Spring Time for IPR Case Law in China?

Guidingcase.jpgRecently, there have been two important developments involving IP-related guiding cases and precedent that shed light on these different approaches of the Supreme People’s Court, which is in charge of guiding cases, and the Beijing IP Court, which is looking at the role of precedent in China’s court system.  But first some background:

One of the most important continuing efforts on guiding cases is the Stanford Guiding Cases Project (SGCP), which is under the able, enthusiastic and collaborative leadership of Dr. Mei Gelchik.  The SGCP recently hosted a lively seminar at American University to discuss the latest developments, with a keynote by Judge Sidney Stein of the Southern District of New York (picture above).  In addition to the Stanford project, Susan Finder has written about guiding cases in her excellent blog and other postings, Jeremy Daum wrote an excellent recent article on the actual use of guiding cases, and of course there is this blog and others, in addition to  academic articles and recent  SGCP research.

Another significant development in exploring a system of case precedent is the research base established with the approval of the Supreme People’s Court at the Beijing IP Court.  The ecosystem evolving around that research base appears to me to be more practice oriented than theoretical.  As an example of this practice-oriented approach, the IP court is looking at the role of amicus briefs to ensure the interests of non-parties are heard, or en banc rehearings to reverse prior precedent.  A small, but important step in soliciting third party opinions has already been undertaken by the Beijing IP Court in a case involving trademark agents.

Among the two contrasting recent developments  Regarding the guiding cases project, on March 9, the Supreme People’s Court released 10 IP-specific guiding cases; nine of these are civil and one is criminal. The cases span all relevant IP laws, including copyright, trademarks,patents, plant varieties and antitrust.  Here is a link to a Chinese summary of the cases, and a  machine translation of these summaries (source: IPRdaily.cn, google translate).  I assume that the SGCP will do a professional translation of these in due course.  According to the SPC press conference, IPR-related guiding cases now constitute 23% of the total number of guiding cases.

Nonetheless, recent citation data  suggest that there has been little uptake of guiding cases in actual case decisions, as Jeremy Daum’s article points out in his posting:

“Guiding Cases are almost never referenced: Over a five-year period, Stanford found a total of 181 subsequent cases, and PKU found 241. To provide a frame of reference, Chinese courts complete trial of well upwards of 10,000,000 cases per year…

50% of the guiding cases were never referred to at all

Almost half of the references found were to a single case; GC #24. …That case concerns traffic  accidents,…”

If one compared the nationwide references to guiding cases using, as an example, the 561 opinions referencing a guiding case out of 8,723,182 cases on the China Judgments Online website for 2016 (using a simple keyword search to “guiding case”), the citation rate would be about  0.0006%.

These developments on IP related case law at the SPC might be compared to the data in the January 10, 2017 report of Beijing IP Court.  The Beijing IP court cited 279 case precedents in 168 cases since the time the precedent base was established in 2016 until October 2016.  Cases were cited 121 times by parties, and judges undertook their own effort to cite cases in 47 instances.  In total, 117 cases relied on precedent in their decisions.  Of the 168 cases, there were 51 instances where cases were not relied upon due to a difference in facts.  There was no instance where a reversal was obtained of an earlier precedent.  Of the cases cited, 31 were from the SPC, 132 from High Courts (including 117 from Beijing), and others were from local courts.  If this data was further compared to the 8,111 cases concluded by the Beijing IP Court in calendar year 2016, the citation rate was a minimum of 2.1% based on the data provided through October, which is considerably higher than the guiding cases effort.

My impressions: the data from the Beijing IP Court suggests that the bar is using cases in its briefs, and the court is looking at these cases and exploring how to handle them as part of an overall system including amicus briefs, en banc review and other mechanisms.  The SPC’s guiding cases project is a more intensely curated project that also addresses a much larger national challenge in introducing a new way of developing law to civil law educated judges and the bar.  The comparisons between the two experiments are inexact as the Beijing IP court sits in one of China’s wealthiest cities, with a well-educated bench and bar, a sophisticated IP environment and considerable foreign (including American) interaction.  It is not surprising that nationwide uptake of a precedent system using a limited number of  guiding cases for a vast judicial system is more theoretical and slower than the one taking place at the Beijing IP Court using the 100,000 plus IPR cases that are adjudicated nationwide each year.

