New Development in China’s Protection of Intellectual Property

Issue 1 By Jiang Zhipei,[Comprehensive Reports]

China’s Judicial Protection of Intellectual Property Has Produced A Marked Effect After Its Accession to WTO

China revised its Copyright Law, Trademark Law and Patent Law according to Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) before its accession to the WTO. After the accession to WTO, TRIPS has become one of the WTO’s most important regulations that China has to observe and influences all newly created intellectual property laws.

Chinese Courts have formulated a number of judicial interpretations regarding intellectual property laws and have established a Chinese intellectual property judicial protection system, which is constantly being altered to make it work more positively and creatively. TRIPS includes general provisions and basic principles, minimum standards concerning the protection of intellectual property rights, and minimum standards concerning the enforcement and enforcement procedure.

In recent years, Chinese Courts, adhering to the theme of “justice and efficiency,” have been working for the enforcement of intellectual property law procedure according to Chinese domestic laws, and have tried a great deal of civil, criminal, and administrative cases concerning intellectual property. According to the judicial statistic of 2001, Chinese Courts at all levels accepted 5265 civil cases concerning intellectual property, among which 5041 cases have been concluded. They also handled 319 criminal cases of first instance concerning intellectual property, among which 314 have been concluded.

Additionally, in 2001, Chinese Courts accepted 531 criminal cases concerning the crime of manufacturing or selling fake and inferior products and the crime of illegal business operation, many of which involved illegal acts against intellectual property. The courts passed sentences onto 969 persons, and accepted 64 cases of judicial review concerning administrative declaration on ownership of intellectual property and about 3000 judicial review cases concerning the administrative enforcement of law.

In 2002, the Courts accepted 7800 intellectual property cases of first instance, second instance and retrial (excluding cases of crime against intellectual property), among which 7162 have been concluded and 2532 are still pending. There was a big increase in the number of cases that were accepted and concluded in 2002. In 2002, the Courts accepted 6201 intellectual property cases of first instance altogether, which accounted for 79.5% of intellectual property cases and increased 17.8% compared with the corresponding period of the last year. Among these cases, disputes over patent, copyright, and technology contracts ranked as the three most prevalent cases and accounted for 84.21% of intellectual property cases.

Among these cases, disputes on infringement are the absolute majority. 1122 copyright infringement cases accounted for 61.1% of copyright disputes cases, 504 trademark infringement cases accounted for 71.3% of trademark cases, 1725 patent infringement cases accounted for 82.9% of patent cases.

According to statistics, in 2003 the Courts accepted 9271 intellectual property cases of first instance, second instance, and retrial which increased by 18.9% compared with the corresponding period of 2002 and among which 8978 cases had been concluded, an increase of 25.4%. The intellectual property cases accepted in 2003 increased by 12.61% to 6983, among which 5534 cases were disputes on ownership and infringement, and they accounted for 79.3% of all the cases. Copyright cases increased the most rapidly and ranked first in intellectual property cases. 2439 copyright cases were accepted in 2003, an increase of 36.68%. Additionally, 100 cases on new plant variety were accepted in 2003.

The increase of concluded cases of first instance was higher than that of accepted cases. In 2003, 6860 intellectual property cases of first instance, which accounted for 74.3% of the intellectual property cases accepted in 2003 and involved RMB1.494 billion, were concluded. The Courts made decisions on 2929 cases, which accounted for 42.7% of these 6860 cases. 84.8% of the concluded cases were concluded by the Intermediate Courts. Among the concluded cases, 94 cases were foreign-related, 58 were Hong Kong-related, and 42 were Taiwan-related.

In 2003, the Courts awarded criminal punishment on 551 persons for crime against intellectual property. Among them, 12 persons were sentenced to more than five years imprisonment, 253 persons were sentenced to less than five years imprisonment, 325 persons were sentenced to criminal detention or public surveillance, 419 persons were sentenced to criminal fine concurrently, and 57 persons were sentenced to criminal fine separately. Through the trial of the cases, a marked effected was achieved: the act of passing off and piracy were punished severely, the legal rights and interests of owner of intellectual property right were protected effectively, the order of market-oriented economy was regulated, and the investing environment was improved. The foreign enterprises and businessmen responded to the crack down by the Chinese courts.

