A Pair of Experiments in the Beijing IP Court

依波路(远东)有限公司

Back in 2012, I noted that “[t]he Chinese civil judiciary is pursuing reform and gaining experience, as Deng Xiaoping noted, by crossing the river by feeling the stones. A disproportionate part of that judicial experience is also being gained from the relatively small numbers of IP cases in the Chinese courts.” One notable and welcome source of those reforms is the new Beijing IP court, which is also serving as a base for experimenting in the development of a system of case law with Chinese characteristics.  I believe that the most notable development in Chinese IP in 2015 has been the role the courts are playing in judicial reform generally.  I have been privileged to hear Chief Judge Su Chi and his team from this court speak several times since his court was established, and have never failed to be impressed by their depth of knowledge and passion for judging.

There have been two notable year-end developments by the Beijing IP court.  One case involved the use of en banc decisions to invalidate a trademark normative document.  In this case the IP Court made an en banc decision to implement Article 21 of the SPC’s Interpretation on Practical Questions regarding the Administrative Litigation law of the PRC中华人民共和国行政诉讼法〉若干问题的解释 (April 28, 2015) (the JI). Article 21 of the JI provides that “When normative documents are not in accordance with law, the People’s Court shall not use it as proof that the administrative action has a legal basis, and shall explain this in the reasoning of its decision.  The People’s Court’s decision shall make recommendations on disposition of the normative document to the enacting agency, which can be copied to the government organs at the same level of the enacting agency, or to one government level higher.” (规范性文件不合法的,人民法院不作为认定行政行为合法的依据,并在裁判理由中予以阐明。作出生效裁判的人民法院应当向规范性文件的制定机关提出处理建议,并可以抄送制定机关的同级人民政府或者上一级行政机关。)

The other case, no less dramatic, involves what may be the publication of a dissenting period. Both of these developments occurred this month (December 2015).

The case arising under Article 21 of the SPC Interpretation involved an interpretation of the State Administration of Industry and Commerce regarding what constitutes a “day” for purposes of implementing a change in trademark classifications.  The IP Court found that the notice’s definition of a “day from a 24 hour period to a month exceeded the scope of power to explain the law, ruling in favor of plaintiff who claimed to have filed its trademark in advance of two other parties who filed one week and three weeks after plaintiffs filing.

When this case was heard in September, Chinese media talked about this as the first effort to “break the ice” by a Chinese court to invalidate administrative “红头文件” – red letterhead documents, i.e., normative documents of the type referenced in the JI.    The court reportedly also experimented in using live testimony and cross-examination in an atypical debate-style process. The pleadings were also entered into as part of the opinion after the party’s signatures confirmation. The decision does not yet appear to be on line, but a summary is attached  here (in Chinese).

Another procedurally significant decision involved the appearance of dissenting opinions in IP cases. Here again, the Beijing IP court is a trail and trial blazer in this recent experiment. The case involved Ernest Borel (Far East) Co. Ltd. and China’s Trademark Review and Adjudication Board. There were different opinions by the court on proof of copyright in the logo of Ernest Borel, including use of the original trademark registration and a subsequent copyright registration to prove that the design belonged to Ernest Borel. The minority opinion supported using these two registrations as a proof of copyright ownership.  Ernest Borel was attempting to prove that it owned the copyright in a logo that was being used by a Shenzhen company in its trademark registration (深圳市依波路保健科技有限公司).

Two notable experiments by an experimental court!

Note that the logo at the top of this article is a logo of Ernest Borel that I found online if for illustrative purposes only.  It does not imply any endorsement of the positions here by Ernest Borel.  It may not also be the trademark that is the subject of the pending case.  Any trademarks and copyrights are the property of their respective owners.

 

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