Forthcoming Webinar on Developments in SEP Prosecution and Injunctive Relief in China

The Federal Circuit Bar Association and USPTO announced on July 17, 2017 that they are hosting a webinar on the latest research and developments in standards essential patents (SEPs) in China on July 25, 2017 from 9:00 to 11:30 AM, EST.  The draft agenda and suggested reading materials are available via the link here.  Registration is free and is required to participate in the program.  Some of the speakers will also be discussing live at USPTO, for which registration is also required.  The focus of the program is on developments and research in patent prosecution and injunctive relief for SEPs.

Collaboration vs Litigation in IP Licensing in China: 2016 Update

A string of articles and deals in the patent licensing sector are highlighting the increasing importance of collaborative licensing practices for foreigners to attract licensees.  Is such a collaborative approach to licensing necessary due to development, culture or other reasons?   

Let’s review some of the news from 2016:  VIA licensing, a subsidiary of Dolby has reportedly signed up Lenovo . as its newest member of the pool operated by Via for Advanced Audio Coding (AAC) patents.  IAM’s Jacob Schindler, quotes Ira Blumberg, Lenovo’s vice president for intellectual property, who praises negotiators on the other side for “recognizing and flexibly addressing unique market circumstances applicable to China and other emerging markets”. Speaking with IAM, VIA president Joe Siino confirmed that his company is focusing on win-win collaboration opportunities.  Paul Lin of Xiaomi, which has a licensing agreement with Microsoft, has  observed that many Western companies make the mistake of  importing their usual licensing approach to China wholesale, and that a collaborative element needs to be introduced.  Also in 2016, former arch enemies Huawei and Interdigital entered into an  agreement,  announcing a multi-year, worldwide, non-exclusive, royalty bearing patent license agreement  to settle all proceedings.  The two companies (frenemies?)  put in place a “framework for discussions regarding joint research and development efforts”, including a “process for transfer of patents from Huawei to InterDigital”.

Yet, it was also apparent in 2016 that traditional, non-collaborative approaches, continue to have some vitality particularly where recalcitrant licensees are involved, such as the case Qualcomm brought against Meizu, a reported law suit by Dolby Labs against China’s Oppo and Vivo in India’s High Court of Delhi, or the SEP case brought by Wireless Future Technologies against Sony in Nanjing.  The high win rate for foreigners should also be acting as an additional incentive to use the Chinese litigation system, although foreigners continue to play a disproportionately small role of foreigners in IP litigation in China (about 1.3% of the docket).

There may, indeed, be greater incentives for foreign licensors to seek Chinese partners at this time.   One of these factors is of course the size of the Chinese market itself, including a greater reliance on the Chinese domestic market by potential Chinese licensees/infringers, which may provide incentives to licensors to find longer-term licensing mechanisms through close collaboration with a Chinese partner. In looking at IP-related partnerships, most Chinese companies have IP strategies that still tend to be inwardly focused, by having strong domestic portfolio supported by local subsidies, and thereby making them challenging adversaries for practicing foreign entities in domestic litigation.  At some point, these strong domestic portfolios may also encourage collaboration by a foreign company with a Chinese company as an effective way for the foreign company to boost its domestic Chinese portfolio.  Other factors include the greater intervention by the state in monetization of IP rights, which encourages development and ownership of core IP by Chinese companies, with state subsidies and banking support.  Another factor which encourages collaboration is the Technology Import/Export Regulations of China, which encourages related party licensing between the US and China to avoid mandatory indemnities and grant backs. 

There may also be disincentives for US companies from being too US-focused in conducting R&D and IP monetization at this time.  The AIA, legal uncertainties over the scope of patentable subject matter in the United States and changes in the litigation environment may also be weakening the value of patent rights and ultimately acting as a disincentive to investment in new IP-intensive enterprises.  At the same time, Chinese companies have been increasingly investing overseas, including within the United States, and have shown a willingness to bring law suits in the United States (such as Huawei’s suit against Samsung in California) and may have reciprocal needs for a US partnership, as they seek to license their rights in the United States and elsewhere.  Such a need may be at the heart of the Huawei/Interdigital deal, discussed above.

