Can You Protect Your Intellectual Property Rights In China?

The short answer is yes. But it requires more effort than in the developed world, such as in Canada.

The standard advice that I provide to clients is that the PRC has intellectual property laws that meet world standards, and that it is a party to the major treaties on IP rights. The main laws, the Patent Law, the Trade-mark Law and the Copyright Law all have been either amended three times, or are in the midst of their third set of amendments, since the adoption of the original version after the commencement of the改革开放 (reform and opening up) period. The amendment procedure, like the Chinese law-making process in general, involves a great deal of internal and external (or foreign) consultation. I have participated in many of the consultations.

Currently the amendments for the Trade-mark Law have largely been completed and were released for a further consultation in September by Legislative Affairs Office of the State Council before being tabled in the Standing Committee of the National People’s Congress for adoption.

The Patent Law amendments were adopted by the Standing Committee on December 27,2008 and came into effect on October 1, 2009.

After a couple of years of background research the amendment process for the Copyright Law was declared as having commenced in July.

Secondly, Chinese courts do enforce these laws. Most Chinese courts in the more advanced regions have separate divisions for intellectual property cases. These divisions also handle Anti-Monopoly Law cases and franchise cases, and are considered the more sophisticated and elite divisions of the courts. The courts have made posting their decisions online a priority and tens of thousands of IP decisions are now available online, albeit in Chinese. The IPR Division of the Supreme People’s Court has a special web page where decisions from mostly outside Beijing are posted: http://ipr.chinacourt.org/ . The Beijing court system has its own web page:  http://bjgy.chinacourt.org/cpws/?LocationID=0901020000 that has the decisions from the various divisions including the 民事-知识产权文书 (Civil Section – IPR Decisions).

But this does not mean that there are not problems protecting your IPR in China. The PRC is still a developing country with a gdp per head that ranks in the low- middle income class. There is a general correlation between a higher gdp per head and jurisdictions having a strong rule of law.  The tables below that I prepared for an American Bar Association presentation on compliance programs in China last summer illustrate this idea:

 

Nominal GDP Per Head                                             Rule of Law

(World Bank)                                                 

           1. United States—11                                    1. Singapore--      100   

           2. Japan--              19                                      2. United States--  90

           3. South Korea--   35                                     3. Japan--                81

           4. China (PRC)--    98                                     4. South Korea--    75

                                                                                      5. China (PRC) --   46

                                                                                      6. North Korea--   0

http://info.worldbank.org/governance/wgi/index.asp

 

In other words, In can be said that the PRC has a “Wild West” economy. The phrase more commonly used in China is that it lacks市场秩序 or “market order.” Further the Chinese economy is developing very rapidly as we all know. In many ways this rapid development is similar to a historical period in the U.S. In a 2007 Harvard University Press book by history professor Stephen Mihm entitled “A NATION OF COUNTERFEITERS: CAPITALISTS, CON MEN AND THE MAKING OF THE UNITED STATES, he described the social conditions in the U.S. after the revolution and while the country expanded westward as:

“… a tumultuous period in which the rigid hierarchies of colonial times finally dissolved, replaced by the more fluid social order of a democratic commercial society. Self-fashioning and self-advancement slowly became a viable way of life…”

In my view something similar is happening in the PRC as people jockey for a position in the rapidly emerging private sector of the economy.

From these social conditions emerge real threats to your IPR, such as the widespread practice of counterfeiting. But also from these conditions there has emerged in China a real desire to move beyond this lack of market order. And in comparison to other countries having a similar gdp per head China does very well. As Professor Randall Peerenboom put it in his book, “CHINA MODERNIZES: threat to the west or model for the rest?” (2007) “China’s legal system now outperforms the average in its income class on the World Bank’s rule of law index.” (p. 20).

What I and others who look carefully at the Chinese IPR court decisions have noticed is that foreigners are more likely to win their cases than not. This may be that foreigners are somewhat afraid of the Chinese court system and thus refrain from bringing the more doubtful cases to court. Or it could be from a bias in favour of foreigners. But either way it is harder to detect a bias against foreigners in the Chinese IPR cases than it is to detect one in their favour. Maybe the courts are just neutral with respect to foreigners.

I am not confident that Chinese judges are totally neutral in IPR matters. In the early United States frontier justice was described as “rough justice” with a reduced tolerance for the rights of the accused. There were said to be “hanging judges” who sought to establish law and order in the old west with stiff punishments and a low tolerance for possible defenses.

I do see examples of such IPR cases in China where in my view the judge has shown a low tolerance for a counterfeiter, and has written a judgment against the alleged counterfeiter with a reduced reliance on legal logic to support his findings.

In these social conditions I generally advise clients that their intellectually property rights can be protected in China, but they will probably have to spend more on such protection and due diligence then they do in North America. How to do this is a topic for another posting.

And one of the more significant issues in protecting your IPR in China is how to prove your case in a Chinese court. China is a civil law jurisdiction modeled on the German legal system. This is a choice made long ago by the Dowager Empress Cixi and her administration at the end of the Qing Dynasty. In civil law systems the courts operate in different ways, and rely more on written evidence, preferably from third party sources, than on the oral evidence of the parties. This also is another topic for future discussion. But in short, it means that to protect your IPR in the Chinese courts you will also need to plan more in advance.

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