Draft Civil Code Technology Contract Law Available for Comment

The NPC has released a draft of the contract chapter of the draft civil code for public comment. According to the NPC Observer, this is the first draft of the entire Civil Code with the final round scheduled for consideration as early as March 2020.  Comments are being accepted by the NPC through January 26, 2020.  According to the NPC Observer the contracts section of the draft had previously been separately published in December 2018.  This blog considers the differences between the contract law provisions and the current draft, as well as the relationship of the draft entire civil code with other legislative changes involving technology contracts.

Chapter 20 of the contract chapter deals with technology contracts. Based on a quick read, several provisions are directed to long-standing concerns, such as ownership of service invention compensation, ownership of improvements (grant backs), indemnities from infringement, and the relationship of contract regulation to China’s Antimonopoly Law and the recently amended Technology Import Export Regulations (TIER).

Some Key Substantive Provisions

Articles 847 and 848 deleted from the prior draft the part  (Arts. 622, 633) that addressed mandatory service invention (employee inventor) compensation, which proposed that “[a] legal person or an unincorporated organization shall extract a certain percentage [emphasis supplied] from the proceeds obtained from the use and transfer of the service technical achievements and award or reward individuals who have completed the service technical achievements.” The draft law thereby appears to carry forward the ambiguity and debate regarding what amount of compensation is required, if any, in addition to salary and other benefits.  This had also been a focus of previous bilateral discussions.

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。

第八百四十八条 非职务技术成果的使用权、转让权属于完成技术成果的个人,完成技术成果的个人可以就该项非职务技术成果订立技术合同。

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.

Article 848 The right to use or transfer a non-service technical achievement belongs to the individual who completed the technology achievement, and the individual who completed the technology achievement may conclude a technology contract for the non-service technological achievement.

Articles 849 and 875 addresses ownership of improvements, providing further detail on the implications of the removal of Article 27 in the recently revised Administration of Technology Import Export Regulations (TIER). This provision also supports freedom of contract, by providing that the improving party owns the improvements unless the parties stipulate otherwise.  Article

第八百七十五条 当事人可以按照互利的原则,在合同中约定实施专利、使用技术秘密后续改进的技术成果的分享办法;没有约定或者约定不明确,依照本法第五百一十条的规定仍不能确定的,一方后续改进的技术成果,其他各方无权分享。

Article 875 The parties may agree in the contract in accordance with the principle of mutual benefit and determine how to share the technical results of implementing patents and using technological secrets for subsequent improvements; if there is no agreement or the agreement is not clear, and it is still uncertain according to the provisions of Article 510 of this Law 【regarding  supplemental contractual language】 then the technical results of subsequent improvement by one party shall not be shared by the other parties.

Article 874 also supports freedom of contract by providing for a default but negotiable indemnity against third party infringements or torts.   This language is consistent with the revised Art. 24 of the TIER

第八百七十四条 受让人或者被许可人按照约定实施专利、使用技术秘密侵害他人合法权益的,由让与人或者许可人承担责任,但是当事人另有约定的除外。

Article 874 Where the assignee or the licensee implements a patent or uses proprietary technology to infringe upon the legal rights and interests of others, the assignor or the licensor shall be held liable unless the parties agree otherwise.

Relationship with Other Laws

As indicated, the draft law must also be read in conjunction with the revised TIER and other laws and regulations.  As a higher level, more recent legislation, the Civil Code language would generally be more authoritative than the TIER in the event of any conflict.  Among the provisions that reference other laws and regulations is Article 877 which provides that these other laws and regulations shall normally govern.  Moreover, Article 877 does not expressly restrict the Civil Code from “gap-filling” these other laws and regulations.  It may thereby perpetuate the possibility of government intervention through its vague language such as “mutual benefit”, “monopolize technology”,  “hindering technological development”, ‘infringing technological achievements”, etc.

第八百七十七条 法律、行政法规对技术进出口合同或者专利、专利申请合同另有规定的,依照其规定。

Article 877 If there are laws and administrative regulations on technology import and export contracts or contracts for patents or patent applications, such provisions shall be followed.

The draft law also contains vague references to competition and antimonopoly law.  Article 850 contains identical language to Article 329 of the Contract Law, and Article 864 is nearly identical to Article 343 of the Contract Law:

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.

