Action Plan for Further Implementation of the National IP Strategy (2014-2020) Approved

According to a Chinese Government website, on  December 29, the State Council reviewed and approved the Action Plan for Further Implementation of the National IP Strategy (2014-2020) (Action Plan). The Outline of the National IP Strategy (NIPS) had been implemented for 6 years.  Premier Li Keqiang, and SIPO Commissioner Shen are quoted in the this brief summary.

Chinese authorities have pointed to three key aspects of the NIPS Action Plan:

A.  First, to “Strive to Build A Strong IPR Country”  (努力建设知识产权强国).

B.  To improve IP utilization and protection (知识产权运用和保护).

C.  Practical new steps are to be announced, including plans to promote the development of IP intensive industries (知识产权密集型产业发展).  This  includes greater coordination amongst various branches of national and local government.  Interestingly, and perhaps of greater concern, it also includes “strengthening patent pilot projects,  joint utilization of patents and collective management of patents… to strengthen the competitive advantages of industries.” (强化专利导航、专利协同运用、专利集群管理等工作…增强产业竞争优势).

Here is how I read the tea leaves on this announcement:

First, the references to China becoming an IP “strong country” , and not merely an IP “big country” is a new concept in the NIPS, and likely reflects the observations and approaches of former Commissioner Tian Lipu.  In fact, many observers believe that too much patenting, particularly patenting of a low quality, can be harmful to innovation. I have often noted in this blog that patent quality is a continuing negative side effect of China’s metric-driven approaches to innovation.  In addition, innovation is largely a local phenomenon – China’s efforts to become a strong innovative country this time will also include programs to make strong IP provinces and cities in China.

Second, the reference to IP utilization directly quotes the negotiated language of the Third Plenum and its commitment to “Strengthen the Utilization and Protection of IP” (加 强知识产权的运用和保护).  This was also something that former Commissioner Tian discussed as a positive outcome of that meeting.

Third, the reference to IP intensive industries is new to China’s strategic planning, and, as noted by Commissioner Shen, reflects the influence of the influential US government  2012 report on Intellectual Property and the US Economy.   Reference is also made by Commissioner Shen to IP intensive industries being low on resource demands and low polluting.

The legislative basis for the National IP Strategy is the China Science and Technology Promotion Law (Dec 2007).  Article 7 of that law provides that China will establish a NIPS, in order to promote innovation, encourage indigenous innovation (激励自主创新), and raise the utilization protection and management of IP.  This 2007 law was famous for codifying the concept of indigenous innovation, which elicited considerable concern at the time over potential discrimination against the foreign technology community.  This Action Plan introduces several new and useful concepts which, if implemented fairly, will benefit foreign and domestic investors alike.

 

 

SPECIALIZED IP COURTS ABOUT TO LAUNCH IN THREE CITIES – AND ARE THEY GOOD FOR FOREIGNERS?

Recent Chinese efforts at developing specialized IP courts and in promoting greater judicial independence suggest that the system may significantly improve in the years ahead. According to press reports, some of these efforts may take final form at the 10th meeting of the 27th Session of the Chairman’s Council of the 12 Session of NPC Standing Committee which will be held on August 25 through 30. At that meeting, the NPC Standing Committee will review the bill submitted by the Supreme People’s Court which is the Draft Resolution of SPC to Establish IPR Courts in Beijing, Shanghai and Guangzhou.

Why specialized IP courts? On August 12, 2014, Deputy Chief Judge Jin Kesheng (金克胜), of the third civil (IPR) division of the Supreme People’s Court, said: “In recently years, the speed of increasing IP court was grow slow smoothly, however, there are more and more the new style cases and complicated cases involving foreign parties so that these cases were difficult to judge and the attention from the public to these cases were enhanced. The number of case filed at the Supreme Court was increasing, especially in patent cases with more complicated technology and huge market value and interest. Additionally, the administrative cases are growing rapidly, the proportion of cases involving the fields of medicine, electronic, telecommunication patents are increasing. The proportion of cases in competition cases involving network technology and new business models is large, business secrets and counterfeiting cases continue to increase, and the Supreme People’s Court is hearing antimonopoly cases for the first time… Therefore, this year the Central Committee of the Party and some related departments did some investigations with regard to establishing a specialized IP courts…”

 China has had specialized IP tribunals (ting 庭), beginning with an initial experiment in 1993 in Beijing. Currently there are about 3,000 judges in sit these tribunals. In addition, there are 560 tribunals throughout the country, including basic, level, intermediate, high court and supreme people’s court tribunals or divisions.   In recent years, China has been experimenting with more basic courts (e.g. Yi Wu People’s Court and Kun Shan People’s Court) hearing IP cases including patent cases. Historically, these tribunals had sometimes been called “No. 3 Civil Tribunals” (e.g. No.3 Civil Tribunal of Shanghai Higher People’s Court, No.3 Civil Tribunal of Pudong District People’s Court), “No. 5 Civil Tribunals” (No.5 Civil Tribunal of Shanghai No.1 Intermediate People’s Court, No.5 Civil Tribunal of Shanghai No.2 Intermediate People’s Court) or IP Tribunals (IP Tribunal of Zhuhai People’s Court). Increasingly these tribunals may combine civil IP jurisdiction with administrative review and criminal jurisdiction (“three in one tribunals”).

