RIP VAN WINKLE RETURNS FOR THE TRADE WAR

A Modern Illustrated Political Fable By an Anonymous Folklorist

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Rip Van Winkle VIII, Esq, the great US government intellectual property and trade lawyer and descendant of the Hudson Valley Van Winkles,  fell asleep on December 12, 2001, the day after China joined the WTO.  He woke up earlier this year to find a changed country, engaged in a trade war that undercut all his prior hard work.   He was disappointed at how the US had handled the legacy of China engagement that marked the period before WTO accession.  He had a Yogi Berra-like moment of “Deja-vu all over again “, and felt he had to reach out to the American people to tell his story.  These are my interviews with him.

I asked Rip about the 301 report on Chinese forced technology transfer. “You mean, the report that launched the trade war”, he remarked with a wry smile.  He said that he was surprised by the tactics that the President pursued.   The US “pressured China without imposing tariff sanctions in the 1990s and with considerable success.  For example, China agreed to have a trade secret law back in 1995 or so.  No administration in the 1990s had to pull the tariff trigger on China, although we had a clearer legal basis in international law to do so since China was not yet a WTO member.  We also had the statutory authority to revoke MFN on human rights issues but didn’t do that either.  Now our imposing these sanctions risk dismantling the global trading system.  I understand the frustration about China’s WTO compliance, but I don’t understand why we haven’t more aggressively pursued WTO remedies.”

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I asked Rip, “Was it because the issue back in your day was one of China’s compliance with the laws, rather than enforcing than the laws as written? After all, it is hard to bring a case on how adequately a country is enforcing its laws.  There are lots of flexibilities built into the TRIPS Agreement.”

Rip pensively pulled on his long Van Winkle beard and noted ”Back then the efforts were not simply legislative.  China’s enforcement of IP was weak too, and some progress was made: for example, there was a special Customs regime on exports, which is TRIPS+, which survives to this day.  Specialized IP tribunals were also something that he had worked on ‘back in the day.’  There were also a number of special campaigns, task forces, and other efforts.   In fact, people had even been complaining that some of the enforcement had gotten too tough when China launched a ‘strike-hard’ campaign against some of this activity.”

“But, “ I added “today we have high tech issues in addition to counterfeiting and piracy issues.  We have AI, and IOT, and 5G, and genetic engineering, online businesses, plus all the counterfeiting and fake goods.  These are new issues!”

“All true,” said Rip, “and you have other new things that are also fake,” Rip smiled, “fake news and–,” he added sarcastically, “this President.”  Rip appeared puzzled that a reality TV show actor could also become President.

“But I am not surprised by all the fake goods originating from China that are sold throughout the world,”  he continued.  “After all, that was the problem with regional trade in the 1990s.  It was to be anticipated – that was the reason we asked China to control infringing exports in the ’90s. “

“As for technology, we had those challenges as well.  There was the ‘great subsidy’ compilation CD exported from China that infringed on multiple business software copyright owners,”  Rip mused. “That was a high-tech problem.  We found solutions working in Taiwan and China.  And what about the submarine they discovered in Hong Kong to haul counterfeit DVD’s? That was also a high-tech problem.”

Rip pulled out a beaten photo of a diagram of the submarine that was captured by Customs authorities in Macau:

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Photo by Mark Cohen from an original diagram at Macau Customs.

“I don’t get it though” Rip snorted. “Why did the US file a WTO case in 2007 against China’s export of counterfeit goods, DS362?  We all knew that this was not a WTO issue, but one that depended on external pressure on China.  China was only obligated to have Customs remedies on imports. Yet we haven’t yet filed a case against how ineffective China’s IP remedies are, which is a specific WTO requirement?  I expected more, from China’s carefully crafted WTO accession package and from the US and the WTO itself.  We worked so hard on that package.”

“As best we could, we foresaw many of these problems in the 1990s and created the roadmap for legal strategies.  Sure, it wasn’t perfect.  It was a crystal ball exercise.  But look at China’s WTO commitments.  China’s obligations had no grace period.  There was a special safeguard measure.  China was subject to a range of extra commitments as a non-market economy under our dumping law.  China was also subject to extensive new transparency obligations.  Moreover, China’s trade regime was subject to a 15-year annual review.  Its IP regime should now be the subject of WTO cases.”

Rip shook his head: “Only a few weeks after WTO accession in 2001, China implemented a discriminatory technology licensing regime called the Technology Import/Export Regulations, which discriminated against foreigners.   Why did we wait until March 23, 2018 for the US to file a  case against this regulation?  Who else was asleep when I went to sleep? Did someone put sleeping pills in the water?”

It is true, as the press reported, that when Donald Trump met Rip Van Winkle, they both agreed that nothing had changed on China IP.  However, the media once again generated some fake news around that meeting.   Rip disagreed that Trump’s strategy made sense, or that the US should indeed feel like it had exhausted its patience.  After the meeting, Trump tweeted that “Rip Van Winkle is a BAD man”.

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That was indeed their only meeting.  Trump referred Rip’s personnel dossier to OPM for further investigation to see if he had been collecting salary during the past 18 years when he should have been on leave without pay or whether he was simply AWOL.

After the incident with Trump, Rip went to Beijing.  He noticed that things had changed.  The street vendors of DVD’s, counterfeit Beanie Babies, and all another manner of fake goods were largely gone.  When he talked to average Beijingers, they seemed to know a great deal about patents, trademarks, and copyrights – perhaps more than the average American.  He was shocked to see that the patent and trademark offices had grown to the largest in the world.  He was pleased to see that China had a system of multiple intellectual property courts, with specialized judges.  He met many American-trained lawyers working in Chinese law firms, in companies, and in government.  This looked very much like the kind of system that the US might have imagined for China back when he was negotiating.

