Continued Efforts on Judicial IP Enforcement—An interview with Kong Xiangjun

Issue 29 By Liu Rong,[Comprehensive Reports]

On March 9, 2009, Judge Kong Xiangjun was invited to the People's Daily Online, for a face-to-face netizen dialog on how the courts protect intellectual properties (IP). Thereafter, Judge Kong was interviewed by China IP and the IP Channel of the People’s Daily Online to discuss widely concerned issues involving the judicial certification of well-known trademark and antitrust cases.

China IP: According to statistics released by the Supreme People’s Court, in 2008 there was a nationwide increase of the filing of new cases and the conclusion of first instance trial cases by 36.52% and 35.2% respectively.  New filings and the conclusion of second instance IP cases numbered 4,759 and 4,699, respectively, representing an increase by 66.11% and 63.73% over the previous year.  Finally, in 2008 retrials numbered 102 and 71, an increase by 161.54% and 57.78%,  What do you think of these numbers in terms of IP cases?

Judge Kong Xiangjun (hereinafter Judge Kong): The increasing numbers do tell us something. The protection of intellectual property (IP) has developed as China has grown economically, socially, and culturally. In some respects, the increasing numbers reflect the developments of IP protection in the judiciary, which have the following specific aspects:

First, the proprietors have begun to have a stronger sense of protecting their rights. When their rights are infringed, they are more willing to resort to legal weapons to protect themselves. Second, the protection offered by the judiciary has become stronger. As the courts have maintained, through adjudication, the rights of the proprietors, the proprietors have been encouraged, believing that their rights can be safeguarded and their demands can be satisfied in the courts. The courts would not have had these many cases if the proprietors did not believe that their demands could be met, otherwise they would be unwilling to go to the courts. Third, judicial protection has become more important, and the proprietors have placed more confidence in the courts and their legal protection. Fourth, IP has played a bigger role in economic and cultural developments and in foreign exchanges. After all, court cases would not increase unless there were more IP and the proprietors placed more of an emphasis on and attention to IP protection.

Moreover, as you have mentioned, the number of IP retrials has largely increased. One of the essential reasons for this is the newly amended Civil Procedure Law, which became effective on April 1, 2008.  This has created additional protection over the right to appeal. An appeal is made easier for any party unsatisfied with a judgment that has become effective.

China IP: How is the right to appeal addressed in the amended Civil Procedure Law?

Judge Kong: It offers more procedural protections over the appeal right by clarifying the conditions for an acceptance and the legal causes of action, defining an accepting and examining period, and heightening the level of the courts that have jurisdiction. For example, before this amendment, after the final judgment by a provincial court went into effect, an unsatisfied party that intended to appeal generally had to be reviewed first by the provincial court. If the party was also not satisfied with this review, that party could appeal to the Supreme People’s Court. However, according to the new Civil Procedure Law, a party that is not satisfied with a provincial court judgment that has gone into effect may not go anywhere else but the Supreme People’s Court. Now this channel is more direct and straightforward, and thus the number of cases being appealed keeps on increasing.

China IP: What measures have been taken to enhance the judicial protection of IP?

Judge Kong: We have and will continue to adopt measures to strengthen the protection of IP. For example, the right of action has been further protected and a party can now easily exercise this right; the evidential rule has been perfected making the production of evidence and maintenance of rights easier; larger compensation is being awarded to lower the costs for one to maintain their rights making it worthwhile  for proprietors to sue; and adjudication supervision has been strengthened to further safeguard judicial fairness.

China IP: Will larger compensation lead to more people suing solely for compensation, creating more cases and heavier workloads for the judiciary?

Judge Kong: The general trend of the judicial policies of the Supreme People’s Court has always been focused on larger compensation. That is, larger compensation should be awarded as long as practical, in order to punish, preclude, and deter infringing acts or actions. Therefore, it is a trend generally to increase compensation. In the past few years, despite the wide variety of cases, there have been generally more cases involving larger compensation, which apparently are related to the guidance provided by these judicial policies. However, an amount of compensation is not awarded at will; it requires evidence. The proprietor should fulfill its obligations to produce evidence. As long as it is legal, the awarding of larger compensation is consistent with the IP protection requirements, as it encourages the parties to sue for their rights. Also, it is the proprietor’s right to sue for compensation, and the responsibility to protect its legal interest lies with the court.

China IP: After 2008, in response to new developments in China and the world, will the Supreme People’s Court change its deployment in carrying out this IP strategy?