第八百六十四条 技术转让合同和技术许可合同可以约定实施专利或者使用技术秘密的范围,但是不得限制技术竞争和技术发展。

Article 864 A technology transfer contract and a technology license contract may stipulate the scope of patent implementation or use of technology secrets, but they shall not restrict technology competition and technology development.

As with the prior Contract Law and TIER, the law does not clarify the difference between a covenant not to sue or a settlement of an infringement lawsuit on the one hand, and a patent license agreement.  Lawyers drafting such settlement agreements may wish to ensure that default provisions of the Civil Law, such as those regarding indemnities and ownership of improvements do not come into play.

These provisions also further underscore the importance of thorough monitoring of changes on technology transfer, including the TIER, particularly as operational implementation by the courts and administrative agencies, through cases, judicial interpretations, and rule making,  may now be more significant than legislative changes.

In addition to these revisions to China’s contract law in the proposed Civil Code, an Export Control Law has also been released for public comment by the NPC.  The draft law sets up a general export control system and specifically regulates both technologies and services (Art. 2).  Comments are also due January 26, 2020.

Happy New Year to all!

Note: all translations are based on machine translations with minor editing and are not intended to be authoritative.  Please provide any corrections or suggestions on these translations or any additional commentary to the author.  This blog was revised on March 23, 2020 with the assistance of Dr. Xu Xiaofan.

New CPC and State Council Opinions on Improving IP Protection

wordcloud

On November 24,  2019, the General Office of Communist Party of China and the State Council jointly released the Opinions Concerning Enhancing Intellectual Property Rights Protection (关于强化知识产权保护的意见).

It is often too easy to dismiss documents like these, that have typically delivered an ephemeral higher state of vigilance by the Chinese government.  Nonetheless, there are some useful statements in this document that may be an indicator of future durable improvements, including:

  1. It is jointly published by the CPC and the State Council and thus has high level political and executive branch support.
  2. It does address some long-standing concerns raised by industry, such as development of a patent linkage system, patent term extension and copyright protection for sports broadcasts.
  3. There continues to be a focus on punitive damages in litigation. However, this document does appropriately point out the need to increase actual damages.
  4. Improving criminal enforcement, including revising criminal judicial interpretations – is also addressed.  Along with revising the criminal code, revising criminal JI’s and their high criminal thresholds was a goal of the WTO case that the US filed against China over 10 years ago (DS362).  This task is long overdue.
  5. Improving coordination between administrative and criminal enforcement is once again highlighted. This is also a long-standing issue.  In light of numerous prior efforts and experiments, a more concrete explanation of how this might be accomplished to better enable prosecution of major criminal actors would be helpful in the future.
  6. Case guidance and public trial systems are highlighted. Hopefully, the case guidance system will add further momentum to successful case law experiments in IP at the Beijing IP Court.
  7. The introduction of technical assessors into administrative enforcement could suggest a continued enhanced role for patent administrative enforcement, which has been increasing even as trademark administrative enforcement has been declining. If so, it may not augur well for foreigners who have traditionally been heavy “consumers” of the administrative trademark system, but not the administrative patent system.
  8. Improvements in the “examination” of utility models and designs are noted as a goal. However, these rights are generally not examined for substance except in the case of “abnormal” applications.
  9. Continuing attention is paid to challenging markets, such as e-commerce platforms and trade fairs, as well as establishing faster protection mechanisms.
  10. There is a continuing focus on supporting Chinese rightsholders overseas.

This document arguably goes part-way in establishing an outline for addressing US concerns about IP theft.  However, it offers little to address such concerns as ensuring greater transparency in the courts, publishing foreign-related cases, or addressing certain trade-sensitive topics outlined in USTR’s Section 301 report, such as cyber intrusions or criminal trade secret misappropriation.

The word cloud, above, is drawn from a machine translation of this document.  The original Chinese language and my redlining of a machine translation are found here.

