SIPO/IP Agencies to Be Reorganized and Consolidated

Several Chinese news agencies have reported on by the State Council, the proposed reorganization now being presented to the National People’s Congress, which will significantly rearrange all Chinese agencies, including IP agencies.

According to the plan, after the reform, the number of state-level ministries and commissions will be reduced by 8 and vice-ministerial agencies were reduced by 7.  State Councilor Wang Yong(王勇), who was formerly a Minister at AQSIQ (Administration for Quality Supervision, Inspection and Quarantine, 2008-2010) where he addressed tainted milk amongst other issues,  noted in introducing the changes to SIPO that “SIPO would be newly organized.  The creation, protection, utilization of IP will be strengthened as an important measure to speed up the establishment of an innovative economy.” The proposal includes combining trademarks and patents which are separately managed and have “redundant” enforcement authority.   These authorities will be combined with ASQISQ’s authority over Geographical Indications to establish a national State Market Supervision Adminsitration (国家市场监督管理总局) (“SMSA” for purposes of this blog).

Wang Yong’s statement in Chinese:

(九)重新组建国家知识产权局。强化知识产权创造、保护、运用,是加快建设创新型国家的重要举措。为解决商标、专利分头管理和重复执法问题,完善知识产权管理体制,方案提出,将国家知识产权局的职责、国家工商行政管理总局的商标管理职责、国家质量监督检验检疫总局的原产地地理标志管理职责整合,重新组建国家知识产权局,由国家市场监督管理总局管理。其主要职责是,负责保护知识产权工作,推动知识产权保护体系建设,负责商标、专利、原产地地理标志的注册登记和行政裁决,指导商标、专利执法工作等。商标、专利执法职责交由市场监管综合执法队伍承担。 

The creation of SMSA suggests that SIPO’s once lofty goal/dream of serving as an integrated IP agency, which was initiated by Dr. Gao Lulin when he was Commissioner, may have come to a temporary end.  At one time a stumbling block to this proposal may have been integrating the vast trademark enforcement resources of SAIC.  It appears that such an integration would likely be accomplished under the new SMSA.  Another legacy issue that may need to be addressed involves SIPO’s legacy authority over international IP which often overlapped with MofCOM’s authority over trade-related IP, which became especially important after WTO accession by China and may be even more challenging by the integration of SIPO into a bigger agency.  Noticeably absent from this proposal, however, are the copyright authority (under the National Copyright Administration), as well as trade secret protection (under SAIC).  Plant variety protection, already divided between two agencies (Agriculture, Forestries) with SIPO helping to support international engagement, is is also absent.  One view of these changes is that voices within China that look at IP (including patents) as an instrument of market regulation, including consumer protection, may have won out.  This approach was evident in the work of the National Leading Group Fighting IP Infringement and Substandard Products (全国打击侵权假冒办公室), as well as the increased activity of SIPO over the years in conducting market supervision actions involving false marking and patent infringements.  Indeed the wisdom of keeping this Leading Group within MofCOM in light of a new SMSA may be questioned; however, the Leading Group consists of many more agencies than SIPO, SAIC and AQSIQ.   Nonetheless the State Council had previously called for reducing redundancies in enforcing the market order, and it was also part of the yet to be adopted patent law revisions.  In that State Council opinion, which may be a guiding part of this reorganization, there is a call for  “the elimination of duplicative multilayered enforcement”, including territorial and subject matter overlaps. See: https://chinaipr.com/2014/07/16/state-councils-new-opinion-on-market-order/. 

The approach of creating a SMSA to address enforcement challenges is also distinct from the technology-oriented reforms of China’s judicial system in recent years, which have led to the creation of technology oriented IP courts as well as the creation of more autonomous IP  tribunals.  The incorporation of sui generis GI protection into SMSA agency also pits two sometimes rivalrous agencies with different perspectives on utilization of the trademark (private rights) system with a sui generis (more public rights oriented) system to protect GI’s.  Finally, it would also likely have the effect of elevating SIPO to a General Administration in the State Council structure, which is just below a Ministry-level agency.   This is somewhat more similar to the structure of the USPTO which is within the Department of Commerce in the United States.

