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

Statecouncilwordlcoud.PNG

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.

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

 

 

 

Synergies and Contrasts Between The National IP Strategy Action Plan and Fourth Plenum (with contrasting wordclouds)

 

“””NIPS

Here is an unofficial translation of the English language translation of the Action plan of the National IP Strategy (2014 -2020) (NIPS), about which I previously blogged. A wordcloud from this English translation is above – with an obvious focus on “management,” “strengthening,” “promotion” and “enforcement” and some mentioning of the “market.”  As the NIPS was released just weeks after the Fourth Plenum, it make a useful point of contrast on where China is headed on IP, including IP-related rule of law. An annotated version of the Fourth Plenum decision is available here for comparison.   For those with short attention span, or a strong visual orientation a wordcloud of the Fourth Plenum decision is found at the end of this post.  In short, the Fourth Plenum is emphasizing the “market,” “law” and “enforcement.”  The NIPS, however, seems to be all about strengthening the IP system.

The NIPS contains some interesting general goals, particularly in terms of developing IP intensive industries, including developing Chinese patent pools and Chinese cultural industries. promoting IP services, integration of IP into state science and technology plans, and expanding cooperation.   Some sticky issues, such as involving China’s multiple track system of protecting geographical indications will be changed into a unified system of some kind.  The NIPS also calls for a Chinese-type Section 337 remedy, as was originally contemplated in China’s Foreign Trade Law, ie., to “carry out investigations on infringement of Chinese IPR by imported products and other unfair competition acts in import trade.”

Regrettably, the NIPS keeps some of the failed metrics of its first implementation in place.  Patent filings will increase from 4 per 10,000 people in 2013, to 14 per 10,000 in 2020.  This means that SIPO will be receiving in excess of 6 million patent applications per year. In an implicit recognition of the problem I have noted that patent maintenance  is at least as important as patent applications, the NIPS also wants to increase the average maintenance period for invention patents from 5.8  years to 9.0  by 2020.  However this data point doesn’t resolve the problem of low maintenance rates for utility models and designs and it is to be hoped that in all cases, maintenance rates expand due to growth in the market and not due to the kinds of artificial subsidies that already plague China’s patent applications.   Among the market oriented targets, export growth in IP rights is also slated to grow from 1.36 billion USD in 2013 to 8 billion USD in 2020.  Commercialization-related goals reflect the goals of the Third Plenum, to increase IP utilization generally.

Here’s what the NIPS says about the judiciary:

“Strengthen.. the criminal law enforcement and the judicial protection of IP. We will intensify the investigation of IP crime cases and supervise the handling of key cases; persist in the combination of fight and prevention to gradually bring special campaigns onto the track of normalized law enforcement; strengthen the linkup between the administrative law enforcement of IP and criminal justice and intensify the handover of cases of suspected crimes; strengthen the trail of IP-violating criminal cases according to law, intensify the application of pecuniary penalty to deprive infringers of the capability and conditions for committing crimes again; strengthen the civil and administrative trial of IP to create a good innovation environment; provide human, financial and material guarantee and support for the establishment and operation of IP court according to the plan for establishment thereof.”

The NIPS seems to be following the lead of other agencies in judicially-related efforts.  In administrative law, it also supports  the State Council’s effort to promote administrative transparency, including extending it to credit reporting systems:

“We will … solidly push forward the disclosure of information on cases of administrative punishment of IP infringement to deter law violators and, in the meantime, promote standardized, just and civilized law enforcement by enforcers; incorporate the disclosure of case information into the scope of statistical notification of the efforts of cracking down on infringement and counterfeits and strengthen examination; explore the establishment of the credit standard related to IP protection to include acts of mala fide infringement in the social credit evaluation system, disclose the relevant information to credit reporting agencies and raise the social credit level for IP protection.”

However, regarding IPR-related commercial rule of law, one needs to focus a bit more on the Fourth Plenum.  Here are some of the significant judicial reforms that will affect IP:

Reform systems for judicial organs’ personnel and finance management, explore the implementation of separating courts’ and procuratorates’ judicial administrative management affairs and adjudication or procuratorate powers.

The Supreme People’s Court will establish circuit courts, to hearing major administrative and civil cases that cross administrative regions. Explore the establishment of People’s Courts and people’s procuratorates that cross administrative districts and handle cross-regional cases…

Reform systems for court acceptance of cases, change the case filing review system to a case filing registration system, and in cases that should be accepted by the People’s Courts, ensure parties’ procedural rights by requiring filing when there is a case, and requiring acceptance where there is a lawsuit…

Perfect systems for witnesses and experts appearing in court, ensure that courtroom hearings play a decisive role in ascertaining the facts, identifying the evidence, protecting the right of action, and adjudicating impartially.”