Addendum of November 26, 2019:

Susan Finder in her Supreme People’s Court Monitor blog, reported on Judicial Interpretation drafting by the SPC for next year, some of which are referenced in the recently released Opinions.  According to that blog, on 29 April 2019, the SPC’s General Office issued a document setting out a list of 47 judicial interpretation projects, 36  with an end of 2019 deadline.  Several of these involve IP-related issues, including issues addressed in the joint CPC and State Council Opinions, including:

  1. Interpretation Concerning the Application of Law in Cases of Disputes over the Infringement of Trade Secrets (关于审理侵犯商业秘密纠纷案件应用法律若干问题的解释). Responsibility of the #3 Civil (IP) Division.
  2. Interpretation on Several Issues Concerning Punitive Damages for Intellectual Property Infringement (关于知识产权侵权惩罚性赔偿适用法律若干问题的解释). Responsibility of the #3 Civil (IP) Division.
  3. Provisions on Issues Concerning the Application of the Foreign Investment Law of the People’s Republic of China (I) (关于适用《中华人民共和国外商投资法》若干问题的规定(一)). Responsibility of the #4 Civil Division. The Foreign Investment Law and the recently released draft implementing regulations contain provisions protecting the intellectual property of foreign investors, including prohibiting forced technology transfers and enhancing the availability of punitive damages.

These draft JI’s have a due date of the first half of 2020.  Susan Finder notes in her blog that given the worldwide attention on the issues set forth in these three judicial interpretations, she expects that they will be released for public comment.  I hasten to add that the IP Division of the Court has generally taken a positive attitude towards soliciting public comment on its draft judicial interpretations, and I hope that they maintain this tradition.

It was also noted by Susan Finder that certain JI’s were due by year-end 2019, including:

  1. Intellectual Property Rights Evidence Rules (关于知识产权民事诉讼证据的若干规定).  Responsibility of the #3 Civil (IPR) Division. This draft was discussed at a conference hosted by the SPC in Hangzhou in 2018.  As Chinese courts experiment with more expanded discovery, evidence preservation and burden of proof reversals, clearer rules regarding the obligations of parties to produce evidence are becoming more critical.  A particular notable example of such a reversal is found in the recent amendments to the trade secret law (Article 32), whereby  a rights holder that has preliminarily proven that it  has taken reasonable confidentiality measures on the claimed trade secrets and has preliminary evidence reasonably demonstrating that its trade secrets have been infringed upon, can shift the burden of proof (BOP) to the infringer to prove that the trade secrets claimed by the right holder do not belong to those as prescribed in this law.
  2. Judicial interpretation on administrative cases involving patent authorization and confirmation (关于审理专利授权确权行政案件若干问题的解释). Responsibility of the #3 Civil IPR) Division. Another interpretation that previously had a 2018 year-end deadline.  A draft was issued for public comment in the summer of 2018; see my earlier blog.

Addendum of November 27, 2019:

Another China law blog, the NPC Observer also expects that some of the IP legislation flagged in the Opinions for revision may be considered as early as late December of 2019t.  According to the NPC Observer:

We expect the session to review a … draft amendment to the Patent Law [专利法] …The session may additionally consider the following bills: …

I have previously blogged about proposed revisions to the Patent and Copyright Law.

Addendum of January 9, 2020: Here is a translation of the Opinions from China Law translate.

The Changing Legislative Landscape of Trade Secret Protection in China

This blog is a supplement to my prior blog on the recent TM law and AUCL revisions.  Attached is a bilingual translation provided by the Quality Brands Protection Committee (QBPC) of the recent revisions to the Trademark Law and Anti-Unfair Competition Law (AUCL).   This blog focuses on the trade secret amendments.  And thank you, QBPC!

The trade secret amendments by themselves are promising.  The NPC, recognizing their importance, took the unusual step of making the amendments immediately effective, unlike the Trademark Law amendments which have a delayed effective date.

Perhaps the most critical change addressed the problem created by prior amendments to the AUCL which removed natural persons from the scope of covered entities.  The logic at that time appeared to be that natural persons were covered under the definition of trade secrets provided in the General Outline of the Civil Code (GOCC),  中华人民共和国民法总则 (Art. 123).  However, the inconsistency between the AUCL and the GOCC created unnecessity ambiguities that these amendments help address.

The AUCL revisions also expand the remedies for trade secret protection by imposing liability on “inciting” or “abetting” (教唆)trade secret theft.  Inciting or abetting is an inchoate offense under the Chinese Criminal Law (Art. 29), and it also appears in China’s Tort Law (Art. 9), as well as in actual or proposed IP legislation, such as a 2012 Judicial Interpretation regarding online copyright liability.   This would appear to expand the scope of liability for those who facilitate or organize a trade secret infringement.

