RIPPLES IN STILL WATER: RECENT DEVELOPMENTS ON IP IN CHINA


Ripple in still water / When there is no pebble tossed / Nor wind to blow  (Robert Hunter)

The Chinese IP environment continues to pursue its own domestic needs-driven agenda.  Criminalization of trade secret matters, while an area of concern to the United States, is also important to China’s development of an innovative economy.  Certain improvements in China’s criminal trade secret regime are also contemplated in the coming year, including a lowering of criminal thresholds, as required  by the Phase 1 Trade Agreement (Art. 1.7) and  the SPC’s judicial interpretation plans for the year.   

It is not surprising, then, that a recent Nanshan (Shenzhen)  criminal trade secret case involving employee misappropriation of 5G-related technology from ZTE has caught the attention of the media, including Aaron Wininger and Jacob  Schindler (behind a paywall), as well as the Chinese press.   As Western reporters have noted, how much is such a case a harbinger of changes to come?

There are three significant concerns with reading this case as an example of criminal trade secret reform in China: (a) it took place in Shenzhen; (b) it involved an SOE as a victim (ZTE); and (c) it involved an important technology to China (5G).

Shenzhen has long been a center of criminal trade secret litigation, with a typical scenario involving a well-connected local Chinese company suing its ex-employees for theft of trade secrets.   I recall a meeting I had with the Shenzhen police department many years ago, where their case statistics suggested that they may have investigated as many as one fourth of the total number of criminal trade secret cases in China that year.  My back of the napkin calculation at that time seems to have been accurate.  For example,  during the period from mid-2013 to -2014, Shenzhen courts heard 23 criminal trade secret cases involving 25 people.  By comparison, in 2017, the total number of criminal trade secret cases handled nationwide by the courts was 26

Whatever the current number, the police department from Shenzhen is proactive in that area.  It has brought several cases on behalf of local companies.  The Shenzhen police even polls companies on how they manage trade secret concerns.  Moreover, as with the recent cases, and  China’s administrative enforcement mechanisms for trade secrets, defendants are typically SME’s or individuals.  

Concerns have also been expressed in the past about excessive criminalization of trade secret cases in China.  If there are high damages where there is adequate proof or other measures to compel evidence (such as under recent revisions to the Anti-Unfair Competition Law), civil cases should also be brought, and might thereafter be referred to criminal prosecution by the civil judge as suggested by Prof. Huang Wushuang 黄武双 . Prof. Huang is a leading Chinese academic in this area;  34 of his recent lectures on trade secretion protection in Chinese are found here.  . 

How much of a “ripple in still water,” without any durable impact, is this recent case? One important test will be whether a foreign victim of trade secret theft involving a priority technology for the Chinese government would have similar access to criminal trade secret enforcement resources, particularly if the defendant is an important local Chinese company. 

 I will discuss a few other potential “ripples in still water” in forthcoming blogs…

A Hot Tale of Cool Teas

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Just recently the lunar calendar passed into the period of “Grain Rain”((谷雨, guyu) in China.  This is a time of increasing temperature and high humidity, which is ideal for growing grains.  The temperature also means that humans begin to swelter, and it is time to drink herbal “cooling teas” (涼茶, liangcha).

Cooling teas are now engaged in their own seasonal battle – one might say it is ambush marketing with Chinese solar calendar characteristics.

The preeminent cooling tea is likely 王老吉Wanglaoji, which originated in the Qing dynasty, nearly two hundred years ago. The owner of that mark in China is a state owned Chinese enterprise in Guangdong.  However, the formula, which has been handed down for generations, is arguably in the hands of another brand, Jiaduobao 加多宝 which used to be a licensee of Wanglaoji.  Jiaduobao also apparently has the support of the descendant of the founder.  Not only the name, and formula but also the distinctive red can has arguably been imitated.

Which one, then, is the most authentic?

Passengers entering and exiting Beijing last week through the old airport terminal saw the two companies going head to head, both claiming that they were “authentic.”   The scene was replayed with marketing reps of the streets of Beijing, offering discounts and giveaways…

In the pictures above from the Beijing airport, Jiaduobao is pictured on the left, Wanglaoji on the right, both claiming authenticity.

SAIC Announces Beginning of Revision Process to Anti-Unfair Competition Law

SAIC has announced on its website that it has “formally” begun the topic of revision the Anti-Unfair Competition Law (which includes trade secrets): http://www.saic.gov.cn/fldyfbzdjz/gzdt/201403/t20140303_142680.html. (《反不正当竞争法》修法课题正式启动).

According to this press report, the SAIC Competition Enforcement Bureau held a meeting on February 28.  Beijing University, Renmin University, China University of Politics and Law and other schools participated, along with Jiangsu, Zhejiang, Shanghai, Guangdong, Sichuan, Heilongjiang, Hubei, provincial and municipal AIC’s.  The purpose of the meeting was to discus the framework for revision, topics to be covered, coordination and separation of work, etc.