Two Upcoming Events: Innovation and Technology Licensing

ITIF, the Information Technology & Innovation Foundation,  is holding a seminar in How the Trump Administration Can Stop China’s Innovation Mercantilism on March 16, 2017.   Here’s the link to the program.  Speakers include: Robert D. Atkinson (ITIF) , Stephen Ezell (ITIF), Scott Kennedy (CSIS), Claire Reade (Arnold & Porter), and John Veroneau (Covington) for what I am sure will be a lively 90 minute event in Washington, DC.

In an unrelated event, USPTO and the Ministry of Commerce are  jointly sponsoring a program on cross border technology licensing on March 28 in Beijing at Renmin University’s law school (specific room still TBD).  Here is a draft agenda.

 The USPTO/MofCOM program is intended to provide an opportunity to discuss cross-border IP licensing.  In particular, including China’s Technology Import Export Regulation (“TIER”) 技术进出口管理条例and its impact on US technology collaboration and licensing.  The program builds upon prior programs with SIPO that explored similar topics.  RSVP’s for this program are requested by Wednesday, March 22.   Please email Ms. Liu Jia – jia.liu@trade.gov – to RSVP. 

False Friends (形似神异): Comparing US and Chinese Administrative Patent Enforcement

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.

SIPO Publishes Proposed Revisions to Patent Examination Guidelines

On October 27, 2016, the State Intellectual Property Office (SIPO)  published the  Draft (For Public Comment) of Revisions to the Patent Examination Guidelines .  The Chinese text is available here. Comments on the draft should be submitted before November 27.

 In the important area of post filing data supplementation for pharmaceutical inventions, the proposed revisions clarify that such supplementation is permissible where “the technical effect to be proved by the supplemental experimental data shall be that which can be obtained in the contents of the [original] application disclosure by one who is ordinarily skilled in the art.” 对于申请日之后补交的实验数据,审查员应当予以审查。补交实验数据所证明的技术效果应当是所属技术领域的技术人员能够从专利申请公开的内容中得到的。

 The examination guidelines also loosen the standards for obtaining business method patents if there is a technical element to the novel business method.  Presumably these inventions were previously denied patentability on the basis that they were intellectual rules or methods under Article 25 of the Patent Law.  The proposed guidelines state:

 Claims related to business methods that contain both business rules and methods and technical characteristics, shall not be excluded from the possibilities of obtaining patent rights be Article 25 of the Patent Law. 涉及商业模式的权利要求,如果既包含商业规则和方法的内容,又包含技术特征,则不应当依据专利法第二十五条排除其获得专利权的可能性。

The examination guidelines also appear to loosen the standards for obtaining software enabled inventions:

In the second line of Part II, chapter IX, section 5.2, paragraph 1, the third sentence of the Patent Examination Guidelines are amended from, “and describe in detail which parts of the computer program are to be performed and how to perform them” to provide that “The components may not only include hardware, but may also include programs. 将《专利审查指南》第二部分第九章第5.2节第1段第3句中的并详细描述该计算机程序的各项功能是由哪些组成部分完成以及如何完成这些功能修改为所述组成部分不仅可以包括硬件,还可以包括程序”.

Postscripts (Nov 18 and 28, 2016):

1.  Here’s Jacob Schindler’s October 31, 2016 commentary in IAM on this blog, and  here’s another blog comparing US and Chinese software patent developments. 

2.  Here are AIPLA’s comments on the proposed revisions to the patent examination guidelines (Nov. 25, 2016 – bilingual).

 

New State Council Decision on Intellectual Property Strategy For China as a Strong IP Country

Statecouncilwordlcoud.PNG

On July 18, 2016, the State Council issued a new policy document,国务院关于新形势下加快知识产权强国建设的 若干意见-重点任务分工方案  — the “Opinion of the State Council on Accelerating the Construction of Intellectual Property Powers for China as an Intellectual Property Strong Country under the New Situation –Division of Tasks.”  Here’s a link to this action plan (docketed as State Council  Working Office No. 66)  , and a link to the machine translation, from which the world cloud above is drawn.   The action plan itself is drawn from a State Council document issued in 2015 on accelerating the establishment of a strong IP country in the context of a new situation.  This 2015 document identified such problems as China being a big country for IP, but not a strong country, protection was not adequately strict, infringement was easy and pervasive, and that these factors were affecting industry’s efforts to innovate.

