January 16 – 29, 2018 Update

Jan 16 – 29, 2018 

Here are some updates on IP developments in China from past two weeks.

  1. China criticizes US moves on intellectual property 商务部:缺少确凿证据无可信度 China on Thursday criticized recent moves by the U.S. targeting the sale of fake goods and Chinese telecoms equipment, saying Washington lacked “objectivity” in its approach to Chinese businesses. Commerce Ministry spokesman Gao Feng told reporters the U.S. Trade Representative lacked direct conclusive evidence and supporting data in listing three Chinese online commerce platforms and six physical bazaars within China as “notorious markets” engaging in commercial-scale copyright piracy and trademark counterfeiting. Meanwhile, Alibaba Group recently released a series of initiatives to strengthen its intellectual property rights protection. The event happened days after Taobao was put listed as notorious market. The ecommerce giant intends to gather as much information as they can and use the expertise of both brands and rights holder to create a much stronger database. It should effectively improve the algorithm that Alibaba uses to counteract the fakes and even gather evidence for offline investigations. Moreover, Preempting the 2017 USTR report’s publication by one day, the company has released the 2017 Alibaba Intellectual Property Protection Annual Report (in Chinese).
  2. Google announces patent agreement with Tencent amid China push Alphabet Inc’s Google has agreed to a patent licensing deal with Tencent Holdings Ltd as it looks for ways to expand in China where many of its products, such as app store, search engine and email service, are blocked by regulators. The agreement with the Chinese social media and gaming firm Tencent covers a broad range of products and paves the way for collaboration on technology in the future, Google said on Friday, without disclosing any financial terms of the deal. Additional articles are available here and here.
  3. China Publishes More Scientific Articles Than the U.S. For the first time, China has overtaken the United States in terms of the total number of science publications, according to statistics compiled by the US National Science Foundation (NSF). According to the report, China published more than 426,000 studies in 2016, or 18.6% of the total documented in Elsevier’s Scopus database. That compares with nearly 409,000 by the United States. India surpassed Japan, and the rest of the developing world continued its upward trend.
  4. SIPO Released Statistics Data on Major Work for 2017国家知识产权局公布2017年主要工作统计数据 SIPO recently released detailed breakdown of statistics on its work for 2017. Government data show that the number of annual applications for invention patents filed in the country topped 1.38 million in 2017, a 14.2 percent rise on the previous year. Beijing, Shanghai and Jiangsu are the top 3 provinces for number of patents per 10,000 people. State Grid Corporation of China, Huawei, and Sinopec are top companies with most patents granted.
  5. China’s trademark applications hit record high in 2017 China’s trademark applications exceeded 5.7 million last year, up 55.7 percent year on year, both setting record highs. At the end of 2017, China had 14.92 million qualified registered trademarks, the most of any country worldwide.
  6. “Jianwang [Swordnet] 2017” closed 2554 Pirated Websites“剑网2017”关闭侵权盗版网站2554个National Copyright Administration, State Internet Information Office, MIIT and Ministry of Public Security jointly held a conference on “Jianwang” special campaign recently. Since this special act being implemented in July 2017, 63,000 websites have been investigated and 2554 infringing websites have been closed. According to officer from National Copyright Administration, this special act had a focus on videos, news, mobile Internet applications (APP) and e-commerce platform.