In my estimation, collaborative approaches to licensing are responses to market and legal challenges in China as well as part of China’s maturing engagement on IP issues, including its own talented labor pool and potential as an innovative economy.  Collaborative approaches to licensing are part of greater trends in collaborative IP creation with China.  In 2015, Qualcomm may have kicked off this current trend when it announced a 150 million USD investment fund in China around the same time as its settlement of its antitrust dispute with China.   In addition, we are seeing greater Chinese participation in cross border R&D.  The Global Innovation Index noted the increasing importance of such international collaboration to China last year and  that “the Chinese innovation system is now densely connected to sources of expertise everywhere.” (p. 93).  Chinese companies had “the 7th largest foreign footprint of all countries with 178 R&D centers set up or acquired outside China by year end 2015.”  USPTO data also shows greater co-inventorship in Chinese patent applications, there is also  greater Chinese participation in international standards setting, and greater Chinese co-authorship of scientific publications (now at about 15%). Hollywood is also seeing a high degree of collaboration, in the form of co-productions, investments, and other collaborative mechanisms.

Collaboration in IP creation is occurring in response to changing market circumstances – developmental, economic, legal and perhaps cultural.  It is no surprise that it is also appearing in licensing transactions.

Qualcomm’s Litigation Strategies and Recent IP Developments in China

反者道之動。弱者道之用。 (, Chap. 40) (Return is the movement of the Dao. Yielding is the way of the Dao.  Daodejing, Chap. 40.)

To the uninitiated, Qualcomm’s licensing practices in China must appear confusing.  Since paying a fine of 975 million USD to NDRC – about 50,000 times average patent damages according to the CIELA database for its Standards Essential Patent licensing practices, Qualcomm has entered into approximately 100  licensing settlements with Chinese companies.  How can the weak become so successful, so soon?

According to press accounts, Qualcomm has settled with the major cell phone manufacturers in China,  most recently with Chinese cell phone companies Vivo and Oppo.  Both deals came after Qualcomm decided to bring law suits against cell phone manufacturer Meizu in the Beijing and Shanghai intellectual property courts for damages that reportedly total about 520 million RMB.  The first law suit was filed by Qualcomm around June 23 at the Beijing Intellectual Property Court.   The complaint essentially sought to enforce an NDRC rectification plan imposed on Qualcomm against other infringers/potential licensees.  The original complaint, according to Qualcomm’s press release “requests rulings that the terms of a patent license offered by Qualcomm to Meizu comply with China’s Anti-Monopoly Law, and Qualcomm’s fair, reasonable and non-discriminatory licensing obligations.  The complaint also seeks a ruling that the offered patent license terms should form the basis for a patent license with Meizu for Qualcomm’s fundamental technologies patented in China for use in mobile devices, including those relating to 3G (WCDMA and CDMA2000) and 4G (LTE) wireless communications standards.”  Since that filing, Qualcomm filed 17 new complaints were filed in Beijing and Shanghai.

Given the risks to Qualcomm posed by seeking injunctive relief for standards essential patents, Qualcomm appears to have initially launched its litigation campaign against Meizu by enforcing the NDRC approved licensing terms against one hold out company who might thereafter be left with an unfair competitive advantage.   Qualcomm appears to be reducing its antitrust risks by first getting “immunized” by NDRC, and then enforcing the terms of the NDRC “rectification plan” and couching its patent infringement litigation in terms of promoting fair competition.  This in effect has turned the tables on recalcitrant licensees who have previously relied on Qualcomm’s FRAND commitments to reduce the risk of being sued by Qualcomm by threatening an antitrust counterclaim.  What remains to be seen, however, is the legal status the court affords the rectification plan given the often unclear relationships between judicial and administrative decision making.

Qualcomm’s GC, Don Rosenberg said Qualcomm is taking legal action out of a sense of fairness to other companies that are paying what they owe.  In addition, the case represents a vote of confidence by Qualcomm in the court system.  As Don Rosenberg noted “”We’re putting our faith in the court system there and we wouldn’t do that if we didn’t think we were in capable hands.”  Qualcomm may no doubt have been inspired by the success of its licensing program as well as the perfect or near perfect win rate in the sixty five infringement cases filed by foreigners in 2015 in the Beijing IP court.  As I have noted repeatedly on this blog, foreigners do win IP cases in China.

