SPC’s 2020 IP-Related Judicial Interpretation Agenda

On March 19, 2020, the Supreme People’s Court’s Judicial Interpretation Agenda for 2020 (“2020 Judicial Interpretation Agenda”) 最高人民法院2020年度司法解释立项计划 was discussed and adopted by the SPC Trial Committee at its 1795th meeting on March 9, 2020. In 2020, there are 49 judicial interpretation (JI) projects, divided into two categories: 38 in the Class I Projects, which are required to be completed by the end of 2020; 11 in the Class II Projects, which are required to be completed in the first half of 2021. Generally speaking, the complete catalogue covers various fields such as the enforcement, security, pre-litigation property preservation, civil code, criminal cases, administrative cases and judicial appraisal. There are a number of  IP-related projects, all of which involve the recently established national Intellectual Property Court as a drafting and research partner with other SPC divisions or tribunals, and suggest an increasingly important role for this specialized court in IP policy making:   

Class I Projects (to be completed before the end of 2020) 

  1. Several Provisions on Evidence in Civil Procedures of Intellectual Property 关于知识产权民事诉讼证据的若干规定 [ As previously noted, this draft was discussed at a conference hosted by the SPC in Hangzhou in 2018. As Chinese courts experiment with more expanded discovery, evidence preservation and burden of proof reversals, clearer rules regarding the obligations of parties to produce evidence are becoming more critical. ]

 Organizers: Civil Adjudication Tribunal No.3, Civil Adjudication Tribunal No.1, Research Office, Intellectual Property Court 

  1. Interpretation of Several Issues concerning the Application of Law in the Trial of Administrative Cases for Patent Validity 关于审理专利授权确权行政案件适用法律若干问题的解释 [Note: A draft was issued for public comment in the summer of 2018; see the earlier blog].

 Organizers: Civil Adjudication Tribunal No.3, Intellectual Property Court 

  1. Interpretations of Several Issues concerning the Application of Law in the Trial of Trade Secret Secret Infringement Cases 关于审理侵犯商业秘密纠纷案件适用法律若干问题的解释 [Note: Regarding the Interpretations of Several Issues concerning the Application of Law in the Trial of Trade Secret Infringement Cases, it was also on SPC’s 2019 JI Agenda. As mentioned in Susan Finder’s November 26, 2019, blogpost, this judicial interpretation is flagged in the Party/State Council document (November, 2019) on improving intellectual property rights protection with a goal to “explore and strengthen effective protection of trade secrets, confidential business information and its source code etc. Strengthen criminal justice protection and promote the revision and the amendment and improvement of criminal law and judicial interpretations 探索加强对商业秘密、保密商务信息及其源代码等的有效保护。加强刑事司法保护,推进刑事法律和司法解释的修订完善.”]

Organizers: Civil Adjudication Tribunal No.3, Criminal Adjudication Tribunal No.1, Intellectual Property Court [Note the involvement of the Criminal Adjudication Tribunal is a positive sign for seeking an integrated civil/criminal/administrative enforcement approach] 

  1. Provisions on Several Issues concerning the Application of Law in the Trial of Pharmaceutical Patent Linkage Dispute Cases 关于审理药品专利链接纠纷案件适用法律若干问题的规定 [Note: this appears consistent with the requirement for adopting a patent linkage system in the Phase 1 IP AgreementAs we have discussed in a previous blog, the Pharmaceutical-Related Intellectual Property section of the Phase 1 IP Agreement requires China to adopt a patent linkage system, much as was originally contemplated in the CFDA Bulletin 55, but subsequently did not appear in the proposed patent law revisions of late 2018]

(New Project)

Organizers: Civil Adjudication Tribunal No.3, Case Filing Tribunal, Intellectual Property Court  

  1. Provisions on Several Issues concerning the Application of Law in the Trial of Civil Dispute Cases Arising from Monopolistic Conduct () 关于审理因垄断行为引发的民事纠纷案件应用法律若干问题的规定() (New Project)

 Organizers: Intellectual Property Court, Civil Adjudication Tribunal No.3

 Class II Projects (to be completed in the first half of 2021)

  1. Provisions on Several Issues concerning the Specific Application of Law in the Trial of National Defense Patent Disputes 关于审理国防专利纠纷案件具体应用法律若干问题的规定 (New Project)

