China tops EU list of IP’s ‘problem’ countries
The “scale and persistence” of IP right problems in China, including forced technology transfer and bad faith trademark registrations, have kept the country at the top of the EU’s list of priority countries.
The European Commission issued a report yesterday, January 9, identifying three groups of countries where the state of IP rights protection and enforcement gives rise to high levels of concern.
China remains as the only priority one country on the list, because of the “scale and persistence” of problems.
More than 80% of the seizures of counterfeit and pirated goods by EU customs authorities originate from China and Hong Kong, according to reports.
India and Southeast Asian countries such as Indonesia, Malaysia, Thailand and Vietnam are also significant sources of counterfeits while transit hubs such as Hong Kong, Saudi Arabia, Singapore and the United Arab Emirates also play an important role.
“While the Chinese legal system for the protection of IP rights has substantially developed during recent years, concerns remain about the lack of clarity of legal provisions, which often seem to provide the authorities with an unusually broad margin of discretion for the practical implementation of laws and regulations,” said the report.
In March 2018, China’s government approved a plan to restructure the administration responsible for IP rights. The EU noted that it was too early to assess the effect of this administrative reform.
However, the establishment of three specialised IP courts in Beijing, Shanghai and Guangzhou is “clear progress” said the report, adding that the creation of specialised IP court as part of the Supreme People’s Court (focusing mainly on patent cases) is “promising” as it could increase coherence of court decisions at all levels.
Systemic problem
The EU report added that forced technology transfer is an “increasingly important trade irritant” and continues to be a systemic problem in China.
“It is a complex phenomenon which includes a variety of practices carried out by the government or government-influenced private actors that require, pressure or induce foreign firms to transfer their technology to China in exchange for market access, investment access or other administrative approvals,” said the report.
On January 1, the much publicised Foreign Investment Law came into effect, banning the practice known as forced technology transfer.
As an example, the EU claimed that China forces foreign companies to license technology, often at below-market rates, as a pre-condition to access and operate on certain markets.
In addition, the report noted that EU stakeholders are reporting that Chinese companies widely use these technologies without paying adequate royalties for the standard-essential patents (SEPs) involved.
“Chinese competition authorities are reported to often impose heavy fines on foreign holders of SEPs, setting unreasonably low royalty rates, or using ‘informal’ investigations to influence business to business negotiations,” it added.
Priority countries
India, Indonesia, Russia, Turkey and Ukraine remain priority two countries, all of which allegedly have “serious systemic problems”.
Argentina, Brazil, Ecuador, Malaysia and Thailand remain priority three countries (where the gravity and the number of problems identified in these countries are lower than in priority two countries).
Due to its growing importance as a transit country for counterfeits, Nigeria was also added to priority three list.
Saudi Arabia was selected because of its role as a regional transit country for counterfeit and pirated goods and because stakeholders report high-scale satellite and online piracy and ineffective enforcement measures to tackle them.
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