To enforce the newly established laws and regulations, the Supreme People’s Court of China formulated a series of judicial interpretations, especially the interpretation for the enforcement of revised intellectual property laws, such as Regulations on the Application of Law in the Cessation of Infringement of Patent Rights Before Litigation, Interpretation on Application of Laws in the Cessation of Infringement of Right to the Exclusive Use of Registered Trademarks, and other judicial interpretations for the application of Copyright Law and Trademark Law. 

From December 2000 to October 2002, the Supreme People’s Court formulated and published more than ten judicial interpretations, by which the civil procedure system for intellectual property protection, such as civil remedy measures, burden of evidence, prohibitory injunction before litigation, and judicial review for administrative act, were strengthened and perfected. Under the complete intellectual property law system, through the above judicial interpretations, a new Chinese intellectual property judicial protection system had been established.

At present, the Supreme People’s Court is drawing up a Regulation on the Application of Laws in Criminal Cases Relating to Infringement on Intellectual Property. This judicial interpretation will be jointly published by the Supreme People’s Court and the Supreme People’s Procuratorate in 2004.

The Characteristics of the Chinese Intellectual Property Judicial Protection System

What are the characteristics of the Chinese judicial remedy to protect intellectual property after China's Accession to WTO?

1. The intellectual property scope covers all topics that TRIPs discusses. This covers copyright, trademarks, patents, trade secrets, layout designs of integrated circuits, new plant varieties, anti-unfair competition, inventions, utility models, and design. Additionally, copyright includes the copyright for computer software.
 
These rights or interests can be protected according to Patent Law, Trademark Law, Copyright Law, Anti-unfair Competition Law, Civil Procedure Law, Regulation on Protection of Computer Software, Regulation on Protection of New Plant Variety, and the Supreme People’s Courts’ Judicial interpretation for intellectual property protection. If these rights are infringed upon, the owner or the interested parties can file a lawsuit with the Courts or apply for other remedies.

2. Established remedial measures such as permanent injunctions, statutory damages, and the determination of equivalent infringement.
 
Patent Law, Copyright Law, Trademark Law and the corresponding judicial interpretation all provide “the ceasing of the infringing act promptly” as one of the methods of bearing civil liability. The Courts may order the infringer to stop its infringing act (permanent injunction) in the first item of the decision of first instance or the final decision upon the request of the litigant and enforce the injunction compulsorily upon the request of the litigant.

Both Copyright Law and Trademark Law make the infringer civilly liable for compensating for their infringing act. The amount of compensation for infringement shall be the amount of the losses (including any reasonable expenses the infringed has paid in its effort to put an end to the infringement) that the infringed has suffered as a result of the violation during the period of infringement, or the profit that the infringer has earned as a result of the infringement. Copyright Law and Trademark Law provide statutory compensation, that is where the actual losses cannot be determined, the court shall then decide on a compensation amounting to not more than RMB 500,000. Patent Law provides that the court may assess the amount of compensation due. The Supreme People’s Court’s judicial interpretation of Patent Law states that the Courts may assess the amount of compensation, taking into consideration the kind of the patent, the nature and circumstance of the infringement, the amount of the exploitation fee and the nature of it, scope, and the period of the contractual license. If the losses cannot be determined, the Courts may decide on the compensation of not less than RMB 5,000 and not more than RMB 500,000.

To provide all-around protection to the legal rights and interests of the owner of patents and an unequivocal basis to determine the amount of infringement, the Supreme People’s Court’s judicial published an interpretation called “The Principle of Equivalence.” It is the first-of-its-kind document in that it explains how to determine determination the amount of infringement that is done to patent rights. In Article 56 1) of Patent Law the provision reads,  “the scope of protection for a patent right of an invention or a utility model shall be determined by the contents of the patent claim. The specification and appended drawings may be used to interpret the patent claim.” This means that the amount of protection granted for an invention or a utility model shall be determined by the scope defined by the necessary technical characters recorded in its patent claim.

According to the above interpretation, equivalence means not the equivalence of the patent claim, but certain technical characteristics are equivalent to the technical characteristics of the infringing product. Additionally, the provision explains that two requirements must be satisfied at the same time: 1) it performs substantially the same function, in substantially the same way, to achieve substantially the same result as that described in the patent claim; 2) it is so obvious for the average technical personnel that they can associate it with certain characteristics without creative efforts. These two requirements are consistent with the provision of other countries and international treaties.

