Developments In China’s Intellectual Property Law

This article offers an overview of the state of intellectual property protection in China. In the past decade, the People’s Republic of China (PRC or China) has significantly upgraded its intellectual property rights protection regime. In order to provide a background for evaluating intellectual property in modern China, this article deals with the history of intellectual property protection in China and examines the significant new intellectual property laws enacted by China in the recent years.

I. History of Intellectual Property Rights In China

A. ANCIENT CHINA

From the beginning, the control of symbols and creative works was viewed as a state communal right, not put in place to protect individual ownership but in order for the state to assert control over works, particularly its own. China’s first copyright regulation was announced in A.D. 835. It prohibited the unauthorized reproduction of works related to natural events based on the understanding that the Emperor was the only link between them and the people.The first official substantive Intellectual property laws were enacted in the early 20th century. Following this, China enacted its first copyright law in 1910, its first patent law in 1912 and its first trademark law in 1923.[1] But these provided little protection for foreigners and were never well enforced.

B. MAOISM

Maoism, known in China as Mao Zedong Thought, is a political theory derived from the teachings of the Chinese political leader Mao Zedong, whose followers are known as Maoists. It developed from the 1950s until his death in 1976 it was widely applied as the guiding political and military ideology.

With the rise of Maoism, the intellectual property regime then in place was altered under a regime of brutal Cultural Revolution and information control. The system previously in place could no longer exist.[2]The effects of this specific era in China’s cultural, political and legal history have continued to linger on the implementation of its intellectual property regime today.

C. POST MAO CHINA

After Mao’s death China was no longer practicing the isolationist policy it had adhered to under Mao and was instead focused on bringing China back as a major international political player. In1979 China signed the Agreement on Trade Relations between the United States of America and the PRC, allowing for protection of American copyright, patent and trademarks in China[3]. The 1980’s saw China become party to the World Intellectual Property Organization, the Berne Convention, the Paris Convention and the Patent Cooperation Treaty.

However Chinese people did not have legislation relating to intellectual property customs enforcement until fifteen years ago.[4] Furthermore, the legal system is vulnerable to political interference.  Corruption is also intensified by the relatively low salaries of judges and court officials, which makes bribery an enticing option. Lack of legal education becomes an even larger problem.  Furthermore, the case reporting system in the PRC is barely sufficient, making legal precedent almost useless since cases and decisions are not well documented or accessible. Moreover with low damages, the lack of ability to effectively enforce judgments, allegations of protectionism by the courts; a lack of ability to patent certain subject matter, a lack of transparency on legal matters and other factors made China a less desirable jurisdiction.

II. Developments in the Intellectual Property Laws

A. PATENT SYSTEM

In 2015, there were substantial changes to China’s patent laws that expanded the scope of permitted subject matter eligible for patent protection. The State Intellectual Property Office of the People’s Republic of China (“SIPO”) received the most applications in 2015 (1,101,864 filings) and became the first office to receive more than a million applications in a single year[5]. Approximately 1.3 million applications were filed at the SIPO in 2016, more than that received at the US, Japan, Korea, and European patent office combined.  It is worth noticing that around 96% of total applications from China are filed in China and only 4% of the total is filed abroad.  Of the 10 largest PCT filers, China’s ZTE, Huawei Technologies, and BOE Technology now collectively file more than the US and Republic of Korea’s Qualcomm, Hewlett-Packard, Intel, LG Electronics, and Samsung Electronics.  Overall filings of PCT applications increased 44% by Chinese applicants in 2016 and they are now the third largest filers behind Japan and the US.  As a further comparison, China was only behind Japan, the second largest filer, by roughly 2,000 filings[6].

B. China’s judicial System for intellectual property protection.

China has also worked hard to improve its court system.  Since 2014, three specialized IP courts in Beijing, Shanghai, and Guangzhou hear all first instance IP matters in these regions.  These courts include judges with IP training and background to facilitate the proceedings.  Based on the successful establishment of these courts, China’s government has continued to expand the specialized courts and opened IP tribunals in Wuhan, Nanjing, Suzhou, and Chengdu in early 2017. In 2015, Beijing IP court handled 3394 administrative review cases (i.e. judicial review over administrative decision, e.g, rejection of applications). The people’s courts exercise judicial power independently according to law, are subordinate only to the law itself, and are not subject to interference by any administrative organ, public organization or individual.

The other challenging issue was the lack of transparency with respect to legal proceedings. Chinese courts did not routinely publish decisions of the court. At most, appellate level courts would issue end-of-year summaries of a limited number of cases that were considered particularly relevant by a specific court. Since 2014, all judicial opinions are to be published on the China Judgments Online (CJO) with few exceptions. This increased transparency is not only important as China legal system becomes more transparent to all observers but the attorneys that practice in China are now able to provide a much more accurate assessment to a client on the strengths and weaknesses of the client’s case.

Chinese Courts also started giving favourable IP owner results. Of the more than 1,600 cases analysed, IP owners won more than 80% of the time and permanent injunctions were issued by the Chinese courts in more than 90% of the cases. Also there is no biasness towards Chinese companies as against foreign companies; In fact foreign companies enjoyed a slightly higher success rate for both proving infringement and obtaining an injunction compared to their Chinese counterparts. Moreover, the average damage awards for both trademark and copyright infringement have also risen, not just for patent infringement.  One possible explanation for this shift is the strong push by President Xi Jinping’s to improve the perception of China as a country that is tough on intellectual property infringement.

III. CONCLUSION

China is not only becoming a critical country to file for patent protection, it is increasingly becoming a viable venue for all intellectual property enforcement.  More and more companies are looking to China as a stand-alone enforcement jurisdiction, as a -effective “second front” to open in conjunction with US or European litigation, and a country where supply chain integrity can be protected via its IP laws and not just contractual means.

Author: Yesha Parikh, Intern at Khurana & Khurana, Advocates and IP Attorneys. Can be reached at swapnil@khuranaandkhurana.com.

References: 

[1] The Second Coming of Intellectual Property Rights in China, Peter Yu

[2] blog.jipel.law.nyu.edu

[3]The Middle Kingdom and the Intellectual Property World 

[4]Kluwer Law International, China Intellectual Property Law Guide

[5] Latest Developments of Chinese Patent Law System

[6]http://www.ipwatchdog.com/2018/05/07/rapid-changes-chinese-legal-system-attractive-venue-ip-litigation/id=96099/

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