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.

Supreme People’s Court Annual Report Shows Continued Meteoric Growth in Litigation and Increasing Professionalism of the Court

It is IPR Week in China, and once again there will be a flurry of reports that were presumably embargoed by Chinese agencies for the festivities of the week.  It’s a bit of an ironic week, since IPR Week is followed in the United States by the Section 301 Report of the US Trade Representative, which means that most of the data released this week has not been made available to the US government in time for its consumption for the Section 301 Report.

One of the more interesting reports is the Supreme People’s Court report on IPR protection, which has been released in English and Chinese for some years now.  It is available here in Chinese and English.

This year’s report is particularly detailed and appears to build upon concerns and critiques raised by many over the years.  In this context, I believe the hard work of individuals like Chief Judge Rader, the annual visits of Intellectual Property Owners, concerns about the general commercial rule of law developments, and my own sporadic inquiries on various issues are also helping the SPC to look into trends that impact foreigners, as well as to collect information on local trends.

Here are some highlights:

Civil IPR Cases Continued Their Meteoric Growth.  There were 87,419 civil IPR cases in 2012, an increase of 46% over 2011.  Copyright cases and trademark cases both increased by approximately 53% to 53,848 and 19,815 respectively.  Patent cases showed a more modest growth of 24%. Technology contracts remain disproportionately small, with an increase of 34% to only 746 cases.  Antimonopoly cases numbered 55, and antiunfair competition cases (which include trade secrets) numbered 1123, a drop of 1%.  This drop in unfair competition cases in the face of escalating IP cases generally and an increased interest in trade secret matters, suggests to me that the anti-unfair competition law needs revision to become more relevant to today’s market in China.

Provisional Measures are Still Under Utilized.  Of the nearly 90,000 civil IPR cases, there were only 27 applications for a preliminary injunction, with a grant rate of 83%.  There were 320 requests for provisional evidence preservation and 74 cases for provisional evidence preservation, with grant rates of 97% and 95% respectively.

Criminal Cases Showed an Even More Rapid Growth.  According to the report, there was an increase of 130% in judicial adjudication of criminal IPR cases, to 13,104 cases.  Infringement cases numbered 7840 cases, of which 4664 involved trademark infringement matters.  The remaining cases appeared to involve IPR infringements that were prosecuted under non-IPR laws, such as illegal business operations. Some of these non-IP laws carry more severe penalties.  This data also shows the impact of the efforts made by the State Council Leading Group in dealing with infringements and substandard products.

Administrative Cases Also On the Rise. There were 2928 IPR administrative appeals last year, an increase of 20% from 2011.  Patent cases increased to 760 (16%) and trademark cases increased to 2150 (22%).   I believe that most of these cases are appeals of patent and trademark validity decisions by the relevant administrative agencies.  Relatively low growth in administrative appeals in the light of rapidly increasing patent and trademark filings and infringement cases, may reflect the difficulty of reversing administrative agencies.

Foreigners Play a Diminishing Role in Civil IPR Litigation, But a Significant Role in Administrative Litigation on IPR Validity.  There was an increase of 8% in 2012 in foreigners using the civil IPR system, or 1,429.  However, as a proportion of total civil IPR litigation, foreigners dropped from 2.2% to 1.6%.    If current trends continue, I expect that foreigners will be less than 1% of the civil IPR docket in the next few years.    By contrast, foreigners constituted 47% of administrative cases, for a total of 1,349.   The large foreign share of administrative cases underscores the importance that foreigners attach to obtaining relevant rights, even if they are reluctant to enforce these rights, and also suggests that the foreign community should continue to engage the Beijing Intermediate and High Court on these important issues.   The introduction in this year’s report of information on foreign utilization of the administrative system is a welcome set of data.

Transparency and Commercial Rule of Law Are Improving.   The report notes that 47,422 IPR cases had been posted on the Supreme People’s Court case network through year-end 2012, which is still a fraction of the total numbers of cases.    Another challenge that needs to be faced is finding a way to make these cases more easily searchable.  The report also highlights numerous provincial-level local initiatives in improving IPR adjudication, on a range of issues such as electronic evidence, karaoke copyright disputes, notarization of evidence, etc. which is a useful listing of otherwise hard to get local initiatives.  Another useful data point is that the overall judicial settlement rate of IP cases last year was 70%.  As some have expressed concern about undue pressure to settle, comparative data on settlement rates in prior years might have been useful.    It might also be useful in future years if the court provided more data to compare with general civil law developments, such as the availability of provisional measures in the civil procedure law, comparisons to trends in contract disputes generally, and comparisons to overall civil and criminal litigation trends.

The report also notes that the SPC has been actively involved in commenting on the revisions to the IPR laws now underway, as well as responding to requests from lower courts on various research projects.  Considering the expansion in administrative enforcement in recent years, the constructive engagement of the courts on enforcement matters should be helpful to developing more balanced policies.  Also, simultaneously with the court’s release of its white paper, it announced the 10 leading cases in China, 50 typical cases and 10 innovative cases.  The innovative cases involved new legal issues and new thoughts on the application of law.  As there is no IPR-specific case that has yet been announced by the Supreme People’s Court in its Guiding Cases Project these cases are likely to be of greater influence.

The report also gives a shout-out to the highly successful Federal Circuit Bar Association program of May last year, which had over 1,200 attendees, 240 Chinese judges, over 200 US attendees, and seven federal circuit judges in attendance including Chief Judge Rader.

At a meeting hosted on April 22 by the US Chamber of Commerce, speakers noted that the IPR tribunal is once again looking at the possibility of establishing a specialized IP court in China, an issue that was previously flagged in the National IPR Strategy Outline of some years ago.  In this context, the report also discusses the numbers of IPR judges, IPR tribunals, experiments in combining civil, criminal and administrative adjudication, and background of the judges.

The report provides a useful snapshot of an increasingly influential, busy and complex IPR adjudication system in China.

A Quick Read of the AML IPR Enforcement Guidelines (Fifth Draft)

As China becomes more of a stakeholder in the IP system, and no longer sees itself as a passive player, how will its perspective on the relationship between intellectual property and antitrust change?

The recently announced fifth draft of SAIC’s “Guidelines on Antimonopoly Law Enforcement in the Field of Intellectual Property Rights” gives some additional perspective on this.  After an initial read, my response is cautiously positive.

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The NBA and Its Continuing Trademark Battles

The July 9 issue of the SIPO Newspaper/ Trademark Weekly (http://www.tmweek.com/yw_list_danye.asp?newsid=1624) reports that Nike and Kobe Bryant are involved in the latest skirmish with an alleged trademark squatter.  A natural person in Fujian person has applied for a mark in class 18 for “科比 KB-KOBE” and obtained a registration against the opposition of Nike.  Nike asserted before the Trademark Review and Adjudication Board  that the mark infringed Kobe Bryant’s personality rights (rights to the name), and was in bad faith, and has since appealed the matter to the Beijing Number 1 Intermediate Court. Continue reading