  7. China Will Take the Lead in Promoting IP Protection Mechanism in Pilot Area我国将在全面创新改革试验区域推进知识产权保护改革率先突破 NDRC recently issued a notice to promote reform on IP protection mechanism in eight pilot areas, including Jing Jin Ji, Shanghai, Guangdong, Anhui, Sichuan, Wuhan, Xi’an, Shenyang. The government intends to promote integrated management of IP rights, explore new mechanism of IP protection, and establish a new mechanism to link administrative and criminal enforcement.
  8. U.S.-China IP Scholar Dialogue was Held中美知识产权学者对话举行 The Fourth U.S.-China IP Scholar Dialogue was held in Shanghai, China from January 17 to 18. Intellectual property is a key issue in the development of U.S.-China economic and trade relations. To increase cooperation and understanding, IP experts from both countries created this dialogue mechanism since 2013. This year’s dialogue emphasized on AI, biomedical innovation, technology licensing, trade secret law reform, IP judiciary protection and dispute settlement mechanism.
  9. US Commerce Secretary Ross says Beijing’s technology strategy is a “direct threat”; China demurs.  US trade authorities are investigating whether there is a case for taking action over China’s infringements of intellectual property, Commerce Secretary Wilbur Ross said. China responds that it did not expect more trade disputes.
  10. China Customs reports seizing infringing goods worth 552 mln yuan in past three years.   China has seized infringing goods worth 552 million yuan (86.06 million U.S. dollars) in the past three years driven by a special act called “Qingfeng” (“Clear Breeze”), according to the General Administration of Customs of China (GACC). The three-year crackdown on intellectual property rights infringement discovered about 120 million infringing items, according to the General Administration of Customs.  Compare prior discussion on previous reports of GACC hereand here.
  11. Beijing to set up IPR center to better serve high-tech firms.  Beijing will establish a center this year dedicated to providing services to high-tech companies on intellectual property rights (IPR), officials said. The center will offer fast-track services for patent applications to companies in information technology and high-end equipment production, two areas with the highest demand.  This is part of an existing SIPO effort to fast track areas of concern to industrial development.  Compare, however, article 27 of TRIPS Agreement – patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.
  12. SIPO released a directory of industries that need IP support.  SIPO recently released the 2018 Intellectual Property Supporting Industries Directory (知识产权重点支持产业目录(2018年本)), which identified 10 industries where IP will be key. The government asked for efficient allocation of IP resources within these industries to promote industrial restructuring and upgrading.
  13. China’s Sinovel Convicted in U.S. of Stealing Trade Secrets.  A Chinese wind turbine maker, Sinovel Wind Group Co. was found guilty of orchestrating the theft in a rare trial in Wisconsin that continues to raises doubts over China’s commitment to fighting infringement of intellectual property and corporate espionage.  The case is U.S. v. Sinovel Wind Group Co. Ltd., 13-cr-00084, U.S. District Court, Western District of Wisconsin (Madison). The conviction was against Sinovel Wind Group.  Previously a former employee of the victim had been found guilty of theft of trade secrets in a criminal case in Austria. In addition, there are in total five civil cases in China between Sinovel and AMSC, with one closed and four pending. AMSC filed one separate trade secret case in China plus two copyright cases and an arbitration.
  14.   Five New Guiding Cases (English translation available).  Of the five newly released GCs, four are administrative cases and one centers on a dispute over the infringement of rights related to a new plant variety (Case No. 92). English translation of those guiding cases are made available by the China Guiding Case Project of Stanford Law School. More information about previous guiding cases available here and here.