The AUCL also “borrows” the concept of quintupled damages if bad faith infringement is found.  This is similar to the new TM law revisions that provide for quintuple damages if there is malicious 恶意infringement.  I am not certain, however, if this provision will have its desired effect of deterring infringement, at least in the short term for two reasons: statutory damages still remain the principal remedy in most IP cases, and cases where actual damages are imposed and could be multiplied are also rare. Nonetheless, this provision could become of increasing importance as Chinese courts experiment with calculating actual damages.  Moreover, quintuple damages may not only be in place to deter infringement and better compensate rightsholders but also to assist in improving the leading role of the civil IP system compared to the criminal and administrative systems in China.

The revised law also clarifies that “electronic intrusion” to obtain trade secrets is an enumerated infringing act (Art. 9), which is in line with other computer crime laws in China such as the Criminal Law  (Art. 285).  This language may be helpful in prosecuting those civil cases where a computer intrusion was involved.  Although my data on trade secret cases involving electronic intrusions in China was very limited (from 2012) it had suggested that cyber intrusions were a  small percentage of China’s civil trade secret docket, perhaps because these matters were pursued through other legal channels.   If readers have more recent data or analysis on this issue, please provide them to me in comments to this blog.

The revised AUCL also provides for a burden of proof reversal (Art. 32).  Jim Pooley described  this provision as the “most promising” among trade secret legislative developments, as it “involves shifting the burden of proof in cases where the circumstantial evidence seems strong—such as the development of a similar product in an unusually short time after access to the plaintiff’s secrets—and requiring the defendant to prove independent development.”  According to Article 32 a rights holder that has preliminarily proven that it  has taken reasonable confidentiality measures on the claimed trade secrets and has preliminary evidence reasonably demonstrating 初步证据合理表明 that its trade secrets have been infringed upon, can shift the burden of proof (BOP) to the infringer to prove that the trade secrets claimed by the right holder do not belong to those as prescribed in this law. The preliminary evidence that may be provided by the rights holder includes: “evidence proving that the alleged infringer has channels or opportunities of obtaining the trade secrets and that the information it uses is substantially the same as the trade secrets“ or “evidence proving that the trade secrets have been disclosed or used by the alleged infringer or have risks of being disclosed or used” or “there is other evidence proving that the trade secrets have been infringed upon by the alleged infringer.”

This is a notable development.   However, the history of BOP reversals in China suggests that such provisions have not always had their expected impact.  Importantly, BOP reversals in process patent cases are required to be available under Article 34 of the TRIPS Agreement and under China’s Patent Law (Art. 61). Stringent requirements, such as requiring that the infringing product is identical with the one accused of violating the manufacturing process, have made it difficult to successfully bring these cases in China.  Most importantly, the low level of publication of trade secret cases, as well as the non-publication of interim orders, may mean that the public will have little insight into how courts handle actual cases, including this BOP reversal.   Trade secrets are perhaps the most opaque area of China’s IP enforcement regime, making it also very difficult to judge when significant improvements are being made.

Another difficulty may occur in ascertaining what constitutes a willful infringement and compensating for it.  Trade secret cases necessarily involve an act that circumvents or ignores precautions taken by the rightsholder.  The fact that such an inappropriate act may have been wrong, willful or even premeditated, also does not necessarily mean that the rightsholder suffered serious losses.  A good example of this is the recent case brought by the US Department of Justice against Huawei, involving the theft of T-Mobile technology and related behavior.   A  prior civil jury verdict related to one aspect of that case found that Huawei’s acts constituted trade secret misappropriation, but declined to award damages or to find that the actions were willful and malicious.

Another challenge, also identified by Jill Ge at Clifford Chance, is that Chinese courts may yet remain intent on using patent doctrines such as ‘novelty’ to determine that a given technology is not a protectable trade secret because it is otherwise in the public domain according to patent law doctrines.  Additionally, as I have noted this approach inappropriately “provid[es] a non-infringement defense based on modifying misappropriated technology,” that is a court may determine that the accused infringer did not use the precise technology and therefore there is no trade secret theft, borrowing perhaps from patent law doctrines regarding conduct that constitutes infringement (make, use or sell).  This problem of borrowing patent law doctrines into technical trade secret cases may be magnified by the experience and background of the technologically oriented IP judges in the IP courts or their IP assessors whose experienced has principally been informed by patent litigation.

