The Federal Circuit Bar Association and USPTO announced on July 17, 2017 that they are hosting a webinar on the latest research and developments in standards essential patents (SEPs) in China on July 25, 2017 from 9:00 to 11:30 AM, EST. The draft agenda and suggested reading materials are available via the link here. Registration is free and is required to participate in the program. Some of the speakers will also be discussing live at USPTO, for which registration is also required. The focus of the program is on developments and research in patent prosecution and injunctive relief for SEPs.
The China Patents and Trademarks journal has now made publicly available the article I wrote late last year with former USPTO Director David Kappos and former Chief Judge Randall Rader (ret.) “Faux Amis: China-US Administrative Enforcement Comparison”, in both English, and Chinese (形似神异：中美专利行政执法制度对比). Kevin Lu 吕行 of USPTO also assisted in researching the article.
The article discusses the differences between administrative enforcement of patents in the United States International Trade Commission (Section 337) and by SIPO in China and notes that the comparisons of China’s administrative patent system to the USITC system are misleading, as the two systems are different both qualitatively and quantitatively.
The opinions in the article are of course strictly the authors’ own.
There continue to be various thrusts and feints in these early days of the Trump administration on Chinese IP related matters. Here’s a quick rundown.
Tim Trainer, a friend and former colleague, who is also the President of Global IP Strategy Ctr, P.C. & Galaxy Systems, Inc. has drawn attention to several China IP-related developments including a Trump executive order that involved IP theft, a bill introduced by Congressman Steve King of Iowa that targets China’s theft of intellectual property (February 14, 2017), and the effect of TPP withdrawal on China’s free trade agenda.
The Executive Order notes the following:
It shall be the policy of the executive branch to:
(a) strengthen enforcement of Federal law in order to thwart transnational criminal organizations and subsidiary organizations, including criminal gangs, cartels, racketeering organizations, and other groups engaged in illicit activities that present a threat to public safety and national security and that are related to, for example:
(ii) corruption, cybercrime, fraud, financial crimes, and intellectual-property theft . . . .
This order from February 9 clearly puts IP theft on the radar. While China is not singled out by name, it is worth reflecting that the term “theft” appears 7 times in the text of Dr. Peter Navarro’s book Death By China. Of these seven times, “intellectual property theft” appears twice, and technology theft appears three times. The term “intellectual property theft” is specifically indexed. Navarro, of course, is a leading advisor to the President on trade policy.
Continuing the theme of IP theft, Congressman King’s bill would, according to Trainer “require the imposition of duties on Chinese origin goods in an amount equal to the estimated losses from IPR violations suffered by US companies if enacted into law.” This early stage bill is found here
Regarding TPP withdrawal and its effect on IP and China China’s Regional Comprehensive Economic Partnership agreements, a recent Congressional Research Service report has noted that the RCEP agreements are “unlikely to include commitments as strong on issues from intellectual property rights to labor and environmental protections”. As I have previously noted, “China’s FTA experience has thus far focused on a limited range of issues, most of which are not ‘core’ IP.”
Apart from Tim Trainer’s blog, the media has also reported extensively recently on several trademark decisions in China in President Trump’s favor. However, China’s trademark examination standards contain provisions that prohibit use of the names of political leaders. Moreover, unlike most other presidents, Trump was not a political leader until he was elected president. The Chinese trademark examination standards prohibit trademarks that hurt social morality or have other ill political effects. Amongst the enumerated bad political effects are trademarks that are identical or similar to a country, region or international organization’s leader’s name.
Postscript February 20, 2017:
While I have no opinion on the merits of any case, I hasten to note that the great grandson of Teddy Roosevelt, Tweed Roosevelt, might have an opinion on whether political officials should be granted trademarks. His company, Roosevelt, Tse and Company, owns several trademarks, many of which involve his eponymous restaurant in Shanghai, and some of which include the family crest (see below). He also seems to have been the victim of some individuals filing using the family name.
