CATR’s Report on Copyright Enforcement in the On Line Enviroment

The China Academy of Telecommunication Research (CATR), at the request of the National Copyright Administration,  released a report on April 26, 2016 on Copyright Protection in the Online Environment.

The report noted that  there were 2,118 on line civil copyright cases in total, an increase of 28.3% from last year (this total number seems smaller than I would have guessed).  The SPC White Paper reported that overall there were 66,690 civil cases, an increase of 12.1% from 2014.  Regarding civil on line copyright enforcement, 44% of the online cases involved music and 18% involved audiovisual infringement.  Amongst the IP courts, Guangdong had the highest percentage of cases (39.5%), followed by Shanghai (33.5%) and Beijing (16.5).  However, the province with the most cases was Hubei (476), followed by Beijing, Guangdong, Zhejiang, Shanghai and Jiangsu) (see chart below).

graphofcivilcases

The report also notes several important legal and policy initiatives, including directives from the National Copyright Administration on online liability, and a revision to the Criminal Code, making it clear that on line technology providers can be held criminally liable for copyright infringement.  The report also singles out the release of a draft of  proposed rule on Copyright Administrative Enforcement. (著作权行政处罚实施办法 (修订征求意见稿)as well as new rules Concerning Specifications of the Copyright Order In Online Transmissions (关于规范网络转载版权秩序的 通知),  Stopping Online Music Service Providers Transmitting Unauthorized Content(关于责令网络音乐服 务商停止未经授权传播音乐作品 的通知)and the Rule Concerning Specifications of the Order of Cloud Driver Service Provider Copyright (关于规范网盘服务 版权秩序的通知).

Data on copyright administrative and criminal enforcement in the online environment was not made available in this report.   According to the SPC White Paper, there were 523 criminal copyright cases, involved 547 people.  Moreover, news reports accompanying its release reported the following data: during the Sword Network Campaign in 2015, there were 383 administrative enforcement actions, with fines of 4.5 million RMB, 59 cases transferred to criminal prosecution, and 113 websites closed.

Summarizing the SPC’s 2015 White Paper

 

WP_20160420_005China releases much of its IP data in April, on the margins of World IP Day (April 26).  This year there have been important conferences summarizing these reports in advance of their release, including reports from the Supreme People’s Court on IP litigation, as well as white paper reports on specialized IP courts in Beijing, Shanghai and Guangdong.  In addition, there are SPC reports on fifty model cases and 10 big IP casesThe Western media has also reported on some of these reports, as have state run media in Chinese and in English.   This blog has reported on SPC whitepapers and model cases for some time.  As in prior years many provincial courts, such as Hubei, are also reporting out white papers of various kinds, as have IP and administrative agencies, such as Beijing municipality.

As in prior years, interpretation of the data, particularly for the foreign business community, can be challenging.  Here is my digest of the SPC’s important 2015 White Paper:

Foreign Cases Are a Shrinking Share

Perhaps the most dramatic national news from the official national data involving foreigners is that in 2015 foreign related IP cases dropped 22% in absolute numbers from last year, despite an overall increase of 7.2% of total decided IP cases. The total number of civil cases involving foreigners was 1,327.   As a consequence, foreign related IP civil cases as a share of total cases dropped from 1.9% (2013), to 1.8% (2014), to 1.2% (2015).   By contrast, total administrative cases in 2015 were 10,926, of which 4,928 were foreign or about 45%, continuing the trend of an outsized foreign administrative presence, with an undersized infringement role.

Data from other sources also casts some doubt on the “foreign-related” data in the SPC’s report.  The Shanghai IP courts reported that approximately one in six lawsuits received involved an overseas party, with most pursuing trademark or patent infringement claims.  A newly set up database company, IP House, also reported that over 20% of the IP litigation in Beijing involved foreigners.  Former SIPO Commissioner Tian Lipu also cast doubt on data suggesting that the amount of foreign-related IP litigation is under 5%, in a letter to then USPTO Director Kappos.  Conflicting data on foreign-related cases is likely due to the manner of reporting.  Although there is no official explanation I know of, I believe that foreign-related cases are likely those cases reported as foreign related for purposes of suspension of mandatory time frames for adjudication under China’s civil procedure law.  However, litigation commenced by a foreign invested entity in China may be characterized by the SPC as a domestic case.