In China’s current legal environment,  where licensing is burdened by seemingly contradictory norms – e.g., where the Chinese government sets prices for license transactions in antitrust cases, restricts the freedom to negotiate of foreigners, provides tax incentives for licensing in to China for high tech enterprises, sets national goals for licensing transactions, and where the courts seem to have difficulty imposing damages based on actual or implied royalties, Qualcomm appears to be turning the 975 million dollars of “lemons” of the  NDRC fine, into a vat of lemonade.

Qualcomm’s vote of confidence in the courts in a high stakes case may also help set an important model for other foreign and Chinese rightsholders, potentially by highlighting such important issues as: Yes, foreigners win cases in China, the importance of actual or explicit license agreements for determining damages (already being tried in some jurisdictions, see: 江苏固丰管桩集团有限公司 vs 宿迁华顺建筑预制构件有限公司 (Jiangsu, 2015), and the respective roles of patent law,  antitrust law, the courts and administrative agencies, in obtaining SEP licenses in China.

Qualcomm and China both have a lot at stake in the handling of SEP issues.   A recent report by Thomson Reuters (The Evolving Landscape of Standard Essential Patents: Keeping What is Essential, Sawant and Oak), showed that Qualcomm owns 17% of the patent declarations before the European Telecommunications Standards Institute, followed by Nokia, Huawei, and InterDigital.   Decisions in Europe such as Huawei vs. ZTE may also have underscored the importance of looking at whether a putative licensee/infringer is in fact negotiating in good faith with a FRAND encumbered licensor.

Judges such as  Zhu Li of the SPC have noted some of these changes publicly.  As Zhu Li said in a recent blog:

…标准必要专利权作出FRAND承诺即自愿放弃了在任何情况下寻求禁令救济的选择,更不意味着其寻求禁令救济一定产生反竞争的效果。因此,作出FRAND承诺的标准必要专利权利人寻求禁令救济的反竞争效果仍然需要具体分析判断。

[T]he owner of standard essential patent FRAND commitment that is made voluntarily does not give up under all circumstances the choice of seeking injunctive relief.  Furthermore, it does not mean seeking injunctive relief must produce anti-competitive effects. Therefore, when a holder of a FRAND encumbered SEP seeks injunctive relief, the anti-competitive effects still need specific analysis and judgment。

The evolving practice appears to be that the evidentiary burden to demonstrate that the infringers have refused to pay a license fee is on the licensor and, as Zhu Li noted,  a monopoly is not necessarily constituted when an injunction is requested by SEP owners.

The State Council’s recent opinion on how China should become a “strong” IP country, also highlighted how China needs to draft rules on standard essential patents that are based on FRAND licensing and “stopping infringement” (Art. 38) (with the involvement of AQSIQ, SIPO, MIIT, and the Supreme People’s Court) and that encouraging standardization of Chinese patents also remains a priority (Arts. 61, 71).

As I indicated elsewhere, a key question for China is “What circumstances exist to suggest that a prospective licensee is engaged in patent hold-out, i.e., refusing to license in good faith which might suspend the licensor’s F/RAND obligation…”  Hopefully China is beginning to ask the better questions that are suitable for its licensing environment and its efforts to become a “strong” IP economy.

What are you observing in this hot area? Please post your comments and corrections!

The preceding is the author’s personal opinion only.

lemonade

Slouching Towards Innovation – A Survey of the Surveys on China’s IP Environment

Here is a summary of the business surveys on IP protection in China, drawn from the European Chamber of Commerce in China, Business Confidence Survey 2015 (June, 2015), the US China Business Councils’ 2015 USCBC China Business Environment Member Survey (Sept. 2015), the American Chamber of Commerce 2016 Business Climate Survey (“Amcham China” Report, Jan. 2016), and Amcham Shanghai’s 2016 China Business Report (“Amcham Shanghai” Report, Jan. 2016), and others.