However, there were other ominous changes for the US.  The Chinese patent office was now several times the size of the US patent office, as was the Chinese trademark office.  Moreover, domestic filers dominated in both those offices, as they did in bringing suits to the courts.  In areas such as information technologies, where the US was once the dominant manufacturer and developer, the leading role had been ceded to China.  China now produced 25 to 30% of the world high tech products, supplanting both the US and the EU.   During a southern excursion on this trip, he saw that Shenzhen had grown to a high-tech mecca, well beyond even his dreams.

shenzhen

Rip was amazed to see that the Chinese IP system by some measures at out-paced the US.  The Chinese courts now handled about 280,000 IP cases in 2018, up 40% from 2017, while US domestic patent cases were declining.  Chinese courts handled over 100 times more copyright cases than US courts.  It was also an IP system that didn’t merely serve big state-owned companies.  The percentage of individual filers of patents as well as patent litigants in the Chinese courts were higher than in the US.  Moreover, in areas like software, business method patents and genetic patents, where the US had a lead “back in the day,” the Supreme Court of the US had made it harder to obtain patent rights.  China, however, was making it easier.  And this eBay case decided by the US Supreme Court in 2006 – why did the US decide to make it harder to get an injunction for an IP dispute, thereby weakening the system even further?”

Rip wondered, was there some kind of reverse alchemy at work – were we turning our IP system of “gold” into one of “lead”, and China was now getting the magic touch?alchemy

“It isn’t quite that simple” tweeted Mr. Trump when he heard of Rip’s reporting on the matter.  “We are pursuing structural barriers!!!”

“Well, we had the Structural Impediments Initiative with Japan back when I was in the government– sounds pretty similar to me.” Rip reported, closing an op-ed he wrote by asking the President: “Have you been asleep too?”

Rip thought that it was not surprising that China would benefit from being a low-cost manufacturer and joining the WTO.  The expectation was that China would also continue to make necessary economic reforms, and the US would monitor these reforms.  After the Tiananmen incident, the Western world was also greatly concerned about China’s commitment to liberal political and economic values.  The current regime in China may be pushing back on the legacy of Deng Xiaoping, but that should have made a WTO case that much easier today, by showing that China had reneged on some of its fundamental WTO commitments to bring about economic reform and institute certain minimum rule of law and transparency obligations.  These kinds of cases would also elicit support from many in China and from our trading partners.”

“Why didn’t you learn your lessons?  Is that the reason you brought back Lighthizer to USTR?  I hadn’t seen Bob for decades.  Did he fall asleep for even longer than me, maybe thirty years?” Rip joked, half-heartedly.

”The Japanese tried to persuade us that the reason there was a trade deficit with Japan was because of our lack of knowledge of their system.  Japanese snow, they said, was different from US snow so we couldn’t sell our skis there.  We all know however that this was a sorry excuse for market barriers set up to protect their industries.“

Mtfuji

Japanese snow by Mount Fuji.  Does it look different?

“With China, we knew there were a host of other, more problematic non-market barriers including possible security issues with Taiwan.   When we worked on the TRIPS Agreement,” Rip recalled, “we made it pretty clear that this was an agreement for market economies.  There was a transition period in the TRIPS Agreement for-state controlled economies, and we had extensive provisions around civil remedies, which reflects the private law orientation of TRIPS.  When we went ahead in our own domestic laws to define what constitutes a non-market economy we didn’t even tackle the role of intellectual property, perhaps because we hadn’t thought through the problem of how a non-market economy could exploit IP in its own interests.  The problem we face today is due to an unanticipated turn by China, that it would ease up on economic reforms and not reject IP but instead incorporate IP its state planning mechanisms.”

“Look at the preamble to the TRIPS Agreement,” Rip fumed. “It says intellectual property is a ‘private right.’ As I recall, the Hong Kong delegation put that into the TRIPS Agreement – they anticipated what was going to happen just a few years later in the 90s when they would be reunited with the mainland.”

“We know that IP is a private right and we knew that Chinese state is interfering in markets. We knew China had technology goals, and that the state was not letting individuals maximize their interests in private property rights.  We knew that addressing these issues was core to the success of China’s WTO accession.  We put in a host of other provisions in the TRIPS Agreement – national treatment, most favored nation treatment, due process in IP cases and IP antitrust cases, right to an independent counsel and an independent lawyer, injunctions and preliminary injunctions, the right to a decision based on evidence  — yet, the only WTO case the United States brought against China on IP until 2018 occurred back in 2007 and it involved asking for greater control by China of those markets – for improvements in China’s criminal and Customs IP remedies, as well as its censorship regime.”

“It doesn’t stop there either.  Our antitrust authorities entered into training and other programs that have further enhanced the role of the state by working with China’s former State Planning Commission and others, so that they can further diminish the value of these rights – rights that our companies have a hard time trying to enforce – and that further strengthen the role of the state.  You can’t have IP abuse unless you have IP use….”

“So having lost this 2007 case,” Rip asked “the US government decided it wasn’t worth filing another WTO case for 10 years or so?  What were we asking for – the Chinese government to step in and do more to control property rights?” Rip snorted.   “I don’t like Mr. Trump, but then again I can’t blame him for lousy strategies of 10 years ago.”

“Maybe the US went astray because you bought into the rhetoric of the 1990s which saw intellectual property as a foreign concept to China, one that was inconsistent with Chinese Confucian culture and that was not susceptible to change due to US pressure alone.  These misunderstandings were promoted by academics and Chinese officials, often over the objections of Chinese scholars.  By almost any measure, their assumptions were flawed, and they could not have predicted China’s wholesale and disruptive embrace of intellectual property into its innovation ecosystem. “

“Of all those assumptions, the one that China would not protect IP until it has IP of its own to protect, is the ‘old wives tale’ that…”

I corrected him: “’Old spouse’s tale’–we don’t use this sexist terminology now, and even that is ageist.”