Organizers: Civil Adjudication Tribunal No.3, Intellectual Property Court 

  1. Interpretation of Several Issues concerning the Application of Punitive Compensation for Intellectual Property Infringement 关于知识产权侵权惩罚性赔偿适用法律若干问题的解释

Organizers: Civil Adjudication Tribunal No.3, Intellectual Property Court  

  1. Interpretation of Several Issues concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition 关于审理不正当竞争民事案件适用法律若干问题的解释 (New Project)

Organizers: Civil Adjudication Tribunal No.3, Intellectual Property Court 

  1. Provisions on Legal Issues concerning the Specific Application of Law in the Trial of New Plant Variety Right Infringement Cases 关于审理植物新品种权纠纷案件具体适用法律问题的规定 (New Project)

Organizers: Intellectual Property Court, Civil Adjudication Tribunal No.3

 Judicial interpretations that are not marked as the “New Projects” have already been on the SPC’s Judicial Interpretation Agenda for 2019 or 2018. Several of them, including Several Provisions on Evidence in Civil Procedures of Intellectual Property (2019) and Interpretation of Several Issues concerning the Application of Law in the Trial of Administrative Cases for Patent Authorization and Confirmation (2018 and 2019), were to have been completed by the end of 2019 or 2018. 

Class I Projects JI No. 37 and Class II Projects  Nos. 3 and 11 all have prior effective versions that were issued in 2012 or earlier.  It is likely that these “New Projects” will be in the form of amendments, perhaps significant, to the previous JI’s.

 

Supreme People’s Court Calls for Public Comments on Enforcement of Intellectual Property Judgments

Addendum of April 18, 2020: Here is an English language unofficial translation of the Implementation Plan and the Guidelines for reference purposes.  If you see any errors, please advise us by comments on this blog.  The translation is provided with no representations or warranties of any kind as to content.  Readers should consult with the Chinese original in the links above, as the translation has no legal significance.  The translation is courtesy of USPTO, which claims no responsibility for any inaccuracies in the translation.

On March 15, 2020, the Supreme People’s Court of China issued a notice soliciting public comments on the Implementation Plan for the Enforcement of Intellectual Property Judgments (Draft for Public Comment) 知识产权判决执行工作实施计划(征求意见稿)and the Guidelines for the Enforcement of Intellectual Property Judgments (Draft for Public Comment) 知识产权判决执行工作指南(征求意见稿 ). Comments are due on May 15, 2020. 

According to one online commentator, one reason for these documents is that in recent years, after the establishment of the punitive compensation mechanism for intellectual property rights in China, a large number of court-enforced cases have emerged. In fact, difficulties in enforcing judgments have been of concern to China’s leadership and the Supreme People’s Court for several years and appear to be independent of the possibility of increased punitive damages. President Xi Jinping identified this issue of enforcement difficulty 执行难 in the Fourth Plenary Session of the 18th CPC Central Committee (2014). The SPC further proposed to solve this problem in two to three years at the Fourth Session of the 12th National People’s Congress. SPC President Zhou Qiang also raised this issue in a report in 2018. None of these high-level pronouncements particularly singled out intellectual property as an area of enforcement concern.

In general enforcement issues that have concerned China involve enforcement of judgments. SPC President Zhou Qiang identified that China has faced such enforcement issues as: (1) judicial difficulties in locating the person and their property because the judgment debtors conceal their property and whereabouts; (2) the traditional liquidation method is subject to a long cycle with a low success rate, and corruption often occurs during liquidation, so the court is unable to liquidate the property to be enforced; (3) local governments and powerful personnel commit corruption and intervene and hinder the enforcement; (4) many unenforced cases accrue year after year, which has led to serious social conflicts.

Enforcement issues that foreigners have identified have included matters arising as part of the judgment, and often before the execution of the judgment including increased infringement compensation, jurisdictional issues of court enforcement, the procedures when a party initiates an enforcement action, enforcement procedures of pre-litigation preservation, enforcement of administrative remedies and criminal remedies including civil compensation for criminal cases, etc.  

