Category Archives: Shenzhen

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March 13 – 19, 2018 Updates

1. China’s export of IP royalties increased 311.5% in 2017  According to the statistics of the State Administration of Foreign Exchange, the volume of trade of Chinese IP royalties totaled 33.384 billion USD in 2017, a 32.7 percent increase from 2016. The amount of exports of IP royalties totaled 4.786 billion USD, a 311.5 percent increase from 2016, which ranked No.1 in terms of the speed of growth in service trade. The exports and imports of IP royalties for manufacturing industry ranked No. 1, at 3.793 billion USD, a 544 percent increase from 2016.  The import amount totaled 20.753 billion USD, up 16 percent. In terms of category. The amount of exports of replication/distribution computer software ranked No.1. at 3.405 billion USD, up 652 percent from 2016. In terms of region, Guangdong province was the No.1 in amount of export and import of IP royalties in 2017. Its export amount totaled 4.013 billion USD, up 591.9 percent from 2016 and its import amount totaled 7.525 billion USD, up 9.8 percent from 2016.

Despite the significant increase in the amount of exports of IP royalties in 2017, China still has a trade deficit in IP royalties. The amount of the deficit totaled 23.812 billion USD, which increased by 0.978 billion USD. About 60% of the deficit reportedly originated from the United States, Germany, and Japan.

IP commercialization and utilization has been a focus of China’s IP efforts since the third plenum of the Communist Party in 2014. However, foreigners continue to view China as very challenging licensing environment despite China’s claims of a licensing “deficit”. China’s technology import/export regulations had been one of the challenges that foreigners expressed special concern. In the US Chamber’s recently released IP Index, it was noted that IP commercialization in China was hampered by “[s]ubstantial barriers to market access and commercialization of IP, particularly for foreign companies.” China received zero points for “Regulatory and administrative barriers to the commercialization of IP assets.”  Here is a link to the discussion of Chinese licensing practices. The US Chamber’s conclusion is not unlike that of the Global Innovation Index (2016) which, as we previously reported, scored intellectual property payments according to a formula as a percentage of total trade. China came out at 72nd place, while it ranked number 1 in high tech exports. Similar concerns were also voiced by USTR in the recently released Section 301 report.

2.SIPO takes efforts to develop ability and capacity of IP mediation entities.  SIPO recently issued a “Notice on Developing the Ability and Capacity of Intellectual Property Mediation Entities” (“Notice”), as part of its effort to strengthen the role of mediation in IP dispute and the overall IP protection system. According to the Notice, SIPO will select 20 to 30 existing IP mediation entities every year as the target for ability and capacity development and help with such development for two years. After the two-year period, SIPO will release the basic information as well as specialties of entities that made great progress. Selection and review of existing entities will start this year, which is done by SIPO. Entities can apply either through local IP offices or to SIPO directly.

Within the region, Japan is also considering the use of mediation system to resolve IP disputes. The Japan Patent Office (JPO) intended to introduce an ADR system to determine appropriate license fee of SEPs in 2017. However, the ADR SEP system is likely to be deferred, as reported after a JPO committee meeting in November 2017.

3.  Huawei v Samsung patent decision released by Shenzhen IP Court. The recent decision in Huawei v Samsung was released by the Shenzhen IP Court.  The case involves assertion of two SEP’s by Huawei, and the grant of an injunction against further infringement.

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December 2017 Update

 

Here are some updates on IP developments in China from this past December 2017:

1.  Xi Jinping: China must accelerate implementation of big data strategy (English) 习近平：实施国家大数据战略加快建设数字中国 (Chinese).  Xi Jinping, during a collective study session of the Politburo on December 8th, has urged the country to accelerate implementation of its big data strategy to better serve social and economic development and improve people’s lives. Xi said efforts should be made to advance national big data strategy, improve digital infrastructure, promote integration and sharing of digital resources, and safeguard data security.

2.  Legal Daily on December 5, 2017 notes that leakage of private data from government  websites is getting attention, all local governments start rectification and protection mechanism  政府网站泄露隐私问题受关注，各地整改升级保护机制 (Chinese)

