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

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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.

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