IP House’s Snapshot of Medical and Health Industry

IP House  has recently published a  Statistical Report on IP Cases in the Medical and Health Industry (December 2017) (Chinese language) covering 391 medical and health industry cases closed from January 1, 2016 to June 30, 2016. Among those cases, 158 were civil cases (67 patent and 91 trademark) and 233 were administrative cases (40 patent and 193 trademark).

As explained in further detail below, this time-limited snapshot of medical and health industry cases shows a relatively low utilization by foreigners of civil infringement remedies in both patent and trademark matters.  Foreigners, including Americans, did actively use judicial review procedures of patent and trademark office decisions.  The cases also show low damage awards for pharma infringement cases despite a high win rate.

Patent

  1. Civil Cases

There was a total of 67 civil patent cases in medical and health industry. Guangdong and Jiangsu were the top 2 provinces with close to 42% of the patent litigation. Among all the civil patent cases, around 74.6% were infringement cases, with the balance involving ownership and contract disputes. Infringement of utility model patents and invention patents were the top two claims of action at 24 and 19 cases respectively.   Amongst invention patents, 14 involved medical devices and 5 involved compound patent claims.

Foreigners were minority plaintiffs in these cases, accounting for only 6 out of 67 civil patent cases.  Only one case involved a US party.   Other countries included Japan (2), Norway (2) and Germany (1).   The foreign plaintiff win rate was 83.3% with average damage of 162,001 RMB, slightly higher than the overall winning rate of   82.1%. This “win rate” is approximately similar to win rates being generally report for patent infringement cases in China as reported in a recent article by Bian Renjun.   First instance (一审) infringement trials on average took took 226 days; second instance infringement actions  (二审) on average took 120 days.

Average damages in these actions was 439,896.2 RMB.   Of these, more than 95% of cases used statutory damage to calculate damages.  Two cases that awarded more than 1 million RMB in damages, which were calculated as lost profits.

The principle reason that plaintiffs lost was that the accused product was deemed “not within the scope of protection.” Invalidity was another reason.

  1. Administrative Cases

There was a total of 40 patent administrative cases in the medical and health industry, involving appeals of decisions of patent office decisions.   US entities were a party in seven of the fourteen foreign administrative cases.  This relatively high proportion of foreign administrative cases follows a pattern in judicial IP actions in China where foreign companies generally enjoy a  higher proportion of cases involving validity than in infringement matters.  Amongst all of these cases, the administrative judgment was vacated by court for 6 cases.

As for review period, action of first instance on average took 446 days, and actions of second instance took on average 248 days. Administrative cases took much longer than civil cases to review.  Amongst the administrative cases 72.5% (29 cases) involved drugs, and 27.5%, (11 cases) involved medical devices.  Furthermore, 33 cases involved invention patents and 7 utility model patents

Trademark

  1. Civil Cases

There was a total of 91 trademark cases, where Jiangxi and Guangxi were the top 2 provinces with most cases.  A majority of these cases involved trademark infringement (88). Plaintiff won 78 cases with a win rate of 85.7%. Trademark civil cases on average took 185 days until the first instance judgment and 106 days for second instance judgment.  Drug and health products constituted 81.8% of these cases, with average damages of 61,412.9 RMB.  All these cases used statutory damages, and only one case involved a foreign party (USA).

The relatively low level of trademark infringement cases may be due in part to the active roles played by SAIC in administrative trademark matters, including their handling of foreign related cases as well as administrative enforcement matters undertaken by CFDA and takedown activities by online etailers.  However, the concentration of cases in Jiangxi and Guangxi is difficult to explain, except perhaps due to inexact reporting procedures.

  1. Administrative Cases

There was a total of 193 trademark administrative cases. Among those cases, 62.2% or 120 cases were brought for review on refusal (驳回复审). Administrative judgements were vacated by court for 49 cases. On average, trademark administrative cases took 266 days for actions of first instance, and 113 days for action for second instance.  Foreign cases accounted for 75 of these administrative trademark cases with the US being the party for the most cases (22 cases), following by Japan and Germany.

In administrative trademark cases, when the applicant had been refused grant of the trademark, the courts primarily ruled on the basis that the same similar trademark was used in the same or similar type of product (87 cases).   Another frequent basis was that a trademark was deceptive, and led to consumer confusion regarding quality and origin.