As I discussed previously, the idea of China needing to become a strong IP country appears in the 2014-2020, National IPR Strategy Action Plan, which has the goal of “Striving to Build A Strong IPR Country”  (努力建设知识产权强国). While China indeed has become “big” on most scales: invention patent filings, trademark, utility models and design patents, intellectual property litigation, criminal IP litigation and administrative litigation, to name a few, “strong” suggests quality, which is much harder to judge.

Here are a few specific observations about this action plan:

  1. Much of the action plan repeats existing efforts, through the MofCOM IPR Leading Group and SIPO’s National IP Strategy Office, and their current efforts at analyzing and coordinating IP effort, as well as cooperative activities (Arts. 1, 3, 13, 15, 18, 21, 22, 25, 30, 44, 88, etc.).
  2. There are greater efforts to incorporate IP into macroeconomic strategies, such as in calculations regarding the national economy and national social welfare (Art. 9), as well as credit reporting (Art. 23).
  3. Increasing compensatory  and punitive damages are a focus (Arts. 14), which have also been an effort of China’s IP courts.  This is one of the key civil-law reform proposals in this plan.   There continues to be an undue emphasis on speed, which I assume is focused on patent administrative enforcement as a more rapid remedy (Art. 16).  China is already a fast moving IP environment.
  4. International cooperation in criminal enforcement is underscored (Arts. 19, 21, 22).
  5. Regarding trade secret protection, the focus is on revising trade secret laws, and protecting IP when employees change jobs (Art. 24).  Changes to China’s discovery regime and other appropriate measures which would greatly assist trade secret claimants, are not discussed.
  6. Geographical indications are a focus, including drafting a stand-alone GI law at “the appropriate time” (Art. 32), increasing the role of trademarks in promoting farmer prosperity (Art. 58), and promoting GI products (Art. 90).
  7. Regarding the long-delayed IP Abuse Guidelines, NDRC, MofCOM, SAIC and the State Council Legislative Affairs Office are all listed as being responsible for drafting “according to their responsibilities” (Art. 36).  Rules on standard essential patents that are based on FRAND licensing and “stopping infringement” are also noted (Art. 38), with the involvement of AQSIQ, SIPO, MIIT, and the Supreme People’s Court).  Encouraging standardization of Chinese patents also remains a priority (Arts. 61, 71).
  8. Service Invention Regulations, an area of some controversy are not specifically noted as a priority.  Encouragement is to be given to enterprises to set up appropriate invention recognition and reward programs in accordance with law (Art. 45), and research is to be undertaken in giving compensation for new scientific achievements (Art. 46).  The language may suggest that more flexibility will be given contractual arrangements and the market, as was agreed to bilaterally between China and the United States.   Relevant agencies involved in these efforts include SIPO, MoST, Ministry of Education, Ministry of Finance, Ministry of Agriculture, SASAC, Chinese Academy of Sciences, MIIT, Ministry of Defense, etc.
  9. Chinese universities are also encouraged to become more actively engaged in commercialization of technology, through establishment of technology transfer offices (Art. 53) and other efforts.
  10. The impact of US efforts to study IP-intensive industries in the US economy is also apparent in this plan in terms of the government’s efforts to investigate promoting IP intensive industries in the Chinese economy, government procurement of products from IP intensive industries, and developing model districts for IP intensive industries (Arts. 55-56).  Interestingly, there is no specific reference to engaging economists on any of these efforts, despite the role of foreign economists in similar efforts, some of who have also directly engaged China on how to determine IP-intensity in an economy.
  11. There is discussion of using tax and financial policies to promote IP creation in China (Arts. 98, 99).  There is no explicit discussion of harmonization with OECD guidelines regarding patent boxes and other forms of international tax avoidance.
  12. The report discusses a number of strategies and plans to reduce overseas IP risks facing Chinese companies, including assisting Chinese companies in strategic planning, patenting and licensing (Arts. 72-76), developing information resources on risks and cases (Arts. 78-79), and – rather ominously – developing policies for countering large intellectual property cases overseas (with the support of MofCOM, Customs, SAIC, AQSIQ, NCA, and the China Council for the Promotion of International Trade – “CCPIT”).   There is no discussion on any changes to current technology import regulations which impose onerous indemnity and non-grant back requirements on foreign licensors.
  13. The report directs research to be conducted of placing IP officials overseas in important countries, region and IP organizations.  Although China’s current IP attaché in the United States is a MofCOM employee, the responsible agencies for this effort include SIPO, NCA, SAIC, and CCPIT (Art. 85).  The first Chinese IP attaché was dispatched to the United States pursuant to a bilateral commitment of the  2005 Joint Commission on Commerce and Trade.
  14. The report notes that China will become more involved in promoting a more “fair and reasonable” international IP regime, through support of the Doha amendments to the TRIPS Agreement, the Convention on Biodiversity and various IP conventions.  The Hague Convention on Industrial Designs is noted, but not UPOV 1991.  Promotion of intangible heritage and folklore are also noted (Arts. 59. 87).
  15. IP talent creation and training are also key elements of the plan (103-105).

