Shanghai, August 2025. After months of investigation and legal action, Lusheng Law Firm (‘Lusheng’) has successfully represented one of the world’s leading breeders of table grapes, cherries, and blueberries, BLOOM FRESH International Limited (‘BLOOM FRESH’), to secure the destruction of a batch of unlawfully propagated vines of the IFG Ten variety known to consumers as SWEET GLOBE™(甜蜜地球™). In this case, vines and fruit of IFG Ten were being sold by the infringing party under the name of "Linglong Xingguang" (玲珑星光), which was deemed a serious breach of BLOOM FRESH's plant variety rights (PVR).&nbsp;
As a result of the litigation action, the illegal propagator of IFG Ten, was compelled to destroy the illegal vines at their own expense and pay substantial compensation to BLOOM FRESH.&nbsp;
This decision should be a wake-up call for any parties involved in the unauthorized cultivation and sale of BLOOM FRESH varieties. The company remains committed to taking legal action against any infringing use of its plant varieties and trade marks. In addition to IFG Ten, BLOOM FRESH holds numerous popular varieties and trade marks, such as IFG Six (registered trademarks: /SWEET SAPPHIRE™)/甜蜜蓝宝石™and IFG Twenty-two (registered trademarks: CANDY DREAMS™/糖果梦想™).&nbsp;
&nbsp;
<h2>Sunny Su of Lusheng Law Firm, the case’s leading lawyer:&nbsp;</h2>
"The success of this litigation case was down to the precise identification of infringement leads, efficient action, and the staunch assistance and cooperation of BLOOM FRESH. The Lusheng team satisfied the chain of evidence requirements through meticulous investigation and coordinated precise DNA testing comparisons. The result was an effective implementation of the overall strategy ultimately assisting BLOOM FRESH to combat illegal propagation and sales and halting the infringement. Infringing operations of this nature are often complex such as coordinated planting by multiple parties, organization management by specialized entities, and covert sales channels, which significantly increase the difficulty of evidence collection. However, drawing on our extensive experience in the protection of new plant varieties and our close collaboration with BLOOM FRESH, we were able to secure the evidence and substantiate the legal arguments. This case is an example of China's strong plant variety protection system, demonstrating the legal system's commitment to a “'full-chain protection' of intellectual property rights."&nbsp;
&nbsp;
<h2>Josep Estiarte, CEO of BLOOM FRESH:&nbsp;</h2>
"Today we send a very clear message to the industry: We have zero tolerance for illegal propagation and any infringement of our intellectual property rights. We are fully committed to enforcement and will dedicate all necessary resources to protect our rights—no infringement will be overlooked. This case also serves as a warning that violators will face severe economic and legal consequences."
Josep Estiarte emphasized that, "The reason this matter is so important to us is simple: authorized growers in China have placed their trust in us to support their long-term, sustainable growth. We have a responsibility to ensure that infringers are held accountable through legal means—protecting the interests of our licensed partners and safeguarding consumers’ legitimate rights.”&nbsp;

Lusheng secures major victory for BLOOM FRESH in First-of-its-type PVR litigation in China

Large-scale manufacture and export of counterfeit products, including amplifiers, headphones and microphones were halted&nbsp;Three leading audio equipment brands including Shure, have scored a decisive victory against a network in China that were engaged in large-scale manufacture and export of counterfeit products, including amplifiers, headphones and microphones.The case started in May 2022 when <a href="/">Lusheng</a> Law Firm, working with its strategic partner Rouse, uncovered a network of nine companies in China, including trading, logistics and manufacturing companies across Guangdong Province, exporting counterfeit audio equipment to South East Asia. The network operated over eighty separate online stores on Shopee and Lazada supplying to customers in Vietnam, Thailand, Indonesia, Malaysia and Philippines. Although several audio brands were targeted by the counterfeiters, only three brand owners, Shure and two others engaged Lusheng and Rouse to launch a coordinated action.Lusheng reported the case to the Guangdong Province Public Security Bureau (PSB) who coordinated local PSB units to conduct simultaneous raids against all the targets. As well as seizing counterfeit products on site at several locations, the PSB investigated the trading company at the heart of the network and, through careful digital forensics, uncovered records showing more than US$1.7 million in sales of counterfeit products of various international brands.The case concluded in December 2024 with seven suspects handed custodial sentences ranging from two to four and a half years and fines totalling US$1.1million.&nbsp; To address their civil liability, Lusheng concluded settlement agreements with the suspects for&nbsp;considerable compensation.Chris Bailey, now Head of UK &amp; EU Enforcement for Rouse, who led the case in his previous role in China, said：&nbsp;“This is a very gratifying outcome, both for the criminal sanctions and the civil recovery, which returns much more to our clients than the case cost them. It demonstrates the professionalism of China’s PSB in analysing digital evidence from online sales. And shows the value of attacking networks rather than individual parts of the chain: what appeared to be eighty retailers in five countries were actually different outlets of the same organisation. Instead of scattered online takedowns at the local level, the brand owners have uprooted the source”.

Leading audio brands score major victory against counterfeiting network in China

<ul>
<li>The Supreme People's Court upholds landmark ruling regarding the protection of ENZAFruit’s Scilate apple variety, brand name “Envy”, under China’s revised Seed Law</li>
<li>Lusheng helped ENZAFruit secure RMB 3.3 million (£319,000) worth of damages – a significant compensation sum awarded as part of a vegetative Plant Variety Right (PVR) infringement civil case, and the requirement for the infringer to destroy all illegally propagated plant materials.</li>
</ul>
<a href="https://urldefense.com/v3/__https:/www.lushenglawyers.com.cn/__;!!FMox2LFwyA!uIMoC0eAY6XmoxU88JHKDJ6xVijVTOvQxAcldq-dTlyhVAj0nqBdR48wN039b69N_fmuvgmetr8hz6TbUBFC$">Lusheng</a> has helped its client&nbsp;<a href="https://urldefense.com/v3/__https:/www.enzafruit.be/en__;!!FMox2LFwyA!uIMoC0eAY6XmoxU88JHKDJ6xVijVTOvQxAcldq-dTlyhVAj0nqBdR48wN039b69N_fmuvgmetr8hz8sfGnM_$">ENZAFruit New Zealand International Limited</a>, a subsidiary of T&amp;G Global, a leading New Zealand-based fresh produce business, secure the high amount of compensation for a vegetative PVR infringement civil case, following the final ruling by the Supreme People’s Court of the People’s Republic of China. The Supreme People’s Court has ordered the infringer to destroy all illegally propagated plant materials.
In this second instance ruling, Lusheng used its years of PVR filing experience to expertly secure punitive damages totalling RMB 3.3 million (£319,000) to ENZAFruit.
This is a remarkable compensation amount awarded for a PVR infringement case, with the court doubling the illegal revenues generated from the infringing activities to calculate the punitive damages based on the defendant’s demonstration of malice and serious infringement.
According to the Standing Committee of the National People's Congress’ inspections of the enforcement of the Seed Law in 2023, the average total for damages is about RMB 425,000 (£54,000).
The decision upholds an earlier ruling regarding the protection of ENZAFruit’s ‘Scilate’ apple plant variety rights by the Lanzhou Intermediate Court of Gansu Province in November 2023. The court found that the defendant had infringed ENZAFruit’s IP rights by unlawfully cultivating and selling ‘Scilate’ plant variety material and apples harvested from the illegal materials. The Supreme Court ordered the infringer to cease all violations and to destroy illegally propagated plant materials to protect the &nbsp;plaintiff’srights and interests.
Lusheng’s IP litigation team proved this by investigating, collecting and conducting a DNA analysis of the necessary propagation materials during the sapling planting and fruit harvesting seasons from several orchard sites in China.
The judgement by the Supreme People’s Court is a few of its kind, setting a precedent for foreign and domestic PVR holders &nbsp;by extending protection over any harvested fruit to propagation material of any variety, following the recent strengthening of China’s <a href="http://en.npc.gov.cn.cdurl.cn/2021-11/24/c_910015.htm">Seed Law</a>.
Sunny Su, Lusheng principal, Digital and Commercial Team, commented: “This successful case underscores the increasing importance of IP protection for local and foreign brand owners in China's agrifood industry, particularly given the rising demand for quality produce. Recognising the significant time, financial investment, and human resources required in the plant breeding process, this ruling highlights the enforceability of IP rights for asexually propagated materials like fruits and horticultural plants. We believe this outcome, supported by the comprehensive protection offered under the newly implemented Seed Law, will encourage local and international PVR holders to confidently protect their assets and invest in China.”
Liping Xu, Lusheng senior litigator emphasized: “This case represents one of the rare instances in the new plant varieties where punitive damages have been applied in high-compensation cases. The Supreme People's Court elaborated on how harvested materials impact variety rights holders and concluded that calculating damages based on these infringing harvested materials better protects the competitive interests of these rights holders. Furthermore, the destruction of illegally propagated plant materials is the most effective means of safeguarding the interests of PVR holders.”
Morgan Rogers at ENZAFruit added: “This landmark ruling underscores China's commitment to protecting plant variety rights, giving T&amp;G Global greater confidence in our Chinese investments. With stronger IP protection, we can expand our licensing of premium varieties like ENVY® branded apples, benefiting Chinese consumers, partners, growers and our business. This decision paves the way for T&amp;G Global to accelerate our growth plans and further contribute to China's thriving horticulture sector."
With the defendant’s appeal dismissed, ENZAFruit will now also be entitled to file a new lawsuit and seek further compensation for the infringement of rights since the initial 2023 judgement.

Second-instance victory! Lusheng helps parent company of Enzafruit secure landmark win, as Supreme People's Court upholds 3.3 million yuan damages award

Entertainment Law Newsletter | April 1, 2026

Data Newsletter | January 8, 2026

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New rules on administrative protection of trade secrets: interpretation of the Regulation

<h2>This article was first published on IAM. Please contact us for any reprint.</h2>
Patent specifications and drawings are important carriers of technical information. Once they are published by the China National Intellectual Property Administration (CNIPA), they become publicly available knowledge resources. With the rapid development of generative artificial intelligence, a key question has emerged: May published patent specifications and drawings be used as training data for AI models? In China, what legal and compliance risks would such use entail?
&nbsp;
<h2>The copyright nature of patent specifications and drawings and the requirements for publication</h2>
According to the Copyright Law, a work must possess originality and be expressed in a tangible form. Although the drafting of patent specifications and drawings is subject to formal requirements under the Patent Law and they must be examined by the patent administrative authority and published by way of announcement, in essence they are not administrative documents but technical literature created by the applicant. As long as they meet the constitutive elements of a work, they should be protected by the Copyright Law.
There remains room for creativity in the wording, sentence arrangement and design of drawings in patent specifications and drawings, which can reflect the author’s individualized choices and the “beauty of science”. Therefore, patent specifications and drawings that meet the minimum standard of creativity may well constitute works within the meaning of the Copyright Law.
Judicial practice has already provided clear recognition in this regard. For example, in (2021) Jing 73 Min Zhong No. 4384, the Beijing Intellectual Property Court held that patent specifications and drawings do not fall within the category of administrative documents, and that examination and publication by the national patent administrative authority do not alter their nature. The court found that the drawings in the specification demonstrate originality in their structural arrangement and choice of lines and should be protected as graphic works. Similarly, in (2022) Shan Zhi Min Zhong No. 112, the Shaanxi High People’s Court emphasized that the patent specification possesses originality in the expression of the technical solution, the choice of wording and the arrangement of sentences, and constitutes a literary work; its copyright nature cannot be denied on the ground of formal requirements.
These cases indicate that courts generally recognize that patent specifications and drawings should be protected by copyright when they satisfy the requirement of originality, rather than being regarded merely as technical literature. However, the purpose of publishing patent specifications and drawings is to disseminate technical knowledge, and this function naturally limits the exercise of copyright. The acts of the national patent administrative authority in the course of examination and publication, as well as those of the public in reproducing and disseminating these documents to obtain technical information, are generally regarded as reasonable conduct, provided that they do not affect the normal exploitation of the works by the copyright holder or cause unreasonable prejudice. The academic community has also pointed out that the technical disclosure nature of patent specifications and drawings determines that the scope of their copyright protection should be appropriately narrowed so as to avoid impeding the circulation and utilization of knowledge.
&nbsp;
<h2>Legal risks and compliance framework for AI training</h2>
In the development of artificial intelligence, the lawfulness of training data has always been one of the core issues. Including published patent specifications and drawings in training data reflects the reuse of technical resources, but also raises complex considerations under the Copyright Law. Where patent specifications and drawings possess originality and are thus protected as works under the Copyright Law, training activities may involve the right of reproduction or the right of communication through information networks, thereby giving rise to potential infringement risks.
How to strike a balance between copyright protection and technological innovation remains a challenge jointly faced by the judiciary and policymakers. The “three-step test” established under China’s Copyright Law requires that the use must fall within statutory circumstances, must not conflict with the normal exploitation of the work, and must not unreasonably prejudice the legitimate interests of the copyright holder. Whether AI training satisfies this framework has yet to see a uniform conclusion. Although the training process is essentially an analytical use of works rather than a direct substitute for the originals, the delineation of “normal exploitation” and “unreasonable prejudice” still requires further clarification by the judiciary.
In judicial practice, the Shanghai Intellectual Property Court, in the 2023 LoRA/Altman case, introduced the concept of “analytical use”, holding that the purpose of generative AI training is to analyze the ideological elements and patterns of expression of works rather than to reproduce the originals, and that such use may therefore be recognized as fair use. However, the court also stressed that AI service providers must take measures to prevent users from generating infringing content, and that fair use does not equate to exemption from liability. This judicial practice provides an important reference for AI training, while also highlighting the responsibility requirements under the compliance framework.
Meanwhile, policy-level regulations are being continuously refined. The Interim Measures for the Administration of Generative Artificial Intelligence Services explicitly require AI service providers to use training data from lawful sources during the training process, to respect intellectual property rights, to enhance the authenticity and diversity of data, and to establish transparent mechanisms to prevent the generation of infringing content. These provisions not only provide enterprises with a compliance framework, but also mean that even if judicial practice adopts a tolerant attitude toward training activities, enterprises must still assume compliance responsibilities at the institutional level.
In industry practice, some developers of AI patent tools have indicated that their products are based on large models (such as those of Google and OpenAI), and that their training data cover a large amount of publicly available information. Whether patent specifications and drawings are included often depends on data collection strategies and copyright compliance measures. This shows that while industry practice is exploring technological possibilities, it is also continuously adjusting compliance pathways. Although copyright risks cannot be completely eliminated, if the use is limited to internal analysis and model optimization, and does not affect the normal exploitation of patent specifications and drawings or cause unreasonable prejudice to the rights holders, it may meet the requirements of fair use. To this end, enterprises should adopt multiple measures in practice: retain records of the sources of training data and compliance, establish internal review mechanisms, and clearly define the scope of data use and allocation of responsibilities in cooperation agreements.
&nbsp;
<h2>Conclusion and international comparison</h2>
Published patent specifications and drawings provide an important data resource for the development of artificial intelligence. In China, their use for AI training lies at the intersection of the Copyright Law, the doctrine of fair use, and emerging regulatory requirements. Future developments may lie in, on the one hand, gradually clarifying the boundaries of fair use through judicial precedents, and on the other hand, establishing an operable compliance framework through policies and industry norms, thereby promoting innovation while maintaining the order of intellectual property protection.
In international comparison, the U.S. Copyright Office’s third policy report on artificial intelligence, issued in May 2025, focuses on the training of generative AI models. The United States relies on the doctrine of “fair use”, and courts, in multiple cases involving search engines and data mining, tend to find that analytical use rather than substitutive use may constitute fair use.
The European Union, through the Copyright Directive (2019/790/EU), has established a “text and data mining exception”, allowing research institutions and certain commercial entities to use protected works under specific conditions, while granting rights holders the option of “reservation of rights” to exclude their works from being used for data mining or AI training.
This institutional divergence indicates that, in its future institutional design, China may draw on the case-law approach of the United States as well as the legislative model of the European Union, and, in light of its own needs for intellectual property protection and industrial development, explore an appropriate balancing mechanism.
&nbsp;
<h4>[1] https://wenshu.court.gov.cn/</h4>
<h4>[2] https://wenshu.court.gov.cn/</h4>
<h4>[3]https://www.copyright.gov/ai/Copyright-and-Artificial-Intelligence-Part-3-Generative-AI-Training-Re…</h4>
<h4>[4]https://eur-lex.europa.eu/eli/dir/2019/790/oj/eng</h4>
<h4>[5]https://wenshu.court.gov.cn/ https://wenshu.court.gov.cn/</h4>
<h4>[6]https://www.copyright.gov/ai/Copyright-and-Artificial-Intelligence-Part-3-Generative-AI-Training-Re…</h4>
<h4>[7]https://eur-lex.europa.eu/eli/dir/2019/790/oj/eng</h4>

From patent disclosure to AI training: legal challenges and institutional responses

Intel sound mark case: review standards and overcoming lack of distinctiveness

On December 18, the online seminar titled “From Trademarks and Trade Dress to ‘Traffic Strategies’: New Trends in Unfair Competition Disputes and Corporate Responses”, hosted by LCOUNCIL, was successfully concluded. Attorney Wang Shan, Director of the Shanghai Office of Lusheng Law Firm and Co-head of the Dispute Resolution Practice, was invited to serve as the keynote speaker of this course.
Focusing on the evolving trend of intellectual property protection from traditional identifiers to traffic assets, Attorney Wang, in light of the latest judicial practice and typical cases, provided enterprises with response strategies and practical advice, and in particular shared the following key views:
&nbsp;
<h2>1. Reshaping Competitive Logic: From “Identifier Contention” to “Traffic Game”</h2>
Attorney Wang pointed out that the core logic of commercial competition is undergoing a profound transformation. The “identity trilogy” composed of traditional trademarks, enterprise names, and trade dress remains the cornerstone of brand protection; meanwhile, traffic, as a new type of competitive asset that is quantifiable and monetizable, has become a key variable in breaking the traditional protection pattern.
With reference to typical cases in recent years, Attorney Wang elaborated on the evolution of judicial practice—from the “Certain Niu” trade name protection case, which clarified the source protection of enterprise names, to the “Certain Growth Chair” design protection case, which explained the value of trade dress, and further to the “Certain Branded Bag” mass imitation case, which filled the gap in cross-field protection.
In addition, infringing patterns are continuously upgrading. New types of traffic-related infringement methods, such as short-video traffic diversion, live-streaming room scenario imitation, and keyword traffic hijacking, are becoming increasingly common. Infringers often cross industry boundaries, their conduct is more concealed, and their impact is more extensive.
&nbsp;
<h2>2. The Way to Break the Deadlock: Building a Full-Chain Protection System</h2>
In response to this commercial evolution from “identifier contention” to “traffic game,” Attorney Wang indicated that building a full-chain protection system is the key to breaking the deadlock, and shared three critical response directions:
<ol>
<li>Consolidate the fundamental barrier by achieving full coverage of core trademarks and related classes, and convert distinctive trade dress into patents or “distinctive signs”;</li>
<li>Leverage technological tools to conduct multi-dimensional monitoring and accurately capture infringing traces across platforms and industries;</li>
<li>Make good use of a combination of legal measures by concurrently asserting trademark infringement and unfair competition, decisively applying punitive damages, and coordinating with platforms to cut off infringing traffic channels.</li>
</ol>
The forthcoming new Trademark Law and the revised Anti-Unfair Competition Law, which came into effect in October this year, also delineate competitive red lines for traffic assets. Under the new pattern where traffic equates to competitiveness, enterprises should clarify the logic of rights and conduct forward-looking planning, so as to safeguard their brands and long-term value in fierce market competition.
&nbsp;
Courseware Application | From Trademarks and Trade Dress to “Traffic Strategies”: New Trends in Unfair Competition Disputes and Corporate Responses 
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From trademarks and trade dress to traffic tactics: new unfair competition trends