3.  Ministry of Education, Department of Human Resources and Social Security, and Ministry of Finance regulated information disclosure of private information 教育部人社部财政部三部委规范信息公开 保隐私信息安全自查工作要不留死角(Chinese).  This appears to be related to the developments described in the Legal Daily article described above.  Note that unauthorized disclosure of confidential information of foreigners had been a concern during prior meetings of the bilateral Joint Commission on Commerce and Trade.   Compare 2014 and 2016 U.S.-China Joint Commission on Commerce and Trade (JCCT).   From 2014 JCTT: The United States and China confirm that trade secrets submitted to the government in administrative or regulatory proceedings are to be protected from improper disclosure to the public and only disclosed to government officials in connection with their official duties in accordance with law.  Each side will further study how to optimize its respective relevant administrative and regulatory procedures within its legal system, where appropriate, including by strengthening confidentiality protection measures, limiting the scope of government personnel having access to trade secrets, limiting the information required from companies to include only information reasonably necessary for satisfying regulatory purposes, and stipulating that any requirements on government agencies to publicly disclose information appropriately allow for the withholding of trade secrets.  Government officials who illegally disclose companies’ trade secrets are to be subject to administrative or legal liability according to law.  The United States and China agree to exchange information on the scope of protection of trade secrets and confidential business information under their respective legal systems.  China acknowledges that it is to conduct a legislative study of a revised law on trade secrets.  The United States acknowledges that draft legislation proposing a Federal civil cause of action for trade secrets misappropriation has been introduced in the U.S. Congress.  From 2016 JCCT: Both sides confirm that, in those cases in which a judicial or administrative enforcement authority requests the submission of confidential information in conjunction with a trade secret enforcement matter, such requests will be narrowly tailored to avoid putting at risk sensitive business information and will be subject to appropriate protective orders to control additional disclosure and ensure that information is not further misappropriated and that any decision that is made publicly available in conjunction with a trade secret enforcement matter will have all confidential information appropriately redacted. The United States and China confirm that trade secret investigations are conducted in a prudent and cautious manner.

4.  Overview of China’s intellectual property protection: 32000 suspected criminal cases have been transferred since 2011.  中国知识产权保护状况全景式展示  2011年以来移送涉嫌犯罪案件3.2万起(Chinese).  Note: This is data on referrals from administrative to criminal enforcement. The transfer from admin to criminal seems like part of overall efforts that China took to improve IP protection. The article mentioned that three agencies: National Copyright Administration, SAIC and SIPO, all enhanced IP protection enforcement. For instance, National Copyright Administration, through “Jian Wang” (Swordnet) project, investigated 5560 infringement cases over the past 13 years; SAIC investigated 19,400 trademark infringement cases from Jan to Oct 2017; and SIPO and other IP protection agencies investigated 189,000 all kinds of infringement and counterfeiting cases in 2016.Related background information: State Council Opinion on Improving Administrative/Criminal IPR Enforcement Coordination.

5.  China Intellectual Property Development Alliance was established  中国知识产权发展联盟成立 (Chinese).   The focus of this alliance is to create a good environment for IP application and protection and to build an ecosystem for IP operation.

6.  Notice on establishing national intellectual property pilot parks.  关于确定国家知识产权试点园区的通知 (Chinese).  2017 new list of national intellectual property pilot parks 2017年新一批国家知识产权试点园区名单 (Chinese).  These pilot parks are established by local governments.  They will provide IP services, information sharing services, help incubate IP intensive industries, and provide supporting infrastructure. SIPO approves them, and will monitor pilot parks’ work progress and review document for renewal.

7.  The story behind of independent development of C919 (English); C919背后的自主研制之路 (Chinese).  The Chinese article describes the patents involved in the C919 aircraft project.

8.  China implemented the first national military standards of intellectual property management in the field of equipment construction 我国首部装备建设领域知识产权管理国家军用标准实施 (Chinese).

9.  China’s R&D investment hits a new high.  我国研发投入再创新高 (Chinese).   China’s total GDP in 2016 was $11 trillion and R&D investment is around $230 billion, which is about 2.15% of GDP. For US, R&D investment is estimated to be around 2.8% of GDP in 2016.

10. China’s invention patent applications exceed one million from Jan. to Oct. (English); 前10个月发明专利申请量超百万件 (Chinese).

11.WIPO Stats on Patent Application Filings Shows China Continuing to Lead the World (English);  China Tops Patent, Trademark, Design Filings in 2016 (English).

12,  “China Big Data Rule of Law Development Report 2017” released.   《中国大数据法治发展报告（2017）》发布 (Chinese).  Related:  Presentation on 2017 China Big Data Rule of Law Development Report 2017中国大数据法治发展报告（实录与PPT）(Chinese)

13.  China to boost competitiveness in AI (English) 产业三年行动计划提出在八大领域率先取得突破——人工智能服务渐入千家万户(Chinese).  The Ministry of Industry and Information Technology (MIIT) recently released an action plan to substantially improve the development of the AI industry. This plan set to make breakthroughs in eight areas, including smart cars, service robot, drone, AI medical diagnosis, facial recognition, voice recognition, smart translation and smart home product. The MIIT promised more policy support, including special funds, talent cultivation and a better business environment. Measures will also be rolled out to build industry clusters, set up key laboratories and encourage data sharing.