 

Often in looking at plans like these, it is also equally important to ask what is not being covered.   The plan does not focus enough on a China where there is greater scientific collaboration with foreign scientists and engineers, which are also result in an increasingly large number of co-invented patents.  Similarly, increasing Chinese investment in IP-intensive industries in the United States means that many Chinese companies will own substantial IP interests and may be less inclined to view IP issues as “us” vs “them.”  The relative under-emphasis on civil remedies for IP issues in this plan is also troubling, as the availability of adequate civil remedies is what drives IP commercialization.

The report also does not suggest increasing the role of economists in IP and antitrust agencies, despite a clear focus on increasing the IP-intensity of the Chinese economy. Gaps in Chinese law, such as denial of copyright protection for sports broadcasting, weak protection for trade dress, and “circular” litigation between the patent and trademark offices and the courts which may delay final adjudication on matters, controlling trademark squatting and subsidies for unexamined patents are not discussed.

Although there are many positive aspects of this plan, I believe that focusing on issues like compulsory licensing, the Doha Declaration and folklore, or what appears to be political solutions to overseas infringement may also not deliver as much value to the Chinese economy and China’s scientists, engineers, artists and entrepreneurs, as returning to core IP concepts which let the market govern IP creation and enforcement through such measures as improving the scope of rights that are protected under Chinese law, limiting government intervention, increasing the role of the civil judicial system, and promoting increased collaboration.

Translation of Draft Patent Law Amendment

Further to my blog earlier this month, attached are unofficial translations of the draft Patent Law Amendments, as well as the SIPO Explanations about Draft Amendment to the Patent Law.  Comments on the draft are due at the State Council Legislative Affairs Office by January 1.  The drafts are provided by the USPTO office in Beijing, should be compared against the Chinese original for any important concerns.

This draft may generally be said to elicit several different types of concerns. These include positive changes from the earlier draft in areas of concern.  An example of this might be limitations on proposed enhancement of patent administrative enforcement.  Another area of concern is negative changes from the earlier draft.  An example of this might be inclusion of antimonopoly law concepts regarding IP abuse into the patent law amendments. Another type of amendment is a positive change in an already positive direction.   An example of this might be improvements in civil enforcement and conduct of utility model appraisal reports.  Finally, there are issues that are not under consideration for revision in the patent law, which might be useful for Chinese law makes to consider.  Examples of these might include a more robust and longer grace period, and a longer statute of limitations.  There are also issues involving pharmaceutical regulatory procedures and patent protection that also implicate pharmaceutical regulatory procedures, such as patent linkage or patent term restoration which affected companies may wish to comment on.

Also importantly, the State Council Legislative Affairs Office website describes this draft as a SIPO draft , not an SCLAO draft to support further research by the State Council: “The Legislative Affairs Office of the State Council decided to publish the State Intellectual Property Office submission for consideration by the State Council of The Chinese Patent Law Amendment Bill (draft) and its Explanation, in order to solicit views of all sectors of society to conduct further research, and after modification to submit for consideration by the State Council.” “国务院法制办公室决定,将国家知识产权局报请国务院审议的《中华人民共和国专利法修订草案(送审稿)》(以下简称送审稿)及其说明公布,征求社会各界意见,以便进一步研究、修改后报请国务院审议。”

Also for reference, attached is the link to a translation of the prior draft, and comments of the ABA on that prior draft.