“This old assumption” Rip said looking hopelessly at the sky, “that China needs more IP of its own in order to protect US IP should have been discredited only a few years after I went to sleep – because it was around 2005 that the Chinese trademark office grew to be larger than the US trademark office, and that Chinese TM owners were the dominant applicants.  And that trend has spread to nearly every other sector or indicator – patents, plant varieties, copyright registrations, litigation…. “

“As for this indigenous innovation problem, or Made in China 2025, or Strategic and Emerging Industries, or Medium and Long Range Scientific Plan, or 1000 Talent Program, or High and New Technology Industries, or indigenous innovation, or techno-nationalism, or self-strengthening, or China ‘breaking the IP paradigm’,   or China’s Galapagos-style  for local technical standards – whatever you want to call it  — it is also shocking that you didn’t read the signals from the 1970s and 1980s. “

“It was the science and technology people that were negotiating IP issues with us back then – even through the 90’s – including most notably Vice Premier Wu Yi, a petroleum engineer.  Ma Xiuhong, who I understand later became Vice Minister, was an engineer with the People’s Liberation Army.  My IP negotiating counterpart was Duan Ruichun, from the State Science and Technology Commission.  We sent our lawyers, and they sent their engineers and Ph.D.’s!  Did any of you fellows every study Chinese history and look at how China safeguarded its own technology, like sericulture, from the Romans? Have you read Joseph Needham’s Science and Civilization in China….They knew early on the value of technology!”

“Forced Technology Transfer?!”, Rip added, “How about this language from the Office of Technology Assessment Report (OTA) report on Technology Transfer to China in 1988 that I worked on: ‘Although most U.S. firms approach the China market with the intent to sell products, many find they must include technology transfer if they wish to gain access to the China market.’”

“We were also aware when we wrote that report that China was modernizing with military goals in mind,” Rip noted: “‘Our report went on: ‘If China is to become a major power, it will be through developing its own capabilities throughout the economy. Thus, in the long term, technology transfer will have a great military effect if it spurs innovation, modernized thinking, research and development, and economic growth generally.’”

“This isn’t a state secret!” Rip showed me a picture he was given from the Ministry of Science and Technology website that says “indigenous innovation” next to a Chinese missile.

zizhuchuangxin

“To save the situation of the United States, you might want to look at ourselves.  OTA was closed after that report, as was the Technology Administration of Commerce, and the Office of Science and Technology Policy in the White House was also defunded from engaging in China.”

Rip pulled out his perfectly preserved copy of the OTA report from 1988:

ota

“By the way,” Rip asked “Are there any foreign commercial service officers posted overseas that have technology promotion as an export goal? Has the US census changed its antiquated reporting system where it reports technology transfer as exports of ‘industrial processes’– whatever that means…”   Rip was getting agitated. “I would have thought that the US would at least take steps inside our own government to improve  our knowledge and engagement on these issues.”

Rip scratched his beard, told me that he felt like Diogenes looking for a good man by the light of his lantern in ancient Greece.  Rather than looking for an honest man,  he had no idea where to find anybody who understood technology trade in a US government agency in DC.

diogenes.jpgPainting of Diogenes looking for an honest man

“There are WTO cases that could have been filed.  In addition to investigating whether China has an ‘adequate or effective’ IP regime under the TRIPS Agreement, and all the other general requirements of the TRIPS Agreement I talked about,  there might also be cases about the role of the state as infringer and misappropriator of trade secrets and the state’s role as a cyber-spy,  China’s watering down of IP rights through antitrust and denying due process to US lawyers, and there’s always the possibility of a ‘non-violation’ or ‘situation’ complaint.  I understand there is a moratorium in the TRIPS Council on these generalized ‘non-violation’ complaints, but it still might be worth pursuing them.  We could also look at other remedies, such as using the countervailing duty law that China is using subsidies to undercut what we reasonably expected by China’s accession to the Information Technology Agreement.  Hell, he said, “even our lawyers can’t function well in China because the market is so restricted and they are paying higher taxes on their China revenue than Chinese lawyers, even though they are often providing the same kind of advice on Chinese law or foreign law.  That seems to be a national treatment violation of the GATS to me….”

“Many of these cases would be fact-intensive and difficult,” I said.  “They might also invite retaliation…”

“Difficult? You think you have it bad?” Rip asked indignantly. “China has finally gotten around to publishing its cases, and its patent and trademark databases are pretty transparent.  Back in the day, you had to hire a Chinese lawyer to look at the few databases or books that were only available to them.  The trademark classification system was a secret.  Moreover, most judges didn’t have legal training so judgments might not be well-worded.   In fact, back then lawyers would sit around a table exchanging information about the little pieces of information they had about the “nei-bu” (internal)  laws that were governing their clients’ investments.  We had to bring a 301 case just to get China to publish its laws and regulations.  Now you not only have more information, but you also have Chinese lawyers trained in the US system and US lawyers that have graduated from Chinese law schools.  This is a lot better than the random shots we were taking without much information to improve China’s legal environment.”

“Moreover, now the government actually publishes draft laws and regulations for comment, as well as the laws and lots of the enforcement data.  In fact, the Chinese government has been promoting open government platforms, including publishing of cases.  Today you have more data and much more transparency.  Has anybody looked at the licensing data?  Has anybody looked at how the patent office and courts treat foreigners and whether full national treatment is available?  If you want to avoid retaliation against companies, just use the data….” Rip fumed, “we would have died for this kind of information back in the 1990s.  Youse guys don’t know from difficult. ”  Rip’s New York accent was manifesting itself.

“I also don’t understand why US companies don’t bring many cases to the Chinese courts! I understand about 1% of the IP litigation in China today involves foreigners. That is really pathetic. Companies have kept on running to the US government on the same issues but often didn’t pursue the legal remedies that we negotiated.  Not only do Chinese companies file far more cases, but they also bring cases against their own government if the facts support it.  One group of Chinese citizens actually sued the Supreme People’s Court on a land use matter some years ago.  I think those people had more to fear from retaliation than some American companies.    Some of us seem to be scared of our own shadow.”