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Counterfeits in Microchannel Marketing … and Case Law

Amidst the escalating focus on online counterfeiting, piracy and patent infringement, online social media, such as WeChat are also becoming a source of infringing products, as documented in a Wall Street Journal article and other journals.  

James Luo (罗正红), a prominent IP lawyer in China, has been following these developments in his blog, where he recently reported on a Supreme People’s Court promoting of  ten model cases that promote “core socialist values” (最高人民法院关于弘扬社会主义核心价值观典型案例). One model case involved a couple that sold counterfeit goods through WeChat Moments, which was held to  constitute the crime of selling commodities bearing counterfeit registered trademarks 微信朋友圈销售假冒注册商标的商品案)。

The reason for the insertion of the case according to the court, was to promote “honesty in business.” As the court noted:

The case was a typical case of selling via microchannel marketing circle of friends, goods bearing counterfeit trademarks. …Compared with the traditional IPR criminal cases, the perpetrators of such crimes use relatively covert means, but the scope of their promotion and sale of counterfeit goods is broad with an adverse social impact.  …Currently, the “Consumer Protection Law” and the “Rules for Network Transaction Management” do not have specific provisions addressing microchannel shopping, and microchannel marketers do not have to register their business with the State Administration for Industry and Commerce.  The relevant laws and regulations need further improvement in this area. “

本案是一起通过微信朋友圈销售假冒注册商标的商品的典型案例。,利用微信朋友圈等新平台售假者也越来越多。与传统侵犯知识产权犯罪案件相比,这类犯罪作案手段相对隐蔽,但传播面广及推广速度快,销售假冒注册商标的商品涉及面广,社会影响恶劣。目前,消费者权益保护法和《网络交易管理办法》在微信购物方面还没有明文规定,而且微商没有经过工商注册登记,相关法律法规还需要进一步完善。

As the accused had intentionally sold a relatively large amount of counterfeit goods, the defendants were found guilty of the crime of selling commodities bearing counterfeit registered trademarks by the Shaoguan Zhengjiang District People’s Court of Guangdong Province.  Sentences were imposed of  6 – 7 months and a fine of RMB 15,000.

In my opinion, this case appears to be headed in the right direction in terms of addressing the use of social media to commit IP crimes.  The court suggests that the case was important to fill in the gaps in the current legislative regime based on technological changes – the way in which criminals do business online.  This is a typical evolution for IP-related case law in the United States, where courts have a record of using existing statutory provisions to address emerging technologies or ways of doing business.

Why this case was categorized as promoting core socialist values?  Perhaps it promotes socialist core values because it addresses problems in the market of unscrupulous unlicensed individuals who transact business without basic principles of good faith and fair dealing and is thus intended to send a policy signal to other courts and the legislative agencies.

How do these cases compare to other types of cases that the court is promoting?  In my opinion, China is paying more attention to cases to guide judicial decisions and create a more predictable legal environment, with 20,000,000 court cases available on line and new regulations on publishing cases in effect.  China is seeking  to develop a Chinese style system of precedent, and has elicited  much government and academic involvement, including scholarship in journals.  These cases need to be compared to the efforts to become more transparent, promote “model cases”, the system of guiding cases,  judicial interpretations, etc., which are all part of an evolving system intended to insure greater consistency of judicial decision making and address emerging issues.

Addendum of 1/1/2017: Here is a useful blog by Jeremy Daum  from 31 August 2016 on the Beijing IP Court’s experiment in precedent, which lines up nicely with the perspective in my blog.

Three Upcoming Programs

Here are three upcoming programs:

Stanford is hosting a program on guiding cases at Stanford on Wednesday April 6, 2015.

The China General Chamber of Commerce is hosting a programChina-U.S. Intellectual Property Cooperation Dialogue & Chinese Brands Going Global Forum” on April 11, 2016 from 9:30 to 12:30 in New York City.  I will be moderating a session on IP developments in China, with leading companies, lawyers and officials.

George Washington University Law School is hosting a program with USPTO on IP developments involving China on April 14, 2016.  The program looks at challenges faced by US companies in China and challenges faced by Chinese companies in the US.  A dozen Chinese officials, including six judges will be attending the program.  I will be moderating the program with Dean John Whealan.  These programs are usually sell-outs, so please pre-register if you are interested in attending.  Here is the draft agenda. Registration is required for security to gain access to the USPTO, here’s the link: http://goo.gl/forms/TeyiFahzY8 .

