SF: China may seem like a tough nut to crack, but it’s slowly opening up to the needs of national and international businesses that want to access its huge population. WIPR talks to Zhipei Jiang, the former chief justice of IP at the Supreme People’s Court, about what’s right and wrong with IP in China.

Until recently, China was seen as a country that guarded its privacy fiercely. Journalists and foreign businesses alike had difficulties gaining access. But while there is still a way to go, things are changing, and Chinese intellectual property law is a good indicator of how the country is opening up to the outside world.

On the IP front, China’s State Intellectual Property Office (SIPO) regularly reports official and local news in Chinese and English. Unofficial sources also exist, making an increasingly important country such as China more transparent to those that are interested in IP.

Dr Zhipei Jiang, the former chief justice of the IPR Tribunal of the Supreme People’s Court and currently a senior advisor at Chinese law firm Fangda Partners, established www.chinaiprlaw.cn in 1999. He wanted to make China’s IP judicial protection more transparent and provide a platform for the exchange of ideas. “It’s one of the earliest legal academic websites in China and the amount of visits has numbered at around 3 million,” he says.

State of play

Jiang has been involved in the judicial work since 1979 and joined Chinese IP law at early 80 last decade as a judge, actively participating in their development. He says: “I took part in the legislation on Copyright Law, Patent Law, Trademark Law and IP Customs Regulation, as well as judicial interpretations on issues such as copyrights, patents, trademarks, technology contracts and IP Crimes.”

The development of Chinese IP law has paralleled Jiang’s career, allowing him to witness its growth first-hand. “The last three decades mark a period of continuous development for China’s IP protection system, which has grown from scratch,” he says. “In that time, China has set up a fully-fledged legal framework and operational system for IP protection that is compatible with domestic development needs and consistent with international rules.”

IP law in China is yet to provide an adequate solution to the country’s national piracy and counterfeiting problem. These phenomena are become more and more serious with economic growth and active.  IP owners see China as an attractive jurisdiction in which to do business, but may be put off by the high probability that their intellectual property will be stolen for the profit of others.

Jiang agrees that IP infringement in China is serious, yet it mustn’t be taken out context. “[T]he crime of IP infringement is quite serious and rampant in certain areas and sectors, especially [when you look] at the aggregates,” he says. “However, measures that show China is the leading violator do not take into account China’s size. When figures are adjusted for population, China’s rates of IP violation are much lower than those of many other countries, including the US.”

He dismisses the notions that counterfeiting and piracy are anything other than development issues. “[IP infringement] is generally attributed to Chinese traditional culture, the economic system, the legal environment, and even nationalist sentiments of the Chinese populace. These points are making the situation too complex.”

He explains: “China’s [IP infringement] problem has nothing to do with morality or even xenophobia; it is purely a matter of poverty. Piracy was similarly rampant in other Asian countries such as Korea and Japan until people there got richer and domestic needs emerged to encourage their governments to take action to protect IP. With Chinese nationals getting wealthier, the situation will get better in the near future.”

Courting favour

Intellectual property enforcement in China is overseen by the country’s four-level court system. The Supreme People’s court is the highest court in China. Local people’s courts make up the remaining three levels. They consist of high, intermediate and basic people’s courts that have jurisdiction over provinces, autonomous regions, prefectures, municipalities, autonomous counties, towns and municipal districts.

China’s people’s courts provide judicial protection for IP through civil, administrative and criminal procedures. From 1985 to 2009 (the official statistics of 2010 are still awaited), the courts concluded 166,408 civil, 6,387 administrative and 14,509 criminal cases at the first instance, concerning intellectual property. The Supreme People’s Court has published 41 judicial interpretations, and more than 40 judicial guidelines have been issued to help instruct the lower courts.

Jiang says: “Issuance and implementation of judicial interpretations and guidance documents have provided courts with more concrete substantive and procedural bases on which they rely for adjudication of IP-related lawsuits. As a result, the judicial system has continued to see progress. According to statistics dated October 2008, China’s local courts had established a total of 298 separate IP divisions and 84 IP panels in civil divisions, and staffed 2,126 specialised IP judges.”

But Jiang says that the courts still need to find ways of steadily lowering the cost of protecting IP, enhancing the cost of infringement and stopping infringement more effectively. “[It has been proven] that establishing a specialised IP tribunal in the people’s court agrees with the Chinese judicial system,” he says. “[It guarantees] the judgment quality of IP cases, [trains people] for IP judgment and [allows] judgment experience [to be accumulated].”