We hope to be providing more updates in the year ahead from UC Berkeley.  As usual, the information herein does not necessarily represent the opinion of any government agency, company, individual or the University of California.

Updated: February 13, 2018

New State Council Decision on Intellectual Property Strategy For China as a Strong IP Country

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On July 18, 2016, the State Council issued a new policy document,国务院关于新形势下加快知识产权强国建设的 若干意见-重点任务分工方案  — the “Opinion of the State Council on Accelerating the Construction of Intellectual Property Powers for China as an Intellectual Property Strong Country under the New Situation –Division of Tasks.”  Here’s a link to this action plan (docketed as State Council  Working Office No. 66)  , and a link to the machine translation, from which the world cloud above is drawn.   The action plan itself is drawn from a State Council document issued in 2015 on accelerating the establishment of a strong IP country in the context of a new situation.  This 2015 document identified such problems as China being a big country for IP, but not a strong country, protection was not adequately strict, infringement was easy and pervasive, and that these factors were affecting industry’s efforts to innovate.

As I discussed previously, the idea of China needing to become a strong IP country appears in the 2014-2020, National IPR Strategy Action Plan, which has the goal of “Striving to Build A Strong IPR Country”  (努力建设知识产权强国). While China indeed has become “big” on most scales: invention patent filings, trademark, utility models and design patents, intellectual property litigation, criminal IP litigation and administrative litigation, to name a few, “strong” suggests quality, which is much harder to judge.

Here are a few specific observations about this action plan:

  1. Much of the action plan repeats existing efforts, through the MofCOM IPR Leading Group and SIPO’s National IP Strategy Office, and their current efforts at analyzing and coordinating IP effort, as well as cooperative activities (Arts. 1, 3, 13, 15, 18, 21, 22, 25, 30, 44, 88, etc.).
  2. There are greater efforts to incorporate IP into macroeconomic strategies, such as in calculations regarding the national economy and national social welfare (Art. 9), as well as credit reporting (Art. 23).
  3. Increasing compensatory  and punitive damages are a focus (Arts. 14), which have also been an effort of China’s IP courts.  This is one of the key civil-law reform proposals in this plan.   There continues to be an undue emphasis on speed, which I assume is focused on patent administrative enforcement as a more rapid remedy (Art. 16).  China is already a fast moving IP environment.
  4. International cooperation in criminal enforcement is underscored (Arts. 19, 21, 22).
  5. Regarding trade secret protection, the focus is on revising trade secret laws, and protecting IP when employees change jobs (Art. 24).  Changes to China’s discovery regime and other appropriate measures which would greatly assist trade secret claimants, are not discussed.
  6. Geographical indications are a focus, including drafting a stand-alone GI law at “the appropriate time” (Art. 32), increasing the role of trademarks in promoting farmer prosperity (Art. 58), and promoting GI products (Art. 90).
  7. Regarding the long-delayed IP Abuse Guidelines, NDRC, MofCOM, SAIC and the State Council Legislative Affairs Office are all listed as being responsible for drafting “according to their responsibilities” (Art. 36).  Rules on standard essential patents that are based on FRAND licensing and “stopping infringement” are also noted (Art. 38), with the involvement of AQSIQ, SIPO, MIIT, and the Supreme People’s Court).  Encouraging standardization of Chinese patents also remains a priority (Arts. 61, 71).
  8. Service Invention Regulations, an area of some controversy are not specifically noted as a priority.  Encouragement is to be given to enterprises to set up appropriate invention recognition and reward programs in accordance with law (Art. 45), and research is to be undertaken in giving compensation for new scientific achievements (Art. 46).  The language may suggest that more flexibility will be given contractual arrangements and the market, as was agreed to bilaterally between China and the United States.   Relevant agencies involved in these efforts include SIPO, MoST, Ministry of Education, Ministry of Finance, Ministry of Agriculture, SASAC, Chinese Academy of Sciences, MIIT, Ministry of Defense, etc.
  9. Chinese universities are also encouraged to become more actively engaged in commercialization of technology, through establishment of technology transfer offices (Art. 53) and other efforts.
  10. The impact of US efforts to study IP-intensive industries in the US economy is also apparent in this plan in terms of the government’s efforts to investigate promoting IP intensive industries in the Chinese economy, government procurement of products from IP intensive industries, and developing model districts for IP intensive industries (Arts. 55-56).  Interestingly, there is no specific reference to engaging economists on any of these efforts, despite the role of foreign economists in similar efforts, some of who have also directly engaged China on how to determine IP-intensity in an economy.
  11. There is discussion of using tax and financial policies to promote IP creation in China (Arts. 98, 99).  There is no explicit discussion of harmonization with OECD guidelines regarding patent boxes and other forms of international tax avoidance.
  12. The report discusses a number of strategies and plans to reduce overseas IP risks facing Chinese companies, including assisting Chinese companies in strategic planning, patenting and licensing (Arts. 72-76), developing information resources on risks and cases (Arts. 78-79), and – rather ominously – developing policies for countering large intellectual property cases overseas (with the support of MofCOM, Customs, SAIC, AQSIQ, NCA, and the China Council for the Promotion of International Trade – “CCPIT”).   There is no discussion on any changes to current technology import regulations which impose onerous indemnity and non-grant back requirements on foreign licensors.
  13. The report directs research to be conducted of placing IP officials overseas in important countries, region and IP organizations.  Although China’s current IP attaché in the United States is a MofCOM employee, the responsible agencies for this effort include SIPO, NCA, SAIC, and CCPIT (Art. 85).  The first Chinese IP attaché was dispatched to the United States pursuant to a bilateral commitment of the  2005 Joint Commission on Commerce and Trade.
  14. The report notes that China will become more involved in promoting a more “fair and reasonable” international IP regime, through support of the Doha amendments to the TRIPS Agreement, the Convention on Biodiversity and various IP conventions.  The Hague Convention on Industrial Designs is noted, but not UPOV 1991.  Promotion of intangible heritage and folklore are also noted (Arts. 59. 87).
  15. IP talent creation and training are also key elements of the plan (103-105).