This is the first time that the Supreme People’s Court has formulated an implementation plan and work guidelines specifically for intellectual property rights enforcement. While this move is explicitly aimed at strengthening the judicial protection of IP rights and ensuring that effective judgments on IP cases are enforced in accordance with the law, another purpose of this initiative is likely to fulfill China’s commitments under Article 1.28 of The Phase 1 IP Agreement of ensuring expeditious enforcement of IP judgments. Article 1.28 “Enforcement of Judgments” 判决执行 provides:

1.The Parties shall ensure expeditious enforcement of any fine, penalty, payment of monetary damages, injunction, or other remedy for a violation of an intellectual property right ordered in a final judgment by its own court.

2. Measures China shall take include executing work guidelines and implementation plans to ensure expeditious enforcement of judgments, publishing its work guidelines and implementation plans within one month after the date of entry into force of this Agreement, as well as publishing online quarterly reports of implementation results.

As the main part of the Implementation Plan, Section 2 “Specific Implementation Plan” 具体实施计划 includes the following provisions: filing of enforcement of IP judgment (Art. 1), pre-litigation preservation (Art. 2), how to quickly identify and control the property of the executed person (Art. 3), assets evaluation (Art. 5), assets disposal (Art. 6), obligations of the executed person (Art. 7), handling enforcement cases offsite (Art. 10), judicial publicity (Art. 12), etc.  Generally speaking, these provisions point to the specific measures previously promulgated by the SPC, rather than making headway in new policies or experiments, or suggesting more concrete measures or working methods. In this sense, the Implementation Plan highlights out IP judicial enforcement issues are tied to general enforcement concerns.

Addendum of April 18, 2020: Here is an English language and unofficial translation of the Implementation Plan and the Guidelines, for reference purposes.  If you see any errors, please advise us by comments on this blog.  The translation is provided with no representations or warranties of any kind as to content.  Readers should consult with the Chinese original in the links above, as the translation has no legal significance.  The translation is courtesy of USPTO.

According to Article 13 of the Implementation Plan, a special section of “Intellectual Property Judgment Enforcement Publicity” on China’s Enforcement Information Disclosure Website will be published by the end of June 2020, focusing on publicizing the implementation information of intellectual property judgments, so as to facilitate transparency, public understanding,  and supervision. This appears consistent with the requirement for publishing online reports of implementation results in the Phase 1 IP Agreement. In fact, as we have previously noted, the disclosure should not only be limited to the disclosure of the enforcement of IP judgments. In order to ensure that China’s civil enforcement is observable and accessible, China would need to publish all of its IP cases, including cases involving provisional measures, as well as dockets that may include motions and settlements. Many observers, including in this blog, have noticed a large drop in publication of foreign-related IP cases since approximately January 1, 2018, which should also be addressed. Finally, it is unclear from the text of the Implementation Plan or the Phase 1 Agreement, whether China intends to publish the actual enforcement decisions to the same extent that it publishes cases, notwithstanding that many enforcement cases are now available on the SPC’s official website.

In addition, over the past several years, there has been an increasing incidence of multinational IP disputes, particularly in technology sectors. As previously noted, the Phase 1 IP Agreement also does not address the problems arising from these cases. An added problem arising from SEP cases in particular, has arisen over anti-suit injunctions and whether China should issue its own anti-suit injunctions, which was the subject of a recent conference (January 2019) at Renmin University.

In terms of execution of foreign judgments, Article 7(1) of the Guidelines mention that: “If a foreign party applies for execution, it shall submit a written application for execution in Chinese. If there are special provisions in the mutual legal assistance treaty concluded or co-joined by the country where the party is located and China, the treaty provisions shall apply.” This provision noticeably omits any reference to the Article 282 of  Civil Procedure Law, which permits enforcement of foreign judgments on the basis of reciprocity. United States courts have also occasionally enforced Chinese money judgments, including those which have an IP-related element, under the Uniform Foreign Money Judgments Recognition Act.   According to Susan Finder, the SPC is working on drafting a judicial interpretation on this issue at some time in the future.

Based on the Implementation Plan and Guidelines, it remains unclear how the enforcement of IP judgments differs from other judgments and, indeed, why it should be different from other civil, criminal or administrative matters. In the past many judicial reforms have been tested in the IP context.  The past experience of initially testing legal reforms in IP than reaching out to other areas is less evident in these two documents.  While few new specific measures have been proposed, the SPC’s release of these documents does reflect its increasing emphasis on IP rights, perhaps undertaken in response to US pressure. 