“We have to acknowledge some of the recent positive changes too.   I like it that China has a new foreign investment law that says the government can’t compel tech transfer as a condition of investment approval, and they finally discarded their tech transfer regime.  I wish you good luck on supervising those, however, particularly if you don’t do the data-driven analytics.  I also like the new appellate IP court.  It is like our own CAFC, and they are increasing damages in the courts, and have increased transparency and are experimenting with case law. I don’t think the US should be pursuing punitive damages in China however, as much as compensatory actual damages.  We have to let the civil system fulfill its role as the primary arbiter of disputes around private property rights.  You guys in the government should be all over this.  In fact, you should be sharing your views with industry, including your comments on draft laws,  rather than treating your comments and engagements as some kind of secret negotiations.  These are important reforms that could have wider consequences.  And you don’t have to be in a trade war to talk about them with China or with our own industry.”

“But there have also been negative developments, and it seems like you have been ignoring both the good and the bad. Today, it is harder to get a pharmaceutical patent in China than back in 1995, when we finally got China to grant patents for new pharmaceutical compounds.”

“Moreover, back around 20 years ago, I saw that the likelihood that a US company would get a patent granted for a semiconductor patent in some classes was nearly 100%.  By 2014, the grant rate drops dramatically to between forty and sixty percent.” Rip looked around sheepishly on that one: “Are you certain I wasn’t the only one asleep?

“The reasons for these changes are pretty obvious.  China needed foreign investment or international recognition back then.  Motorola’s semiconductor plant was the big foreign investment project in the 1990s when I was getting ready to fall asleep.  We left you with a pretty good, improving track record then on pharma and semiconductor issues.  Now China believes it doesn’t need to offer the same protection.  We wrote the TRIPS agreement to promote private property rights and transparency.  We brought China into the WTO with multiple additional commitments, possibilities for review of China’s IP regime, and to ensure there was no discrimination against industrial sectors in patent grants, litigation, and other areas.  How are those projects going?”

I told Rip that I was unaware of any such projects.

“If you started looking at the data, you might have a different view of what is really going on and how to use the WTO.  For instance, I know many in the US were upset when China didn’t need to change its criminal IP laws in 2007 as a result of a split decision on a WTO case.  But in the next several years the number of criminal IP cases in China went up dramatically.  It seems the US ultimately identified a real problem to China.  You could also say the same thing about US efforts to get China to publish its IP cases in 2007.  Today China has public databases with most cases available online.  You don’t need to win the dispute in a written decision in order to make a difference. ”

”I know the data is incomplete.” He added.  “ I noticed, for example, that not all the cases were being published.  There is lots missing.  But the missing data is also instructive.  Back then, we had real China watchers.”

For a moment, Rip looked like the Wizard from the Wizard of Oz giving a heart to the Tin Man, knowing that he already had one: “These China watchers looked for what was missing in China in the reports, not what China told us about its system.  They learned their lessons from the old Soviet Union, that is, they learned to look at what is missing in a photograph of Red Square or an economic report.”

Tinman

“As for this Confucius Institute problem, I see that the Modern Language Association reports that Chinese language studies are dropping in this country (13% between 2013 and 2016).  Are we supposed to rely on China to teach us about China? I guess that doesn’t matter, since even that pathetic effort is under attack.”

confuciusinstitute

“By the way, I heard that these problems of Chinese misappropriation of US technology might even affect private and public US science and technology collaboration, where China was entitled to own all improvements to technology licensed to China.  I would hope that the US government and industry would share any information that they have on this so that we can learn from it, and we could have a data-driven discussion around it…!”

Rip was feeling exhausted.  “When I first woke up, I thought this had to be a Sputnik moment.  The US would need to get back on its feet, revitalize its competitiveness and invest in science and science diplomacy.  I was wrong.  This is more of a Pogo moment than a Sputnik one.  We are forgetting technology, misunderstanding China, eroding our IP system, and not utilizing the tools we put into place.”

POGO

“You see, the problem isn’t that China has become the new Japan, nor is the problem that China doesn’t protect IP,” Rip concluded. “The problem is that the US forgot the significance of two elements of IP in China: (a) the Chinese economy is state-controlled and includes economic plans involving IP, and  (b) IP is a private right.”

He sighed, “I recognize that there are other trade issues, but having a foreign state adopt socialist-style economic plans on innovation is a recipe for government intervention into the markets to the disadvantage of foreigners, and for frustrated trade negotiations on IP or innovation.  These should have been addressed consistently and head-on.”

As we closed the interview, Rip looked increasingly exhausted.  He took me on a slow stroll past Lafayette Square in Washington, DC and gave me one final suggestion.  “Why don’t you try and bring back some of the old team, like the folks who worked on the OTA project  – some of those folks are still around – gee, even that greenhorn Craig Allen is now the President of the US-China Business Council, isn’t he?  He was just an intern when we worked together at OTA.  My old friends who worked on that OTA report, the China lawyer Stan Lubman and the China innovation expert Pete Suttmeier, are still around.  They didn’t have the benefit of a twenty-year beauty nap like me, but then again, I would hope they hadn’t fallen asleep at the wheel like the rest of you.”

And with that, Rip looked wistfully at the White House, thinking of his little family hamlet in the Hudson Valley, and the historic sacrifices of his family for his country since the founding of the Republic.   He tucked himself into some worn bedding and closed his eyes to the traffic and tourists.  If you travel to Washington, DC you may still hear him snoring gently near the White House gates.

Don’t think of him as just another homeless person.  He is really waiting for the right moment for the country to wake up again.

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SO MANY CHINA IP CONFERENCES, SO LITTLE TIME…

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Here’s a rundown of some past events, and some upcoming ones.  I will provide an update on some of the legal developments at a later date (I know I have been a bit remiss).

On October 4, 2018, I spoke about China at the University of Nevada Las Vegas’ program  on “Intellectual Property Enforcement at Trade Fairs.”   My observations: (a) China does not routinely great preliminary injunctions at trade fairs, despite heavy reliance on injunctive relief in final adjudication of IP infringements;  (b) The United States does have robust preliminary injunction/temporary restraining order trade fair remedies; (c) the use of sui generis administrative or quasi-administrative enforcement mechanisms for trade fair enforcement in China may be one reason that judicial remedies are not that common; (d) trade fairs do afford other opportunites – they are excellent evidence gathering opportunities, their use can help satisfy use requirements for a trademark, and they may constitute infringing conduct as an “offer for sale” under the patent law.  Please look through my  power point and tell me if you have any comments.

