Detailed Analysis of IP Agreement in Phase One US-China Trade Deal

The US-China Trade Deal has not been signed. However, as my previous report indicated, some aspects of the IP Agreement have occurred. The various IP rights covered by the IP Agreement are summarized as follows:

TRADE SECRET

The Chinese Anti-Unfair Competition Law protects trade secrets. On April 23, 2019, the Standing Committee of the National People’s Congress revised the Chinese Anti-Unfair Competition Law. The revised Article 9 expands the means of improperly obtaining commercial secrets, increases the statutory obligation of confidentiality, and incorporates the implementation of infringement by other natural persons, legal persons and unincorporated organizations other than the operator into the subject of infringement. The revised Article 11 adds punitive damages compensation and significantly increases the maximum amount of statutory compensation and administrative fines. New Article 32 focuses on the allocation of burden of proof specifically for trade secret cases, which significantly reduces the requirements of the right holder’s proof.

INTELLECTUAL PROPERTY ISSUES RELATED DRUG AND PATENT TERM EXTENSION

On January 4, 2019, the Standing Committee of the National People’s Congress released the latest version of the proposed Amendment to the Chinese Patent Law. The proposal to amend Article 42 of the original Chinese Patent Law to read: “The duration of the patent right for inventions is twenty years, the duration of the patent right for utility models is ten years, and the duration of the patent right for designs is fifteen years are counted from the date of application. To compensate for the time required for the review and approval of the listing of innovative drugs, the State Council may decide to extend the term of the patent right for invention patents for innovative drugs that are marketed simultaneously in China and abroad, with the extension period not exceeding five years. The total effective patent right period after the launch of an innovative drug does not exceed fourteen years. ”

GEOGRAPHICAL INDICATIONS

On November 27, 2019, the China National Intellectual Property Administration revised the Measures for the Protection of Foreign Geographical Indication Products, which mainly involved three aspects. The first aspect is to clarify the two channels for foreign geographical indications to apply for protection in China, namely, under the treaties signed between China and foreign countries or the international treaties to which they have jointly participated, or according to the principle of reciprocity. The second aspect is to increase the number of changes and revocations after protection, allowing changes and revocations. The third aspect is to clarify the application channels for the protection of foreign geographical indication products, and to stipulate more comprehensive rules of procedure to enable foreign geographical indication products to be applied for, reviewed and regulated and protected.

CRACK DOWN ON PIRACY AND COUNTERFEITING ON E-COMMERCE PLATFORMS

The E-Commerce Law (effective January 1, 2019) stipulates that operators of e-commerce platforms shall establish rules for the protection of intellectual property rights, strengthen cooperation with intellectual property rights holders, and protect intellectual property rights in accordance with law. If the intellectual property right holder believes that their intellectual property rights have been infringed, they have the right to notify the operator of the e-commerce platform to take necessary measures such as deletion, blocking, disconnection, termination of transactions and services. The notice should include preliminary evidence that constitutes infringement. After receiving the notification, the operator of the e-commerce platform shall take necessary measures in a timely manner and forward the notification to the sellers or alleged infringers on the platform; if the necessary measures are not taken in a timely manner, the e-commerce platform shall bear joint and several liabilities with the sellers or alleged infringers on the platform. If the sellers or alleged infringers on the platform is damaged due to the wrong notification, the IP right holders shall bear civil liability according to law. If the wrong notification is issued in bad faith, causing losses to the sellers or alleged infringers on the platform, the IP right holders shall be liable for compensation.

The proposed Amendment to the Chinese Patent Law released on January 4, 2019 (Article 17) provides that patentees or parties of interest may, on the basis of the verdict, adjudication, mediation made by the People’s Courts, or the order to stop infringement made by the administrative offices, notify the internet service provider to delete, block or break the link of infringing products. The internet service provider which does not take necessary measure after receiving the notice, should be held jointly liable together with the internet user who infringes the patent right, for the enhanced damage.

FIGHT AGAINST MALICIOUS REGISTRATION OF TRADEMARKS

The Chinese Trademark Law amended on April 23, 2019 forbids maliciously applying for trademark registration and hoarding trademarks for profit. Article 4 of the Chinese Trademark Law stipulates that applications for the registration of malicious trademarks not for the purpose of use shall be rejected. During the trademark opposition period, anyone can file an opposition with the Trademark Office. For a registered trademark, any unit or individual may request the Trademark Office to declare the trademark invalid. As for a trademark agency, if it is known or should be known that the trademark applied for registration by the client is a malicious trademark registration, it shall not accept its application. Otherwise, the administrative department for industry and commerce shall have the right to impose administrative penalties in accordance with the provisions of Article 68.

STRENGTHEN JUDICIAL ENFORCEMENT & PROTECTION OF IP

Article 63 of the Chinese Trademark Law revised on April 23, 2019 stipulates that, in the trial of trademark disputes, the People’s Courts shall, at the request of the right holder, order the destruction of goods that are counterfeit registered trademarks, except under special circumstances; materials and tools that are mainly used for the manufacture of counterfeit registered trademarks are ordered to be destroyed without compensation; or under special circumstances, the aforementioned materials and tools are prohibited from entering commercial channels without compensation. Products with counterfeit registered trademarks shall not enter commercial channels after only removing counterfeit registered trademarks.