<h2 style="text-align: left;">Table of Contents</h2>
I. Panel Ruling, Appeal and Subsequent Developments
II. Overview of the World Trade Organization (WTO) Dispute Settlement Mechanism
III. Multi-Party Interim Appeal Arbitration Arrangement (MPIA)
IV. Initial Arbitration Ruling of the World Trade Organization (WTO)
V. Filing an MPIA Appeal
VI. Recent Follow-up Steps
VII. Subsequent Measures if China Fails to Comply with the Ruling
VIII. Current Status of Litigation on Standard-Essential Patents (SEPs) in China: Judicial Evolution from Anti-Suit Injunctions to Independently Determining Global Royalty Rates
IX. Conclusions and Implications
&nbsp;
<h2 style="text-align: left;">Panel Ruling, Appeal and Subsequent Developments</h2>
Executive Summary
In July 2025, the appellate arbitration tribunal of the World Trade Organization (WTO) ruled that China’s practice of issuing anti-suit injunctions (ASIs) in standard-essential patent (SEP) cases violates its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The ruling found that China’s anti-suit injunction policy restricts the rights of SEP holders to enforce their patents and conduct licensing negotiations on a global basis, fundamentally altering their bargaining position. The tribunal overturned the previous findings of the panel and required China to bring its relevant judicial practices into conformity with WTO rules within 90 days. This ruling marks a major victory for European patent holders, reaffirms their ability to protect intellectual property across jurisdictions, and demonstrates that the WTO continues to play a role in resolving global intellectual property disputes even during the paralysis of its Appellate Body.
&nbsp;
Background
WTO dispute case DS611 originated in 2022, when the European Union challenged China’s practice of issuing anti-suit injunctions (ASIs) in SEP cases. The EU argued that these anti-suit injunctions restricted the rights of EU SEP holders to enforce their patents and conduct licensing negotiations outside China, and that this practice violated TRIPS by weakening the protection of patent holders’ rights at the international level. Although the initial ruling of the WTO panel was mixed, the case subsequently entered the appeal stage under the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). It should be specifically noted that the panel’s initial ruling in fact supported China’s position, finding that China’s anti-suit injunction policy did not violate international trade rules.
&nbsp;
<h2 style="text-align: left;">Overview of the World Trade Organization (WTO) Dispute Settlement Mechanism</h2>
The WTO dispute settlement mechanism is a multi-stage procedural system for handling trade disputes between Members:
&nbsp;
Consultation Stage: The complaining party shall request consultations with the respondent, seeking to reach an amicable solution within 60 days.
Panel Stage: If consultations fail, a panel shall be established to examine the dispute. The panel shall hold hearings and ultimately submit a report containing findings of fact and recommendations.
Appeal Stage: The parties may appeal the panel’s legal findings to the WTO Appellate Body within 60 to 90 days. The rulings of the Appellate Body are final and binding.
Implementation Stage: The losing party must comply with the ruling or agree on a compensation arrangement. If it fails to do so, the prevailing party may request authorization to impose trade sanctions.
Special Note: As the WTO Appellate Body is currently non-functional, some Members have adopted the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary appeal mechanism to ensure the continuity of the dispute settlement process.
&nbsp;
<h2 style="text-align: left;">Multi-Party Interim Appeal Arbitration Arrangement (MPIA)</h2>
Since 2019, due to the United States’ continued obstruction of the appointment of Appellate Body members, the WTO Appellate Body has been unable to function properly, resulting in appeals being indefinitely stalled and weakening the dispute settlement mechanism.
In response, a number of WTO Members, including the European Union and China, jointly established the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary appeal mechanism to ensure the continued operation of rules-based dispute settlement procedures.
China agreed to use the MPIA procedure in the DS611 case, reflecting its strategic consideration of maintaining stable trade relations with the EU, a consideration that is to some extent influenced by the ongoing China–US trade war.
&nbsp;
<h2 style="text-align: left;">Initial Arbitration Ruling of the World Trade Organization (WTO)</h2>
Background
In August 2020, the Supreme People’s Court of China ruled that Chinese courts may issue anti-suit injunctions (ASIs) to prohibit patent holders from bringing patent actions before non-Chinese courts.
Overview of the Dispute
On 18 February 2022, the European Union initiated WTO dispute settlement proceedings, alleging that China restricted EU companies from seeking patent judicial protection before foreign courts.
Core Issues in Dispute
The dispute in this case focuses on standard-essential patents (SEPs), namely patents that are indispensable for implementing specific industry standards (such as in the field of mobile communications). The EU argued that anti-suit injunctions (ASIs) issued by Chinese courts impeded EU companies from legitimately exercising their SEP rights.
The EU alleged that these measures violated multiple provisions of TRIPS.
Initial Ruling
The WTO panel’s initial ruling supported China’s position and found that the anti-suit injunction policy did not violate international trade rules.
&nbsp;
<h2 style="text-align: left;">Filing an MPIA Appeal</h2>
Time and Background of the Ruling
On 21 July 2025, the MPIA arbitration tribunal issued its ruling. This ruling constitutes the second appeal arbitration case conducted under the MPIA framework in which both China and the EU are participating parties.
Core Findings
According to the ruling of the WTO appellate arbitration tribunal in the EU–China intellectual property enforcement dispute (DS611), China must adjust its anti-suit injunction policy.
Arbitral Decision
The MPIA arbitration tribunal overturned the original panel ruling that had been favorable to China. The tribunal found that China’s anti-suit injunction policy restricted SEP holders from exercising their intellectual property rights before foreign courts, in violation of relevant provisions of TRIPS.
Procedural Background
As the WTO Appellate Body is currently non-functional, the EU and China, pursuant to Article 25 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), jointly agreed to resort to arbitration under the MPIA arrangement in this case.
Significance of the Case
The ruling marks a major victory for the EU and requires China to adjust its policy measures that hinder foreign patent holders from seeking judicial patent protection outside the Chinese jurisdiction.
&nbsp;
<h2 style="text-align: left;">Recent Follow-up Steps</h2>
Implementation Period
China must revise its anti-suit injunction policy. China is required to consult with the EU to determine a “reasonable period of time” for implementation, or have a specific time limit determined by arbitration. By reference to China’s past WTO dispute cases, such implementation periods are typically between 8 and 15 months (see other WTO cases involving China).
&nbsp;
Compliance Review
The EU will monitor whether China actually revises its anti-suit injunction policy within the agreed time limit to ensure compliance with the MPIA ruling.
&nbsp;
<h2 style="text-align: left;">Subsequent Measures if China Fails to Comply with the Ruling</h2>
Compliance Review Procedure: If China fails to complete the policy revisions within the reasonable period of time, the EU may request the establishment of a compliance panel to determine whether China’s measures are consistent with WTO rules.
Authorization of Trade Retaliation: If China fails to comply with the ruling, the EU may seek authorization to implement equivalent trade countermeasures (such as increasing tariffs on Chinese goods), with an intensity commensurate with the trade losses caused by China’s anti-suit injunction policy.
Given that the MPIA ruling was issued on 21 July 2025, the parties should currently be in the stage of agreeing on a reasonable period of time for implementation. Available information has not yet indicated any subsequent developments after the ruling concerning China’s response measures or implementation timetable in this case.
&nbsp;
<h2 style="text-align: left;">Current Status of Litigation on Standard-Essential Patents (SEPs) in China: Judicial Evolution from Anti-Suit Injunctions to Independently Determining Global Royalty Rates</h2>
Since the EU filed its WTO complaint on 18 February 2022, Chinese courts have not issued any new anti-suit injunctions.
&nbsp;
Historical Practice (Before 2022)
Chinese courts had used anti-suit injunctions as a strategic tool to consolidate their judicial authority in setting global FRAND royalty rates. Such anti-suit injunctions created jurisdictional barriers, preventing patent holders from pursuing parallel litigation before foreign courts. Such parallel proceedings could challenge or undermine the authority of Chinese courts in determining global licensing terms.
&nbsp;
Post-WTO Complaint Period (2022 to Present)
Since the EU initiated the WTO complaint in 2022, Chinese courts have significantly adjusted their judicial strategy. Without relying on traditional anti-suit injunctions, Chinese courts have continued to exercise jurisdiction to determine global royalty rates, which marks a more institutionally confident approach in handling international SEP disputes.
Evidence currently observed indicates that, although Chinese courts continue to advance the practice of determining global licensing rates, they have shown clear restraint in issuing anti-suit injunctions since the initiation of the WTO complaint.
&nbsp;
<h2 style="text-align: left;">Conclusions and Implications</h2>
The MPIA arbitral ruling in case DS611 is an important milestone in international enforcement of intellectual property rights and presents key opportunities and considerations for patent holders, particularly enterprises holding SEP portfolios.
&nbsp;
Key Takeaways
<ul class="list-paddingleft-2">
<li>
The ruling reaffirms that the WTO dispute settlement mechanism remains an effective tool for addressing restrictions on cross-border enforcement of intellectual property rights, even during the paralysis of the Appellate Body.
</li>
<li>
Patent holders may more freely implement cross-jurisdictional enforcement strategies without fearing obstruction by Chinese anti-suit injunctions.
</li>
<li>
The ruling strengthens the bargaining position of SEP holders in FRAND licensing negotiations with Chinese implementers.
</li>
</ul>
&nbsp;
Strategic Considerations: Although Chinese courts have in practice ceased issuing anti-suit injunctions since 2022, clients should continue to closely monitor China’s formal implementation of the MPIA ruling and any resulting changes in judicial practice. The continued evolution of Chinese courts toward independently determining global royalty rates indicates that SEP disputes will remain complex and that jurisdictional strategies must be formulated with caution.
&nbsp;
Forward-Looking Outlook: Enterprises holding significant SEP portfolios should reassess their global enforcement strategies in light of this ruling. The ruling may also influence how other jurisdictions approach anti-suit injunctions and cross-border patent disputes. We will continue to track developments in China’s implementation timetable and subsequent compliance measures.

China’s SEP practice faces challenges under WTO rules

<h2 style="text-align: left;">What is Patent administrative protection? Why is it important?</h2>
Patent administrative protection serves as a vital mechanism for safeguarding patent rights through administrative enforcement channels. Organizations like the China National Intellectual Property Administration utilize this system to enable patent owners to swiftly address issues such as infringement and counterfeiting. By leveraging administrative procedures, rights holders can quickly halt unauthorized use of their inventions, making this approach an effective tool for promoting innovation. However, for cases that require compensation or involve complex disputes, a combined strategy of administrative and judicial avenues is often recommended.
&nbsp;
<h2 style="text-align: left;">How Patent Administration Enforcement Service Works</h2>
<h2 style="text-align: left;">Scope of Patent Administrative Protection</h2>
The scope of patent administrative protection encompasses several key areas.
First, patent owners can handle infringement disputes by filing complaints with administrative agencies, requesting that infringers cease their actions. This process allows for a prompt response to unauthorized use of patented inventions.
Additionally, administrative penalties can be imposed on counterfeit behavior, including the production of products counterfeiting a patent (e.g. Labeling the product with a patent number that does not exist,&nbsp; counterfeiting other’s patent number) and false patent labeling. This serves as a deterrent against infringement and ensures that violators face consequences for their actions.
Mediation of patent disputes is another crucial aspect of administrative protection, addressing issues related to patent ownership and licensing agreements. This mediation process helps resolve conflicts amicably and efficiently.
Finally, other administrative measures include customs filing of patent rights for border protection and the protection of intellectual property at exhibitions. These measures are essential for safeguarding patent rights in various contexts and ensuring compliance with patent laws.
&nbsp;
<h2 style="text-align: left;">Process of Administrative Protection (Infringement Disputes Example)</h2>
<ol>
<li> Complaint:The patentee submits a request and relevant evidence (e.g., patent certificate, proof of infringement).</li>
<li> Filing Review:The administrative authority decides within 15 days whether to accept the case.</li>
<li> Investigation and Evidence Collection:Agencies may conduct inspections and inquiries.</li>
<li> Decision Making:If infringement is confirmed, an order to cease the activity may be issued; dissatisfied parties can file an appeal to the upper level administrative authority or file a lawsuit.</li>
<li> Execution:If the infringer refuses compliance, the authority may seek court-enforced action.</li>
</ol>
&nbsp;
<h2 style="text-align: left;">Advantages and limitations</h2>
Benefits
<ul>
<li>High Efficiency:&nbsp;The process is typically faster than judicial litigation, often concluding within 3 months.</li>
<li>Low Cost:&nbsp;No court fees are required, making it accessible for small and medium-sized enterprises and individuals.</li>
<li>Specialized Expertise:&nbsp;Administrative agencies possess specialized knowledge in patent examination , suitable for complex cases.</li>
<li>Proactive Measures:&nbsp;Agencies can investigate counterfeit acts without needing complaints from rights holders.</li>
</ul>
Limitations
<ul>
<li>Compensation Requires Judicial Procedures:&nbsp;Administrative agencies cannot impose a fine as administrative penalty,&nbsp; or &nbsp;rule on compensation to the right owner, necessitating separate civil litigation.</li>
<li>Limited Coercive Power:&nbsp;Enforcement may require court involvement, and some cases could shift to judicial proceedings.</li>
<li>International Differences:&nbsp;Some countries, like the United States, rely primarily on judicial protection and have fewer administrative options.</li>
</ul>
&nbsp;
<h2 style="text-align: left;">Practice in China</h2>
Compared to the international landscape, China has established a robust administrative protection system that forms a “dual track” approach alongside judicial protection. This integrated framework enhances the effectiveness of intellectual property rights enforcement.
The legal basis for this system is grounded in the Patent Law, the Implementing Regulations of Patent Law, and the Administrative Enforcement Measures for Intellectual Property Rights and relevant local laws and regulations. These regulations provide a comprehensive structure for managing patent-related issues and ensuring compliance.
Market supervision bureaus in China regularly publish cases of penalties for counterfeit patents, demonstrating the active enforcement of these laws. Additionally, the system facilitates the rapid removal of infringing products from e-commerce platforms through administrative complaints, allowing for swift action against violations and protecting the interests of patent holders.
&nbsp;
<h2 style="text-align: left;">Conclusion</h2>
In conclusion, patent administrative enforcement in China is essential for protecting IP rights and promoting innovation. The dual-track approach, combining administrative and judicial mechanisms, enhances enforcement effectiveness. Understanding these processes is vital for rights holders.

Navigating patent administrative enforcement in China – Part 1

Decoding DeepSeek’s patent technology and layout

The trends shaping Chinese pharma patent litigation

In Part 1 (<a href="/awards-press/navigating-patent-administrative-enforcement-in-china-part-1/">https://rouse.com/insights/news/2025/navigating-patent-administrative-enforcement-in-china-part-1</a>) of our two-part series, we explored the significance of patent administrative protection in China and its role in safeguarding patent rights through efficient enforcement. In Part 2, we present case studies from 2023 that showcase the Guangdong Provincial Market Supervision and Administration's efforts to enhance IP protection and effectively resolve patent disputes while combating infringement and counterfeiting.
&nbsp;
<h2>Case Studies of Patent Administrative Protection</h2>
In 2023, the Guangdong Provincial Market Supervision and Administration handled notable cases to strengthen intellectual property protection. These cases cover a range of rights, including patents, trademarks, and geographical indications, showcasing the province’s commitment to combating infringement and counterfeiting. By releasing these typical cases, the administration aims to illustrate the effectiveness of its enforcement efforts and promote a fair market environment.
For details, please refer to:&nbsp;<a href="https://amr.gd.gov.cn/zwdt/xwfbt/content/post_4441602.html">Information source: Guangdong Provincial Administration for Market Regulation Time: June 18, 2024</a>&nbsp;&nbsp;
<ul>
<li>Window Sticking Machine Utility model patent dispute</li>
</ul>
The Guangzhou and Wenzhou Market Supervision Administrations collaborated on a patent infringement case involving a utility model patent for a “pre-pressing device for cutting film of window sticking machines.” The applicant, who held the patent, claimed infringement during the South China International Printing Exhibition. The two administrations coordinated to resolve the dispute through mediation, resulting in the respondent halting the infringement and paying a rights protection fee.
This case has transformed the administrative adjudication process for patent infringement disputes by establishing a cross-regional administrative protection framework through procedural linkage, technical support, and cross regional collaboration.It effectively addresses the root cause of patent infringement in a timely manner. Furthermore, the case’s management spans pre-exhibition, during the exhibition, and post-exhibition phases, offering valuable insights for developing new models to resolve exhibition-related patent disputes and enhancing the long-term impact of administrative oversight on illegal activities at exhibitions.
<ul>
<li>A Starry Sky Projection Lamp invention patent dispute</li>
</ul>
In this case, the patentee of an invention for a “Starry Sky Projection Lamp” sought administrative action against an electronic company in Shenzhen for patent infringement. The respondent failed to defend their case. Without the support of the respondent's defense, the technical investigator was commissioned to participate and provide a comparative opinion on whether the accused infringing product falls within the scope of patent protection, providing professional technical support for the fair handling of this case. The administrative ruling ordered the company to cease selling the infringing products and remove them from e-commerce platforms. The case highlighted the importance of technical investigations in resolving complex patent disputes.
<ul>
<li>Dipeptidyl Peptidase Inhibitors invention patent dispute</li>
</ul>
The Yuexiu District Market Supervision Administration addressed a dispute involving a patent for “Dipeptidyl Peptidase Inhibitors.” The applicant alleged that a competitor participated in centralized procurement of infringing products without permission. The investigation confirmed that the competitor’s products fell within the patent’s scope, leading to an administrative ruling to halt sales. This case underscores the significance of protecting pharmaceutical patents for public health and market competition.
<ul>
<li>Articulation Device and Storage Device invention patent dispute</li>
</ul>
The Foshan Market Supervision Administration handled a case involving an “Articulation Device and Storage Device” patent. The applicant provided evidence that the respondent was manufacturing and selling infringing products. The administration ruled in favor of the applicant, determining that the products violated the patent’s claims. This case is notable for its focus on environmental features in patent claims and reinforces the criteria for determining infringement.
<ul>
<li>Controller for Electronic Devices design patent dispute</li>
</ul>
The Dongguan Market Supervision Administration dealt with multiple infringement cases regarding a design patent for a “Controller for Electronic Devices.” The applicant submitted 13 requests against various respondents. The administration adjudicated these cases simultaneously, ultimately ruling that the respondents infringed the design patent. This series of cases illustrates the effective coordination of law enforcement efforts in handling complex patent disputes.
<ul>
<li>Drum Brake Table Method invention patent dispute</li>
</ul>
In a case involving a patent for a method determining the height difference of a drum brake table, the Zhuhai Intellectual Property Office investigated a claim against an automobile testing company. Expert opinions indicated that the accused methods did not infringe the patent, leading to the rejection of the requester’s complaint. The subsequent legal proceedings reinforced the role of technical expertise in patent adjudication.
<ul>
<li>Desk Lamp Design Patent dispute</li>
</ul>
The Zhongshan Intellectual Property Office addressed a complaint regarding a design patent for a “Desk Lamp.” The applicant alleged infringement by 20 different enterprises on e-commerce platforms. Utilizing a coordinated law enforcement model, the administration facilitated mediation, resulting in all parties ceasing their infringing activities. This case highlights the benefits of comprehensive law enforcement in resolving multiple patent disputes efficiently.
<ul>
<li>Lamp Design Patent Disputes</li>
</ul>
The case involves a design patent dispute between two affiliated companies, one owning a patent for a "Lamp (Disk Module 9028)" and the other for a "Ball Bubble Lamp" along with six additional related patents. The requester alleged that a Jiangmen-based company infringed on their patent by manufacturing and selling unauthorized products. To resolve the issue, the Jianghai District Market Supervision Administration filed separate cases for the eight patents but opted for a joint trial due to the overlap in the products involved. A mediation agreement was reached and confirmed by the Guangzhou Intellectual Property Court on June 7, 2023. This case is notable for its innovative approach of merging separate filings, facilitating efficient mediation, and promoting collaboration between administrative and judicial bodies, ultimately reducing litigation burdens and enhancing the effectiveness of patent enforcement.
<ul>
<li>Production of Cosmetics violating an EU invention patent</li>
</ul>
The Baiyun District Market Supervision Administration conducted an inspection of a cosmetics company suspected of producing counterfeit goods. The investigation revealed that the products were falsely labeled with a European patent number. Administrative penalties were imposed, including fines and confiscation of illegal gains. This case emphasizes the ongoing efforts to combat counterfeiting in the cosmetics industry.
&nbsp;
<h2>Conclusion</h2>
In conclusion, Part 2 of "Navigating Patent Administrative Enforcement in China" underscores the Guangdong Provincial Market Supervision and Administration's commitment to enhancing intellectual property protection through a series of notable case studies. These cases illustrate innovative administrative methods, effective cross-regional collaboration, and the crucial role of technical investigations in resolving patent disputes. By showcasing successful enforcement actions against infringement and counterfeiting across various rights, this part highlights the importance of a robust administrative framework in fostering a fair market environment and promoting innovation in China.
&nbsp;
The information in this article is for general informational purposes only and should not be considered as professional or legal advice. Please get in touch with us should you like to discuss further.

Navigating patent administrative enforcement in China – Part 2

China’s revised Plant Variety Regulations (2025): key changes & tips

Following our firm’s successful representation of the Scilate (Envy) plant variety case, which was subsequently recognized by the Supreme People’s Court as a landmark case in the judicial protection of plant variety rights, we have frequently been asked about the keys to successful enforcement. Drawing from our practical experience, we have developed an effective litigation strategy we refer to as the “Three Killer Moves’. This term is inspired by the legendary three killer moves of Cheng Yaojin, a character in the Chinese classic Romance of the Sui and Tang Dynasties, known for his swift and decisive tactics that could turn the tide of battle.
The core challenge in plant variety infringement litigation lies in proving that the defendant has used the protected variety without authorization. This evidentiary process involves several tightly connected steps. When properly executed, the “Three Killer Moves’ strategy enables right-holders to build a strong case. These strategic steps are as follows:
&nbsp;
<h2 style="text-align: left;">1. Notarized Purchase and Testing of Infringing Samples</h2>
In cases involving asexually reproduced plant varieties, infringing propagation materials typically include entire plants or parts such as seedlings, stems, roots, or leaves. Where direct access to such materials is difficult - due to a cautious infringer or complex growing environments - it may be feasible to obtain fruit as harvested materials produced from the suspected infringing material. Regardless of whether plant parts or fruit are collected, the entire process should be notarized to meet the evidentiary requirements of the court. Given the perishable nature of these materials, they must be carefully packaged and promptly submitted to a qualified testing institution for analysis. We also recommend notarizing the submission process to ensure the traceability, legality, and consistency of the samples.
&nbsp;
<h2>2. Notarized Collection and Testing of Samples of Protected Variety</h2>
For asexually reproduced varieties such as fruits and flowers, obtaining a reference sample of the protected variety can be challenging, as administrative authorities and depository institutions typically do not preserve standard samples during the examination process. To overcome this, we focus on collecting reference samples that can be reliably traced back to the mother plant identified during the official DUS inspection or to its directly propagated offspring. The collection process must be notarized to ensure the authenticity of the samples. Once obtained, the reference samples should be promptly submitted to a qualified institution for testing, and the submission process should likewise be notarized to maintain a secure and verifiable chain of custody. A notable example of this approach is the “Zhonggan No. 5’ citrus variety infringement case [(2022) Supreme Court IP Civil Final No. 782].
&nbsp;
<h2>3. Testing</h2>
The final and decisive step in establishing infringement is &nbsp;tesing. We engage qualified testing institutions to conduct comparative DNA analysis between the notarized samples of the infringing materials and the reference samples of the protected variety. This analysis is conducted in accordance with applicable national or industry standards, using molecular marker testing methods tailored to the specific plant variety. Where no such standards exist, validated scientific methodologies may be adopted, provided they offer clear, reproducible, and reliable results to differentiate plant varieties. Infringement can be established if the test results indicate that the samples are identical or highly similar.
However, when testing is initiated solely by the right holder, it is common for defendants to challenge the results or request re-testing. Courts will often consult both parties on whether to proceed with additional testing. This puts the right holder in a dilemma: agreeing to re-testing may allow the defendant to submit a different sample, while rejecting it may undermine the probative value of the original report.
To address this, we thoroughly assess whether the original report and the associated evidence chain demonstrate a high degree of likelihood sufficient to prove infringement. Courts typically evaluate such reports based on the following factors: whether both the infringing and reference samples were obtained and submitted through properly notarized procedures, and whether the identification was performed by a qualified institution per appropriate standards. If there is a complete and reliable chain of evidence, and the defendant fails to present valid counterevidence, the court may accept the original report as sufficient to support a finding of infringement.
Notable examples of this approach are the “Hongyunlai’ Guzmania atilla &nbsp;variety infringement case [(2022) Supreme Court IP Civil Final No. 1362] and the “Lucinda’ potato variety infringement case [(2022) Supreme Court IP Civil Final No. 278].