Implications for the future:

This data, although limited, is suggestive of what a further landscape for pharma patent litigation will be if China institutes a patent linkage system.  To speculate: the data does not suggest that foreigners will rush in to assert infringement of their patents, but rather that foreigners currently play a limited role in infringement litigation.   The high foreign and domestic win rate on infringement matters also suggests that a linkage regime could therefore be very helpful in securing cost effective and timely protection of patent rights, even if this right may not be asserted with great frequency.  Finally, the data also suggests that foreigners appear relatively comfortable in pursuing challenges to administrative action in pharma IP matters, and therefor may ultimately be willing to avail themselves of a patent linkage regime administered by CFDA and the courts. I believe a greater factor in determining how much a linkage system may be utilized may be the development of new, innovative drugs that are patent protected by foreign or domestic entities.

Perhaps the readers of this blog have a different opinion –  we look forward to receiving them.

Written by Mark Cohen with the assistance of Emily Yang.

 

 

 

 

2017 Opens with More Positive Trademark Developments

The SAIC has announced that it has  amended its TM review and examination standards (“Trademark Review and Examination Standards”).  The revised standards, with a date of December 2016, are available here. The revisions incorporate revisions to Articles 19, 50, 15.2, 1and 10 of the Trademark Law.

In addition, the Supreme People’s Court published a judicial interpretation on Certain Issues Related to Trials of Administrative Cases Involving the Grant and Confirmation of Trademark Rights 最高人民法院关于审理商标授权确权行政案件若干问题的规定.  A public comment draft of the JI was circulated as early as 2014; the final version was released at a press conference on January 11, 2017.   The JI clarifies the application of “adverse influence” in Article 10(1)8 and “other improper means” in Article 44(1) of trademark law and provides details on prior rights of Article 32  including copyright, naming right, trade name,  amongst other provisions.   The Financial Times has suggested that the JI is linked to the Qiaodan case , although as the Chinese media as noted, Qiaodan may also be seen as one of a series of cases providing more expansive relief against abusive registrations and recognizing more extensive related rights, such as naming rights and even merchandising rights.  In an unrelated development, the SPC on January 7, 2017 listed the Qiaodan case  as one of the top 10 civil and administrative cases for 2016.

 The 2016 JCCT obligated China to “take further efforts to address bad faith trademark filings”, according to the recently released Joint Fact Sheet. The amended examination guidleines, JI, and related case developments, including the development of case law in IP,  should help implement this commitment. 

Identical vs. Similar Trademarks in Criminal and Civil Adjudication

Both Judge Bao WenkJiong 包文炯 in Zhichanli, and James Luo on his blog, have recently  published  summaries of a 2014 case in Wuxi (无锡滨湖法院(2014)锡滨知刑初字第0002号刑事判决书) involving the definition an “identical” mark under China’s criminal trademark law.

This case raises the important question of the differing roles and standards for civil and criminal prosecution of trademark infringement – an issue that is especially important in light of the many different manners of enforcing IP in China, which also includes an extensive administrative punishment system.

Judge Bao noted that the court held that attention should be paid to avoiding excessive application of the “trademark similarity” standard of civil trademark cases to criminal cases.  More specifically, the case held that a counterfeit “identical trademark” in the criminal law means one that is identical with the registered trademark or not visually different from the registered trademark and therefor is enough to mislead the public.   Where, however, there is a slight difference between the accused counterfeit trademark and the registered trademark, the close similarity is sufficient to cause the relevant public to be confused and it should also be regarded as an “identical trademark.”

The requirement of an “identical trademark” derives from Article 213 of China’s Criminal Code, which provides:

“Whoever, without permission from the owner of a registered trademark, uses a trademark which is identical with the registered trademark on the same kind of commodities shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall also, or shall only, be fined; if the circumstances are especially serious, the offender shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years and shall also be fined.”

A 2004 judicial interpretation on criminal IP matters (关于办理侵犯知识产权刑事案件具体应用法律若干问题的解释 (2004)) further clarified what constituted an “identical trademark” for purposes of China’s criminal IP laws:

“Article 8: An ‘identical trademark’ as provided for in Article 213 of the Criminal Law refers to the same trademark as the counterfeited registered trademark, or one that is substantially visually indistinguishable from the counterfeited registered trademark, and is sufficient to mislead the public.”

