Championing IPR
Xi’an Intellectual Property Tribunal is established in northwest China’s Shaanxi Province on February 24, the first in northwest ChinaThe U.S. Trump administration did not wait long before hardening its tone toward China. Barely a year in office, accusations of China violating American intellectual property rights (IPRs) have already been made. The White House then launched an investigation under Section 301 of the U.S. Trade Act of 1974, arguing that China forces foreign companies to turn over technology secrets. Experts believe that the issue has become one of the main reasons behind the looming trade war between the world’s two largest economies. The accusation was refuted by Shen Changyu, Commissioner of the State Intellectual Property Office (SIPO) of China. According to him, the accusation is baseless, and the investigation report of Section 301 did not take into account the Chinese Government’s efforts to protect IPRs. In fact, 10 years after the implementation of China’s national strategy on intellectual property, the country is more than ever committed to better IPR protection, he said.
A leap forward
China’s modern IPR protection regime came into being in the late 1970s. China was thus a latecomer in terms of IPR protection, in addition to having fragile foundations, said Wang Binying, Deputy Director General of the World Intellectual Property Organization (WIPO). “But in just four decades, the country has managed to accomplish what other countries have taken several centuries to achieve,” she added. If, for some, China still has the unsavory reputation of being a copycat uninterested in respecting intellectual property, recent data paint a completely different picture. Last year, China paid $28.6 billion in IPR royalties to foreign IPR holders, compared to $1.9 billion in 2011. The amount paid to U.S. IPR holders alone in 2017 increased by 14 percent year on year. Data also shows that in 2017, a total of 1.382 million patent applications for invention were filed in China, which puts the country in the first place globally for the seventh consecutive year in this regard. Moreover, many of the applications now come from abroad. According to statistics published by the SIPO, in 2017, the office granted more than 23,000 patents to U.S. applicants, placing the United States second among foreign countries.
“China’s implementation of its intellectual property strategy demonstrates the Chinese Government’s determination to protect IPRs,” said Mark Snyder, Vice President of Qualcomm, a U.S. leading manufacturer of electronic chips. Qualcomm has also become one of the leading patent applicants in China, which also explains why its investments have increased significantly in China in recent years.
“Meanwhile, Chinese innovators are increasingly outward-looking and seeking to spread their original ideas to new markets,” explained WIPO Director General Francis Gurry. China has also become the second largest source of international patent applications filed through WIPO in 2017, gradually closing the gap with the United States. Huawei and ZTE - two Chinese technology giants - ranked at the top of patent applicants in 2017.
Another revealing fact is that in recent years, particularly since 2014 when three intellectual property courts were set up in Beijing, Shanghai and Guangzhou, China has seen a rise in patent dispute resolutions related to foreign companies, who consider themselves treated on an equal footing in the country. Reports indicate that in 2015, 65 foreign plaintiffs won against foreign defendants in Beijing Intellectual Property Court; foreign plaintiffs suing Chinese companies won in 81 percent of cases, about the same success rate as Chinese plaintiffs.
Further strengthening protection
Despite China’s undeniable progress in the field, its IPR protection regime is far from perfect. In his speech at the Boao Forum for Asia Annual Conference 2018 held in South China’s Hainan Province in early April, Chinese President Xi Jinping called for further strengthening of IPR protection. “IPR protection is the centerpiece of the system for improving property rights protection, and it would provide the biggest boost to enhancing the competitiveness of the Chinese economy,” he pointed out, adding that stronger IPR protection is the requirement of foreign enterprises, and even more so of Chinese enterprises.
Specifically, China aims, among other things, to significantly increase the cost of violating IPR for offenders. According to the current Patent Law, in cases where judges do not have sufficient evidence to establish harm suffered by the victim, the maximum amount payable for damages is 1 million yuan ($157,000). To give full play to its deterrent effect, the fourth revision of the law is expected to increase this amount. “It was proposed to increase punitive damages and legal compensation to add new administrative sanctions and to resolutely fight violations,” said SIPO Commissioner Shen.
Meanwhile, with the implementation of an innovation-driven development strategy in China, not only big companies, but also small and medium-sized ones are seeking to protect their IPRs. Thus, to meet the growing needs of emerging industries, the SIPO has set up 19 centers dedicated to IPR protection throughout China. “These centers, which aim to carry out investigations, enforce the law in a fast and coordinated way, and offer one-stop, low-cost and high-performance services,” said Shen. The office expects to further extend its network and perfect its structure this year, he added.
Another important measure aims at restructuring the SIPO, which is now responsible for the administration of trademarks, patents and geographical indications - a responsibility that was previously shared among several departments. According to Shen, the restructuring will address issues such as the lack of administrative cohesion and redundancy of enforcement functions, thus strengthening and improving the application of relevant laws. “Today, China has gone from a student to a strong advocate, a major player and an active builder of international IPR rules,” said Wu Handong, Professor at Zhongnan University of Economics and Law.
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