In an unrelated development which also highlights the importance of making appropriate linkages between the civil and criminal trade secret regimes, US Deputy Assistant Attorney General Adam Hickey  recently gave a speech on national security and trade secret theft (April 24, 2019).  Reflecting on recent criminal prosecutions against Chinse nationals he noted:

“[T]here are trade secret cases where we cannot prove beyond a reasonable doubt that the Chinese government itself directed the theft.  …  But although we could not prove in court that these thefts were directed by the Chinese government, they are in perfect consonance with the Chinese government’s economic policy. “

China’s problem seems to be the reverse of the United States, by its historical underemphasizing of criminal remedies.  Although the AUCL amendments incorporate many notable improvements, they also do not address weaknesses in the criminal IP regime for trade secrets, the low level of criminal trade secret cases, and the widening differences that now exist between civil and criminal cases in such areas as proof of infringement.    All countries seeking to protect trade secrets need to strike the correct social balance between civil and criminal enforcement of trade secret theft.  DOJ’s inabilities to secure convictions also demonstrate the necessity in the US of having effective civil remedies, including 337 actions.    An integrated, stand-alone trade secret law in China that incorporates civil, criminal and administrative remedies, as well as doctrines from labor law, contract law, corporate law, and other areas, could help secure a more advanced, holistic perspective on how China should address trade secret infringements.  To address cross-border trade secret infringements, foreign government judicial cooperation in facilitating discovery, taking depositions, and enforcing judgments would also help improve the bilateral environment in this area.  In addition, China might consider additional policies that make it harder to engage in “efficient” trade secret theft, where costs of being caught are less than the cost of innovating on one’s own.  Such policies might include government procurement debarment for products using stolen technologies, invalidation of patents granted on the basis of misappropriated technologies and debarment from the Chinese patent office, return of any subsidies or grants for developing the technology, and denial or revocation of recognition capital contributions of technology for tax or other purposes, amongst other possibilities.

 

Trademark Law and AUCL Revisions Passed Into Law

Jill Ge of Clifford Chance has brought to my attention that the changes proposed  to the Trademark Law and Anti-Unfair Competition Law that I reported on April 21, have now been passed at the 10th session of the Standing Committee of the 13th National People’s Congress on April 23, 2019. There does not appear to have been the usual process for public comment on these changes.  This was fast!

Here is a link to the iprdaily.cn reporting of this news, a pdf of the article as it appeared on that website, as well as a machine (google)  translation of the article.  I wanted to distribute these to readers quickly in the interest of time.  If any readers have more polished translations that I can use, please send them to me.

No doubt, these changes are intended to help address US concerns over “forced technology transfer”, “IP theft” and related issues.  A significant concern I have about these positive legislative changes is whether they will be accompanied by the requisite transparency of the implementing and enforcing agencies.  Because trade secret cases in particular often include confidential technical or business information, they are often not reported by the courts in public databases.  In recent months, there has also been a reported slowdown in the adjudication of foreign-related cases in the courts, which may also affect reporting on IP litigation by the courts.  Unless there is comprehensive reporting of this information, it will be difficult to assess the problems they had sought to address, their impact, and their compliance with expectations of the NPC, rightsholders or foreign governments.

These legislative changes are also timed with events around IP Week in China, which typically includes releases of statistical data on patent and trademark prosecution, significant cases, policy initiatives, etc.  In light of other pending legislative changes (such as the patent law, the drug administration law, etc.), the government reorganization, the new IP court, a reported “surge” in IP litigation in China in 2018, and US-China trade relations, we can expect that there will be other useful information released in the days ahead.

Update of April 25, 2019:  Here are the NPC Observer’s comments on the revised laws as well as Jim Pooley’s observations on the new AUCL amendments in the context of international developments.

Further Trade-Responsive IP Legislative Developments May Be In the Works…

“When a stranger lives with you in your land, do not mistreat him. The stranger living with you must be treated as one of your native-born. Love him as yourself, for you were strangers in Egypt.” (Leviticus, Vayikra וַיִּקְרָא) .

He Jing of the Anjie law firm brought to my attention today an article in the April 21 Legal Daily which identifies proposed amendments to the Trademark Law, Anti-Unfair Competition Law and Administrative Licensing law that appear to be responsive to United States concerns over unfair treatment of Americans, “forced technology transfer” and IP protection in the current trade war.   Here is a copy of the Legal Daily article.