Judge Kong: On the one hand, as always, we will keep on improving the judicial protection of IP. On the other hand, in response to the changing situation, we will research and seek suitable measures to create greater harmony between judicial protection and social economic development.

This protection is needed internally given China’s economic, social and cultural development. Someone might think that to protect IP we intend to encourage more foreign exchanges. This is certainly true, but instead what is needed is China’s social economic development. This is well explained by the majority of IP cases between Chinese domestic parties.

China has paid consistent attention to the protection of IP. Last year, the State Council issued the Outline of the National Intellectual Property Strategy (Outline), which covers IP protection as a fundamental strategic measure, rather than as a short-term solution or a situation-specific measure. Now, the financial crisis is spreading, and the essentiality of IP is evident. For example, those companies owning independent IP have found their product value increasing with more orders and growing opportunities. Other companies involved in OEM or simple processing have fallen out of the market or have been closed down. This shows how essential IP can be. So, it is a fundamental and constant need to strengthen the protection of IP and encourage independent innovation.

China IP: Some people believe that during a financial crisis, we should not be too strict with companies that provide counterfeits or poor-quality goods, since they provide employment opportunities and pay taxes. What’s your opinion about this?

Judge Kong: This must be viewed in a dialectic way. On the one hand, cracking down on those counterfeiters simply means depriving them of their illegal gains. If our employment and taxation relied on counterfeiting activities, it would be like quenching one’s thirst by drinking poison. On the other hand, if regular brands were pushed out of the market by the counterfeits, it would also lead to unemployment and tax losses, and would be detrimental in the long run. So, in my opinion, it is not contradictory to strengthen IP protection and manage the financial crisis. Stronger protection will be good for domestic companies and their sustainable growth, as well as for employment. Also, to crack down on counterfeiters, by itself, means to protect the healthy growth of authentic brands, and is beneficial to long-term economic development.

China IP: What has the Supreme People’s Court done to implement the Outline issued last year?

Judge Kong: The Supreme People’s Court and Chief Justice Wang Shengjun have paid close attention to the implementation of the Outline. Following the issuance of the Outline, a number of measures were taken, mainly as follows.

A leading group and office was organized to ensure that the Outline is implemented by courts at all levels.

In 2008, the Supreme People’s Court notified and required the local courts at all levels to carry out the Outline. Also, in November of last year, the Court initiated a special monthly program named “The Judiciary Protects Your Rights and Encourages Innovation”, among the various courts nationwide, to improve the judicial protection of IP. It has also held IP workshops and taken other measures among the courts nationwide to implement the Outline.

Moreover, the Opinions of the Supreme People’s Court on Several Issues in Carrying out the Outline of the National Intellectual Property Strategy, which was just issued, comprehensively and systematically arranges for the courts at all levels to carry out the Outline. The guideline has been a major influence in China, as well as other countries.

China IP: Any follow-up plans?

Judge Kong: To carry out the national intellectual property strategy, this year, courts nationwide have been engaged in an annual program called “A Better Judicial Environment for Independent Innovation”. The Supreme People’s Court plans to develop a series of special adjudicatory activities and issue judicial interpretations and policy documents on patents, well-known trademarks and anti-monopoly, in order to create a judicial environment favorable for independent innovation and for an innovative nation.

China IP: Can you tell us how the courts determine well-known trademarks and the related judicial interpretation?

Judge Kong: Well-known trademarks have a clear position in the law. It is not given to a company as an honorary title or for advertising; instead it gives special protection to trademarks that have acquired a certain amount of fame. For example, if you have an unregistered trademark that is found to be a well-known trademark, you may preclude others from squatting or using it. If you have a registered trademark that is found to be a well-known trademark, you may also preclude others from squatting or using it in other product categories. So, this is the true intention of the law to provide for well-known trademarks. 

However, in our daily life, because some companies or relevant authorities are not clear about this legal definition, or because the term well-known trademark sounds good and reputable, they deliberately use well-known trademarks for advertisement purposes. This may lead to adverse consequences and the status of well-known trademarks may be “mutated.” It is possible that some companies, when driven by this, sue solely for a well-known trademark.

If a company sues to have its well-known trademark protected, the court certainly offers protection as long as the legal conditions are met. The court would not support, but would instead preclude any unfair act or action. To fulfill the true intention of the law, recently the Supreme People’s Court has attended to the regulation of well-known trademarks by setting up a few rules. For example, a well-known trademark is only a finding of fact during judgment, rather than an honorary title. The finding is case specific, that is, in principle, a well-known trademark finding is effective only for the case at hand; it is not universally effective in other cases. Also, the finding is passive, that is, upon request, the court can determine if a trademark is a well-known one according to the law; but if no request is filed, the court will not do this on its own initiative.