On November 2, 2018.  John Marshall Law School (JMLS) convened its 62nd annual IP conference I chaired a great breakout session on international developments, with Kira Alvarez, Peter Yu, Cynthia Ho, Tobias Hahn and Prof. Dennis Crouch.   The session discussed the state of global IP and China-specific IP negotiations in the Trump administration.   Kira Alvarez noted the success of the administration in negotiation trade secret commitments in the revised NAFTA.  The panel, along with the audience, also discussed the role of soft diplomacy, rather than trade disputes, to resolve IP-related trade conflicts.  Prof. Dennis Crouch attributed many of the changes in civil litigation globally to the work of former Chief Judge Rader “who was really using his gregarious nature to reach out and become close friends with the leading jurists around the world.”  This point was restated by many during the conference and thereafter.  The photo above is from the JMLS international IP panel with Kira to my right.

I also participated at the JMLS annual IP  conference in a plenary discussion on antitrust and IP developments, moderated by Prof. Hugh Hansen of Fordham with  Carlos Aboim, David Djavaherian, Suzanne Munck (FTC),  Prof. Ioannis Lianos, University College London and  Annsley Merelle Ward.   I looked at the evolution of Chinese judicial practice regarding SEPS, which are a remarkable set of steps in light of there being no substantive change in antitrust or patent law during this period, and likely reflect increased judicial experience as well as the impact of economic changes in China as an emerging licensor.  These developments were previously discussed in this blog.  I also discussed China’s historical reliance on civil law measures to deal with IP misuse, rather than remedies under the patent law or antitrust law, and how these compare with US practice.

On November 5, 2018, Dan Rosen (Rhodium Group) launched another path breaking paper “Missing Link – Corporate Governance in China’s State Sector” at the Asia Society of Northern California.  A copy can be found here.  The video of the launch can be found here.  The focus of my comments was on whether SOE’s can play a more active role in China’s innovation plans, and the awkward fit between SOE’s and global trading rules.  I believed that existing efforts to provide greater market accountability and transparency for SOE’s (and more broadly, China) have not achieved their intended outcomes despite  the extensive commitments negotiated with China at WTO accession.

I gave a talk at the IP Dealmakers Forum in NY on November 8, 2018 with several individuals involved in financing litigation, providing patent analytics, buying Chinese patents  – Roger Tu, Y. P. Jou,  Brian Yates, iPEL, and Bill Yuen.  Brian Yates’ company had just been the subject of a Chinese article regarding whether patent assertion entities will now be/should now be coming to China, that was posted by IPHouse.  I think many in the room shared my skepticism that China was now “ripe” for this type of activity, particularly for litigation by foreigners against Chinese.  There was however a general sense that the IP and litigation environment was improving.

In addition to these programs, here are some upcoming events;

November 12, 2018, I will be talking at NYU.  I have always greatly enjoyed the open discussions with Prof. Jerome Cohen (no relation), Ira Belkin and others, and I believe this upcoming event will be no different in my current role at UC Berkeley.

On November 13, 2018, I will be at Columbia University talking about “IP and the China Trade War: Long Overdue, a Pretext, or Both?”     I may be guided by the discussions around that topic at JMLS earlier in November, where many concurred that these actions on IP in China are both overdue and dwarfed by other concerns.

On December 2, 2018, I will be in Shenzhen. Peking University School of Transnational Law (“STL”) will be partnering with Berkeley to present an exciting program on “Legal and  Funding Issues for Successful Startups.”  Both the topics and speakers promise to make this an especially exciting launch event. Here’s the link to register.

On December 3, 2018, I will be at IPBC  Asia moderating a session on “China’s Mandate to Innovate” and its impact on IP commercialization. IPBC has constituted a great panel, including former SPC Chief IP Judge Kong Xiangjun, now Dean at Jiaotong University Law School, and Prof. Yang Guohua of Tsinghua Law School (former Chinese IP Attaché in the US, and DDG of MOfCOM), as well as Liren Chen, from Qualcomm, Eeva Hakoranta from Nokia and Roger Tu from Marconi.

On December 4, I will be at Tsinghua University speaking at the first annual Tsinghua/Berkeley conference on “Transnational IP Litigation: Opportunities and Challenges”.  A copy of the agenda (Chinese) is found here.   We will also have some great speakers for this launch event which focuses, non-exclusively, on US developments.  The speakers include several Tsinghua and Berkeley professors, and leading attorneys from practice in the US and China.  The program will cover a full range of issues including empirical data on litigation trends, venue, jury trials, Section 337 litigation, antitrust, the role of expert witnesses, and licensing strategies to mitigate risk.

I have some other events upcoming in Taiwan in December – but that will be another posting, along with some overdue updates on Chinese IP developments.

TWO NEW SENIOR CHINA POSITIONS OPEN IN THE US GOVERNMENT

Two senior China-related positions involving, to different degrees, intellectual property have recently opened in the US Government.

A position similar to the one I helped create at the US Patent and Trademark Office is now open.     The incumbent will serve as “Senior Counsel for China Intellectual Property Policy.”  The position closes on August 6, 2018.  Applicants must be US Citizens, graduated from an accredited law school, and be a member of the bar.  PTO is seeking someone who has “Knowledge of a wide variety of international matters, particularly issues related to China IP and civil law matters.”  The introduction of knowledge of “civil law” seems new to me.   The position is also subject to a chain of command of “assist[ing] the Under Secretary of Commerce and Director, Deputy Under Secretary and Deputy Director, Chief Policy Officer and Director for International Affairs of OPIA, the Deputy Chief Policy Officer of OPIA, and others by rendering advisory legal and technical opinions on a wide range of complex China IP issues and sensitive negotiations.”