IP Issues a Core Concern

While IP issues are less dominant than in recent years, businesses report that IP is still critical to them. When Amcham China respondents in all sectors addressed what they considered their competitive advantage versus Chinese domestic entities, three of their top four perceived advantages were IP-related: Brands (74%), Technology & IP (63%), and Development and Innovation (59%). USCBC respondents listed IP concerns in a number four priority slot, having dropped from number 2 in 2014. However IP issues have averaged as a number 4.5 priority over the past ten years, so the drop is not that significant. According to Amcham Shanghai’s survey, 49% of respondents believed that lack of IPR protection and enforcement constrains their investment in innovation and R&D in China.

Still different IP concerns vary in their impact on different businesses. For example, tech companies in the USCBC survey noted the following IP-related issues in their top 10 challenges: Innovation policies (number 2), IPR enforcement (number 5), cybersecurity (number 6), government procurement policies (number 7), standards and conformity assessment (number 8) and antitrust/antimonopoly law (number 10).

IPR Enforcement is Improving

On the brighter side, 91% of respondents of the Amcham survey indicated that IPR enforcement had improved over the past five years, a view that was generally shared by USCBC respondents (38% reported some improvement over the past year).

USCBC’s survey addressed the most viable options for IP enforcement: administrative enforcement had a slight edge in terms of viability in some or most cases (78%), followed by civil cases (70%) and criminal courts (57%).

The data also suggests that trade secrets will be of continuing concern. Amcham China respondents were least satisfied with trade secrets legislation and enforcement (45/40%).  Amcham China respondents were most satisfied with patent legislation and patent enforcement (66%/54%), followed by trademarks (62%/51%) and copyrights (57%/48%). USCBC respondents similarly rated trade secrets as their top area of concern (32%) followed by trademarks (28%), patents (22%), and copyright (9%).

Of particular importance for trade secret protection are challenges noted in responses to surveys in attracting and retaining talent.   According to the Amcham survey, among the principal challenges in attracting the right talent were competition from local businesses (45%), and competition from other foreign businesses (34%). Data security and cybersecurity were also identified as concerns by many surveys.

China’s Efforts to Innovate Leads to More Foreign R&D in China

Innovating in China has clearly become a priority for the foreign business community. The EU Chamber notes that China R&D centers are increasingly achieving global levels of innovation, although a large percentage (42%) are primarily focused on product localization. According to USCBC, about 43% of large member companies had established an R&D center.

European companies viewed innovation as one of five most critical drivers needed to move the Chinese economy up the value chain. The USCBC report notes that more than 9 out of 10 US companies believe that innovation in China will be critical to their company’s future in China, with 40% of the companies reporting that that half their profits came from products designed, developed or tailored to local requirements (an increase from 32% last year). Companies prioritizing investment in R&D, according to the Amcham Shanghai survey, were in hardware, software and services (81%), automotive (65%), industrial manufacturing (55%) and health care (35%).

Continuing Concerns about Technology Transfer

USCBC reported that 59% of respondents expressed concern about transferring technology to China. Twenty three percent of USCBC respondents advised that their company had been asked to transfer technology to China and that central or local governments had requested the technology transfer 60% percent of the time. Concerns about technology transfer included maintaining protection of the proprietary information during certification/ approval (83%), protection of IP (75%), enforcing license agreements (51%) and the government dictating or influencing licensing negotiations (32%). Nonetheless, according to USCBC, technology transfer concerns fell out of the top twenty this year, to number 23 out of 30. However the USCBC noted that the companies impacted by this issue felt it “very acutely”.

Innovation Policies Not All Positive

Thirty two percent of technology and other R&D Intensive industries that responded to the Amcham China survey indicated that China’s increasing capability for innovation presented an important opportunity for their business. However, as the preceding data suggests, not all of China’s innovation and IP policies have been perceived to be positive by foreign industry. Fifty-five percent of USCBC tech companies stated that China’s innovation promotion policies had a significant negative impact on sales to date, or had a significant negative impact on sales or operation. Also of note was that 75% of USCBC respondents indicated that they limited the products that they introduced into China because of IPR concerns. In addition, 37% of USCBC respondents indicated that China’s level of IPR enforcement limited R&D activities in China, as well as limited products co-manufactured or licensed in China. The Amcham China survey also noted that 83% of technology R&D intensive companies feel less welcome than before.