More broadly, here’s what the Fourth Plenum says about IP:

“Perfect a property rights system and an intellectual property rights system that encourage innovation, and structures and mechanisms to stimulate the transformation of scientific and technological achievements. Strengthen the construction of a legal system for the market, compile a civil code, … stimulate the free circulation, fair exchange and equal use of commercial products and factors, strengthen and improve macro-level coordination and market supervision according to the law, oppose monopolies, stimulate reasonable competition, safeguard a market order of fair competition. ”

Conclusion: It should come as no surprise that the Fourth Plenum, although more general, may more greatly impact IP-related judicial / legislative issues.  Based on a recent trip to Beijing, I understand that work is already underway to draft IP provisions of a civil code.  The new chief judge of the Supreme People’s Court IP tribunal (Song), the new Chief Judge of the Beijing IP Court (Su), the new Vice President of the SPC with authority over the IP tribunal  (Tao) all have civil law backgrounds.  In addition, consideration is being given to the specialized IP courts having a circuit court type role.  New technology assessors in the IP courts will affect the way that evidence is considered and will likely enhance the independence and professionalism of the courts. 

Will the Fourth Plenum further push China towards a more market-oriented approach to IP?  I personally believe that for the NIPS to work effectively, the decisive factors has to be the market.  Metrics for IP creation are meaningless unless there is utilization of IP.  Hopefully the Fourth Plenum will push the NIPS implementation even further in a market orientation, which is a key factor of the Fourth Plenum, as this wordcloud shows…

Fourthplenum

 

 

SPECIALIZED IP COURTS ABOUT TO LAUNCH IN THREE CITIES – AND ARE THEY GOOD FOR FOREIGNERS?

Recent Chinese efforts at developing specialized IP courts and in promoting greater judicial independence suggest that the system may significantly improve in the years ahead. According to press reports, some of these efforts may take final form at the 10th meeting of the 27th Session of the Chairman’s Council of the 12 Session of NPC Standing Committee which will be held on August 25 through 30. At that meeting, the NPC Standing Committee will review the bill submitted by the Supreme People’s Court which is the Draft Resolution of SPC to Establish IPR Courts in Beijing, Shanghai and Guangzhou.

Why specialized IP courts? On August 12, 2014, Deputy Chief Judge Jin Kesheng (金克胜), of the third civil (IPR) division of the Supreme People’s Court, said: “In recently years, the speed of increasing IP court was grow slow smoothly, however, there are more and more the new style cases and complicated cases involving foreign parties so that these cases were difficult to judge and the attention from the public to these cases were enhanced. The number of case filed at the Supreme Court was increasing, especially in patent cases with more complicated technology and huge market value and interest. Additionally, the administrative cases are growing rapidly, the proportion of cases involving the fields of medicine, electronic, telecommunication patents are increasing. The proportion of cases in competition cases involving network technology and new business models is large, business secrets and counterfeiting cases continue to increase, and the Supreme People’s Court is hearing antimonopoly cases for the first time… Therefore, this year the Central Committee of the Party and some related departments did some investigations with regard to establishing a specialized IP courts…”

 China has had specialized IP tribunals (ting 庭), beginning with an initial experiment in 1993 in Beijing. Currently there are about 3,000 judges in sit these tribunals. In addition, there are 560 tribunals throughout the country, including basic, level, intermediate, high court and supreme people’s court tribunals or divisions.   In recent years, China has been experimenting with more basic courts (e.g. Yi Wu People’s Court and Kun Shan People’s Court) hearing IP cases including patent cases. Historically, these tribunals had sometimes been called “No. 3 Civil Tribunals” (e.g. No.3 Civil Tribunal of Shanghai Higher People’s Court, No.3 Civil Tribunal of Pudong District People’s Court), “No. 5 Civil Tribunals” (No.5 Civil Tribunal of Shanghai No.1 Intermediate People’s Court, No.5 Civil Tribunal of Shanghai No.2 Intermediate People’s Court) or IP Tribunals (IP Tribunal of Zhuhai People’s Court). Increasingly these tribunals may combine civil IP jurisdiction with administrative review and criminal jurisdiction (“three in one tribunals”).

