Enforcement in the East I: What’s the use of a Chinese patent?

In Insights, Uncategorized

9 July, 2009

In recent years, many of the former planned economies in the East have put state-of-the-art IPR legislation in place. Even so, IP managers in Western countries often hesitate to spend money on adding a Russian or Chinese member of a patent family.

It’s true that a patent requires more of its owner (patentee) than a trademark or copyright does. The average police officer will recognise a fake waist belt or a pirated DVD on sale in a street, while very few people apart from IP specialists know what technology is patented. With few exceptions, it is the patentee’s responsibility to discover infringements and notify the police, the customs or the like. However, the efficiency and swiftness of national judicial systems differ considerably, as do the familiarity with IPR and the toolbox of available actions to stop an infringement.

This blog post discusses enforcement of patents in China, and one that is soon to follow will be about Russia.

Over the past twenty years, China (pop. 1.3 billion, GDP $ 4.4 trillion) has reformed its IP system fundamentally. Chinese industry, once heavily focused on the manufacture of ‘existing’ products, is becoming more and more knowledge-based, and this stimulates IP awareness in the country. Court statistics show a remarkable development: in 2008 more than 24,000 IP cases were closed, in 2007 about 18,000 cases, in 2006 about 14,000 cases, while the yearly average between 1991 and 1996 had been 3,500 cases. The Chinese government considers national legislation, which is now in line with the TRIPs agreement, to be complete and to fully cover all aspects of penal law actions, temporary civil injunctions, litigation and customs procedures.

Chinese courts at the lowest level, and, indeed, the majority of those at the next level up, are not authorised to deal with IP-related cases. Yet know-how is spreading thanks to the fact that increasing numbers of cases are being handled outside Beijing or Shanghai, thus enabling the judges to swiftly accumulate IP experience. The government will further boost this development by means of a training programme.

As many know, American patent litigation involves complex initial ‘discovery’ procedures, high attorney expenses and damages of a magnitude that sometimes condemns the losing party to immediate bankruptcy. The Chinese judicial procedure is comparatively swift – usually faster than in Sweden or Denmark – and the damages awarded are moderate (see the CIELA database). The litigation expenses to be paid by the losing party are rarely excessive.

An interesting procedural provision in the country’s Patent Law is the reversed burden of evidence when infringement in a patented process of manufacture is claimed: unless the resulting product is a known one, the defendant has to prove that his manufacture is carried out in a manner that is different from that used in the patented process.

Certain difficulties in enforcing judgements have been reported, especially in rural areas where local protectionism is strong. Regarding damages, the public can log on to the website of China’s Supreme People’s Court to check for pending obligations from civil court rulings nationwide.

IP rights can be registered with the customs authorities, whose representatives will then look for and impound infringing goods as they cross the border. In recent years the Chinese IP Office, SIPO, has set up local IP authorities in each of the nation’s 31 provincial capitals. These are intended to assist in handling cases of patent infringement. The Ministry of Commerce also runs some fifty IP Service Centres to increase the local judicial penetration. Complaints can be filed via their hotline number 12312.

From time to time, foreign organisations draw attention to how the Chinese authorities fail to discover and stop violations of IP rights, especially copyright and trademarks. This is why the United States Trade Representative maintains China on the Priority Watch List in this year’s Special 301 Report on IP enforcement. Managing Intellectual Property is of a similar opinion.

The DG Trade within the European Commission runs a website dedicated to IPR and Trade, including enforcement issues. European companies working with China may want to turn to the China IPR SME Helpdesk, which is there to help them on a practical level.

Returning to the initial question, it is clear that China is going through a period of dramatic change as regards patents and their enforcement. Government entities seem to be one step ahead in this development, pushing it forward and encouraging private stakeholders to join in. Judging by the indicators available to us, a Chinese patent is becoming more and more useful.

Anders Hansson, Associate

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