Mastering the ‘Three Killer Moves’: a strategic approach to enforcing plant variety rights

This article was first published on World Trademark Review
Dismantling and remodeling previously-owned luxury bags has become a booming business in China, but these businesses may risk infringing the IP rights of brand owners. We look at the types of services being offered, and factors that determine whether such activity constitutes trademark infringement.
&nbsp;
<h2>Factors behind increasing customisation trend</h2>
Keyword searches of terms such as 'modification of big brand bags' on popular social media platforms (eg, Xiaohongshu or Douyin) yield hundreds of related videos and posts. Among this content are posts by business operators offering bag modification and customisation services, as well as blogs sharing experiences of upcycling previously-owned luxury bags. Both types of content attract a large audience and drive demand for these services and products.
Beyond the influence of social media, factors driving this trend include the following:
<ul>
<li>Large potential customer base – as China's luxury market grows, an increasing number of customers own unused ‘old’ luxury bags, creating significant market potential.</li>
<li>Growing environmental awareness – customers are becoming more conscious of the impact of their consumption habits, and upcycling old bags is one way to reduce waste and contribute to a more sustainable lifestyle.</li>
<li>Desire for uniqueness – Chinese customers, particularly among the younger generation, are increasingly seeking products that reflect their individuality and personal style. Customisation allows them to create unique items.</li>
<li>Appreciation for craftsmanship – upcycling and customisation often involve a creative process that resonates with traditional Chinese culture, which values craftsmanship.</li>
<li>Supportive government policies – the Chinese government champions green consumption and actively encourages waste reduction through the implementation of the Circular Economy Promotion Law and related policies.</li>
</ul>
&nbsp;
<h2>Hidden infringement risks </h2>
This trend seems appealing for both customers and business operators, but there are substantial potential risks. From the customer perspective, it is not uncommon to see complaints online about the poor quality of remodelled or upcycled bags.
As for business operators, trademark infringement is a real risk. Currently, there are two types of old bag remodelling or customisation services on offer.
<ul>
<li>Customer provides product for customisation</li>
</ul>
The first type of customisation service sees the customer provide the bag that they own to the business operator for customisation services. Generally, such activity does not constitute trademark infringement.
<ul>
<li>Customer does not provide product for customisation</li>
</ul>
The second type of service does not see the customer provide their bag to the business operator. Instead, operators own luxury bags, which they use as raw materials before selling the remodelled bags. Such activity is more complex and may constitute trademark infringement.
In December 2022, Chinese authorities arrested several individuals involved in selling remodelled bags and seized dozens of luxury bags, along with materials (eg, leather pads, hardware and tools). A customer had purchased two remodelled Louis Vuitton bags. On receiving the bags, the customer discovered that some of the leather components and hardware were poorly made. The issue was reported to the police.
Unlike typical counterfeiting, such activity uses parts from genuine products as raw materials. However, the business operator incorporates additional materials (eg, leather and hardware featuring logos of a luxury brand) into the remodelled bags, which constitutes trademark infringement. Even if no counterfeit materials are used, such action is considered trademark infringement. The public prosecutor handling the case in question noted: “[The conduct] altered the original form of the goods without the trademark owner's permission and created a new bag… that is no longer the original product. This infringes upon the market control and quality assurance functions of the registered trademark held by the right holder and does not conform to the conditions for applying the ‘principle of exhaustion of rights’. Consequently, it will be recognised as the crime of counterfeiting a registered trademark.”
&nbsp;
<h2>Factors for determining trademark infringement</h2>
In light of the above case, three key factors determine whether bag remodelling constitutes trademark infringement – namely:
<ul>
<li>whether the trademark of the original product is used on the remodelled bags;</li>
<li>whether significant change has been made to the original product and thus a “new” product has been created; and</li>
<li>whether the business operator advertises and sells remodelled products proactively by targeting a broad and unspecified customer base, or whether it provides remodelling services only to customers who provide their own bags for remodelling and their personal use.</li>
</ul>
Similar considerations have been applied in civil cases involving product remodelling, although luxury goods were not involved.
In Dugao Company v Domino ((2019) Zui Gao Fa Min Shen No 1241), Dugao Company modified the ink path system of Domino's printers while retaining the original trademark. The court held as follows:
<ul>
<li>Dugao Company’s behaviour substantially changed the original quality of the goods.</li>
<li>The continued use of the original trademark on the modified printers was likely to mislead consumers about the source of the goods or create a likelihood of confusion.</li>
</ul>
In contrast, in Warrior v an individual ((2023) E 1081 Min Chu No 900), the court determined that the business operator's behaviour was not infringing. The individual in question had purchased Warrior sneakers and provided a customisation service through his online store, whereby he would paint the sneakers according to the customer’s request and sell the painted shoes. The court held that the painting did not substantially affect the quality of the sneakers and did not change the nature of the goods. The individual had also clearly indicated in the marketing for his online store that the sneakers he sold were products of his secondary creation. Thus, the customers had fair notice, and the court held that the conduct did not constitute trademark infringement.
Courts in other jurisdictions (eg, South Korea, Sweden and Switzerland) have taken a similar approach when determining whether trademark infringement exists. In South Korea, a court <a href="http://koreabizwire.com/court-rules-against-designer-handbag-upcycling-artist-in-louis-vuitton-trademark-case/296085#:~:text=fashionupcyclingindustry.-,ThePatentCourtofKoreaupheldalowercourt'sdecision,materialsbearingthecompany'strademark.">ruled</a> that redesigning luxury products without permission constituted trademark infringement and awarded Louis Vuitton Krw15 million in damages.
In January 2024, the Swiss Federal Supreme Court ruled that the business model of a watch customisation company did not constitute infringement, as customisation was carried out at the request of watch owners and for their personal use, without commercialising the modified products.
In March 2024, the Swedish Patent and Market Court ruled in favour of Tissot, against a watch customiser, which sold watches that were not pre-owned by customers. Thus, the customisation service offered was not private in nature and did not fall under the doctrine of exhaustion of trademark rights.
&nbsp;
<h2>Effective legal mechanisms and proactive monitoring needed </h2>
The rise of the luxury product remodelling business is a global trend that presents challenges for brand owners in maintaining brand identity and preventing counterfeiting. Fortunately, courts in various jurisdictions have demonstrated similar positions when brand owners sue unauthorised remodelling operators for infringement. This indicates that unauthorised modifications and remodelling can be effectively addressed through legal means, which is encouraging for brand owners.
Brand owners should proactively monitor the market for unauthorised customisation or remodelling activity. They should also be prepared to enforce their rights through legal action to safeguard brand identity, creations and innovations, ensuring that they can continue to benefit from their IP assets in an increasingly competitive market.

Hidden infringement risks in China’s booming luxury goods remodelling and customisation market

<h2>This article was first published on IPRdaily. For reprints, please contact us.</h2>
&nbsp;
In July 2025, the Supreme People’s Court, by way of guiding the adjudicatory practice of local people’s courts, promulgated the Judicial Interpretation (Fa Shi [2025] No. 11) (https://ipc.court.gov.cn/zh-cn/news/view-4545.html), which clarifies the legal status of the Patent Evaluation Report and confers upon it general binding effect. The Judicial Interpretation provides that where a Patent Evaluation Report concludes that the patent-in-suit does not meet the statutory conditions for the grant of patent rights under the Patent Law, “the people’s court shall not, solely on that basis, directly rule to dismiss the action; instead, it shall provide necessary explanations in light of the specific circumstances of the case and render a judgment in accordance with the law.”
This Interpretation, which came into effect on 1 August 2025, clarifies the position of the Patent Evaluation Report in litigation: it serves only as one of the evidentiary references for assessing patent validity, rather than as a precondition or threshold for filing or docketing a case. This provision clarifies the rules for local people’s courts when handling patent infringement cases involving the submission of Patent Evaluation Reports and negative conclusions therein, both at the case-filing stage and during trial, thereby enhancing the transparency and consistency of judicial application.
&nbsp;
<h2 style="text-align: left;">Overview of the Patent Evaluation Report Regime</h2>
Within the framework of China’s patent system, utility model and design patents are not subject to substantive examination prior to grant, and the stability of the rights conferred is therefore often questioned. In response to this systemic challenge, the China National Intellectual Property Administration (CNIPA) established the Patent Evaluation Report regime. Upon the request of the patentee, an interested party, or an alleged infringer, CNIPA conducts a systematic search of the prior art and carries out an in-depth analysis, thereby issuing a professional opinion as a reference on the validity of the patent.
In practice, the Patent Evaluation Report is often misunderstood as a “judgment on patent validity.” In fact, the Report is merely a technical opinion issued by an administrative authority, whose legal effect is far inferior to that of a judicial judgment or administrative ruling. With the continuous increase in the number of patent infringement cases, the application of the Report in judicial proceedings has attracted growing attention. In particular, where the Report reaches a negative conclusion, whether the court should still accept the relevant lawsuit has become a focal point of controversy in practice.
&nbsp;
<h2 style="text-align: left;">The Patent Evaluation Report Is Not an Administrative Decision</h2>
Continuing the above discussion on the Patent Evaluation Report regime, it is necessary to further clarify the legal nature of the Report and its position within administrative and judicial procedures.
The Report is issued by CNIPA and is a technical document formed on the basis of a relevant request, following a search, analysis, and evaluation of the prior art relating to a utility model or design patent. Under the current Patent Law and its implementing regulations, the Evaluation Report is neither an administrative decision nor a judicial instrument; its conclusions are not binding and cannot serve as a direct basis for declaring a patent invalid.
If the requester believes that the conclusions of the Report are erroneous, he or she cannot seek relief through administrative reconsideration or administrative litigation. However, CNIPA allows the requester to file a correction request within two months of receipt of the Report and to submit relevant evidence and written arguments for reference. CNIPA may decide to correct or partially correct the conclusions of the Report, or to decline to make any correction. It is noteworthy that, for the patentee, if the validity of the patent cannot be clarified through the correction procedure, the patentee can only passively wait for a subsequent patent invalidation proceeding initiated by a third party to further present arguments and defenses.
&nbsp;
<h2 style="text-align: left;">Submission of the Patent Evaluation Report Is Not Mandatory</h2>
Pursuant to the relevant provisions of the Patent Law, when a patentee of a utility model or design patent initiates an infringement action, the people’s court or the administrative authority in charge of patent affairs “may” require the submission of a Patent Evaluation Report. This wording clearly reflects the non-mandatory nature of the Report.
In specific judicial practice, in the 2018 patent infringement case (Yue Min Zhong No. 2282) decided by the Guangdong High People’s Court, the court expressly addressed the alleged infringer’s contention that the court of first instance had committed a procedural violation by failing to require the patentee to submit a Patent Evaluation Report for the patent-in-suit [1]: where the patentee has submitted the patent certificate, proof of payment of annual fees, and other materials sufficient to demonstrate that the patent-in-suit is in force, the court shall afford protection in accordance with the law and is not required to mandatorily demand the submission of a Patent Evaluation Report. This case further confirms that the Evaluation Report is not necessary evidence at the stage of initiating litigation or handling infringement disputes, and that the court may exercise flexible discretion based on the circumstances of the case.
To unify standards for judicial application, the Supreme People’s Court, in its 2020 “Provisions on Several Issues Concerning the Application of Law in the Trial of Patent Dispute Cases,” explicitly provides: “Where the plaintiff, without justifiable reasons, fails to submit [the Report], the people’s court may rule to suspend the proceedings or order the plaintiff to bear the possible adverse consequences.” This provision emphasizes that the court may exercise discretion with respect to the adverse consequences of a patentee’s failure to submit the Evaluation Report, rather than mandating its submission.
In addition, in order to improve the institutional design and expand the scope of application of the Evaluation Report, the fourth amendment to the Patent Law in 2020 formally included alleged infringers as eligible requesters of the Patent Evaluation Report. This amendment effectively filled the gap in the adversarial nature of the original regime in litigation, enabling defendants, when faced with utility model or design patents, to proactively request a technical Evaluation Report to strengthen their defenses.
&nbsp;
<h2 style="text-align: left;">The Multi-Dimensional Influence of the Patent Evaluation Report</h2>
As a bridge between patent validity analysis and the resolution of infringement disputes, the Patent Evaluation Report plays an important role in patent enforcement practice. Although its conclusions do not have binding legal force, the Report has significant reference value at multiple levels, including judicial adjudication, administrative enforcement, commercial operations, and public perception.
<ol class="list-paddingleft-1">
<li>
Influence on Judicial Enforcement
In patent infringement litigation, the court may refer to the contents of the Patent Evaluation Report but may not base its judgment solely on the Report’s conclusions. Even if the Report is negative, the patentee may still enforce its rights in accordance with the law. However, if the patentee fails to respond actively, the court may suspend the proceedings pending the outcome of patent invalidation proceedings, and in certain exceptional circumstances, the patentee may even be found to have engaged in malicious litigation.
</li>
<li>
Influence on Administrative Enforcement
When local intellectual property offices handle disputes involving utility model or design patent infringement, the Patent Evaluation Report is often treated as core evidence, affecting their case-filing decisions and handling efficiency. In addition, when applying to customs for intellectual property recordation and protection, customs authorities also require the submission of a Patent Evaluation Report with a positive conclusion to ensure successful IP customs recordation and subsequent seizure of suspected infringing products.
When initiating patent infringement complaints on e-commerce platforms (such as Taobao, JD.com, and Pinduoduo), platforms generally require the submission of a Patent Evaluation Report as proof of the validity of the right. In particular, a Report with a positive conclusion often becomes a necessary condition for initiating the complaint procedure.
</li>
<li>
Influence on Commercial Operations
In the process of registering open licenses for patents, the patentee must provide CNIPA with an Evaluation Report containing a positive conclusion [2], thereby sending a signal that the “rights are stable and can be implemented with confidence.”
Furthermore, in patent pledge financing or investment and M&amp;A transactions, banks and investment institutions also generally require the provision of a Patent Evaluation Report. If the Report’s conclusion is negative, it may significantly depress the valuation of the patent or even cause the transaction to fail.
</li>
<li>
Influence on Public Perception
As a technical document publicly disclosed by CNIPA, the Patent Evaluation Report is available for public inspection and copying. Accordingly, its conclusions also exert a certain influence at the societal level and may affect public perceptions of the stability of the patent right and the credibility of the patentee. Patentees should not overlook this.
In summary, although the conclusions of the Patent Evaluation Report do not have legal effect, the Report has important reference value in judicial adjudication, administrative decision-making, and commercial operations.</li>
</ol>
&nbsp;
<h2 style="text-align: left;">Patentees Should Prepare Adequately and Respond Proactively</h2>
In light of the still multi-dimensional influence of the Patent Evaluation Report, it is advisable that patentees of utility model or design patents take the following measures before requesting a Patent Evaluation Report or initiating enforcement actions, so as to reduce the risk of receiving a negative conclusion:
<ul class="list-paddingleft-2">
<li>
Engage professional institutions to conduct a patent stability assessment in advance to anticipate the likely conclusions of the Report;
</li>
<li>
If the Report contains obvious errors or biased conclusions, apply for correction within two months of receipt of the Report and submit sufficient evidence and written arguments;
</li>
<li>
Proactively submit the Evaluation Report in the course of enforcement or litigation to avoid adverse inferences by the court due to non-submission;
</li>
<li>
Even if the Report’s conclusion is negative, the patentee may still file an infringement action in accordance with the law and should not abandon enforcement solely on that basis;
</li>
<li>
Where the conclusions of the Report are unfavorable, strengthen the evidentiary record by supplementing expert opinions, patent validity statements, and the like, so as to enhance the credibility of the patent’s stability.
</li>
</ul>
&nbsp;
<h2 style="text-align: left;">Conclusion</h2>
Although the Patent Evaluation Report does not have binding legal force, as a professional analytical document on patent validity issued by CNIPA, it still occupies an important and indispensable position in the process of patent enforcement. Before submitting a request for an Evaluation Report, patentees should engage professionals to conduct a patent stability assessment and make adequate preparations and responses for the possibility of a negative conclusion.
At the same time, it is recommended that future legislation further improve the relevant procedures and provide more opportunities for communication between patentees and CNIPA. For example, after a preliminary analytical conclusion of the Report is formed, patentees could be allowed to respond and provide supplementary explanations, thereby clarifying the scope of patent protection, safeguarding procedural relief rights, and enhancing both the fairness of the administrative procedure and the credibility of the Report’s conclusions.
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<h4 data-pm-slice="0 0 []">Notes:</h4>
<h4>[1] https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=NFoBqWrxrKSmCsWN06lrMtc/fK+boJqkxz2yJfusprkbY5FqYWE5OZ/dgBYosE2gItm7+Mif3GsM+jkpDQOLXvsWX87jgw5u0DzKypYpmUwYW4TbO7OegtC83B2afXyI</h4>
<h4>[2] Article 66, paragraph 2 of the Patent Law</h4>

Negative patent evaluation report no longer a barrier to filing infringement lawsuits — 2025 SPC judicial interpretation reshapes rights enforcement pathways

In December 2024, the General Office of the State Council issued the Opinions on Comprehensively Deepening the Reform of the Supervision of Drugs and Medical Devices and Promoting the High-quality Development of the Pharmaceutical Industry (Guo Ban Fa [2024] No. 53). In these Opinions, the State Council explicitly pointed out the need to accelerate the patent deployment of original achievements in drugs and medical devices, and to improve patent quality and the efficiency of transformation and utilization. From 2019 to 2024, the number of patent applications filed by Chinese innovative pharmaceutical enterprises showed a compound annual growth rate of 34%, among which the proportion of combination patents jumped from 12% to 41% (data source: China National Intellectual Property Administration), reflecting the transformation of the Chinese pharmaceutical market from “generic following” to “innovation protection”. In the process of shifting from generics to innovation, how to achieve comprehensive protection of innovative pharmaceutical products through patent filing strategies and asset portfolio management, and thereby safeguard product commercialization, is a key issue faced by all innovative pharmaceutical companies.
Dapagliflozin is a blockbuster drug developed by AstraZeneca for global commercialization for the treatment of type II diabetes mellitus. Although its compound patent in China expired in 2023, according to AstraZeneca’s 2024 annual report, dapagliflozin still achieved sales of RMB 3.5 billion in China, setting a new record in the Chinese oral hypoglycemic drug market. This phenomenon breaks the conventional expectation of a “patent cliff” for originator drugs. The successful practice of strategic patent deployment for dapagliflozin in China provides a successful case worthy of study.
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<h2 style="text-align: left;">Dapagliflozin Compound</h2>
Dapagliflozin is the world’s first approved SGLT2 inhibitor for the treatment of type II diabetes mellitus, and its active compound is a phenyl glucoside compound. Its mechanism of action is unique: by inhibiting the renal reabsorption of glucose, it allows excess glucose to be excreted in the urine. This non–insulin-dependent hypoglycemic pathway opens a new door for the treatment of diabetic patients. Clinical data in China show that it can reduce HbA1c by 0.8%, with efficacy significantly superior to traditional drugs.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://media.umbraco.io/dev-lusheng/wwzfpogf/img_2414516123476466390_image.png?mode=max&amp;anchor=&amp;width=558&amp;height=230" alt="" width="558" height="230">
(Molecular structure of the active compound of dapagliflozin)
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<h2 style="text-align: left;">Achieving Market Expansion Through Volume-for-Price Strategy</h2>
After its approval and launch in China in 2017, dapagliflozin entered the National Reimbursement Drug List through price negotiations in 2019, with a price reduction of more than 20%, becoming the first SGLT2 inhibitor included in China’s medical insurance. Although this strategy reduced the drug price to the lowest level worldwide—the unit price per tablet in the United States is as much as six times that in China—the “volume-for-price” strategy produced immediate effects. According to AstraZeneca’s annual report, as of 2023, dapagliflozin had covered 80% of Class III Grade A hospitals nationwide, with annual sales exceeding RMB 3.5 billion (approximately USD 481 million), accounting for nearly 10% of the global market share.
More noteworthy is its indication expansion strategy. From the initial indication of type II diabetes mellitus, a new indication for chronic kidney disease was added in 2022, expanding the patient population by threefold, which confirms a growth model in which clinical value drives market expansion.
&nbsp;
<h2 style="text-align: left;">Patent Deployment of Dapagliflozin in China</h2>
The dapagliflozin compound was originally researched and developed by Bristol-Myers Squibb Company in the United States, with the first application filed in the United States in May 2002 (US10/151436), and a PCT international application (WO2003099836A1) subsequently filed claiming priority from that U.S. application, which then entered China in 2004 (CN03811353.8). For better commercial operation, Bristol-Myers Squibb Company assigned the patents related to dapagliflozin to AstraZeneca AB (Sweden) in 2014. 
Due to the early filing date of the dapagliflozin compound patent and the stringent administrative approval procedures for drug registration, the time to market for the drug was seriously delayed. When dapagliflozin was approved for marketing in China in 2017, it faced the dilemma that the compound patent would expire five years later, in May 2023. In order to mitigate the impact of the shortened term of protection of the compound patent, a comprehensive patent deployment was carried out for the dapagliflozin product in China. Through search and analysis, the author has sorted out a patent protection system consisting of 26 Chinese patents built around dapagliflozin, including 
➤&nbsp;Core-layer Defense (Basic Compound and Process Barriers)
 - Compound patents: (CN100534997C (Application No. CN03811353.8) and its divisional applications) focus on the structure of phenyl glucoside compounds and form cross-protection with multiple divisional applications, covering the molecular entity of dapagliflozin and its intermediates for preparation, thus creating a “hard threshold” for the development of generic drugs. 
- Preparation method patents (CN100391963C (Application No. CN200380110040.1) and its divisional applications) provide comprehensive protection for the synthetic routes of various SGLT2 inhibitors including dapagliflozin, and, through an acetyl protection strategy, provide a preparation method with high purity and high yield. Divisional applications cover preparation methods of key process intermediates, forming multi-level protection. 
➤&nbsp;Intermediate-layer Reinforcement (Polymorph and Formulation Patents)
 - Polymorph patents (CN101479287B (Application No. CN200780024135.X) and CN101468976B (Application No. CN200710300419.9) and their divisional applications) relate to the development of different solvent-complex crystals of dapagliflozin, and innovatively select S-configuration propylene glycol to form solvent-complex crystals with dapagliflozin, thereby obtaining stable crystal forms suitable for industrial formulation and solving the problem that dapagliflozin itself is difficult to crystallize. Through divisional applications, protection is extended to other novel solvent-complexes of dapagliflozin in addition to the propylene glycol complex, thereby comprehensively building patent protection barriers and preventing the use of other types of solvent complexes as a design-around strategy. 
- Immediate-release formulations (CN104382859B (Application No. CN200880016902.7) and its divisional applications) use the S-propylene glycol solvent-complex of dapagliflozin as the core component of the pharmaceutical formulation to obtain an oral dosage form with stable efficacy. This is currently the only formulation composition worldwide that uses a propylene glycol solvent-complex as the active ingredient. This innovation solves the technical problem of the difficulty in formulating dapagliflozin itself, thereby obtaining a stable and effective oral formulation. These formulation patents, together with the polymorph patents, have become core patents that are difficult for generics to circumvent while ensuring consistency of efficacy. 
➤&nbsp;Peripheral-layer Extension (Indication Patents)
 - Twelve medical use patents cover different indications such as heart failure, chronic kidney disease, hyperuricemia, and prevention of diabetes, forming a closed loop in which the discovery of new blue oceans is immediately followed by the construction of patent protection. 
This “basic protection + technological blocking + market extension” three-layer architecture has built a 360-degree protection system for the product.
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<img style="display: block; margin-left: auto; margin-right: auto;" src="https://media.umbraco.io/dev-lusheng/yvdpmnen/img_5286812149127518907_image.png?mode=max&amp;anchor=&amp;width=685&amp;height=308" alt="" width="685" height="308">
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<h2 style="text-align: left;">Protection of Product Competitive Advantage Through Sound Patent Deployment: Insights from the Dapagliflozin Case</h2>
Dapagliflozin has built basic barriers through core-layer patents (compound and preparation methods), while peripheral-layer patents (polymorphs, formulations, indications) form extended defenses, thereby setting multiple obstacles to the production of generic drugs both technically and legally. 
➤&nbsp;High Threshold for Technical Design-around
 The polymorph and formulation patents of dapagliflozin directly raise the R&amp;D threshold for generic drugs. Taking polymorph patents as an example, simple polymorphs of dapagliflozin are not easy to prepare. If generic manufacturers wish to circumvent originator protection, they must invest several years in developing alternative polymorphs; however, the development of new polymorphs is highly unpredictable and may fail bioequivalence verification due to insufficient stability. Such technical barriers generally extend the R&amp;D cycle of generics by 3 to 5 years or more, far exceeding the window period after the expiry of the compound patent. 
➤&nbsp;Ongoing Legal Defense Pressure
 Under China’s drug patent linkage system, generic manufacturers must choose between a “deferred marketing” declaration or a “patent invalidation challenge” declaration before applying for marketing authorization, forcing competitors into a cycle of “declaration–litigation–invalidation challenge”, thereby effectively delaying market competition. Data from 2024 show that, among 34 patent invalidation requests against dapagliflozin, only one use patent was revoked, with a maintenance rate of core patents exceeding 80%. As a result of unsuccessful challenges to formulation patents, generic manufacturers not only bear high litigation costs, but their marketing plans may also be postponed. 
➤&nbsp;Extension of Market Exclusivity Period
 Through “patent relay”, the market exclusivity period of dapagliflozin has been extended from 2023 to 2028. After the expiry of the compound patent, polymorph and formulation patents form a second line of defense, while patents for new indications such as chronic kidney disease further extend the protection period. The effectiveness of this strategy is directly reflected in the sales data: even in the face of generic competition, dapagliflozin still ranked first in the market in 2023 with sales of RMB 3.5 billion, confirming the strong extension effect of a sound strategic patent deployment on the market exclusivity period of dapagliflozin.
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<h2 style="text-align: left;">Implications for the Pharmaceutical Industry</h2>
The success of dapagliflozin in the Chinese market reveals how multinational pharmaceutical companies respond to generic competition through systematic patent deployment and legal strategies. Faced with the risk of imminent expiry of core compound patents, enterprises have extended the product exclusivity period to 2028 through layered deployment, legal offense and defense, and policy coordination, thus providing a replicable strategic model for innovative pharmaceutical companies.
At the same time, the patent deployment case of dapagliflozin marks that the Chinese pharmaceutical market has entered a stage where “competition in innovation quality” and “games of patent deployment” proceed in parallel. For local Chinese pharmaceutical enterprises, it is necessary to break through the passive mindset of “patent avoidance” and shift to the proactive deployment of “innovative patents”. At the stage of initiating new product R&amp;D projects, enterprises should plan a “four-dimensional protection system” covering compounds, polymorphs, dosage forms, and indications, and establish a “R&amp;D–patent–market” linkage mechanism, embedding patent deployment deeply into product lifecycle management, so as to truly achieve the leap from “technology follower” to “rule maker”.
Although the company has recently been embroiled in various controversies, this article discusses in a dialectical manner only its patent strategy in relation to this particular drug, without involving other factors.

