More on Donald Trump on IP and China…

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Our “sister” blogger, Susan Finder, has dug up one of Donald Trump’s trademark litigation under his eponymous mark, and reported it on her Supreme People’s Court Monitor website, suggested that “he is the first person to be elected president of the United States who has sued in the Chinese courts.”  He lost the case.

It is probably true that Mr. Trump will be the first US President to have brought a law suit in his own name in a Chinese court, as Susan Finder points out.  A search for Trump in the court’s database might or in the trademark database might however, overlook that Trump (or any other President) had interests in other marks in the United States other than those with his name (such as Miss Universe, in the case of Trump), and he may also have secured marks in China that were different from those he owned in the United States.  I listed some of the marks he owns and that may be the subject of squattings in an earlier posting, but that list was also partial.

In other blogs, Politico reported Trump’s goals during the first 100 days of his administration include a China-IP related outcome: “TRUMP TRANSITION LAYS OUT INTERNAL TRADE GOALS — By Day 100 of the Trump administration, his team aims to finalize withdrawal from the TPP, renegotiate bilateral trade agreements, and direct the Commerce Department and U.S. Trade Representative to come up with a comprehensive intellectual property theft strategy, with particular regard to China, according to a new policy document described to Pro Transition 2017 by a source downtown.”

Separately, IP Watchdog reported that Vice President elect Pence’s generally more explicit, pro patent views are likely to be influential in a Trump administration.  The blog notes “Pence seems to appreciate the realities and benefits of commercializing patented technology, and the benefit that brings in terms of economic development and better, higher paying jobs.”

The Information Technology and Innovation Foundation has also published a useful summary of Trump’s innovation policies, which focuses on domestic policy and trade policies, but also yet again underscores concerns about Chinese intellectual property theft.

Postscript (Nov. 16, 2016):  The New York Times ran an article November 15, 2016 on the Trump brand of high tech toilets in China.  The Chinalawblog also did an analysis of the trademark squatting case involving Trump, including a recent decision and a discussion of how China has traditionally rejected applications for trademarks that used the names of US presidents.  Photo by alert reader Boris Brawer, thank you!

 

 

 

The TPP’s IP Challenge for China

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The release of the TPP text on November 5, 2015 has caused many friends in Chinese IP colleagues to wonder what implications, if any, there are for China’s development of its IP system.

China’s recent experience of bilateral investment or free trade agreements has not prepared it for a major regional  IP-related agreement such as the TPP.  China’s  FTA  experience has thus far focused on a limited range of issues, most of which are not “core” IP.   As one academic researcher noted “the majority of China’s RTAs [Regional Trade Agreements] focus… on specific categories of IPRs, namely GIs and genetic resources and traditional knowledge or border measures, often omitting any reference to other categories, i.e. copyright, patents, trademarks or IPRs enforcement.”    The last comprehensive IP agreement that China entered into was its accession to the WTO  with  adherence to the TRIPS Agreement (2001).  The TPP is however more comprehensive and forward looking than TRIPS.

The China-Swiss FTA (2013) calls for some important, but limited improvements in China’s IP regime, particularly in areas involving designs, customs protection and plant variety protection.  To take plant varieties as one limited example, the TPP requires all member countries to sign on to UPOV ’91.  This was a step that Switzerland, a member of UPOV ’91 since 2008, did not secure in its bilateral FTA with China despite Switzerland’s having a flourishing agroscience sector.   By any measure the demands that would be placed on China by acceding to the TPP would be greater than most of the developed world, particularly for countries like Singapore, Chile, and Australia that have concluded free trade agreements with significant IP chapters with the United States in the past several years.

Despite these challenges, it would be difficult for China to stay outside of a regional trade agreement that includes such important regional trade partners.  Leaving China outside of the TPP may also not be the most desirable IP strategy.  China is the second largest global economy with the largest IP system in the world, and with rapidly growing innovative sectors and global business models (including in e-commerce).   The TPP and the global trading system could also be greatly strengthened if China were to play a constructive role, conform to and join TPP, and if reformers in China were empowered to bring China in adherence to TPP to spur another effort at market-reform.   As Amb. Holleyman recently noted in discussing the TPP: “the rules that China adopts to promote IPR protection directly impact our economy.  If IPR protection in China were improved to a level comparable to the United States, U.S. net employment might increase by 2.1 million jobs and American companies would benefit from an estimated $107 billion in additional annual sales, according to U.S. International Trade Commission estimates.”