 

Often in looking at plans like these, it is also equally important to ask what is not being covered.   The plan does not focus enough on a China where there is greater scientific collaboration with foreign scientists and engineers, which are also result in an increasingly large number of co-invented patents.  Similarly, increasing Chinese investment in IP-intensive industries in the United States means that many Chinese companies will own substantial IP interests and may be less inclined to view IP issues as “us” vs “them.”  The relative under-emphasis on civil remedies for IP issues in this plan is also troubling, as the availability of adequate civil remedies is what drives IP commercialization.

The report also does not suggest increasing the role of economists in IP and antitrust agencies, despite a clear focus on increasing the IP-intensity of the Chinese economy. Gaps in Chinese law, such as denial of copyright protection for sports broadcasting, weak protection for trade dress, and “circular” litigation between the patent and trademark offices and the courts which may delay final adjudication on matters, controlling trademark squatting and subsidies for unexamined patents are not discussed.

Although there are many positive aspects of this plan, I believe that focusing on issues like compulsory licensing, the Doha Declaration and folklore, or what appears to be political solutions to overseas infringement may also not deliver as much value to the Chinese economy and China’s scientists, engineers, artists and entrepreneurs, as returning to core IP concepts which let the market govern IP creation and enforcement through such measures as improving the scope of rights that are protected under Chinese law, limiting government intervention, increasing the role of the civil judicial system, and promoting increased collaboration.

US and China Customs Data Compared

The following are some reflections on what Customs-related enforcement activity in the US and China last year.   The data generally shows the continuing problem of a high level of exports of counterfeit goods from China, difficulties in addressing online and border measures for patents, and the need to work with Customs officials to secure enforcement.

Both US and Chinese data generally showed an increase in Customs activity, especially in Sino-US trade, for 2015.  According to US  Fiscal Year 2015 data, the number of IPR seizures increased nearly 25 percent to 28,865 from 23,140 in FY 2014.  The total estimated manufacturer’s suggested retail price (MSRP) of the seized goods, had they been genuine, increased 10 percent to $1,352,495,341.  China and Hong Kong together at 87% of seizures, versus 88% for 2014.

China Customs also released its data in late April 2015.  Chinese data shows that the United States rose from the number 5 slot to the number one slot in terms of destination of batches of shipments.  However, the US was number 29 in numbers of seized items (suggesting a relatively small quantity in each batch of seizure for export to the US).   Postal shipments accounted for 84% of overall seizures, an increase of 2.7% from last year.  There was however a drop in seizures upon export from 23,019 to 22,000, which is contrary to the US experience – since increasing on-line sales in particular should likely result in more seizures, presumably at less value.

Iran was the export destination from China with the most goods seized, holding the number one place in 2014 and 2015.  As discussed last year, 2014 showed a diversification in destinations of China’s export destinations for counterfeit goods, which continued for this year.

There was also a change in the mix of China and Hong Kong origin seizures coming into US ports.  China origin seizures by US Customs dropped by 11% in 2015 and Hong Kong picked up the slack (10%).