Addendum of April 18, 2020: Here is an English language unofficial translation of the Implementation Plan and the Guidelines for reference purposes.  If you see any errors, please advise us by comments on this blog.  The translation is provided with no representations or warranties of any kind as to content.  Readers should consult with the Chinese original in the links above, as the translation has no legal significance.  The translation is courtesy of USPTO, which claims no responsibility for any inaccuracies in the translation.

Written by Mark A. Cohen with the assistance of  Xu Xiaofan

New CPC and State Council Opinions on Improving IP Protection

wordcloud

On November 24,  2019, the General Office of Communist Party of China and the State Council jointly released the Opinions Concerning Enhancing Intellectual Property Rights Protection (关于强化知识产权保护的意见).

It is often too easy to dismiss documents like these, that have typically delivered an ephemeral higher state of vigilance by the Chinese government.  Nonetheless, there are some useful statements in this document that may be an indicator of future durable improvements, including:

  1. It is jointly published by the CPC and the State Council and thus has high level political and executive branch support.
  2. It does address some long-standing concerns raised by industry, such as development of a patent linkage system, patent term extension and copyright protection for sports broadcasts.
  3. There continues to be a focus on punitive damages in litigation. However, this document does appropriately point out the need to increase actual damages.
  4. Improving criminal enforcement, including revising criminal judicial interpretations – is also addressed.  Along with revising the criminal code, revising criminal JI’s and their high criminal thresholds was a goal of the WTO case that the US filed against China over 10 years ago (DS362).  This task is long overdue.
  5. Improving coordination between administrative and criminal enforcement is once again highlighted. This is also a long-standing issue.  In light of numerous prior efforts and experiments, a more concrete explanation of how this might be accomplished to better enable prosecution of major criminal actors would be helpful in the future.
  6. Case guidance and public trial systems are highlighted. Hopefully, the case guidance system will add further momentum to successful case law experiments in IP at the Beijing IP Court.
  7. The introduction of technical assessors into administrative enforcement could suggest a continued enhanced role for patent administrative enforcement, which has been increasing even as trademark administrative enforcement has been declining. If so, it may not augur well for foreigners who have traditionally been heavy “consumers” of the administrative trademark system, but not the administrative patent system.
  8. Improvements in the “examination” of utility models and designs are noted as a goal. However, these rights are generally not examined for substance except in the case of “abnormal” applications.
  9. Continuing attention is paid to challenging markets, such as e-commerce platforms and trade fairs, as well as establishing faster protection mechanisms.
  10. There is a continuing focus on supporting Chinese rightsholders overseas.

This document arguably goes part-way in establishing an outline for addressing US concerns about IP theft.  However, it offers little to address such concerns as ensuring greater transparency in the courts, publishing foreign-related cases, or addressing certain trade-sensitive topics outlined in USTR’s Section 301 report, such as cyber intrusions or criminal trade secret misappropriation.

The word cloud, above, is drawn from a machine translation of this document.  The original Chinese language and my redlining of a machine translation are found here.

Addendum of November 26, 2019:

Susan Finder in her Supreme People’s Court Monitor blog, reported on Judicial Interpretation drafting by the SPC for next year, some of which are referenced in the recently released Opinions.  According to that blog, on 29 April 2019, the SPC’s General Office issued a document setting out a list of 47 judicial interpretation projects, 36  with an end of 2019 deadline.  Several of these involve IP-related issues, including issues addressed in the joint CPC and State Council Opinions, including:

  1. Interpretation Concerning the Application of Law in Cases of Disputes over the Infringement of Trade Secrets (关于审理侵犯商业秘密纠纷案件应用法律若干问题的解释). Responsibility of the #3 Civil (IP) Division.
  2. Interpretation on Several Issues Concerning Punitive Damages for Intellectual Property Infringement (关于知识产权侵权惩罚性赔偿适用法律若干问题的解释). Responsibility of the #3 Civil (IP) Division.
  3. Provisions on Issues Concerning the Application of the Foreign Investment Law of the People’s Republic of China (I) (关于适用《中华人民共和国外商投资法》若干问题的规定(一)). Responsibility of the #4 Civil Division. The Foreign Investment Law and the recently released draft implementing regulations contain provisions protecting the intellectual property of foreign investors, including prohibiting forced technology transfers and enhancing the availability of punitive damages.