A further systemic challenge is that the TPP appears to be based in part on its members experience on the difficulties in engaging China on IP.  As one former senior diplomat recently noted before a Japanese audience:

Rampant violations of intellectual property continue, state-owned enterprises are advantages over private competitors, and U.S. companies invested in China have become increasingly disillusioned by China’s unique standards and preference for “indigenous innovation”—not to mention evidence of large-scale cybersecurity violations…

TPP allows the U.S., Japan and our partners, to offer a high-standard, rules-based alternative to China’s state capitalism.

China has already acceded to all the major treaties enumerated as required for TPP accession with the exception of UPOV ’91 — namely the Madrid Protocol, Budapest Treaty,  Singapore Treaty, WCT. WPPT, as well as the Patent Cooperation Treaty, Paris and Berne Conventions, and of course the TRIPS Agreement.    I believe that most of the challenges to China are likely not in the form of adherence to required treaties, but in the more granular implementation of those treaties and in commitments that are not found in any current treaty that China is a part.  For example, in the pharma sector, the TPP contains extensive provisions on patent linkage, patent term restoration, and data exclusivity which go beyond the TRIPS Agreement.  In addition to these substantive IP issues, there are significant challenges in non-IP area chapters that affect commercialization and utilization of IP, such as in market access for lawyers, restrictions on state owned enterprises, e-commerce, and investor-state dispute resolution.

The focus in the TPP on treaties that support greater IP office to IP office cooperation in the TPP (e.g, PCT, Madrid), also underscores that this is a treaty that not only aims to raise substantive norms, but also aims to facilitate greater utilization of IP in the TPP region among its members to facilitate economic integration.   It would be wrong of critics to characterize this agreement as solely a North-driven effort to impose its IP norms on the South.  In addition to cooperative commitments, there are also provisions on genetic resources, access to medicines (aligning with the Doha Declaration), traditional knowledge and capacity building that reflect the interests of developing countries.

China’s recent past has shown that China can enter into WTO plus commitments on IP.  The most notable are China’s  joining the WIPO Internet Treaties, and thereafter hosting and ratifying the Beijing Treaty on Audiovisual Performances.  However, there are also important areas that have not been specifically addressed in recent trade-related agreements, such as trade secrets, have generally shown little norm setting progress since China first enacted its trade secret law in 1993, which had arguably been undertaken in response to US pressure in 1992.

The history of the past several decades of foreign engagement with China has, however, generally shown that linkage-based diplomacy, where trade concessions may be extended or removed in exchange for / or due to violations of IP-related commitments, has likely been the most effective single factor in driving IP-related changes in China.   Many of the key IP-related commitments  evolved in response to normalization of US-China trade relations, as well as WTO accession.

With modern China’s professed interests in becoming an innovative economy, will the TPP spur additional changes that are in China’s long term interests?  What kind of challenge does the TPP set for China’s own economic plans, including the revisions to the current five year plan, the National IP Strategy and China’s efforts to become a strong IP country?

While TPP members were negotiating the final text of their agreement, China’s state planners were drafting a new five year plan, which will further underscore China’s commitment to developing an innovation-oriented economy (see chart below, prepared by Barclays on frequency of ‘innovation’ in the current five year plan).  China will need to look at what it gains in TPP accession in exchange for IP commitments which China may believe it is not yet prepared for, but that in the long run will clearly benefit in the Chinese economy and enable it to become more innovative.  Hopefully, Chinese reformers will seize on the TPP as a way to drive a new era of economic reform, prosperity and IP harmony.

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Top picture: Amb. Robert Holleyman noted at a November 8, 2015 US Chamber event discussing TPP.

Vringo vs ZTE: What the NDA Dispute in New York Suggests For Licensing Strategies

As many of my readers may know, I was not a fan of the Chinese courts’ decisions in Huawei vs. Interdigital in Shenzhen and Guangdong, which raised a number of process and substantive concerns.  A key question raised in that case was whether “the licensee has been afforded a fair opportunity to take a license.  If the licensee has been afforded an opportunity and declines to take a license, then it is my personal opinion that the licensee should not take the “shield” of a FRAND commitment, and turn it into a sword that weakens the licensors ability to license on fair terms.”    The decisions in those cases plus the Qualcomm investigation has also raised many substantive and procedural concerns, including concerns regarding how to license IP within China in an environment that is increasingly seen as nationalistic, whether foreigners have been singled out, and counter-strategies to deal with Chinese companies inclined to seek protection under China’s antitrust laws.

