐阳光vs 清华同方).  A case involving use of parasitic software to modify the original code was noted, under the Antiunfair competition law ( 鹏讯 [深圳] v 上海虹连网络)
  4. Regarding enforcement, the efforts of the courts to develop precedential or guiding cases to resolve complicated emerging issues was also underscored, particularly due to the extensive delays in passing copyright law reform, which has now been ongoing for several years.  There were over 70 research topics underway as part of the copyright law reform.  There needs to be increased scope of protection of copyright and improved mechanisms for enforcement.  Some of the difficulties in providing copyright protection to certain areas were traced back to the original training program in 1985 in Nanjing on copyright law, which was provided by European experts, and introduced European concepts and models, such as neighboring rights.    Changes in substantive law and judicial practice, such as providing for treble damages,  sampling of allegedly infringing content, establishing a requisite standard for “originality” vs a non-original product (see 北京乐东 vs 北京昆仑 concerning copyright in entertainment software characters) idea vs. expression in variety shows (See Beijing High Court’s: 关于审理涉及综艺节目著作权纠纷案件若干问题的解答), harmonization with other laws (such as the Antiunfair Compeittion Law),  how much copying constituted infringement, discovery of source code to verify infringement of software products, and specialized IP courts/three-in-one (administrative/civil/criminal) tribunals were all noted.  In addition, an expanded scope for audiovisual works, or lowering of the creativity required for cinematographic works were noted as possible approaches to providing protection for sports broadcasts.   Rights holders were also selecting overseas venues for litigation where rights were sometimes better protected.

In general, the speakers agreed that China needs copyright reform for its own needs, and that this reform was not due to outside pressure. In addition, there are increasing opportunities for collaboration between the United States and China on the creation and distribution of copyrighted content, which appear to be mirroring increased collaboration in science and technology.  Ultimately, China needs improved copyright protection and enforcement in light of its own desires to increase its soft power, and support its creative industries.

CATR’s Report on Copyright Enforcement in the On Line Enviroment

The China Academy of Telecommunication Research (CATR), at the request of the National Copyright Administration,  released a report on April 26, 2016 on Copyright Protection in the Online Environment.

The report noted that  there were 2,118 on line civil copyright cases in total, an increase of 28.3% from last year (this total number seems smaller than I would have guessed).  The SPC White Paper reported that overall there were 66,690 civil cases, an increase of 12.1% from 2014.  Regarding civil on line copyright enforcement, 44% of the online cases involved music and 18% involved audiovisual infringement.  Amongst the IP courts, Guangdong had the highest percentage of cases (39.5%), followed by Shanghai (33.5%) and Beijing (16.5).  However, the province with the most cases was Hubei (476), followed by Beijing, Guangdong, Zhejiang, Shanghai and Jiangsu) (see chart below).

graphofcivilcases

The report also notes several important legal and policy initiatives, including directives from the National Copyright Administration on online liability, and a revision to the Criminal Code, making it clear that on line technology providers can be held criminally liable for copyright infringement.  The report also singles out the release of a draft of  proposed rule on Copyright Administrative Enforcement. (著作权行政处罚实施办法 (修订征求意见稿)as well as new rules Concerning Specifications of the Copyright Order In Online Transmissions (关于规范网络转载版权秩序的 通知),  Stopping Online Music Service Providers Transmitting Unauthorized Content(关于责令网络音乐服 务商停止未经授权传播音乐作品 的通知)and the Rule Concerning Specifications of the Order of Cloud Driver Service Provider Copyright (关于规范网盘服务 版权秩序的通知).

Data on copyright administrative and criminal enforcement in the online environment was not made available in this report.   According to the SPC White Paper, there were 523 criminal copyright cases, involved 547 people.  Moreover, news reports accompanying its release reported the following data: during the Sword Network Campaign in 2015, there were 383 administrative enforcement actions, with fines of 4.5 million RMB, 59 cases transferred to criminal prosecution, and 113 websites closed.

Lilith Games v. uCool – Seeking Preliminary Relief in the US

Attached is the order denying a preliminary injunction in Lilith Games v uCool (N.D. Cal., Sept. 23, 2015).  According to the order of Judge Conti, Lilith is a video game developer that released the game Dao Ta Chuan Qi (translated as “Sword and Tower”)  in China in February 2014. Lilith holds Chinese copyright registrations in Sword and Tower’s source code and alleges that it owns the copyrights to that code pursuant to Chinese copyright law. Sword and Tower has enjoyed great commercial success, and as of August 2014, was the leading game in Asia.   Defendant uCool is a video game marketer who allegedly obtained access to Lilith’s copyrighted software code for Sword and Tower and used it to create its own game, Heroes Charge , which it published in the United States in August 2014.

Lilith filed this case in March 18, 2015, four months after talks with uCool had broken down. Lilith argued that a four month delay was justified because Lilith is a small start-up  and was reluctant to become involved in costly litigation until it was necessary, although the court noted “It is unclear what Lilith means by ‘small start-up,’ particularly given that Lilith owns the most popular game in Asia.”