These draft JI’s have a due date of the first half of 2020.  Susan Finder notes in her blog that given the worldwide attention on the issues set forth in these three judicial interpretations, she expects that they will be released for public comment.  I hasten to add that the IP Division of the Court has generally taken a positive attitude towards soliciting public comment on its draft judicial interpretations, and I hope that they maintain this tradition.

It was also noted by Susan Finder that certain JI’s were due by year-end 2019, including:

  1. Intellectual Property Rights Evidence Rules (关于知识产权民事诉讼证据的若干规定).  Responsibility of the #3 Civil (IPR) Division. This draft was discussed at a conference hosted by the SPC in Hangzhou in 2018.  As Chinese courts experiment with more expanded discovery, evidence preservation and burden of proof reversals, clearer rules regarding the obligations of parties to produce evidence are becoming more critical.  A particular notable example of such a reversal is found in the recent amendments to the trade secret law (Article 32), whereby  a rights holder that has preliminarily proven that it  has taken reasonable confidentiality measures on the claimed trade secrets and has preliminary evidence reasonably demonstrating that its trade secrets have been infringed upon, can shift the burden of proof (BOP) to the infringer to prove that the trade secrets claimed by the right holder do not belong to those as prescribed in this law.
  2. Judicial interpretation on administrative cases involving patent authorization and confirmation (关于审理专利授权确权行政案件若干问题的解释). Responsibility of the #3 Civil IPR) Division. Another interpretation that previously had a 2018 year-end deadline.  A draft was issued for public comment in the summer of 2018; see my earlier blog.

Addendum of November 27, 2019:

Another China law blog, the NPC Observer also expects that some of the IP legislation flagged in the Opinions for revision may be considered as early as late December of 2019t.  According to the NPC Observer:

We expect the session to review a … draft amendment to the Patent Law [专利法] …The session may additionally consider the following bills: …

I have previously blogged about proposed revisions to the Patent and Copyright Law.

Addendum of January 9, 2020: Here is a translation of the Opinions from China Law translate.

Delay in the Courts… To Prove This One We May Yet Have to Wait…

On July 4, 2019, I posted a blog asking for help regarding rumors of delay and higher-level review of IP cases involving foreigners. Here is the follow-up. 

Spoiler alert: if you are looking for a smoking gun, you won’t find one.

Jacob Schindler from IAM pointed out that he looked into the issue for his magazine and after speaking to a number of lawyers and patent owners with active assertion campaigns in China, “found no evidence that this is true in any general sense.” Jacob noted that “the most likely explanation for delays faced by some US litigants is even more innocuous. Foreign companies, including US firms, seem to be big fans of the Beijing IP Court. And that has led to a very busy docket.” This perspective that clogged dockets are leading to delays has been cited by many, and a few people noted that the issue had been raised in various meetings or conferences.

Erick Robinson relied on his own experience prosecuting Non-Practicing Entity (NPE) cases, and commented in his blog that he had detected no changes. He further stated that claiming “‘cases can be decided but only upon approval from the Supreme People’s Court’ is obviously alarming, but without proof, this seems to be just more US politicizing of the trade war.” I will return to the issue of the trade war and patents in a future blog.  

One well-informed China-resident lawyer informed me that she “heard from a few lawyers that SPC instructed lower courts to suspend adjudicating all US-related cases for at least six months since the end of 2018.” This May, she advised, the SPC lifted the ban and now only supervises “sensitive cases.” For less sensitive matters, lower courts may proceed as they wish. This six month period identified by this lawyer roughly coincides with the period during which I had been hearing this rumor of delay. Others also confirmed that there was high-level supervision.   

The counter-factual that there has been no interference in court cases or administrative proceedings is perhaps easier to disprove. Many individuals have indicated concerns about informal interference in proceedings. Courtney Macintosh of Baker & McKenzie noted that “[w]e have been told by local enforcement authorities not to expect any nice treatment cause of trade war, so it is complex and not so straightforward.” The consulting firm Rouse had also observed what they thought was a trade-related impact in the negotiation of licensing deals requiring local government approval, with local governments “falling over” to ensure that they did not appear to be pressuring companies to transfer technology as a condition of investment approval. AmCham China’s 2019 Business Climate Survey for the first time listed “bilateral tension in US-China trade relations” as a top-five business concern (45% of respondents), and also noted that high tech and research-intensive companies were the most likely to feel less welcome than before (54%).

