Category Archives: Trademark

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Further Trade-Responsive IP Legislative Developments May Be In the Works…

“When a stranger lives with you in your land, do not mistreat him. The stranger living with you must be treated as one of your native-born. Love him as yourself, for you were strangers in Egypt.” (Leviticus, Vayikra וַיִּקְרָא) .

He Jing of the Anjie law firm brought to my attention today an article in the April 21 Legal Daily which identifies proposed amendments to the Trademark Law, Anti-Unfair Competition Law and Administrative Licensing law that appear to be responsive to United States concerns over unfair treatment of Americans, “forced technology transfer” and IP protection in the current trade war.   Here is a copy of the Legal Daily article.

While we wait for the actual draft, I will place these proposed changes in context.

In my posting on good faith in IP-related trade issues,  I identified several issues which this legislation attempts to address, including warehousing of bad faith trademark registrations without intent to use; and  the removal of “employee” as a covered party （经营者） in China’s revised trade secret law (Anti Unfair Competition Law) which facilitates bad-faith employee behavior.   Actually, I am relieved that China may now be understanding how tolerance of bad faith behavior has had a wide spread impact on foreign perceptions of China’s willingness to protect IP.  These are important new steps.

Other provisions this legislation attempts to address also appear to address long-standing US concerns, such as requiring the destruction of counterfeit goods or materials and tools used for their manufacture.  The destruction of semi-finished counterfeit goods and materials and tools was a subject of DS-362, the China IP enforcement case, particularly regarding Customs’ disposal of goods outside the channels of commerce and the role of semi-finished goods in calculating criminal thresholds.

Other concerns raised in the legislation have been raised bilaterally.  Bad faith trademark registrations had long been discussed bilaterally.  Protecting confidential information submitted by foreigners in administrative licensing has also been a long-standing concern of the United States and has been the subject of several JCCT discussions.

Although these changes are positive, I am reluctant to enthusiastically endorse them in the absence of corresponding measures ensuring their implementation.  As previously noted, newly amended provisions in the new Foreign Investment Law prohibiting forced technology transfer are likely to have little impact absent effective complaint and legal challenge procedures, such as the creation of a foreign investment ombudsman and/or appeals to the newly established IP court.  The inclusion of a non-discrimination position in administrative licensing procedures is also welcome news, although it may be similarly difficult to monitor and enforce.

China’s existing trademark law shows the limitations of forcing changes in behavior through legislation.  The trademark law and civil law have had provisions requiring “good faith” behavior, yet there has been little demonstrable impact on the flood of bad faith applications, which had increased to 7.3 million applications in 2018.  Chinese-origin bad faith and fraudulent applications are also causing USPTO to revise its own rules regarding pro se trademark applications from overseas.

As other examples, providing for treble or quintuple damages in patent or trademark proceedings is only useful in those still rare proceedings where statutory damages are not being used to calculate damages.  Similarly, the burden of proof reversals in IP cases, such as trade secrets can be useful but only if they are appropriately and effectively utilized and if motion practice in the courts is observable through online publication. Increasing penalties in administrative trade secret cases sound good on paper, but foreigners little use administrative trade secret enforcement proceedings.  Such proceedings have traditionally been an IP enforcement backwater.  According to the 2011 SAIC Yearbook (p. 855), there were only 57 reported administrative trade secret cases in that year, with an average 77,543 RMB average value and only 1,430,000 RMB (less than five thousand dollars) in fines.  The greatest focus of these cases were individuals, as 26 cases involved natural persons.  The data suggests to me that these cases largely involve employer/employee disputes over trade secret misappropriation, which should be resolvable in the courts.  Perhaps even more striking was the 35% decline in criminal trade secret prosecutions in 2017 to only 26 cases, which was also accompanied by a significant decline in criminal IP cases generally since 2012.   To address tolerance of trade secret theft (and IP infringement) by Chinese society, the most effective approach will be a commitment to criminal trade secret enforcement and an even greater commitment to civil remedies.  The proposed legislation only addresses part of this need.

Substantive changes can only be as effective as they can be monitored.  With respect to changes in substantive trademark and trade secret law, it would be especially useful if the full court dockets and more final cases were published.  If the data cannot be observed, it cannot be monitored for compliance.

While these legislative developments are underway, there is also word that the State Council continues to solicit opinions from the foreign business community on how IP issues are handled on their behalf.  This may also lead to welcome news.