Living political leaders have also had their names misused. Three trademarks applications with the name of Barack Obama in 2008 by a company in Wuhan, China were refused registration by 2010. There are several trademarks and trademark applications of varying status with the name Merkel. A quick database search also showed up 7 applications with the Reagan name in English, one granted as recently as 2015 (Registration Number: 13981276) (for electrical goods). There is one registration for Fidel Castro for use on travel bags, filed by a natural person in Hebei 于锁群 (6792546). Did Fidel authorize this?
Of course, trademarks are not only the names of people. Several marks “In God We Trust” have been refused by the Chinese Trademark Office. One is still pending (21508789). It was filed by a company from Zhejiang.
A recent Washington Post article, noted that China is a country where “faking foreign brands has long been a profitable business practice.” The article refers back to the Qiaodan case as one important milestone in changing practices. As any reader of this blog knows, there have been several important steps in recent years to address abusive trademark practices.
The SAIC has announced that it has amended its TM review and examination standards (“Trademark Review and Examination Standards”). The revised standards, with a date of December 2016, are available here. The revisions incorporate revisions to Articles 19, 50, 15.2, 1and 10 of the Trademark Law.
In addition, the Supreme People’s Court published a judicial interpretation on Certain Issues Related to Trials of Administrative Cases Involving the Grant and Confirmation of Trademark Rights 最高人民法院关于审理商标授权确权行政案件若干问题的规定. A public comment draft of the JI was circulated as early as 2014; the final version was released at a press conference on January 11, 2017. The JI clarifies the application of “adverse influence” in Article 10(1)8 and “other improper means” in Article 44(1) of trademark law and provides details on prior rights of Article 32 including copyright, naming right, trade name, amongst other provisions. The Financial Times has suggested that the JI is linked to the Qiaodan case , although as the Chinese media as noted, Qiaodan may also be seen as one of a series of cases providing more expansive relief against abusive registrations and recognizing more extensive related rights, such as naming rights and even merchandising rights. In an unrelated development, the SPC on January 7, 2017 listed the Qiaodan case as one of the top 10 civil and administrative cases for 2016.
The 2016 JCCT obligated China to “take further efforts to address bad faith trademark filings”, according to the recently released Joint Fact Sheet. The amended examination guidleines, JI, and related case developments, including the development of case law in IP, should help implement this commitment.
Continuing the trends in higher damage awards that rely less on statutory damages and more on actual damages, the Beijing IP Court on December 8 awarded damages of 50,000,000 RMB in favor of the holder of a “USB Key” patent According to deputy chief judge Chen Jingchuan 陈景川, this is the highest damage award of the court to date. The damages included 49 million RMB in civil compensation plus 1 million RMB in legal fees. The case is Watchdata vs Hengbao (北京握奇数据系统有限公司 vs 恒宝股份有限公司), two Chinese domestic companies, for patent number ZL200510105502.1. The plaintiff is a Beijing-based company involved in digital authentication and transaction security.
The patent in suit relates to USBkeys distributed by banks to customers for security. The court found infringement of both its product claims on a USBkey itself and its method claims for authentication when users perform an online money transfer. The damages were based on a calculation of defendant’s sales and profit for patented products. In addition, when three of the fifteen infringing banks and the defendant refused to provide evidence of their sales, the court used evidence provided by the plaintiff. The basis for the court’s reliance on this evidence was a judicial interpretation on refusals to supply evidence (My guess: 《最高人民法院关于民事诉讼证据的若干规定》 (2001年12月21日)， article75 第七十五条 有证据证明一方当事人持有证据无正当理由桓不提供，如果对方当事人主张该证据的内容不利于证据持有人，可以推定该主张成立。)
Commentators have also noted that this may be the first time that the court has awarded legal fees to a prevailing party based on the time spent on the matter, which is also positive news for prevailing parties in Chinese commercial litigation.
Update January 24, 2017: Here’s another useful blog from the comparative patent remedies blog from Yijun Ge, a student of both Prof. Cotter and Fordham. This blog goes into greater detail on the methodology for calculating damages.