Another position that has opened is  that of Director,  Center for Interagency Trade, Implementation, Monitoring, and Enforcement (ICTIME) and is responsible for supervising, directing, and implementing initiatives required by Section 604 of the Trade Facilitation and Trade Enforcement Act of 2015.  The position includes overseeing investigations of information for potential disputes brought by USTR to the World Trade Organization (WTO) and developing positions and strategies for implementation and enforcement of U.S. trade rights under international trade agreements for enforcement of domestic trade laws.  This appears to be the Trade Enforcement unit first proposed by President Obama in a State of the Union Address in January 2012:  “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.”  As a side note, it is interesting to observe how much the focus of USG trade policy has since shifted to technology issues, as indicated by this focus of then-President Obama.  The position closes on July 23, 2018.  This announcement also seeks someone who is capable of the various management competencies of the Senior Executive Service.

Neither position explicitly requires a knowledge of Chinese language, although China is clearly a focus of them both.   Both positions also entail management responsibilities.  The USTR position includes “supervising 20 Trade Enforcement Analysts, detailees, interns, and other employees” while the PTO position involves “serv[ing] as the China team leader”.

October Offerings on Chinese IP

Here are some upcoming programs that involve China in North American in October:

October 11-12, 2017, I will be speaking on a China IP Panel at the ABA IP West conference in Long Beach, California.  The panel will focus on China’s recent (paradoxical) emergence in IP protection and enforcement.  Mike Mangelson, China IP Attaché in Shanghai will also be speaking at a session focused on the China IP Attaché program at this ABA program.

On October 14, 2017, I will be moderating a session on new trends in Chinese IP litigation, courts and enforcement at the Sixth Annual IP  Summit hosted by Loyola University of Los Angeles.

On October 18, 2017, the University of Indiana/USPTO will be hosting a China “Road Show” in Indianapolis.

On October 20, 2017, the John Marshall Law School will be hosting a China “Road Show” with USPTO in Chicago.

On October 26, 2018, I am scheduled to be commenting (as an academic) at the Fordham IP Institute on a presentation by Dr. David Cole of the Hagley Museum and Library on “A Nation of Inventors: The Politics of American Patent Models.  The Hagley Museum is planning an exhibit in China of its patent models in 2018.

Apart from these events, there are also China IP road shows scheduled for Salt Lake City and Denver in October.   Watch the USPTO website for more information on these and other programs.

An addenda to October offerings, per its Federal Register Notice, on October 10, 2017, USTR will be hosting a hearing on the Section 301 investigation involving China’s Technology Transfer, Intellectual Property and Innovation – Related Rractices.

 

Notorious Markets, Alibaba and the JSP

alibabastock

At the end of 2016, a trio of reports are being released by the US government all of which reflect upon the IP environment in China

The first one to be released was the Joint Strategic Plan of the IP Enforcement Coordinator at the White House for the years 2017-2019 (released Dec. 12, 2016) (152 pp).  The second is the Notorious Markets Report of the US Trade Representative, was released yesterday, December 21, 2016 (22 pp).  A third report on China’s WTO compliance, hearings for which were held earlier in 2016.  This annual report is due shortly.  The last report focuses on WTO issues (including IP), while the first two focus on IP issues (including China).

The Joint Strategic Plan singles out China’s “weak protection of intellectual property” (p. 4), relying upon a variety of sources of data, including USTR reports, US Customs seizures, “massive online and physical markets” , business survey data, antitrust concerns, and other sources.    The report also notes China’s legislative efforts to reform its IP laws, the positive role of the National Leading Group, and the “welcome” development of the specialized IP court pilot project.   

The report also singles out US engagement with China on cyber theft as well as US efforts more generally to “mitigate the theft of US trade secrets.” As I have pointed out elsewhere, trade secret misappropriation is a complicated area, where civil, criminal and administrative remedies can be improved and there can be close links to industrial policy.

The Notorious Markets report has gotten the most attention because Alibaba’s Taobao has now been placed back on this list. Taobao is not the only market with a Chinese link.  Other sites included Gongchangcom, which reportedly sells counterfeits, including counterfeit security acts to attach to counterfeit merchandise; Nanjing Imperiosus Technology Co., Ltd (also operating as Domainerschoice.com), which provides services to illegal online pharmacies;  and several physical markets.  These markets include the Baiyun Leather Goods Market (Guangzhou), Jing Long Pan Foreign Trade Garment Market (Guangzhou), Chenghai District Market (Shantou), Wu Ai Market (Shenyang), Cheng Huang Cheng Intenraitonal Auto Parts Market (Beijing), and the Silk Market (in Beijing).

The reports notes that Alibaba’s leadership has underscored the efforts it is taking to address counterfeits but that Taobao “is an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods.” Alibaba was previously on the notorious markets list four years ago. Taobao is among the 15 top sites globally, and among the top 5 in China and was the subject of numerous notorious market submissions by industry.  Some US companies had been questioning why Taobao had been dropped from the list (see my blog from a program at Cardozo law school).  Alibaba’s President, Michael Evans, in response to the relisting of Taobao, noted that the decision “leads us to question whether the USTR acted based on the actual facts or was influenced by the current political climate.”  A press release of the American Apparel and Footwear Association supporting USTR’s decision to list Taobao is found here.

The Notorious Markets Report was released in the afternoon of December 21, 2016; it remains to be seen how much affect (if any) the report has on shares being traded in the United States (see chart above).  Alibaba did overcome other counterfeiting-related legal hurdles this year.  Alibaba had been the subject of several US law suits involving its alleged involvement in counterfeiting activities. A racketeering claim was dismissed in August of this year.  In June of 2016, Alibaba reported that seven securities class actions law suits against Alibaba were dismissed that involved allegations that Alibaba failed to disclose a “white paper” issued by the State Administration for Industry and Commerce before its US public offering.  The white paper was reportedly critical of Alibaba’s IP protection policies.   Attached are two of the recent US court decisions involving the shareholder law suits.

These are personal, non-official opinions.

IPR Outcomes in the 26th JCCT

Here are the IP outcomes of the 26th Joint Commission on Commerce and Trade, concluded early in November 2015 in Guangzhou.  The IP-related outcomes appear primarily in three different places in the JCCT outcome document, under “Competition”, “Intellectual Property Rights” and “Cooperative Dialogues and Exchanges.”