While we wait for the actual draft, I will place these proposed changes in context.

In my posting on good faith in IP-related trade issues,  I identified several issues which this legislation attempts to address, including warehousing of bad faith trademark registrations without intent to use; and  the removal of “employee” as a covered party (经营者) in China’s revised trade secret law (Anti Unfair Competition Law) which facilitates bad-faith employee behavior.   Actually, I am relieved that China may now be understanding how tolerance of bad faith behavior has had a wide spread impact on foreign perceptions of China’s willingness to protect IP.  These are important new steps.

Other provisions this legislation attempts to address also appear to address long-standing US concerns, such as requiring the destruction of counterfeit goods or materials and tools used for their manufacture.  The destruction of semi-finished counterfeit goods and materials and tools was a subject of DS-362, the China IP enforcement case, particularly regarding Customs’ disposal of goods outside the channels of commerce and the role of semi-finished goods in calculating criminal thresholds.

Other concerns raised in the legislation have been raised bilaterally.  Bad faith trademark registrations had long been discussed bilaterallyProtecting confidential information submitted by foreigners in administrative licensing has also been a long-standing concern of the United States and has been the subject of several JCCT discussions.

Although these changes are positive, I am reluctant to enthusiastically endorse them in the absence of corresponding measures ensuring their implementation.  As previously noted, newly amended provisions in the new Foreign Investment Law prohibiting forced technology transfer are likely to have little impact absent effective complaint and legal challenge procedures, such as the creation of a foreign investment ombudsman and/or appeals to the newly established IP court.  The inclusion of a non-discrimination position in administrative licensing procedures is also welcome news, although it may be similarly difficult to monitor and enforce.

China’s existing trademark law shows the limitations of forcing changes in behavior through legislation.  The trademark law and civil law have had provisions requiring “good faith” behavior, yet there has been little demonstrable impact on the flood of bad faith applications, which had increased to 7.3 million applications in 2018.  Chinese-origin bad faith and fraudulent applications are also causing USPTO to revise its own rules regarding pro se trademark applications from overseas.

As other examples, providing for treble or quintuple damages in patent or trademark proceedings is only useful in those still rare proceedings where statutory damages are not being used to calculate damages.  Similarly, the burden of proof reversals in IP cases, such as trade secrets can be useful but only if they are appropriately and effectively utilized and if motion practice in the courts is observable through online publication. Increasing penalties in administrative trade secret cases sound good on paper, but foreigners little use administrative trade secret enforcement proceedings.  Such proceedings have traditionally been an IP enforcement backwater.  According to the 2011 SAIC Yearbook (p. 855), there were only 57 reported administrative trade secret cases in that year, with an average 77,543 RMB average value and only 1,430,000 RMB (less than five thousand dollars) in fines.  The greatest focus of these cases were individuals, as 26 cases involved natural persons.  The data suggests to me that these cases largely involve employer/employee disputes over trade secret misappropriation, which should be resolvable in the courts.  Perhaps even more striking was the 35% decline in criminal trade secret prosecutions in 2017 to only 26 cases, which was also accompanied by a significant decline in criminal IP cases generally since 2012.   To address tolerance of trade secret theft (and IP infringement) by Chinese society, the most effective approach will be a commitment to criminal trade secret enforcement and an even greater commitment to civil remedies.  The proposed legislation only addresses part of this need.

Substantive changes can only be as effective as they can be monitored.  With respect to changes in substantive trademark and trade secret law, it would be especially useful if the full court dockets and more final cases were published.  If the data cannot be observed, it cannot be monitored for compliance.

While these legislative developments are underway, there is also word that the State Council continues to solicit opinions from the foreign business community on how IP issues are handled on their behalf.  This may also lead to welcome news.

There have also been two separate, non-IPR developments, which may have some bearing on the negotiations over the resolution of the trade war.  According to Bloomberg, the European Union is said to have won a dispute brought by China at the WTO seeking recognition of China’s market economy status (“MES”).    A similar case is pending involving the United States.  The lessons from these cases for IP should be that both the US and the EU should encourage more comprehensive and systemic treatment by China of IP as a private right if China is ever to achieve full MES.

