Global Forum of Intellectual Property 2009

Practices and Prospects of China IP Development

Good morning everyone,

I feel honored and pleased to share with you some of my thoughts in this big IP forum.  Today let me share some practices and prospects of China IP development with you distinguished experts.

First of all, I’d like to introduce you the Latest Development of Judicial Protection on Intellectual Property Rights in China

Chinese government and courts all pay much attention on IP protection, and we have already achieved some progress.

We can see the summary of the court’s trial in 2008

1.      Summary of the Court's Trial in 2008

Ø The Number of Cases Steadily Increases;

Ø The Scope of IP Cases is Further Broadened; and

Ø The Trial System is further improved.    

I will give you more details.

Ø The Number of Cases Steadily Increases;

Look at table one, we can see that from January to October of 2008, all district courts in China totally accepted 20,806 civil cases of the first instance concerning IP disputes, up 36.9% over the same period of last year; all courts in China totally accepted 3,251 civil cases of the second instance concerning IP disputes, representing 49.51% increase over the same period of last year; all courts in China totally accepted 3,251 civil cases for retrial concerning IP disputes, representing 162.86% increase over the same period of last year. 

The increase of case numbers indicates that trial on IP cases is more reliant and the number of IP cases shows a rising trend under the background of global financial crises and economic slowdown. 

Ø The Scope of IP Cases is Further Broadened.

China Supreme People's Court issues the Regulations on Cause of Action of Civil Cases and other judicial documents, which further clarifies and broadens the scope of IP cases.  According to such documents, the scope of IP cases expressly includes civil cases relating to franchise, special marks, domain name, trade name, intellectual property agency and antitrust matters.  Foregoing cases shall be accepted and heard by the intellectual property tribunal.  The issuance of such documents also improves the regularization of cause of action in IP cases and makes the division of internal trial work of the courts more reasonable. 

Ø The Trial System is further improved. 

In recent years, for the purpose of improving the trial system, the Supreme People's Court issues a number of judicial interpretations, thereby further clarifying the criteria on the applications of law.  In 2008, by issuing judicial interpretations, judicial policies and typical cases, the Supreme People's Court clarifies some legal issues, such as "how to conduct the trial on civil cases concerning conflicts among registered trademark, trade name and other's prior rights", "the relationship between industrial standard and patent rights", "how to interpret patent claims" and "recognition and grant of trademark rights". 

We can see that, now in China, 71 intermediate courts have been granted to have jurisdiction over cases concerning patents, 38 intermediate courts have been granted to have jurisdiction over cases concerning new plant varieties, and 43 intermediate courts have been granted to have jurisdiction over cases concerning layout designs of integrated circuits.  61 basic courts have been granted to have jurisdiction over part of IP civil cases. 

2.      Compendium of China National IP Strategy

On June 5, 2008, the State Council officially promulgated the Compendium of China National IP Strategy (2008-2020) (hereinafter referred to as the "Compendium").  The issuance of the Compendium serves as a milestone in the history of intellectual property development in China.

It is emphasized by the Compendium that the IP development strategy should be regarded as an important national strategy, and the ability for creation, application, protection and management of intellectual property should be greatly improved. 

The first aspect of the significance of issuing the Compendium is to improve the intellectual property system, to develop the enforcement and management system of intellectual property, to improve the legislation of laws and regulations concerning intellectual property rights, and to strengthen the orientation function of the intellectual property on economic policy, cultural policy and social policy;

The second aspect of the significance of issuing the Compendium is to facilitate the creation and application of intellectual property, to provide guidance and support for the creation and application of intellectual property by market entities, to help enterprises become the major power of creating and managing intellectual property;

The third aspect of the significance of issuing the Compendium is to improve the protections on intellectual property, to impose more severe punishments on the infringements, to lower the costs incurred from the protection of intellectual property, to make the price for intellectual property infringements higher and consequently to deter the infringing acts;

The fourth aspect of the significance of issuing the Compendium is to prevent the abuse of intellectual property, to enact laws and regulations so as to define the limits on intellectual property rights, and consequently to maintain fair competition in the market and protect legitimate rights and interests of the public;

The fifth aspect of the significance of issuing the Compendium is to improve the culture of respecting knowledge, appreciating innovation and complying with laws. 

