More Guiding Cases on IP, and More Experiments on IP Case Law

fcbaprogram

Stanford Law School has just released eight new guiding cases, including including five IP and unfair competition cases covering trademarks, unfair competition, and software copyright.  The cases were determined to be guiding cases earlier this year by the Supreme People’s Court, and are available here.   Dr. Mei Gechik. the Founder and Director, China Guiding Cases Project, also has analytic reports on the CGC Project here.

Regarding IP-related matters, Dr. Gechik notes “the SPC’s confidence in providing guidance in intellectual property and unfair competition through GCs seems to have grown. Five out of the eight GCs released in 2015 Q2 cover these two areas. Of particular note, the SPC went beyond patent law to release cases that address issues in trademark law, as well as copyright law as applied in the protection of computer software.”

These guiding cases appear to me to be part of an increasing interest in developing a system of case precedent in China, particularly since the establishment of China’s IP courts, and the keen interest in developing precedent expressed by the Beijing IP courts, including a national conference on this topic on September 22, 2015 which set forth the role of the Beijing IP court as a national center for research on case guidance (案例指导研究基).

The prospects for Chinese case law, and IP case law in particular, was discussed at a recent IP judicial conference sponsored by the Federal Circuit Bar Association in Shanghai, which included a large turnout of both Chinese and US judges. Among issues discussed included the role of case law in adjudicating cases, the possibilities of introducing amicus briefs, the role of en banc decisions in making or reversing precedential cases, the binding effect of local court decisions and other issues involved in handling cases that are intended to have greater legal impact than determining only the rights of the parties involved in the law suit.

Of course, the development of precedent could be especially valuable to developing “transparency and predictability” for business people seeking greater legal predictable in their complex decision making processes, which would appear to be an important goal of an effort to enhance commercial rule of law between the US and China.

Interestingly these five cases were decided as long as eight years ago.  In addition, only one of these cases was decided by the Supreme People’s Court.  The remainder were adjudicated by local Higher People’s Courts.  From a common law perspective, this may not look like a system of precedent as we know it.  For example, if the cases are to have binding effect, how can past cases be recognized as precedential?   How/why should local cases affect decisions from other provinces? Or are the cases primarily intended for other purposes, such as education of the judiciary and public or to assist in development of a more limited body of case law? Nonetheless, whatever the role of case law will be in China, its development is overall a positive step that should be encouraged and Stanford Law School/Dr Mei Gechik are making a very important contribution to that effort.

Here is a quick summary of these five important cases, with links, that is drawn from the translation and analysis on the Stanford website.  All errors in my summary are of course, my own:

Guiding Case No. 49

Shi Honglin v. Taizhou Huaren Electronic Information Co., Ltd.  This dispute over computer software copyright infringement  involved circumstances regarding reversal of burden of proof when defendant refuses to release source code in a software copyright infringement case.

Guiding Case No. 48

Beijing Jingdiao Co., Ltd. v. Shanghai Naikai Electronic Science and Technology Co., Ltd.  This computer software copyright infringement dispute involved use of technological protection measures (TPM)  to restrict machines from reading the data stored in a file format, thereby ensuring that the machine bundled with computer software possesses a competitive advantage in the market.  The court determined that use of a TPM by this means is not a type of act taken by a copyright owner to protect its software copyright under the Copyright Law.

Guiding Case No. 47

Ferrero International S.A. in Italy v. Montresor (Zhangjiagang) Food Co., Ltd. and Zhengyuan Marketing Co., Ltd.  This unfair competition dispute is one of a few well known and widely commented cases involving Ferrero on trade dress and design protection in China.  This case holds that in order to determine whether a commodity is well known as used in the Anti-Unfair Competition Law, the court should consider a combination of various factors that demonstrate the circumstances under which the known commodity is protected — including sales period, sales regions, sales volume, and sales targets of that commodity within China, as well as the duration, extent, and geographical scope of publicity that has been carried out.