Patent portfolio strategy of multinational enterprises: a case study of dapagliflozin with 3.5 billion in sales

On 20 January 2025, the China National Intellectual Property Administration (CNIPA) officially launched the “Belt and Road” Patent Prosecution Highway (PPH) Pilot Program. The program will run for two years and will end on 19 January 2027. This program is a key initiative by CNIPA to actively implement the achievements of the 10th anniversary of the “Belt and Road” Initiative and presents significant opportunities for foreign enterprises from Belt and Road partner countries that conduct business in China and have demands for Chinese patents.
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<h2 style="text-align: left;">Main points of the program:</h2>
<ol class="list-paddingleft-1">
<li>
Participating countries: Applicants from eligible “Belt and Road” countries may file requests for accelerated examination with CNIPA.
</li>
<li>
Unidirectional accelerated examination: During the program period, eligible applicants may file requests for accelerated examination with CNIPA. Where a participating office (such as the Turkish Patent and Trademark Office), acting as the office of first filing, considers that at least one or more claims of a patent application are patentable, the applicant may, in respect of the corresponding Chinese patent application of the aforesaid patent application, file a request for accelerated examination with CNIPA. Applicants are not required to pay any additional fees.
</li>
<li>
Annual case volume: With respect to the number of cases accepted, CNIPA has established clear limitation rules. The total number of requests for accelerated examination accepted each year will be capped at 1,000, and the number of accelerated examination requests participated in by each participating office will be capped at 100 per year.
</li>
</ol>
The Turkish Patent and Trademark Office is the first institution to participate in this program. Going forward, CNIPA will deepen cooperation with patent examination authorities of more Belt and Road partner countries and will continue to expand and optimize the program.
This program offers significant advantages for foreign enterprises that focus on the Chinese market and have demands for obtaining Chinese patents. By shortening the examination period of patent applications in China, enterprises’ innovative achievements can obtain patent protection more quickly, thereby enabling them to deploy in the Chinese market at a faster pace and gain a first-mover advantage. Furthermore, through cooperation among Belt and Road countries, enterprises can protect their intellectual property rights in the international market more effectively and reduce infringement risks. In addition, this program demonstrates China’s proactive stance on intellectual property protection and its determination to promote intellectual property cooperation among Belt and Road countries, which helps enhance enterprises’ confidence in and willingness to invest in the Chinese market.
We will closely monitor CNIPA’s patent-related policies, assist enterprises in planning their patent filing strategies in advance, and support their global patent portfolio.

“Belt and Road” patent accelerated examination pilot program: a new opportunity for foreign enterprises to expand patent portfolios in China

This article was first published on IPRdaily. Please contact us for authorization prior to any reproduction.
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The patent system is intended to exchange legal protection for the disclosure of advanced technologies. However, where a patent application relates to an invention involving national security or significant public interests, its disclosure may cause irreparable harm to national interests. Therefore, in order to protect national security and significant public interests, most countries have established secrecy examination systems, requiring inventors to obtain prior approval for filing patent applications abroad in respect of inventions or creations completed in their own countries.
Multinational corporations usually have R&amp;D institutions at their headquarters and overseas. When these R&amp;D institutions cooperate on development projects, the choice of jurisdictions in which to seek patent protection is often an important strategic decision, and the rules and practices on secrecy examination in different countries play a key role in this decision-making process.
This article discusses, under the Chinese patent law framework, how to determine whether an invention or creation is completed in China, as well as the necessity and methods of obtaining permission to file abroad, with a view to providing guidance for enterprises in patent compliance management and in formulating patent filing strategies.
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<h2>1. What Is Secrecy Examination / Permission to File Abroad</h2>
Under the Chinese patent law framework, there is no term equivalent to “foreign filing license” as used in the U.S. legal system. The corresponding concept is the secrecy examination system. That is, for inventions or utility models completed in China, a secrecy examination by and approval from the China National Intellectual Property Administration (CNIPA) must be obtained in advance before filing patent applications in foreign countries. This system was introduced in the third amendment to the Patent Law in 2008. The secrecy examination requirement applies to invention patents and utility model patents, but not to design patents.
CNIPA will, upon the applicant’s request, issue a notice of secrecy examination, namely the “Notification of Opinion on Secrecy Examination for Filing Patent Applications Abroad,” specifying whether it approves the filing of patent applications outside China.
Secrecy examination is a mandatory procedural requirement. Regardless of whether the actor is negligent or intentional, or even if the invention does not need to be kept confidential, filing a patent application abroad without undergoing secrecy examination by CNIPA will result in the corresponding Chinese patent being invalid. Once the secrecy examination provisions are violated, there is no remedy available.
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<h2>2. Chinese Patents Invalidated Due to Lack of Secrecy Examination</h2>
In its 2022 Top Ten Typical Patent Invalidation Cases, CNIPA disclosed a utility model patent entitled “Expandable Drive Assembly Device and Lifting Column,” which was declared entirely invalid (No. 55586) because the patentee failed to fulfill its obligation to undergo secrecy examination before filing abroad.
This utility model patent describes a fall-prevention elevator, which improves the safety and stability of the elevator through the arrangement of a bearing column, a screw, a load assembly and a drive assembly. The substantive content of this invention or creation was completed in China, but the patentee completely ignored the secrecy examination requirement and directly filed a provisional application in the United States. Claiming priority from the prior U.S. application, the patentee then extended the patent application to China, and the Chinese patent was quickly granted without substantive examination.
During the patentee’s enforcement of the patent, the alleged infringer filed a request for patent invalidation and discovered that the patentee had neglected patent compliance management and violated the mandatory procedural provisions. The patentee’s negligence led to the Chinese patent being declared entirely invalid, thereby losing the legal basis for enforcement.
This case explains in detail the applicable standards for the secrecy examination provisions in the Patent Law, highlights the importance of procedural compliance, and reminds technological innovators that they must comply with mandatory legal provisions when applying for patents in order to avoid the risk of their patent rights being declared invalid. If a patentee files a patent application abroad without approval and thereby discloses state secrets, it may bear further liabilities, including criminal liability.
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<h2>3. Determining Whether an Invention Is Completed in China</h2>
If the substantive content of an invention is completed within the territory of China, the invention is deemed to be completed in China. For inventions or creations completed through cooperation by multinational teams, in determining whether the substantive content of the invention is completed in China, we recommend considering the following dimensions:
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<h3 style="padding-left: 40px;">3.1&nbsp;&nbsp; Determining the Substantive Content of the Invention</h3>
As to how to determine the substantive content of an invention, CNIPA expressed the following view in the above-mentioned case:
“As to what constitutes the substantive content of a technical solution, it should be determined from the perspective of the content of the invention or creation and the technical solution in the application documents. On the one hand, such substantive content should be reflected in the claims in dispute, especially the independent claims; on the other hand, in principle, such substantive content should be content that has not been disclosed in the prior art.”
Therefore, the definition of the substantive content of an invention is not limited to the claims, but also includes the content recorded in the specification. In the secrecy examination process, CNIPA examines the technical solution itself that was completed in China, rather than the scope of protection sought by the applicant.
In addition, determining the substantive content of an invention also requires consideration of the level of prior art before the filing date, so as to identify the improvements of the invention over the prior art. In other words, the substantive content of the invention should be novel and not disclosed in the prior art.
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<h3 style="padding-left: 40px;">3.2&nbsp;&nbsp; Determining the Contribution of the Inventors</h3>
According to Chinese patent regulations, an inventor is any person who has made a creative contribution to the essential features of an invention. For inventions or creations jointly completed by multiple inventors from different countries, determining the contribution of each inventor is crucial for identifying where the substantive content of the invention was completed.
The contribution of an inventor may be assessed by considering whether each inventor has contributed to the key features that give rise to the technical functions and effects, or to auxiliary features. In addition, for Chinese patents that have been published by third parties, the order of inventors may also serve as a reference for assessing the contribution of each inventor. Although China has no explicit provisions linking the order of inventors to their level of contribution, in practice, there are significant differences between the first-named inventor and subsequent inventors in terms of professional title evaluation, remuneration and benefits. Therefore, the order of inventors is generally determined based on the primary or secondary nature and the extent of each inventor’s contribution.
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<h3 style="padding-left: 40px;">3.3&nbsp;&nbsp; Determining Cross-Border R&amp;D Capabilities</h3>
Similar to the United States, China determines whether secrecy examination is required based on the place where the invention is completed, rather than on the nationality or residence of the inventors.
In cross-border collaborative inventions, the actual R&amp;D capabilities at the locations of the inventors are an important factor. Specifically, R&amp;D capabilities involve the local level of technology, the equipment and facilities used for the invention, and R&amp;D funding, among other aspects. In the above invalidation case, there was no evidence that the patentee had R&amp;D functions outside China, which was also one of the reasons for the patent being invalidated.
Moreover, it is possible that multinational companies may second employees among their subsidiaries in different countries and have them cooperate with local R&amp;D teams to complete inventions. Therefore, detailed records of the locations and processes of innovative R&amp;D are crucial for determining the R&amp;D locations and the inventors. Such records may take the form of laboratory notebooks, project reports, correspondence records, and the like.
&nbsp;
<h2>4. How to Request Secrecy Examination</h2>
There are several ways to undergo secrecy examination before filing abroad, and the appropriate method may be chosen according to the company’s different patent filing strategies:
<h3 style="padding-left: 40px;">4.1&nbsp;&nbsp; First Filing Outside China</h3>
If the applicant needs to file the first patent application outside China, the applicant must separately request secrecy examination from CNIPA in advance. When requesting secrecy examination, a Chinese-language document must be submitted, including detailed information on the technical content of the invention.
<h3 style="padding-left: 40px;">4.2&nbsp;&nbsp; First Filing in China</h3>
If the first patent application is filed in China, a request for secrecy examination may be made to CNIPA at the time of filing the Chinese patent application, or within the Paris Convention priority period and before filing patent applications abroad. This method is relatively simplified, as there is no need to separately prepare and submit documents describing the technical solution of the invention. Unlike in the United States, filing the first application in China does not automatically constitute a request for secrecy examination.
4.3&nbsp;&nbsp; Filing a PCT Application with CNIPA
Filing a PCT application with CNIPA is deemed to constitute a simultaneous request for secrecy examination with CNIPA. Since a PCT application may be filed in English or Chinese, this method may be more economical and convenient for multinational companies that do not intend to seek patent protection in China.
&nbsp;
<h2>5. Time Limit for Secrecy Examination</h2>
The examination period for secrecy examination is also a factor to be considered in patent filing strategies. In practice, where a request for secrecy examination is filed simultaneously with the patent application, the examination result is usually received in about one week; where a request for secrecy examination is filed by other means, the examination result is usually received in about one month. In complex situations, CNIPA will issue a notice to temporarily defer foreign filing within two months, and then make a decision on secrecy examination within four to six months.
&nbsp;
<h2>Conclusion:</h2>
Patent compliance management for multinational companies is more complex due to the differing rules in various jurisdictions. Patent filing strategies involve not only R&amp;D investment, business planning and innovation protection, but also careful compliance review and arrangements to avoid the risk of patent invalidation.
For inventions or creations completed in China, undergoing secrecy examination and obtaining permission to file abroad are mandatory. During the patent application process, recording and retaining detailed information on the process of the invention or creation, and preserving declarations signed by the inventors, help clarify each inventor’s contribution and lawfully establish the company’s ownership, so as to address potential future disputes over the identification of inventors and ownership. By understanding and complying with these patent regulatory requirements, companies can better protect their innovative achievements and manage their patent portfolios.

Patent compliance management: “confidentiality review” essential for global expansion

As DeepSeek’s breakthroughs in the field of AI have led to a plunge in U.S. technology stocks, debates over the differences between Eastern and Western intellectual property strategies have intensified.
OpenAI, relying on U.S. protections for software copyrights and trade secrets, accuses DeepSeek of misappropriating intellectual property. DeepSeek, however, operates under China’s continuously developing intellectual property regime and may argue that its conduct falls within the scope of “fair use” or legally permissible data scraping.
This divergence in legal interpretation is exacerbating the trans-Pacific tug-of-war over intellectual property. As emerging Chinese AI enterprises and U.S. competitors continue to vie for market dominance, this tug-of-war is only likely to intensify. How, then, should the AI industry seek a common path forward to achieve greater synergy and mutual benefit?
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<h2 style="text-align: left;">The Impact of the U.S. and Chinese Intellectual Property Frameworks on the AI Race</h2>
The differing perspectives of the United States and China on intellectual property protection have led to fundamental divergences between their respective legal systems.
The United States has consistently adopted a “light-touch” regulatory approach, prioritizing innovation and market growth. This approach is typically manifested in reliance on industry self-regulation, with voluntary guidelines and frameworks at its core.
Although agencies such as the Federal Trade Commission (FTC) actively combat unfair and deceptive practices related to AI—for example, the FTC took action against five AI companies last year—the overall regulatory environment remains relatively relaxed, providing space for the rapid development and deployment of AI technologies.
By contrast, China has adopted a more proactive and interventionist approach to AI regulation, placing greater emphasis on state supervision and guidance. The Chinese government regards AI as a key strategic technology for achieving economic objectives and has been actively promoting its development and application. This proactive stance is also reflected in China’s evolving intellectual property system, which includes specific regulatory guidance on generative AI, data scraping, and other AI-related activities.
Although this legal framework is still being refined, it offers numerous potential advantages for innovators. For example, China’s legal system recognizes the importance of agreements in determining the ownership of copyright in AI-generated works. By emphasizing the execution of formal contracts, innovators can clarify in advance the ownership and use rights of intellectual property, thereby obtaining legal certainty and protection.
In addition, Chinese courts have taken a proactive approach in interpreting the Copyright Law and applying it to the assessment of the copyright attributes of AI-generated outputs. In particular, cases such as Li v. Liu (the 2023 “Spring Breeze Brings Tenderness” case) and Lin Chen v. Hangzhou Gaosi Co. and Changshu Qinhong Co. (the 2024 “Banxin” case) have provided valuable guidance and precedents for the copyright protection of AI-generated outputs, offering direction and reference for innovators in the complex and rapidly evolving AI field.
This fundamental difference in approaches to intellectual property regulation in the AI field lies at the core of the trans-Pacific tug-of-war over intellectual property, and it also creates numerous challenges for emerging enterprises from the East and West when they attempt to enter each other’s markets.
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<h2 style="text-align: left;">Challenges in Cross-Border Enforcement of Intellectual Property Rights</h2>
Enforcing intellectual property rights across borders in the AI field is a daunting task. Differences in legal frameworks among countries such as the United States and China make this challenge even more complex.
These differences involve not only divergent interpretations of specific intellectual property rights, but also broader issues such as data privacy, competition law, and even the fundamental legal philosophies underlying intellectual property protection.
One of the greatest difficulties lies in the differing standards for determining infringement. For example, when examining data scraping conduct under China’s Anti-Unfair Competition Law, multiple factors must be considered comprehensively, including whether a competitive relationship exists, the nature of the scraped data, and the potential impact on market competition. Such assessments are often subtle and complex.
Furthermore, in the recently published Chinese case of Shanghai Xinchuanhua Cultural Development Co. v. Hangzhou Shuimu Intelligent Technology Co. (the 2024 Hangzhou Ultraman case), the court held that, when assessing whether the data input and training of an AI model constitute copyright infringement, a relatively relaxed and inclusive standard should be adopted, thereby making “fair use” a viable defense. This approach stands in stark contrast to that of the United States, which typically adopts a stricter stance and often regards data scraping as an infringement of copyright or trade secrets.
In addition, evidentiary issues further complicate cross-border intellectual property disputes. Collecting evidence of infringement in different jurisdictions often presents both legal and procedural challenges. Differences in procedures for evidence exchange (for example, the presence or absence of discovery), data privacy rules, and even language barriers may all impede the collection and admissibility of evidence.
The complexity of jurisdictional issues is equally significant. In cross-border intellectual property disputes, determining which court has jurisdiction is often contentious. This is particularly true in cases involving online infringement, where infringing acts may span multiple jurisdictions.
This lack of uniform standards further contributes to uncertainty and inconsistency in the cross-border enforcement of intellectual property rights. This naturally raises the question: is it possible to establish a unified global framework for AI-related intellectual property protection?
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<h2 style="text-align: left;">International AI Agreements or Industry Standards</h2>
Given that the United States and the United Kingdom failed to sign the Paris Summit declaration on inclusive and sustainable development of artificial intelligence, it is evident that the establishment of truly international standards on a global scale will still take time.
However, to address the challenges of intellectual property protection and enforcement and to promote the sound development of the global AI industry, it is essential to advance the conclusion of international agreements and to formulate common standards for AI-related intellectual property.
These initiatives include harmonizing the definitions of key terms such as “fair use” and “data scraping,” establishing clear guidelines and procedures for cross-border enforcement of intellectual property rights, creating effective dispute resolution mechanisms, and, through bilateral and multilateral AI governance, reaching consensus on ethical norms, safety measures, and transparency requirements for advanced AI technologies.
Industry-led best practices and standards can also play an important role in bridging the gaps between different legal frameworks. Cooperation between AI companies in the United States and China can help countries build consensus on intellectual property protection, thereby fostering a more cooperative and innovative environment that benefits all industry participants.
Resolving the trans-Pacific tug-of-war over intellectual property in the AI industry requires the joint efforts of governments, enterprises, the legal community, and international organizations, and this is clearly no easy task. Yet, by striving to establish clear international standards and frameworks, we can ensure fair and effective protection of cross-border intellectual property rights while unlocking the potential of AI for the benefit of the world.

Can the AI industry resolve the trans-Pacific intellectual property tug-of-war?

In early September 2024, China announced two significant policy changes aimed at further opening its healthcare and biotechnology sectors to foreign investment. These policies include easing restrictions on foreign investment in stem cell, gene therapy, and genetic diagnosis sectors within four Free Trade Zones (FTZs) and allowing wholly foreign-owned hospitals in specific regions. 1. Policy Summaries<ul><li>Easing restrictions on foreign investment in biotechnologyChina has eased restrictions on foreign investment in the development and application of human stem cells, gene therapy, and genetic diagnosis technologies within four FTZs: Beijing, Shanghai, Guangdong, and Hainan. This policy change allows foreign-invested enterprises to engage in product registration, listing, and production, provided they comply with Chinese laws and regulations, including those related to human genetic resource management and ethical review.</li><li>Wholly foreign-owned hospitals</li></ul>China will now permit the establishment of wholly foreign-owned hospitals in designated cities and regions, including Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen, and the island of Hainan. This move is part of a broader initiative to expand pilot programs in the medical field, aiming to enhance healthcare services and attract foreign expertise and investment. 2. Impact on Technology<ul><li>Enhanced technological collaboration</li></ul>The new policies are expected to foster greater technological collaboration between Chinese and foreign entities. By easing restrictions on biotechnology investments, foreign companies can introduce cutting-edge technologies in stem cell research and gene therapy, potentially accelerating innovation in these fields. This influx of advanced technologies and expertise will likely lead to significant advancements in medical research and treatment options within China.<ul><li>Improved healthcare services</li></ul>Allowing wholly foreign-owned hospitals aims to bring in advanced medical technologies and practices, significantly improving the quality of healthcare services. Foreign hospitals can introduce state-of-the-art medical equipment, innovative treatment methods, and best practices from around the world, which can enhance patient care and outcomes in China.<ul><li>Increased R&D opportunitiesThe relaxed investment restrictions in FTZs provide a conducive environment for research and development. Foreign companies can leverage China’s vast market potential and advanced infrastructure to conduct cutting-edge research in biotechnology. This can lead to the development of new therapies and medical technologies that can benefit both the Chinese and global markets.</li></ul> 3. Impact on Patent Protection<ul><li>Strengthened patent protection mechanisms</li></ul>With increased foreign investment, there will likely be a heightened focus on patent protection and intellectual property (IP) rights. Foreign companies entering the Chinese market will bring their patented technologies, necessitating robust IP protection mechanisms. China’s commitment to adhering to international IP standards will be crucial in attracting and retaining foreign investments.<ul><li>Regulatory framework and IP security</li></ul>The policies emphasize the importance of operating within a well-regulated framework, which includes adherence to Chinese laws governing drug clinical trials and ethical reviews. This regulatory environment helps protect IP rights and prevent patent infringements, providing foreign investors with a secure and predictable business landscape.<ul><li>Opportunities for IP collaboration</li></ul>The new policies present opportunities for IP collaboration between Chinese and foreign entities. Joint ventures and partnerships can lead to the co-development of new technologies and the sharing of IP rights. This collaborative approach can enhance innovation and ensure that both parties benefit from the advancements made in biotechnology and healthcare. 4. ConclusionThese policy changes mark a significant step towards opening its healthcare and biotechnology sectors to foreign investment and are expected to attract advanced medical technologies and practices, fostering innovation and improving patient care.For non-Chinese corporations, these changes present substantial opportunities. The relaxed investment restrictions in Free Trade Zones provide a favorable environment for research and development, enabling companies to leverage China’s vast market potential and advanced infrastructure. Additionally, the ability to establish wholly foreign-owned hospitals allows for direct market entry and greater control over operations.Increased foreign investment will likely lead to a stronger focus on patent protection and intellectual property rights. China’s commitment to adhering to international IP standards and maintaining a robust regulatory framework will be crucial in attracting and retaining foreign investments. The new policies also open doors for IP collaboration, allowing for the co-development of new technologies and the sharing of IP rights.Overall, these policy changes offer new avenues for growth and innovation in one of the world’s largest and most dynamic markets, making China an increasingly attractive destination for foreign investment in healthcare and biotechnology. Policies published in China official websites:<a href="https://english.www.gov.cn/policies/featured/202409/14/content_WS66e54e99c6d0868f4e8eafd7.html">https://english.www.gov.cn/policies/featured/202409/14/content_WS66e54e99c6d0868f4e8eafd7.html</a><a href="https://english.www.gov.cn/news/202409/08/content_WS66dd8885c6d0868f4e8eabae.html">https://english.www.gov.cn/news/202409/08/content_WS66dd8885c6d0868f4e8eabae.html</a>