3.      Amendment to the China Civil Procedure Law

The revised Civil Procedure Law becomes effective as of the date of April 1, 2008.  Some amendments are made on the matter "procedure of trial supervision and enforcement".  For instance, circumstances for initiating a retrial are specified.  There are 5 circumstances for initiating a retrial as provided by the former Civil Procedure Law, and now there are 13 circumstances for the initiation of a retrial, which improves the feasibility of handling a retrial application.  To take another example, if a person, whose properties are to be enforced, fails to fulfill the obligations specified in a legal document and may hide or transfer his properties, the enforcement officers may take the compulsory enforcement measure immediately.

After the revised Civil Procedure Law becomes effective, all high courts and the Supreme People's Court have more significant responsibilities of trial supervision, and the number of applications for retrial accepted by such courts dramatically increases.  From April to October of 2008, the Supreme People's Court totally accepts 142 cases for retrial concerning IP disputes, the number of which is equivalent to 1.5 times of its counterpart of last year; meanwhile, the reinforcement on the enforcement improves the enforcement efficiency in IP cases. 

4.      Update on the Antitrust Law and Court's Trial

The Antitrust Law becomes effective as of the date of August 1, 2008.  Before the Antitrust Law becomes effective, the Supreme People's Court circulates the notice emphasizing that antitrust cases shall be heard by intellectual property tribunal.  Antitrust cases are extremely complex, which involve both economic issues and legal issues.  Besides, antitrust cases will make significant influences on relevant enterprises and industries, and some antitrust cases relate to the economic security of China.  Therefore, courts' responsibility of hearing IRP cases provides new requirements on a judge's skill and accordingly poses new challenges.

5.      The Third Amendment to the Patent Law

The decision on the third amendment to the Patent Law was adopted at the Sixth Session of the Eleventh National People’s Congress in December 2008, and this decision will become effective as of the date of October 1, 2009. 

After the amendment, the Patent Law contains eight chapters and 76 articles, the contents of which include: "general provisions", "condition for the grant of patent rights", "application for patents", "examination and approval of patent applications", "term, termination and invalidation of patent rights", "compulsory license for exploitation of a patent", "protection of patent rights" and "supplementary provisions".

The third amendment to the Patent Law involves a lot of contents, among which two highlights should be emphasized:

Firstly, the revised Patent Law provides a stricter requirement on the grant of patent right, and the compulsory requirement of novelty is adjusted and improved;

Secondly, the revised Patent Law provides more severe administrative punishment measures against patent infringements and raises the amount of money for infringements compensation. 

Foregoing highlights will raise the criteria on the grant of patent rights, improve the protections on patent rights, and significantly facilitate the scientific innovation.

With respect to the big problem - "junk patent", the revised Patent Law accordingly raises the criteria on the grant of patent rights, and it especially revises the criteria on novelty of granting patent rights, which clearly indicates that an invention or utility model has novelty only when it is not an existing art.  The term "existing art" refers to "the art known to the public prior to the application date".  This provision eliminates the situation that an invention or utility model might have novelty even when it is publicly used abroad prior to the application date, which was provided by the former Patent Law.  In other words, the revised Patent Law adopts the "absolute novelty" criteria.  Besides, the revised Patent Law raises the criteria on the grant of design patents.  The revised Patent Law provides that if a design was known to the public prior to the application date, the design patent rights shall not be granted.  The revised Patent Law also clearly provides that if a design serves as the mark identifying the pattern, color or combination of pattern and color of a two-dimensional print, the design patent rights shall not be granted.  Foregoing provisions will effectively improve the quality of patents in China and prevent from creating more "junk patent".  The amendment to the Patent Law also involves the administrative punishments on fake patents and civil liability for patent infringements.  It is provided that the fine imposed on the infringer shall be less than "4 times" of the illegal profits, and the former provision indicates "3 times".  In the event that there is no illegal profits, a fine of less than RMB200,000 might be imposed on the infringer, and the former provision indicates "RMB50,000".  Besides, the authority in charge of patent managements now has the power to seize or detain products using fake patents.        