14.  Encourage indigenous innovation and build strong brands.  鼓励自主创新 聚力品牌经济 (Chinese).  The China Council for Brand Development is working with the National Development and Reform Commission to formulate “China’s Brand Development Strategy.” This program aims to cultivate 1000 well-known international brands in five years.

15.  More than 2000 clues have been received for the “Suyuan” campaign against trademark infringement.  打击商标侵权“溯源”行动已收到2000余条案件线索 (Chinese)  SAIC started a campaign called “Suyuan” against trademark infringement in September 2017. Until the end of November, more than 2000 clues on cases have been reported.

16.  Shenzhen IP court and Shenzhen Finance court were established 深圳知识产权法庭和深圳金融法庭同时揭牌办公 (Chinese).   A new Shenzhen IP court was opened on December 26, 2017. This court will handle intellectual property cases which were under the jurisdiction of the Shenzhen Intermediate People’s Court.

17,. Wang Jinshan was appointed as the Chief Judge of Beijing IP Court.  王金山被任命为为北京知识产权法院院长 (Chinese).  Wang replaces Chief Judge Su Chi, who has guided the court since it was first launched and implemented numerous reform projects. We wish him well. Judge Wang graduated from Peking University with a major in Law. He was the party secretary of Beijing IP Court since May 2017. Judge Wang also previously worked at Beijing Intermediate People’s Court.

18.  China’s software copyright registration exceeds 700,000 in 2017.  2017年我国软件著作权登记量突破70万件  http://www.nipso.cn/onews.asp?id=39313 (Chinese).

We hope to be providing more updates in the year ahead from the Berkeley Center for Law and Technology.

As usual the information contained herein does not necessarily represent the opinion of any government agency, company, individual or the University of California.

By Berkeley staff.

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GPNE vs Apple: The Multi-Year Saga

Hawaii-based NPE, GPNE Corp.,  has  requested damages in a patent law suit related to GPRS standards of 900 million RMB in Shenzhen (about 129 million USD) against Apple as well as other related parties (Foxconn et al),  according to various news reports.  This is a significant increase over original damages request of 95 million and 1 million RMB, respectively.  The request was made in a hearing before the Shenzhen Intermediate Court in November 2016.

The case appears to have been filed as early as January 28, 2013.   Apple had reportedly previously filed three invalidations in China against the GPNE patents.  The high damages request has been noted by the media as the largest damage claim in Chinese IP history to date.  Apple had also successfully won a federal circuit appeal involving GPNE’s claims of infringement in August 2016.

The Apple/GPNE case is one of several global IP disputes, which include China as an important venue, and where damages, discovery, availability of injunctions, an increasingly hospitable Chinese legal environment to global patent litigation and likelihood of success all appear to be playing important roles.  The increase in damages may a reaction in part to Apple seeking to use evidence obtained in its successful defense against a GPNE law suit in California in the Shenzhen case.  In 2014, Apple argued that due to lack of discovery in China and differing methods of calculating damages, Apple requires discovery of GPNE’s licensing practices from the US court, pursuant to 28 USC Sec. 1782.  Apple noted in its motion that “the limited discovery sought by Apple is important to the China litigation, and will allow Apple to present the probative evidence regarding the value of GPNE’s patents and its history of granting licenses.” Apple substantiated its motion by pointing to the limitations on Chinese damage calculations and on limited discovery as supporting the relevance of its request:

GPNE also introduced evidence intended to support an “illegal gains” damages model. Under Chinese law, a claim for “illegal gains” may be chosen by the patentee if a claim for “lost profits” is difficult to determine. Although Chinese courts typically start the damages analysis with plaintiff’s chosen damages model, Chinese law allows for different damages models, and GPNE may be constrained in the damages it can seek by its licensing practices.

However, under Chinese law, there is no discovery process in civil litigation proceedings similar to that in the United States. Accordingly, GPNE may not be subject to any legal liability if it refuses to submit the relevant license agreements to the Shenzhen Court. Id. To the extent Apple intends to argue to the Shenzhen Court that GPNE’s licensing practices should inform any damages model, it will be necessary for Apple to produce GPNE’s licenses to the court. After the parties have provided the necessary evidence, Apple expects that the Shenzhen Court will weigh the evidentiary submissions and arguments and, should the court find Apple liable, may make a damages determination.

This case is also one of several IP law suits that have been filed in China against Apple over the years, including design patent, invention patent and trademark litigation, Apple has also been filing more patents in China, ranking number seven in utility model patents in 2014 amongst all foreign companies. Although an earlier report I posted on is no longer available on the SIPO website, earlier data showed that Apple had been increasing its invention patent applications in China,

GPNE’s website notes that it holds “more than 30 patents worldwide in the field of wireless and wired data communications”  and that it has entered into various forms of licensing agreements with Microsoft, Huawei, Sony and others.   The Company’s name is an abbreviation of  the four founders of the company, G – Gabriel Wong, P – Po-Sing Tsui, N – and E – Edwin Wong, but also possibly standing for “Garage Pioneer of New Electronics” as noted on its website.