Aggressive Antimonopoly Enforcement of Concern to Foreign Companies

Eighty percent of USCBC respondents were concerned about antimonopoly law enforcement in China. Among the key substantive issues were: (a) lack of transparency in AML cases (55%), excessive focus on foreign companies (50%), lack of clarity on key criteria and definitions (49%), lack of due process (29%), and inability to have legal counsel (26%).

Rule of Law: Another Overarching Concern

One common thread amongst antimonopoly and IP concerns was rule of law. The EU Chamber Report contains the most information on desires of foreign companies for the Chinese government to improve the rule of law, with 39% of European businesses rating the Chinese government’s efforts in 2015 as “below expectations”, and rule of law perceived as the main driver of future economic growth by 78% of respondents. For Amcham China, 57% of respondents believed that inconsistent regulatory interpretation and unclear laws were their top business challenge in China. Legal reforms were identified as the top reform priority by Amcham Shanghai members.  USCBC respondents rated uneven enforcement of Chinese laws, as their number nine challenge, however companies reported that the problems are persistent and worsened in the last year.

Putting China in Context: Not All That Patents Is Innovative

There are other reports that have been released have recently been released that also place China in a comparative perspective. The Information Technology & Innovation Forum, for example, recently issued a report Contributors and Detractors: Ranking Countries’ Impact on Global Innovation, which ranked 56 nations on how much they contribute or detract from global innovation. China ranked 44, and was classified as an “innovation mercantilist” that “significantly balkanize[s] both global production and consumption markets” and has “generally weaker protection” for intellectual property than the global norm. However, China does perform better than “innovation follower” countries in contributing to the global innovation ecosystem, largely due to investments in STEM fields and high numbers of graduates in those areas. China ranked twenty eight out of fifty six in terms of contributions, and was among the top five detractors from global innovation, according to this report (behind Thailand but ahead of India, Argentina and Russia).

Thomson Reuters in its China’s IQ (Innovation Quotient) Report (December 2015) analyzed China patent filings. The IQ Report noted that citations of Chinese patents had increased. In data processing patents, China had forward citation data of 1.17 This was much less than the United States (6.72), but comparable to Japan (1.82), and Europe (1.31), and better than South Korea (.78). Interestingly, another Thomson Reuters report on the top 100 innovators (2015), declined to include a single Chinese company. Huawei did appear as a top innovator in 2014. Its antitrust adversary, InterDigital, was considered a top innovator in 2015.

Policy Outcomes

The USCBC’s Board of Directors recently outlined its priorities for the year, which included: strengthening IP enforcement, including deterrent civil and criminal remedies; improving enforcement against online infringements; strengthening trade secret protections; harmonize patent examination practices; reforming China’s system of innovation incentives (HNTE incentives/service inventions). Other USCBC recommendations in transparency, antimonopoly law, and ecommerce also have IP-related implications.

Summary

There may be a number of reasons for the repetition in these reports, including a common core of concerns, a focus on issues in the media and bilateral relations, and common membership among the organizations. The location and membership of each organization can still result in different perceptions. Moreover, certain rights, such as copyrights, tend to be of core concern to fewer industries some of which, such as the entertainment sector, may be less extensively invested in China. As such, the surveys reflect concerns and priorities, and may not necessarily represent researched approaches to resolving specific problems of concern to all American industries. The surveys may also not align well with China’s own surveys such as on software piracy, where China has offered a counter-survey that counts other incidences of piracy, or on satisfaction with China’s IP system. As for satisfaction at least, it is all subjective. In some cases, the survey data likely aligns well with other factual or empirical data, such as licensing revenues, damages in antimonopoly law cases, IP enforcement activity, etc.

