New SPC Guiding Opinion on E-Commerce and IP

On September 12, 2020, the Supreme People’s Court issued its new “Guiding Opinion on the Trial of Civil Cases of Intellectual Property Rights Involving E-Commerce Platforms”  关于审理涉电子商务平台知识产权民事案件的指导意见 (the “Guiding Opinion”).

This Guiding Opinion explicitly references China’s E-Commerce law.  A translation is available here. I previously discussed the drafting of that law here.  As best I can tell this document was not anticipated in the SPC’s JI drafting agenda of earlier this year.    That is likely because strictly speaking a “Guiding Opinion” is not a judicial interpretation.  As one observer has noted: “These notices and opinions encourage judges to make decisions, or local courts to explore new mechanisms based on their attitudes. The SPC will sometimes formulate official judicial interpretation based on the judicial practice after these documents are published.”

The Guiding Opinion should further help implement obligations set forth in Section 1 (E) of the Phase 1 Trade Agreement regarding “Piracy and Counterfeiting on E-Commerce Platforms”, although It is not a specifically enumerated “deliverable” in that Agreement.  The Phase 1 Agreement does include a number of specific reforms that the US and China agreed to, including “extend to 20 working days the deadline for right holders to file a judicial or administrative complaint after receipt of a counter-notification”; “ensure validity of takedown notices and counter-notifications, by requiring relevant information for notices and counter-notifications and penalizing notices and counter-notifications submitted in bad faith” and  that “China shall provide that e-commerce platforms may have their operating licenses revoked for repeated failures to curb the sale of counterfeit or pirated goods.”  These reforms may be reflected in other legislative or judicial acts.

In the absence of a complete translation, I offer here one provision regarding implied knowledge of infringement by an e-commerce platform in the Guiding Opinion ,which is likely intended to help implement Arts. 38, 41, 42 and 45 of the E-Commerce law:

“电子商务平台经营者存在下列情形之一的,人民法院可以认定其“应当知道”侵权行为的存在:

  (一)未履行制定知识产权保护规则、审核平台内经营者经营资质等法定义务;

  (二)未审核平台内店铺类型标注为“旗舰店”“品牌店”等字样的经营者的权利证明;

  (三)未采取有效技术手段,过滤和拦截包含“高仿”“假货”等字样的侵权商品链接、被投诉成立后再次上架的侵权商品链接;

  (四)其他未履行合理审查和注意义务的情形”

“The People’s Court may determine that an e-commerce platform operator ‘should be aware of’ the existence of infringement under the following circumstances:

1) Failure to perform legal obligations such as formulating intellectual property protection rules and reviewing the operating qualifications of operators on the platform;

(2) Where there is no review of the proof of rights of operators whose store types on the platform are marked as “flagship store”, “brand store”, etc.;

 (3) Failing to adopt effective technical means to filter and block infringing product links containing the words “high imitation” and “fake goods”, and links to infringing products that are re-listed after the complaint is established; and

(4) Other circumstances where reasonable review and care obligations are not performed.”

What constitutes “effective technical mean to filter and block” or  “reasonable review and care” are key issues in the Guiding Opinion and for the future.  This Guiding Opinion offers some concrete examples. As technology evolves in such areas as machine learning and recognizing of fake products and fake product purveyors, the concepts of “effective” and “reasonable” may necessarily evolve.  These changes in technology could impose greater technical and financial obligations on e-commerce platform operators. As I recall, the evolving nature of these technologies was discussed about a decade ago by the late Prof. Guo Shoukang and hosted by AmCham on e-commerce liability, and it remains true today. 

Terms such as “effective” and “reasonable” in the Guiding Opinion offer an opportunity for the courts to flexibly address newly emerging challenges as they arise.  These general concepts are also in synch with a trend towards greater flexibility by the Chinese courts in addressing emerging legal and technical challenges in China.  As with the definitions of “bad faith” which are also described in the Guiding Opinion Arts. 6, 8 and 10 for platform business operators  and rights holders providing notifications and counter-notifications of infringement, the concept of “implied knowledge” is part of a broader effort to incorporate “good faith” -type obligations into Chinese IP and civil law generally. 

