2nd Round of Patent Law Amendments Released for Comment

According to the NPC Observer and other sources, the NPC Standing Committee is now seeking comments to the second review draft of the  Patent Law amendments专利法修正案草案二次审议稿.  The official NPC comments released with the draft are here.  A longer report on the status of the revisions of the Patent Law dated June 28, 2020 is found here.  Comments are due by July 31, 2020.

In reviewing this draft, it may be worth referring to the prior draft including a translation provided by the Anjie law firm.

Please send in any translations that you have as well as any comments that you would like to share (chinaipr@yahoo.com).

Along with the recently proposed revisions to the Copyright Law, as well as drafts of recent judicial interpretations and further implementation of the Phase 1 Trade Agreement, this has been a busy season for law and policymaking in IP in China

The Patent Law will be discussed at the concluding webinar that Berkeley will be hosting July 15, 2020.  Prior to that, on July 8, 2020 there will also be a webinar on the Copyright Law including the proposed amendments.  Information on this successful series is available here.

An Unwelcome Addition and A Welcome Subtraction in the Technology Transfer Provisions of the New Civil Code

The Civil Code of China has now been enacted by the National People’s Congress (eff. January 1, 2021).  As previously discussed in this blog, the Civil Code now incorporates the technology contract provisions of the former Contract Law, with certain revisions.   

There are two significant changes in the enacted technology contract provisions from the prior public draft.  One constitutes an unwelcome addition, while the other is a welcome removal.

The Unwelcome Addition

The unwelcome addition is the underlined text below:

第八百四十七条   职务技术成果的使用权、转让权属于法人或者非法人组织的,法人或者非法人组织可以就该项职务技术成果订立技术合同。法人或者非法人组织订立技术合同转让职务技术成果时,职务技术成果的完成人享有以同等条件优先受让的权利。 职务技术成果是执行法人或者非法人组织的工作任务,或者主要是利用法人或者非法人组织的物质技术条件所完成的技术成果。

Article 847 Where the right to use or transfer a service technical achievement belongs to a legal person or an unincorporated organization, the legal person or unincorporated organization may conclude a technical contract for the service technical achievement. When a legal person or an unincorporated organization concludes a technology contract to transfer service technology achievements, the person who completed the service technology achievements has the right to receive priority transfer on equal terms. The service technical results are the technical results of performing the work tasks of a legal person or an unincorporated organization or mainly using the material and technical conditions of a legal person or an unincorporated organization.

This provision is like Article 29 of SIPO’s draft service invention remuneration regulations which provided:

第二十九条 单位拟转让职务发明的知识产权的,发明人享有在同等条件下优先受让 的权利。

29. Where an entity intends to assign intellectual property rights of a service invention, the inventor is entitled to priority transfer on equal terms.

This provision is similar to Articles 339 and 340 of the Contract Law (1999), which had however established that this right was subject to other terms separately negotiated (除当事人另有约定的以外), however it is now non-negotiable.  The IP and International Law Sections of the American Bar Association had commented on the non-negotiable draft regulation (April 20, 2015).  It noted that such language was “contrary to international norms”, but also was contrary to the ownership rights of the acquiring company.  Moreover, such a right may be in conflict with the employee’s labor contract with her company.  As drafted this language may also entail an additional layer of approvals from the inventor and could impede subsequent commercialization through sublicensing or assignment to third parties by the owner by establishing a non-waivable first right of first refusal which is also not limited by time.  It may thereby weaken China’s ability to commercialize higher value service invention patents at precisely the time when its technology markets appear poised to take-off.  I hope that subsequent laws, regulations and court practice will limit its potentially expansive scope.

The Welcome Removal:

Article 850 addresses appears to address a long-standing contract in the technology contract law, namely its overlapping jurisdiction with China’s Antimonopoly Law.   As I noted in my prior blog, an added level of ambiguity is interposed because the Civil Law is more recent that the revisions to China’s Technology Import/Export Regulations, and is at higher level of legislation than these regulations.  Moreover, it is considered major legislation,  as it is enacted by the NPC as a whole and therefor might be considered as having significant persuasive weight.  Vague language in the technology transfer contract provisions of the Civil Code such as “mutual benefit”, “monopolize technology”,  “hindering technology progress”, ‘infringing technological achievements”, create unpredictability in China’s burgeoning technology markets.  The the removal of “hindering technology progress” as a basis for invalidating technology contracts (Art. 850) is therefor welcome:

第八百五十条 非法垄断技术、妨碍技术进步或者侵害他人技术成果的技术合同无效。

Article 850 A technology contract that illegally monopolizes technology, hinders technological progress, or infringes on the technological achievements of others is invalid.

The removal of this phrase  may serve to limit discretion of courts or administrative agencies in invalidating contracts to circumstances more clearly defined by third parties.  Contractual provisions that are determined to be anti-competitive under China’s Antimonopoly law or are determined in a court or administrative proceeding to infringe on the rights of third parties are now more clearly within the scope of Article 850.   Moreover, the Antimonopoly Law already contains eight separate references to technology development and thus may be said to adequately reflect concerns over contracts that seek to monopolize technology.  Contrariwise, there is no separate agency specifically tasked to determine what constitutes “technological progress” in a contract, so its removal makes clear that invalidity determinations may depend on separate antimonopoly or infringement proceedings.  