Moreover, additional measures have been taken, such as, the requirements of the Supreme People’s Court that upper courts should strengthen their supervision and verification over lower courts; and that documents for well-known trademark certification should be submitted to the Supreme People’s Court, to facilitate the Court’s supervision over other local courts.

In the past few years, we have put more effort into the investigation and study of well-known trademarks. Based on this work, we started to draft a judicial interpretation of this judicial protection. The interpretation will define some key issues and provide operable rules for adjudicatory work, according to the original legislative intent and the practice of judicial protection. It is expected to be issued in the first half this year.

The drafting process was very transparent. We solicited opinions on a wide scale, and published a notice in November, 2008 to seek opinions from all walks of life. Finally, a few hundred opinions were received and were sufficiently absorbed. The coming interpretation will include new or specific legal norms and standards.

China IP: What do you think of the antitrust cases, are they a major concern for all?

Judge Kong: The Supreme People’s Court attaches much importance to the implementation of the Anti-Monopoly Law and the trials of these cases.

As I have learned, the antitrust cases, for which litigations have been brought up, are tried first by an intermediate court. The Anti-Monopoly Law is relatively hard to operate because it is very subject-specific and many provisions of the law are abstract general principles, with room for misunderstanding. Also, it is difficult to determine antitrust violations. For instance, the market is concerned with a monopoly, that is, a monopolizing act or action is normally found within the relevant market. This is strongly professionally-oriented and sometimes requires many economic analyses. So, these are very difficult trials for the courts. We are very cautious about this. The antimonopoly law has just been put into effect, and we need to be careful to sum up these practices and experiences.

In the second half of 2008, the Supreme People’s Court convened a seminar in Tianjin, to discuss issues related to antimonopoly civil litigation and to engage in some preliminary study. The Court has also set up a special antimonopoly bench within the IP Division. This special bench is equipped with certain powers, and a few judges are specifically responsible for trying and studying antimonopoly cases. Local courts have also been prepared organizationally.

We are now developing judicial interpretations for antitrust litigation, to provide a solution for plaintiff standing (as to who may sue), the jurisdiction of the court, evidentiary rules, and civil liabilities. We wish that the courts could play these adjudicatory roles well using the Antitrust Law.

China IP: Have you heard of Shanzhai? (Shanzhai, literally means the “outlaw,” or “Robin Hood,” which means the coarse imitation or alteration of the named brand products.)  Do you like this phenomenon?

Judge Kong: “Shanzhai” is very popular today. It interests numerous people and is discussed widely, but it is vague and lacks a clear definition. There are many different situations in terms of law. If Shanzhai means to pirate or copy a copyrighted object, then it is copyright infringement. If it means to counterfeit a patented design or trademark, it is infringement of patent right or trademark right. However, it would be OK to imitate something that the law does not forbid.

The essential thing is whether such Shanzhai, or imitating act, violates any specific law, meaning the definite and clear law. Generally, to imitate is not always a bad thing. It includes many elements of learning and is the basis on which society progresses. As long as it is legal, it will add to pluralism and encourage us to develop and learn. Due to its vague meaning, Shanzhai can hardly be defined from one angle or using one quality. Instead, in terms of law, it must be dealt with according to different situations.

Of course, any over exaggeration of the Shanzhai phenomenon may not be a positive thing or could lead to misconceptions. For example, if we talk about it too much, others may believe that our society is filled with infringements, pirates, or illegal copies. This may harm our image and cause a negative effect.

Life is colorful. It is natural in one’s social development, and we do not need to give it a fuss. Any new term or act is allowed, unless it violates the law. Also, we should try to encourage something elegant, vigorous, and positive. Let life and society weed out those that are negative or base.

China IP: Any forecast on new developments in IP cases for 2009?

Judge Kong: Based on our previous experiences, generally the number of IP cases will increase smoothly. The average increasing rate has been maintained at more than 20 percent recently. It was a little higher last year. I cannot tell you the exact number for this year, but a continuous increase will occur normally. With social-economic growth, new developments or issues will arise in the trial of IP cases, and new and more difficult questions may crop up. For this sake, we will respond timely and take specific measures to continuously improve IP trials.

 (Translated by Ren Qingtao)

 

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