He adds: “Sticking to [this] method, the courts should continue to explore establishing specialised IP tribunals [that accept] civil, administrative and criminal cases together, and to integrate and optimise judicial resources. The court may also study the feasibility and necessity of establishing an IP appellate court to meet the requirement of perfecting the IP appeal procedure…”

Being civil

IP owners wishing to enforce their rights in Chinese courts may instigate civil, criminal or administrative procedures. Civil and criminal cases usually involve acts of infringement, while administrative cases tend to focus on invalidity disputes and judicial review. “In my experience, civil processes appear to be more effective in stopping IP infringements and [securing] compensation,” says Jiang.

He explains: “Judges of civil cases are more familiar with IP than those of criminal procedures. In China, civil cases are heard by specialised IP tribunals, with an Intermediate People’s Court typically serving as the ‘court of first instance’. However, IP criminal cases are first heard by criminal tribunals in the court with jurisdiction over the location of criminal offences; courts at the sub-provincial level typically serve as the court of first instance. Therefore, judges of civil cases are better in terms of IP-related experience and expertise.”

“IPR owners may get more compensation for their loss caused by the infringement. In civil processes, IPR holders have opportunities to claim economic damages for the loss of market share and for lost income caused by infringements. By contrast, administrative and criminal cases only provide opportunities to impose administrative penalties or criminal punishment on infringers in addition to fines. As a result, monetary compensation awarded by civil cases is broadly more.”

Jiang adds: “Since civil cases are initiated by IPR holders themselves, they may file lawsuits against infringing at the earliest time. Comparatively, initiating criminal cases is more difficult, not only because they are generally initiated by prosecutors after an initial Public Security Bureau investigation, but also there exists a minimum value threshold for infringing to be eligible for a criminal case.”

Driving revenue

China offers plenty of ways of enforcing intellectual property, but it must also protect IP from the outset to allow businesses to properly plan and implement their IP strategies.

Foreign brand owners wishing to do business in China have to consider language issues when deciding how best to protect their IP. The country’s population use languages with words that may not directly translate into other languages. As such, brands traditionally protected by word marks may suffer in a market such as China, so non-traditional marks for things like sound and three-dimensional images may offer an alternative.

Non-traditional trademarks are not registrable under China’s current Trademark Law, according to Jiang. “…Article 8 [of the law] provides that ‘any visual sign capable of distinguishing the goods or services of one natural person, legal person or any other organisation from those of others, including words, devices, letters or numerals, three-dimensional symbols, combinations of colours or any combination of the above elements may be applied for the registration of a trademark,” he says.

But these restrictions are being revised to modernise and harmonise China’s trademark system with other systems around the world, explains Jiang.

“[These revisions] will allow IP owners to apply to register non-traditional trademarks such as colours, moving images, holograms, sounds, scents and tastes. These changes will be an extraordinary boost to trademark owners competing in the Chinese and world marketplaces.”

Patent owners wishing to secure protection for their computer-implemented inventions may not be afforded such luxuries.

Jiang says: “The current Patent Law provides in Article 2 that invention for purposes of Patent Law means any new technical solution relating to a product, a process or improvement thereof. According to Article 25(2), rules and methods for mental activities are not patentable subject matter. Both Articles 2 and 25 underpin the legal basis for determining whether computer software-implemented inventions can be patented in China. Therefore, computer software is generally considered to constitute rules and methods of mental activities and cannot be protected by Patent Law.”

He adds: “However, as there is no definition of what constitutes a ‘technical solution’, in practice, the technical requirement standard has been loosened and patent examiners have some leeway in dealing with that. According to the Guidelines for Patent Examination published by SIPO, a software-related invention is patentable if it resolves a technical problem, uses a technical measure and reaches a technical result. But unlike rulings in the US and Europe, claims to media containing computer software (a storage medium only defined by a program recorded on it, for example) are not allowed in China.”

To-do list

Chinese intellectual property law has come far during Jiang’s career, but he says that it still has a way to go before it meets international norms of protection and enforcement. China needs to continue to make positive and practical contributions to the development of the international IP system, says Jiang. “As China becomes a major player in the global economy, it needs to strengthen its dialogue and exchanges with foreign countries and international organisations,” he explains. “[It must also] co-operate with other major economic powers by all means, particularly in the area of enforcement and damages.”

Jiang also wants the country’s IP system to be closely aligned with the needs of the Chinese public, enabling people to easily and fully protect their intellectual endeavours and increase Chinese innovation.

He says: “IP protection is at the heart of China’s endeavour to achieve these goals. There is still a long way to go before China becomes an innovation-oriented nation. The IP system should be further brought into full play to enhance innovation in the whole society, to transform modes of economic development and to increase core national competitiveness.”

China is home to a huge population with a huge potential—potential that it is putting to good use. Chinese Premier Wen Jiabao wants China to rely on scientific advancement and the improvement of labour quality for future economic growth, and an effective IP system will help to make this a reality. Jiang says that the country is recognising this fact as it makes concrete efforts to improve the quality and efficiency of its economic development.