China’s new policies on foreign investment in healthcare and biotechnology

Catalyzing innovation and strengthening patent protection

Outline  <ul><li>Introduction </li><li>Navigating the Customs Recordal Process </li><li>Enhancing IP Awareness through Customs Training </li><li>Ex-officio Customs detention of suspected illegal shipments </li><li>Customs Seizure of specific shipment based on IP right owner’s request </li><li>Actions Taken by Thai Customs Against Infringing Products </li><li>Emerging Trends and Challenges in IP Border Protection in Thailand </li></ul> Introduction The importation of counterfeit, imitation, and infringing products has long presented significant challenges in Thailand, impacting both the government and rightful owners of trade marks and copyrights. These illicit activities result in lost tax revenues for the government, pose health risks to consumers, and harm the brand reputation and revenue of rights holders. To address these issues, Thai Customs plays a vital role as the first line of defense against illegal imports. Since as early as 1987, Customs has been actively intercepting counterfeit goods at Thailand's borders through proactive inspections. They possess the authority to seize products based on trade mark or copyright infringement and tax evasion, among other violations. Below are the statistics on the annual number of raid actions and items seized by the Royal Thai Police, the Department of Special Investigation, and Customs, sourced from the Department of Intellectual Property’s website: <a href="https://www.ipthailand.go.th/en/ipr-enforcement-operation/item/staticpp_dipyear-aug2567.html">https://www.ipthailand.go.th/en/ipr-enforcement-operation/item/staticpp_dipyear-aug2567.html</a> The statistics indicate that Customs is successfully seizing a substantial number of counterfeit products each year. In recent years, the Customs recordal process has emerged as a vital mechanism for enhancing the protection of intellectual property (IP) rights. This article delves into the intricacies of the Customs recordal process in Thailand, providing insights into its application, the required documentation, and the role of Customs officers in identifying and detaining infringing products. It also explores the importance of ongoing training for Customs personnel to bolster their ability to recognize counterfeit goods and enforce IP laws effectively. By understanding these processes and fostering collaboration between rights owners and Customs, stakeholders can significantly improve the enforcement of IP rights in Thailand. <img src="https://media.umbraco.io/lusheng/ypinimaj/img_3315422016901680104_statistic-renewal.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" height="249.99999999999997"><figure style="text-align: center;"><figcaption>Source: <a href="https://www.ipthailand.go.th/en/ipr-enforcement-operation/item/staticpp_dipyear-aug2567.html">https://www.ipthailand.go.th/en/ipr-enforcement-operation/item/staticpp_dipyear-aug2567.html</a></figcaption></figure> Navigating the Customs Recordal Process Customs recordal serves as a vital mechanism for protecting trade marks and copyrights, enabling Customs officers to work directly with rights owners or their representatives when counterfeit products are suspected. Across Asia, Customs authorities are becoming increasingly proactive in combating counterfeit goods by implementing advanced Customs recordal systems to enhance enforcement efforts. Each country has its unique approach and fee structure for these recordal services: <ul><li>China: A Customs recordal costs USD 100 per trade mark or copyright, offering strong protection against infringement. </li><li>Vietnam: For just USD 10, a single Customs recordal application covers unlimited trade mark registrations, patent certificates, and copyrights, providing comprehensive protection. </li><li>Indonesia: Customs recordal is available without an official fee, making it a cost-effective option for IP protection, although it only permits the recordal of trade marks. </li><li>Thailand: Customs recordal incurs no official fees and allows for the recordal of both trade marks and copyright works.</li></ul>In Thailand, the process is streamlined by the Ministry of Commerce Notification on the Determination of Counterfeit Goods and Pirated Goods as Prohibited Goods from Export, Import, and Transit, B.E. 2565 (2022), and Customs Department Announcement No. 106/2565. Since July 29, 2022, rights owners with trade marks or copyrights registered with the Thai Department of Intellectual Property (DIP) can utilize the new Thai Customs IPR Recordation System (TCIRs) system for Customs recordals. Applications can be submitted through the TCIRs website (<a href="https://thaiipr.customs.go.th/ipr-app/">https://thaiipr.customs.go.th/ipr-app/</a>) at no official cost. However, obtaining a certified extract of the trade mark registration from DIP incurs an official fee of approximately USD 6 per trade mark.  Required documents for Customs Recordal in Thailand include: <ul><li>A Power of Attorney (POA) signed by the rights owner's authorized signatories, notarized by a notary public, and legalized at the Thai embassy/consulate. </li><li>A copy of Company Certificate or Certificate of Good Standing, notarized by a notary public, and legalized at the Thai embassy/consulate. </li><li>A certified extract of Trade Mark Registration from the DIP, or a copyright ownership document (if available). </li></ul>Rights owners and their representatives may also provide guidelines on distinguishing genuine products from counterfeits and specify the ports of importation for genuine products to assist Customs officers in their inspections.  Application Process The Customs recordal application process involves submitting information about trade marks or copyrights, details about the goods, and uploading the required documents and optional information on the TCIRs website. After completing the online submission, rights owners or their representatives must schedule an appointment with a Customs officer to present the original documents for review. The application status can be tracked online via the TCIRs website. Upon approval, Customs recordal remains valid for three years or until the recorded trade mark or copyright protection expires, whichever comes first. Renewals can be requested at least 30 days before the expiration date. Modifying or updating information in the Customs recordal is possible through the TCIRs website after approval, with no official fees incurred. The process is efficient, user-friendly and comes at no cost. Once all required documents are uploaded and presented in person, Customs recordal can typically be completed within 1 to 2 working days—significantly faster than in some other countries where the process may take up to 30 working days. As of August 2024, approximately 1,100 Customs recordal applications have been approved, with trade marks accounting for 95% and copyrights for 5%. While this process is relatively new, Customs is actively developing training programs for its officers on how to effectively use the TCIRs. As of August 2024, the adoption of TCIRs among Customs officers is still limited. In instances of detaining suspected illegal products, many officers at borders and Customs posts may refer to the DIP’s trade mark database to contact trade mark representatives or consult those who have recently undergone Customs training. Enhancing IP Awareness through Customs Training  For rights owners aiming to strengthen IP protection via Customs, the initial step is to file for Customs recordal. The subsequent step involves providing regular training sessions to enhance the familiarity and awareness of trade marks and copyrights among Customs officers. This foundational knowledge equips officers to better identify counterfeit products. Furthermore, ongoing training fosters collaborative relationships with Customs and other law enforcement agencies. Thai Customs does not conduct its own training events. Instead, rights owners, through their representatives, should coordinate directly with Customs to schedule sessions that are mutually convenient. Most trainings take place in Bangkok, where other relevant law enforcement agencies—such as the Department of Special Investigation (DSI), Department of Intellectual Property (DIP), Economic Crime Division (ECD), and Consumer Protection Police Division (CPPD)—can also be invited. These agencies frequently participate in Customs training sessions due to their shared mandate in combating IP infringement. Annual training is recommended to keep pace with the continuous influx of imported products and the growing number of trade marks and copyrights. Regular refresher courses are essential for maintaining and enhancing Customs officers' awareness of brand owners’ IP rights. In addition to the training in Bangkok,  rights owners may consider organizing sessions outside the capital, particularly when a trend of illegal products is identified at specific Customs posts. For example, at the Aranyaprathet port on the Cambodia-Thailand border, counterfeit clothing and personal items are often encountered. Similarly, the Sadao Customs House port on the Malaysia-Thailand border has seen frequent detections of suspected counterfeit fuel and alcoholic beverages. Targeted training sessions for brands in the clothing, fuel, and beverage sectors at these ports would be highly beneficial.  Ex-officio Customs detention of suspected illegal shipments When suspected counterfeit products are identified, Customs officers promptly detain them and initiate preliminary screenings to evaluate their authenticity. Following this, they reach out to the rights owners or their representatives, typically by phone, followed by a formal request letter sent via courier or mail to verify the product's authenticity. Officers may include one or two photographs of the suspected items for initial assessment. If these images are insufficient, representatives can request additional photographs or access to the detained products, depending on their storage conditions. According to Customs' procedures for detention and notification, a verification letter from rights owners or representatives must be submitted within three days of receiving the formal request from Customs. In the rare event that an importer or exporter asserts that the seized products are genuine, rights owners or representatives may submit a verification letter along with a request for execution within three days of receiving Customs' notification. A seven-day extension for verification may also be granted. In such cases, officers may request a guaranteed deposit, the requirement and amount of which are determined at the discretion of the responsible authority. However, such requests are extremely uncommon, and there have been no documented instances of this occurring. If rights owners or representatives fail to verify the authenticity of the seized products by the deadline, officers may involve a third-party specialist. This specialist might include individuals closely associated with the brand owner in Thailand, such as sales assistants or brand managers, to confirm authenticity within 15 days of non-response. Based on our experience, Customs seeking a third-party specialist is virtually unheard of. In practice, Customs often extend their monitoring of brands beyond official Customs recordals. They may detain products bearing trade marks listed in the DIP database, which is publicly accessible via this link: <a href="https://search.ipthailand.go.th/">https://search.ipthailand.go.th/</a>. This extended monitoring involves cross-referencing seized goods with the trade marks recorded in the DIP database to identify potential infringements. While extended monitoring by Customs is a viable option, it is advisable to maintain Customs recordals and provide training to maximize the chances of successful Customs detentions.  Customs Seizure of specific shipments based on IP right owner’s request When rights owners become aware of a specific shipment of infringing products, they can request Customs to detain the shipment by submitting a POA along with a formal request letter for examination. Once the validity of the POA is confirmed, Customs officers will notify the rights owners or their representatives to attend the physical examination of the shipment within 24 hours. If the products are determined to be infringing, the rights owners or representatives must promptly provide an authentication verification letter and submit a request for execution within three days following the examination. Actions Taken by Thai Customs Against Infringing Products Once products are confirmed to infringe trade marks or copyrights, offenders face severe penalties, including confiscation of counterfeit goods and fines of up to four times the total value, including taxes. Penalties may also include imprisonment for up to 10 years, or both fines and imprisonment. In practice, fines are the most common form of punishment. Thai Customs will seize and store the infringing products in its warehouses, organizing annual destruction at no cost to the rights owners. This destruction is conducted in collaboration with the private sector, utilizing environmentally friendly waste disposal methods. For instance, the 2024 Destruction Ceremony of Intellectual Property Rights Infringing Goods in Bangkok was hosted by INSEE ECOCYCLE, which used rollers, compactors, and cutting equipment for the destruction of confiscated items. Esteemed attendees included the Minister of Commerce, the Director-General of the DIP, the Police Commander, the Director-General of Customs, the Director-General of the Department of Special Investigation, and the Commander of the Royal Thai Army Air Defense Command. Rights owners, their representatives, and journalists were also invited to witness the event. Additional destruction ceremonies were held in Chonburi and Saraburi provinces, extending the efforts beyond Bangkok. The 2024 Destruction Ceremony of Intellectual Property Rights Infringing Goods in Bangkok was conducted in a formal and impactful setting. This event underscored the government’s dedication to enforcing IP rights through a meticulously organized destruction process, as depicted in the images below. <figure style="text-align: center;"><img src="https://media.umbraco.io/lusheng/iymhbvwp/img_3107827665741610191_picture-2-destroy-counterfeit-products.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="335" height="251"><figcaption>At the opening of the destruction event, honorable attendees participated by cutting and smashing the counterfeit products.</figcaption></figure> <img src="https://media.umbraco.io/lusheng/3s3fnk3d/img_4175777417805825416_picture3.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="212" height="159"><img src="https://media.umbraco.io/lusheng/adah3jub/img_7560984221614655847_picture4.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="200" height="150"> <figure style="text-align: center;"><img src="https://media.umbraco.io/lusheng/xo1ciphz/img_3824958968261765909_picture5.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="174" height="233"><figcaption>Some photos of counterfeit products.</figcaption></figure><img src="https://media.umbraco.io/lusheng/113iaetn/img_5431533721914712464_picture6.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="374.78184991274" height="500"> <img src="https://media.umbraco.io/lusheng/z5jbpmwl/img_2889936061628004822_picture7.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="318" height="424"><img src="https://media.umbraco.io/lusheng/nb2glb1b/img_4014855585890774677_picture8.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="303" height="228"><img src="https://media.umbraco.io/lusheng/p2sb0tex/img_6009939348432480498_picture9.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="312" height="416"> <figure style="text-align: center;"><img src="https://media.umbraco.io/lusheng/fhoeeou2/img_8373794358427267398_picture10.png" style="display: block; margin-left: auto; margin-right: auto;" width="320" height="427"><figcaption>The destruction of counterfeit products employed a range of environmentally friendly methods, including rollers, compactors, and dismantling machines, all managed by skilled experts.</figcaption></figure>  Emerging Trends and Challenges in IP Border Protection in Thailand The proliferation of counterfeit and imitation products — such as clothing, shoes, bags, and electronics — can be attributed to lower prices, limited public awareness of IP rights, and the rapid growth of e-commerce and transportation industries. In our increasingly globalized world, sellers can easily reach consumers across borders, and the booming transportation sector further facilitates the distribution of these goods. Simultaneously, infringers are becoming more adept at evading detection. Some employ tactics such as importing counterfeit items in small parcels without branding labels, using air transport, declaring items as unbranded, or mixing infringing products with legitimate goods—all designed to minimize the chances of Customs detection. To combat these challenges, rights owners should strengthen their collaboration with Customs through recordals and annual training sessions. This proactive approach will enhance brand visibility, aid in the identification of infringing products, keep officers informed about evolving importation methods used by infringers, and ultimately increase the success rate of Customs seizures.   For more information or assistance regarding Customs recordal, training, or any inquiries related to protecting IP in Thailand, please feel free to reach out to us at <a href="mailto:DRTThailand@rouse.com">DRTThailand@rouse.com</a>.  AuthorsSophia Hou (Lusheng)，Pin (Jeerisuda) Boonnum (Rouse)

Counterfeit challenges in thailand: Customs strategies and successes

For years, Lusheng Law Firm and its strategic partner the Rouse Guangzhou office have been assisting clients in taking action against infringing exhibitors at the Canton Fair, the world’s largest import and export exhibition. During this time, we have witnessed a significant strengthening of IP protection by enforcement authorities and the event organizers.What do IP rights owners think about the importance of protecting their intellectual property at the Canton Fair? Recently, <a href="https://www.lushenglawyers.com.cn/who-we-are/sophia-hou/" title="Sophia Hou">Sophia Hou</a>, the Managing Partner of Lusheng Guanghzou office  and Head of the China Enforcement Group, interviewed Mr. Drew Lamb, Vice President of Intellectual Property at Samsonite. He shared his insights on how continuous and resilient enforcement efforts, in collaboration with on-site authorities and organizers, have proven to be both worthwhile and impactful. In this article, we present the key takeaways from this interview, aiming to encourage IP rights owners to adopt more proactive measures at the Canton Fair to deter infringement. 1. Why do you believe it is important to take action at the Fair continuously over the years?Samsonite has been taking action at the Canton Fair since 2012 at nearly every luggage exhibition session. We can identify trends in the copying of our products and designs and take steps to stop the infringement before they reach global markets. We also believe it is important to try to continuously educate suppliers, through oral warnings and other actions, not to copy our designs and products, as well as the specific features they should not copy. We seek to  encourage them to produce different designs and products.  This can effectively be done in one go at the Canton Fair with so many exporting exhibitors and also visiting traders. It's a budget well spent. 2. What impact have you observed after many years of enforcement action at the Canton Fair?We have seen a reduction in the copying of our IP rights over the years. In earlier years, we encountered counterfeit products featuring our brand, such as Samsonite luggage and backpacks, as well as 1:1 copies of our iconic Cosmolite luggage design. These represented straightforward trade mark and design patent infringements, and we filed complaints with the on-site Complaint Center to have them removed from display. In recent years, we have noticed fewer direct copies and a decline in the replication of older designs. Instead, we have observed a trend of suppliers exhibiting more variations of our original products. We consider this a positive outcome of our ongoing efforts, as we believe it is acceptable for them to be inspired by our designs, but not too closely, in creating their own designs which do not infringe our rights. Providing verbal warnings assist in this education to avoid such direct copes. I have personally joined the Rouse enforcement team periodically to walk through the luggage section to get a feel for the products and how close they may be to ours as well as the scale, and engage with exhibitors in person, educating them about the importance of not copying us in good faith. Several exhibitors have recognized me and taken the initiative to show me their booths, demonstrating that they have stopped displaying the infringing copies identified during previous sessions. Some have even expressed a willingness to cooperate with Samsonite. I am pleased to see that suppliers’ awareness of the importance of not copying Samsonite has significantly increased. We have also seen a much-improved attitude, and assistance from the Fair organizers and IPR enforcement centre over the years from and from our initial approaches. This in conjunction with online systems has led to improved handling of complaints. We also welcome other alternative ways of handling copies of our products by Fair organizers to efficiently solve multiple complaints that would had been too much of burden to the enforcement officials to handle within limited exhibition time period. 3. What improvements have you observed in Canton Fair enforcement over the years by the enforcement authorities and the Fair organizer?In general, we find that the enforcement officials at the Complaint Center and the organizers are becoming more open and receptive to IP complaints. I remember when Samsonite began its IP protection efforts was a battle because each session lasted only five days, and the complaint process was slow. This meant that enforcement officials could not promptly handle multiple complaints in a timely manner. There was little point in acting against infringing exhibitors on the fourth day when the five-day session is nearing its end. Over the years, we have encouragingly experienced quicker and more efficient enforcement at the Fair. For example, regarding our patented B-lite handle design, we continue to encounter copies at every session, and we consistently file complaints with the Complaint Center for their removal. Now, the officials are familiar with this design, making it easier for them to make quick decisions. To alleviate the burden on enforcement officials who handle numerous complaints from different IP rights owners within the limited time of the exhibition, the Canton Fair organizer has also sent experts to assist in managing some of the complaints. At the May Canton Fair this year, we had a constructive meeting with a manager from the Fair organizer responsible for handling IP infringement complaints. He informed us that IP protection at the Canton Fair is becoming increasingly important for the organizer, both during and outside of the Fair sessions. As each Canton Fair approaches, they send notices to all potential exhibitors, alerting them not to infringe on others' IP rights and providing a list of key IP rights that have been commonly identified in previous sessions. I was pleased to see that Samsonite was included on that list. After each session of the Canton Fair we understand and welcome that the Guangdong Provincial Intellectual Property Bureau transfers any filed complaints to the relevant local enforcement authorities with jurisdiction over the concerned exhibitor for further investigation. I expressed Samsonite’s appreciation for the follow-up efforts by local AMRs (Administration for Market Regulations) and shared with the manager the two cases that were transferred to the Tianjin AMR and Hangzhou AMR for infringing Samsonite’s design patent rights. Both cases were resolved satisfactorily for us: one case resulted in a penalty decision from the AMR, while the other was settled through mediation with damages paid. We welcome such coordinated action and follow-up. 4. What new infringement trends have you observed at the latest Fairs?As I mentioned earlier, exhibitors are increasingly seeking ‘inspiration’ from Samsonite, which continues to launch innovative new designs. Nowadays, while we continue to see direct copies, we also see more variations of products. Sometimes, they imitate our most distinctive designs to attract potential customers, attempting to present their products as similar to those of Samsonite, the global market leader in luggage. However, aware that they may infringe on our rights, they often create variations that avoid directly copying our original designs, but which may still be a concern and infringe our rights, but which are more challenging for the officials at the Complaint Center to assess within the limited timeframe available for action. We have also seen an increasing awareness of Intellectual Property rights (patents, designs and trademarks) and that such rights should be respected and not be infringed, 5. What advice do you have for other IP rights owners at the Canton Fair?Preparation and getting involved are key. Intelligence gathering is the first step and involves surveying the relevant categories of products at the fair and identifying which designs and products are being copied. The results of previous fairs and what is in the market can assist in identifying which designs are being copied. Before taking action at the Canton Fair, ensure that all necessary paperwork, such as the Power of Attorney (POA), trade mark registrations, and patent certificates, are properly prepared in advance. If the initial survey reveals unexpected infringements of certain design patents, which is always the case, these can be noted, verbal warnings given and then formal enforcement action at the next Canton Fair once you have the patent certificate and evaluation report in place if they are seen again. It is crucial for IP rights owners to collaborate closely with enforcement officials in addressing infringers, as there is limited time. Officials need to quickly understand your patent in order to assess infringement and make decisions. Additionally, it’s important to educate suppliers not to copy our designs and to encourage buyers to be vigilant against purchasing copycat products. Overall, if the exhibitors believe it is important to attend the fair and show infringing copied designs, then we believe it is equally important for us to attend and get such infringing copy products removed from display and to send the message that such copies will not be tolerated, as well as try to dissuade anyone from copying our products and designs. We appreciate the IP protection system provided at the Canton Fair, and we will continue to take action at the Fair while communicating to suppliers the importance of respecting intellectual property rights.