How do the other IP agencies shake out?  It is too soon to know.  The Ministry of Culture is merging with the Tourism Administration.  Will the National Copyright Administration remain within the General Administration of Press and Publications/State Administration for Radio Film and Television structure? Also, there are some reports that the Ministry of Science and Technology is also being reorganized to absorb the State Foreign Experts Bureau and the China National Science Foundation.  Finally, the Legislative Affairs Office of the State Council is reportedly moving to the Ministry of Justice.    The SCLAO has exercised a tremendously important role over the years in crafting IP legislation.  The impact of some of these changes will also likely depend on personnel shifts within the agencies.  In addition, it could impact or accelerate efforts already in place by these agencies.  For example, will the change in the SCLAO structure affect long-overdue proposed revisions to China’s copyright law, which reportedly are once again the subject of active discussion? Similarly, it is unclear to me at this stage what impact there will be on the China Food and Drug Administration (reorganized in 2013), in light of other changes to health-oriented agencies and SIPO, and if this will affect, or perhaps accelerate, efforts to reform IP administration by SFDA, such as through a patent linkage regime.  

These proposed changes elicit more questions than answers; we will need to see how they are enacted and implemented in the coming months.  We welcome corrections and additional information from readers!

Update of March 14: Fu Yiqin at Yale has put together a useful summary of proposed State Council reorganizations.  Here is the link: https://yiqinfu.github.io/posts/state-council-reform/.  Fu Yiqin notes that the State Food and Drug Administration and antitrust enforcement agencies will be combined in the State Market Supervision Administration (where SIPO, et al will also be located).  SARFT is maintained as a separate agency in this chart.  Other news has SARFT being restructured: http://deadline.com/2018/03/china-abolish-sapprft-media-authority-consequences-xi-jinping-1202336724/.  Clearly we need some more dust to settle on some of these issues. Hypothetically if antitrust and IP are combined into one agency (perhaps including copyright), and if IP enforcement also is combined into that agency, the problem of the inherent conflict of interests between IP grants, IP enforcement and controlling for IP abuse would be heightened.  However, if SFDA is also combined with SIPO/other IP agencies, there is also the possibility for greater coordination on pharma-related IP issues, such as linkage. I will be updating this as more information becomes available.  Note that in a prior blog, I abbreviated SMSA as GAMA – I am following the nomenclature of Fu Yiqin.

Update of May 7, 2018:  Here is a thoughtful article by the Anjie law firm on the government restructuring which points to the increased supervisory role of the new agency over SIPO’s formulation of IP strategy, as well as the new role of the Ministry of Justice in reviewing legislation.

 

 

 

Beginning the Journey for Trade Secret Reform: the Recent AUCL Draft

A much awaited, proposed public draft revision to the Antiunfair Competition Law was released by the State Council Legislative Affairs Office on February 25, 2016. Comments are due by March 25, 2016.  An open source translation is available here.

This is not an easy law to comment on, as the law combines a range of various issues to varying degrees: competition and fair trade law, trade secrets law, trade dress law, cybersquatting and enterprise name infringements, advertising regulation, bidding law, compliance/anti-bribery, network management and other areas.  Strictly speaking it is not an IP law which focuses on giving individuals private rights.  Rather, it is geared towards ensuring that there is fair competition in the market, as its title suggests.

A key focus for me has been on the trade secret provisions of the draft.  Pertinent provisions are discussed and copied below:

“Article 9: A business operator must not carry out the following acts infringing on trade secrets:

(1) Obtaining rights holders’ trade secrets by theft, enticement, intimidation, fraud, or other improper tactics;

(2) Disclosing, using, or allowing others to use a rights holders’ trade secrets acquired by tactics provided for in the previous item;

(3) Disclosing, using, or allow others to use trade secrets in their possession, in violation of agreements or the rights holders’ demands for preserving trade secrets.

