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China IP

More changes on the horizon

18 July 2019

Over the years, China's IP protection regime has constantly been accused of being inadequate by the West. IP and technology transfer has been a focus in the China-US trade war. Against this backdrop, China has recently unveiled a series of measures to enhance IP protection, ranging from a Supreme Court guideline on preliminary injunctions in IP cases to a new draft Amendment to the Patent Law. Even more notably, a National IP Appeals Court in the form of an IP Tribunal has been established within the Supreme People's Court (SPC) which is already up and running. With those institutional changes, we hope to expect stronger protection and enforcement when it comes to procuring, utilizing and enforcing IP in China.

Supreme Court guideline on preliminary injunctions in IP cases

On 26 November 2018, some four years after the issuance of a draft for comments, the Judicial Committee of the Supreme Court issued the regulation regarding preliminary injunctions in IP disputes (PI Regulation) which has come into effect on 1 January 2019.  

Some key points of the PI Regulation include the following: 

  1. confirming that preliminary injunction may be permitted without communicating to the respondent if the grant of a preliminary injunction is of urgency;
  2. listing the substantive factors to be considered for the grant of a preliminary injunction include the factual and legal merits of the case, whether the failure to grant a preliminary injunction will cause irreparable damage to the legitimate rights and interests of the applicant, or cause difficulty in the enforcement of the ruling for the case; whether the damage caused by the failure to grant a preliminary injunction exceeds the damage caused by the preliminary injunction to the respondent, whether the preliminary injunction will damage public interests and other factors;
  3. procedurally, stipulating the time for the court to consider the grant of a preliminary injunction and distinguishing the different procedural requirements for a utility model or design patent;
  4. setting out remedies against wrongful application for preliminary injunction; and
  5. setting out the guidelines on the bond amount required.

As such, the PI Regulation is a welcome measure which marks China's effort to give consistency and more legal certainty across courts at all levels and geographical areas in China.

New draft Amendment to the Patent Law

The proposed Fourth Amendment to the Patent Law is another measure by the Chinese government to step up its efforts in protecting IP rights in China. The allegation that IP protection in China is inadequate has always been linked with low damages awards and the difficulty in collecting evidence due to the lack of the discovery processes under Chinese law.

The most notable changes in the draft Amendment are as follows:

  1. Increasing statutory damages for patent infringement from the current range of RMB 10,000 to RMB 1 million to RMB 100,000 to RMB 5 million.
  2. Introducing fines against infringer for wilful infringement for up to five times the determined amount of damages.
  3. Codifying the court's authority in determining damages solely based on the plaintiff's claim and evidence if the infringer fails to disclose its financial records and all other materials relating to the infringement as ordered.
  4. Setting out the responsibilities of internet service provider to comply with takedown requests by the rightholder based on the decision of the courts or administrative bodies.
  5. Increasing the term of protection for design patents to 15 years.
  6. Affording patent term extension for innovative pharmaceutical patents for up to five years.

The aforementioned changes have long been hoped for and would further harmonize the Patent Law with laws of major IP jurisdictions. It remains to be seen how the draft Amendment will be finally adopted and later implemented by the Chinese courts.   

National IP Appeals Court 

In addition to the specialized courts in Beijing, Guangzhou and Shanghai and the specialized IP tribunals in other regions to handle technical IP disputes, the newly established National IP Appeals Court in the form of an IP Tribunal within the SPC will mainly handle appeals relating to civil and administrative IP issues, especially on patent cases and other technology-related cases which require a high degree of technical knowledge. Going forward, IP-related appeals from the Intermediate People’s Court and the specialized IP courts in Beijing, Guangzhou and other regions will be heard by this new National IP Appeals Court within the SPC.

Judges at the new National IP Appeals Court under the SPC are expected to be equipped with specialized knowledge and experience in adjudicating technical IP cases, and are believed to be able to better handle such cases with more consistent rulings than local, provincial courts.

Practitioners are also hopeful that through consolidating appeals in one court, it would help bring about consistent rulings in infringement cases appealed from a first-instance infringement court and concurrent invalidation proceedings appealed from the Beijing IP Court.

While the effectiveness of this new National IP Appeals Court under the SPC will need to be tested, in view of the volume of patents and patent cases in China, it is certainly going to be a busy forum and is going to have a significant impact on IP jurisprudence in China in the years to come.

Conclusion

China has the ambition to build a knowledge- and innovation-based economy. Against this backdrop, IP has been elevated to signify such strengths and, as a result, improving the environment and infrastructure for IP protection and litigation has been an active agenda item within China for several years now. Those recent changes, whether associated with any outside pressure or not, are here to stay. More importantly, given this changing dynamic, it would be increasingly crucial to tailor any IP strategies for China.