Guiding Case No. 46

Shandong Lu Jin Industrial Co., Ltd. v. Juancheng Lu Jin Crafts Co., Ltd. and Jining Lizhibang Home Textiles Co., Ltd.  This trademark infringement and unfair competition dispute involved a determination that “Shandong Brocade” (Lu Jin) had already become a generic name for textile products that possessed regional characteristics.  According to the court, a generic name can be an appellation established by the industry norm or it can also be the abbreviated name used as a convention by the public. The court noted that Shandong Brocade has a history of over a thousand years and that Shandong Brocade has been generally recognized by the State mainstream media, various kinds of specialized newspapers, and the news media of Shandong Province.  Reference books on arts and crafts and fine arts have confirmed that “Shandong Brocade” is a type of  cotton folk textile product that is hand made in Shandong.  The case’s decision implicates not only what constitutes a generic geographical term, but also the role of traditional knowledge/intangible cultural heritage in defining whether a term is generic and how to handle the relationship between these terms and the trademark system.

Guiding Case No. 45

Beijing Baidu Netcom Science and Technology Co., Ltd. v. Qingdao Aoshang Network Technology Co., Ltd. et al.  This unfair competition case addressed acts by Aoshang Network Company and Unicom Qingdao Company which involved their advertising popping up when network users log onto the Baidu website to conduct keyword searches through the Internet access service provided by Unicom Qingdao.  The court determined that this practice violated the good faith and business ethics and was within the scope of prohibited acts under Article 2 of the Anti-Unfair Competition Law.

Photo from recent FCBA program with East China University of Politics and Law.

Dueling Software Data in the Spring and A Changing Tech Environment

夜来风雨声, 花落知多少? (At night the sound of wind and rain; Who knows how many flowers have fallen?; Poet Meng Haoran, 689-740, “Spring Dawn”)

cherryblossoms

It is almost April, which means it is not only time for cherry blossoms in Washington, but, as we approaching IP Week in China (April 26),  — dueling software data.

Here’s a digest of how China’s recently released data compares to BSA data.

According an article published in SIPO’s newspaper, which reported on a press conference on March 20,  New Progress in China’s  Promotion of Software Legalization, in 2014,  83% of Central and State organs promote their institutions have completed software legalization;   826,700 were procured, operating systems, Office, antivirus software, with a purchase amount of 461 million RMB. A total of 4,112 firms included in the annual software legalization work; 3,715 enterprises completed software legalization through inspection and acceptance.   The most critical datapoint: at the end of December 2014, new computer pre-installed genuine operating system software pre-installed rates continue to move up for 8 consecutive years, to a rate in 2013 at 98.42%.

The data from the Busines Software Alliance, released in the June 2014 BSA Global Software Survey, tells a different story. According to BSA, China has an unlinced PC software rate of 74%, with an unlicensed value of $8.767 billion. This reflected a decline from 82 percent in 2007.  The commercial value of unlicensed software dropped from 8.702 to 8.767 billion from 2011 to 2013.

The good news is that both sides appear to degree that software piracy is declining. The bad news is that the Chinese view the glass as nearly full.  BSA views the glass as more than 2/3 empty.

There may be any number of reasons for the differences in data, including sampling and analytical differences, but also including the type of software under consideration (package/embedded/cloud-based, commercial/non-commercial, etc.), and the impact of technological changes on these differences.   The migration to smart phone, tablet and cloud platforms and increasing competition may also be affecting package software sales.

In an apparently unrelated development, Microsoft announced March 18, 2015, that it is offering Windows 10 upgrades to both licensed and unlicensed users in China.   Microsoft said that its plan is to  “re-engage” with the hundreds of millions of users of Windows in China.  Microsoft is also working with Lenovo Group, to help roll out Windows 10 in China to current Windows users, and it also is offering Windows 10 through security company Qihoo 360 Technology Co and Tencent Holdings Ltd, China’s biggest social networking company.

Based on the press release one additional positive outcome of the plan may be that this free upgrade (or, indeed, legalization) is intended to help with adoption of Microsoft’s Windows Mobile platform,  which reportedly will provide a universal app platform across a range of devices including Microsoft’s mobile platform.