There have also been two separate, non-IPR developments, which may have some bearing on the negotiations over the resolution of the trade war.  According to Bloomberg, the European Union is said to have won a dispute brought by China at the WTO seeking recognition of China’s market economy status (“MES”).    A similar case is pending involving the United States.  The lessons from these cases for IP should be that both the US and the EU should encourage more comprehensive and systemic treatment by China of IP as a private right if China is ever to achieve full MES.

In another development, a WTO panel ruled in favor of Russia in a dispute brought by Ukraine that the “national security” exception afforded by the WTO was not completely self-judging. The case could be read as a warning that the United States does not have unbridled discretion in deciding what constitutes a threat to its national security.  Taken together both cases affirm the WTO’s desire to remain relevant to changing circumstances in China and a changed perspective on international trade of the United States.

I wish everyone a happy Passover, Easter or spring holiday.

Buddha

 

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Upcoming Program on Fashion and IP Law

I will be speaking on February 20, 2019 at Berkeley Law at 12:50 in a Fashion and IP discussion and screening with my former Fordham colleague Prof. Susan Scafidi. We will be screening the recent film Fashion and IP.

The program is free and open to the public.

Fashion and IP Poster - Feb. 20th (1)

 

Here’s a report from last year  of the Council of Fashion Designers of America on the problem of bad faith registrations of trademarks in China which discusses the pervasiveness of the problem, including the costs imposed on small and medium enterprise members, as well as the impact of serial squatters.

This report further underscores the importance of addressing tolerance of bad faith activities in China’s IP regime in current bilateral trade discussions as well as the need to recognize the significant improvements that are being made that have begun to address them.  Amongst the many significant cases addressing bad faith registrations in the clothing sector was the Michael Jordan case in 2016, which was based in part on naming rights and was reported here.  Another significant case from last year involving protection of trademarks and design elements that has significance for the fashion industry was Bayer v. Li Qing, which involved pirating of a Bayer design for its Coppertone lotions for pirate registrations, and Bayer’s assertions of a copyright interest in those designs to defeat the pirate’s assertions of trademark infringement in a declaratory judgment action involving the anti-unfair competition law, trademark and copyright laws.  The case was also notable as the court did not suspend its decisions pending the outcome of trademark invalidity decisions.

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A Statistical Snapshot of IP Prosecution, Admin. Enforcement and Monetization for 2018

As reported by zhichanli, CNIPA (the new agency formed from SIPO, SAIC and AQSIQ’s – IP authorities within the State Administration for Market Regulation) held a news conference on January 10 to report on statistical developments for 2018.  Here are some of the highlights:

Explosive Patent Growth Continues: 1,542,5000 invention patent applications were received by CNIPA, an increase from 2017 when it was 1,381,594.  432,000 patents were granted.  Of these 346,000 were domestic patent applications (2017: 326,970).  This leaves 86,000 foreign applications for 2018 (2017: 93,174).  There was therefore an increase of  5.8% to 19,030 in Chinese domestic patent grants in 2018, while foreign grants appear to have dropped by 7.7% to 7,174.  Any drop in a growing economy and IP system can be indicative of a problem of some type.

In total 93.3% of the domestic invention patents were service inventions, which is one indicator of possibly increasing quality.    Huawei remained the lead domestic filer with 3,369 invention patent applications.

CNIPA had a busy year examining 808,000 invention patents, 1,874,000 utility model patents (an increase from 1,687,593), and 667,000 design patents (an increase from 420,144).  The PRB heard 38,000 cases, resolved 28,000 and invalidated 5,000 patents.

Comparative data on 2017 is drawn from this report.

Trademarks Too, on Overdrive: CNIPA received 7,337,1000 trademark applications (2017: 5,748,00) and registered 5,000,7000.  Of these, 4,797,000 were domestic applicants.  In aggregate, there were 18,049,000 trademarks registered in China (2017: 14,920,000).  The good news is that the rapid growth in TM applications is slowing.  In 2017, there had been a year-on-year increase of 55.7% in trademark applications. In 2018, the increase was “only” 31.8%.