“第八条 刑法第二百一十三条规定的“相同的商标”,是指与被假冒的注册商标完全相同,或者与被假冒的注册商标在视觉上基本无差别、足以对公众产生误导的商标.”

Why should a higher degree of similarity of trademarks be required in criminal trademark cases but not for civil cases?    The critical test, to my mind, should be whether the infringement is willful, and not whether a cunning counterfeiter designed a mark that is insufficiently identical but nonetheless potentially confusing to a segment of the consuming population.  From a policy perspective, public criminal enforcement of the trademark laws can and should protect public interests greater than the legitimate trademark itself, including such interests as purchases by innocent consumers, protecting investment in brand creation and deterring brand dilution, and addressing the confusion of third parties who may be harmed by using these products.  These policies suggest that more liberal construction of what constitutes an “identical” trademark could be useful.   Indeed some courts in the United States have used civil standards to determine when a trademark is counterfeit (United States v. Petrosian , 126 F.3d 1232, 1234 (9th Cir. 1997).  Nonethelesss, even if prosecutors declined to prosecute an “identical” trademark case, the rights owner may still be free to bring a civil case under the “similar trademark” civil standard.

The Chinese summary of the case notes that the Jiangsu IP courts, where this case was held, play a role in delineating the role of the civil and criminal IP systems, as these courts have combined civil, criminal and administrative case adjudication in one tribunal.  I hope that these courts can play an even greater role in clarifying addressing the public policy needs behind different standards of IP protection under China’s civil, criminal and administrative enforcement regimes.

E-Commerce Law Up for Public Comment

The National People’s Congress announced this week that it has released a draft of the E-Commerce Law for public comment.  The public comment period began December 27, 2016 with comments due by January 26, 2016.  Although focused on the overall development and regulation of e-commerce, the draft also contains provisions regarding IP protection by platforms and their responsibilities, in order to preserve market order and fair competition 市场秩序与公平竞争.  The draft in Chinese is attached here, with relevant provisions and machine translations below.  I hope to provide more detailed comments later – I am particularly interested in how this draft relates to provisions in the tort law, IP laws and civil laws regarding online liability, as well as how enforcement authority over infringements for online operators will be amended and divided up amongst the various IP agencies if this draft is implemented into law.

Article 53 provides:

第五十三条   电子商务经营主体应当依法保护知识产权,建立知识产权保护规则。电子商务第三方平台明知平台内电子商务经营者侵犯知识产权的,应当依法采取删除、屏蔽、断开链接、终止交易和服务等必要措施。         

Article 53 The electronic commerce business principal operator shall protect intellectual property rights in accordance with the law and establish rules for the protection of intellectual property rights. If the e-commerce operator infringes the intellectual property rights within the platform, it shall take the necessary measures such as deleting, shielding, breaking the link, terminating the transaction and service according to law.

Article 54 provides:

第五十四条   电子商务第三方平台接到知识产权权利人发出的平台内经营者实施知识产权侵权行为通知的,应当及时将该通知转送平台内经营者,并依法采取必要措施。知识产权权利人因通知错误给平台内经营者造成损失的,依法承担民事责任。   

平台内经营者接到转送的通知后,向电子商务第三方平台提交声明保证不存在侵权行为的,电子商务第三方平台应当及时终止所采取的措施,将该经营者的声明转送发出通知的知识产权权利人,并告知该权利人可以向有关行政部门投诉或者向人民法院起诉。   

电子商务第三方平台应当及时公示收到的通知、声明及处理结果.

Article 54 Where a third-party platform for e-commerce receives a notice from a platform operator of intellectual property rights issued by the owner of the platform for intellectual property infringement, it shall promptly transmit the notice to the operators within the platform and take the necessary measures according to law. If the intellectual property right owner causes any loss to the operator of the platform due to the wrong notification, he shall bear civil liability according to law.
If the platform operator submits a declaration to the e-commerce third-party platform to ensure that there is no infringement, the third-party platform shall promptly terminate the measures taken and forward the statement of the operator to the notification Property rights, and inform the right person to the relevant administrative departments of complaints or to the people ‘s court.
E-commerce third-party platform shall promptly publicize the received notice, statement and processing results.