Loyola/Berkeley/Renmin Program Highlights Recent US-China IP Developments

On Friday November 7 I attended and spoke at the US-China IP Summit at Loyola (https://chinaipr.com/2014/09/07/loyola-los-angeles-hosts-us-china-ip-summit-november-7/). Here are some highlights:

Prof. David Nimmer (UCLA) talked about whether there is a need to reintroduce a concept of formalities in copyright again, in order to deal with problems in determining rights and better utilize information technologies.

Dean Liu Chuntian of Renmin University, argued that China’s true economic constitution should be a civil code. He took issue with those that argue the Antimonopoly Law is China’s “new economic constitution.” In addition he expressed concern that IP shouldn’t depart from the civil law. Prof. Liu also reiterated his long-standing opposition to administrative enforcement in civil law matters and also argued that copyright law reform issues should focus on matters of economic importance. Copyright protection of sports broadcasting in China was singled out as such an economically important issue.

Regarding specialized IP courts, Dean Liu also noted that several “10’s of members” of the NPC Standing Committee dissented from the NPC decision. Prof. Luo Li noted that the Beijing Specialized IP Court was established last week, just before APEC. Prof. Luo noted that the jurisdictional divisions of the courts were quite complicated, due to differences in adjudication amongs civil, criminal and administrative jurisdiction. Computer software cases (piracy?) would also be heard by the specialized IP Courts.

I raised concerns in this discussion on the courts about how foreigners would be treated by these specialized courts, in light of evidence that suggests foreigners may fare less well in appellate specialized IP tribunals (see: https://chinaipr.com/2014/08/22/specialized-ip-courts-about-to-launch-in-three-cities-and-are-they-good-for-foreigners/)

Prof. Merges of UC-Berkeley described AIA post grant proceedings as a kind of “quiet harmonization” with foreign practices, including with SIPO. As with China, there is no mandatory stay of civil proceedings during these administrative proceedings.

Prof. Zhang Ping of Peking University discussed the Huawei/InterDigital Corporation case as a pioneering effort on the part of Chinese courts to deal with global standardization crises, including by determining appropriate royalty rates for standards essential patents.

Prof. Huang Wushuang of East China University of Politics and Law discussed current efforts at trade secret legislative work. He noted that he had submitted proposed revisions on the Antiunfair Competition Law regarding trade secrets, by expanding the current one article to 10. His discussions focused on several issues, including what constitutes reasonable precautions to protect trade secrets and the role of non-compete agreements and how to strike a balance between rights of employers and employees. He noted that he did not think it reasonable for injunctions in trade secret matters to be permanent, since every trade secret has its own life span. Regarding damages, he thought that a traditional hierarchy should apply by basing calculations on the plaintiff’s loss, the defendant’s profits, reasonable royalty and statutory damages. He also noted that there were few cases in China which showed a causal relationship between damages and infringing cases.

The last panel discussed trans-border cases and was one where I participated. There was an especially lively discussion on issues involving recognition of judgments and the timely implementation of Hague Convention requests for evidence. Various speakers noted efforts to settle global IP disputes such as by suspending cases in favor or one or more venues, using Hong Kong arbitration for cases involving Chinese entities, and the need for means to resolve increasingly more complicated trans-border disputes.

There were many more great speakers — my notes are hardly complete. Hopefully a transcript or summary of the presentations will be compiled shortly. Kudos to the organizers, including Prof. Song of Loyola, for another great program.

IPR Deliverables at the Strategic & Economic Dialogue

Xi Jinping's Opening Speech

Xi Jinping’s Opening Speech

The US and China recently concluded their Sixth Strategic and Economic Dialogue. IP-related outcomes involved such areas as: trade secret protection; cooperation with China’s judiciary; and software procurement. In addition there were other outcomes with IP-related deliverables in such areas as antimonopoly law and control over active pharmaceutical ingredients.