Some individuals suggested that there is no political interference at all in Chinese judicial proceedings. While an extensive analysis of the manner in which politics interferes in adjudication is beyond the scope of this blog, there is considerable literature around how politics influences Chinese court decisions, and there is no indication that IP cases are exempt from such influence.

First of all, as a de jure matter, an SPC decision to delay foreign cases is not inconsistent with Chinese civil procedure law.  Chinese courts are authorized to delay foreign civil proceedings, including IP litigation. Section 249 of the Civil Procedure Law provides that “The period for the trial by the people’s court of civil cases involving foreign parties shall not be subject to the restrictions of Articles 149 and 176 of the Law.” Articles 149 and 176 require first and second instances cases to be resolved in six to three months respectively, except when otherwise authorized by supervisory authorities.

Second, the courts themselves recognize that they are not exempt from politics. Prof. Susan Finder’s  Supreme People’s Court Monitor recently discussed this in her analysis of a speech by SPC Justice Liu Guixiang. Liu noted that “The People’s Court is first and foremost a political organ. It must put political construction in the first place and clearly talk politics.” The speech noted four principles, including “[t]o uphold the absolute leadership of the party,” and that “judicial independence” of the West must be resolutely resisted. 

Academic literature also has shown documented political influences and the data supporting it.  Prof. Perenboom’s China’s Long March toward Rule of Law (2002) surveys the many ways that “judicial independence” can be compromised in China’s system (pp. 280-342).  Prof. Howson’s article “Judicial Independence in China: Lessons for Global Rule of Law Promotion” notes that Shanghai courts “evidence serious independence limitations” in two areas: acting as the handmaiden of policy implementation in contravention of what the Company Law allows, or directly by blanket rejection of public company/large plaintiff cases.  Profs. Xin He and Su Yang looked at how the “have’s” come out ahead in Shanghai court cases and “cast doubt on the party capability theory.” The authors “speculate[d] that the causes of judicial inequality in China lie not only in resource gaps but also in the roots of the law and the nature of the court.”

Denying case acceptance has long been recognized as a political tool of the courts to push off politically sensitive cases, although it may be less frequent in foreign-related cases

Higher-level supervision is also well documented, in addition to being specifically provided for in the civil procedure law. Such higher-level supervision appeared prominently in the WTO IP enforcement case with China (DS362), when the US side presented a letter from China’s Supreme People’s Court on how to best handle a copyright issue that was then sub judice in Hunan (Exhibit US-60, Letter from the Supreme People’s Court to the Hunan Province Higher People’s Court in Zheng Haijin v Xu Zheng Xiong,  知监字 [1998]). As the Panel Report discusses, this letter was contradicted by a letter of the National Copyright Administration of China to the lower court with the opposite position. Panel Report Sec. 7.51.

Political interference may also originate from the court that hears the case, particularly its adjudication committees (shenpan weiyuanhui). Such committees play an important role in ensuring that cases are consistent with political directives. As the Duihua Foundation points out: 

“[Adjudication Committees] are unique to the Chinese judicial system and exist at  each of the four levels of China’s court system, from basic-level county courts up to the Supreme People’s Court. The committees meet regularly to discuss important or difficult cases, ‘sum up judicial experience,’ and review other important matters related to case adjudication. Generally, they are composed of the president and vice-presidents of the court, as well as the heads of the court’s tribunals—many of whom are, in effect, administrators rather than working judges.  

Committee meetings may be attended by the head of the procuratorate, which has a dual function as prosecuting body and overseer of judicial activity, as well as members of the judicial panel hearing the case under discussion. Court rules encourage submission of written case reports summarizing the facts of the case, major issues of contention, and preliminary opinions on how the case should be handled, but some cases are simply presented orally. Detailed minutes of the committee’s discussions are kept, but they are classified as state secrets and do not become part of the formal trial record.

Among cases that adjudication committees routinely take up are those ‘involving serious threats to national security,’ the death penalty, and ‘important’ matters involving foreigners or persons from Hong Kong, Macau, or Taiwan, as well as cases with multiple parties (quntixing anjian) that have a major social impact or could easily intensify conflicts. Meetings are held several times per month, and multiple cases are normally discussed at each meeting.” [emphasis supplied]

Such supervision need not be adverse to a foreigner’s interests. Politically sensitive litigants, domestic or foreign, use court supervision to advance their claims, as has been documented in an article by Profs. Feng Yuqing and Xin He.