In another development, a WTO panel ruled in favor of Russia in a dispute brought by Ukraine that the “national security” exception afforded by the WTO was not completely self-judging. The case could be read as a warning that the United States does not have unbridled discretion in deciding what constitutes a threat to its national security.  Taken together both cases affirm the WTO’s desire to remain relevant to changing circumstances in China and a changed perspective on international trade of the United States.

I wish everyone a happy Passover, Easter or spring holiday.

Buddha

 

Public Comment Draft of Patent Law Revisions Released by NPC

The National People’s Congress has released a public comment draft of the long-awaited revised patent law on its website .  Here is the draft itself, and here are the official explanations on the draft , along with other laws released by the NPC.  The comments are due by February 3, 2019.

The NPC Observer’s summary of the legislative history to date is here.   Based on a quick read, the biggest disappointment remains the absence of a patent linkage regime, as was noted of the State Council draft.  The inclusion of patent term restoration (five years) for pharmaceuticals is however, a plus.  There are also provisions on 5x punitive damages, extension of term for design patents (15 years), on-line infringement, expanding administrative enforcement, dealing with “counterfeit” patents, reversals of burden of proof for information on damages caused by the infringer, and an extension of the statute of limitations to three years, amongst other positive aspects.  There is also a good faith requirement to deter abusive patent litigation, but not one for prosecution of patents (e.g., a duty of candor).

In addition to filing comments electronically, commentors can use snail mail, by writing to NPCSC Legislative Affairs Commission 全国人大常委会法制工作委员会.  Instructions may be found at the NPC Observer website.

The draft may have been expedited in order to show a package of reforms that adddress US concerns in light of imminent trade discussions between the US and China, and as such appears to be part of larger package – perhaps even including the establishment of the new SPC IP Court.

I welcome readers to submit any translations of the proposed law and any comments they file to this blog for further publication.

A Potpourri of AIPLA Legislative Comments — And Other Developments

potpourri

The American Intellectual Property Law Association has once again made its comments on proposed changes to Chinese IP legislation (laws, regulations, rules, examination guidelines,  judicial interpretations, etc. ) available to this blog.

Attached are the AIPLA’s response to the request for comments to revision of the trademark law in China (商标法修改公开征集意见) first published by SAIC.  SAIC is now a part of SAMR – the State Administration for Market Regulation. It had published a public solicitation of ideas for revising the trademark law on April 2, 2018, with a due date for comments of July 31, 2018.  AIPLA’s comments primarily focus on providing clarifying and strengthening legislation regarding bad faith trademark applications and registrations.

AIPLA has also commented on the proposed patent validity rules  of the SPC on administrative patent litigation (最高人民法院关于审理专利授权 确权行政案件若干问题的规定(公开征求意见稿)).  This judicial interpretation was previously discussed in this blog, with a translation by the Anjie law firm.  Additionally, here  is the Chinese version of these comments.

Finally, AIPLA has commented on the special approval procedure for innovative medica devices (创新医疗设备特别批准程序(修订稿)) which was first published for public comment on May 7, with a closing date of June 15.   Here is a text of the draft approval procedures in Chinese.

In a related legislative development, the recent dismissal of party secretary Bi Jinquan of the SAMR due the tainted vaccine scandal may also impact reforms that BI had spearheaded, which included pharma-related IP reforms (patent linkage, regulatory data protection, etc).   Commissioner Bi formerly served as the leader of China’s Food and Drug Administration.  An August 20, 2018 notice of the State Council  (no. 83) on deepening reform in China’s medical sector ominously omits any mention of patents or IP reform.  国务院办公厅关于印发深化医药卫生体制改革2018年下半年重点工作任务的通知, (国办发〔2018〕83号.  The next place where we might see the continued life in these reforms is in the proposed revisions to China’s patent law, which the National People’s Congress had tabled for completion by the end of 2018 as noted in its 2018 workplan  (全国人大常委会2018年工作要点).  A first draft of the revised patent law is needed as early as late August/early September 2018 in order to meet the NPC’s deadline.  One much anticipated pharma-related concern in the new draft, which would also support China’s efforts to develop both an innovative and high quality pharma sector, is incorporation of “artificial infringement” by which a request for regulatory approval would be deemed an infringing act in order to support a patent linkage regime.

 

Note: The above photo by Unknown Author is licensed under CC BY-NC-ND