Why was there such a dramatic “migration” of counterfeits to Hong Kong?  One other odd trend is that trademark litigation in Southern China (Guangdong)  actually dropped by 4.11%, according to data from the Guangdong High Court.   Any downward trend in Chinese IP statistics is often a warning sign – by comparison, the Supreme People’s court noted in its 2015 White Paper that national civil TM cases increased nationwide by 13.14% during this time frame to 24,168 cases.   The data might suggest that Guangdong is becoming less important as a place for enforce trademarks and/or that transshipment through Hong Kong is becoming more important, but it is too early to tell.

US data shows that the three largest categories by numbers of seizures were wearing apparel, consumer electronics and pharmaceuticals/personal care for 2015.  China reported that cosmetics, tobacco products, and machinery were amongst the major categories of seized products.  Cosmetics, jewelry, medical devices, and watches showed the greatest levels of increases in Chinese seizures.

Chinese Customs data also shows that the number of articles seized based on ex officio actions dropped dramatically (65% vs. 98%) comparing 2015 to 2014, suggesting the need for increased engagement by rightsholders with Chinese Customs to alert them to suspected infringing shipments.

Interestingly, China reported a noticeable increase in seizures on behalf of its domestic IP rights owners, which included 1939 batches with a value of more than 55,900,000 RMB.

As with the United States, Chinese Customs’ emphasized seizing trademark infringing goods over other rights.   In 2014,  TM’s occupied 96.86% of total items seized, with only 1.94% related to patent.  In 2015, TM related seizures increased to 98% of total items seized; copyright and patent combined were about 2% of the items seized.

US Customs reports that there was also a big increase in exclusion orders issues and enforced on behalf of the International Trade Commission, typically involving patents, with a 13-fold increase in shipments seized from 2 to 26.   In China, on-line enforcement against articles that infringe patents is also attracting more attention from Chinese regulators, with the Chinese patent law amendments also looking at an increased scope of liability for online service providers (Art. 63).

While on-line enforcement is getting more attention,  the Federal Circuit decided last year in ClearCorrect v. Align that the USITC Section 337 jurisdiction over the importation of “articles that infringe” does not extend to the “electronic transmission of digital data”, which may reduce the ITC’s role in the digital environment, particularly those involving patents.  This otherwise appears to be a trend that is contrary to an increased focus on on-line infringement.

IP in the Xi-Obama Meeting – Following the Data Stream

There wasn’t much IP in the recent meeting of the Chinese and US heads of State at APEC in Beijing, nor should one expect more than a brief mentioning amongst all the other issues that the U.S. and Chinese leadership have to discuss. However there were two points of reference.  One was in the Chinese tabulation of the list of agreed outcomes which stated:

七、双方同意于2015年初举行中国公安部和美国国土安全部部级会晤。双方将利用这一契机深入探讨加强反恐、执法等相关领域合作。双方同意继续在追逃追赃、遣返非法移民、禁毒、打击网络犯罪、加强知识产权执法等领域开展对话与合作。

Essentially this commits the Ministry of Public Security and the Department of Homeland Security to their first Ministerial-level meetings in 2015 to discuss deepening cooperation in enforcement related actions. In addition they agree to dialogue and cooperation in addressing including online crimes and strengthening intellectual property enforcement.

President Obama also noted in the joint press conference that he “stressed the importance of protecting intellectual property as well as trade secrets, especially against cyber-threats [with Xi Jinping].”

This is one instance where the statistical back story supports the respective statements of the leadership.

In China, there has been a big increase in domestic criminal IP cases in China during 2014. In the first half of 2014, the number of all the intellectual property-related criminal cases of the first instance was 5,429,r ising 29.35% over the same period of last year.

In 2013, intellectual property-related criminal cases. of first instance handled by local courts, were reduced by 28.79% to 9,331 cases, including 5,021 infringement cases (3,473 involved infringement of registered trademarks, such as use of counterfeit marks, and 1,484 cases involved copyright infringement).  This drop of 35.96% from the prior year was probably due to the end of a special campaign.

The multi-year trend clearly shows continuing increases in criminal enforcement. Wang Yu(王瑜),an IP lawyer, tabulated the number of IP cases in a recent blog (Oct. 29, 2014), translated here.

