US-China Security Commission – Readout of Hearing on June 8, 2018

On June 8, 2018, I testified before the US-China Economic and Security Review Commission on “U.S. Tools to Address Chinese Market Distortions.” This was my second time testifying in the past three years.  My written submission is available here.  The written submissions of other speakers, including a video of the proceedings is available through this link.  The presentations of my colleagues were all excellent.

I suggested several non-tariff alternatives for dealing with IP-related concerns with China, and underscored the necessity of developing appropriate domestic government structures to engage China on technology and innovation issues.  For example, the Commission seemed generally supportive of raising the diplomatic rank of USPTO attaches overseas.   I also discussed the importance of data-driven analysis, including use of the case database to look at how foreigners actually fare in the courts.  The Commission seemed skeptical that the data captured some of the more egregious judicial cases of foreign mistreatment, which they viewed as undercutting the credibility of the data that is being generated.  In my written submission, I encouraged the Commission to consider a hearing devoted solely to transparency in the courts.

The President’s recent decision to impose tariffs on Chinese imports in response to Chinese IP practices may render many of suggestions superfluous for now.  Nonetheless, I believe the increasing complexity of China’s IP and innovation environment are issues that cannot be ignored.  As I noted in my written testimony:

“The US experience suggests that innovation flourishes in open ecosystems where there is a free flow of capital, talent and technology. At the same time, the US needs to address mercantilistic practices which not only pose competitive threats to the United States but can also undermine the innovative ecosystems that have driven growth in the US economy, such as exist in Silicon Valley. Any steps taken to reduce collaboration with China or any other country needs to be carefully evaluated about its potential impact on our own technological competitiveness.”

In a separate, but nonetheless related matter, I spoke at the IPBC Global 2018 Conference in San Francisco on June 12 regarding developments in IP monetization in China.  Here’s a good summary of my presentation.  I thought one of the more telling moments in the panel I participated in involved China’s Technology Import/Export Regulations.   One lawyer acknowledged that “the regulations are stupid” and that “what we try to do is have parties to a technology transaction acknowledge that the regulations exist and agree not to enforce them.”  I discussed the regulations as potential “landmines” which could be invoked at a later time by a licensee.  Many licensors appeared to be unaware of these regulations.

JCCT 2014 Winds Up – Joint Fact Sheets Now Released

JCCT2014

The 2014 JCCT was hosted by the US government in Chicago, Illinois this year. Here is a link to the updated English  fact sheet (released Dec. 29) (Chinese:第25届中美商贸联委会联合成果清单)  that is now a joint fact sheet.    Here is a summary of the IP accomplishments of this year’s JCCT according to the joint fact sheet:

One significant outcome involved “technology localization” which is the practice whereby China grants tax preferences based on where IP is owned or R&D is undertaken.  Here is what the fact sheet says about the outcome in this area:

The United States and China commit to ensure that both countries treat intellectual property rights owned or developed in other countries the same as domestically owned or developed intellectual property rights.  ..Both China and the United States confirm that the government is entitled to take measures to encourage enterprises to engage in research and development and the creation and protection of intellectual property rights. 

In my personal estimation, the significance of this outcome is that China committed to not discriminating in awarding tax preferences based on where IP is owned.  To a degree this reflects footnote 3 of the TRIPS Agreement, which prohibits discrimination in “protection” of IP, which includes “matters affecting the use of intellectual property.”

Regarding service invention compensation, which has been important to readers of this blog, the JCCT commitment reflected the accomplishments of the 2014 Innovation Dialogue regarding freedom of contract:

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

Another JCCT outcome involved protection of trade secrets in government regulatory proceedings:

The United States and China confirm that trade secrets submitted to the government in administrative or regulatory proceedings are to be protected from improper disclosure to the public and only disclosed to government officials in connection with their official duties in accordance with law…

The rather “hot” issue of geographical indications was also the subject of an “outcome” involving not extending GI’s to generic terms and establishing procedures to object to and cancel the registration of the GI.

There were also a number of cooperative commitments which will likely be a focus of various bilateral discussions and programs, including on technology licensing, bad faith trademark registrations, judicial best practices, data supplementation for pharmaceutical patents, IP in standards setting, sale of IP-intensive goods and services, and addressing on-line infringement.