Several news outlets have reported on the recent WIPO World Intellectual Property Indicators 2016 report on IP filings, noting that China’s surpassing a milestone of one million patent applications in 2015, and that this may, according to WIPO reflect “’extraordinary’ levels of innovation.”
There are two significant problems with the reporting.
The first is that the news of one million invention patent filings is about one year old. SIPO publishes its patent filing data on a monthly basis, which is available to all, at no cost. The chart at the top of this blog is from the SIPO website statistics web page as of November 27, 2016 and covers patent filings through the end of September 2016. In other words, the news about China surpassing the one million benchmark was probably available sometime in the first quarter of 2016 – making it hardly news.
The second point though is the more troubling one: Bigness does not mean “strength”, as China has itself noted in State Council documents. Moreover, bigness does not necessarily mean innovation.
Let’s tease apart five of the hidden data of what the WIPO:
- WIPO Contradicts Itself on China’s efforts to Innovate: Some studies show China lags considerably on its efforts to innovate. While WIPO’s Francis Gurry notes that “Innovators in China powered global patent applications to a new record in 2015” another WIPO-commissioned Global Innovation Index looking at a broader range of factors, suggested that China is number 25 in global innovation, and number 72nd in technology payments, despite holding a top position in high tech exports. The data suggests that what is made in China is disproportionately not innovated in China. Indeed some would argue that the large overhang of unexamined utility model and design patents in particular is making it more difficult to innovate, by making it difficult to conduct freedom to operate analyses in China’s market.
- The Rising Tide Is Not Raising All Boats: China’s rapid increase in patent filings are overwhelmingly from Chinese domestic filers only. For example, according to the more up to date SIPO data above only 10.6 % of the invention patents filed through end of September 2016 were from foreign filers. For design and utility model patents, the foreign numbers are even lower: about 3% for designs and about 1% for UMP’s. Possible reason: subsidies for domestic patent filings may be more generally available than subsidies or other incentives to file overseas.
- China’s Patent Tide Stops at its Boundary Waters: China is not a major international filer. As the WIPO report notes: “around 96% of total applications from China are filed in China and only 4% of the total are filed abroad. In contrast, filings abroad constitute around 45% of the total in the case of applicants from Japan and the U.S.” As I have detailed elsewhere, when China does file overseas – such as at the USPTO – the quality of the patents is high. However these overseas-filed patents still are a limited cohort of China’s domestic filings, even if it may represent its most innovative and high quality patents.
- China Is A Big IP Country, But Not Necessarily A Strong One = Particularly When Other Comparative Data is Introduced. When patents per capita or patents per unit of GDP are compared or patents in force are calculated, China does not come out on top. Japan, Korea, Switzerland, the United States and other countries all have their strengths when comparative data is introduced. In fact, the United States has 2.5 million patents in fact, and China is behind Japan in the number three slot (1.4 million patents in force), despite the rapid growing number of its invention patent applications.
- Is China “Pulling out the Stalks to Make the Plants Grow”: A system that is overly geared to easy metrics? No less dramatic than the 1,000,000 patent benchmark are the areas where China so outstrips other countries as to suggest that there may be fundamental problems in the value proposition of its IP system. China’s 1.1 million utility model applications are about 127 times second-ranked Germany’s (chart A55). China’s design patents constituted nearly 94% of global filings (p. 127) The data suggests that China is indeed strongest where the government can most actively support registration activity. Quantitative data also works to the disfavor of economies that have strong pharma sectors, which are dependent on fewer patents, and industries that rely on proprietary/unpatented technology. This blog has also repeatedly reported on both these SIPO filing data, and some of the distortions that have accompanied this dramatic ramp-up in patent filings, including subsidies, “get out of jail” free subsidies, and end of year acceleration in patent filings to take advantage of incentives. These incentives have helped increase patent quantity, but their impact on quality is harder to measure.