Patent Administrative Enforcement Continues to Be the Focus:  CNIPA reported 77,000 administrative patent cases, with an increase of 15.9% over the previous year.  35,000 cases involved patents disputes, of which 34,000 involved infringement (an increase of 22.8%).  43,000 cases involved counterfeit patents, with an increase of 10.9%.  There were also 31,000 cases involving illegal trademark activities.  This was an increase from approximately 30,000 the year before, which was itself a decrease of 5.1% from the prior year.  The apparent administrative enforcement realignment to patents thus continues, despite recent moves to improve the civil patent system, including the establishment of a specialized IP court at the SPC level, and the relatively high historic utilization of the administrative trademark system by foreigners.

Another odd development: 2018 marked the launch of the first administrative case involving infringement of a registered semiconductor layout design.

TM’s Remain Number 1 in Geographical Indications: There were 67 sui generis GI registrations approved, presumably under the former AQSIQ system, and 961 GI trademarks registered.   The trademark-based GI system thus appears to be occupying a dominant role.

Cross-border Trade In IP – is it Growing:  CNIPA also reported that “usage fees” for IP rights in cross border trade increased to 35 billion USD.  Comparative data to prior years and breakout data with individual countries would be especially useful, in order to do year-on-year comparisons and to also compare with US data on licensing revenue.  As reported in an earlier blog, according to official Chinese statistics for 2013, technology import contracts into China were reported at 41 billion dollars, with patent licensing contracts constituting 15.4% of that total.  I don’t have comprehensive data to make even preliminary comparisons at this time – and such data would be highly useful.

Summary: Altogether, the report shows a rapidly growing huge IP system, with active government involvement, encouragement and planning.  The report also suggests that there may be a diminishing foreign role, relative and/or absolute, in certain areas.  Finally, this report is the first hint of how the combined CNIPA may report on its joint activities in patents, trademarks, semiconductor layout designs, GI’s and administrative enforcement.  Additional data is usually released around IP Week of each year (April 26).

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Trade and Peace on Earth: Part 2

pendency

In the first part of this blog, I talked about unilateral steps that the United States and China have been taking during the ‘trade war’ to address concerns regarding forced tech transfer.  In this section I look at bilateral steps that can be taken.   I begin by looking at what the US and China should not do (“Do No Harm”), and then I focus on 5 areas for legislative reform:  trade secrets, licensing, good faith, patents and litigation. I conclude with confidence building steps.

Do No Harm:

There are some bilateral steps taken from playbooks of the past that China and the US should not do:

  1. Political campaigns, particularly to address patent or trade secret infringement. These actions are great for politicians, but they offer no prospect of durable relief.
  2. Accepting Chinese political statements or enactment of normative documents (inferior to State Council “regulations” 法规） that have no binding effect.
  3. Permitting two different fact sheets in Chinese and English to emerge from discussions – Diplomatic discussions should not be a “Rashomon” (羅生門) (see picture below) –  subjective explanations of a common experience.  We have already  differing interpretations of recent negotiations.  For a formal document, that generally means that an agreement needs to be reached several days before a due date in order to ensure there is a harmonized text.
  4. Entering into an agreement that is not verifiable or that the US government doesn’t have the resources to verify.

In his June 9, 2010 testimony  before the Congressional Security Commission, USTR’s Lighthizer, then a private attorney, noted that “China’s commitment to the rule of law is very much in doubt, and the U.S. government continues to express major concerns about China’s failure to respect  U.S. IPR.”  Given the investments to date in effecting change in China, I hope that USTR seeks durable legal changes that have too often been atypical.

The prognosis, however, is not positive.  Willingness to “horse trade” ZTE sanctions and Huawei extradition for trade concessions is one indication of US willingness to bend its rules.  Similarly, Xi Jinping apparently suggested at Buenos Aires that he would approve the NXP merger with Qualcomm at this time.  Many countries, including the US have extended  bilateral science and technology cooperation agreements with China without necessary legal changes to China’s licensing regime in place that would definitively facilitate sharing of improvements between the countries.  The administration’s reluctance to bring trade cases involving IP against China is another sign that negotiation, rather than durable legal changes, may become the dominant means of resolving the current impasse.  However, if we accept extra-legal commitments from China, how can we expect China to make structural changes in accordance with rule of law?