The above are my personal opinions only.  Please post any factual corrections, or any differences of opinion that you may have. Please consult counsel for any legal guidance on matters discussed in this blog.

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Book Review on Report on Development of Intellectual Property Development in China (2015)

The Report on Development of Intellectual Property Development in China 2015 中国知识产权发展报告 (IP Teaching and Research Center of Renmin University of China / IP Academy of Renmin University) (Tsinghua University Press, 2016) (320 pp., 98 RMB) (http://tup.com.cn/booksCenter/book_06886601.html) (the “Report”), is a bilingual Chinese-English report prepared by Renmin University and commissioned by the Ministry of Education.   The book presents a comprehensive summary of developments and challenges in IP protection and enforcement in China, with a particularly strong focus on legislative developments, the role of national plans, the history of IP in China, government funded R&D, education and training-related issues, and the pressing needs of market and legal reforms.

After a general overview (Part I), where the authors discuss various national plans, and general legislation, such as the Civil Law and the Law to Counter Unfair Competition, the authors discuss patents and innovation (Part II).  The Report notes that quality needs to be improved in life science patents, most of which come from small inventors (such as in TCM).  The report also candidly references critiques of SIPO’s performance (p. 150), as well as the low quality of university patent applications and suggests that there should be additional attention paid to university IP commercialization, including the many restrictions that apply to state-owned assets, a matter that was litigated in the Infineon case here in the United States many years ago.  The report also criticizes unrestricted subsidies and other incentives for patent applications, which has led to “the amount of patent applications to be falsely huge” and has given rise the problem of “rubbish patents.” (p. 163).  Regarding China’s extraordinary growth in patent filings, the authors conclude, as I have often in this blog, that “the motivational role of the market should be strengthened” in lieu of such incentives.

Regarding the proposed Patent Law amendments, the authors also argue that judicial decisions on patent validity should be final and not be subject to a final decision by an administrative agency, and that there should be appropriate limitations on administrative enforcement involving patent infringements (pp. 166-167).  The authors also seek to limit the abusive assertion of unexamined utility models and designs, including by authorizing the courts to consider the abusive assertion of patent rights a matter of unfair competition (p. 173).

In discussing trademarks, the authors similarly note that despite the huge numbers of trademark filings, Chinese companies play an undersized role in lists of global brands.  The authors identify problems in “rush registration of trademarks” involving grabbing a trademark previously used by others, particularly where a mark has international popularity, where there are fictional figures and titles of movies and television hits, and in the case of celebrity names (p. 183).   The authors suggest that where a trademark is not being used, there should be no compensation given to the infringer, as one step to address rush registrations – a practice that apparently is already being used in Shanghai and perhaps other courts.  The authors also suggest that in the case of foreign rights owners, the courts should take into account the popularity of the brand enjoyed outside of China and the subjective malice on the person conducting the registration.   As with low quality patents, the author see a useful role for courts in adjudicating these rush registrations as acts of unfair competition (pp. 186-187).

These themes of addressing proposed legislation, adopting new legislation to new circumstances, more effectively insuring that markets rather than government fiat direct IP commercialization and protection,  and using unfair competition law to address abuse of IP rights play an important role in other chapters of the book, including the chapters on Copyright Law (Part IV), Competition law (Part V), IP protection by the Judiciary (Part VI), IP Education (Part VII), developments in Shenzhen City and Jiangsu Province (Part VIII), and other issues, such as free trade agreements (Part IX).

Overall the authors support the role of the courts as the principle vehicle for adjudicating IP disputes in a market-oriented economy, and that the IP laws should be revised to “attach importance to enhancing the leading and final role of the judicial protection of the intellectual property rights, limit and regulate intellectual property-related administrative enforcement …” (p. 240).  The authors also support the tendency to increase damages on IP disputes (P. 282), the role of specialized IP courts and the case law system, and deficiencies in administrative enforcement reform including problems of coordination among agencies.

In their summary, the authors note that “the sound operation of the IP system is not merely an issue of the IP law; it relies on an improved legal system and environment of the rule of law.  Only with innovation based on the market economy and driven by market interest is it possible to be the lasting, stable fore to drive the socio-economic development.” (pp. 315-316).  The book is a very useful summary of some of the hot issues now facing the Chinese IP system, with a focus on rule of law and market orientation.

I look forward to the 2016 edition.