Please send in any corrections or comments.

Translation of Draft Patent Law Available

Thanks to He Jing of the Anjie Law Firm, attached please find an unofficial line-by-line translation of the recently released Patent Law Amendments 2nd reading.   Comments are due August 16, 2020.

Some highlights of this draft:

Partial Design Protection

Article 2 adds language back in to allow partial design protection.  This is a welcome development.  Article 42 also maintains the earlier draft’s extension of the duration of the design patent to 15 years.

Patent Abuse

Article 20 clarifies that the abuse of patent rights to exclude or restrict competition constituting a monopoly shall be dealt with under the anti-monopoly law.  The AML is itself under revision.

Good Faith/Public Interest

Article 20 continues to require “good faith” in patent filings and the exercise of patent rights, an important concept borrowed from the Trademark Law revisions which is having an increasing substantive impact.  The limitation that patents shall not be “allowed to harm public interests” raises similar concerns to me to the recently proposed amendments to the Copyright Law, about the definition of “public interest.”

Pharma Issues – Patent Term Restoration and Linkage

The notices of the NPC regarding the draft law, state that pharma-related IP issues were drafted to implement ‘”trade agreement(s).”   These are reflected in proposed Article 42 which provides for patent term restoration.  This draft removes the requirement of the “synchronous” launching of marketing approval outside of China with approval in China in order for patent term restoration to be granted.

Article 75 also sets forth an outline for a patent linkage regime, and calls for the drafting of more detailed measures to further implement the provisions.  Under this proposal, the innovator challenges a generic applicant for marketing approval within 30 days of the announcement of the application.  If the patentee does not file a lawsuit, a generic company may also request a determination from the courts or patent office of non-infringement based upon the China Patent Information Registration Platform for Listed Drugs.  A court or administrative procedure on patent infringement should render its decision within 9 months.  This draft lacks an incentive provision for a generic to successfully challenge an innovator through granting of a first generic marketing exclusivity due to a successful challenge to the patents. This skeletal section is also drafted as an addendum to the statutory exemptions to infringement, which appears to be an awkward placement.

Damages and Liability

Joint liability of Internet service providers for patent infringement has been removed.

Minimum statutory damages of RMB 100,000 has also been removed.  Statutory damages are capped at 5 million RMB.  Quintuple punitive damages up to 5 times remain from the prior draft.   The statutory damage maximum increases to RMB 5 million (Art. 71). In addition to the continuing focus on increases in damages, this draft also continues the momentum for a larger role for patent administrative enforcement.

The extension of the statute of limitations to three years has been retained from the prior draft (Art. 74).

Several provisions address the proposed “open licensing” system (Chapter 6).

The draft also encourages a flexible remuneration system including “equity, options, and dividends” to enable inventors or designers to reasonably share the proceeds of innovation (Art. 16).

Update of August 16, 2020:  The American Bar Association Intellectual Property Law Section and Section of International Law have made their comments on the draft Patent Law Amendments available here.

 

 

 

Berkeley Webinar Recap

China Daily just published an article on June 23 on our June 17, 2020 webinar on patent eligibility. The publication also coincided with a blog by Prof. Adam Mossoff on opposition to Section 101 reform in the United States.  The webinar provided a counter-intuitive insight into important areas of patent law where China has been developing a more protective regime for patent-eligible innovations than the United States.

The next webinar on June 24, 2020, is on abusive trademark registrations.  This was a topic covered in the Phase 1 Trade Agreement and in Chinese legislative reforms of early 2019.  In my estimation, it is probably the IP issue most commonly encountered involving China’s IP regime by large and small US companies  – whether or not they have actually entered the Chinese market.  The program will be moderated by Prof. Eric Priest of the University of Oregon, with participation from the Chinese and US IP offices, as well as in-house and outside counsel.  Issues to be discussed include the successes in the Jordan/Qiaodan trademark dispute.  Registration information is here.