Nonetheless, it isn’t too hard to develop a range of possible legal outcomes that would help address US concerns over the IP issues identified in the Section 301 Report, provided they are carefully monitored.  Here is my initial positive list:

Trade Secrets:

China adopts a unified, stand-alone trade secret law.  This law would address the problem of scattered trade secret laws, insure that criminal trade secret cases are prosecuted, and that employees are treated as subject of trade secret protection and as actors in trade secret infringement, provide appropriate burden of proof reversals (e.g., for “inevitable disclosure” or in proving aspects of misappropriation), establish punitive damages, provide for referral mechanisms from administrative or civil proceedings to the courts, etc.  China previously rejected the idea of a stand-alone law in revising its current Anti-Unfair Competition Law, yet many leading Chinese IP authorities still consider it to be a useful concept.

China might also follow recent Korean legislative practice criminalizing overseas trade secret misappropriation with the intention to benefit a  domestic entity, and imposing aggravated penalties in such circumstances.  Such a provision, if enforced and monitored, could help address US concerns about Chinese indifference to overseas trade secret thefts, as well as set the stage for greater cooperation in transborder trade secret theft.

Technology import/Export Regulations and Licensing:

The Chinese government is already seeking to revise the Catalogue of Foreign Investment in China,  and is considering a Foreign Investment Law to provide greater protections against forced technology transfer, including, hopefully, provisions regarding Joint Venture ownership of foreign licensed technologies.  These positive steps are still not enough, due to pervasive national and local incentives in China at this time to acquire new technologies and the difficulties in tracking forced technology transfer.  As one additional step, China should vest jurisdiction in disputes over such forced technology transfer in the newly established circuit IP tribunal of the Supreme Peoples Court, in order to insure a consistent, high-level focus and opportunity for redress, including expanding its jurisdiction over decisions to approve or deny joint venture registrations.

China has also shown no interest to date in revising the Administration of Technology Import/Export Regulations (TIER).  Chinese intransigence in this area is harmful to China.  Until China amends its law, I suggest that the US consider enacting legislation imposing reciprocal treatment on Chinese licensors of technology to the United States, as ITIF has also suggested.

I also encourage formation of a bilateral non-governmental commission (“Bilateral Commission”) to review progress in forced technology transfers.  If necessary, the US could reimpose sanctions if sufficient progress is not made.  This Commission should also require that China regularly publish reliable licensing data on the quantity of legitimate technology transfer occurring between China and other countries, including technology transferred as part of a joint venture formation.  This information could support better data-driven discussions on technology flows between China and other countries.

Patents:

China’s patent law reform offers the possibility for concrete changes that should not be missed.  Of particular concern, is the absence of a patent linkage regime in the current draft.  USTR might consider requiring China to make necessary changes in its patent and food and drug laws to fully implement a modern pharmaceutical patent linkage regime, including data exclusivity and patent term restoration.

The Section 301 report also hardly addressed potential issues involving discriminatory treatment in patent prosecution, such as has been alleged from time to time in China.  As examples, low rate of patent grants in pharmaceuticals, and disparate treatment in granting of SEPS have been the subject of academic and industry concern.  Consideration of discriminatory treatment, or lack thereof, should be the focus of any future collaboration between the US and China (such as my proposed Bilateral Commission).

This issue of bias need not be “tip-toed” around.  China fired what was likely the first salvo when it alleged unfair treatment by USPTO regarding an IWNCOMM patent application at the USPTO during a JCCT meeting (a “Rashomon” meeting, where there was a  different U.S. outcome sheet).  USPTO data, however, generally shows that Chinese patent applications in the US are treated as well if not better than US applications, according to my former colleague Larry Lian (see, e.g.,  slide 14 above and the accompanying deck).  China has not produced similar data on American applications in China or refuted the research to date in this area.

The United States and other countries might also look at temporal studies to see if there is any link between changing industrial policies and behavior of China’s patent office towards foreigners.  One promising area of research that one of my students undertook in my Chinese IP class this year suggests that there could be temporal differences in patenting behavior over a multi-year period: as China increasingly focuses on national policies to stimulate indigenous innovation, bias rates may be affected.

The US should also push China to reform its metrics driven approach to patent filings, which wastes resources and distorts markets.

Good Faith/Bad Faith:

One of the discrete trends in China’s domestic IP environment is an increasing focus on the role of good faith / bad faith in a range of IP-related activities.  Elevating the legal consequences of bad faith actions could lead to structural changes in China’s IP regime.  Good faith has been an increasing factor in dealing with bad faith trademark registrations, in Guangdong IP court guidance on SEP negotiations, as well as in trust-losing patent behavior in the recent NDRC MOU providing for coordinated interagency action involving patenting behaviors, and will likely play a part in consideration of punitive damages for patent infringement in the proposed patent law reforms.  It could be extended further to impose a duty of candor on patent and trademark applications, provide for deterrent penalties against frivolous IP litigation, address contempt of court, etc.  Despite my concerns regarding the social credit system, it can also be tasked to monitor bad faith behavior in IP and non-IP related areas, to support claims for enhanced damages or referrals to criminal prosecution.  The courts can take an initial look at this area across a range of judicial sectors.

