The Spectacular Development of Chinese Intellectual Property

System Through 7 Remarkable Milestones

Attorney Le Quang Vinh – Bross & Partners

Email: Vinh@bross.vn

China has made great strides in the development of its intellectual property system, although China national IP strategy has been running 11 years earlier than Vietnam's.[1] That step contributes to making China the second largest economy in the world with GDP in 2020 reaching 14.7 trillion USD. The amazing development of China's IP system can be evidenced by 7 remarkable milestones as below.

First Milestone: China has been the world champion for many years in a row in terms of number of applications for patent, trademark and industrial design

According to the World Intellectual Property Indicators 2021 published by the WIPO, in particularly 2020, China has approximately 1.5 million patent applications, accounting for 45.7% of total number of patent applications in the world. China also accounts for 97.6%, 54.3%, 55.5% and 39.8% of total global applications for utility solutions, industrial designs, trademarks and plant varieties respectively, of which trademarks, particularly in 2020 there were 9.3 million trademark applications filed with the China Intellectual Property Office (CNIPA) compared with more than 17 million trademark applications worldwide.[2] One of the examples that helps evaluate the spectacular development of China's intellectual property after the promulgation of the national IP strategy in 2008 is the statistical index of patent applications per 1 million people. Specifically, in 2008 there were only 147 patent applications filed for every 1 million people in China, but 10 years later this number has increased dramatically to nearly 8 times with 1,001 patent applications filed in 2018 as the WIPO analysis table below.

Second Milestone: Many Chinese companies own thousands of patents, one of them valued at over $50 million

The two charts[3] below reflect three key messages. First, more and more Chinese companies own up to thousands of patents. Second, the number of patents owned by Chinese companies is still 50% larger than that of foreign companies owing the most patents in China in 2020. And third, the number of patents granted to Chinese individuals/ legal entities outnumbers the number of patents owned by foreign entities, for example, in 2020, foreign entities account for less than 17% (with 89 patents granted) compared to over 83% (with 441 patents granted) for Chinese individuals/ legal entities.

Source: CNIPA annual report 2020

Although there is still an opinion that most Chinese patents are of low value, the reality shows that there are still many Chinese patens valued at dozens millions of dollars, for example on November 19-20, 2021, the Dongting Intermediate People's Court of Shandong Province, China held an auction on Alibaba platform 6 patents owned by a Chinese company, Shandong Kerui Petroleum Equipment Co. , Ltd., with a minimum offering price of 1.49 billion yuan ($233 million) as part of a coercive proceeding on behalf of 6 exclusive right holders's creditor. In fact, the six patents, valid until 2034 and 2035, are valued at 2.13 billion yuan ($333 million).[4]

Third Milestone: China's IP legal system is continuously amended and updated to keep up with the development of science, technology and the internet

China continuously promulgates and improves its IP legal frameworks. The four main forms of protection are patents, industrial designs, trademarks and copyrights, which are built into separate laws named respectively as patent law (which regulates 3 subject matters: inventions, utility solutions/utility models and designs), trademark law and copyright law.[5] In addition, China enacted the Law on Prevention of Unfair Competition in 1993, amended in 2019 with the aim of protecting the fair competition order, including protection of trade secrets, protection of unregistered trademarks and trade dress as long as they are famous or influential.

In order to fight against bad faith when establishing trademark rights, China continues to actively amend Trademark Law the 4^th time in 2019 in which the most significant is the addition of Article 4 stipulating that any natural person, legal person or other organization wishing to obtain the exclusive right to use the trademark for their goods or services in the process of production and business activities needs to file a trademark application with the Trademark Office. An application for a trademark registration in bad faith filed with the intention of not being used is not admissible for protection. In order to guide the implementation of Article 4, on October 16, 2019, the Ministry of Market Management (SAMR)[6] issued "Regulations regulating trademark registration applications" effective from December 1, 2019, including 19 articles (“Regulations”) with the main purpose of preventing bad faith when registering a trademark. The Regulations notably use the term “unusual applications” to refer to bad faith or malicious applications.

China’s amendment of its patent law took effect from June 1, 2021, including the first addition of Article 76, which regulates the patent linkage system. To implement article 76, on July 4, 2021, the National Medical Products Administration (NMPA) in conjunction with CNIPA issued "Measures to implement an early settlement mechanism for pharmaceutical patent disputes (experimental)". China's patent linkage system has the function of preventing the license of generic drugs circulation until after the expiration of other's patent. On July 5, 2021, the Supreme People's Court of China (SPC) issued "Rules of the Supreme People's Court on issues related to the application of law in adjudicating civil cases of registering pharmaceutical patent disputes” describes in detail the litigation mechanism. On July 5, 2021, CNIPA published “Administrative Adjudication Measures for the mechanism for early settlement of pharmaceutical patent disputes” detailing the administrative remedies.[7]

Fourth Milestone: The Supreme People's Court of China actively participates in the guidance and interpretation of IP law