Here’s what this survey of the surveys suggests to me:

  1. China’s IP laws are generally good and its enforcement is improving but still problematic.
  2. China has become deeply interested in patents and innovation, which will present important strategic opportunities over time.
  3. There remains a low level of confidence in trade secret protection in China, which can be a significant impediment to China’s innovative ecosystem.
  4. China’s innovation environment has become increasingly complex and nationalistic, leaving many foreign tech companies with a sense that they are less welcome.
  5. Reforms in the legal system and antitrust enforcement are a high priority.

The US Chamber will be issuing its latest International IP Index February 10 in Washington, DC. Let’s see how China stacks up there…

Any corrections or comments? Something I have missed? Please write us!

 

Federal Circuit Affirms Findings of Non-Infringement and Invalidity in Interdigital 337 Appeal

In a non-precedential opinion authored by Chief Judge Prost and released today, the Federal Circuit  affirmed findings of non-infringement or invalidity in the five patents asserted by InterDigital in Certain Wireless Devices with 3G Capabilities and Components  thereof,Inv. No. 337-TA-800 (Dec. 19, 2013), in which Huawei and ZTE, amongst others, were respondents.  Huawei initiated  law suits in China in response to InterDigital’s original 337 filing, including claims for prospective damages for abuse of dominance by reason of InterDigital’s seeking an exclusion order at the ITC for claimed standards essential patents.

 

A Quick Report on the EIPC MIIT Conference Including SAIC’s IP Abuse Rules, Patent Law Amendments, EIPC MIIT Standardization Policies, Standards and IP Abuse…

EIPC MIIT’s Conference on Intellectual Property Standards and Anti-Monopoly Law convened on December 10 and 11 in Beijing.  The conference brought together about 150 international and Chinese experts, including lawyers, judges, academics, diplomats, and other professionals to the Wanshou Hotel in the Haidian District, Beijing.  There were over over 30 speakers. The initial speakers set the tone for the conference by concentrating on one theme:  China’s anti-monopoly regime had entered a new phase from theory to enforcement.  Further, this transition period is characterized by the need to balance anti-monopoly law and IP rights, regulation and innovation.

One example of the struggle for balance is the debate over the prevalence and importance of holdouts, or the practice of standards implementers engaging in conduct intended to drive royalties down royalties for Standards Essential Patent (SEP) holders to lower than F/RAND levels.  Dina Kallay, Director of Intellectual Property and Competition at Ericsson Ltd.  argued the problem of hold outs was real.  David Wang, Director of Standards and IPR Strategy, Intellectual Property Rights Department of Huawei Technologies Co., argued that that there is no evidence of real life hold outs.  His opinion comes in light of Huawei’s recent litigation with IDC, in which a court ruled that IDC should compensate Huawei for excessive pricing and tying practices.

Many speakers addressed current and future reforms.  Yang Jie, Director of the Anti-Monopoly and Anti-Unfair Competition Enforcement Bureau at SAIC, explained new revisions to its forthcoming rules on abuse of dominance and exclusionary relief (presumably, SAIC’s IP Abuse guidelines or rules). Since August, SAIC has modified seven articles. First, Yang Jie said that SAIC has maintained the “essential facilities” doctrine in the new version, however with some modifications. The doctrine will apply when an intellectual property right cannot be easily substituted in the relevant market, other players want to be part of the market, a refusal to deal would restrict competition or innovation in the relevant market, it harms the public interest, and the licensing of the patent would not negatively or unreasonably harm the interests of the patentee.

Yang Jie also explained that SAIC has adopted a narrow interpretation of refusal to deal for players in a dominant position.  It will only apply when the intellectual property right constitutes an essential element for production.  Moreover, a violation only occurs when the behavior limits competition. Additionally, in abuse of dominance, “abuse” must be considered parallel to other elements and the behavior must harm the public interest or consumer behavior.

Concerning guidelines for the standard setting process, Yang Jie explained that the rules do not include a special provision for horizontal agreements in the standard setting process, because this is covered under the provision for anti-monopoly agreements.  Furthermore, Yang Jie divided monopolistic behavior in the standard setting into standard setting procedures – for instance if a firm fails to say something in a patent application – and standard implementation, which would include violations of F/RAND commitments.  Yang Jie said that the standards clarify the “what should have been known” standard for the standard setting process.  For standard implementation, the guidelines add the requirement of restricting or limiting competition.  Additionally, the new guidelines will treat intellectual property rights the same as other property rights. In other words, SEP holders are not automatically deemed to have market dominant positions. Instead, a case specific analysis must show that a firm is “dominant” within the meaning of relevant provisions of the Anitmonopoly Law.