There are a few interesting points in this case worth comparing to Chinese practice:

  1. Application of Law and Recognition of Evidence: The court determined that Lilith “owned valid Chinese copyright registrations and therefore has provided prima facie evidence of copyright ownership under Chinese law.” In addition, it was “undisputed that Lilith is the entity that filed for and obtained the copyright registrations and that these registrations expressly list Lilith as the copyright owner. Thus, Lilith was the developer of the Sword and Tower source code and the copyright for Sword and Tower consequently belongs to Lilith.” The court also noted that “Lilith brings its copyright infringement claim under the Berne Convention, an international agreement governing copyright.”

The court directly  applied Chinese copyright law and the Berne Convention, which are rather unusual.  To its credit, there was no evidence that the court required notarized and/or consularized documentation, as might be required of a US company submitting similar evidence in China.   

  1. Regarding copying, the court concluded that “a finder of fact is likely to conclude that the source code for Heroes Charge is substantially similar to the source code for Sword and Tower,”and that “the evidence shows that the games are almost identical from the user’s standpoint, with only minor modifications.”

Although the court noted that Lilith sought to apply the Berne Convention, the court’s determination of copyright infringement appears squarely based on US practice.  Screen shot comparisons can be found here.

  1. In its trade secret analysis the court noted that “Lilith’s efforts to maintain the confidentially of its source code, while not as rigorous as they could have been, were sufficiently reasonable to maintain the code as a trade secret. Lilith keeps its source code on a secure server and limits access only to those employees who need it to perform their duties. Lilith also encrypts the Sword and Tower source code so that it cannot be easily deciphered. Although Lilith failed to secure confidentiality agreements from all of the employees that had access to the code, Lilith has presented evidence to show that these employees understood Lilith’s code to be confidential business information. Further, there is no evidence to suggest that any of these employees disclosed the code to a third party.”

Difficulties in demonstrating that a trade secret owner has established appropriate measures to protect the confidentiality of a trade secret are one of the obstacles in trade secret litigation in China.   The court’s approach is not unreasonable given that there appeared to be adequate procedures in place, and any gap in protection was not a cause of the leak of confidential information.

  1. Preliminary Injunction “E-Bay” Factors

Although the court determined that there was a strong likelihood that Lilith would succeed on the merits, it denied the motion for a preliminary injunction.  In the court’s view Lilith could not demonstrate that there was adequate imminent injury, either by reason of reputational injury in a market where it had little presence or by difficulties in developing that market through an exclusive distributorship.  The court took note that eight months had passed from when Lilith discovered the alleged copying to when it filed for a preliminary injunction. The court’s apparently suspicious view of Lilith’s argument that it was a small start-up, which accounted for the delay, may also have been a factor in this determination.

These cases are part of a growing trend of Chinese companies using the US courts to address claims of infringement by Chinese, US or third country actors.  There are also several obvious comparisons in recent Chinese cases to this one.  The case may be compared to the preliminary injunction granted by the Guangdong IP court in Blizzard Entertainment and NetEase versus Chengdu Qiyou Limited, involving a US rightsholder.  In that case, I noted the importance of having an active licensee as a co-plaintiff to succeeding in a preliminary injunction matter; the lack of an active licensee may have been a problem with the US case in demonstrating irreparable harm due to difficulties in obtaining an exclusive licensee. 

This is the second recent case brought by a Chinese company seeking a preliminary injunction in the US courts for copyright infringement.  In the earlier CCTV case, the Chinese plaintiffs were granted a preliminary injunction applying US law.    As I noted in the CCTV cases, had the US court applied Chinese law it might have found that no copyright infringement existed at least with respect to sports broadcasting.

Another comparison is with the   Eli Lilly v. Huang Mengwei (黄孟炜) case, where a preliminary injunction was granted in China for a trade secret matter.  However, that case was publicly discussed but never published.  The Lilith case is published, according to US practice, with confidential information removed.   

Perhaps the most interesting comparative aspect of the Lilith case was the delay in initiating litigation by the plaintiff.  Had this case been tried in China, the delays in seeking preliminary injunctions might have been more problematic in light of the expectations of tight time frames, where litigation and IP matters change in “a New York minute.”    After all, in eight months, most IP litigation has been finally adjudicated.

 

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

 

More Guiding Cases on IP, and More Experiments on IP Case Law

fcbaprogram

Stanford Law School has just released eight new guiding cases, including including five IP and unfair competition cases covering trademarks, unfair competition, and software copyright.  The cases were determined to be guiding cases earlier this year by the Supreme People’s Court, and are available here.   Dr. Mei Gechik. the Founder and Director, China Guiding Cases Project, also has analytic reports on the CGC Project here.