Interview: Samsonite's approach to IP enforcement at Canton Fair

In June, a technical trade secrets spat related to electrical vehicle (EV) chassis technology between Chinese veteran player Geely and a new EV brand, Weltmeister, came to an end after six years with the highest damages in China’s IP enforcement history.China’s Supreme People’s Court (SPC) handed down the RMB 640 million (about $95 million) <a href="https://mp.weixin.qq.com/s/OCnWUdSLx7MhzFaKaV_p_w">judgment</a> on 14 June, overruling the Shanghai Higher People’s Court’s judgment by stating that Weltmeister illicitly obtained and used Geely’s whole EV chassis technical secrets rather than some parts of the secrets and increasing the award from the initial statutory damages of RMB 5 million (about $700,000). The final figure was calculated using Weltmeister’s sales profits of EX series SUV plus two times punitive damages.The ruling is indicative of the Chinese court’s efforts and ambitions to further strengthen the trade secret protection, especially in the EV sector which may power China’s economy growth in the coming decades.Just last year, the SPC handed down a landmark ruling on another trade secret dispute related to the rubber antiaging agent process with <a href="https://www.iam-media.com/trade-secrets/article/landmark-chinese-trade-secrets-damages-ruling-carries-important-messages-rights-holders">then-record breaking damages</a> of around $28 million. Taken together, the rulings send the message that trade secrets theft between competitors working in the same field, no matter whether they are foreign or local companies, may be punished by skyrocketing damages orders. Highlights of the EV judgmentThe SPC further lowers the plaintiff’s burden of proof when the evidence shows it is highly possible that the defendant illicitly obtained the secrets.The 2019 reform of China's unfair competition law set an “access and substantial similarity” rule to lower the plaintiff’s burden of proof. That is, the accused infringers have to show that they do not infringe the claimed trade secrets if the right holders already submitted preliminary evidence to show the infringers have had access to the secret and the information they used is substantially the same as the secrets.In this case, SPC further reduced the plaintiff’s burden of proof. The court presumed Weltmeister infringed Geely’s trade secrets contained in 12 sets of chassis drawings even though four sets of drawings of Weltmeister’s chassis were not substantially similar because the evidence showed a high probability that the defendant illicitly obtained and used Geely’s secrets and Weltmeister had no legal source for its chassis technology.The SPC found that Weltmeister was likely to have illicitly obtained and used Geely’s secrets based on the facts that:<ul><li>There was a well-organised and planned theft of Geely’s trade secrets via the poaching of nearly 40 senior technical experts and managers over a very short period of time.</li><li>Weltmeister had no accumulation in car chassis technology in SUV but launched its new SUV EX5 in approximately two years. This abnormally short time period obviously went beyond the time spend of at least four years for comparable R&D processes.</li><li>Weltmeister was unable to submit any R&D documents to prove it developed the technology independently.</li></ul>That some technical information was published does not cause the trade secrets to lose their confidential status.Geely claimed its trade secrets based on 12 sets of car chassis engineering drawings, and digital models thereof.Weltmeister argued that the shape, size and connection of the chassis could be tested from the Geely’s products on the market and by using information that had been published in patent filings.The SPC held that the technical information of the 12 sets of drawings and digital models should be protected as a whole. Although the launched products or prior patents disclosed some information, even taken together they did not disclose all technical details showed in the drawings as a whole solution. As a result, while some parts of the information could be known to a skilled person, it did not cause the whole secrets to lose their confidentiality. The SPC doubles punitive damages to WeltmeisterThe SPC awarded two times the punitive damages because Weltmeister intentionally infringed Geely’s technical secrets with serious consequences:<ul><li>The founder of Weltmeister, Shen Hui, is the former vice president of Geely. Weltmeister intentionally poached nearly 40 employees of Geely to join as chassis technology experts.</li><li>After illicitly obtaining Geely’s secrets, Weltmeister filed 12 utility model patents in its own name and did not cease the infringement even after Geely filed the litigation.</li><li>Weltmeister launched a new SUV product in a short time, which acquired obvious competitive advantages in the market and resulted in Geely’s project being shut down.</li></ul>The ruling is broken into several specific measures for enforcement with penalties for non-compliance.To stop the existing infringement and prevent future damages accruing, the SPC ordered the defendant to notify the court’s order to all senior managers, employees, affiliated companies and car chassis suppliers and asked all persons and suppliers who has contact with the trade secrets to sign non-disclosure agreements.The SPC also ordered Weltmeister to hand over its 12 utility model patents based on the stolen trade secrets to Geely and prohibited Weltmeister from transferring, enforcing or withdrawing the filings.The SPC set a penalty of 1 million RMB ($150,000) per day/per patent if the defendant fails to enforce the court’s order in time. Key takeaways for the right holders It is vital for trade secret holders to establish a professional trade secret protection system.<ul><li>Geely’s win was built on a well-established trade secret management system. It is advised that the right holders can take essential measures to protect their secrets of key technologies, including:</li><li>Formulating internal rules and policies to manage secrets. For example, setting different security levels for different technical documents.</li><li>Establishing an internal office IT system to transfer the trade secret documents that can be traced afterwards.</li><li>Conducting regular inspections of trade secret leak risks. Geely became aware of breach during a regular risk inspection.</li><li>The sensitive documents containing trade secrets should be labelled with the proprietary right holder and any contact should be approved by an authorised person.</li><li>Providing regular trade secret management training to all staff and retaining the training records.</li><li>Ensuring departing employees sign a confidential agreement when they quit their job.</li></ul>Seeking trade secret protection is not in conflict with filing patents for complex technical innovations.The features that can be tested or observed from the outliers of the product, such as structure and size are suitable for filing patents. Patent filings covering parts of the trade secret may not break the confidentiality of the whole trade secret.Therefore, the innovator can use patents and trade secrets to protect different aspects of a new complex technology. For example, the structure or design of the products that can be readily obtained or tested after launching into markets are advised to be protected by patents.The plaintiff’s burden of proof may be lowered if the defendant intentionally infringes the trade secret.If there is evidence to prove that the defendant has had access to the trade secret via an illicit approach and intentionally infringed it, the courts in China may decide they are liable even though the preliminary evidence shows the disputed technology has similarity with only parts of the claimed secrets. This is good news for the right holders seeking to enforce their trade secrets in China. This article was first published on <a href="https://www.iam-media.com/trade-secrets/article/ev-chassis-trade-secret-litigation-sets-new-damage-record-in-china-ip-cases">IAM</a> in July 2024.

EV chassis trade secret litigation sets a new damage record in China IP cases

In this guest analysis, Lusheng Law Firm associate Claire Zhang outlines the most common types of non-compliance with IP licensing agreements, and how best to pursue action when breaches occur.In today's global marketplace, IP rights are crucial for businesses looking to protect their brands and innovations. Licensing agreements are a common way for these entities to grant permission to others to use their intellectual property in exchange for royalties or other forms of compensation. However, when a licensee fails to comply with the terms of the agreement, the licensor can suffer losses as a result of the breach of contract and IP infringement. The overlap between breach of contract and IP infringement can have severe consequences for both parties involved. It can damage brand reputation, erode consumer trust and lead to lost sales and diminished brand equity. Moreover, it can create confusion in the marketplace, making it difficult for consumers to distinguish between genuine and counterfeit products.The article explores: <ul style="text-align: justify;"><li>the common types of non-compliance in relation to IP licensing agreements; </li><li>the legal consequences of infringement; and </li><li>how rights holders can effectively manage and pursue action against a local licensee in China.</li></ul> <h2 style="text-align: justify;">Common types of non-compliance</h2><h3 style="text-align: justify;">Unauthorised use beyond licensed scope </h3>One common type of non-compliance involving IP infringement is when a licensee uses the licensed intellectual property beyond the scope permitted in the agreement. This use can include:<ul style="text-align: justify;"><li>exploiting the intellectual property for unapproved products;</li><li>exceeding agreed-on quantities; and </li><li>continuing to use the intellectual property after the licence term has expired.</li></ul>According to Article 8 of the Judging Criteria for Trademark Infringement, “without permission of the trademark registrant" includes circumstances where:<ul style="text-align: justify;"><li>permission has not been obtained; and </li><li>the goods or services are beyond the category, term or quantity of the permitted goods or services.</li></ul>For example, if a business licenses out its trademark for use on a specific type of product, but the licensee begins to use the trademark on a different product without the licensor's permission, it constitutes unauthorised use beyond the licensed scope. <h3 style="text-align: justify;">Sub-licensing without permission </h3>Another common issue is sub-licensing without permission. If a licensee grants a sub-licence to a third party without the licensor's consent, it may allow the third party to use the intellectual property in ways that are not authorised by the original licence agreement. This can lead to a loss of control over the use of the intellectual property and can damage the brand's reputation. <h2 style="text-align: justify;">Legal consequences and possible actions</h2>When a licensee infringes IP rights, the licensor has both common law contractual remedies and statutory recourses at their disposal. Initially, the licensor can invoke the licensing agreement to terminate the contract or seek financial penalties for the breach. Negotiation is typically a precursor to more severe legal action. In cases where the licensee refuses to cooperate and/or cease and desist the infringement, initiating prompt legal proceedings is often the best option. There are four ways to do this:<ul style="text-align: justify;"><li>Civil litigation for infringement – in the event of infringement, the licensor may file a civil lawsuit against the licensee. The licensor can seek compensatory and, if applicable, punitive damages to cover the financial losses and the impact to its brand reputation.</li><li>Administrative complaints – if the infringement is also considered an administrative violation, the licensor can lodge a complaint with the relevant regulatory authorities. This can lead to administrative penalties (eg, fines and confiscation of the infringing products) and other corrective measures. Seeking remedy for an administrative violation can be more effective than civil litigation at stopping the infringement if the licensee is uncooperative.</li><li>Criminal prosecution – in cases where the infringement is severe and constitutes an offence, the licensor can pursue criminal charges. The pursuit of criminal liability can result in significant penalties (including imprisonment), which reflect the gravity of the infringement.</li><li>Strategic use of legal and contractual tools – the licensor must strategically employ a combination of legal actions to protect their intellectual property effectively. This dual approach not only deters the licensee from further infringement, but also sends a clear message to other potential licensees and infringers.</li></ul> <h2 style="text-align: justify;">Different approaches to enforcement </h2>A business relationship exists between the licensor and the licensee. Even when the licensee is in breach of the agreement, in most instances, the licensor is often reluctant to initiate legal actions immediately. Instead, licensors typically prefer to resolve issues through negotiation. This approach is based on mutual benefit, given the licensor's awareness of its licensing market. For instance, pursuing legal action may deter future potential partners.However, in extreme cases where the licensee's behaviour is so egregious that it cannot be overlooked, it becomes imperative to initiate enforcement actions through the appropriate legal channels.To effectively respond to non-compliance involving IP infringement by a local licensee, the licensor must have a comprehensive and explicit licensing agreement, which clearly defines the rights and responsibilities of both parties, including:<ul style="text-align: justify;"><li>the repercussions of non-compliance (eg, liquidated damages); and </li><li>the mechanisms for enforcement.</li></ul>The clarity of contract stipulations is particularly crucial for administrative and criminal actions. In practice, if the contractual provisions are vague, the regulatory authorities may:<ul style="text-align: justify;"><li>dismiss the case as a civil matter; or </li><li>conclude that no administrative or criminal offence has been committed, thereby undermining the efficacy of the enforcement measures. </li></ul>The following case provides guidance on how to clarify liability in relation to infringement following a licensing agreement. <h2 style="text-align: justify;">Case study: clarity in contractual terms  </h2>In the case of Zhe 07 Criminal Final No 1205 (2018), defendant Boshun Co pleaded that it had signed a trademark licensing agreement with Bosideng Co. However, the agreement signed by both parties clearly excluded thermal shirts from the scope of authorisation. The court found that the evidence on record was sufficient to prove that Boshun Co used the registered trademark in question beyond the authorised scope without the permission of the rights holder, and that the amount of illegal gains was substantial, constituting a particularly serious case. As a result, Boshun Co was convicted of the crime of counterfeiting a registered trademark.It is evident that when specific conditions are clearly stipulated in a contract, the court can disregard a defendant's objections. Drawing from numerous case studies and practical experience in enforcement actions, we believe that a licensor can explicitly define certain breach scenarios as constituting IP infringement, thereby reserving the right to pursue administrative penalties and/or criminal liability.Further, drawing from our experience in enforcement actions, the authorities often exercise caution when licensing agreements are involved. This stems from the belief that the case may be a civil dispute and, therefore, not within the authority's jurisdiction. When the contractual terms are not explicit, regulatory authorities may be reluctant to intervene, viewing the matter as a civil dispute rather than an actionable infringement, which can significantly hinder the enforcement of IP rights. <h2 style="text-align: justify;">Conclusion</h2>Managing the overlap between breach of contract and IP infringement in licensing requires a highly proactive approach. Licensors can effectively protect their IP rights by:<ul><li style="text-align: justify;">drafting clear and detailed licensing agreements;</li><li style="text-align: justify;">establishing conditions for enforcement actions; and </li><li style="text-align: justify;">being prepared to take legal action when necessary.</li></ul> This article was first published on <a href="https://www.worldtrademarkreview.com/article/how-manage-ip-infringing-licensing-breaches-in-china">WTR</a> in August 2024.

How to manage IP-infringing licensing breaches in China

<!DOCTYPE html><html><head></head><body>Graphical User Interface (GUI) is a way of displaying function keys and functional components of equipment, facilitating interaction between humans and the equipment.  Since GUI was first introduced in 2014 into the China legal framework as an eligible subject matter for design patents, notable changes have occurred, offering IP owners more possibilities and options for enhanced GUI design protection in China. In this article, we will explore regulatory changes, filing trends, and the practice of GUI design patents. Regulatory changesThe rules for GUI design patents in China were marked by the following key milestones on the regulatory timeline. Essentially, the regulatory restrictions on GUI design patents in China have been loosened over time.- Before May 1, 2014, GUI was not protectable by design patents in China. In fact, it was explicitly excluded for design protection in the Guideline for Patent Examination.- On May 1, 2014, GUI became an eligible subject for design patent protection in China, though bonded to specific products in practice, according to the amendment to the Guidelines for Patent Examination by Order No. 68 issued by the CNIPA.- On November 1, 2019, restrictions on a GUI design patent for specific products were lifted, according to the amendment to the Guidelines for Patent Examination by Order No. 328 issued by the CNIPA.- On June 1, 2021, when the fourth amendment to the Chinese patent law became effective, GUIs could be protected by partial designs, and GUI design patents started to enjoy the extended duration of protection from 10 to 15 years.- On February 20, 2024, when the latest amendment to the Implementing Regulations of the Patent Law and the Guidelines for Patent Examination become effective, more detailed rules were released for the requirements and examination of GUI design patents. Filing trendIn parallel with the loosening regulations, the filings of GUI design patents are growing strongly in China (see below chart).<img src="https://media.umbraco.io/lusheng/ohyg3zm2/img_8080103703391063503_picture1.png" style="width: 500px; height: 258.835px; display: block; margin-left: auto; margin-right: auto;">(Data source: Patsnap)Remarkably, GUI design patents filed under the category of “screen displays and icons” (Locarno design classification 14-04) increased fourfold from 2014 to 2022.  A large portion of these design patents has been filed by Chinese applicants, although remain underutilized by international applicants. According to our research, less than 3% of Chinese GUI patents published in 2021 to 2023 were filed by international applicants. Despite this trend, we anticipate that international companies may increasingly recognize the value of protecting their innovative GUI designs in China. What GUIs can be protected by design patents in China?We’ve analysed the subjects of registered GUI designs in China filed from 2014 to 2023 and observed a shift from GUIs bonded with hardware to GUIs independent of hardware.  The chart below illustrates how the top subjects for GUI designs change over time.<img src="https://media.umbraco.io/lusheng/pplbx10h/img_1387641413384844394_picture2.png" style="width: 500px; height: 309.157px; display: block; margin-left: auto; margin-right: auto;">(Data source: Patsnap)We’ve also observed that Chinese GUI design patents are extended from traditional GUIs on computer or mobile phone screens to non-traditional GUIs such as automotive HUD (Head-Up Displays), VR/AR/XR displays, and GUIs related to virtual characters.Moreover, Chinese design patents on parts or components of GUIs in the form of partial designs have become possible since 2021.  Typical subjects for GUI design patents in China include the following: GUIs independent of hardware- Graphical user interface- Software interface- Interactive interface- Operating interface- Display panel for electronic devices GUIs bonded with hardware- Mobile phone with GUI- Computer/tablet with GUI- Television with GUI- Display monitor with GUI- Watch with GUI Parts or components of GUIs- Main body of GUI- Module of GUI- Area of GUI- Display Zone of GUI- Operating Zone of GUI What GUI/GUI elements cannot be protected by design patents in ChinaThere are also limitations to the patent eligible subjects of GUI design patents.  The Guidelines for Patent Examination (Section 7.4, Chapter 3 of Part I) explicitly excluded the following subjects from design protection in China:- Gaming interface- Patterns displayed by a display device that are irrelevant to human-machine interaction- Wallpaper for an electronic screen- Startup picture or shutdown picture- Website layout irrelevant to human-machine interaction It is worth nothing that for an icon in a GUI, if it is just a pattern displayed by a display device unrelated to human-machine interaction, the icon may not be protectable by a Chinese design patent. However, if it is an icon for user-interaction, e.g., launching an APP on an electronic device, it may be considered to be relevant to human-machine interaction and protectable. Patent PracticeGUI designs will follow the general requirements for a design patent from filing to grant.  PriorityA Chinese design patent may be filed based on a foreign or domestic priority within 6 months from the application date of the first filing. The first filing may be design, patent, or utility model application(s). Formality requirement- Title of the GUI design patent shall indicate the use and the applied product(s) of the GUI design.- Views of the GUI design patent may include the product to which the GUI design is applied, or just the views of the GUI without showing the product, in case the GUI is applicable to any electronic device.- For dynamic GUI, the starting state of the GUI and key frames of the GUI shall be included in the views to illustrate the complete transition process of the dynamic GUI. Partial Design- The whole or partial design must be indicated in the brief description.- The claimed portion of a partial design can be indicated by      · solid line (claimed) and dashed line (not claimed); or      · translucent layer- The claimed portion of the partial design should be a relatively independent region or relatively complete design unit of the product.- Pure surface pattern or combination of pattern and colour are not eligible for partial design protection.- Multiple partial designs with related function or design and providing certain visual effects can be filed in one design application.- Divisional design application: if the parent design application is a partial design, its divisional application cannot be a whole design, and vice versa.- Design amendments: the whole design cannot be amended to a partial design, and vice versa. Examination A design patent will be subject to formal examination before granting. Examination of obvious differences over prior designs has been introduced as a part of formal examination in the Guidelines for Patent Examination in 2024. This means there is a higher bar for the granting and validity of design patents in China. GrantOn average, a Chinese design patent may be granted within 3–4 months under the current practice. The examination of GUI design patents may take longer. According to our research, the average pendency from filing to granting is around 7-8 months for GUI design patents filed in 2021 to 2023. General Recommendations- Consider the specific requirements for GUI design applications in China as early as possible, if design protection in China is intended.- Considering the higher bar for granting and validity of Chinese design patents, it’s advisable to conduct design novelty search for GUI designs, if stable design patent protection is desired.- In view of the high volume of GUI design patents filed in China, design clearance search would be helpful to identify and manage the risk of potential design infringement disputes on software or hardware products with GUI to be launched in China.In summary, as the rules of the game have been changed significantly, we would advise IP owners to explore and utilize the possibilities of improved GUI design patent protection in China. </body></html>

Unleashing the power of GUI design protection in China

The Beijing Internet Court recently issued a first instance judgment on AI-generated artwork, finding copyrightable elements in an image created using Stable Diffusion. This is the first time that China’s courts have rendered a ruling on AI-generated image artwork. In contrast, earlier in February 2023, the US Copyright Office made a decision and deemed the images generated by AI drawing tool Midjourney ineligible for copyright, underscoring the importance of human authorship in copyright law.By igniting debates on AI-generated content (AIGC) copyright, these two cases encourage us to critically examine the interplay between human and AI contributions to creation.Yet, when comparing Stable Diffusion and Midjourney, the creative process feels very similar. Users set prompts and adjust settings, then choose from AI-generated images to refine further by tweaking inputs until they reach a satisfying final artwork. What, then, has led these two authorities to reach contrasting decisions?The key question of authorshipThe fundamental principle behind copyright in both the US and China centres on originality and human authorship. Only works with demonstrably original elements created by a human author can be copyrighted, and machines cannot be the author.A key question to answer when determining copyrightability for AIGC is, therefore, how much the end result demonstrates the involvement of human intelligence and&nbsp;whether the process of creation is determined and controlled by a human. We can see different approaches and focuses emphasised by the China court and the US Copyright Office.The court in China recognised the significant human involvement invested by the plaintiff Mr Li, a blogger, in generating the image. It&nbsp;emphasised Li'spersonal will and selections&nbsp;in the process of creation, when he set out prompts and parameters, and made choices among the images generated from Stable Diffusion, which made his final image different from the ones made by others. It confirmed Li's artistic vision and decision, validating the intellectual work he invested.The court concluded that, despite the use of an AI model, it would not impact the copyrightability of the final result generated, as&nbsp;the AI model was defined as “a tool to support creation by a human”.The Chinese court compared the AI model to a camera, highlighting its function as a tool that translates human intention into artistic output. The court's rationale was that, while the process required less human labour as the result of technological advancements, this should not stop us from using copyright to encourage machine-assisted creativity.Unlike creators in work-for-hire situations, who interpret instructions and make artistic decisions to execute the vision, AI models lack the agency to be considered authors under copyright law due to their lack of independent will. Consequently, the user employing the AI should be recognised as the copyright holder.Illustrative screenshot of the creation process in Stable Diffusion case <img src="https://media.umbraco.io/lusheng/easiayiz/img_1619778078257196085_picture1.png" style="width: 500px; height: 277.77777777777777px;"> &nbsp; &nbsp;Insert prompts&nbsp; &nbsp; <img src="https://media.umbraco.io/lusheng/ufept1mi/img_6844300302449092534_picture2.png" style="width: 250px; height: 354px;"><img src="https://media.umbraco.io/lusheng/skpnp1im/img_3799310466757533002_picture3.png" style="width: 240px; height: 347px;"><img src="https://media.umbraco.io/lusheng/c0hpkluy/img_200924915798457754_picture4.png" style="width: 262px; height: 347px;">Images produced during the process, round by round<img src="https://media.umbraco.io/lusheng/zhalkmoq/img_1713579549767335208_picture5.png" style="width: 253px; height: 357px;">Final imageBy contrast, the US Copyright Office's evaluation of AI art tools like Midjourney&nbsp;highlights the limited control users have over the final artwork, and put more weight on the AI model's role in generating the images.It determined that the substantial gap between user prompts and the AI-generated images leaves users lacking the creative control necessary to be considered the legal authors.The US Copyright Office concluded that the AI-generated images lacked the necessary human creative spark, viewing them as mere outputs of an automated process, and thus ineligible for copyright protection.It also compared AIGC to works made-for-hire, highlighting similarities that the user of AI model (instructor) is not the one who directly forms up the work, and is not entitled to the authorship.Illustrative screenshot of the creation process in Midjourney case<img src="https://media.umbraco.io/lusheng/tf1lyxt2/img_9104280444675828166_picture6.png" style="width: 500px; height: 406.25px;">Prompts and the generated 4 images for selection<img src="https://media.umbraco.io/lusheng/f0sn4lt2/img_2721581254603214379_picture7.png" style="width: 500px; height: 238.71527777777777px;">AIGC image on left, image after human editing on right<img src="https://media.umbraco.io/lusheng/taombalp/img_8274869295109663452_picture8.png" style="width: 500px; height: 335.9375px;">Final images in the comic bookCritical interplay between AI and human contributions to creationCompared with machines invented in the past, generative-AI is apparently more “intelligent”. On one hand, it is desirable that AI models are smart enough to reduce the burden of human labour in creation, while on the other hand, if an AI model is too smart to move beyond human control, it would trump the authorship of a human in the process of creation.Looking into how Stable Diffusion and Midjourney are working at current stage, I tend to agree that human users still undertake a substantial and critical role in guiding and deciding the final outputs, and that creations demonstrate the selection and artistic vision of a human.That being said, one issue remains unsolved in context of copyright regime, as it is challenging for users to predict and repeat the creation. Even if by inputting the same prompts and parameters, it may not necessarily lead to the same image output. This would affect the human “control” level.Regardless, the rapid evolution of AI necessitates the emergence of more sophisticated and dynamic copyrightability frameworks, paving the way for potentially transformative conclusions regarding authorship and ownership. Currently, copyright regimes still provide the most suitable or closest framework to protect AI-generated works, and it is possible that by adopting copyright rules, we could further encourage generative-AI technology to be developed as more predictable and controllable by human users, without compromising on its intelligence. This also conforms to the ethical pursuit of AI technology.Moving forward, if it is still difficult to accommodate AI-generated content within the spectrum of copyright, it could be worthwhile exploring another, bespoke, regime – just like how it has been discussed for database rights.All in all, the widespread adoption of generative AI is inevitable. To foster responsible innovation and safeguard creativity while ultimately benefitting humanity, we need an appropriate legal framework that protects and regulates the use of generative AI and AIGC.This article was first published on IAM.

