IPR in China: Everything You Must Know
IPR in China

IPR in China: Everything You Must Know

The main reason to study IPR in China is that this country has long been regarded as the “world’s factory,” producing low-quality manufactured items and copying foreign products and business practices. China — or so the tale goes — is a country of knockoffs incapable of the invention and with little respect for intellectual property rights (IPR), whether owing to heavy-handed government involvement or some cultural dispute about Confucian educational principles.

Of course, this isn’t correct. Despite this, many American businesses continue to believe this myth. According to a 2017 survey conducted by the American Chamber of Commerce in China, member businesses have mixed feelings about China’s intellectual property laws and regulations; however, more than half of those polled remain skeptical that the country’s intellectual property laws will be properly enforced.

Foreign companies have long complained that enforcing their intellectual property rights in China is difficult owing to judicial protectionism, difficulties gathering evidence, low damage awards, and perception of prejudice against foreign companies.

China, on the other hand, has been more progressive in recent years and has exhibited a strong commitment to enforcing an effective IPR policy. Indeed, as Chinese companies focus on worldwide development and high-tech innovation at home, they have become increasingly reliant on the government for effective IP protection. In reality, legislative reforms and new enforcement procedures have addressed many of the concerns highlighted by international corporations operating in China.

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What has China been doing for its IPR policy?

China’s legislators have been revising policies, including punitive punishments for IP infringement, among other things. China’s courts have been working hard to enhance trial quality and efficiency, with the goal of dispensing palpable fairness and justice and improving judicial protection of intellectual property rights.

The Supreme People’s Court of the People’s Republic of China (SPC) has been issuing judicial interpretations on legal applications in IP litigations and has built a guidance system by publishing guiding cases and typical cases to improve trial quality and ensure uniform and consistent legal applications in IP-related trials. IP infringements have been aggressively prosecuted in China by the IP law enforcement agencies. 

One of the most common criticisms directed at China’s IPR policy is that matters brought before an intermediate court (at the city level) would face local judicial protectionism.

A plaintiff suing in his/her hometown is much more likely to win in IP lawsuits involving Chinese enterprises, according to Long and Wang’s 2015 study entitled “Judicial local protectionism in China: An empirical study of IP cases”. When cases are appealed to higher courts (at the provincial level), the plaintiff’s location no longer has a substantial impact on a case’s result.

China has taken significant measures to eradicate local judicial protectionism and establish a fair adjudication process in IP matters, as outlined in a white paper by the Supreme People’s Court.

The Supreme People’s Court formed the Intellectual Property Division in October 1995 to manage national cases. Beijing, Shanghai, and Guangzhou each established their own intellectual property tribunals in 2014. Nanjing, Suzhou, Chengdu, and Wuhan all established specialist intellectual property tribunals in early 2017.

Since these courts have first-instance jurisdiction over all IP cases at the provincial level, not only would the adverse consequences of local protectionism be ameliorated in a more methodical manner by expelling cases from local jurisdiction, but the courts will also be able to better provide judges and technical investigators with the knowledge required to deal with challenging nature of their caseloads. This will guarantee that both domestic and international plaintiffs are treated fairly.

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IPR in China: Copyrights, Trademarks, and Patents

On June 1st, 2021, the Fourth Amendment to China’s Patent Law took effect. Patent protection in China has been strengthened as a result of the revisions. Punitive damages for intentional patent infringement have been added to the new Patent Law as well. Punitive damages can be awarded in the range of one to five times the sum estimated based on the patent holder’s losses, the benefit gained by the infringer, or a multiple of the patent license fee. Simultaneously, the maximum number of statutory damages has been raised to 5 million RMB Yuan.

A patent linking mechanism is also included in the new Patent Law. A dispute between a drug marketing approval applicant and the holder of relevant patent rights related to the drug and pending patent application can be resolved in civil judicial or administrative proceedings before the China National Intellectual Property Administration, also known as the Chinese Patent Office, during the drug review and approval process under the patent linkage mechanism.

IPR in China

The patent linkage system’s main goal is to link the drug approval process to a patent infringement lawsuit, resolve patent infringement disputes as early as possible during the generic drug approval process, protect drug patent holders’ legitimate rights and interests, and reduce the risk of patent infringement after a generic drug is marketed.

The condition for punitive damages under the Trademark Law and the Anti-Unfair Competition Law revised in 2019 is “bad faith (or malice),” whereas the prerequisite for applicability in other intellectual property laws is “intent.” In practice, the distinction between the two names generates some misunderstanding. The revised JI defines the concepts of “bad faith” and “intent,” ensuring that they are compatible with the Civil Code’s requirements.

The revisions to the PRC Copyright Law were enacted by the Standing Committee of the National People’s Congress of the People’s Republic of China on November 11, 2020. Since June 1, 2021, the revised PRC Copyright Law has been in effect. The new Copyright Law contains important measures, such as the unrestricted destruction of illegal copies, as well as their manufacturing materials, tools, and equipment. When it is difficult to assess the losses of the copyright owners or the illegitimate gains of the copyright infringers, damages for copyright infringement are computed in consideration of the copyright royalties.

The NPC Standing Committee’s approval of the third amendment to the PRC Copyright Law is not only a significant step toward implementing policies such as strict intellectual property rights protection and improving the business environment and intellectual property rights protection system, but also a necessary step toward aligning with international standards and implementing the Beijing Treaty on Audiovisual Performances, which went into effect in 2021.

Closing Statements

The question that still remains, is whether China’s intellectual property policy is truly as awful as it appears? It is widely assumed that the continuing trade war between the United States and China is at least partly motivated by Communist China’s habit of forcing the transfer of technology and its shoddy IP protection. However, China’s intellectual property policy is not as severe as the continuing trade war narrative implies. Instead, we may observe a contradiction in China’s intellectual property regime: while it is dangerous in many respects, it is frequently less risky than many Western CEOs may believe.

Responding to the contradictory realities of China’s IP protection policy necessitates a more complex two-pronged approach to Chinese market planning. To begin with, Western CEOs should not believe that Chinese intellectual property systems are incapable of securing asset returns. In reality, multinationals may more confidently utilize technology and brands in China to keep up with more progressive Chinese competitors.

IPR in China

Second, Western CEOs should work together to assist future changes in China’s institutions, notably its intellectual property system, in a more constructive way. Further escalation of trade tensions may damage Western corporations more than help them: for example, Chinese enterprises’ state-backed effort to become less reliant on foreign technology/suppliers may accelerate even quicker, and Chinese home customers’ anti-American brand sentiment may deteriorate.

Many online retailers have begun developing user-friendly, internal governance systems that enable the protection of IP and their image as socially responsible corporate citizens in order to combat the spread of counterfeit goods and the rising number of associated complaints. The Alibaba Group, for example, has spearheaded the construction of an ever-more complex and successful IP protection system through testing. Alibaba’s Platform Governance Department has devised and implemented a comprehensive method for detecting and penalizing offers including counterfeit goods on its platforms, based on sophisticated computer technologies and big data. Alibaba’s governance methodology is based on real-time monitoring and an efficient notification mechanism for IP rights infringement.

So, if you’re asking the question of whether Alibaba is going to steal your legitimate idea, China’s recent advancements in IPR protection are more than like to help you protect that idea. The legal advancements are also likely to spur innovation and foster a pro-business climate, allowing IPR holders to rely on their intellectual property to secure their economic interests, ensuring competitive advantages and market growth.

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