 As civil enforcement is the lion’s share of judicial IP litigation, the civil experience of these judges has in a sense helped also to develop the capacity of China’s judiciary to handle criminal and administrative litigation. In addition, by combining civil, criminal and administrative jurisdiction there is a greater likelihood of consistent handling of matters that may cross jurisdictional boundaries such as use of administrative evidence in civil cases, providing civil compensation in criminal matters, referring administrative or civil matters to criminal litigation, or handling patent and trademark validity matters in conjunction with an ongoing civil case. Today all of these matters may be handled in one tribunal.

 What prior work has been done in this area by the Chinese government? While specialized IPR courts have been talked about for some time, institutional improvements in the IPR tribunals were set forth as a national goal in the Outline of the National IP Strategy (2008) which was coordinated by SIPO. The NIPS stated “Studies need to be carried out on establishing special tribunals to handle civil, administrative or criminal cases involving intellectual property”. The SPC took an important step in this direction in July 2009, when it directed the civil IP tribunals in the Beijing No. 1 Intermediate Court to handle validity matters on appeal from China’s patent and trademark offices. (最高人民法院关于专利、商标等授权确权类知识产权行政案件审理分类的规定).

 The impetus to develop specialized IP courts in China took an even greater leap forward back on November 12, 2013, at the Third Plenum Session of Eleventh Communist Party Central Committee (the “Third Plenum”). The Third Plenum set as a goal to “explore the establishment of intellectual property court(s).” Since that time, Beijing, Shanghai, Guangzhou, Nanjing, Chengdu, Zhengzhou had started to apply for establishing the IP court with the Supreme Court. On March 10, 2014, Zhou Qiang(周强), the President of the SPC discussed the work schedule of 2014 and said that the Supreme Court would promote to establish the specialized IP court. On July 9, 2014, the Supreme Court at its press conference outlining judicial reforms for the Supreme Court (2014-2018) discussed establishing Specialized IP courts at places where IP cases are concentrated. Professor Tao Xinliang (陶鑫良) had proposed establishing the IP Intermediate Court at some places where IP cases concentrated to judge the civil IP cases and administrative IP cases of the first instance and the civil IP cases, administrative IP cases of the second instance and some criminal IP cases. (Prof. Tao Xinliang 陶鑫良<Some thoughts on Establishment of Specialized IP Court建立知识产权法院的若干思考> Madame Tao Kaiyuan (陶凯元) , a Vice President of the Supreme Court, and a former Director General of the Guangdong IP Bureau (where she likely worked with Vice Premier Wang Yang(汪洋)) has also said that the SPC should continue to promote three-in-one IP tribunals.

Why might China be adding a new emphasis on a specialized IP court in additional to combined tribunals? A specialized IP court may promote and improve the civil judicial enforcement system by providing more resources, promote the independence of the judiciary, and provide for more training of judges, particularly on technical patent matters. The judges of a specialized IP court might be even more professional and autonomous. They might be better able to handle the administrative cases, criminal cases and civil cases at the same time. Like other specialized courts (e.g maritime, military, railway court), civil/criminal and administrative jurisdiction would also combined, reflecting the subject matter expertise of the judges in that court and likely reducing subject matter and venue conflicts for IP litigation.

 The SPC has not yet published the detailed program for implementation of specialized IP courts. In addition, we have heard little about important areas of the IP tribunals’ jurisdiction which are not as directly related to IP, such as antimonopoly law, unfair competition and licensing, and whether these areas will also remain within the specialized court jurisdiction. We assume they will be, and would actually hope that other IP-related areas could be specifically included (such as consumer protection, substandard products, and geographical indications). However, we have seen nothing to date discussing these areas.

Will a specialized IPR court be good for foreigners? Most foreign rights holders have continuing concern with local protectionism and political influence in IP adjudication. Beijing, which appears to be a focus for development of a specialized IP court is the jurisdiction that appears to hear the most foreign cases. As we have previously blogged, foreign parties are involved in approximately 47% of their administrative appeal docket (which is primarily based in Beijing); or about 1349 cases, nearly equal to the number of infringement cases in 2013 of 1429. Hopefully, giving the Beijing courts more independence and confirming their “three in one” approach will provide greater judicial autonomy for the Beijing courts.

One concern is whether specialized IP courts will indeed function in a more independent manner than IP tribunals. The US experience with our specialized national patent court, the Court of Appeals for the Federal Circuit, has generally been that the CAFC has some impact on correcting local biases at the trial court level, including possible anti-foreign jury bias. This is borne out by data which shows that in general, reversal rates in favor of foreigners is higher at the CAFC than reversal rates in favor of domestic entities.

