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CHINA (PRC FIRMS): An Introduction to China

Contributors:
Feng, Janet Zheng
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The year of 2020 unexpectedly started with the outbreak of COVID-19, an unprecedented disruptor to everything we are used to. Whilst we still need time to fathom to what extent the pandemic affects the global economy, myriad industry sectors and their in-house departments unsurprisingly face budget restraints and law firms are therefore met with slashed billable hours, shelved projects and cancelled in-person meetings. People quickly adapt to the new normal, with traditional face-to-face attorney-client meetings largely replaced by virtual meetings and IP Offices and courts moving most case hearings online. During times of volatility, China’s top legislature has completed the overhaul of amendment to Patent Law and Copyright Law and promulgated varied judicial interpretations and policy documents projected to bring substantial changes to the nation’s intellectual property landscape starting 2021.

On January 15, 2020, China and the United States signed the Economic and Trade Agreement (Phase One), under which China has taken obligations covering wide intellectual property issues, including trade secret protection, reforms to pharmaceutical-related patents, combating e-commerce infringement, anti-counterfeiting, deterring bad faith trademarks, reforms to evidence rule and so forth. China has promulgated a series of laws and regulations this year, which is read as both to satisfy China’s own demand and to echo the foregoing agreement.

The most eye-catching legislation is the amendment to the Patent Law. After several years of discussions, the amendment was finally passed this year. The amendment materialises quite a few major reforms, among which the Patent Law recognised 1) patent linkage and patent term compensation for pharmaceutical-related patents, where the patentee is permitted to solve patent disputes during the drug marketing approval process without waiting for the drug to be launched to the market, and the patent term could be granted with extension up to five years and no more than 14 years from the date of regulatory approval in China as compensation for unreasonable examination delay during the patent granting procedure; 2) reforms of rules about damages, where the legislation recognises punitive damages for wilful infringement, increases the statutory damages from the range “CNY 10,000 ~ 1,000,000” to “CNY 30,000 ~ 5,000,000”, and recognises shifting the burden of proof to the defendant to produce a sales record which is under the defendant’s control provided that the plaintiff has exhausted measures to collect such evidence; 3) reforms to design patents, where for the first time partial design is permitted to be patentable subject matter, and the patent term is extended from 10 years to 15 years; 4) provisions about good faith principle to discourage patent abuse.

China has also refined its trade secret regime. The Supreme People’s Court promulgated a judicial interpretation for civil cases, “Provisions on Several Issues Concerning the Application of Law in Adjudicating Civil Cases Involving Infringement of Trade Secret”, which provides comprehensive rules including definition of trade secrets, determination of appropriate trade secret protection measures, determination of misappropriation, parameters to ascertain trade secret infringement, preliminary injunction and remedies, allocation of burden of proof, and dovetailing of civil proceeding and criminal proceeding, among others. Almost at the same time, the Supreme People’s Court and the Supreme People's Procuratorate jointly promulgated a judicial interpretation for criminal cases, “Interpretation on Several Issues Concerning the Application of Law in Handling Intellectual Property Criminal Cases (III)”, which stipulated the criteria of how to determine that a trade secret infringement has met the threshold for pursuing criminal liability of the infringer. Furthermore, the State Administration for Market Regulation has also published a draft rule regarding administrative enforcement of trade secrets, which is still under discussion.

Moreover, the Supreme People’s Court promulgated a strand of important judicial rules that will guide the judicial practice in a broad manner, including “Several Provisions on Evidence in Intellectual Property Civil Lawsuit”, which details the evidence rules for intellectual property civil litigations; and “Provisions on Several Issues Concerning the Application of Laws in Adjudicating Administrative Cases Involving Granting and Affirmation of Patent Rights (1)”, which provides detailed rules and criteria followed by courts regarding patent re-examination and invalidity cases.

Besides the above, the Supreme People’s Court also promulgated several policy provisions, including “Opinions on Fully Strengthening the Judicial Protection of Intellectual Property”, “Opinions on Ramping up Punishment to Intellectual Property Infringement”, as well as “Guidelines on Adjudicating Intellectual Property Civil Cases Concerning E-Commerce Platform”, aiming to improve the friendly environment to intellectual property owners in China.

There are still quite a lot of legislative initiatives in the pipeline. For instance, the government is drafting rules to implement the amended Patent Law and the Copyright Law, there will be more judicial interpretations associated with the major amendments, and the government is also drafting rules to conduct administrative enforcement of intellectual property rights. The well-coordinated legislative efforts insure that the practice will have detailed rules and criteria to follow and is also conducive to increase the consistency, predictability and transparency for intellectual property protection in China.