Chinese behavior overseas may reveal an expectation that political interference or supervision in judicial processes is not unusual. For example, China reported an ersatz JCCT outcome to “give review priority” to a Chinese application on the basis that it believed that the USPTO had given unfair treatment to a patent application by the SOE, IWNCOMM. By contrast, the  US outcome sheet does not reflect any such commitment.  

In the absence of a “smoking gun” does the data suggest any changes in Chinese disposition of US or foreign patent cases?  The databases will not reveal this information until, if at all, next year for this year. Even then, as Prof. Benjamin Liebman and others have pointed out in “Mass Digitization of Chinese Court Decisions: How to Use Text as Data in the Field of Chinese Law”, there is a “need for humility and methodological pluralism among scholars seeking to use large-scale data from Chinese courts. The vast amount of incomplete data now available may frustrate attempts to find quick answers to existing questions…”   Finally, even if there were some delays or additional oversight in the handling of foreign-related cases, this may not prove the existence of a new internal directive or prejudice.  It may simply be due to existing civil procedures or courts exercising some greater prudence at this moment in time. 

We will need to wait and see.

Postscript of July 31, 2019:

Since this blog was posted, I have received two additional emails regarding the impact, if any, of the trade war on foreign-related IP litigation, particularly patent litigation involving Americans.

One well-placed source advised me that if there was any delay in adjudicating foreign IP cases, it would be due to the rapid growth in IP dockets in China and the relative flexibility in timing afforded adjudication of foreign-related IP cases.   This explanation is also quite plausible.  Overall IP cases did increase by 40.97% to 283,414 accepted cases.  Patent cases increased by 35.53% to 21,699.  These are huge increases and foreign cases may get delayed as courts adjust to their dockets.  See 中国法院知识产权司法保护状况 2018 年)(Intellectual Property Protection by Chinese Courts in 2018).

Another source told me that their client was told that due to the trade war and attendant “sensitivities”, the court would not be issuing its decision at this time.  No new timeline was offered.

References to “sensitivity” or “inconvenient time” can be a euphemism for political concerns or they can reflect real-world issues like a clogged docket or a complex case.  I can remember once as a government official, I directly asked a Chinese colleague and old friend if the time was “really” inconvenient to meet me, or whether this was simply a  way of avoiding conflict.  He responded with a long list of other commitments and told me “we look forward to seeing you, but it is really quite busy now.”  We both laughed.

Please continue to write in any other observations you may have.

 

Reviewing the 2017 SPC Report on IPR Judicial Protection: The Generalities and the Exceptions

There have been a number of empirical reports in recent weeks on China’s IP system. In this blog, I look at the annual Supreme People’s Court 2017 Report on the Situation Regarding Judicial Enforcement of IPR in China  (中国法院知识产权司法保护状况) which was released during IP week (the “Report”).

According to the Report, 2017 saw a major increase in IP litigation in China.  There were a total of 237,242 cases filed and 225,678 cases concluded, with an increase of 33.50% and 31.43%, respectively, compared to 2016.

First instance cases increased by 47.24% to 201,039.  Patent cases increased 29.56% to 16,010.  Other increases were in trademarks (37,946 cases/39.58%); copyright (137,267/57.80%); competition-related cases (including civil antitrust cases of 114) (2,543/11.24%).  Two counter-cyclical numbers stand out:  technology contract cases dropped by 12.62% to 2,098, and second instance cases increased by only 4.92% or 21,818 cases. Note that disaggregated numbers for civil trade secret cases are not disclosed in the Report, but are presumably included under “competition” cases.

Comparing dockets with the United States, in 2017 United States courts heard 4,057 cases patent cases, 3,781 trademark cases, and 1,019 copyright cases, according to Lex Machina.  The biggest margin of difference between the US and China was clearly in copyright cases.  Chinese courts heard 134.7 times more cases than the United States. However, Chinese copyright cases are less likely to be consolidated amongst different titles, claims or causes of actions, which can inflate the statistics  — although I doubt to a 100 or more fold level.