Prof. Epstein expressed similar concerns in a policy brief  and a Forbes Magazine article earlier this year: “Far from being a device to promote competition, the AML is used to harass foreign firms that provide much needed competition to China’s state-protected agencies….The antitrust laws should not be applied so as to single out patents or any other intellectual property rights for special treatment; all property deployed in the marketplace should be treated equally under the competition laws.”

Two interesting decisions from Judge Kaplan in the Southern District of New York in the matter of Vringo vs ZTE Corp (14-CV-4988) highlight strategic responses to this perception of an aggressive posture of the Chinese courts and administrative enforcement authorities on alleged abusive licensing practices.

By way of background, Vringo has raised money from venture capital firms and is a licensor of telecomm patents, including patents formerly held by Nokia Corporation and Alcatel-Lucent.  From the perspective of a Chinese licensee, of which ZTE may be typical, Vringo is engaged in “abuses of intellectual property” as a “non-practicing entity” that uses “the threat of litigation and injunction to support [its] demands for unfair licensing fees.”  Vringo claims that patents it is asserting are standards essential.  Moreover, it has brought litigation in such places as Australia, Brazil,  France,  Germany,  India,  Malaysia,  the Netherlands, Romania, Spain, and the United Kingdom against ZTE for their alleged infringement.

In a June 3, 2015 decision by Judge Kaplan of the Southern District of New York regarding a July 2014 action filed by Vringo for breach of a Non-Disclosure Agreement (NDA) related to possible settlement of these litigations and any other disputes between them, Judge Kaplan issued a preliminary injunction to enjoin ZTE from further disclosing information subject to the NDA in antitrust matters in the EC and China brought by ZTE. The NDA specifically required that confidential information disclosed could not be used in “any existing or future judicial or arbitration proceedings” or “for [their] commercial advantage, dispute advantage, or any other purpose.”

Judge Kaplan’s decisions are suggestive of possible strategies for companies concerned about entering into settlement discussions without increasing Chinese AML litigation risks through well drafted NDA’s. Here is what I derive:

  1. Insist on Appropriate Governing Law, Know Chinese Legal Arguments and Make Sure Your NDA Has A Close Nexus to the Jurisdiction. Judge Kaplan applied New York law, and rejected ZTE’s arguments that Chinese law should govern the NDA and that that ZTE was required to provide the information to Chinese authorities.   Based on an affidavit submitted by my friend Doug Clark, a Hong Kong barrister with considerable Chinese patent experience, Judge Kaplan characterized ZTE’s assertions that it needed to disclose confidential information, as “nothing more than gamesmanship.”  Also of dispositive importance was that Vringo maintains its principal place of business in New York and sought protection under its laws when entering into the NDA.  ZTE voluntarily consented to New York law knowing this background.
  2.  Enter Into Settlement Discussions To Support Resolving Resolve Litigation. Judge Kaplan also rejected ZTE’s argument that the NDA is unenforceable under New York law as “an agreement to suppress evidence.”  The NDA was a permissible agreement between private parties about use of information in private litigation.  New York has a strong public policy encouraging settlement and “[t]here can be no doubt that the NDA was entered into for the explicit purpose of facilitating candid settlement discussions.”  Moreover, “it was entirely lawful for Vringo and ZTE to agree that they would not use information exchanged in settlement discussions in any judicial proceedings.”
  3. Make Out a Case for Irreparable Harm and Appeal to the Courts Sense of Equity. Judge Kaplan found that the irreparable harm requirement was met because “Vringo … probably would suffer injury in the future that could not be undone even if it prevails in this action.”  As with any well-crafted NDA, this NDA also contemplated the availability of equitable remedies for breach including by providing for procedures for the parties to seek a protective order from a court and by reciting, “that money damages may not be a sufficient remedy for any breach of this Agreement and that, in addition to all other remedies to which it may be entitled, the Parties will be entitled to seek equitable relief, including injunction and specific performance, for any actual or threatened breach of the provisions of this Agreement.” Judge Kaplan also noted that Vringo had not been made informed of the initiation of civil litigation or the unauthorized disclosure of its confidential information in an administrative action filed by ZTE in China, which had further compromised its position in those matters. Although he didn’t discuss the fast pace of litigation in China, which I have raised elsewhere in this blog, I am glad to see judges and rightsholders recognize how critical timing is to IP and antitrust matters involving China.