3. Established temporary measures including preservation of evidence, preservation of property, and temporary injunction. Patent Law, Trademark Law, and Copyright Law all provide the option of a temporary injunction that orders the infringer to cease infringement before litigation and Trademark Law and Copyright Law provide for the preservation of evidence before litigation.

To improve the system of temporary measures before litigation, the Supreme People’s Court formulated judicial interpretations for patents, trademarks, and layout design. According to the interpretations, temporary injunction, preservation of evidence, and preservation of property can be applied to protect all kinds of intellectual property before litigation. They can also be applied when or after the lawsuit is filed.

In the case of a dispute over an anti-unfair competition act and infringement upon trade secrets, temporary measures including injunction, preservation of evidence, and preservation of property can be applied after the case is filed according to the Supreme People’s Court’ s judicial interpretation [12].

4. Establish and improve the rules of evidence in the civil procedure of intellectual property cases. Evidence is very important in the trial of an intellectual property case. The evidence needed in litigation for an intellectual property case is more intricate than that in other civil litigation due varying technical nature of the cases.

(1) Evidence is needed to confirm the right owner and the interested parties. Filing a lawsuit of intellectual property presupposes the fact that the litigant owns the intellectual property right. Therefore, the court shall first determine whether the litigant rightfully owns the intellectual property right. In a case of a copyright, the drafts, original copies, legal publication certificates of copyright registration, and certifications issued by the authenticating organ shall be used in determining whether the litigant rightfully owns the copyright. The defending party is allowed to provide evidence to the contrary

In a case of a copyright, the drafts, original copies, legal publications certificates of the copyright’s registration, and certifications issued by the authenticating organ which are proven to be true, shall be taken as proof that the litigant owns the copyright and the court shall affirm this unless the opposite litigant provide evidence to the contrary to disprove.

When the book publisher or producer of sound recordings and video recordings provides the legal publications as the evidence verifying the fact that he owns the right related to the copyright, the court shall not directly deny his status of being an right owner on the basis that the litigant does not provide the evidence testifying that he has been granted a license by the copyright owner.

The right for a name, packaging, or decoration peculiar to a well-known product results from use. If a litigant files a lawsuit of anti-unfair competition for infringement of the name, packaging, or decoration peculiar to a well-known product, the litigant must provide evidence testifying to the fact that such products are well-known in a certain market. The court shall then confirm that such products are indeed well-known products and shall protect the name, packaging, or decoration peculiar to such products, unless the defendant provides evidence proving otherwise.

Patent rights, rights to the exclusive use of a registered trademark, rights for new plant varieties, exclusive rights for layout designs of integrated circuits, and rights for the name of businesses are the rights registered according to legal procedures or approved after examination. If a litigant provides valid registration certification and the opposite litigant cannot provide the evidence to prove that such right has been canceled, declared to be invalid, or otherwise assigned, the court shall then confirm that the litigant owns the right.
 
The interested parties defined in intellectual property law shall be confirmed according to the facts and the law. According to judicial interpretations, exclusive licensees and sole exclusive licensees can be confirmed as the interested parties. The licensee under the general license contract can be regarded as the interested party if the licensor has authorized it. The interested parties can file a lawsuit or apply for temporary measures by himself or with the owner of the intellectual property right according to the law and judicial interpretations. The exclusive licensee can file a lawsuit or apply for temporary measures by himself on the condition that the right owner does not file a lawsuit or apply for temporary measures.

The Supreme People’s Court’s Regulations on Evidence in Civil Procedure (Evidence Rules) was published in the end of 2002 and came into force on April 1, 2003. It summed up the Courts’ experience in civil cases and discussed the results of trial mode reforms, drawing lessons from the experiences of other countries. This judicial interpretation will play a important role in achieving justice and efficiency in civil procedure. In civil cases of intellectual property, especially the case of infringement, there are usually heated disputes over the facts. To find out the facts, ensure the trial quality, comply with the statutory time limit for trial, and raise trial efficiency, the Courts have to apply the “Evidence Rules” in matters such as burden of evidence, time limit for providing evidence, and ascertainment of evidence.