The revised joint fact sheet also includes a joint commitment on abusive litigation:

Patent Protection and Bad Faith Litigations

  • The U.S. and China remain committed to promoting a robust intellectual property system that will incentivize future innovation and economic growth in both countries. Both parties are to strengthen cooperation to protect innovators from bad faith litigations, including to hold a joint seminar on IP licensing, so as to create positive conditions for innovation.

 

 

There were also outcomes that weren’t focused on IP but have significant IP implications.  One involved medical device and pharmaceutical market access, where China committed to accelerate approval procedures, which has long been hampered by inadequate resources at China’s Food and Drug Administration.  Another involved clarifying standards for antimonopoly law enforcement, including providing for greater due process and law firm access.  Still another commitment involved collaboration on law firm market access, which certainly affects foreign IP lawyers practicing in China.

In my personal experience, this 25th JCCT might equally be labeled JCCT v. 3.0.  The JCCT has changed to accommodate the growing complexity and importance of US-China trade.  In its first version (1983 to approximately 2001), the JCCT was as often a rather sleepy technical exchange mechanism.  I remember attending an early JCCT dealing with the enforcement of arbitration awards.  Another iteration (v 2.0) was under the leadership of Vice Premier Wu Yi after China’s WTO accession.  The JCCT then became a mechanism for negotiating trade issues with the Vice Premier chairing on the Chinese side and the Secretary of Commerce and US Trade Representative as formal co-chairs, but with an important added role for the Secretary of Agriculture.  Version 3.0 includes the same leadership structure, but with more involvement by industry and the host locality through various programs and symposia, joint fact sheets, and commitments to move negotiations changes in the negotiating calendar, including “a year of continuous work to address important issues facing our two nations.”

The above are my personal, non-official observations.

Simulating the China IPR Enforcement case

For the past few years, I have been conducting moot court simulations of DS/362, the WTO US-China IPR “enforcement case” with students and colleagues at Fordham University and elsewhere. The heart of DS/362 was the US’s argument that, by establishing prosecution and conviction thresholds that were too high, China did not provide an adequate criminal remedy to address commercial scale counterfeiting and piracy. The WTO panel determined that the United States had not made out an adequate case that China did not, in fact, provide such protection.   The U.S. argued that China had not complied with an earlier request, under “Article 63” of the TRIPS Agreement, to provide additional data (including cases) about its IPR enforcement system that would have been germane to the case, while the panel believed that such data would not have been difficult to obtain. Continue reading

Obama’s New Laboratories for IP Enforcement Involving China

The President mentioned China four times in his State of the Union address on January 24, 2012.   Although it’s a bit unclear what his game plan is, it seems that he is looking closely at IP-related claims.  “It’s not right when another country lets our movies, music, and software be pirated,” Obama said:  “Tonight, I’m announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trade practices in countries like China. “

What will be the nature of this Trade Enforcement Unit? During the Bush administration, a “top to bottom” review at the U.S. Trade Representative’s office resulted in the creation of a China trade enforcement unit within USTR that took the lead on China trade cases at the WTO.  Claire Reade, the current Assistant USTR for China was the head of that unit.  Continue reading

Brief recap of “Patents, Trade, and Innovation in China”

Attached is the speech by USPTO Director David Kappos from the joint Fordham/George Washington University conference on IP, innovation and trade issues in China on December 13.   USPTO Director Kappos was introduced by CAFC Chief Judge Rader, himself a veteran of Chinese-IP engagement.  The speech gives a good summary of hte current state of US IP engagement with China from the perspctive of USPTO including the important work of patent cooperation with SIPO which is handled by USPTO directly.

China Transitions: Where People Went in 2011, And Where They Are Headed

Looking back on 2011 and into 2012, it has been a year with considerable transition for individuals following IP issues in China.

There were some important lateral changes in the private sector.   With the Hogan Lovells merger, Doug Clark went to Hong Kong, and Horace Lam left Hogan Lovells for Jones Day in China.  Former Supreme People’s Court IPR Chief Judge, Jiang Zhipei, left the Fangda Partners for King and Wood.  Meanwhile, King and Wood, which already had a large China IP practice, merged with the Australian law firm, Mallesons, which has a Chinese IP practice.  Amongst the more recent retirees from the Chinese government, Xu Chao, of the National Copyright Administration, and Yin Xintian, of the State Intellectual Property Office, both left the government for the Wanhuida law firm.  An Qinghu, the former Director General in charge of the Chinese Trademark Office, also left his parent agency, the State Administration for Industry and Commerce, to work for the Chinese Trademark Association. Continue reading