The revised Patent Law also provides that the infringer shall bear all reasonable expenses incurred by the patentee for the prevention of infringements, and it also revises the provisions on statutory damages.  After the amendment, the statutory damages shall be more than RMB10,000 and less than RMB1,000,000.  In other words, if damages are awarded according to the rule of statutory damages, the minimum amount shall be no less than RMB10,000. 

Furthermore, the revised Patent Law eliminates the provision that stipulates the designation of foreign related patent agency for foreigners’ patent applications; the revised Patent Law eliminates the provision that requires an entity or individual to entrust a Chinese patent agency as its/his agent when such entity or individual plans to file a patent application to a foreign institution; the revised Patent Law also revises the provisions relating to the compulsory license for exploitation of a patent. 

6.      Optimizing the Judicial Resources

Chinese courts continue to make efforts to improve the trial system and the working mechanism.  According to a preliminary statistics, one high court, nine intermediate courts and 14 basic courts have launched pilot projects that all civil, administrative and criminal cases concerning intellectual property shall be accepted and heard by one tribunal.  We have accumulated some useful experiences from these pilot projects.

Well, let me share my comments and prospects on the Development of IP in China

The global financial crisis has a big influence on the economic development of China and the factors supporting the rapid economic development in China have changed.  Around the country export trade has decreased, stock markets have fallen, capital chains of some enterprises have ruptured, more and more factories and companies are running under their production capacity, and layoff has become the highest-click-rate word.  All these bring a great impact and challenges to the economic development pattern in China.  And these must bring some impact to the China IP litigation system.

The infringing acts of intellectual property are various now.  Besides the infringements on and crimes of Intellectual Property, the IP conflicts between companies are another serious problem.  Different right owners have different concerns on their own rights; the multinational enterprises’ concern and suspicion on the protection of proprietary intellectual property rights in China still remain too.  The financial crisis made the above problems worse.  Thus, people cut budget of IP protection.  For one thing, the conflicts are increased.  For another, the budget of IP protection is decreased.  All of these problems bring big pressure to IP litigation, not only on the quantity degree, but also on the quality degree.

We are for sure that China do and will insist on the principles of “reform and opening to the outside world” and “constructing innovative country”.  On this basis, the peaceful development, which indicates the pursuit of internal harmony and external equality, is still the general trend for future development.  For one hand, we should enhance the economic development with all our strength; for another hand, we have to keep balances and tame the economy.  Therefore, we are establishing a powerful, impartial, transparent, and convenient IP judicial protection system, and we should enhance IP international cooperation.

The Supreme People's Court of China is thinking about establish intellectual property appellate court in the capital Beijing.  The Supreme People's Court is actively conducting investigation on the unified standards in judicial practice, such as patent infringement and grant of trademark rights.  The reforms of administrative authorization, complicated judicial proceeding, and recurrent litigation are also to be launched.

We are happy to see that now in China, more and more qualified legal service professional are under the developments.  These legal service professionals have experiences on providing international legal service; they are fluent in foreign languages; they are well-qualified lawyers and have good professional ethics.  Developments of such teams will improve the quality of legal service to be provided to domestic or international clients.

The improvements and developments of intellectual property protection system will provide a sound legal environment for the stable and rapid economic development of China, and such improvements and developments will also make positive influences on the economic developments and intellectual property protections of other Asian countries. 

Thank you for your attention.

On the occasion of the New Year, may I extend to you my greetings.  Wish you a happy New Year.  May 2009 bring you greater success and your family happiness.