Where a third party clearly knows or should know of unlawful acts listed in the preceding paragraph, but obtains, discloses, uses or allows others to use a rights holders trade secrets, it is viewed as infringements of trade secrets.

(一)以盗窃、利诱、胁迫、欺诈或者其他不正当手段获取权利人的商业秘密;

(二)披露、使用或者允许他人使用以前项手段获取的权利人的商业秘密;

(三)违反约定或者违反权利人有关保守商业秘密的要求,披露、使用或者允许他人使用其所掌握的商业秘密。

“Trade secrets” as used in this Law refers to technological information and business information that are not publicly known, have commercial value, and are subject to corresponding secrecy measures taken by the rights holder.”

Importantly, the draft drops the earlier statutory requirement that trade secrets had to have practical applicability, a “TRIPS-minus” provision which may have had the effect of denying trade secret protection to experimental failures.  The distinction between technical information and business information in this draft may also reflect other laws and government agencies some of which, like the Ministry of Science and Technology and SIPO have expressed interest in “technical trade secrets” or “service invention” compensation for trade secrets. Chinas IP courts similarly have jurisdiction over technical trade secrets, but not business confidential information.

The law also expands the scope of a covered business operator, to include natural persons, which is a positive step:

“‘Business operators’ as used in this Law refers to natural persons, legal persons or other organizations engaged in the production or trade of goods, or the provision of services. (“goods” hereinafter includes services). “(Art. 2)

The draft offers very little in the way of improving procedures for trade secret litigation.  There are improvements to trade secret administrative enforcement.

“Chapter III: Supervision and Inspection

Article 15: When supervision and inspection departments investigate acts of unfair competition, they have the right to exercise the following powers of office:

(1) Enter business premises or other venues related to the conduct under investigation to conduct inspections;

(2) Question business operators under investigation, interested parties, or other entities or individuals, and request supporting materials, data, technical support or other materials relating to the acts of unfair competition;

(3) Make inquiries about, or reproduce, agreements, account books, invoices, documents, records, business correspondence, audio-visual materials or other materials relating to the acts of unfair competition;

(4) Order business operators under investigation to suspend suspected unlawful acts, to explain the source and quantity of property related to the conduct under investigation, and to not transfer, conceal or destroy that property;

(5) Carry out the sealing or seizing of property suspected to be involved with acts of unfair competition;

(6) Make inquiries into the bank accounts of business operators suspected of acts of unfair competition as well as accounting vouchers, books, statements and so forth relating to deposits;

(7) Where there is evidence of the transfer or concealment of unlawful funds, an application may be made to the judicial organs to have them frozen.

Article 16: When supervision and inspection departments are investigating acts of unfair competition, business operators under inspection, interested parties or other relevant units or individuals shall truthfully provide relevant materials or circumstances, shall cooperate with supervision and inspection departments performing duties according to law, and must not refuse or obstruct supervision and inspection.”

Although I believe most right holders seek improvements in trade secret enforcement, including more deterrent remedies, I am uncertain how much those desires extend to administrative enforcement.  Transferring of relevant confidential material to an SAIC official tasked with trade secret enforcement will raise concerns of further trade secret leakage, which are probably not of equal concern in the case of administrative enforcement of, for example, trade dress infringements covered under this draft law.    Moreover, the State Council has elsewhere stated that all administrative cases should be conducted ex-officio.  To me administrative ex-officio enforcement of trade secrets, with authority to enter business premises to inspect and conduct investigations, is problematic.

The draft law also seeks to increase administrative fines for trade secret theft, and improve burden of proof issues:

“Article 22: Where business operators violate the provisions of Article 9 of this law, the supervision and inspection departments shall order them to cease the unlawful acts, and shall impose a fine between 100,000 and 3,000,000 RMB depending on the circumstances; where the act constitutes a crime, criminal responsibility is pursued in accordance with law.