 As civil enforcement is the lion’s share of judicial IP litigation, the civil experience of these judges has in a sense helped also to develop the capacity of China’s judiciary to handle criminal and administrative litigation. In addition, by combining civil, criminal and administrative jurisdiction there is a greater likelihood of consistent handling of matters that may cross jurisdictional boundaries such as use of administrative evidence in civil cases, providing civil compensation in criminal matters, referring administrative or civil matters to criminal litigation, or handling patent and trademark validity matters in conjunction with an ongoing civil case. Today all of these matters may be handled in one tribunal.

 What prior work has been done in this area by the Chinese government? While specialized IPR courts have been talked about for some time, institutional improvements in the IPR tribunals were set forth as a national goal in the Outline of the National IP Strategy (2008) which was coordinated by SIPO. The NIPS stated “Studies need to be carried out on establishing special tribunals to handle civil, administrative or criminal cases involving intellectual property”. The SPC took an important step in this direction in July 2009, when it directed the civil IP tribunals in the Beijing No. 1 Intermediate Court to handle validity matters on appeal from China’s patent and trademark offices. (最高人民法院关于专利、商标等授权确权类知识产权行政案件审理分类的规定).

 The impetus to develop specialized IP courts in China took an even greater leap forward back on November 12, 2013, at the Third Plenum Session of Eleventh Communist Party Central Committee (the “Third Plenum”). The Third Plenum set as a goal to “explore the establishment of intellectual property court(s).” Since that time, Beijing, Shanghai, Guangzhou, Nanjing, Chengdu, Zhengzhou had started to apply for establishing the IP court with the Supreme Court. On March 10, 2014, Zhou Qiang(周强), the President of the SPC discussed the work schedule of 2014 and said that the Supreme Court would promote to establish the specialized IP court. On July 9, 2014, the Supreme Court at its press conference outlining judicial reforms for the Supreme Court (2014-2018) discussed establishing Specialized IP courts at places where IP cases are concentrated. Professor Tao Xinliang (陶鑫良) had proposed establishing the IP Intermediate Court at some places where IP cases concentrated to judge the civil IP cases and administrative IP cases of the first instance and the civil IP cases, administrative IP cases of the second instance and some criminal IP cases. (Prof. Tao Xinliang 陶鑫良<Some thoughts on Establishment of Specialized IP Court建立知识产权法院的若干思考> Madame Tao Kaiyuan (陶凯元) , a Vice President of the Supreme Court, and a former Director General of the Guangdong IP Bureau (where she likely worked with Vice Premier Wang Yang(汪洋)) has also said that the SPC should continue to promote three-in-one IP tribunals.

Why might China be adding a new emphasis on a specialized IP court in additional to combined tribunals? A specialized IP court may promote and improve the civil judicial enforcement system by providing more resources, promote the independence of the judiciary, and provide for more training of judges, particularly on technical patent matters. The judges of a specialized IP court might be even more professional and autonomous. They might be better able to handle the administrative cases, criminal cases and civil cases at the same time. Like other specialized courts (e.g maritime, military, railway court), civil/criminal and administrative jurisdiction would also combined, reflecting the subject matter expertise of the judges in that court and likely reducing subject matter and venue conflicts for IP litigation.

 The SPC has not yet published the detailed program for implementation of specialized IP courts. In addition, we have heard little about important areas of the IP tribunals’ jurisdiction which are not as directly related to IP, such as antimonopoly law, unfair competition and licensing, and whether these areas will also remain within the specialized court jurisdiction. We assume they will be, and would actually hope that other IP-related areas could be specifically included (such as consumer protection, substandard products, and geographical indications). However, we have seen nothing to date discussing these areas.

Will a specialized IPR court be good for foreigners? Most foreign rights holders have continuing concern with local protectionism and political influence in IP adjudication. Beijing, which appears to be a focus for development of a specialized IP court is the jurisdiction that appears to hear the most foreign cases. As we have previously blogged, foreign parties are involved in approximately 47% of their administrative appeal docket (which is primarily based in Beijing); or about 1349 cases, nearly equal to the number of infringement cases in 2013 of 1429. Hopefully, giving the Beijing courts more independence and confirming their “three in one” approach will provide greater judicial autonomy for the Beijing courts.