Article 88 provides:

第八十八条   电子商务第三方平台违反本法第五十三条的规定,明知平台内经营者实施侵犯知识产权行为未采取必要措施的,由各级人民政府有关部门责令限期改正;逾期不改正的,责令停业整顿,并处以三万元以上十万元以下的罚款;情节严重的,吊销营业执照,并处以十万元以上五十万元以下的罚款。         

Article 88 If a third-party platform for e-commerce violates the provisions of Article 53 of this Law and knows that the operator of the platform does not take the necessary measures for infringement of intellectual property rights, the relevant departments of the people’s governments at various levels shall order it to make corrections within a prescribed time limit; If the circumstances are serious, the business license shall be revoked and a fine of not less than 100,000 yuan but not more than 500,000 yuan shall be imposed.

 

 

Book Review on Report on Development of Intellectual Property Development in China (2015)

The Report on Development of Intellectual Property Development in China 2015 中国知识产权发展报告 (IP Teaching and Research Center of Renmin University of China / IP Academy of Renmin University) (Tsinghua University Press, 2016) (320 pp., 98 RMB) (http://tup.com.cn/booksCenter/book_06886601.html) (the “Report”), is a bilingual Chinese-English report prepared by Renmin University and commissioned by the Ministry of Education.   The book presents a comprehensive summary of developments and challenges in IP protection and enforcement in China, with a particularly strong focus on legislative developments, the role of national plans, the history of IP in China, government funded R&D, education and training-related issues, and the pressing needs of market and legal reforms.

After a general overview (Part I), where the authors discuss various national plans, and general legislation, such as the Civil Law and the Law to Counter Unfair Competition, the authors discuss patents and innovation (Part II).  The Report notes that quality needs to be improved in life science patents, most of which come from small inventors (such as in TCM).  The report also candidly references critiques of SIPO’s performance (p. 150), as well as the low quality of university patent applications and suggests that there should be additional attention paid to university IP commercialization, including the many restrictions that apply to state-owned assets, a matter that was litigated in the Infineon case here in the United States many years ago.  The report also criticizes unrestricted subsidies and other incentives for patent applications, which has led to “the amount of patent applications to be falsely huge” and has given rise the problem of “rubbish patents.” (p. 163).  Regarding China’s extraordinary growth in patent filings, the authors conclude, as I have often in this blog, that “the motivational role of the market should be strengthened” in lieu of such incentives.

Regarding the proposed Patent Law amendments, the authors also argue that judicial decisions on patent validity should be final and not be subject to a final decision by an administrative agency, and that there should be appropriate limitations on administrative enforcement involving patent infringements (pp. 166-167).  The authors also seek to limit the abusive assertion of unexamined utility models and designs, including by authorizing the courts to consider the abusive assertion of patent rights a matter of unfair competition (p. 173).

In discussing trademarks, the authors similarly note that despite the huge numbers of trademark filings, Chinese companies play an undersized role in lists of global brands.  The authors identify problems in “rush registration of trademarks” involving grabbing a trademark previously used by others, particularly where a mark has international popularity, where there are fictional figures and titles of movies and television hits, and in the case of celebrity names (p. 183).   The authors suggest that where a trademark is not being used, there should be no compensation given to the infringer, as one step to address rush registrations – a practice that apparently is already being used in Shanghai and perhaps other courts.  The authors also suggest that in the case of foreign rights owners, the courts should take into account the popularity of the brand enjoyed outside of China and the subjective malice on the person conducting the registration.   As with low quality patents, the author see a useful role for courts in adjudicating these rush registrations as acts of unfair competition (pp. 186-187).

These themes of addressing proposed legislation, adopting new legislation to new circumstances, more effectively insuring that markets rather than government fiat direct IP commercialization and protection,  and using unfair competition law to address abuse of IP rights play an important role in other chapters of the book, including the chapters on Copyright Law (Part IV), Competition law (Part V), IP protection by the Judiciary (Part VI), IP Education (Part VII), developments in Shenzhen City and Jiangsu Province (Part VIII), and other issues, such as free trade agreements (Part IX).

Overall the authors support the role of the courts as the principle vehicle for adjudicating IP disputes in a market-oriented economy, and that the IP laws should be revised to “attach importance to enhancing the leading and final role of the judicial protection of the intellectual property rights, limit and regulate intellectual property-related administrative enforcement …” (p. 240).  The authors also support the tendency to increase damages on IP disputes (P. 282), the role of specialized IP courts and the case law system, and deficiencies in administrative enforcement reform including problems of coordination among agencies.