Note that Judge Kaplan did not enjoin ZTE from filing an AML action in China, but only from using the information obtained in violation of the protective order. Although the facts and circumstances are different, from the perspective of the Huawei vs InterDigital case, Judge Kaplan showed deference to the parties’ choice of law and did not take steps to interfere with decisions to file legal proceedings in other jurisdictions.  Of course, from ZTE’s perspective, it was likely being deprived of  information that it thought would be highly valuable to Chinese authorities.

In a more recent, July 24, 2015 decision, Judge Kaplan threatened sanctions against ZTE’s counsel for interposing objections that appear to be intended to delay or harass the deposition of ZTE’s counsel in what appears to have been subsequent discovery related to the above mentioned brief of the ZTE/Vringo NDA. This order appears to have been issued to support Vringo’s allegations that ZTE’s counsel “had an active role in coordinating pressure tactics by Chinese authorities in response to Vringo’s licensing demands.”   ZTE’s counsel have been ordered by Judge Kaplan to show cause why they should not be sanctioned under F.R.C.P, Rule 11.

The spate of IP-related Chinese licensing and antitrust decisions has also come at a time when the US and Chinese judicial and administrative systems are increasingly interacting, sometimes with a deepening sense of each other’s legal system or the comity that may be afforded to another court, or the different time frames that US and Chinese courts operate under.

The opinions expressed here are the author’s own academic perspectives and should not be taken as a reflection of any opinion of any client or employer, past or present, or a reflection on any market valuation of any stock or equity of any kind. Please email me with any corrections to this or any other posting, or feel free to post your own commentary on this blog.

The SPC’s “Top Two” Dueling IPR Cases

The Supreme People’s Court recently released its ten top cases for IP week at the end of April.  Perhaps the most striking was that the high profile trade secret case in Shanghai that was lost by the SI Group of Schenectady, NY.  Here is a rough translation of the summary of that case by the Supreme People’s Court:

“Fifth, the dispute involving resin patent infringement trade secrets. SI Group, SI Chemical (Shanghai) Co., Ltd. and Hua Qi (Zhangjiagang) Chemical Co., Ltd., Xu Jie appeal against a trade secret dispute [Summary] SI Group and SI Chemical (Shanghai) Co., Ltd. jointly claimed that technical information regarding SP-1068 were trade secrets of the SI Group that had been taken over by the defendant Xu Jie, who was formerly an employee of the SI Shanghai company. When Xu Jie resigned from that company to work at the defendant SI Shanghai Hua Qi (Zhangjiagang) Chemical Co., Ltd.. Xu Jie allegedly disclosed the two plaintiffs’ trade secrets to Huaqi which used them. The two plaintiffs requested the court to order the defendants to stop the infringement, eliminate the effects, and compensate for the economic loss of 2 million RMB.

The Shanghai Second Intermediate People’s Court entrusted a technical appraisal expert which concluded that that technical information of Huaqi on production of SL-1801 product, as well as patents involved, are not the same substantive technical information and dismissed the plaintiffs’ claim. The two plaintiffs refused to accept the appeal. The second instance court dismissed the appeal and upheld the original verdict.

[The meaning of this typical case] In the trial of a trade secrets infringement case, the court must not only safeguard the rights of people who are claiming trade secret protection, they should also pay attention to the balance between the interests of the parties, regulate fair competition between the parties, and maintain the market’s legitimate order.  In the course of comparing the technologies in the current case, the court of first instance conducted a rigorous, regularized technology appraisal process, and the appraisal body issued a highly professional appraisal report.

To me, this was one of several “dueling” trade secret cases in the past several years – some of which involved civil, criminal or administrative litigation.  Some also involved high profile political attention, and some also involved conflicting decisions between China and foreign countries.  In this case, there are several dueling elements.

The SPC’s assessment of the technical appraisal is itself subject to some dispute in this matter.  According to press reports as well as company announcements, a prior technology verification effort of the trade secrets in China, which was conducted at the behest of the police, had confirmed that the technical information was confidential in nature and that there was a similarity between the plaintiff and defendants’ manufacturing processes. 