The Xmas Phone Call of ’06 And What It Meant to IP Cooperation

ID5The recent, successful launch of the ID5 (the Industrial Design 5) at the USPTO (picture above), with the participation of  OHIM (Office for Harmonization in the Internal Market of the EU), JPO, KIPO and USPTO underscores, yet again, the role of cooperative dynamics in IP reform.  While historically academics and officials had argued that IP reform in countries like China depended on either indigenous pressure (becoming a “stakeholder” in the IP system) or exogenous pressure (301, threats of trade retaliation or ‘linkage diplomacy’ as part of WTO accession or other trade agreements), another form of engagement is that conducted by and among IP offices.

I was fortunate to have played a small role in the evolution of this third dynamic.  On December 24, 2006, while on vacation in Los Angeles, I received a phone call from then USPTO Director Jon Dudas requesting that I call up SIPO’s Commissioner Tian Lipu to explore the possibility of developing an expanded “trilateral” of patent offices (EPO, JPO and USPTO) to include SIPO and KIPO.  On Christmas eve, I placed a phone call to the then Director General of SIPO for International Cooperation, Lv Guoliang 吕国良, extending an invitation for Commissioner Tian and Director Dudas to have a phone call together to see if SIPO might be interested in joining an expanded group, now called the IP5. From that original effort also came the inspiration for grew the TM5 [Trademark Five], and this past week, the ID5.

It is difficult to estimate the importance of these relationships, as they typically involve more technical issues of office operations, with the involvement of trade associations that are focused on the operations of these offices.   However, cooperation amongst the five largest offices also represents the vast majority of patent, trademark or design filings globally, and are also responsible for much of the activity in each of the five offices own dockets, as well as through such mechanisms as the Patent Cooperation Treaty, Madrid Protocol or Hague system for industrial designs.

One way of understanding its importance to China of these mechanisms evolved in response to that Xmas phone call.  In the spring of 2007, the United States took certain public steps towards filing of a WTO case against China.  The three claims that were ultimately filed involved copyright piracy and trademark infringement.  At that time, I was serving as IP attaché in Beijing.  Former Vice Premier Wu Yi told a large audience during IP Week in April 2007 in Beijing that China would “fight the US to the bitter end”.  I was at the conference as was then Ambassador Clark T. Randt, III.  The US Trade Representative, Susan Schwab, was quick to respond that filing of a WTO complaint was not a hostile act.   China had tried to avert the filing of a case by lowering criminal thresholds for IP criminal enforcement earlier in April, but apparently this had been deemed to be too little, too late.  China still warned of “severe damage” to bilateral trade relations and a suspension of some forms of cooperation between the US and China.

Despite threats and retaliation, the IP5 meeting planned for Honolulu, Hawaii in May of 2007 went on as  scheduled.   Since that time in fact, the IP5 has flourished, and has been joined by the TM5, and now the ID5.

What kinds of strategy works best to advance IP reform?  Taking the WTO case as an example, some have argued that the WTO case was a failure for the US  at the time, while others (including some Chinese scholars) have argued differently.  The rapid rise in criminal enforcement in China for IP infringements suggests that even if one accepts the premise that the US did not succeed in having China amend its law, it did draw attention to an important enforcement mechanism that had been underutilized in China, and now has grown to about 13,000 cases per year.    In a sense, the case accomplished its goal of increasing criminal enforcement in appropriate circumstances and in retrospect should be seen as a success for both sides.

Another way of looking at progress is to see what China was interested in advancing despite the WTO case.  Did the IP5 go forward in 2007 because the WTO case did not significantly involve patents, an area which I had considered “orphaned” trade discussions until relatively recently? Did the case demonstrate China’s abiding increase in continuing to engage in patents, an area which it deemed vital for its goals of developing an innovative economy?  Was the success of the IP5 due in part to the close relationship that existed between Jon Dudas and Tian Lipu? Or do these mechanisms succeed because their goals are invariably more technical, practical and obviously win-win?  Clearly, these big office cooperation mechanisms have their advantages, both in promoting practical steps towards improving services for the clients the offices serve, but also in developing trust amongst their leadership.  As USPO Director Michelle Lee noted in the recent launch of the ID5 “as only the five largest industrial design offices can, we must come together collectively to strategically develop tools, practices, and office efficiencies. These agreements will promote the further development of user-friendly, consistent, and interoperable industrial design protection systems. It through this approach that the ID5 will become the success we are all here to ensure.”