Notably, on November 24, 2019, the General Office of the State Council issued the Opinions on Strengthening the Protection of Intellectual Property Rights, which, among other things, incorporates the protection of intellectual property rights into the performance evaluation of the local governments.

It appears that changes are happening since the start of the US-China trade negotiations. The negotiations probably speed up the adoption of the relevant positive changes. If these changes were planned before the negotiations and would occur anyway, then the IP Agreement may be less effective. The hard part of any trade agreement is implementation and transparency. IP owners should seek wise counsel to chart a specific IP strategy to protect their innovation and creation in U.S., China and on a worldwide basis.

IP Agreement Between US and China in Phase One Trade Deal

“China and the United States have reached consensus on strengthening intellectual property protection in several aspects, including protection of trade secrets, intellectual property issues related to drugs, extension of patent validity, geographical indications, crackdown on piracy and counterfeiting on e-commerce platforms, and crackdown on piracy and counterfeiting production and export of products, combating malicious registration of trademarks, and strengthening judicial enforcement and procedures of intellectual property.” Wang Shouwen, Deputy Minister of Commerce and Deputy Representative of International Trade Negotiations

Twelve Chinese Provinces and Cities Strengthen Cooperation in Administrative Protection of Intellectual Property

The Beijing, Tianjin, Hebei, Jiangsu, Shandong, Guangdong, Chongqing, Sichuan, Hubei, Zhejiang, Anhui, and Shanghai Intellectual Property Offices of the 12 Chinese provinces and municipalities jointly signed the “Provincial and Municipal Intellectual Property Administrative Cooperation Agreement” in Shanghai. According to the agreement, relevant provinces and cities will further cooperation in terms of clue transfer of intellectual property administrative protection cases, assistance in investigation and enforcement, joint law enforcement protection, mutual recognition and sharing of results, etc., and enhance work synergy.

According to the agreement, the Twelve Provinces and Municipal Intellectual Property Offices will further open channels for the transfer of relevant case leads, strengthen cooperation in case investigation and evidence collection, processing of document delivery, and implementation of processing decisions, and promote the establishment of a mutual recognition mechanism for intellectual property infringement determination, the city’s key trademark protection mutual recognition list, etc., and strengthen the sharing of service resources such as intellectual property infringement dispute inspection and appraisal, arbitration and mediation, and overseas rights protection assistance.

In addition, the relevant provinces and cities will also carry out joint enforcement and handling of major events such as the Expo, the Canton Fair, the Winter Olympics, exhibitions, the Internet, and professional markets, as well as major and difficult cases, and crack down on intellectual property infringements.

China Allows Patenting of Inventions Using Certain Human Embryos

The National Intellectual Property Administration of China recently amended its Patent Examination Guidelines to remove certain restrictions on stem cells inventions using certain human embryos.

According to Section II, Chapter 1, 3.1.2, … … If the invention is to use human embryos within 14 days after fertilization and have not undergone in vivo development to separate or acquire stem cells, the patent may not be denied on the grounds of “violating social morality”.

The amendment takes effect November 1, 2019.

China Unifies IP Appeals at New IP Tribunal of Chinese Supreme People’s Court

Effective January 1, 2019, the Chinese Supreme People’s Court will form a new IP Tribunal to hear IP appeals, including patent appeals, from across the country. IP Appeals against the first-instance judge of the IP courts and Intermediate Court are no longer heard by the Provincial High Court.

The Standing Committee of the 13th National People’s Congress voted to pass the “Decision on Several Issues Concerning the Proceedings of Patent Cases” on October 26, 2018.

According to the Decision, the Supreme People’s Court shall hear the appeals from the parties who are dissatisfied with the first-instance judgments and rulings of intellectual property civil or administrative cases involving invention patents, utility model patents, new plant varieties, integrated circuit layout designs, trade secrets, computer software, monopoly, etc. The Supreme People’s Court may also order the people’s court at a lower level for retrial.

A national level IP appeal forum may unify and standardize the judicial IP enforcement, facilitate and protect scientific and technological innovation.

China Renamed Its IP Office to China National Intellectual Property Administration

China recently renamed State Intellectual Property Office to China National Intellectual Property Administration (CNIPA). This represents one step closer to combine both patent and trademark administration into one regulatory body. The CNIPA will have four important functions:

1. Organizing the implementation of the national intellectual property strategy, especially to strengthen the creation, protection and application of intellectual property rights;

2. Promoting the construction of intellectual property protection system, guiding the administrative enforcement of trademarks and patents;

3. Being responsible for the registration and administrative ruling of patents, trademarks, geographical indications of origin; and

4. Coordinating foreign-related intellectual property matters, and conducting foreign intellectual property negotiations.

China Will Reorganize State Intellectual Property Office

According to the Thirteenth National People’s Congress, the State Council will reorganize the State Intellectual Property Office. The responsibility of the current State Intellectual Property Office, the responsibility of the State Administration for Industry and Commerce on trademark management, and the responsibilities of the State Administration of Quality Supervision, Inspection and Quarantine on the administration of geographical indications of origin shall be integrated, and the new State Intellectual Property Office shall be reorganized and managed by the State Market Supervision Administration.