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RACORN / SHUTTERSTOCK.COM
16 February 2015PatentsGiovanni Guglielmetti

IP in China: Signs of improvement

China has always been seen as a country that provides limited protection of intellectual property rights. Despite the Chinese government’s increased efforts in recent years to protect IP, damages awarded remain low and piracy and counterfeiting remain high, as does the re-offending rate. Moreover, the judicial system still suffers from inefficiency and corruption.

Consequently, companies—luxury brands in particular—encounter problems in enforcing their IP and have difficulty obtaining measures against increasingly sophisticated and organised counterfeiters.

Fortunately, however, the situation shows signs of improving thanks to the growing awareness of the issue, with recent successes in combating counterfeiting after collaboration with the authorities.

These successes include an increase in customs seizures, following the improvement of the recording system for IP right holders and training provided by them to customs officers. Administrative enforcement, such as raids by the Administration for Industry and Commerce, have resulted in positive outcomes for brand owners.

Brands are also collaborating more and more with local businesses, especially e-commerce providers, thereby helping luxury brands to develop IP protection and remove fakes from auction sites connected to large counterfeiters.

Important changes to the Chinese IP system have also been introduced, starting with the reform of the trademark law in April 2014 and followed by the establishment of a specialised IP court in December, with more to follow.

New IP courts

Before this latter change, no specialised IP courts existed in China—only specialised IP divisions spread among the approximately 550 ‘general’ IP courts. Spread over four levels, these courts—the Basic People’s Court, Intermediate People’s Court, High People’s Court and the Supreme People’s Court—are presided over by 3,000 IP judges. The introduction of IP courts has been accompanied by a rapid increase in IP cases in China, with the majority being held in Beijing, Shanghai and Guangzhou.

"The benefits include that IP decisions should now be of a higher quality and consistency, and cases should be handled more efficiently."

This increase led the Standing Committee of the PRC National People’s Congress to issue its decision, on August 31, 2014, on the establishment of IP courts in Beijing, Shanghai and Guangzhou. This decision was then implemented through a set of jurisdiction rules that the Supreme People’s Court issued on October 31, 2014.

Under these rules, the specialised IP courts have:

(i) First instance jurisdiction over:

civil and administrative cases concerning patents, new plant varieties, layout design of integrated circuits, technological secrets (excluding commercial trade secrets) and computer software; and cases on the recognition of well-known trademarks; and

(ii) Second instance jurisdiction over appeals against first instance civil and administrative cases concerning copyright, trademarks, technology contracts, and unfair competition.

The Beijing and Shanghai courts have jurisdiction in their respective cities, whereas the Guangzhou court has jurisdiction over the entire Guangdong province (which is the largest in terms of size and population and includes other cities such as Shenzhen and Zhuhai).

Therefore, although the new specialised IP courts do not cover the entire Chinese territory, more than 50% of all IP cases decided in China each year are brought before these courts—unsurprising given that the combined population of these three areas totals approximately 150 million people.

Additionally, the Beijing specialised IP court has exclusive jurisdiction over appeals against:

(i) Administrative decisions by China’s patent and trademark offices concerning patents, trademarks, new plant varieties and layout designs of integrated circuits;

(ii) Administrative decisions by China’s patent office concerning compulsory licences and the consequent remuneration regarding patents, new plant varieties and layout designs of integrated circuits; and

(iii) Other administrative decisions of the State Council concerning the granting of IP rights in general.

These changes have both benefits and drawbacks. The benefits include that IP decisions should now be of a higher quality and consistency, and cases should be handled more efficiently. We are also likely to see changes in court administration matters with, for instance, the increase in judges’ salaries. The establishment of the specialised IP courts might also lead to an increase in judges’ professionalism and expertise, which are already quite high. Judges are also set to be assisted by experts.

For luxury brands, which are likely to be more concerned with trademark and copyright matters, especially e-commerce matters involving Chinese counterfeiters, the drawback is that the specialised IP courts seem mostly to address patent and technology-related issues. It remains to be seen if the distinction between common and well-known trademarks is an appropriate criterion for determining the jurisdiction of the specialised IP courts.

The specialised IP courts are a pilot project, so if they are successful we expect the Chinese authorities to possibly consider extending the jurisdiction of these special courts to criminal IP cases in the future.

There may be an opportunity to improve and broaden the new system, perhaps in terms of the number of courts and their jurisdiction, when it is evaluated in three years.

Additionally, the specialised IP courts are intermediate courts, the decisions of which can still be appealed before the IP division of the respective Beijing, Shanghai and Guangdong Higher People’s Courts, which are not specialised IP courts themselves.

There is still a long way to go, but these changes are certainly a step in the right direction and show the efforts being made to improve IP protection in China.

Giovanni Guglielmetti is a partner and head of the intellectual and industrial property law department at  Bonelli Erede Pappalardo. He can be contacted at: giovanni.guglielmetti@beplex.com

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