The SPC is very active in promulgating legal guidelines and interpretations to direct the court system at all levels to adjudicate intellectual property cases. In 2000, the SPC issued guidelines for adjudicating copyright disputes on the internet. In 2001, the SPC issued guidelines for the application of pre-trial law in patent infringement cases. In 2002, the SPC issued an explanation of the application of the law when adjudicating a trademark dispute. In 2007, the SPC and the Supreme Procuracy (SPP) issued guidelines for applying the law when adjudicating IPR infringement crimes. In 2008, the SPC issued guidelines for adjudicating civil disputes on conflicts between trademarks and business names and prior rights. In 2009, the SPC promulgated regulations on adjudicating administrative cases related to IPR with the subject matter of patents and trademarks. On June 16, 2021, the SPC issued a decision to amend the Regulation on work related to judicial interpretation. Judicial interpretation introduces a new type of judicial interpretation called “Rules” that are used to govern the adjudication and enforcement of the court system. According to the amending decision, the SPC can now issue five types of judicial interpretations for different purposes: (1) “interpretation” (jie shi) - which stipulates how to apply a particular law or how to apply law to a particular set of cases or problems; (2) “regulatory” (gui ding) - formulation of a request or opinion in the spirit of legislation; (3) “rules” (gui ze) – directing and controlling judicial activity and enforcement; (4) “answer” (pi fu) - answer questions/issues asked by a high court or a military court; and (5) “decision” (jue ding) - repeal or amend existing judicial interpretations.[8]

Fifth Milestone: China is the busiest IP litigation place in the world

Regarding the capacity to enforce intellectual property rights, in addition to the system of handling IP infringement by traditional administrative measures, the IP court system was very active and effective, although it was not until 2014 that China started to establish and operate a specialized court system for intellectual property, also known as “IPR Court”[9] located in 3 important centers: Beijing, Shanghai and Guangzhou. At the beginning of 2017, China continued to set up special courts under the current court system but with the special task of intellectual property[10] (specialized/ short "IP Tribunals") in 4 more cities including: Nanjing, Suzhou, Chengdu and Wuhan. According to the SPC's 2020 report, the number of IPR cases heard by the national court system at first instance increased from 101,000 cases in 2013 to 467,000 cases in 2020 or in other words, from 2013 to June 2021, the court system has tried 2.06 million IP cases, including 143,000 patent cases, 473,000 trademark cases, 1.316 million copyright cases and 18,000 cases related to technology transfer contracts.[11] According to the chart below for comparison purposes, in 2017 the Chinese court system received 237,242 IP cases and resolved 225,678 cases compared to 8,857 IP cases heard by the US court system in the same year 2017, or compared with 114,952 IP cases heard by the European Union court system (including courts of 28 member states and courts of the EU).[12]

[Source: https://www.jdsupra.com/legalnews/china-ip-litigation-and-prosecution-20820/]

Sixth Milestone: Speed of the IP case trial is very impressive

China's IP court system and the team of judges are under great pressure due to the large number of IP cases. However, they still prove to be highly productive and efficient in resolving IP cases with amazing speed. For example, the average adjudication time by the Guangzhou IP Court is 50 days. The first instance trials of simple patent disputes are reduced to an average of only 3-4 months. IPR trials with foreign elements in Beijing IP Court are about 4 months while in the EU is normally 18 months. The courts also actively mobilized involved parties to mediate before the procedure process, according to which, for example, Shanghai Intellectual Property Court decided 85 pre-litigation cases, accounting for 29.2% of IP cases entering the mediation stage.

In order to be able to adjudicate IP cases with such impressive speed, the Chinese IP court system has applied a diverse technical analysis mechanism on the basis of using human resources to provide technical support, judicial endorsements and expert opinions. Statistics show that 3 IP courts have recruited 61 technical investigation personnel - who have provided opinions in more than 1000 cases in 2017.

Seventh Milestone: CNIPA's industrial property application examination productivity is very high

According to CNIPA's report, despite the number of trademark applications filed in China reaching over 9.3 million (accounting for 55.5% of the total global trademark application), China still amazes the whole world in term of speed of examining, for example, CNIPA successfully shortened the legal substantive examination time from 9 months to only 4 months, making the total time for trademark registration only about 10 months. The duration for settling complaints and objections to trademarks is also maintained at 18 months. The duration of processing extension, amendment and transfer procedures has been reduced to 15 days, 1 month and 2 months respectively. According to some sources, CNIPA has a total of 16,500 employees including 12,000 patent and trademark examiners.[13]

It is particularly important to note that China's Trademark Review and Adjudication Department ("TRAB"), a unit under CNIPA, plays a very important role. In particular, the TRAB has the authority to accept complaints of the following types: (a) requests for examination of applications filed under Article 32; (b) requests for an examination of an objection denied by the CTMO under Article 33; (c) re-claims being to deal with claims against a denial of protection, objection, or cancellation of a trademark. According to information published by TRAB in 2017, the total number of trademark complaints cases decided by TRAB reached a record number of 168,900 cases of which 9,310 cases were filed by TRAB with subpoenas.

Bross & Partners, a Vietnam intellectual property law firm ranked Tier 1 in 2021 by Legal 500 Asia Pacific, has experience and capacity to resolve complex IP disputes regarding trademark, copyright, patent, plant variety and domain name in Vietnam and abroad.

Should you need any assistance, please contact: vinh@bross.vn; mobile: 0903 287 057; Zalo: +84903287057; Skype: vinh.bross; Wechat: Vinhbross2603.