Contrasting AI artwork copyright cases raise fundamental questions

<!DOCTYPE html><html><head></head><body>China's Supreme People's Court recently handed down an influential decision on the validity of a Chinese pharma patent covering Takeda Pharmaceutical's star product alogliptin (alogliptin case)- a ruling that contains important guidance on the standard for testing what is the same subject matter for the purposes of priority examination. Selected as one of the SPC's biggest cases of 2023, the decision will be applied in the priority examination during all future patent invalidation proceedings and administrative litigation.In China, the proper standard for this has not been very clear or consistent in practice. The China National Intellectual Property Administration applies a "substantially the same" standard, which is also used in novelty assessment. This involves examining whether the claimed solution as a whole in the later patent has the same technical field, technical problem to be solved, technical solution and expected effect as the earlier application ((2021) SPC no. 593 Judgment).In contrast, the courts have tended to use a more rigid “directly and unambiguously derived" standard, which requires every feature in claims of later patents to be recited in the earlier application.In previous decisions, the SPC had never carefully differentiated the two standards because in most cases both standards lead to the same conclusion in priority examination. However, in the alogliptin case the situation is different because the claims include administration features.The “substantially the same" standard would ignore the administration features if these features cannot distinguish the claimed solution in the later patent from the earlier application. But the subject matter is not the same between the later and earlier patents since the administration features are not recited in the earlier patent according to "directly and unambiguously derived" standard.In the new ruling, the SPC for the first time clarifies that the standard for testing the same subject matter in priority examination should be "directly and unambiguously derived" standard rather than the "substantially the same" standard. Key points of alogliptin caseThe basic facts of the alogliptin case are not complicated and mainly involve the examination of priority. The case details are shown in Figure 1. There are two main issues in dispute:<ol style="text-align: justify;"><li>what criteria should be applied to determine the "same subject matter" in the priority examination; and</li><li>whether features that did not put limitation on the scope of claims should be considered in the examination of the same subject matter of priority.</li></ol><img src="https://media.umbraco.io/lusheng/nnggdepg/img_7568953886469781828_image-1.png" style="width: 937px; height: 420px;">Figure 1:Schematic diagram of the Alogliptin caseThe SPC ruled that the "directly and unambiguously derived" standard should be applied in the examination of the "same subject matter" of priority. The SPC opined:<ul style="text-align: justify;"><li>From the perspective of legislation, the foreign priority system stipulated in the first paragraph of Article 29 of the Patent Law is to ensure that the applicant does not lose the benefit of the first application due to the difference in the application time between different countries and regions. The application of the "directly and unambiguously derived" standard in the examination of the same subject matter is consistent with the legislative purpose of the priority system.</li><li>The substantive limitations of some features on claimed solution could be considered from the patentability side when analysing novelty and inventive step. But the examination of priority aims to confirm whether the filing date of the prior application can be used as a priority date, and should not involve the patentability considerations into priority examination.</li><li>Priority examination should be the previous step before examining novelty and inventive step. In this step, it should apply the standard for priority examination rather than involving standard used in novelty and inventive step examination.</li><li>If using the standard of substantive limitation on claimed solution during the examination of priority, the priority will be well-established as long as the patentee adds features into the claim that have no limitation on examination of novelty and inventive step. This is inconsistent with the purpose of the priority system and will also make the patentee obtain improper benefits.</li><li>According to the Guidelines for Patent Examination, the standard for determining the same subject matter should be the "directly and unambiguously derived" standard, which is different from the "substantially the same" standard for novelty examination.</li></ul> Not to be confused with “the same invention” for novelty purposesAlthough the Chinese Guidelines for Patent Examination provide rules and doctrines for testing the same subject matter of priority, there is no clear guidance on the relation between "the same subject matter" in priority and "the same invention" in novelty assessment. Similar wording used in the Guidelines makes the boundary between standards applied in priority and novelty examination even more vague. Specifically:<ul style="text-align: justify;"><li>Section 4.1.2 of Chapter 3 of Part II gives the definition of "the same subject matter" in priority: An invention or utility model with the same subject matter as mentioned in Article 29 of the Patent Law refers to an invention or utility model relating to the same technical field, solving the same technical problem, having the same technical solution and achieving the same expected effect.</li><li>Section 3.1 of Chapter 3 of Part II prescribes the standard for "the same invention" of novelty over prior art: the claimed invention constitutes the same invention over prior art if both of them has substantially the same technical field, the technical problem to be solved, the technical solution and the expected effect.</li></ul>The CNIPA is inclined to apply the similar standard used in novelty evaluation when examining priority in invalidation proceedings, that is, considering whether the later patent has the same technical field, the technical problem to be solved, the technical solution and the expected effect as the earlier application.In the alogliptin case, the SPC expressively clarifies, for the first time, that testing the same subject matter in priority examination should mean applying the "directly and unambiguously derived" standard, and should not confuse this with the standard for novelty assessment.Further, the SPC indicates that according to the essence of establishing priority system, the "same subject matter" in the priority examination underlines the claimed features or solutions in later patent should recite in the earlier application, rather than analysing whether the claimed solutions are substantively the same as prior art. Therefore, the testing standard for priority examination should be different from the standard applied in novelty assessment and it is not appropriate to introduce elements in novelty assessment into priority examination. Every feature in claims influence priority establishment After this ruling, the standard for priority examination will be unified to "directly and unambiguously derived" standard in later patent invalidation and administrative litigations.Under such a standard, every feature of claims in later patent applications will be examined whether they are literally recited or can be ambiguously derived from the earlier application. As for a pharma patent, any features defining medical use, characterisation data, administration methods or manufacturing process should be considered in priority examination regardless of whether those features place limitations on the claimed subject matter or not.For example, the medical use feature would be considered in priority examination no matter whether this feature has limitation on the structure of claimed compound. If the product claims of the later application include a new medical use feature that are not recited in the earlier application, even though the medical use has no limitation on the structure of the compound, the later application cannot enjoy the priority according to "directly and unambiguously derived" standard. A new 'Achilles' heel' for patents in China?The consistency between the earlier and later applications is vital for establishing valid priority. Although it is not required that the expression of the later patent is completely the same as the earlier application, less consistency brings more risk to successful establishment of priority.Patent holders can try the following things to reduce the risk of losing priority:<ul style="text-align: justify;"><li>Avoiding using different technical terms in earlier and later applications. If the later patent application uses a technical term that does not have the same meaning or scope of the term recited in the earlier application, the later patent cannot enjoy the priority date of earlier patent. For example, in InterDigital v Huawei, "CSI request field" of claims 1-10 of later patent is not equivalent to "CQI request field" recited in priority document, so that claims 1-10 cannot enjoy the priority date and are all invalidated due to lack of inventiveness over a 3GPP technical standard published between priority date and filing date of the patent.</li><li>Claiming multiple priorities if the later application includes more than one set of solutions. Patentees are allowed to claim multiple priorities based on different earlier patent applications. However, it should be noted that the minimum element for claiming priority is one single technical solution, rather than technical features. That is, the claims in later patent restructuring features recited in two or more priority documents are unable to enjoy any priority date of earlier patent applications.</li><li>Avoiding broadening the scope of claims in later patent by generalisation. When an earlier patent application only recites one specific embodiment of the product, the later patent cannot claim a general product covering different embodiments even if they have the same function and effects. For instance, a hair removal device claimed in a later patent cannot enjoy the priority of a laser hair removal device because the later patent broadens its scope to non-laser hair removal devices which are not recited in earlier priority documents ((2023) SPC no. 689 Judgment).</li></ul>  This article was first published on IAM. </body></html>

China's Supreme People's Court clarifies priority examination standard in recent ruling

On November 4, 2024, the State Administration for Market Regulation (SAMR) issued the "Anti-Monopoly Guidelines for Standard Essential Patents" (the "New Guidelines"). This issuance follows a draft version released in June 2023 and coincides with recent actions by SAMR concerning the Avanci patent pool. Specifically, on June 27, 2024, SAMR issued a reminder to Avanci about potential monopoly risks associated with their licensing practices for automotive wireless communication SEPs. This action underscores SAMR’s ongoing efforts to enforce antitrust laws and ensure fair competition in the market. The New Guidelines provide a clear framework for SEP licensing, emphasizing the importance of compliance with antitrust regulations. They aim to refine and improve China's antitrust regulatory framework for standard essential patents (SEPs), preventing the abuse of SEPs, promoting transparency, and ensuring that licensing practices are fair and reasonable. These measures address concerns similar to those raised in the Avanci case. The new "Guidelines" mainly cover the following six aspects: <ol><li>General provisions</li></ol> The New Guidelines clarify the purpose, basis, relevant concepts, and analytical principles. This section sets the foundation for understanding and applying the Guidelines in various contexts related to SEPs. <ol start="2"><li>Disclosure of information, licensing commitments, and good faith negotiations involving SEPs</li></ol> SEP holders are encouraged to timely and fully disclose patent information, make fair, reasonable, and non-discriminatory (FRAND) licensing commitments, and engage in good faith licensing negotiations with standard implementers. This aims to enhance transparency and foster trust between SEP holders and implementers. <ol start="3"><li>Monopoly agreements involving SEPs</li></ol> This section details how to identify and handle monopoly agreements involving SEPs. It includes specific situations where operators may reach monopoly agreements during the formulation and implementation of standards, such as: <ul><li>Excluding other specific operators from participating in standard formulation without justifiable reasons.</li></ul> <ul><li>Excluding other specific operators' relevant solutions without justifiable reasons.</li></ul> <ul><li>Agreeing not to implement other competitive standards without justifiable reasons.</li></ul> <ul><li>Restricting specific standard implementers from testing, obtaining certification, or other activities related to standard implementation without justifiable reasons.</li></ul> <ul><li>Other related situations.</li></ul> It also covers specific situations where multiple patent holders may reach monopoly agreements during patent pooling, such as: <ul><li>SEP holders exchanging sensitive competitive information such as prices, quantities, and market division through patent pooling.</li></ul> <ul><li>The management or operation entity of the patent pool including competitive patents in the pool.</li></ul> <ul><li>The management or operation entity of the patent pool jointly restricting SEP holders from licensing independently.</li></ul> <ul><li>The management or operation entity of the patent pool organizing SEP holders to reach monopoly agreements or providing substantial assistance for SEP holders to reach monopoly agreements.</li></ul> <ul><li>Other related situations.</li></ul> Additionally, it addresses situations where SEP holders may abuse patent rights to implement monopoly agreements, such as: <ul><li>Restricting the price, quantity, geographic scope, or quality of products involving SEPs produced or sold by standard implementers.</li></ul> <ul><li>Restricting standard implementers from developing competitive technologies.</li></ul> <ul><li>Other situations that may constitute monopoly agreements.</li></ul> <ol start="4"><li>Abuse of Market Dominance Involving SEPs</li></ol> This section clarifies five factors to consider when determining whether an operator has a dominant position in the relevant market. It then details several situations where operators may abuse their market dominance, including: <ul><li>Licensing SEPs at unfairly high prices;</li></ul> <ul><li>Refusing to license SEPs;</li></ul> <ul><li>Tying SEPs with other products or services;</li></ul> <ul><li>Imposing other unreasonable trading conditions involving SEPs;</li></ul> <ul><li>Discriminatory treatment involving SEPs;</li></ul> <ul><li>Abusing relief measures involving SEPs.</li></ul> <ol start="5"><li>Concentration of Operators Involving SEPs</li></ol> This part covers the declaration and review of operator concentration involving SEPs. It explains how to handle transactions involving SEPs to ensure that operator concentration does not lead to exclusion or restriction of competition, thereby protecting consumer interests and promoting technological innovation. Operator concentration refers to two or more operators: <ul><li>Merging;</li></ul> <ul><li>Acquiring control over other operators through shares or assets;</li></ul> <ul><li>Acquiring control over other operators or exerting decisive influence over them through contracts or other means.</li></ul> When operator concentration reaches certain thresholds, operators must declare in advance to the State Council's anti-monopoly enforcement agency, and concentration cannot be implemented without declaration. <ol start="6"><li>Supplementary Provisions</li></ol> This part explains the effectiveness, interpretation, and implementation of the new "Guidelines." These comprehensive measures are designed to create a fair and competitive market environment for the implementation and licensing of SEPs, fostering innovation and protecting consumer interests. By addressing potential monopoly risks and promoting transparency, the New Guidelines aim to prevent the abuse of SEPs and ensure that licensing practices are fair and reasonable. This proactive approach by Chinese government reflects its commitment to maintaining a balanced and competitive market landscape. Policy sources: <ul><li>Notice of the SAMR on Issuing the "Anti-Monopoly Guidelines for Standard Essential Patents"</li></ul>         <a href="https://www.gov.cn/zhengce/zhengceku/202411/content_6985623.htm">https://www.gov.cn/zhengce/zhengceku/202411/content_6985623.htm</a> <ul><li>SAMR Issues Reminder to Avanci Patent Pool on Monopoly Risks</li></ul>        <a href="https://www.samr.gov.cn/xw/zj/art/2024/art_ec1c9ce3d71a4a5baf853d430a3b5667.html">https://www.samr.gov.cn/xw/zj/art/2024/art_ec1c9ce3d71a4a5baf853d430a3b5667.html</a>

Overview of China’s "Anti-Monopoly Guidelines for Standard Essential Patents"

In September, WIPO released the Global Innovation Index 2024, highlighting Switzerland, Sweden, the United States, Singapore, and the United Kingdom as the world’s most innovative economies. Notably, China is recognized as one of the fastest climbers over the last 10 years, alongside Türkiye, India, Vietnam, and the Philippines[1]. China has set its goal of becoming a technology exporter and an intellectual property powerhouse by 2035, as outlined in its national strategy released in 2021[2].  This strategy aims to empower China's innovation-driven growth and solidify its position as a global intellectual property leader.  Patents are a crucial indicator of innovation activities, especially for high-tech companies. Three Chinese companies, including Huawei Technologies (maintaining its first-place ranking), BOE Technology, and Contemporary Amperex Technology Limited (CATL), stand out prominently among the top 10 filers for PCT applications in 2023.  In addition, China experienced a remarkable surge in patent filings in the same year, with a total of 921,000 invention patents granted, reflecting an annual growth of 15.4%. <a name="_ftn1" href="#_ftnref1"></a>The chart below illustrates the top ten patent-receiving offices, with China accounting for 46.8% of the patent filings worldwide[3] (excluding design applications).  <figure style="text-align: center;"><img src="https://media.umbraco.io/lusheng/akcn5z3e/img_5443487262712071470_picture1.png" style="display: block; margin-left: auto; margin-right: auto;" width="353" height="235"><figcaption>(https://www.wipo.int/en/ipfactsandfigures/patents)</figcaption></figure> Patents play a crucial role in protecting innovations, granting inventors exclusive rights to use and commercialize their patented technologies. This prevents others from making, using, or selling products and services associated with the patent without permission. For instance, Huawei has successfully leveraged its strong patent portfolio to dominate markets for its key technologies and fend off competitors. Despite the rapid growth in patent filings, Chinese patents are granted swiftly. According to the CNIPA (China National Intellectual Property Administration) annual report 2024, the average duration for reviewing an invention patent was reduced from 16.5 months to 16 months last year. China continues to enhance the efficiency of its patent application examination process, aiming to reduce the examination time to 15.5 months this year. <img src="https://media.umbraco.io/lusheng/k5jhynlb/img_8463433380035901514_picture2.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" height="82.87795992714025"> The chart below, showing the average patent pendency in major jurisdictions, further demonstrates the “China speed” in the niche aspect of examining patents. Several factors contribute to this efficiency, including recent reforms, the adoption of advanced technologies, and increased examiner training. These improvements not only expedite the patent granting process but also ensure high examination accuracy, which reached 94.2% last year. <img src="https://media.umbraco.io/lusheng/n02hyg0f/img_8967237824683469540_picture3.png" style="display: block; margin-left: auto; margin-right: auto;" width="408" height="268"> We’ve observed and summarized a few factors that may contribute to the shortened examination duration of patents in China: <ul><li>KPI driven: According to the comments of former CNIPA examiners, specific requirements are set for CNIPA examiners on a specified shortened examination duration. The implementation of the management within CNIPA ensures that examiners are motivated to complete reviews within a set timeframe.</li></ul> <ul><li>Expanded workforce: To handle the large volume of applications, CNIPA has significantly expanded its workforce by hiring more patent examiners. Since 2017, CNIPA has set up seven examination offices in multiple cities, and the number of Chinese patent examiners has grown to over 16,000 [3] by the end of 2023. This expansion has helped reduce the backlog and speed up the examination process.</li></ul> <ul><li>Advanced technologies: CNIPA has invested in advanced technologies, such as artificial intelligence (AI) and big data, to enhance the efficiency of prior art searches for patent examinations, which was previously very time-consuming.</li></ul> These factors collectively enhance the efficiency of China’s patent examination process, making it one of the fastest in the world and positions China as a favorable destination for innovators seeking patent protection and making it more attractive for collaborative innovations and business operations. For foreign companies, this means a more streamlined and reliable process for securing patents in China, which can facilitate smoother market entry and stronger protection for their intellectual property. By prioritizing innovation and robust IP protection, China is not only supporting its domestic businesses but also creating a more welcoming environment for international companies. This balanced approach can help China continue to thrive as a global leader in innovation, fostering a collaborative and dynamic ecosystem that benefits all stakeholders. References[1] https://www.wipo.int/pressroom/zh/articles/2024/article_0013.html[2] lushenglawyers.com.cn/cn/奖项与新闻/从知识产权从业者视角看-知识产权强国建设纲要-2021-2035年/[3] https://www.wipo.int/en/ipfactsandfigures/patents[4] https://english.cnipa.gov.cn/art/2024/6/13/art_3090_193032.html AuthorLi MiHead of Patents, Lusheng Law Firm

Accelerating innovation: The rapid pace of patent granting in China

Introduction At the 2024 Global Digital Economy Conference, the China released the "Global Digital Economy White Paper (2024)" which shows that the added value of China's core digital economy industries in 2023 is estimated to exceed 12 trillion RMB (approximately 1.7 trillion USD), accounting for about 10% of China's GDP. The total digital economy of China, the United States, Germany, Japan, and South Korea exceeds 33 trillion USD, with a year-on-year growth of over 8%. The new generation of technologies, centered around big data, artificial intelligence, and the Internet of Things, has expanded and deepened the scope and depth of informatization, thus promoting the transformation from informatization to digitalization. The rapid growth of the digital economy is closely related to the rapid iteration of data processing and digital technologies, reflecting technological and social progress. Correspondingly, China has also made full preparations in patent legislation and judiciary to encourage and promote innovation in digital technologies. Legislative and Judicial Updates The "Patent Examination Guidelines” (Guidelines) effective from 20 January  2024, introduced significant modifications to the examination provisions for invention patent applications involving algorithmic features or business method features. Firstly, the Guidelines emphasize the principle of reviewing claims as a whole, rather than simply separating technical features from algorithmic or business method features. All content recorded in the claims should be evaluated as a whole to assess the substantive contribution of the invention. Consequently, claims involving algorithms and business methods that include technical features should not be excluded from patent eligibility merely because they involve intellectual activities. Finally, when determining whether a claim constitutes a patentable technical solution, it is necessary to analyze the technical means involved, the technical problems solved, and the technical effects achieved, using the "three-element" standard for patent examination. The amendments to the Guidelines provide more flexibility and clear standards for examining the eligibility of digital technologies that embody algorithm features. By adopting a moderately relaxed examination standard, the patent examination standards for digital technologies are kept in line with social and technological progress, giving digital technology innovations more opportunities to obtain patent protection, thereby encouraging and promoting economic growth. In this context, the Supreme People's Court (SPC) concluded an administrative litigation case in November 2024 regarding patent eligibility of a business method patent based on data processing, clarifying the patentability of algorithms and business methods that include technical features. This case sets an important precedent under the revised Guidelines for evaluating the eligibility of innovations implemented by computers that combine technical, algorithmic, and business features. Summary of the SPC Case The patent in question is an invention patent application for a "Method for Automatically Changing Values in Sharing" submitted by a Chinese information technology company in 2016. This invention proposes a novel "group buying" business model and describes a method for automatically changing values in sharing. By binding the relationship between the sharer and the invitee and tracking user orders, the system automatically adjusts the group buying price based on the number of orders, thereby encouraging more sharing. The China National Intellectual Property Administration (CNIPA) and the first-instance court deemed the subject matter of the patent application to be a business method, which is not protected under the Chinese Patent Law. After reviewing the case, the SPC, in November 2024, made a final ruling, overturning the decisions of the CNIPA and the first-instance court, and recognized the invention as a patentable subject matter. In its ruling, the SPC provided a detailed statement on how the patent application meets the criteria for patentable subject matter under the Patent Law. The court evaluated the claims as a whole to determine whether they met the "three-element" standard, which includes the use of technical means, solving technical problems, and achieving corresponding technical effects. <ul style="font-weight: 400;"><li>The patent application involves a method for automatically settling the final payment, which is a typical business method carried out by a computer program. Although "group buying" is a business model, the prior art cannot track the shared information or determine which users placed orders through the shared information on social media, which is a technical issue and thus a technical problem in the industry.</li></ul> <ul style="font-weight: 400;"><li>To solve this technical problem, the patent application encrypts the first user's identifier and product identifier in the shared link when sharing product information. When the second user clicks the shared link, it decrypts the link to obtain the first user's identifier and product identifier and stores them in an identification file. After the second user logs in, the second user's identifier is bound to the identification file, and the binding relationship is stored in a temporary file on the sharing platform. This way, when the second user places an order, the system can query the temporary file to determine whether the identification file bound to the second user contains the first user's identifier and product identifier, thereby determining whether the second user placed an order through the first user's shared link.</li></ul> <ul style="font-weight: 400;"><li>The patent application employs technical means such as information encryption and decryption, association binding storage, and data matching to solve the technical problem of determining which users placed orders through shared information, to achieve the technical effect of accurately tracking the use of shared links.</li></ul> <ul style="font-weight: 400;"><li>Updating the final payment value based on invitation information is merely a business operation adopted after solving the above technical problem. Using this operation or other operations does not negate the technical nature of the solution in tracking orders. Therefore, the claimed solution in the patent application is a technical solution as defined by the Patent Law.</li></ul> The SPC emphasized that when evaluating the patent eligibility of business methods implemented by computers, the technical and business features in the patent claims should be considered as a whole. Unless it is evident that the invention does not constitute a technical solution, it should not be excluded from patent protection merely because it includes non-technical content. Business methods, that incorporate technical means, solve technical problems, and achieve technical effects, meet the standards for patentable subject matter. The SPC indicated in its ruling that the examination of the eligibility of business method patents could follow relatively lenient standards unless it is evident that they do not constitute a technical solution. However, during substantive examination, stricter standards can be applied to assess the technical contribution of the patent application by comparing it with prior art technologies, thereby fairly and reasonably determining the scope of patent protection. If substantive examination standards are incorporated into the examination of subject matter eligibility, it may inappropriately raise the standards and exclude inventions that should be protected under the Patent Law. Impact and Conclusion The SPC’s ruling is a milestone in the examination of business method patents implemented by computers and aligns with the latest revisions of the "Patent Examination Guidelines." By recognizing the technical contributions of such inventions, the court has set a precedent for more inclusive and balanced patent eligibility standards. The revised patent regulations and the SPC's ruling have promoted more consistent patent examination and confirmation. China is committed to the development of the digital economy, promoting the integration of digital technology with the real economy. This balanced patentability standard will play a crucial role in fostering innovation in the field of algorithms and digitalization and ensuring fair and reasonable patent protection for inventors and enterprises. They can look forward to a more friendly and predictable legal environment to protect their technological advancements. SPC ruling: <a href="https://ipc.court.gov.cn/zh-cn/news/view-3693.html">https://ipc.court.gov.cn/zh-cn/news/view-3693.html</a>