Administrative cases, the majority of which are constituted by appeals from the patent and trademark offices, showed an overall increase while patent validity cases decreased.  Administrative patent appeals dropped 22.35% to 872 cases, while administrative trademark cases increased to 7,931 cases, or by about 32.40%.  The drop in administrative patent cases is particularly notable in light of the increased activity in patent prosecution and patent licensing.  By comparison the numbers of Inter Partes Reviews undertaken by the USPTO during 2017, according to Lex Machina, were 1,723, in addition to 9 cases involving covered business method patents.

The SPC did not offer disaggregated reversal rates of the PRB and TRAB in its data; combined patent and trademark cases included 964 cases involved  affirming the administrative agency decisions; 150 involving a change in the administrative decision; 5 cases involved a remand for further review; and 24 cases were withdrawn.

Criminal IP cases have also continued to decline.  There were 3,621 first instance criminal IP cases in 2017, a decline of 4.69%.  Among those 3,425 involved trademarks (-3.93%) and 169 involved copyrights (-13.33%).  There was also a decline of 35% in adjudication of criminal trade secret cases to only 26 cases.  The decline in criminal cases since 2012 (when cases totaled over 13,000) especially in copyrights and trade secrets is odd as Chinese leadership has in fact recognized the need for deterrent civil damages, including punitive damages and criminal trade secret remedies.

The five provinces that receive the most IP cases continued to grow in influence. Beijing, Shanghai, Jiangsu, Zhejiang and Guangdong saw an aggregate increase of 56.63% in IP cases, to 167,613 and now constitute 70.65% of all IP cases filed in China (p. 6).  Guangdong alone saw an increase of 84.7% to 58,000 cases and Beijing trailed behind at 25,932 cases with an increase of 49.2 percent.  Other less popular destinations also saw dramatic increases.  Jilin province had an increase of 210 percent, while Hunan and Fujian each saw increases of 73.8% and 73.14%.

Settlement and case withdrawal rates also changed in 2017.  Shanghai had the highest reported rate of the big five at 76.31%, while the inland province of Ningxia had an overall rate of 88.46%, including a 100 percent rate where litigants accepted judgments without appealing  服判息诉 (!).

The SPC also reported supporting 11 cross-district IP tribunals in Nanjing, Suzhou, Wuhan, Chengdu, Hangzhou, Ningbo, Hefei, Fuzhou, Jinan, Qingdao and Shenzhen.  In addition, 10 provinces or autonomous cities established a system of combining civil, criminal and administrative jurisdiction over IP cases in their IP tribunals in the first half of 2017.  As noted however, despite this change in judicial structure, there was a decline in criminal enforcement and in some administrative appeals in 2017 overall (p.11).

The Report also notes that the SPC is actively supporting research on establishing a national specialized appellate IP Court (p. 10).   The SPC also actively participated in the providing comments on other draft laws, and devoted some effort to the revisions of the Anti-Unfair Competition law, including meeting three times with the legal affairs committee of the NPC, as well as numerous phone calls   According to the Report, the “majority of the opinions proposed were adopted into law” which leaves the question of what was not adopted.  One possibility may be the removal of a specific provision treating employees as “undertakings” under the revised AUCL.  In fact, I have heard that some NPC legislators are continuing to push for a stand-alone trade secret to further improve upon the revised AUCL.

The Report also points to several research projects undertaken by provincial courts.  Amongst those of interest are: a research project on disclosure of trade secret information in litigation in Jiangsu; a report on using market guidance for damages compensation of Guangdong Province; a report on standards essential patents in Hubei; and a research project of the Beijing IP Court on judicial protection of IP in international competition.

Regarding transparency, the Report notes that the SPC has published all of its cases on the Internet, however similar data is not provided for other sub-SPC courts (p. 16).

In international affairs, the Report notes that the SPC has participated in the discussions on the proposed treaty on recognition and enforcement of foreign civil judgments (p. 17), in the China-European IP dialogue, and has sent people to the annual meeting of INTA, amongst other activities.  No mention is made of US government engagements (p. 17).  This omission may be due to current political sensitivities.  Nonetheless, due to the increasing number of cross-border disputes and the need for better understanding of both our judicial systems, I believe judicial engagement with Chinese courts would continue to be a fruitful enterprise.  Indeed, Berkeley hopes to host a program on cross-border IP litigation with Tsinghua University Law School later this year.

Finally, while we are on the subject of the courts, I commend Susan Finder’s recent blog on how to translate court terminology.   I hope I have not departed too far here from her excellent suggestions!