Where the rights holders of trade secrets can prove that information used by others is substantially the same as their trade secrets and that those others had the capacity to obtain their trade secrets, those others shall bear the burden of proof to show that the information they used came from lawful sources.”

It is unclear to me from Article 22, that this “burden of proof” reversal in the second paragraph above applies to administrative enforcement or civil enforcement, or even criminal process.  Moreover, the requirement of substantial similarity of the technology for the shifting to take effect, is probably too high a threshold, having been an impediment for plaintiffs in trade secret litigation in China to date.

Does this law go far enough in addressing trade secret issues in China?

Although SAIC has historically conducted many administrative trademark cases on behalf of foreigners, historically trade secret administrative enforcement has not significantly benefitted foreign companies or small enterprises.  As I previously blogged:

That there were 174 trade secret cases [for 2008-2010] out of 110,896 cases involving the Law to Counter Unfair Competition, or about 0.2% of the total. In addition, the data shows that average fines were 11,624 Yuan, and only 7 cases or about 4 % of the trade secret case were referred to criminal enforcement.  Like the civil system, the administrative system also appears to be frequently used to address employee theft of confidential information.  Precisely one third, or 58 of these 174 cases involved individual respondents; 24 involved private companies  (14%) and 23 cases involved individual businesses (13%).   There were no cases where a state owned enterprise or publicly held company was named as a defendant in an administrative action.  

One may question, therefore, whether this draft revision of the AUCL addresses the full range of substantive and procedural improvements that need to be made to improve trade secret enforcement in China, much of which may be more uniquely linked to trade secret protection compared to other IP rights.  Moreover, many of the problems are amplified by comparison with trade dress or other provisions of this draft law.

Much of the problem with trade secret protection has been in the lack of discovery in the civil system.  One significant advantage of improved trade secret administrative enforcement however could be in facilitating the transfer of information obtained in administrative investigations to civil courts or law enforcement authorities, consistent with State Council guidance on facilitating case transfers.  Improving civil procedures for trade secret cases could also greatly help in civil prosecution of trade secret cases, including by making necessary changes in evidence collection, burden of proof reversals, and other areas.

The current draft appears unduly oriented to instances where trade secret theft has actually occurred.  One critical area concerns the availability of relief for threatened misappropriation of trade secrets including preliminary injunctions, adoption of “inevitable disclosure” type doctrines, and evidence or asset preservation measures.  Such measures can be especially important as the harm that may be caused by a misappropriation may be incapable of being compensated for by the misappropriator or beneficiary of the theft. Although revisions to China’s Civil Procedure Law now permit preliminary injunctions for trade secret theft (Eli Lilly vs. Huang Mengwei),  China may wish to consider specific provisions in this law to facilitate more liberal dispensation of provisional remedies.  China had specifically provided for preliminary injunctive relief in other IP laws, before the most recent Civil Procedure law amendments, and may want to consider appropriate provisions for trade secrets.

Regarding threat of trade secret law, the current law also only addresses “disclosing, using, or allowing others” to use the secret information.   This deficiency could easily be remedies by including language on threat or imminent trade secret theft.    The Uniform Trade Secrets Act in the United States, by comparison, specifically addresses “actual or threatened misappropriation” which may be enjoined, and also provides a remedy for trade secret inducement.  The TRIPS Agreement itself clarifies that a key focus of WTO member trade secret obligations is “preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices.” (emphasis added).  The need for preventative measures is also reflected in TRIPS Article 41, which requires WTO members to have “expeditious remedies to prevent infringements.”  In addition, inducement liability is being considered in other China IP laws (patent/copyright) and does not appear to be part of this draft.  A clear definition of inducement liability may be helpful in limiting losses due to third party misappropriation of trade secrets.

China’s trade secret regime also has several other challenges, including difficult criminal thresholds; unclear relationships with labor law, labor mobility regulations, and employee non-competes; difficulties in gathering evidence; unclear divisions among the appropriate role of civil, criminal and administrative remedies;  and even an emphasis on trade secret protection as an aspect of market regulation, rather than as a civil IP right, as is under consideration.    Some of these deficiencies may be cured by judicial interpretation and guidance, as was previously addressed by the Supreme Peoples Court in an earlier Judicial Interpretation.