Another, more important, “dueling” element is that te  US International Trade Commission reached a contrary decision to the Chinese courts.  As stated at page 46 of the eighty-eight page Commission decision: “This is classic misappropriation of trade secrets, with copying down to the thousandth decimal place.“ (page 46),  The USITC  also determined that the public interest was not adversely affected by this remedy, and that principles of comity did not preclude it from issuing a decision that is contrary to the holding of a Chinese court (http://www.usitc.gov/press_room/documents/337_849_ID.pdf).

A third dueling element was in the media.  The Chinese press reported that the USITC had found no infringement, when in fact the USITC determined  that it would issue a limited exclusion order of the infringers’ products, rather than a general exclusion order.  Specifically the Commission determined that the following respondents were in violation:

Precision Measurement International LLC of Westland, Michigan; Sino Legend (Zhangjiagang) Chemical Co., Ltd. Of Zhangjiagang City, China; Sino Legend Holding Group, Inc. of Kowloon, Hong Kong; Sino Legend Holding Group Ltd. of Hong Kong; Red Avenue Chemical Co. Ltd. of Shanghai, China; Shanghai Lunsai International Trading Company of Shanghai City, China; Red Avenue Group Limited of Kowloon, Hong Kong; and Sino Legend Holding Group Inc. of Majuro, Marshall Islands.

The Commission issued a “limited exclusion order for a period of ten (10) years prohibiting the unlicensed importation of rubber resins made using any of the SP-1068 Rubber Resin Trade Secrets that are manufactured by, for, or on behalf of violating respondents or any of their affiliated companies, parents, subsidiaries, licensees, contractors, or other related business entities…” 

This was hardly the finding of “no infringement” that the Chinese press claimed. 

Some explanation of the importance of this case may also be found in the next “top” case (no. 6) listed by the SPC, the Shenzhen intermediate court decision in Huawei vs InterDigital, involving a FRAND license.  Unlike the SI Group case, the SPC did reference the initiation of the ITC action by InterDigital as part of its description of the background of this case.  In the Huawei case, as I previously noted, the Shenzhen Intermediate Court viewed the filing of a USITC action where there was a corresponding FRAND commitment as an actionable violation of China’s antimonopoly law.    Both the SI Group and Huawei cases involved concerns about the market: the court viewed the SI case as regulating fair competition, while one of the Huawei cases involved a claim under China’s antimonopoly law.

Both Susan Finder in her Supreme People’s Court Monitor blog hand I have previously written about the development of guiding and model cases in China.  Publishing of these cases may be intended more for pedagogical purposes than to bind the courts.  In 2013, these two cases where Chinese courts took decisions adverse to ITC decisions constituted twenty percent of the top 10 cases published by the court.  This can be compared to the less than two percent of Chinese IP cases that had a foreign element in 2013 – in essence, these SPC is calling attention to high profile statistical outliers.  The cases could suggest a disproportionate interest in matters where foreign companies are defendants, where IP “abuse” is alleged, where market factors need to be balanced, or where there are concurrent USITC actions.   Or are these two “dueling cases” just coincidences?

 

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US-China IP Cooperation Dialogue Report Released

The “US-China IP Cooperation Dialogue Report” was released last week. The Report was prepared by experts from both the US and China, including co-chairs Professor Liu Chuntian of Renmin University and Joseph Papovich, former Assistant US Trade Representative. I was an also a member of the expert committee, first as an academic with Fordham Law School, and later as an advisor when I returned to USPTO, in an otherwise private sector initiative.

The Report reflects the consensus reached during several days of meetings among this experienced team. Here are some of its suggestions:

  1.  Civil Enforcement: the Report urges greater use of precedents through a guiding case system, experimenting with amicus briefs for important cases, expanding evidence preservation and preliminary injunctions, and greater civil deterrence in damage awards.

  2. Criminal Enforcement: the Report calls for adjustments to the criminal enforcement system and an expanded and stable role for criminal IP enforcement.  The US experts sought greater clarity over “for profit” requirements in criminal IP convictions, while the Chinese side believed that current judicial practice will ultimate reduce these difficulties.  Both sides agreed that criminal enforcement should be directed towards repeat offenders, large scale criminal activity, and cross-border criminals.  In addition, officials should be encouraged to increase the volume of criminal prosecutions.  Authorities should also consider plea bargaining and proportional criminal fines, as well as criminal settlement and victim-offender reconciliation.  Victims’ compensation (fudai) claims should also be allowed.  Specialized IP enforcement teams and specialized prosecutors were suggested, as well as clearer IP criminal investigation guidelines.