Another explanation may be that the high level of foreign-related administrative cases may be due to the centralization of IP prosecution in the headquarters of many foreign companies which file these cases in the name of the parent company.  After China’s patent office or trademark office grants the right, the foreign company might then transfer the rights to the subsidiary.  This transfer is validated by the high percentage of related party IP licensing activity which US census also reports. I have not, however, seen any studies that seek to correlate foreign licensing activity, foreign investment and foreign-related litigation, which might support this hypothesis.

As I have noted elsewhere, comprehensive data must, however, await publication of the relevant source cases or data by the SPC and other courts.

IP Cases Continue to Grow Overall

The shrinking reported foreign share contrasts with the rapid growth of IP cases in China.  The SPC reported that newly reported first instance IP cases increased to 130,200, up 11.73% from 2014.  Total cases adjudicated were 123, 059, an increase of 11.68%, of which 101,324  were civil cases, an increase of 7.22%.  Administrative cases adjudicated constituted 10, 926, an increase of 123.57%, most likely due to changes in China’s trademark law which establish a more direct role for the courts.   Criminal cases adjudicated were 10,809, maintaining their slightly decreased level since 2013 (the SPC report notes that the cases are “stable” 同比基本持平)。

Patent Cases Continue to Grow

The SPC reported that patent and licensing cases continued grow, and that they increasingly involved complex areas of technology, with an increase of 22.1% to 13,087 cases.   However, I have not yet seen a breakdown of cases by type of patent or technology type which fully documents this observation.  The data appears too general at this point, considering that perhaps 2/3 of China’s patent cases involve unexamined utility models and designs of varying technological complexity, the relatively small share of licensing disputes, and the reality that many software and unfair competition cases may in fact involve high technology cases (but may not otherwise be reported as such).

Unfair Competition Cases on the Rise

The SPC report shows that unfair competition cases have increased, including those involving the internet and software technologies. Civil cases increased to 2,181, with antitrust cases increasing to 156. The total increase was 53.38%. Trade secret cases have not yet been separately reported out. They are generally a significant share of this relatively small portion of the IP docket. In 2009, for example, there were 1,282 cases under the Law to Counter Unfair Competition in the courts, of which 253 involved trade secrets.

What the Data Suggests on Courts Foreigners May Want to Pay Attention To

A foreigner traveling to China who is considering where to bring a case, or risks of being sued in a particular venue, should not consider all court as equally well situation.  The Beijing courts, for example, clearly play a key role in foreign related IP adjudication. As administrative cases are overwhelmingly located in Beijing, the Beijing IP court hears perhaps 80% of the combined civil/administrative foreign docket.

In addition, the SPC reports that Beijing, Shanghai, Jiangsu, Zhejiang and Guangdong accounted for 70 percent of the first instance IP litigation of all types. Shanghai is also a good place to engage, as it has the SPC has established an international exchanges base there. Indeed, the Shanghai white paper also reported out on its exchange activities, including singling out a significant conference last year with the US Court of Appeals for the Federal Circuit. Still, several courts are assuming increasing importance, and some may pose defensive risks and opportunities for foreigners.   Jiangsu’s docket increased by 38.71%; the docket in Tianjin increased by 50.41%. Anhui saw an increase of 101.26%, while courts in Shandong, Shaanxi, Hunan and Helilongjiang all saw increases of over 30%.

Just as the specialized IP courts were releasing their white papers, the SPC reported that NPC delegates from a number of provinces had been asking to establish their own IP courts in their region, and that the SPC would report out in August on these proposals.  In my opinion, these requests reveal the problem of this otherwise noble experiment in specialized IP courts: if multiple regions have specialized IP courts at the intermediate level, then efforts to insure national unity in reduce local protectionism in IP litigation through a national appellate court may be compromised. However, it is also important to note that these specialized IP courts would replace specialized IP tribunals – a significant difference from US trial court litigation, which  involves courts of general jurisdiction.