Articles 2, 4 and 7 of “Evidence Rules” provide the general principles of burden of evidence, which can be applied to the burden of evidence in intellectual property cases. These provisions should be applied to the burden of evidence in intellectual property case unless otherwise provided in laws or interpretations.

Patent Law, Trademark Law, and Copyright Law have some special provisions for burden of evidence. Article 57 2) of revised Patent Law provides that where any infringement relates to a patent for invention or for the manufacture of a new product, any entity or individual manufacturing the identical product must provide evidence to show that the process used in their manufacturing of its product is different from the already-patented process. Article 56 3) of revised Trademark Law provides that where a person unknowingly sells goods which represent an infringement upon another person’s exclusive right to the use of a registered trademark, but can prove that they are obtained by himself legally and can identify the supplier, he shall not bear the liability to pay compensation. Article 11 40) of revised Copyright Law provides that the citizen, legal entity, or other organization whose name is mentioned in connection with a work shall, in the absence of evidence to the contrary, be deemed to be the author of the work. Article 52) of revised Copyright Law provides that a publisher or a producer of reproductions who fails to prove the following shall bear legal responsibilities: That they are legally authorized to publish or produce the reproductions; that they are an authorized distributor of the reproductions; that they are a renter of reproductions of a cinematographic work or a work created by a process analogous to cinematography, computer software, sound recording or video recordings. The Courts enforce these above provisions strictly.

The inversion of burden of evidence provided in Article 4 1) A is consistent with the provisions of Patent Law. However, the inversion of burden of evidence does not mean that the rightful owner does not bear any burden of evidence. The burden of evidence can be inverted and the opposite litigant bear the burden to furnish evidence to show that the process used in the manufacturing of their product is different from the patented process only when the right owner has proved that he owns the patent right and the opposite litigant has manufactured the identical product. When the burden of evidence is inverted, the litigant accused of infringement shall not be exempted from the liability to furnish evidence no matter whether he rebuts the accusation or not, unless he admits that he has used the patented process.

(2) The Evidence Rules provide that the litigant shall bear the liability to furnish evidence for the facts in support of the claim or the rebuttal. During the course of the trial, the judge will have to determine whether the litigant has fulfilled his responsibility for providing evidence according to the actual circumstances of the case. Only by determining correctly whether the litigant has fulfilled his liability to furnish evidence, the facts of the case can then be clearly ascertained and the laws can be appropriately applied. To determine whether the litigant has fulfilled his duty to furnish evidence, the judge has to master the rules of burden of evidence provided by the law and judicial interpretations and apply these rules after understanding the details of the case thoroughly.

If the burden of evidence cannot be determined according to the existing law and judicial interpretations, the court shall then consider the litigant’s ability to furnish evidence to determine burden of evidence according to the principle of justice and the principle of good faith provided in Article 7) of the Evidence Rules. Unique, intricate intellectual property cases will often have to apply Article 7) of the Evidence Rules.

The Interpretation for the Application of Laws in the Trial of Civil Disputes over Copyrights which has been passed by the Adjudication Committee of the Supreme People’s Court states that the material objects and invoices obtained when the litigant purchased infringing productions by order of spot transaction by himself or through trustee can be used as evidence. The notarization issued to the litigant for the evidence obtained in the above methods, and the course of obtaining the evidence in the condition that the notary did not demonstrate his identity to the opposite litigant accused of infringement, can be taken as evidence unless there is evidence to the contrary. This judicial interpretation is beneficial to the infringee’s fulfillment of the responsibility to provide evidence. The court can consult this interpretation on copyright when trying other intellectual property cases.

(3) There is a time limit for providing evidence and for the exchanging of evidence. Following the Evidence Rules, the time limit for providing evidence shall be designated by the court or agreed upon by the litigants with the approval of the court. According to judicial interpretation, the time limit for providing evidence should be determined in the following method: the time limit for providing evidence shall be designated by the court first; if the litigants want to change the time limit for providing evidence through consultation by themselves, the time limit determined through consultation shall be approved by the court and shall not affect the timely conclusion of the case within the statutory time limit. In many intellectual property cases, observing the difference of the litigants’ ability to provide evidence, the court shall allow the litigant to postpone providing evidence upon the litigants’ request should they provide justified reasons.