Summary: Judging the extent to which China’s rapidly evolving system is contributing to China and global innovation requires more careful thought than simply looking at the explosive growth in China’s IP filings. In addition to the problems noted, it also requires looking at other data such as commercialization, citation rates, relationship to manufacturing and exports, licensing and assignment rates, adoption by standards setting organizations, etc. Nonetheless, the quantitative curve is obvious and impressive (see below).
The 27th Joint Commission on Commerce and Trade concluded in Washington, DC on Wednesday, November 23, 2016, in time for the Thanksgiving holidays in the United States. Here is a link to the U.S. government fact sheet. The following is my summery of IP-related issues –
Amongst the “core” IP issues the fact sheet notes that China agreed to “take further efforts to combat bad faith trademark filings.” Regarding technology transfer, China advised that it is “actively conducting research on the Technology Import and Export Administration Regulations (2002) (TIER) to address U.S. concerns.” Both of these statements are forward leaning although they admittedly lack specificity. Regarding trade secrets protection, China agreed that “ in practice, trade secrets misappropriation may be committed by individuals, including employees, who may not be directly involved in the manufacture or sale of goods and services” , thus addressing the concern that the trade secret provisions of the anti-unfair competition law only address commercial undertakings (this issue was also addressed in the draft revisions of the AUCL that was released earlier this year). China also announced that it plans to bolster other elements of its trade secrets regime, including with respect to evidence preservation orders and damage calculations. Also on the technology side, China also confirmed that “the government has never asked the fund to require compulsory technology or IPR transfer as a condition for participation in [state semiconductor] Funds’ investment projects.”
Issues involving entertainment market access in China also got some attention. Regarding music licensing, China committed to “issue a measure allowing foreign-invested enterprises to engage in online music distribution and revoking the requirement established by the Ministry of Culture’s 2009 Circular on Strengthening and Improving Online Music Content Examination.” Regarding theatrical film distribution, which had been the subject of a settlement of a WTO case between the United States and China, China affirmed that it will “enter into consultations with the United States in calendar year 2017 in order to provide further meaningful compensation to the United States.” Furthermore, the United States and China agreed that, as part of the calendar year 2017 consultations, they will seek to increase the number of revenue-sharing films to be imported each year and the share of gross box office receipts received by U.S. enterprises.
There are several outcomes which are cooperative in nature. Regarding on-line IP issues, both sides committed to training of small and medium-sized enterprises as well as exploring the use of big data and other new information technologies to enhance the capability for combating infringement and counterfeiting online. A program on copyright protection for live sports broadcasts is planned for 2017. In addition, China committed to further study the feasibility of protecting the broadcasts of sporting events under its Copyright Law and the United States “welcomes further clarification” on this issue from the Chinese judiciary “at the earliest possible time.” Other cooperative programs include ones on: “legal protections for product and service designs, and U.S. trade dress protections “; “criminal enforcement of trade secrets and counterfeit pharmaceuticals”; a joint conference in 2017 on criminal law, legislation and enforcement “to share experiences on recent trends in technologies, business models, and legal developments”; and a workshop on Judicial IPR Protection in China in 2017.
Often events happen on the margins on the JCCT which may not be fully reflected in JCCT outcomes. There were two notable developments around the time of the JCCT affecting intellectual property rights. One was the publication of the draft revisions of China’s patent examination guidelines, which address post filing data supplementation, software and business method patents. Post-filing supplementation of data has been the subject of prior JCCT and bilateral commitments. Another development involved de-linking of government procurement policies with indigenous innovation, which has been the subject of a recent State Council document that, according to the fact sheet, “requir[es] all local regions and all agencies to further clean up related measures involving linking the indigenous innovation policy to the provision of government procurement preferences….”
The JCCT has a long history, but has typically grown in scope and significance over the years as the US and Chinese economies have increasingly become interdependent. This was the last JCCT of the Obama administration. It will next be up to the Trump Administration to decide how to guide the JCCT to continue to play a useful role in bilateral trade relations.
The above are my personal, non-official observations. All photos are by Mark A. Cohen.