Bon voyage, ID5 – a continuing journey that I like to think began on Christmas Eve, 2006.

Service Inventions A Focus Point Once Again…

Although there is nothing under a year old when I looked today on SIPO’s s special service invention webpage, the topic of how much freedom employers have in determining how to reward their employee/inventors, has once again become a hot issue. Much of the discussion on this topic is being raised by the Ministry of Science and Technology, although SIPO reportedly is focusing on this issue as well.

Here’s an update on where we are:

At the US-China Innovation Dialogue in July 2014, the US and China agreed to the following language:

The United States and China resolved to protect the legal rights of inventors in accordance with their respective domestic laws and regulations, and in line with their domestic laws committed to respect the rules and policies developed by employers and/or legitimate contracts between employers and inventors concerning the awards and/or remuneration of inventors.

This language was essentially reaffirmed at the subsequent JCCT in December 2014:

The United States and China commit to protect the legal rights of inventors in respect of their inventions and creations, in accordance with their respective domestic laws and regulations, and in line with their domestic laws, commit to respect the legitimate rules and regulations developed by employers and legitimate contracts between employers and inventors concerning inventor remuneration and awards.

On March 2, 2015 the National People’s Congress also released a draft for public comment of The Law for Promoting Science and Technology Achievements (促进科技成果转化法修正案(草案)).  Here’s an unofficial translation of the changes that this draft makes to the old law.  This draft contains the following specific provisions on inventor compensation:

One article is added as Article 43: “After the commercialization of a service STA [Science and Technology Achievement], the STA completing entity shall give reward and remuneration to those who have made important contributions to the completion and commercialization of the STA.

The STA completing entity may prescribe or agree with its scientific and technological personnel on the form and amount of the reward and remuneration. When formulating the relevant regulations, the entity shall fully listen to the opinions of its scientific and technological personnel and make public the relevant regulations within the entity. ”

A revised Article 44 provides for default provisions for compensation, presumably if provisions are not established with technological personnel: “If the STA completing entity has not formulated such regulations or agreed on the form and amount of the reward and remuneration, the reward and remuneration shall be given to those who have made important contributions to the commercialization of the service STA according to the following criteria:

(1) If the service STA is transferred or licensed to others for implementation, no less than 20% shall be drawn out of the income from the STA so transferred or licensed;

(2) If the service STA is evaluated for investment, no less than 20% shall be drawn out of the shares or the proportion of contribution formed by the STA;

(3) If the entity implements the service STA by itself or in cooperation with others, no less than 5% shall be drawn out of the operating profits obtained from 3~5 consecutive years of implementation of the STA after its commercialization and successful start of production.

The criteria provided in the preceding paragraphs for the reward and remuneration given those who have made important contributions to the completion and commercialization of service STAs include the remuneration given to the inventors and designers of service inventions and creations that have received patent right in accordance with the Patent Law of the People’s Republic of China and the detailed rules for implementation thereof. …”

Although more general than the Service Invention Regulations that are under consideration by SIPO, this is a law that is more authoritative than a regulation. This law, along with agreed statements by the Minister of Science and Technology Wan Gang and OSTP Director Dr. John Holdren at the Innovation Dialogue could be read to show an inclination to favor contractual arrangements or corporate policies in establishing appropriate compensation for employee/inventors, although greater clarity concerning when such arrangements would be superseded by default provisions would be helpful.   Also of concern is that if more restrictive regulations are adopted in the Service Invention Regulations proposed by SIPO, they will be entitled to considerable deference as a subsequently adopted regulation which narrowly focuses on inventor compensation.  Moreover the regulations will be particularly important to SIPO itself in any enforcement or policy making it undertakes.

Another boost to regulating service inventions appears to have come from Premier Li Keqiang at  his March 5 speech at the recent 2015 “lianghui” – the meeting of the National People’s Congress and Chinese People’s Consultative Congress, where he stated that China should “enable innovative talents to share in achievements and profit, complete the transformation of science and technology achievements, and the service invention legal system” (使创新人才分享成果收益, 完善科技成果转化、职务发明法律制度).

Comments on the draft law are due by April 1.

As always, these are my personal opinions.