One concern is whether specialized IP courts will indeed function in a more independent manner than IP tribunals. The US experience with our specialized national patent court, the Court of Appeals for the Federal Circuit, has generally been that the CAFC has some impact on correcting local biases at the trial court level, including possible anti-foreign jury bias. This is borne out by data which shows that in general, reversal rates in favor of foreigners is higher at the CAFC than reversal rates in favor of domestic entities.

 U.S.: Patent Infringement Civil Litigation Appellate Win Rates

 

Overall

Foreign Companies

Patent Owner Win Rate

25%

27%

Accused Infringer Win Rate

75%

78%

Source:Paul M. Janicke & LiLan Ren, Who Wins Patent Infringement Cases?, 34 AIPLA Q.J. 1 (2006).

However, according to data from the CIELA database (www.ciela.cn), second instance patent appeals in China generally show an inclination to support the Chinese domestic party against the foreigner.

China : Invention Patent Litigation Data

 

All Plaintiff

Foreign

Domestic

1st instance win rate

73%

78%

72%

2nd instance win rate

52%

40%

52%

Overturn rate

19%

30%

17%

Mean compensation

RMB 439,614

RMB 230,827

RMB 525,939

Medium compensation

RMB 100,000

RMB 125,000

RMB 100,000

Duration

8.2m

11.8m

6.9m

(Courtesy of Tim Smith of Rouse & Co. )

Why might appellate IP courts or tribunals behave differently in each country? First, the CAFC is a national court, not a regional or local court. In this sense, it may be more accountable to national law and reputation than local courts. The CAFC under former Chief Judge Rader had in fact been a leading global proponent of national specialized IP courts. Second, the CAFC has a different jurisdictional role. It does not retry cases, rather it hears appeals. In addition, it hears both patent validity and infringement matters in one court. Moreover, its decisions on matters of law are binding on lower courts. As such, it has more authority in deciding legal matters, and in instructing lower courts on proper adjudication. For example, the CAFC had taken an active role in addressing venue issues at the E.D Texas on patent litigation issues. A third reason is found in China’s political situation. In general, Chinese courts are much less independent than US courts. Local Chinese courts, particularly in remote areas, may also tend to be even less accountable to national law and policy. Second instance Chinese courts may be more susceptible to receiving national policy directives and may therefore be more susceptible to national political influence in adjudicating disputes. Moreover, local statutes enacted by local people congress are at a higher political hierarchy than national administrative rules (部门规章). The local political congresses that enact these statutes also appoint judges. When a second instance case is heard, for example, in a provincial high court, there may in fact be a problem of more direct political influence through political actors in the provincial capital.

The limited data available to date suggests to me that while specialized IP courts have promise, their potential impact will also be affected by national judicial reform efforts and may continue to be constrained by existing limitations in the political independence of the Chinese judicial structure. As Susan Finder has noted in her blog, there are several efforts under way to address some of these systemic issues in the Chinese judicial system, which may also bear promise for Chinese IP adjudication. In sum, specialized IP courts may not be the panacea that foreigners might otherwise seek in minimizing anti-foreign bias in local adjudication in China, but I do believe they offer some hope for a better and stronger judiciary.

 By Mark Cohen, with Ms. Yao Yao of Fordham Law School (LLM Candidate, 2015).

SPC Publishes Revised Judicial Interpretation on Patent Infringement Litigation for Public Comments

On July 16, the Supreme Peoples Court published a public comment draft of proposed revisions to its “Decision of the SPC Regarding Questions of Application of Law in Adjudication of Patent Cases”, 最高人民法院关于审理专利纠纷案件适用法律问题的若干规定. Comments are due by August 15, 2014. Comments may be emailed to: zhuanliyijian@163.com。 The last revision to this document was in 2013, when a provision was inserted to give jurisdiction to designated basic courts to handle patent cases.

Of particular note in this short set of revisions are provisions regarding providing an appraisal report for utility model patents to the court if such a report had been requested by the plaintiff of SIPO, as well as provisions which appear to provide more flexibility in calculation of damages by the court, consistent with the 2008 patent law.

Many of the changes appear self-explanatory – such as those which track changes in relevant statutory provisions.  However, in light of the efforts to amend the patent law, experiments in specialized IP courts, calls for more deterrent damages and more extensive commercialization of IP rights, some additional explanation would be helpful regarding the reasons for any changes in policy that may be implicit in these revisions and any further changes that may be contemplated.

Earlier USG comments on the patent law revisions are found here.

Once I receive a full translation or comparison of prior drafts from any reader, I will post it on line. Readers are encouraged to send in their translations, suggestions and comments. For now, the full Chinese text of the proposed revisions with my own initial bilingual observations are attached.