Article 850 was originally promulgated in Article 329 of the Contract Law  (1999).  Its adoption occurred eight years before China enacted its Antimonopoly Law.  With the passage of the Antimonopoly Law, it created an unnecessary ambiguity over its scope and role. this Civil Code revision is a welcome rejoinder to the concerns I had previously raised in a book I coauthored on the AML (2011), and in testimony before the US-China Economic and  Security Review Commission (2015). At that time I expressed concern about China’s desire to pursue antimonopoly regulation in licensing contracts in the absence of an antimonopoly law. Those concerns now appear to have been addressed.

Conclusion:

I hope you will considering joining me and several other great speakers when we discuss these and other issues in a timely webinar on Licensing and Antitrust in China, Wednesday June 3, 2020 at 4:30 PM PST.

Draft Copyright Law Up for Public Comment

The National People’s Congress released a draft of the Copyright Law for public comment.  Comments are due by June 13, 2020.  The NPC comments on the draft are found here.  The NPC Observer’s concise summary of the legislative history is here.   I had discussed the earlier draft, along with the NPC observer predictions regarding consideration in late 2019, here.  The draft will likely be reviewed again near the end of this year and could pass in late 2020 or 2021.

There have already been some reactions to this draft.  Aaron Wininger pointed out in a recent article the provisions regarding quintuple damages, increased statutory damages, shifting of the burden of proof, and improvement in digital rights management.  He also briefly discusses some other changes, such as the change from “audiovisual works” to “cinematographic works.”  On first glance, the draft does appear to have expanded provisions on technological protection measures and anti-circumvention of technological protection measures, although further study is necessary to determine their consistency with prior laws, regulations, China’s commitments under the WIPO Internet Treaties, etc. (See Art. 48).

“Quintuple damages” and burden-shifting appear to be the “new normal” in revisions to Chinese IP laws. These changes predate the current trade war and are part of a mounting effort to increase civil deterrence.  It remains to be seen how they will be implemented in judicial interpretations and how observable they will be in judicial practice through the publishing of relevant cases.

Prof. Liu Chuntian, a friend and colleague from Renmin University, has written an insightful quick response article regarding the draft on weixin (Chinese language only).  Prof. Liu participated in the drafting of the PRC’s first copyright law.  His principle concerns with the draft include:

  1. The concept of “audiovisual works” replaces the expression “movies and works obtained by methods similar to filming.” This change in definition will provide protection for video games regardless of the technology that employed.   It may also have implications for expanded protection of live webcasting of sporting events, which has been a continual problem under Chinese copyright law, which were often thought be in sufficiently creative to be protected as a cinematographic work.  Prof. Liu suggested that China’s drafters consider borrowing from the practice of other countries, notably Brazil, which expanded copyright protection using the concept of “audiovisual works” regardless of the technology.  This can mitigate the possibility of continuing the conflict in Chinese IP law (and the law of other jurisdictions) between “cinematographic works” and “audiovisual works” which have provided uncertain protections depending on the technology employed.  At the same time, according to Prof. Liu, as the new law stipulates that the right owner in an AV work belongs to the producer, it will also be important to clarify the rights of authors and composers whose works are incorporated into AV works. He suggests that the new law should clearly stipulate that the rights in these works should be controlled by the copyright holder.
  2. Prof. Liu agrees on the importance of the improvements to the civil system, including increased damages and rights to demand production of evidence.
  3. Prof. Liu generally opposes the expansion of copyright administrative authorities to the county (xian) level, noting that it would lead to the creation of over 3,000 copyright offices in China – more than the rest of the world combined. He also takes issue, as do I, with the expansion of administrative enforcement power in the copyright law, and notes that as a private property right the civil system should be the principal vehicle for enforcement. This also appears to be a “new normal” in Chinese IP legislation, which has also been urged on in recent years by US demands for enforcement campaigns and increased punishment, including increased online enforcement for copyright in the Phase 1 Trade Agreement (Arts. 1.13, 1.14).
  4. Prof. Liu also notes that it is important that copyright is considered an aspect of civil law, and that it is guided by civil law principles, including tort and contract law, as well as the on-going drafting of the Civil Code. He notes that currently there is no IP chapter in the Civil Code and it is therefore even more important for the civil law and the copyright law to be integrated.  Consistent with China’s civil law tradition and his desire to ensure that copyright is protected as a private civil right, Prof. Liu places the primacy of the creator of the work as the first subject of protection. He notes “[t]he rights of other people are all rights that come from, are obtained through legal acts, through contracts or authorization mechanisms, and regulate the rights of the acts passed on.  This is the task of other laws.”

Update of July 20, 2020: Here are the comments of Prof. Andy Sun.

Update of August 15, 2020: Here is a blog post of Matthew Alderson from Harris Bricken on the originality issues involving the protection of sports broadcasts under the proposed revisions to the copyright law. 

Update of August 15, 20202: Here is a translation of the proposed Copyright Law amendments by Prof. Jiarui Liu.

Please also send us any translation or comments you have prepared to post on this blog.