From the above chart, the IP-related criminal cases appear to be rising again.  Copyright cases are also rising fast, from 0.6% of 2010 to 39% of 2013.  Trade secret cases, however, are a small percentage and hover around 50 total.

USDOJ data shows that there were about 168 and 178  federal cases filed in 2011 and 2012 respectively. As the data shows, the US federal government has a much smaller litigated criminal IP docket than China.

The data suggests that: (a) China has a comparatively large, and rising docket of criminal IP cases, and (b) the numbers and proportion of Chinese criminal trade secret cases are rather few. The above data, of course, does now reveal qualitative differences, plea bargaining, or how many cases were international in nature, amongst other important differences between the US and Chinese systems..

In sum, after looking at the data, if I were Mr. Obama, I might ask Mr. Xi about improving trade secret enforcement. If I were the Chinese leader, I might ask Mr. Obama about cooperation on criminal IP cases.

And that’s what they appeared to do.

Ministry of Commerce IP Program in DC December 5

Chen Fuli, IP Attaché at the Chinese Embassy in Washington, DC the morning of December 5.   The program is free of charge, but seating may be limited.   You should RSVP at: lishuai@mofcom.gov.cn.

The topics are all ones that I have actively followed in this blog.  Here is the tentative agenda:

International High Level IPR Cooperation Forum

Dec 5,  Georgetown Holiday Inn

2101 Wisconsin Ave, NW, 20007, Washington DC

 9:00-9:20  Opening remarks, by Both China and U.S. Representatives

 9:20-9:40   New developments in IP enforcement in China, by Director Jing Zhang from the Office of Fighting Against IPR Infringing and Making or Selling Counterfeit and Shoddy Products under the State Council

9:40-10:00  New amended Chinese Trademark Law, by Deputy Director General Qing Xia from CTMO

 10:00-10:15 Q & A

 10:15-10:30 Coffee Break

 10:30-10:50  Amending of Chinese Copyright Law by Deputy Director Ping Hu from NCAC

10:50-11:10  Amending of Chinese Patent Law and Regulation on Service Invention by director Yanhong Wang from SIPO

11:10-11:30  New practice of IP trials after the amendment of Chinese Civil Procedure Law by Judge Yuanming Qin from SPC

11:30-11:50 Q & A

11:50-12:00 Closing Remarks

—————-

12:00-13:30                    Lunch (hosted by China for all the participants)

In addition to the speakers noted above, there will also be Chinese official participants from public security, Customs, procuratorate, AQSIQ and other agencies, which should help make for lively discussion and interaction.  I hope to see you there!

The NBA and Its Continuing Trademark Battles

The July 9 issue of the SIPO Newspaper/ Trademark Weekly (http://www.tmweek.com/yw_list_danye.asp?newsid=1624) reports that Nike and Kobe Bryant are involved in the latest skirmish with an alleged trademark squatter.  A natural person in Fujian person has applied for a mark in class 18 for “科比 KB-KOBE” and obtained a registration against the opposition of Nike.  Nike asserted before the Trademark Review and Adjudication Board  that the mark infringed Kobe Bryant’s personality rights (rights to the name), and was in bad faith, and has since appealed the matter to the Beijing Number 1 Intermediate Court. Continue reading

Simulating the China IPR Enforcement case

For the past few years, I have been conducting moot court simulations of DS/362, the WTO US-China IPR “enforcement case” with students and colleagues at Fordham University and elsewhere. The heart of DS/362 was the US’s argument that, by establishing prosecution and conviction thresholds that were too high, China did not provide an adequate criminal remedy to address commercial scale counterfeiting and piracy. The WTO panel determined that the United States had not made out an adequate case that China did not, in fact, provide such protection.   The U.S. argued that China had not complied with an earlier request, under “Article 63” of the TRIPS Agreement, to provide additional data (including cases) about its IPR enforcement system that would have been germane to the case, while the panel believed that such data would not have been difficult to obtain. Continue reading