 U.S.: Patent Infringement Civil Litigation Appellate Win Rates

 

Overall

Foreign Companies

Patent Owner Win Rate

25%

27%

Accused Infringer Win Rate

75%

78%

Source:Paul M. Janicke & LiLan Ren, Who Wins Patent Infringement Cases?, 34 AIPLA Q.J. 1 (2006).

However, according to data from the CIELA database (www.ciela.cn), second instance patent appeals in China generally show an inclination to support the Chinese domestic party against the foreigner.

China : Invention Patent Litigation Data

 

All Plaintiff

Foreign

Domestic

1st instance win rate

73%

78%

72%

2nd instance win rate

52%

40%

52%

Overturn rate

19%

30%

17%

Mean compensation

RMB 439,614

RMB 230,827

RMB 525,939

Medium compensation

RMB 100,000

RMB 125,000

RMB 100,000

Duration

8.2m

11.8m

6.9m

(Courtesy of Tim Smith of Rouse & Co. )

Why might appellate IP courts or tribunals behave differently in each country? First, the CAFC is a national court, not a regional or local court. In this sense, it may be more accountable to national law and reputation than local courts. The CAFC under former Chief Judge Rader had in fact been a leading global proponent of national specialized IP courts. Second, the CAFC has a different jurisdictional role. It does not retry cases, rather it hears appeals. In addition, it hears both patent validity and infringement matters in one court. Moreover, its decisions on matters of law are binding on lower courts. As such, it has more authority in deciding legal matters, and in instructing lower courts on proper adjudication. For example, the CAFC had taken an active role in addressing venue issues at the E.D Texas on patent litigation issues. A third reason is found in China’s political situation. In general, Chinese courts are much less independent than US courts. Local Chinese courts, particularly in remote areas, may also tend to be even less accountable to national law and policy. Second instance Chinese courts may be more susceptible to receiving national policy directives and may therefore be more susceptible to national political influence in adjudicating disputes. Moreover, local statutes enacted by local people congress are at a higher political hierarchy than national administrative rules (部门规章). The local political congresses that enact these statutes also appoint judges. When a second instance case is heard, for example, in a provincial high court, there may in fact be a problem of more direct political influence through political actors in the provincial capital.

The limited data available to date suggests to me that while specialized IP courts have promise, their potential impact will also be affected by national judicial reform efforts and may continue to be constrained by existing limitations in the political independence of the Chinese judicial structure. As Susan Finder has noted in her blog, there are several efforts under way to address some of these systemic issues in the Chinese judicial system, which may also bear promise for Chinese IP adjudication. In sum, specialized IP courts may not be the panacea that foreigners might otherwise seek in minimizing anti-foreign bias in local adjudication in China, but I do believe they offer some hope for a better and stronger judiciary.

 By Mark Cohen, with Ms. Yao Yao of Fordham Law School (LLM Candidate, 2015).

Forecasting the Impact of the Third Plenum on IP Adjudication

What are the impacts of the resolution and spirits of the recent Third Plenum of the 18th Communist Party on rule of law in China, particularly commercial rule of law and IP? 

The morning of December 11, from 10:00 to 11:30, George Washington University Law School will be hosting its third annual China IP Program to discuss what China’s recent rule of law developments mean.    I will attend this program along with Don Clarke  of GWU, Xuan-Thao Nguyen (Southern Methodist University), Chief Judge Rader of the CAFC and others.   By my reckoning there have been three important streams of change affecting IP and rule of law in the past few months. 

One of the important developments is administrative transparency and accountability.  As previously reported,  Premier Li Keqiang is seeking to establish greater transparency in administrative enforcement decisions, through the State Council’s enactment of an “Opinion on Making Publicly Available According to Law Information on Administrative Penalties Concerning the Production and Sale of Fake, Counterfeit and Sub-standard Goods and Intellectual Property Rights Infringement” (关于依法公开制售假冒伪劣商品和侵犯知识产权行政处罚案件信息的意见).  At a conference this past December 5 sponsored by MofCOM, we were told that this regulation is likely to be made public available in the near future.  Moreover, as many as 300,000 cases each year involving IP infringements and fake and shoddy goods are likely to be affected.   