The focus on market regulation denies trade secret holders in China the ability to address infringement based on where a product that benefits from a trade secret misappropriation is sold, but instead may require litigation where the misappropriation occurred.  See Siwei v. Avery Dennison (Min San Zhong Zi No. 10/2007) (Sup. People’s Ct. 2009) (China).   This may also encourage foreign litigants, concerned about  local protectionism or undue influence of local companies on local courts, to seek remedies elsewhere (such as through Section 337 remedies in the United States).  In addition, the lack of discovery can also lead to the “exporting” of such litigation.  Making these necessary procedural improvements, including improving “success rates” for domestic trade secret cases and improving procedures for gathering evidence, may also enhance China’s position that Chinese judgements in trade secret cases are entitled to res judicata effect in other jurisdictions.

Former SPC Vice President, now Chief Procurator  Cao Jianming 曹建明, noted in 2005,  trade secret enforcement was the area with the “greatest difficulties” for the courts Industry has also raised concerns about many of these deficiencies.  While many of the changes in the AUCL on trade secret protection are positive, a more comprehensive approach could require reforms in other areas, including the practices of law enforcement and the courts, administrative law reform, civil law reform, and/or a stand-alone trade secret law.

My personal estimation: the AUCL draft is a beginning and not an end in the trade secret reform process.

IPR Abuse and Refusals to License

The US Chamber and American Chamber of Commerce (the “Chambers”) have recently made available its recent comments on the NDRC and SAIC drafts of the IP abuse guidelines to be promulgated by the Antimonopoly Commission of the State Council.  Here are the links: NDRC IP Abuse Guidelines Chinese; NDRC IP Abuse Guidelines English; SAIC IP Abuse Guidelines Chinese; SAIC P Abuse Guidelines English.  As there is no public database of comments received on most Chinese legislation, I will continue to try to make available comments by private entities here on this blog.

The NDRC and SAIC comments of the Chambers continue to focus on certain key areas of concern, including China’s endorsing of an essential facility doctrine without considering the pro-competitive aspects of licensing (or standards setting).  The Chambers have expressed concerns about “an approach that imposes restrictions on licensing because it is possible to imagine a license that creates more competition”, which (in my view) is essentially a state-management approach to licensing and intellectual property.    The Chambers also focus on burdens of proof – an increasingly important issue in IP cases generally, as well as extraterritorial authority based on “effect” on the Chinese market, without regard to substantiality or immediacy.  As I have noted elsewhere, concerns over extra-territorial issues have been of increasing concern bilaterally. 

The Chambers also support provisions to enable portfolio licensing, which may include expired patents and would otherwise need to be adjusted or renegotiated every time a patent expires or is found invalid.  The Chamber also takes issue with presumptions that cross-licenses and grant backs are anti-competitive.   The Chambers also address concerns about aggressive regulation of refusals to license patents, particularly those that are not encumbered by a F/RAND obligation (eg., Article 24, SAIC draft).

An important development on refusals to license in China has been noted by Benjamin Bai in a recent blog on a non-SEP refusal to license case now pending in China.  According to Benjamin:

Hitachi Metals At the time of writing, there is an ongoing litigation on whether a refusal to license non-essential patents constitutes IP abuse. Four Ningbo companies brought this case against Hitachi Metals in the Ningbo Intermediate Court. The dispute centers on neodymium-iron-boron magnets, which are widely used in the electric engineering, wind power, automotive, and high tech industries. About half of the global consumption of rare earth metals relates to this magnetic alloy, whose intellectual property rights are mostly held by Hitachi Metals. It owns more than 600 neodymium-iron-boron magnet patents globally but has only licensed selected patents to eight Chinese companies. Hitachi has refused to license to other Chinese companies.