Litigation:

China’s efforts to publish cases and increase transparency over the past several years are laudable, but the work is not complete and confidence in the judicial system thereby suffers.  The courts should insure that, wherever possible, all cases are published.  Cases involving national or trade secrets could be expunged of confidential information but otherwise be made public.  The current data on trade secret theft is especially incomplete.  Complaints and other motion papers, including dismissals due to settlements, should be made available to the public, along with preliminary and interim injunctions.   Generally speaking,  China’s transparency efforts are vulnerable to claims of selection bias, which undercut the utility of these efforts for comprehensive trade negotiation purposes.  Transparency has the potential to create and support structural change, and it should be exploited for that purpose.

Confidence Rebuilding:

Assuming that the US and China can get past this 90 day milestone, efforts to improve the environment for high tech also need to be established  There were some efforts underway in the Obama administration that can create incentives for improvement in China’s IP regime (e.g., accession to the TPP), and positive environments for technology collaboration (e.g., the US-Clean Energy Research Center).  There is a tremendous upward potential for collaboration between the US and China if the right frameworks can be developed.

One thing is clear: real accomplishments, not conferences and dialogues, are needed.  As I often reminded my Chinese colleagues over the years, reform in China should not be an entirely self-serving process. The world needs better scientific collaboration to address many of the looming global challenges we face.  If China plays its cards correctly it can emerge as a balanced global stakeholder and welcome partner in innovation.  Otherwise, I fear that the trend could be ever downward.

January 2， 2019 Update：  A translation of the draft Foreign Investment Law, which is now open for public comment is available at the NPCObserver website.

(Note: Please feel free to add your suggestions!  Also, I am indebted in this blog to the work of my students in my Chinese IP class at Berkeley this year, many of whom prepared papers on some of the suggestions in this blog).

Movie poster for Rashomon, below:

rashomon

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A Potpourri of AIPLA Legislative Comments — And Other Developments

potpourri

The American Intellectual Property Law Association has once again made its comments on proposed changes to Chinese IP legislation (laws, regulations, rules, examination guidelines,  judicial interpretations, etc. ) available to this blog.

Attached are the AIPLA’s response to the request for comments to revision of the trademark law in China (商标法修改公开征集意见) first published by SAIC.  SAIC is now a part of SAMR – the State Administration for Market Regulation. It had published a public solicitation of ideas for revising the trademark law on April 2, 2018, with a due date for comments of July 31, 2018.  AIPLA’s comments primarily focus on providing clarifying and strengthening legislation regarding bad faith trademark applications and registrations.

AIPLA has also commented on the proposed patent validity rules  of the SPC on administrative patent litigation (最高人民法院关于审理专利授权 确权行政案件若干问题的规定(公开征求意见稿)).  This judicial interpretation was previously discussed in this blog, with a translation by the Anjie law firm.  Additionally, here  is the Chinese version of these comments.

Finally, AIPLA has commented on the special approval procedure for innovative medica devices (创新医疗设备特别批准程序（修订稿)) which was first published for public comment on May 7, with a closing date of June 15.   Here is a text of the draft approval procedures in Chinese.

In a related legislative development, the recent dismissal of party secretary Bi Jinquan of the SAMR due the tainted vaccine scandal may also impact reforms that BI had spearheaded, which included pharma-related IP reforms (patent linkage, regulatory data protection, etc).   Commissioner Bi formerly served as the leader of China’s Food and Drug Administration.  An August 20, 2018 notice of the State Council  (no. 83) on deepening reform in China’s medical sector ominously omits any mention of patents or IP reform.  国务院办公厅关于印发深化医药卫生体制改革2018年下半年重点工作任务的通知, (国办发〔2018〕83号.  The next place where we might see the continued life in these reforms is in the proposed revisions to China’s patent law, which the National People’s Congress had tabled for completion by the end of 2018 as noted in its 2018 workplan  (全国人大常委会2018年工作要点).  A first draft of the revised patent law is needed as early as late August/early September 2018 in order to meet the NPC’s deadline.  One much anticipated pharma-related concern in the new draft, which would also support China’s efforts to develop both an innovative and high quality pharma sector, is incorporation of “artificial infringement” by which a request for regulatory approval would be deemed an infringing act in order to support a patent linkage regime.