In their summary, the authors note that “the sound operation of the IP system is not merely an issue of the IP law; it relies on an improved legal system and environment of the rule of law.  Only with innovation based on the market economy and driven by market interest is it possible to be the lasting, stable fore to drive the socio-economic development.” (pp. 315-316).  The book is a very useful summary of some of the hot issues now facing the Chinese IP system, with a focus on rule of law and market orientation.

I look forward to the 2016 edition.

USPTO Issues Guidance on Unauthorized Trademark Prosecution Practice (In Chinese)

HereThe USPTO recently took the unusual step of addressing the unauthorized practice of trademark law before it by posting up Chinese language websites detailing the legal requirement to represent a client before the Trademark Office and the consequences of such unauthorized practice.

Here is the English version of the PTO’s guidance on registration to practice trademark law, and on applicants and registrants
that are excluded from practice.  Here are the Chinese language versions of the first and second documents.  The Show Cause and Exclusion orders that are linked to the second document demonstrate the extent of the problem and the PTO guidance discusses the consequences of unauthorized practice to rightsholders. 

In one case, a Ms. Emilie Bo of Kunshan, Jiangsu is alleged to been involved in more than 1,000 trademark applications or registrations without being a properly licensed attorney or authorized signatory.  A Ms. Richel lee of Hangzhou is similarly alleged to be associated with more than 350 registrations or applications.  It would be interesting to determine if individuals involved in the unauthorized practice of a large quantity of trademark applications before the United States have also engaged in similar unethical activities, such as trademark squatting, in China.

USPTO’s rules on practicing before it permit both US attorneys and designated signatories (such as officers of a company) to prosecute trademark applications.  Restrictions on the practice of law in China including the specific restrictions that apply to the practice of IP law are discussed in an article I wrote in the Fordham Law Review on international law firms in China (see text at footnotes 18 and 19) and  have generally been more restrictive.  Market access restrictions for lawyers and restrictions on their attending hearings or meetings in conjunction with Chinese counsel have also been the subject of JCCT discussions and outcomes, including in the AML context.

Update November 18, 2016: Here are some of the PTO documents, including two orders to show cause and the exclusion order, discussed above.

 

Jordan/Qiaodan Trademark Case – Translation Now Available Here

Thanks to the hard work of Jessie Zeng 曾 潇 of Tsinghua University Law School, and the support of his professor, former Chief Judge Randall Rader, we now have a translation of the Michael Jordan/Qiaodan case.  Here is a translation of the decision in word formatJessie Zeng has also kindly provided a translation of cited laws in the decision.

On first impression, the case has significant implications for entertainment law, trademark rights for well known foreign individuals in China as well  bad faith issues.  Here are some key points: 

A) The SPC overturned Beijing High Court’s view that required a definitive association between Qiaodan and Michael Jordan, but instead required a stable association.  The court relied heavily on general civil doctrine, including tort law, IP law and advertising law in making its analysis.  The court also noted that, with respect to foreigners,  the key factor is that the relevant public in China has gotten used to calling the foreigner with a Chinese name in translation.

B) The court also admitted a range of evidence to support the fame and reputation of Michael Jordan as proof of bad faith by Qiaodan, including a large number of articles, endorsements and survey data.

C) The court recognized that, with respect to foreign names,  sometimes the public may use a name for the individual that is different from the name the person actively uses, and that this name should be protectable.

D) The court also noted that Qiaodan’s prior investment activities and brand promotion did not give it any “squatter’s rights”, noting that “Qiao Dan Inc.’s operation condition, its efforts in related trademarks’ publicity, use, related trademarks’ awarded prizes and received protection and etc. cannot make the disputed trademark’s registration legitimate.” Qiaodan operates about 6,000 stores in China.  The case is in a sense a warning shot to trademark pirates that a business model based on bad faith is risky in today’s China.

In fact, in the many years that I have followed this case one of my greatest concerns was how much a court would be unwilling to disrupt expectations built around a bad faith business model.  Viewed as a political statement, the SPC is sending a strong and laudable signal by saying that relatively settled expectations based on bad faith registrations will not legitimize these trademark registrations and indeed can end up being quite costly.  Times are changing…

My thanks, once again, to Jessie Zeng! 

(Note: Translation revision: January 6, 2017).