 Hitachi’s refusal to license its patents to the plaintiffs is the basis for the suit. The accused abusive conduct includes refusal to license, bundling, etc. This is the first case in which plaintiffs have requested a Chinese court to license non-essential patents based on the notion of “essential facilities”. The plaintiffs argue that Hitachi’s patent portfolio on neodymium-iron-boron magnets should be considered as essential facilities for the industry because its patent portfolio cannot be substituted and avoided. The plaintiffs seek damages of RMB24 million (~USD3.4 million). A nine-hour hearing was held on December 18, 2015. The court has not yet issued any decision. This case will undoubtedly have a huge impact on the Chinese jurisprudence on refusal to license and IP abuse.

Benjamin concludes his blog by noting:

When it comes to non-essential patents, however, the rationale of Huawei v. InterDigital does not apply. Instead, the analytical framework laid out in Qihoo v. Tencent should be followed. According to the Chinese Supreme Court, market dominance refers to the position of an undertaking with the ability to control the price, quality of other transactional terms of products in the relevant market, or the ability to impede or affect the entry into the relevant market by other undertakings. The determination of market dominance is a multifaceted process. No single factor is necessarily outcome-determinative. A high market share in and of itself should not lead to a presumption of market dominance, especially where the high market share is due to high efficiency or better-quality products. Therefore, a high market share conferred by technology superiority might not lead to a finding of dominance.

Extension of essential facilities outside of the F/RAND context where a company may not have willingly abandoned certain rights in exchange for incorporation in a standard is problematic, as Benjamin notes. I believe there are also implications for China’s IP system.   Neither recent draft guidelines or court decisions to date recognize patents as a unique form of property which is based on a right to exclude offered in exchange for disclosure of an invention.   Aggressive antitrust enforcement could erode that incentive.  This can be of great concern in the non-SEP space, where a patentee may have a choice whether to disclose an invention or keep a proprietary method secret.  As disincentives to patenting continue to mount due to narrowing scopes of patentability, procedural changes making litigation more difficult and patents less stable, and/or increased antitrust enforcement, the technological “commons” created by patent disclosures, as well as the incentives that patents provide for investment and product development, may narrow. The dynamic efficiencies of the patent system, which frequently creates new technologies which is not even in current manufacture and “include[es] societal gains from innovation” (GAI comments on NDRC draft) could be placed at risk.

I also remain concerned about disproportionality between antitrust damages and a continuing low level of patent damages.  CIELA currently lists average patent damages in China at 419,366 RMB, based on a cohort of 511 cases where the plaintiff won its claim of patent infringement.  This is about 70,000 dollars, or about 1/10,0000 of the fine imposed on Qualcomm in its recent NDRC investigation.  Of course,  patent damages address harm to the rights holder and antitrust damages address harm to competition, making comparisons somewhat inexact.  A legal argument however is that, whatever the calculation of antitrust damages, China has an explicit international obligation to insure that patent infringement damages “constitute a deterrent to further infringements” (TRIPS Article 41).  WTO members may even impose criminal remedies for patent infringement where willful and on a commercial scale (Article 61).   The authorization for WTO members to address IP abuse under the TRIPS agreement is only to take “appropriate” measures (Art. 40).   In my view, overly aggressive antitrust enforcement in China when the IP system is fundamentally weak, is “inappropriate” for China, and could weaken market-based incentives to license and patent, as well as incentives for disclosure at a critical time in China’s quest to become an innovative economy.

 

 

SAIC Announces Its Latest Draft of IP Abuse Guidelines

“[T]he word transparency [is] the ‘most opaque in the trade policy lexicon.’” Sylvia Ostry

On Feb. 4, 2016, SAIC published for public comment its draft Guidelines On Anti-Trust Enforcement Against IP Abuse, dated February 2, 2016,  <关于滥用知识产权的反垄断执法指南(国家工商总局第七稿>公开征求意见的公告> .  SAIC advises that this is their seventh draft. The deadline for SAIC’s receiving comments is February 23, 2016.   The draft is also accompanied by an explanation, which briefly reviews the earlier drafts and notes that the numbers of comments received throughout the commenting process, which was first initiated in 2009.