 

Note: The above photo by Unknown Author is licensed under CC BY-NC-ND

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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!

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April 24 – May 7, 2018 Summary

1.NPC Standing Committee Releases 2018 Legislative Plan. The NPC Standing Committee (NPCSC) on Friday released its annual legislative plan for 2018. As usual, the plan is divided into two sections—the first listing specific legislative projects slated for discussion at the NPCSC’s remaining five sessions in 2018, and second setting forth general guiding principles for its legislative work this year. The plan divides the legislative projects into three categories: (1) those for continued deliberation (that is, those carried over from 2017); (2) those for initial deliberation (that is, bills first submitted in 2018); and (3) preparatory projects.

Below is a list of laws and amendments that implicate IP matters:

E-commerce Law 电子商务法: passed under initial deliberation and is set for continued deliberation. December 2016 draft, October 2017 draft. 

Patent Law (Revision) 专利法(修订): set for initial deliberation in June. Draft released for public comments by the State Council in December 2015.  There have been several blogs previously on the drafting process and controversial issues.

Foreign Investment Law 外商投资法: set for initial deliberation in December. Draft released by the State Council for public comments in January 2015

The 2018 legislative plan also includes a list of preparatory projects, most of which won’t be submitted for deliberation this year. That list includes an Atomic Energy Law and Export Control Law and revision/amendments to Copyright Law.

2. New initiatives released by SIPO on World Intellectual Property Day. During a press conference for the World Intellectual Property Day, Shen Changyu, head of SIPO, made remarks of new initiatives planned by SIPO. According Shen, China is revising its Patent Law and establishing a punitive damages system for intellectual property infringement to increase the cost of illegal behavior and create a deterrent effect. In addition, China pledged to establish more intellectual property protection centers, in addition to the 19 intellectual property protection centers established nationwide. Meanwhile, SIPO planned to release a working guide for Anti-Monopoly law in the field of intellectual property. Should SIPO move ahead with this project, it may be an indication of an increased role for it in the newly reorganized government structure which it shares with China’s antitrust agencies.

As reported before, SIPO and other IP agencies are under reorganization. According to Shen, after the reorganization, SIPO will become the world’s biggest IP office. The new office will have 16000 staff, with 11000 patent examiners and more than 1500 trademark examiners.

3. China’s top court rules in favor of Dior in trademark case. In a judgement on World Intellectual Property day, China’s Supreme Court ruled in favor of Dior in a suit against the Trademark Review and Adjudication Board after a multi-year court battle. The board wrongly rejected a 2015 application by Dior to register a trademark of its tear drop shaped J’adore perfume bottle, the top court said in a statement on its website. Alert blog readers may remember that the Michael Jordan trademark case was similarly held on World IP Day in 2016.

4. Shanghai seizes U.S.-made microchip equipment over IPR. At the start of 2018, Chinese company Advanced Micro-Fabrication Equipment Inc (AMEC) learned that U.S. equipment suspected of infringing the company’s patents would arrive at Shanghai Pudong International Airport. Shanghai customs authorities then seized the suspected products, Jiefang Daily reported on Friday, citing customs officers. Customs suspended the clearance of the products worth 34 million yuan ($5.36 million). With Customs’ involvement, the U.S. company, whose name was not revealed, negotiated with AMEC. The two sides agreed to settle the dispute by offering cross licenses to each other. Chinese media reported that the case is a rare but important example of using Chinese Customs remedies to address imports of products infringing a Chinese patent to effect a cross-license.  The case appears to be a settlement of a long running dispute between Veeco Instruments of Plainview, NY and AMEC, which was reported in the western press, including the trade press, and also involved invalidity challenges, US court cases and an infringement law suit in Fujian province.   According to the western press on December 7, 2017 the Fujian High Court had granted AMEC’s motion for an injunction prohibiting Veeco Shanghai from importing, manufacturing, selling or offering for sale to any third party infringing an AMEC patent in China (revised June 4, 2018).

Other:

A summary of SPC’s IPR Report 2017 was released, but the whole report will be released in hard copy soon. Here’s the link to the summary.