I have repeated below the outcome language in full, without the annotation that appears in the US Department of Commerce release on the subject, followed by my own “references” on the outcome to compare the text with recent developments in these areas.

The Chinese government version of the outcomes follows the US outcomes.

COMPETITION

China’s anti-monopoly enforcement agencies are to conduct enforcement according to the Anti-monopoly Law and are to be free from intervention by other agencies.

China clarifies that commercial secrets obtained in the process of Anti-monopoly Law enforcement are protected as required under the Anti-monopoly Law and shall not be disclosed to other agencies or third parties, except with a waiver of confidentiality by the submitting party or under circumstances as defined by law.

Taking into account the pro-competitive effects of intellectual property, China attaches great importance to maintaining coherence in the rules related to IPR in the context of the Anti-monopoly Law. China clarifies that any State Council Anti-monopoly Law Commission guidelines will apply to the three anti-monopoly law enforcement agencies.

The Chinese side clarifies that in the process of formulating guidance related to intellectual property rights in the context of anti-monopoly law, it will solicit comments from relevant parties, including the public, in accordance with law and policy.

References: SAIC’s IP Abuse rules, NDRC’s draft IP Abuse rules. Importantly, this outcome specifically recognizes the pro-competitive nature of promoting IP. As I said in my comments on the NDRC’s IP abuse guideline questionnaire, “Rather than seek to minimize IP rights through euphemisms such as “balance” perhaps a better approach would be how to optimize the patent system to foster long term innovation and competition and insure that the competition system supports and does not retard such development.”

INTELLECTUAL PROPERTY RIGHTS

Standards and Intellectual Property

The United States and China affirm the beneficial role of standards in promoting innovation, efficiency, and public health and safety, and the need to strike an appropriate balance of interests of multiple stakeholders.

The United States and China commit that licensing commitments for patents in voluntary standards are made voluntarily and without government involvement in negotiations over such commitments, except as otherwise provided by legally binding measures.

The United States confirms that Chinese firms participate in the setting of voluntary consensus standards in the United States on a non-discriminatory basis, consistent with the rules and procedures of the relevant standards organizations. China welcomes U.S.-invested firms in China to participate in the development of national recommendatory and social organization standards in China on a non-discriminatory basis.

With a view to enhance mutual understanding and trust, the United States and China agree to hold dialogues over issues under this topic.

Here are some other blogs on this important topic.

Trade Secrets

The United States and China are committed to providing a strong trade secrets protection regime that promotes innovation and encourages fair competition.  China clarifies it is in the process of amending the Anti-Unfair Competition Law; intends to issue model or guiding court cases; and intends to clarify rules on preliminary injunctions, evidence preservation orders and damages. The United States confirms that draft legislation proposed to establish a federal civil cause of action for trade secrets misappropriation has been introduced in relevant committees. Both sides confirm that IP-related investigations, including on trade secrets, are conducted in a prudent and cautious manner.  The United States and China agree to jointly share experiences and practices in the areas of protecting trade secrets from disclosure during investigations and in court proceedings, and identify practices that companies may undertake to protect trade secrets from misappropriation in accordance with respective laws.

References: Note that the reference in the trade secret provision to a degree mirrors that of the Competition outcome, regarding protecting confidential information in administrative proceedings. Proposed revisions to the AUCL were previously discussed here.

Geographical Indications (GIs)

The United States and China will continue our dialogue on GIs. Both sides reaffirmed the importance of the 2014 JCCT commitment on GIs and confirmed that this commitment applies to all GIs, including those protected pursuant to international agreements. China will publish in draft form for public comment, and expects to do so by the end of 2016, procedures that provide the opportunity for a third party to cancel already-granted GIs.

Reference: This commitment builds on the 2014 GI commitment in the JCCT. An important case involving enforcement of a trademark based GI for scotch whisky is discussed here.

Sports Broadcasts

The United States and China agree to protect original recordings of the images, or sound and images, of live events, including sports broadcasts, against acts of unauthorized exploitation, including the unauthorized retransmission of such broadcasts over computer networks, in accordance with their respective laws and regulations.  The United States and China agree to discuss copyright protection for sports broadcasts and further cooperate on this issue in the JCCT IPR Working Group and other appropriate bilateral fora.

References: Copyright protection for sports broadcasting has been discussed elsewhere in this blog, and is of increasing important to China as it prepares to host the Winter Olympics and wants to develop its sports leagues. In addition US courts have granted copyright protection to Chinese sports broadcasts in a recent case. Tencent has also signed an important licensing deal with the NBA to make content available online.

Enhanced Enforcement Against Media Boxes and Unauthorized Content Providers

Noting the challenges posed by new technologies to the protection of copyright, China and the United States will continue discussions and share respective experiences and practices on combating the unauthorized online distribution of audiovisual content made possible by media boxes.  China clarifies it is to enhance enforcement against such media boxes and the providers of unauthorized content in accordance with its laws and regulations.

Reference: A recent US media box case involving Chinese content is discussed here.

Online Enforcement

In order to address the civil, administrative and criminal enforcement challenges caused by the rapid development of e-commerce, as part of the JCCT IPR Working Group, China and the United States will enhance engagement and exchanges between U.S. and Chinese government IPR policy and enforcement officials, IP right holders, business representatives and online sales-platform operators, among other relevant stakeholders.  This engagement will cover current and anticipated challenges in protecting and enforcing IPR online by sharing respective practices, discussing possible improvements in each country’s systems, facilitating information exchange and training between our two countries, and increasing cooperation on cross-border enforcement.  The goal of this effort is to enhance existing legal and cooperative regimes among businesses, rights holders and governments in civil, administrative and criminal online IPR enforcement.  Appropriate criminal matters will be referred, if necessary, to law enforcement agencies through the Joint Liaison Group (JLG) IP Criminal Enforcement Working Group or domestic law enforcement officials.