At the same time as these papers were being released, a judicial delegation from China was engaging with US federal and state judiciary to discuss the role of IP courts and possibility of future cooperation (see picture above by me from the Wisconsin Supreme Court).  I also believe that we can expect more discussion on these important issue in the months and years ahead.

2014 Judicial IPR White Paper Shows Huge Growth in Trademark Appeals

It is IP week and for IP data geeks like me, China is publishing huge amounts of data in a short period of time.  The biggest challenge isn’t collecting the data, but in understanding what the data says and doesn’t say.

I have reported for several years now on judicial data that is released by the Supreme People’s Court (SPC) around this time.  The Beijing Intellectual Property Institute and other media released data from the SPC Court 2014 White Paper.  Here is a summary:

1.  IPR Cases Continue to Climb, Foreigners Continue to Play a Small Role.

The courts throughout China received 133,863 cases in 2014, and adjudicated 127,129 cases, increases of 19.52% and 10.82%, respectively.  Much of the increases were due to increases in civil copyright cases and administrative trademark cases.

Patent infringement litigation filings increased to 9,648  or 4.93%;trademarks decreased to  21,362 for a decrease of  8.21% and copyright increased to 59,493 cases, or an increase of 15.86%.  Technology contracts increased to 1,071 or an increase of 12.86%;anti-unfair competition cases (which include trade secrets) increased to 1,422 (of which there were 86 civil antitrust cases) with an increase of 9.22%.     Filings of second instance appeals increased to 13,760 cases, or by 15.08%.

Foreign related civil cases increased by a meagerly 0.11% to 1716 cases, or are now a 1.8% of the civil IPR docket, down from last year’s 1.9%.   Hong Kong/Macau/Taiwan cases dropped to 426 cases, or by 11.8%.

2.  Administrative Cases Continue to Climb, Affecting the Beijing IP Courts Docket and Being a Focus of Foreign Rightsholders

Foreign-related administrative cases, which principally consist of appeals of patent and trademark office decisions to grant or deny patent or trademarks, showed a dramatic increase, to 9,918 cases filed and 4,887 adjudicated, with a jump of 243.66% and 68.46% respectively.  Patent cases declined 11.67%  to  539.  However, new trademark cases increased by 330.59% to 9,305, an increase of 330.59%.  There were also 12 copyright administrative cases filed, and 62 administrative cases of other types.

There was overall an increase of 70.5% in foreign related administrative cases (including Hong Kong, Taiwan and Macau) to 2247 cases.  Foreigners represented 45.77% of the total administrative docket.

3.  Criminal Cases Continue to Grow

New criminal IP cases filed in 2013 totaled 11,088, an increase of 18.83%. Appeals numbered 573 cases, a decrease of 13.44%.

Conclusion –

As I noted back in December, the Beijing IP Court continues to be the most important court for foreigners.  In addition the court was facing an “explosion” in trademark civil litigation, which is re-directing the courts resources.

In the past declines in patent administrative litigation, such as occurred in 2014, have been associated with the busy dockets of the court which has resulted in low “reversal rates” by the courts due to the amount of time needed to properly reverse SIPO.  This may indeed be the current situation. I recently heard Chief Judge Su of the Beijing IP Court talk about the busy docket his court is facing.  I suspect that the rapidly increasing trademark docket has resulted in the Beijing IP court focusing on disposing of its trademark docket, as SIPO reversals are more time consuming.  This may have resulted in a decline in patent administrative litigation.  In any event, the decline in administrative appeals to the courts in 2014 is not attributable to any decline in patent filings, which increased by 12.5% in 2014 to 928,000, or any decline in civil patent litigation, which as I noted, increased as well.

I am waiting for more specific data on civil or criminal trade secret cases, as the summaries I have read do not break out trade secret cases from other anti-unfair competition law cases.

As in past years, foreigners continue to play an important role in administrative IP litigation while their role in civil IP litigation continues to be a small percentage of a large docket.  The growth in criminal IP cases, however, also suggests greater opportunities for rightsholders and foreign governments to cooperate on IP cases, including transborder IP cases.

Here’s a link to the 2014 White Paper on the WIPO website (中国法院知识产权司法保护状况 [2014]).