  3. Customs: Greater support of Chinese customs, with more resources, and more engagement with foreign countries.

  4. Copyrights: The experts supports the 2012 Supreme Peoples Court Judicial Interpretation on intermediary liability and commended the court’s openness in accepting outside comments and evaluating foreign practices.  Both sides also encouraged foreign companies to more aggressively use legal remedies to stop infringement.  While China has made significant improvements in end user piracy, the necessity of criminal liability was also underscored.  The experts also believed that live sports programming should be protected under China’s copyright law, and expanded protection should be afforded to technological protection measures.

  5. Trademarks: The experts expressed support for SAIC’s efforts to address online sales of counterfeit goods, and urged the SPC to consider leveraging its experience in dealing with secondary liability in the copyright context to the trademark context, in order to encourage more cooperation between platform owners and brand owners.  The experts also urged the CTMO to adhere to the principle of good faith TM registrations to deal with squatting, and to expand cooperation with express mail services to deal with global counterfeiting organizations.

  6. Patents: The experts agreed that the courts should continue to play a central role in adjudicating patent cases.  The experts also suggested that China should consider centralized jurisdiction over patent cases to ensure specialization and predictability.  If a centralized patent court cannot be established, the experts considered that the SPC might wish to reduce the number of courts that hear patent litigation cases from the current 89.  The experts also expressed their concern about the low rate of injunctive relief for invention patent cases, and consider means of improving evidence collection, particularly in process patent cases.  The experts also discussed Article 26.3 of the Patent Law (enablement), and problems with retroactive application of examination guidelines and restricting data supplementation.  In evaluating appeals from the PRB to the Beijing courts, some experts also pointed to low reversal rates by the courts, and too much involvement by PRB officials in the court’s decision making process, which can impair impartiality.  The experts also recommended a study on the impact of the short statute of limitations (two years) in China on protection of patent rights.  The Chinese side also thought that foreigners also need better protection and planning for litigation in China.

  7. Trade Secrets: The experts agreed that theft of trade secrets, whether the victims are foreign or Chinese, is “not tolerable.”   The experts further noted that trade secret theft “harms business value and destroys trust” and that trade secret cases can have a big impact on “sustaining the growth of R&D facilities and technological collaboration in China.”  The experts pointed out that parties in trade secret disputes need to be given a fair opportunity to discover key facts and to examine evidence.  Police officers should be able to conduct undercover investigations (Criminal Procedure Law, Art. 51).  Chinese experts also cautioned that criminal prosecutions may be abused and that in some cases the civil and criminal results of the same trade secret cases have had conflicting results.

This eight page bilingual Report is a very useful read for policy makers in the United States and China.  What is perhaps even more important is that it was a joint collaborative effort, which showcases the potential for future cooperation on IP policy efforts.

The Door Opens Wider on Administrative Enforcement Transparency

ImageThe State Council recently promulgated its notice of its “Trial Opinion” on Making Publicly Available According to Law Information on Administrative Penalties Concerning the Production and Sale of Fake, Counterfeit and Sub-standard Goods and Intellectual Property Infringement (Guo Fa No. 6,  Feb. 19, 2014).   The Chinese and a machine translation are also available here.

I previously blogged about the drafting of this Trial Opinion, including the background of earlier controversies involving the United States and China when China refused to reveal information about pending administrative cases, see: Through A Glass Less Darkly: China’s March to Administrative Enforcement Transparency.   Here are a few of the key points of this Trial Opinion:

A) First, as its name suggests the initial focus is on fake, counterfeit and sub-standard goods.  While IP infringement is also a part of this effort, traditionally the amount of enforcement against substandard goods is greater than IP.   This seems to be the continued focus.  The opening chapeau mentions as the first goals of this regulation “to protect consumer interests” and to “maintain the market order for fair competition.”  The chapeau does not mention that protecting the legitimate rights of IP holders is a specific goal.   

It is also unclear if certain IP-related offenses are included in the scope of this regulation, such as illegal business operations by manufacturing or selling of illegal publications and antitrust matters, particularly those that involve Article 55 of the Antimonopoly Law regarding abuse of IP rights.

B) The Trial Opinion also has a substantive commitment regarding IP enforcement: administrative agencies, “in principle” should conduct their enforcement actions in an “ex-officio” (self-initiated) manner.  The distinction between ex-officio and enforcement on complaint has historically been a problem in certain jurisdictions, as administrative officials may feel less compelled to provide information on cases if they had “self-initiated” cases than if they were responding to a complaint (Art. 1.1).