Excerpts from the Joint Fact Sheet are below —

Trade Secrets:

The United States and China affirm that they do not approve of trade secret theft for commercial advantage and that the protection and enforcement of trade secrets is essential to maintain fair competition and to develop an innovative economy. Both sides are to pursue criminal and other actions to deter the misappropriation of trade secrets, and make information available to the public about their actions, to the extent permitted by law. China has incorporated the protection and enforcement of trade secrets into its 2014 Priorities of the Nationwide Crack Down on Intellectual Property Infringement and Production of Counterfeit and Shoddy Products, published by the State Council on April 14, 2014. As its next step, China is to vigorously investigate and prosecute trade secret theft cases; ensure that civil and criminal cases are tried and the judgments are published according to law; and protect trade secrets contained in materials submitted by companies as part of regulatory, administrative, and other proceedings according to Chinese law. China is also to undertake publicity and education activities to improve the awareness of companies and the general public regarding the protection of trade secrets; to undertake studies and research on trade secrets law and related legislative and policy issues; and is to continue engaging in technical exchanges with the United States on these issues. China affirms that it is to continue prioritizing trade secrets protection and enforcement and is to take positive actions that are to be included in upcoming work plans.

Trade Secrets and Administrative Licensing:

…Further, the United States and China commit to strictly implement existing laws and regulations to adequately protect any trade secret or sensitive commercial information provided by the applicant during the administrative licensing or approval process, consistent with laws.

Judicial Cooperation:

Building on the prior successful exchanges between the United States and China at the Joint Commission on Commerce and Trade (JCCT) Intellectual Property Rights Working Group and at meetings among relevant agencies, the United States and China are to continue to promote exchanges between respective Intellectual Property (IP) agencies, including judicial and administrative bodies, on topics of mutual interest, such as enforcement, transparency, and specialized IP courts. These
discussions and any recommendations are to be reported to the JCCT and other bilateral meetings.

Software Procurement:

China confirms that the Deployment Standards for the Assets of the Office of General Software of Government Agencies is a measure designed to strengthen the administration of spending and implement the CPC Central Committee’s call for frugality. This measure was drafted with the intention to not have any purpose or effect of creating obstacles to international trade. The United States and China are to continue to engage on ways to address any obstacles to trade facing companies.

Other Outcomes with IP Implications

Antimonopoly Law:

The United States and China recognize that the objective of competition policy is to promote consumer welfare and economic efficiency rather than promote individual competitors or industries, and that enforcement of their respective competition laws should be fair, objective, transparent, and non-discriminatory. China commits that its three Anti-Monopoly Enforcement Agencies (AMEAs) are to provide to any party under investigation information about the AMEA’s competition concerns with the conduct or transaction, as well as effective opportunity for the party to present
evidence in its defense.

Active Pharmaceutical Ingredients:

To advance the shared goal of ensuring access to safe and high-quality medicines for patients and protect supply chain integrity, to affirm the responsibilities of the manufacturers and regulators over the life-cycle of the drug to ensure product quality, and to fight against illegal actions to manufacture, distribute, and export counterfeit and substandard active pharmaceutical ingredients (APIs) and APIs used for counterfeit and substandard products, China commits, during the process of revising the Drug Administration Law (DAL), to develop and seriously consider amendments to the DAL requiring regulatory control of the manufacturers of bulk chemicals that can be used as APIs (“bulk chemicals”), including “export only” producers and distributors. To this end, China commits to hold a multi-ministerial work mechanism on a potential regulatory and enforcement framework to develop the oversight of bulk chemicals, and a roadmap for implementation, by the end of this year. The United States commits to continue to review its authority to exclude from consideration the import of bulk chemicals from firms that are not registered with China Food and Drug Administration (CFDA). In addition, the United States and China commit to deepen technical exchanges, trainings, and regulatory cooperation to enhance the safety of bulk chemicals traded between the United States and China, and to exchange views on the user fee programs at the upcoming pharmaceutical working group meeting of the JCCT.

There is also a separate US Fact Sheet which further elaborates on these deliverables.

Software Piracy by the Government: A Tempest in the Tomato Garden?

The Chinese media, including China Radio International, broke the news on October 8 that the website of China’s State Intellectual Property Office (www.sipo.gov.cn) was hosting training materials which appeared to have been prepared with pirated software that was acquired through the notorious “Tomato Garden”  website.  Information on the presentation is available here  – under “author” are the Chinese words “番茄花园” (tomato garden).  The facts were uncovered by a microblogger, and picked up by mainstream publications such as Xinhua.  The “Tomato Garden” website was the subject of a well publicized and successful criminal case which resulted in jail time and fines for illegally distributing software online. Continue reading