References: there have been numerous Chinese domestic efforts to deal with on-line infringement, including copyright-related campaigns, and an important role for Chinese Customs.

COOPERATIVE DIALOGUES AND EXCHANGES

Searchable Database for Intellectual Property (IP) Cases

The United States welcomes that the Supreme People’s Court has established a database for searching intellectual property-related court decisions.  In order to increase the understanding of each other’s legal systems, the United States and China agree to dialogue and to share experiences on their respective databases containing IP cases.

References: Whether or not China is developing “case law with Chinese characteristics,” understanding how Chinese courts handle cases can help guide sound business decisions.

Bad Faith Trademark Filings

Given the importance of addressing bad faith trademark filings, both sides agree to continue to prioritize the issue of bad faith trademark filings, and to strengthen communication and exchange on this issue through existing channels.

References: This is a continuation of earlier efforts.

Copyright Legislation

The United States and China are to continue exchanges on the development of their respective copyright laws.  China clarifies that its Copyright Law is in the process of amendment and useful principles and interpretative guidance from the Supreme People Court’s 2012 Judicial Interpretation on Internet Intermediary Liability will be considered in the law, if appropriate and feasible.

The final judicial interpretation is available here. Here is a blog on the 2014 State Council draft of the Copyright Law revision, and a blog on a 2012 NCA draft.

Exchange on Intellectual Property Rights Legislation

Recognizing the success and experience of recent exchanges on IP legislation through the JCCT IPR Working Group, programs under the Cooperation Framework Agreement and other fora, as well as the desire of the United States and China to further understand recent developments in this area, the United States and China agree to exchange views on their legislative developments in IP and innovation including on pending reforms in copyright law, patent law, trade secret law (anti-unfair competition law), science and technology achievement law, etc., with relevant legislative bodies.

References: This is a broad commitment, with much legislative activity planned in China in areas such as trade secrets, copyright, patents and related regulations.

Protection of New Plant Varieties

The United States and China agree to hold exchanges on the protection of new plant varieties through bilateral meetings and other means to be determined.

References: China and Switzerland agreed to extend plant variety protections in the Swiss-China FTA.

Here are the outcomes involving IP from the MofCOM website.  Source:

http://www.mofcom.gov.cn/article/i/jyjl/l/201512/20151201200026.shtm

“特别301”报告 SPECIAL 301 REPORT

美方重申其承诺,将在“特别301报告”中客观、公正、善意地评价包括中国在内的外国政府,在知识产权保护和执法方面付出的努力。美方欢迎旨在加强中国知识产权保护的改革和行动,并承诺在2016年“特别301报告”中将强调中国政府在知识产权保护和执法方面采取的积极行动。

 恶名市场 NOTORIOUS MARKETS

美方重申其承诺,如果适当,将在“恶名市场”名单中客观、公正、善意地评估和认可外国实体,包括中国实体,在知识产权保护和执法方面付出的努力和取得的成绩。美方计划在2016年通过将利益相关方的异议期延长一倍,继续增加程序的透明度。美方将继续与中方就此事项进行讨论。

 

知识产权有效和平衡保护 EFFECTIVE AND BALANCED IP PROTECTION

考虑到《与贸易有关的知识产权协定》的原则和目标,美方和中方将继续就诸如有助于保护创新者免于恶意诉讼的相关政策进行交流和沟通,为创新行为提供积极环境。

 

知识产权合作 IP COOPERATION

中美双方确认知识产权保护在中美双边经贸关系中的关键作用。双方承认合作的益处,并认可合作构成了双方知识产权交流的基础,承诺进一步加强重要领域的深入合作,包括:

进一步加强中美商贸联委会知识产权工作组作为牵头协调知识产权问题双边论坛的作用。

继续高度重视中美知识产权合作框架协议的工作,包括2016年司法交流和将在中国举办的一项培训项目;在完成并对现有承诺项目进行审查后,在预算允许的前提下,考虑在框架协议下增加其他项目。

支持中国商务部在2016年第一季度举办的技术许可联合研讨会。

其他项目将根据个案原则进行组织。双方认识到中美双方,特别是美方,与一系列从事知识产权培训和技术交流的机构和私人组织合作,实施了广泛的项目策划工作。

 

加强在打击网络盗版方面的合作  STRENGTHENED COOPERATION IN DEALING WITH ONLINE PIRACY

为应对在美国涉嫌网络盗版刑事侵权案件影响中国权利人的情况,中美执法联合联络小组下设的知识产权刑事执法合作工作组在美国驻华使馆的联系人将负责接收中方行政部门转交的此类信息。

 

通过中美双边合作加强知识产权在企业中的利用和保护 USING BILATERAL COOPERATION TO STRENGTHEN IP UTILIZATION AND PROTECTION IN ENTERPRISES

认识到双边贸易与投资持续增长的情况,中美双方同意加强合作与交流,就各自国家知识产权保护和利用有关的经验数据进行研究,并在此领域采取具体行动或举办项目,以协助中美关于鼓励创新的决策,并帮助中美创新者、创造者和企业家更好地理解如何在各自国家创造、保护和利用知识产权。

 

深化和加强中美知识产权刑事执法合作 DEEPENING CRIMINAL ENFORCEMENT COOPERATION IN IP

在中美执法联合联络小组下设的知识产权刑事执法合作工作组机制项下,中美将继续就跨国知识产权调查开展合作。双方将确定共同合作的重点案件,就此类案件保持定期沟通和信息分享,并探索在共同感兴趣的领域开展技术交流的机会。

 …

中美共同打击网络销售假药 JOINT SINO-US COMBATTING OF ONLINE COUNTERFEIT MEDICINE SALES

中美两国政府都非常重视打击网络销售假药以保障公共的用药安全和健康。两国食品药品监管机构之间已就打击网络销售假药开展合作,并承诺未来继续开展合作。这种合作包括分享信息、分享提高公众对网络销售药品认知的最佳实践以及加强在现有国际组织活动中的沟通与协调。

Updated: December 2 and 3,  2015, December 26, 2018.