Regarding IP-related matters, Dr. Gechik notes “the SPC’s confidence in providing guidance in intellectual property and unfair competition through GCs seems to have grown. Five out of the eight GCs released in 2015 Q2 cover these two areas. Of particular note, the SPC went beyond patent law to release cases that address issues in trademark law, as well as copyright law as applied in the protection of computer software.”

These guiding cases appear to me to be part of an increasing interest in developing a system of case precedent in China, particularly since the establishment of China’s IP courts, and the keen interest in developing precedent expressed by the Beijing IP courts, including a national conference on this topic on September 22, 2015 which set forth the role of the Beijing IP court as a national center for research on case guidance (案例指导研究基).

The prospects for Chinese case law, and IP case law in particular, was discussed at a recent IP judicial conference sponsored by the Federal Circuit Bar Association in Shanghai, which included a large turnout of both Chinese and US judges. Among issues discussed included the role of case law in adjudicating cases, the possibilities of introducing amicus briefs, the role of en banc decisions in making or reversing precedential cases, the binding effect of local court decisions and other issues involved in handling cases that are intended to have greater legal impact than determining only the rights of the parties involved in the law suit.

Of course, the development of precedent could be especially valuable to developing “transparency and predictability” for business people seeking greater legal predictable in their complex decision making processes, which would appear to be an important goal of an effort to enhance commercial rule of law between the US and China.

Interestingly these five cases were decided as long as eight years ago.  In addition, only one of these cases was decided by the Supreme People’s Court.  The remainder were adjudicated by local Higher People’s Courts.  From a common law perspective, this may not look like a system of precedent as we know it.  For example, if the cases are to have binding effect, how can past cases be recognized as precedential?   How/why should local cases affect decisions from other provinces? Or are the cases primarily intended for other purposes, such as education of the judiciary and public or to assist in development of a more limited body of case law? Nonetheless, whatever the role of case law will be in China, its development is overall a positive step that should be encouraged and Stanford Law School/Dr Mei Gechik are making a very important contribution to that effort.

Here is a quick summary of these five important cases, with links, that is drawn from the translation and analysis on the Stanford website.  All errors in my summary are of course, my own:

Guiding Case No. 49

Shi Honglin v. Taizhou Huaren Electronic Information Co., Ltd.  This dispute over computer software copyright infringement  involved circumstances regarding reversal of burden of proof when defendant refuses to release source code in a software copyright infringement case.

Guiding Case No. 48

Beijing Jingdiao Co., Ltd. v. Shanghai Naikai Electronic Science and Technology Co., Ltd.  This computer software copyright infringement dispute involved use of technological protection measures (TPM)  to restrict machines from reading the data stored in a file format, thereby ensuring that the machine bundled with computer software possesses a competitive advantage in the market.  The court determined that use of a TPM by this means is not a type of act taken by a copyright owner to protect its software copyright under the Copyright Law.

Guiding Case No. 47

Ferrero International S.A. in Italy v. Montresor (Zhangjiagang) Food Co., Ltd. and Zhengyuan Marketing Co., Ltd.  This unfair competition dispute is one of a few well known and widely commented cases involving Ferrero on trade dress and design protection in China.  This case holds that in order to determine whether a commodity is well known as used in the Anti-Unfair Competition Law, the court should consider a combination of various factors that demonstrate the circumstances under which the known commodity is protected — including sales period, sales regions, sales volume, and sales targets of that commodity within China, as well as the duration, extent, and geographical scope of publicity that has been carried out.

Guiding Case No. 46

Shandong Lu Jin Industrial Co., Ltd. v. Juancheng Lu Jin Crafts Co., Ltd. and Jining Lizhibang Home Textiles Co., Ltd.  This trademark infringement and unfair competition dispute involved a determination that “Shandong Brocade” (Lu Jin) had already become a generic name for textile products that possessed regional characteristics.  According to the court, a generic name can be an appellation established by the industry norm or it can also be the abbreviated name used as a convention by the public. The court noted that Shandong Brocade has a history of over a thousand years and that Shandong Brocade has been generally recognized by the State mainstream media, various kinds of specialized newspapers, and the news media of Shandong Province.  Reference books on arts and crafts and fine arts have confirmed that “Shandong Brocade” is a type of  cotton folk textile product that is hand made in Shandong.  The case’s decision implicates not only what constitutes a generic geographical term, but also the role of traditional knowledge/intangible cultural heritage in defining whether a term is generic and how to handle the relationship between these terms and the trademark system.

Guiding Case No. 45

Beijing Baidu Netcom Science and Technology Co., Ltd. v. Qingdao Aoshang Network Technology Co., Ltd. et al.  This unfair competition case addressed acts by Aoshang Network Company and Unicom Qingdao Company which involved their advertising popping up when network users log onto the Baidu website to conduct keyword searches through the Internet access service provided by Unicom Qingdao.  The court determined that this practice violated the good faith and business ethics and was within the scope of prohibited acts under Article 2 of the Anti-Unfair Competition Law.

Photo from recent FCBA program with East China University of Politics and Law.