This guideline draft is in addition to the IP abuse rules that SAIC promulgated in 2015, with an effective date of August 1, 2015.  Unlike the guidelines, which will be adopted under the auspices of the Antimonopoly Commission of the State Council, the rules were adopted pursuant to SAIC’s own legislative authority.  It will be interesting to compare the guidelines with the rules.  If both rules and guidelines ultimately co-exist, and there are differences in wording and policy, there will inevitably be concerns over how these differences will be enforced.

I have previously discussed NDRC’s drafting process here, and on a non-public SAIC draft here.  In fact, my comments on the SAIC fifth draft go back nearly to the time this blog was established, in 2012. As noted in the book I co-authored with Steve Harris and others, Anti-Monopoly Law and Practice in China (2011), SAIC’s engagement on IP abuse dates back to 2004 – before the AML was itself enacted — when it published a paper “The Competition Restricting Measures of Multinational Companies in China and Counter Measures.”

SIPO is also reportedly involved in drafting or commenting on IP abuse guidelines.  As with SAIC, SIPO’s involvement goes way back.  SIPO’s 2009 IPR Action Plan specifically contemplated that it would “step up research on abuse of IP rights, and strengthen communication and negotiation with relevant foreign government authorities on this issue.”

When I wrote the chapter on IP for my book, in fact there were various copies of the IP Abuse Guidelines of SAIC circulating, but none had been made available for public comment.   Much has changed since then.  In recent years, many laws and regulations have been subject to multiple opportunities for commenting at different stages of legislative drafting. Along with copyright law amendments, these guidelines have been very long in the making with many such commenting opportunities.  As with the copyright law amendments, I also believe that comments on these IP abuse guidelines are not only intended to enhance the quality of the subject legislation, but also intended to show support for legislation that may be subject to claims of different agencies.

 The current AML policy environment is also suggestive of the type of IP environment that Martin Dimitrov outlined in his book Piracy and the State: The Politics of Intellectual Property Rights in China, where he attributed China’s inconsistent enforcement to campaign based, redundant approaches, responsive to external pressures, and unduly complex.  I previously blogged that one important step might be for the State Council to take a more active role in this area, consistent with current plans to reform China’s legislative process.  Another, small positive first step might be for the AML-related agencies to publish an annual report which outlines their policy and enforcement mechanisms, much as is currently done for other areas, such as intellectual property, and which forces a degree of coordination.

I hope to post comments from others on this draft later on this blog.

Another positive note: SAIC has also made it site available in large type and with audio accompaniment for those who have visual impairments.

Updated: 2/8/2016

 

 

GAI’S Comments on NDRC’s IP Abuse Guidelines

 “[T]he code is more what you’d call “guidelines” than actual rules” (Barbossa, Pirates of the Carribean, The Curse of the Black Pearl).

Attached find the comments of the Global Antitrust Institute of George Mason University (GAI) on the recently released public comment draft of NDRC’s IP Abuse Guidelines.

GAI’s excellent comments suggest that NDRC adopt a more compliance-based approach to ensure predictability to commercial actors.  In its view, the Draft Guidelines do not explain the significance of each of four factors enumerated by NDRC or how they will be weighed in Anti-Monopoly Law (AML) agencies’ overall decision-making process.  This approach allows the AML agencies broad discretion in enforcement decision-making without providing the guidance stakeholders need to protect incentives to innovate and transfer technology that could be subject to AML jurisdiction.  GAI also recommends that the NDRC include throughout the Guidelines examples similar to those found in the U.S. antitrust agencies’ 1995 Antitrust Guidelines for the Licensing of Intellectual Property to illustrate how the AML agencies will apply the basic principles.  GAI also provided specific line-edit proposed edits on four provisions: general analysis, charging “unfairly high” royalties, discriminatory treatment, and injunctive relief.