Lastly, the guidelines no longer include a specific provision targeting copyright collecting societies for abuse of dominance or restricting competition. Yang Jie explained that the provision was cut because there was no real evidence of copyright organizations abusing their position. That being said, enforcement agencies can still pursue copyright organizations as they are not otherwise exempt from the law.

Yang Jie also said that the official version has not yet been promulgated. The regulations have been submitted to relevant bodies within the State Council for review (note from Mark Cohen: it is unclear to me if this is registration with the State Council, or review by the Antimonpoly Enforcement Agencies, or another process.  If this document is an SAIC rule, then review by the State Council should be limited).

Zhang Yonghua, Deputy Director of No. 1 Division of the Legal Affairs Department of the State Intellectual Property Office of China (SIPO), provided details regarding the latest draft of the proposed patent law amendments.  The new draft empowers judicial and administrative bodies with the right of investigation and evidence collection. It also allows administrative agencies to effectively settle infringement issues by compensation.  Furthermore, the draft provides for punitive damages for severe infringements, a concept already employed in China’s trademark law. Additionally, protection for industrial design is extended to 15 years. The new draft also introduces a burden of proof shifting scheme in which the burden of proof shifts once the patentee has satisfied certain of its evidentiary burdens.

Zheng Wen, Deputy Director General of the Anti-Monopoly Bureau, focused on the need for improvement in the merger review process of MofCOM.  Zheng Wen said that MOFCOM had received over 1000 cases since August 2008 and had finished over 900, imposing sanctions in only 3% of the cases.  Zheng suggested that there was a need to impose more sanctions and to crack down on parties that illegally skipped merger review.  Since November, MOFCOM has been publishing notices of sanctions on parties that did not report their proposed merger but should have.  Zheng Wen also expressed the desire to set up a long term cooperation mechanism with the E.U. and U.S., especially for large scale transnational mergers.

Huang Yong, Vice Chair of the Expert Advisory Committee under the State Council Anti-Monopoly Commission, stated that allowing agencies the rights of investigation and suggestion would be a step in the right direction.

Concerning the new Specialized IP Courts, Jin Kesheng, Deputy Chief Judge of the IPR Tribunal and senior Judge of the Supreme Court said that we could look forward to a judicial interpretation regarding the role of the court’s “technology investigator” position.  Additionally, Zhang Xiaojin, Chief Judge of the Second Tribunal in the Beijing Intellectual Property Court, expressed serious concern over the new court’s ability to handle their large caseload. For instance, the Beijing specialized IP court has 100 staff in total, only 22 of whom are judges and the court is expected to receive 15,000 cases annually.  He expressed further concern over their ability to carry out judicial reform while so severely understaffed.

Finally, Shi Shaohua of EIPC MIIT spoke about feedback to EIPC MIIT’s own Template for IP Policies in Industry Standards Organizations, (which I previously wrote about here). Two criticisms were that the structure was too complicated and that courts do not have sufficient expertise to adjudicate F/RAND issues; injunctions and unwilling licensors;  and reference factors for unreasonable licensing, including factors such as the smallest component or device, the total aggregate royalties of all potential SEPs, the influence of standards on patents, and the extra value that standards bring to a patent.  EIPC MIIT also received comments concerning reciprocity requirements, for instance what standard should be employed and whether adding restrictions to SEP licensing will influence cross-licensing, market access, and reciprocity.

The conference also included presentations on Legal Issues of Competition in Internet Industry” and “Internet Based Information Security and Intellectual Property Protection” which unfortunately we were not able to cover.

Prepared by Marc Epstein of Fordham Law School with edits by Mark Cohen.   A special thanks to EIPC MIIT and Shi Shaohua for allowing a Fordham student to attend this important conference!  Please provide us with any corrections, additions or comments!  As always, these comments are the authors’ own.