Protecting intellectual property in China requires good strategy, and foreign businesses too often show weakness through ignorance. Richard Li explores the latest laws and trends, and asks what weapons corporate counsel need to be clever warriors for their companies

The development of China’s economy has entered a stage where more emphasis is being placed on quality, making the protection of outstanding brands and innovative achievements increasingly pressing. In terms of strengthening efforts to protect intellectual property (IP), China has rolled out a series of important measures in the past few months, increasing the penalties for infringement, and further improving the intellectual property (IP) judicial adjudication regime.

However, certain enterprises, particularly foreign ones, still lack sufficient understanding of China’s IP protection regime. Corporate counsel responsible for IP need to stay abreast of the most recent legal and judicial trends, while also improving internal communication and management mechanisms, as only in this way can they effectively protect their company.

Zhang Yi, a senior partner in the Shanghai office of Hiways Law Firm, notes that in the past few months the senior state leadership has been sending out strong signals on strengthening IP protection. In his keynote speech at the opening ceremony of the first China International Import Expo, in November 2018, President Xi Jinping raised this issue and mentioned the introduction of an IP punitive damages system.

And at the dual national meetings this year – the National People’s Congress and the Chinese People’s Political Consultative Conference, both held in early March – Premier Li Keqiang reiterated that IP protection was to be comprehensively strengthened, with improvements to be made to the infringement punitive damages system.

So the general direction has been set, and a significant number of specific developments in the protection of IP by China’s legal and judicial systems has also been achieved.

On 26 November 2018, the Supreme People’s Court adopted the Provisions on Several Issues Concerning the Application of the Law in the Examination of Cases Involving Act Preservation in Intellectual Property Disputes, which entered into effect on 1 January 2019. Helen Cheng, a partner in the Shanghai office of Zhong Lun Law Firm, says these judicial interpretations comprehensively address such issues as jurisdiction, application, examination, and provision of security relating to act preservation (i.e., court orders to restrain actions that may cause harm) in IP disputes, not only improving and making uniform the regulations on act preservation, but also ratcheting up the protection of IP.

“As intangible property, intellectual property has always faced the problem of the difficulty of making up the losses incurred once it is infringed,” says Cheng. “Even if the rights holder ultimately prevails, it might still lose its competitive advantage due to infringement. Accordingly, the judicial philosophy of intellectual property protection has gradually shifted from after-the-fact relief to before-the-fact prevention, and act preservation is an important measure for before-the-fact prevention for rights holders.”

On 5 December 2018, the State Council passed the Bill to Amend the Patent Law (Draft) and submitted it to the Standing Committee of the National People’s Congress for deliberation. “The highlights in the current Patent Law draft are quite numerous, putting forth revised measures for ‘chronic patent illness’, an acute problem in practice, and genuinely strengthening the level of patent protection,” says Cheng. “For example, with respect to the difficulty of adducing evidence, the draft clarifies the infringer’s burden of proof in co-operating in providing relevant information, which will aid in reducing circumstances in which a rights holder is unable to obtain reasonable damages due to the difficulty of adducing evidence.

Helen Cheng Zhong Lun Law Firm

“With respect to the issue of inadequate damages, the draft increases the penalties for the passing off of a patent, adding a ‘not less than the amount and not more than five times’ punitive damage system for wilful infringement. Additionally it increases the upper limit on statutory damages from RMB1 million (US$149,000) to RMB5 million, markedly enhancing the level of protection of rights holders.”

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