At the same time, an equally important September 2012 decision that I previously reported on: the “Opinion Concerning How to Improve The Work of Coordinating Administrative and Criminal Enforcement in Striking at IP Infringements and the Manufacture and Sale of Fake and Shoddy Goods”  (关于做好打击侵犯知识产权和制售假冒伪劣商品工作中行政执法与刑事司法衔接的意见), remains non-public.  However, it appears that this effort at administrative coordination in criminal IP from September 2012 has now “migrated” to a higher level.  Improvements in administrative/criminal coordination were also discussed in the November 12, 2013 Resolution Concerning Some Major Issues in Comprehensively Deepening Reform, passed at the  Third Plenum (“CCP Resolution”) (Chinese language version is found here.  That Resolution called for China to “resolve issues of overlapping responsibilities and many-headed law enforcement, and establish administrative law enforcement systems with unified powers and high-efficiency authority” and to “perfect mechanisms to link administrative law enforcement with the criminal judiciary”.  China is once again “crossing the legal reform river by feeling the IP stones.”

Another important area is in general judicial transparency and reform.  SPC President Zhou Qiang discussed the importance of publishing court decisions involving intellectual property in an important exchange he had with Chief Judge Rader on October 16 of this year.  Since that time, according to press reports, the newly appointed SPC President has vowed to increase transparency in the judicial process in light of the spirit of the recently concluded Third Plenum. 

But transparency includes more than publications of decisions.  Chief Judge Rader has informed me that at the meeting between SPC President Zhou and Chief Judge Rader, Zhou inquired at length about the CAFC practice of publishing the verbatim version of arguments within minutes on the internet, a practice that Zhou might have compared with broadcasts made during the Bo Xilai trial.  In addition, Chief Judge Rader expressed praise for the civil procedure and trademark reforms, which have introduced greater transparency and accountability, including permitting a measure of compulsory discovery of adverse evidence held by an opposing party.  The transparency of judicial decisions generally was also raised in the CCP Resolution, which provided that China should:  “Move towards open trials and open prosecutions, record and maintain materials from the entire court process, strengthen the rationality of legal documents, and promote openness of valid court judgment documents.”

Another important judicial reform that could be significant for IP in the CCP Resolution involves “explor[ing] the establishment of judicial jurisdiction systems that are suitably separated from administrative areas, guarantee the uniform and correct implementation of State laws” and to “reform the trial committee system, perfect case handling responsibility systems for presiding judges and collegiate benches, let those hearing the case judge, and those judging the case be responsible.” The former, if fully implemented, would support greater independence of the courts from the local governments that fund them, and the latter would dilute influence from adjudication committees and return decision-making power to judges who hear cases.  As it is possible that a disproportionate number of foreign-related cases are decided by adjudication committees, this could be a significant development.

A third area of reform is in specialized IP courts.  The 2008 National IP Strategy stated that China would “study the jurisdictional issues for the appropriate concentration for adjudication of patent and other technologically complex cases, and will investigate establishing an appellate IP court.”  The CCP Resolution states that China would “explore the establishment of intellectual property rights courts.”

Compared to the National IP Strategy, the CCP Resolution is a higher political statement.  Moreover, its substance is not limited to appellate courts, nor constrained to “technologically complex cases”.  While in 2008 an appellate IP court had been considered necessary to provide protection from local influence, the CCP Resolution notes elsewhere and more generally that China should establish “judicial jurisdiction systems that are suitably separated from administrative areas”.   One conclusion: the necessity of having courts that are less tied to local influence has migrated from an IP-related topic in the 2008 National IP Strategy, to one involving general legal reform.

Several courts are already moving to establish specialized IP courts.  At a recent program I attended in Suzhou sponsored by Renmin University, the President of Jiangsu’s High Court noted that Jiangsu is actively preparing for establishing such a court.  Moreover, the media has noted that Guangdong is also conducting research efforts for its establishment. Both jurisdictions are pioneers in combining civil/criminal and administrative IP jurisdiction in one tribunal.  Beijing was the first jurisdiction to establish IP tribunals in its intermediate courts (1993), and is probably the most important place where greater improvements could assist both foreign and domestic rights holders, as it is the jurisdiction where appeals from the patent and trademark offices are held.  As I have noted in a prior blog,  foreign parties are involved in approximately 47% of that IP administrative appeal docket.   

Former Supreme People’s Court IPR Tribunal Chief Judge Jiang Zhipei has also been a strong advocate for specialized IP courts in Beijing because of its national and international influence.   I share the hope of my friend Chief Judge Jiang that the CCP Resolution will help accelerate the establishment of these specialized IP courts and even more importantly, improve the adjudication of all legal issues matters for Chinese and foreigners alike.

 

 

 

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