Anyone keeping a list of all the legislative activity in this area is likely to be bewildered.  I have previously released other comments of the GAI, including their recent comments on SAIC’s draft of the IP Abuse Guidelines, and an earlier draft of the NDRC IP Abuse Guidelines.  I also commented on NDRC’s questionnaire regarding the guidelines, and published the ABA’s comment on the questionnaire.  Activity on IP Abuse guidelines now stretches back several years.  Indeed. there were already SAIC several drafts when I helped author a chapter on IP and China’s antimonopoly region in Antimonopoly Law and Practice in China  (2011).   Additionally, the AML itself is reportedly under consideration for revision by the NPC, and related legislation, a draft of the Anti-Unfair Competition Law, has reportedly recently been submitted to the State Council for its consideration (it was listed for preparatory work in the State Council’s 2015 legislation plan).

One saving grace: the final guidelines would likely need to be adopted by the Antimonopoly Commission which, according to the AML itself, is in charge of “organizing, coordinating, and guiding anti-monopoly work.” In the interim, the large number of drafts by different administrative agencies, lack of clear legislative or judicial guidance, the overhang of active enforcement activities and large damage/international administrative and judicial decisions (such as Qualcomm and Interdigital), the “exporting” of AML cases overseas (such as in Huawei vs. ZTE), SIPO’s effort to address standardization issues in the patent law revision, etc., all suggest that a situation where agencies could be using rulemaking to both address voids in legislation but also enhance their position in a multi-agency turf battle.

During my trip to China last week, I also repeatedly heard concerns expressed about current practice of Chinese agencies drafting legislation that may be used to enhance their administrative power or enhance their influence, with calls for greater direct legislation by the State Council or National People’s Congress (here’s one article on this topic involving educational legislative work).  Despite the heavy work load of the State Council, it seems to me that the IP Abuse Guidelines are increasingly becoming more ripe for the already planned consideration by the Antimonopoly Commission or the State Council Legislative Affairs Office itself.

(Updated Jan. 21, 2016)

GAI Comments on SAIC IP Abuse Guidelines, NDRC’s Up For Comment

Attached are the comments in English of the Global Antitrust Institute on SAIC’s draft IPR Abuse, as well as the Chinese Translation)  (received January 14 here at chinaipr.com)

NDRC’s comments are also up for comment, with a due date of January 20, 2016.

SIPO is also reportedly preparing its own draft, according to some media sources.

(updated January 17, 2016).

 

“I’m Lovin’ it!” – A “Wrong Way” for McDonalds?

mcdonalds

My colleague at Fordham Law, Geoffrey Sant, has written an interesting  blog  on Salon “McDonald’s self-hating complex: Why its overseas P.R. campaign is the worst of all time” that addresses McDonald’s Chinese slogan which translates “I’m lovin’ it” to 我就喜欢  (wo jiu xihuan).

As Geoff explains:  “The second word in this sentence (jiu) is used to emphatically contradict what someone else has said.  The natural implication is that the speaker is responding to someone who has just insulted McDonald’s food.  While there is no perfect translation for the phrase, it has the same essential spirit as “I like it no matter what you say!”

Every student of Chinese in the West learns about the jiu particle early in their Chinese language career.   However, rather than rely on my study of Chinese grammar forty years ago,  I checked with Google translate, which suggests that the phrase  indeed connotes faint praise, and translates it as “I would like to.”

There are many other similar mistakes in both Chinese and English, including such notables as the “Rongwei” car, which sounded suspiciously like ‘wrong way”, and is now known in English as the Roewe.

Goeff suggests positive alternatives such as  “我很喜欢” (wo hen xihuan) or “我好喜欢” (wo hao xihuan), both of which mean “I really like it.”

Apparently the SAIC trademark database reflects a different market reality.  When I checked on March 15, 2015, I noticed that McDonald’s has six registrations in four classes (28, 29 , 30, 32 and 43) for 我就喜欢  (wo jiu xihuan).  There were an additional 21 registrations by other companies or individuals.

Perhaps McDonald’s has some squatters who are more interested in being paid off than grammatical niceties?