Justice Tao Kaiyuan and the Role of the Judiciary

MadameTaoMichelleLee

Justice Tao Kaiyuan of the Supreme People’s Court, who had been to the United States in 2015 delivering important speeches on rule of law, has recently published an article on “Giving Full Play to the Leading Role of Judicial Protection of IP Rights“ 充分发挥司法保护知识产权的主导作用”(Dec. 31, 2015).  The article is receiving considerable attention in China, as it was published by Qiu Shi, 求是(“Seeking Truth”), a bimonthly political theory published by the Central Party School and the Central Committee of the Communist Party of China.  The publication of the article appears to be timed with the release of the recent draft of the Patent Law Amendments, comments for which were due the day after publication (January 1).  The proposed patent amendments would strengthen the role of administrative agencies in IP enforcement, to the possible detriment of the judiciary.

The author of the article is no less important than its contents.  Madame Tao knows patents.  She was the former Director General of the Guangdong Patent Office and therefor once had “vertical” reporting responsibility to SIPO (see picture above taken by me of Madame Tao [on the right] with USPTO Director Michelle Lee taken in 2015).  Although the article was authored in her name, many in China were speculating that the article was approved by higher authorities – perhaps Zhou Qiang, the President of the Supreme People’s Court, with Madame Tao serving as an appropriate messenger.

The concerns about this draft on patent law enforcement are not that different from those in the earlier (2012) draft when I blogged in “Why the Proposed Amendments to the Patent Law Really Matter … and Maybe Not Just For Patents” that “the changes strike me as a rather sudden about face in China’s march towards better civil protection of IP.” Madame Tao takes this several steps further.

Madame Tao’s article is divided into three parts: (1) The important meaning of giving full play to the leading role of the judicial protection of IP rights; (2) The key factors that constrain the leading use role of judicial protection of IP; and (3) Key measures in giving full play to the leading role of judicial protection of IP rights.   Here are some of the points she makes:

Madame Tao refers back to the National IP Strategy and related documents, such as the Third Plenum, the NPC’s decision to establish IP courts, and the Action Plan for the National IP Strategy to underscore the well-established, leading role of the courts in enforcing IP.

Her article compares certain key elements of judicial protection versus administrative protection.  In her view, judicial enforcement can curtail abuses of administrative enforcement.  It also has other advantages.  It has clear rules.  It is transparent.  It can help establish guidance for businesses by establishing clear standards for similar disputes (a possible nod to efforts at developing case law/guiding cases).  Moreover, civil enforcement comports with notions of private ownership and the development of markets and creation of a fair competitive environment in China.  Madame Tao especially underscores the role of the courts in supervising administrative agencies.  As I have noted, this is also an important part of the foreign IP docket in China.  Madame Tao states that the judiciary should also actively guide administrative law enforcement in investigation and review of evidence, and determination of infringements.

Madame Tao also calls for greater coordination in administrative and judicial roles in IP protection, noting that administrative enforcement played an important leading role in the beginning of China’s IP enforcement environment.  Administrative enforcement has “in a short time met the need for building effective IP protection.”  However, the “growing maturity” of the judicial system has caused increasing problems in the coordination process.

Madame Tao also calls for specific policy initiatives, many of which are already underway.  She calls for greater deterrent civil damages, including by revising patent, copyright and unfair competition laws based on experience of the trademark law revisions.   She also suggests that a discovery system should be considered.  Civil and criminal divisions in IP should be unified.  She suggests that a specialized national IP court should be researched and promoted, and she calls for the unification of technical appellate cases, perhaps like the CAFC.  She also notes that the division between infringement and validity determinations in the courts in patents and trademarks should be addressed, and calls for improvements in the availability of provisional measures.

She calls for greater improvements in judicial protective measures, including in obtaining evidence and the convenience and effectiveness of remedies.  Among other specific judicial reforms, she also suggests exploring intellectual property case law, improving judicial accountability and developing judicial professionalism.  Finally, Madame Tao also calls for expanding international awareness by IP judges to better protect national interests and to increase China’s IP influence.

Altogether, a tour de force.

Here’s what her speech looks like in a machine-translated wordcloud:taowordcloud