Intellectual property reforms in China: a long and tortured road?

March 2015  |  FEATURE  |  INTELLECTUAL PROPERTY

Financier Worldwide Magazine

Article 27 of the Universal Declaration of Human Rights states that: “Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author”. In today’s increasingly complex world, such ‘production’ has earned the moniker of intellectual property (IP) and its protection is achieved through patents, copyright and trademark enforcement.

IP as a bona fide legal concept first came to prominence in the late 20th century. Since then, the term has become globally recognised, resulting in authorities scrambling to establish stringent laws to deal with IP transgressions. Despite such worldwide legislative jostling, one country seemingly oblivious to the ramifications of IP has been China, a nation that over the years has been consistently criticised for its failure to stem the flood of counterfeit products into the market.

However, in late 2014, after substantial trials, tribulations and deliberations, the government of the People’s Republic of China (PRC) finally saw fit to establish specialised IP courts.

Specifically, on 31 October 2014, the PRC Supreme People’s Court issued the ‘Provisions of the Supreme People’s Court’ on the jurisdiction of the IP Courts in Beijing, Shanghai and Guangzhou. These provisions, which took effect on 3 November 2014, mean that the IP courts in these regions have the power to hear the following types of cases: first-instance civil and administrative cases involving complex technology issues; first-instance civil cases for recognition of well-known trademarks; first-instance administrative cases against administrative acts made by administrative authorities or local governments above county level relating to copyrights, trademarks and unfair competition; and appeals against first-instance civil and administrative cases relating to copyrights, trademarks, technical contracts and unfair competition.

In addition to these powers, exclusive jurisdiction has been handed to the Beijing IP Court in terms of first-instance administrative cases involving the authorisation and determination of IP rights made by administrative authorities, such as the PRC State Intellectual Property Office and the PRC State Trademark Office.

“The establishment of specialised IP Courts is an important step forward for China in tackling the huge counterfeiting issues that proliferate,” says Bob Youill, senior managing director of the Global Risk and Investigations practice at FTI Consulting. “However, we are still witnessing the vast majority of counterfeiting offences being tackled under administrative legislation – a situation that has been in place for many years.”

Welcoming the PRC’s belated moves to strengthen its IP rights is Daniel Chew, patent attorney and senior associate at Withers & Rogers. “In recent years, there has been a positive change in attitude towards IP in China. In a bid to encourage more home-grown innovation, the PRC has been urging companies and individuals to seek IP protection and use the new, improved IP system to do so. The establishment of specialist IP courts is an important next step and is a further sign of the PRC’s commitment to creating a more robust IP system that will allow companies to enforce their IP rights,” he says.

Previously, specialised divisions rather than specialised courts heard IP cases in China, but with the number of IP cases increasing from 12,000 in 2004 to 100,000 in 2013, the establishment of specialised IP courts is a timely development. Claire Howell, a senior lecturer in law at Aston Business School and an IP specialist, concurs. “The establishment of IP courts not only demonstrates a willingness by the Chinese to adhere to conventions such as the agreement covering Trade-Related Aspects of Intellectual Property (TRIPS), but the three courts will also help to remove some of the differences that exists in applying the law between the local and central courts,” she says.

Further indications of the seriousness with which the Chinese authorities have taken the IP rights issue is exemplified by the stipulation found in Article 4 of the Guiding Opinions on the Election and Appointment of Judges of IP Courts which states that “judges in IP courts must have at least six years of working experience in the relevant IP trial work”. Additionally, the presiding judge of the IP tribunal of the PRC Supreme People’s Court, Mr Song Xiaoming, has made clear that the IP Courts plan to establish a “technology experts” system to deal with technologically complex IP cases, such as patent and computer software cases.

Yet, however robust the shakeup of IP rights in China appears to be, much work remains to be done before the effectiveness of the newly introduced courts can be proven. “We need to see transparency and high-quality and cost-effective decisions being made before the credibility of the IP court system can be established,” believes Mr Chew. “Where businesses may have been reluctant in the past to seek IP protection in China, the specialist courts should give foreign companies more confidence.”

An increase in confidence is a view shared by an optimistic Ms Howell: “Despite the economic downturn in China there has been a huge increase in home grown Chinese innovation. The need for protection of this home-grown innovation is obvious and I am sure a great deal of effort will be expended by the IP courts in protecting it.”

And an ardent Mr Youill asserts the need for concerted efforts by the enforcement authorities to use the full power of current legislation to move a larger volume of counterfeiting cases from the administrative punishment environment into criminal prosecution. “Consequently, we need to witness a significant ramping up of criminal prosecutions to establish a library of case matters on which the courts can build,” he says.

Whilst major steps have been taken by the PRC to finally bring its IP practices up to speed with the 21st century, one thing is clear: it may take some time before China can fundamentally improve its recognition and enforcement of IP issues.

© Financier Worldwide

BY

Fraser Tennant