C) The Trial Opinion sets forth specific requirements regarding the information that much be disclosed, such as the name of the offending party, their legal representative, legal basis for the punishment, and person(s) who decided the case. (Article 2). 

D) County level officials and above ae responsible for directly implementing this Trial Opinion (Article 3).  For IP-related offenses, this is likely to impose the highest burden on SAIC, as it is the largest IP-related agency, and has offices at sub-county levels.

E) Generally disclosure is principally to be made via the Internet.  In most cases disclosure should be made within 20 days after the punishment decision.  However, if the decision involves public health and safety, it should be made immediately available (Art. 4)

D) Information that should not be disclosed include trade secret information, government secrets and information that involves privacy concerns (such as involving the physical location of individuals and their phone number) (Art. 5).  Chinese practice of not disclosing in its entirety cases that involve “trade secrets” may make it exceedingly difficult to understand how trade secret and many other IP cases are handled, particularly at a time when the IPR Leading Group is considering a trade secret enforcement campaign.

It is hoped that, over time, China will publish administrative and civil cases that remove relevant confidential information.  The current civil practice seems to involve not publishing cases and sometimes having cases discussed in the press by enforcement officials.  This was practiced by judges who have written articles that discussed Huawei vs. Interdigital, an antimonopoly civil case.   This approach can have the unfortunate consequence of giving the public the impression that an undue amount of power has been given to the enforcing official to disclose the nature of the case on the regulator’s own terms. 

In general, the Trial Opinion shows a commitment to greater transparency of administrative agency, and appears to be occurring in tandem with efforts to improvement transparency in the courts.   While it took 90 days for this Trial Opinion to be made public, another important step in transparency would be to make public a State Council opinion on improving administrative-criminal IPR enforcement coordination (September 12, 2012).  The latter opinion appears to have markedly improved criminal IPR enforcement within China, and may have been referred to obliquely in Article 2.5 of the Trial Opinion as it requires public disclosure of administrative punishments for cases that are referred to criminal prosecution. 

Rev: Jan 16, 2017

 

 

Positive Developments on IP in JCCT Outcomes

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The 24th bilateral Joint Commission on Commerce and Trade concluded on December 20, 2013 at Diaoyutai State Guest House.  The US “Fact Sheet” on this year’s JCCT is attached here

The JCCT was jointly chaired by the US Department of Commerce, the US Trade Representative and the US Department of Agriculture at the ministerial (Secretary) level on the US side, and by Vice Premier Wang Yang on the Chinese side.  It is a key bilateral mechanism for raising trade-related bilateral intellectual property concerns.

This year there were several outcomes that were IP-related.  These outcomes included: a commitment by China to include trade secrets protection as a priority item in the interagency IPR leading group for 2014, as well as a commitment to work on trade secret legislative reform matters in China.  A prior commitment by China to insure that patent applicants in pharmaceutical patents can supplement their data was expanded to specify that this commitment applied to examination, re-examination and SIPO’s representation before the courts, as well as to work together to resolve specific cases. 

China also committed to work with the US on civil IPR enforcement matters, to continue to work on trademark squatting issues, cooperate on enforcement efforts to realize increases in sales of legitimate, non-infringing goods and services, and to undertake enforcement efforts involving substandard and infringing semiconductors.  

There was a also a recognition of SIPO’s efforts to date to provide design patent protection for graphical user interfaces, and a signing ceremony for a bilateral MOU with the U.S. Trade And Development Agency to provide IPR-related technical assistance with MofCOM as a coordinating agency (that is the picture above).  The various signings are attached here.   A Chinese summary of the outcomes from the concluding ceremony also includes improved bilateral criminal justice enforcement cooperation on IP matters.

The JCCT is sometimes used to break new ground (such as on trade secrets, or SIPO’s representations before the courts on pharma patents).  It is also used to reinforce existing commitments (such as on GUI’s and sales of legitimate goods), and to expand areas of technical assistance and cooperation (such as in civil enforcement of IP and the signing of the TDA MOU).

I personally believe the outcome statement shows a good balance among the role of administrative enforcement agencies, resolution of technical IP issues, and the importance that the civil and criminal systems should play in the development of a mature IP system.

 

Photographs above and below by Mark Cohen.

Diaoyutai scenery

Diaoyutai Scenery