According to Article 37 2) of the Evidence Rules, where the case is complex and difficult or containing a great deal of evidence, the court shall organize the litigants to exchange evidence before the court session. Because most intellectual property cases do contain a great deal of evidence, the evidence shall be exchanged in most intellectual property cases.

The aim of the early exchange of evidence is to fix the evidence that has been collected, find out the focus of the dispute, determine the litigants’ claim and make preparations for the cross-examination of the evidence. After the exchange of the evidence, the court shall promptly open its session unless the litigants rebut and therefore new evidence is needed for the second exchange of evidence.

During the course of the exchange of evidence in cases of patents or trade secrets, the evidence involving trade secrets also should be exchanged within the scope of plaintiff’s claim. The court may not hear such a case in public if the litigant so requests and may request the opposite litigant to bear the liability to keep silent. If the opposite litigant breaches the request to keep secret, the court may handle such a breach according to the provisions on acts obstructing the civil procedure. If such a breach causes damages of the other persons’ interest, the breaching litigant shall bear legal liability such as ceasing the infringing act and paying compensation for the damages.

(4) Intellectual property cases usually involve a great deal of evidence involving technologies in special fields, which increases the difficulty in ascertaining the facts. Therefore, if the litigant requests that one or two persons with professional knowledge appear in court to explain some problems of technology in special field, the court shall allow it.

The statements of expert witnesses will help the judge to understand the evidence and the technical matters. The expert witnesses can question the expert witness of the opposite litigant, the opposite litigant, and the evaluator. If the litigants have opinions different from the statements of the expert witnesses, the courts allow such litigants to question the expert witnesses and provide opinions to the contrary.

No matter what methods are adopted, the judge shall make the final decision on the basis of the understanding of the technical facts. While the statements of expert witnesses cannot be taken as the direct basis on which the decision is made, the certainly hold much influence in the judge’s decision. Conclusions of the expert witnesses shall be cross-examined and can be accepted only after it has been proven to be true.

5. The establishment of professional tribunals and providing of professional judges. The court system began to reform in 2000. At present, the Supreme People’s Court and 31 Higher People’s Courts all named the No.3 Civil Tribunal as the official tribunal to try the intellectual property cases. The Intermediate Courts of the capitals of provinces, autonomous regions, and municipalities directly under the Central Government also named the tribunals that try the intellectual property cases.

According to the judicial interpretation of the Supreme People’s Court, 44 Intermediate Courts designated by the Supreme People’s Court can accept patent cases as courts of first instance, and more than 400 Intermediate Courts can handle other intellectual property cases, such as trademark cases and copyright cases.

Additionally, a few basic-level courts of some large municipalities designated by the Supreme People’s Court can accept intellectual property cases of first instance. The No.3 civil tribunals are provided professional judges of higher quality in order that the intellectual property cases can be handled appropriately.

After China’s Accession to WTO, the Chinese government assumed the obligation to protect intellectual property. The recent cases tried by the Supreme People’s Court reflect the fact that Chinese judicial organs have strengthened the protection of intellectual property by applying revised intellectual property law.  For example, in one intellectual property case, the litigants had agreed that the amount of compensation for the losses should be ten times the amount of the losses. The court respected the litigants’ agreement and ordered the accused to pay compensation of more than RMB 2,000,000 while the amount of verified losses was only more than RMB 20,000. In another case, the court determined the equivalent infringement and it was the first case in which the Supreme People’s Court determined the equivalent infringement. The court upheld the plaintiff’s claim and ordered the accused to pay the plaintiff RMB 1,000,000 which was calculated on the basis of the unit price of the patented product provided by the plaintiff. The third case is an appeal over the dispute of patent infringement between Eli Lilly Company and Hansoh Pharmaceutical (China) Co., Ltd. Eli Lilly filed the appeal on the grounds that the court of first instance, was in violation of Civil Procedure Law and Patent Law, and took the evidence provided by Hansoh without cross-examination. After appealing the case, the Supreme People’s Court held that the court of first instance adopted the evidence that had not been cross-examined, thus failing to follow the correct process. The act of the court of first instance was in violation of the law and resulted in the facts in insufficient. The Supreme People’s Court set aside the decision of first instance and is resubmitting the case to the court of first instance for retrial.
 
With China’s Accession to WTO, the efforts of the Supreme People’s Court should be noted as they are taking significant steps to strengthen the protection of intellectual property.

 

 

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