Landmark SPC ruling on patent-eligible business methods

Paving the way for digital innovation and patent protection in China

China’s new patent examination guidelines aim to foster AI innovation

On 30 September 2024, the State Council of the People’s Republic of China promulgated the Regulations on the Administration of Network Data Security (hereinafter the “New Regulations”). The New Regulations effectively integrate the understanding and application of rules governing relevant data across different regulatory dimensions, sending a positive signal that the compliance burden on enterprises is being eased, and will formally come into force on 1 January 2025.When the draft for comments was released three years ago, the “three pillars” of China’s network and data security regulatory regime – the Cybersecurity Law, the Data Security Law and the Personal Information Protection Law – had already come into effect. The primary purpose of the New Regulations is to supplement and refine the implementation details of these laws.Over the past three years, a series of legislative and enforcement activities have emerged in China’s data regulatory field, and the regulatory framework has evolved from non‑existent to existent, and from existent to refined. The New Regulations cover almost all data processing activities involving China. Compared with the draft for comments, the regulatory approach is more relaxed. The key points are summarised below.&nbsp;Highlight I: Three‑category administration of network dataA. Personal information(1) Adjustment of disclosure requirements for personal information processingCompared with the draft for comments, which imposed numerous additional disclosure items, the New Regulations basically follow the Personal Information Protection Law without adding extra requirements, merely emphasising separately that the methods for account cancellation and withdrawal of consent shall be disclosed, and allowing the use of criteria for calculating retention periods in lieu of specifying a concrete retention period where it is difficult to determine the latter. In addition, the New Regulations optimise the means of disclosure. Besides requiring the centralised public display of processing rules for external reference, they also require the general adoption of the “dual‑list” requirement originally designed specifically for the display of APP privacy policies, namely that, regardless of the form of data processing activities, the collection and external provision of personal information shall be disclosed in the form of lists.(2) Clarification of the preconditions and exercise methods for the right to data portabilityThe right to data portability can further protect the right to be informed and the right of control over personal information. The New Regulations fill the gap as to when and how the right to data portability may be exercised, allowing the transfer of personal information collected on the basis of consent or as necessary for the performance of a contract, where the data subject’s real identity can be verified, the rights and interests of others are not infringed, and it is technically feasible, and allowing the charging of necessary fees where a request exceeds a reasonable scope.(3) Removal of the time limit for responding to personal information rights requestsCompared with the draft for comments, the New Regulations remove the requirement to respond to personal information requests within 15 days, enabling enterprises to balance compliance requirements and business needs more flexibly. In particular, when an individual exercises the right to erasure, the New Regulations no longer require completion of erasure/anonymisation within 15 days, nor do they require an explanation to the individual where erasure cannot be completed.(4) Gradual normalisation of personal information compliance auditsSince 2023, China has been exploring the formulation of regulations and standards relating to personal information protection audits, reflecting the trend that Chinese legislators seek to ensure the security of general processing activities through continuous self‑supervision. The New Regulations limit the scope of audits to personal information processing activities.&nbsp;B. Important data(1) Integration of criteria for identifying important data and reporting rulesThe New Regulations clarify the definition of “important data” and set out systematic identification methods and management requirements. The final determination of “important data” is subject to the notification by relevant localities or departments to network data processors, or the public release of catalogues or lists of important data.(2) Refinement of internal security management requirements for important data processorsBased on the Data Security Law, the New Regulations refine the requirements for the data security officers and management bodies of important data processors, including professional knowledge, work experience, position level, authority, etc. It is noteworthy that the New Regulations require that members of the management level (rather than the decision‑making level) serve as the responsible persons, and that they have the authority to report network data security matters directly to the relevant authorities.(3) Coordination and integration of important data risk assessment mechanismsThe New Regulations require the avoidance of unnecessary overlapping and repetitive inspections, and promote the alignment and mutual recognition of risk assessment mechanisms. At present, risk assessments for important data are mainly divided into annual risk assessments and special risk assessments.(4) Newly added obligation to report data disposal plans following merger and acquisition transactionsThe New Regulations introduce an obligation, in circumstances such as merger, division, dissolution, bankruptcy and other situations that may affect the security of important data, to report data disposal plans, information on recipients, and other relevant matters.&nbsp;C. Other dataFor other data that is neither personal information nor important data, the New Regulations establish general security obligations based on the Cybersecurity Law, the Data Security Law, the Personal Information Protection Law and other instruments. For example, providers of network equipment or services shall report data incidents that may affect national security to the relevant authorities within 24 hours.In addition, similar to practices in certain industries (such as the automotive industry) and certain regions (such as the Beijing Pilot Free Trade Zone), the New Regulations also seek to break down the conceptual barriers between personal information and important data. Although personal information relating to 10 million individuals does not equate to important data, processing personal information at that scale is still subject to certain obligations applicable to important data processors.&nbsp;Highlight II: Focus on high‑risk data processing activitiesThe New Regulations focus on imposing higher compliance obligations on high‑risk scenarios such as external provision, entrusted processing, joint processing, merger and acquisition transactions, and cross‑border flows.(1) Strengthening supervision of recipients of personal information and important dataConsistent with the provisions of the Personal Information Protection Law on entrusted processing, the New Regulations require entities that provide personal information externally to enter into data processing agreements, stipulating the purposes, methods, scope and security protection obligations of processing, and to supervise the recipients. In addition, the New Regulations require that records of the above activities be retained for three years. The New Regulations do not adopt the requirement in the draft for comments that administrative licences be obtained for the sharing, trading or entrusted processing of important data.(2) Implementation of important data risk assessment mechanismsAs mentioned above, the New Regulations integrate the risk assessment mechanisms for important data. Among them, where important data is provided externally, entrusted for processing or jointly processed, a special risk assessment shall be conducted unless such activities are necessary for the performance of statutory duties and obligations. In particular, outbound transfers of important data shall be subject to security assessments for cross‑border data transfers.(3) Continued promotion of the orderly cross‑border flow of dataOn 22 March 2024, the Cyberspace Administration of China issued the Provisions on Promoting and Regulating Cross‑border Data Flows, ushering in a new stage of reducing the burden of prior governmental approval for cross‑border data transfers. The New Regulations continue this trend, recognising the existing legal bases for cross‑border data transfers and adding the performance of statutory obligations as a new legal basis. In terms of transferring data overseas pursuant to international treaties, China has already carried out international cooperation involving cross‑border data flows with Hong Kong, Macao, Germany and the European Union respectively.In addition, since the Personal Information Protection Law also applies to circumstances where overseas entities directly collect personal information from China, the New Regulations refine the obligations of such overseas enterprises to establish dedicated entities or designate representatives in China and to report relevant information to the cyberspace administration authorities.&nbsp;Highlight III: Balancing emerging technologies with existing rules(1) The dominant role of platforms in maintaining a fair and open environmentThe New Regulations provide that network platform service providers (“platforms”) shall manage third parties accessing the platform and bear corresponding liability when damage is caused to individuals. The New Regulations clarify the requirement for platforms to issue annual social responsibility reports, and incorporate into the data security framework the requirements arising from algorithm governance and anti‑unfair competition. For large platforms with more than 50 million registered users or more than 10 million monthly active users, complex business types, and network data processing activities that have a significant impact on national security, economic operations, or the national economy and people’s livelihood, the New Regulations require that their annual risk assessments explain the network data security status of key businesses and supply chains.(2) Newly added obligation to delete personal tags related to personalised recommendationsOn the basis of the obligation to allow users to turn off personalised recommendations, the New Regulations support users in simultaneously requesting platforms to delete user tags generated based on their personal characteristics.(3) Providing compliance solutions for unnecessary personal information collection caused by automated technologiesThe New Regulations provide an interpretation of the “principle of minimum necessity” that is more aligned with technical realities. They provide a compliance solution for unavoidable, unnecessary collection resulting from automated technologies, allowing a “collect first, delete later” approach. Such provisions may be regarded as a positive signal for the AI industry, particularly with respect to AI training data obtained through web‑crawling technologies.&nbsp;Compliance recommendationsIt is observed that the New Regulations do not involve many entirely new topics or contents, but mainly refine the existing Cybersecurity Law, Data Security Law and Personal Information Protection Law, and integrate rules, policies and standards at different levels. At the same time, they summarise the enforcement practices and achievements since the three laws in the field of network data security came into effect. The promulgation of the New Regulations marks the gradual maturation of cybersecurity and data compliance enforcement in China and provides a more detailed and feasible legal basis for future enforcement activities.Given their higher legal hierarchy and more detailed provisions, the New Regulations will become an important tool for future regulatory enforcement. The transition period reserved for enterprises is now less than three months. Accordingly, we recommend that enterprises conduct the following compliance self‑checks against the New Regulations:<ul class="list-paddingleft-1"><li>Systematically revise privacy policies. For multinational companies that have already formulated general privacy policies for their global operations, it is advisable to prepare privacy policy appendices for their Chinese affiliates to bridge potential gaps in compliance requirements arising from differences in jurisdictions.</li><li>Maintain records of routine data processing activities in various scenarios (for example, processing record registers) and supporting documentation (for example, network logs). Prepare templates for data processing agreements to be entered into with third parties, as well as lists required for subsequent risk assessments and compliance audits.</li><li>Improve internal security management structures and personnel arrangements. Eligible foreign enterprises should establish dedicated entities or designate representatives in China as soon as possible and closely monitor the reporting requirements of local cyberspace administration authorities. Professionals with expertise in Chinese privacy practices should be assigned to handle personal information requests originating from China, particularly with respect to safeguarding the right to data portability.</li><li>Enhance capabilities for the prevention of and response to security incidents. Improve incident notification and reporting strategies relating to China. Prepare standardised notification templates and streamline internal and external communication and response procedures.</li></ul>&nbsp;For further information related to this article, please contact: rousedigitalservicesteam@rouse.com.This article was jointly prepared by the data team of Lusheng Law Firm and its strategic partner Rouse International

China’s new data security rules in 3 months: key trends and compliance insights

<!DOCTYPE html><html><head></head><body><div class="newsSummaryContent">Guidelines for Patent Examination released at the same time</div><div id="content-detail">On December 21, 2023, the Chinese Government released the Implementation Regulations of the Patent Law and the Guidelines for Patent Examination, following two and a half years since the fourth Amendments to the Patent Law came into effect. The revised Implementation Regulations and the Guidelines for Patent Examination will take effect on January 20, 2024.You can access the full text of the amendments and implementing regulations <a href="https://www.gov.cn/zhengce/content/202312/content_6921633.htm">through this link</a> (available in Chinese only). The Guidelines for Patent Examination can be found through <a href="https://www.cnipa.gov.cn/art/2023/12/21/art_526_189193.html?xxgkhide=1" data-anchor="?xxgkhide=1">this link</a> (available in Chinese only). Once the Patent Law comes into force, we will provide a comprehensive analysis along with our recommendations.</div></body></html>

China patent law implementation regulations released

<!DOCTYPE html><html><head></head><body>The Patent Re-examination Board of China’s National Intellectual Property Administration (PRB) recently issued a decision to invalidate two “orange book” patents owned by AbbVie. The ruling, which will likely to be one of the most interesting and consequential invalidity decisions issued by the Chinese patent office this year, establishes a new rule that sufficient disclosure of experimental data should be considered when reviewing the priority of a pharma patent.Warning about the dangers of claiming priority to a document without experimental data, especially where Markush claims are concerned, the PRB’s decision relates to patent No.ZL2010800692920.6 (Decision No. 561725) and its divisional application ZL201810902092.0 (Decision No. 562232). The applications were registered in the “orange book” of the Chinese patent linkage system and cover the second-generation JAK inhibitor Upadacitinib.The main issue of the Upadacitinib case was whether Markush claims 1-3 of ZL201810902092.0 enjoyed the earliest priority date. The petitioner Si Chuan Gowell Pharma challenged the inventiveness of the patent using one AbbVie’s early filing (WO2009/152133A1), a filing published between the priority date and the filing date of the patent, arguing it would constitute closest prior art if the priority was not established.Yet, while the decision maintained the Markush claims 1-3 as valid as these claims successfully enjoy the earliest priority date, the board found that the specific structure of Upadacitinib was not disclosed in the priority document and corresponding claims 11-12 were declared invalid because of non-obviousness over the early filing in combination with common knowledge.<h2>Key points of Upadacitinib case</h2>The decision ruled that:<ul><li>The right to claim priority, as prescribed in the Paris Convention and Article 29 of the Chinese Patent Law, is intended to give the patentee more time for preparing procedural documents when filing in different countries. It is not a grace period to complete the substantive content of the invention.</li><li>The patentee is not forbidden from further supplementing the invention within the priority period. However, in doing so, they will incur a risk of not enjoying priority. If the priority document provides only a general direction of research, it will not be regarded as an invention of the same subject as the later patent that has clearly confirmed one of specific technical effect.</li><li>Forming a new, narrower Markush claim resulting the original claim by deleting or further limiting alternative elements of some groups is permitted. But this is only so if such deletion or limitation does not produce a particular combination or highlights individual compounds or groups of compounds not specifically mentioned in the original application. Also, such amendments must be carried out within the scope of the entire Markush, and no new core compound of invention may be created. Therefore, the priority of the amended Markush claims was well-established as it shared the same subject matter as the earlier application before deletion.</li><li>The patentee can submit supplementary experimental data in the invalidation proceedings to prove the claimed compounds have a better effect over the prior art. But the supplementary data shall not be accepted if the technical effects or the fact to be proved by the supplementary data cannot be obtained from the disclosure of the patent document.</li></ul> <h2>Takeaways from Upadacitinib case</h2>For pharmaceutical patents, the priority documents need to sufficiently disclose experimental data relevant to the claimed compounds. Otherwise, the patent might not enjoy the priority.For the patents in common technology fields, such as machinery, if the priority of the targeted patent is challenged, the examiner only needs to examine whether the claimed solution is recited in the priority document.However, for pharmaceutical patents, the Chinese patent office requires the inclusion of experimental data to confirm the compound has a certain kind of pharmacological activity. Thus, two things are needed. Not only does the priority document require the same chemical structure, but it also must sufficiently disclose experimental data to prove that the invention has already completed before the priority date.If the priority document merely alleges that the claimed chemicals can be used to treat certain disease without any experimental data, it will not be regarded as the same subject-matter as the patent behand where disclose the detailed experimental data focusing specific activities of the compounds. As a result, the later patent cannot enjoy the priority.When claiming a priority of an individual compound, the priority document needs at least to disclose the chemical structure, manufacturing method, characterization data and activity data. When claiming a priority of a Markush claim, pharmaceutical activity data of certain number of compounds falling into the scope of the Markush claim must be included in the priority document. Although the decision did not mention how many compounds is sufficient for establishing the priority (25 compounds were disclosed within the formula Ic), the experimental data should be enough for the skilled person to confirm the Markush claim can achieve the technical effects alleged in the priority document.The amendment of Markush claims by deleting or further limiting alternative elements of groups of Markush formula during patent prosecution or divisional process will not be detrimental to enjoying priority in the invalidation proceeding.The decision confirmed that it is allowed to narrow a Markush claim by deleting or further limiting alternative elements of groups of Markush formula in the prosecution and divisional process. Further, the amended Markush claim can enjoy the priority of original claim in the invalidation proceeding as it is considered to have the same subject matter.As per Daiichi Sankyo Company Limited vs. Beijing Winsunny Pharmaceutical Co., Ltd, the amendment of Markush claims in the invalidation proceedings is rigid and it is generally not allowed to delete some alternative elements of groups to narrow the scope of Markush claims. As a result, it is recommended for the patentee to file and submit a hierarchy of Markush claims with different protection scopes in the prosecution and divisional process. This strategy may let those narrowed claims have the same priority as the original claims, in addition, it may also give patentee more space to select a proper claim to deal with challenges using various prior arts in the invalidation actions. The patentee is allowed to submit supplemental experiment data to prove the claimed solution has a better effect, but the supplemental data will be strictly reviewed by the examiner.As per the latest Guidelines for Patent Examination, the patentee is allowed to submit supplementary experiment data to prove the inventiveness of the claims over prior arts in the invalidation proceedings. In the Upadacitinib case, the examiner carefully reviewed the supplementary data filed by the patentee in the invalidation proceedings. The review concerned not only on whether the technical effect was originally disclosed by the patent, but also on whether the supplementary data can be used to compare the effects between the closest prior art and claimed compound.If the patentee wants to let the examiner accept the supplementary data, it may need to meet the following requirements:<ul><li>The format of supplementary data should meet the legal format requirement for evidence. For example, if supplementary data was filed as an Affidavit of a technical expert, the hard copy of Affidavit should be notarized and legalised, and the expert should attend and testify in the oral hearing.</li><li>Supplementary data is preferably submitted with original experiment records, so that the examiner can check the authenticity of the data.</li><li>The technical effect or activity of the supplementary data needs to be disclosed in the original description. In the Upadacitinib case, the examiner only accepted the supplementary data of the inhibitor activity of JAK-3, but not the selective activity against JAK-2/JAK-1 as the original description only disclosed JAK-3 activity.</li><li>Supplementary data should be conducted between the claimed compound and the prior art compound having the closest chemical structure. If the supplementary data used an improper compound of the prior art document as a comparison subject, it is insufficient to prove the claimed compound has an unexpected effect and is inventive over prior arts, notwithstanding that the test results showed that the claimed compound had a better activity or effect.</li></ul>The requirement for the disclosure of experimental data in priority document remains a contested and unclear issue in China. However, this case provides an important guideline to follow for pharma patent holders, especially when claiming a broad Markush claim covering compounds with various structure and medical activities. This article was firstly published on IAM.</body></html>

Chinese patent office hands down key ruling on pharma patent requirements

<!DOCTYPE html><html><head></head><body>This article is co-written by Landy Jiang and Melanie Zhu(Rouse).Because the recently issued amendments to China’s Trademark Law are not likely to come into force for some time, brand owners might be tempted to sit back and think there’s nothing they need to do at the moment. That would be a mistake.The proposed amendments, particularly those relating to bad faith registrations and use requirements, are a reflection of the government’s continuing efforts to strengthen the intellectual property system, and an indication of both current trends in China’s trademark scene and likely changes to the practice of CNIPA (China National Intellectual Property Administration) and the courts. To avoid unpleasant surprises, and make sure you are well placed to take advantage of these trends and changes, now is the time to check brand protection and enforcement strategies and make any necessary adjustments.Here are six key changes to consider.<a>Portfolio management</a> strategies<ol><li>Filing defensive applications: Article 22 of the draft amendments provides that, where a large number of applications for registration of the same mark are filed without any intention to use the mark, those applications will constitute bad faith applications. Brand owners accustomed to using defensive filings as a means of preventing trademark squatting in China should, therefore, now be giving very careful consideration to the applications they file. Whereas defensive filings will still be necessary, careful consideration should be given to the marks and the goods/services in relation to which registration is sought, and to whether and what evidence of use, or intended use, can be filed. In appropriate cases, consideration may also be given to relying on the extended protection of well-known marks (see more on this below).</li><li>Developing new trademarks: Article 22 also classifies as bad faith applications, those for marks that are detrimental to the national or public interest, or have otherwise significant negative associations. This should be borne in mind when developing and registering marks, particularly any marks that contain political, religious, racial, or sexual elements.</li><li>Fulfilling use requirements: While details of the proposed amendments are yet to be finalised, strengthening the use requirements is a major focus for removing ‘dead wood’ from an overcrowded register. Among other things, a compulsory declaration of use of a registered mark every five years has been contemplated, with the Trademark Office making spot checks requiring the production of such evidence. Whatever form the requirements ultimately take, brand owners should be taking steps now to create and maintain an evidence bank containing appropriate evidence of use of all their marks. They should also be conducting regular audits to ensure that they have appropriate evidence of use in place for all their marks.</li></ol>Enforcement strategies<ol start="4"><li>Making greater use of enforcement authorities: The power of enforcement authorities is being significantly enhanced, giving brand owners more and better options for tackling trademark infringement. In the past, because of the limited penalties enforcement authorities could impose, even successful administrative actions would often not be sufficient to deter infringers, and infringement would continue. That is changing, as authorities will be able to impose more stringent penalties. As a result, administrative actions should be playing an increasing role in enforcement strategies.</li><li>Combatting bad faith registrations: Bad faith trademark applications have long been a major problem in China and reducing them is a major focus of on-going efforts to improve the intellectual property system. The actions available to brand owners in this area are expanding and enforcement strategies should be reviewed with this in mind. For example, Article 83 of the draft amendments proposes that any party suffering damage from a bad faith filing can bring a civil action and claim damages, which would include at least the reasonable legal costs of taking action. The draft also makes provision for applications to CNIPA for the mandatory transfer of bad faith registrations, under certain circumstances.</li><li> Actions based on well-known mark protection: Because the draft amendments extend the scope of protection available to well-known marks, action may now be available in situations where in the past it would not have been. Cross-category protection, for example, has been extended to unregistered well-known marks. It is also important to note that both local and international registrations will be taken into account in determining whether a mark is well-known. Further, dilution, tarnishment, and free-riding are prohibited in relation to marks that are “familiar to the general public”. Brand owners should be ready to take action in appropriate cases: preserving and maintaining appropriate evidence will be key.</li></ol>Considering and checking these aspects of your trademark protections and enforcement strategies now, and making appropriate adjustments, will help ensure brand owners are well-placed to benefit from current trends and developments, and to take defensive action wherever necessary.</body></html>

Trademark strategies in China: six key changes to consider

<div class="newsSummaryContent">This article is co-written by Ling Jin at Lusheng Law Firm and Holly white at Rouse.</div><div class="newsSummaryContent"></div><div class="newsSummaryContent">In this article we discuss key drivers, pain points and how to address them.</div><div id="content-detail">International businesses in China who deploy data management software solutions may need to implement a regulatory compliance strategy for cross-border transfer of data. Becoming compliant is ever more critical as real risks are emerging, especially with threats rising from customers and employee complaints. Business suspension, fines and reputational damage could arise as a result.On the surface if may seem hard to define the action that needs to be taken and the urgency. There are considerable uncertainties and multiple complex factors that need to be considered. However, steps can be taken to identify the key pain points and prioritise actions to manage the risks to an acceptable level. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business drivers for ensuring complianceAny business who might be exposed to regulatory non-compliance should act now. Particular drivers are highlighted in the case studies below:&nbsp;Example 1: Publicly listed industrial manufacturing company with multiple entities in ChinaThe Business had undergone a&nbsp;restructuring&nbsp;and&nbsp;let employees go. A&nbsp;previous employee complaint&nbsp;had a&nbsp;negative impact on the business.&nbsp;Therefore, the overseas HQ wanted to&nbsp;ensure compliance&nbsp;across&nbsp;all Chinese entities&nbsp;to&nbsp;avoid&nbsp;potential future&nbsp;problems.&nbsp;Each entity took a different approach to processing the personal information of employees, job candidates and business partner contacts, requiring&nbsp;bespoke rectification actions for each.&nbsp;Example 2: Multinational entertainment business operating multiple apps, social media channels and international ERP systemThe&nbsp;commercial strategy&nbsp;was&nbsp;changing,&nbsp;reducing the delivery via third-party entities, and increasing their own role in operational delivery. Therefore, creating&nbsp;greater exposure.&nbsp;In addition, the business was reliant on an&nbsp;overseas ERP system&nbsp;to process employee and business partner personal data. Operating in a&nbsp;highly regulated sector,&nbsp;they had previously experienced impacts from regulatory non-compliance. Desire to&nbsp;avoid future issues.&nbsp;Common pain points when charting the route to cross-border data transfer compliance:Most businesses should comply with Standard Contractual Clauses (SCC) route, as they will not meet the government security review threshold and the route to be certified by a specialized agency is far from operational. Implementation of the SCC is imminent this year. Businesses should prepare. There are common challenges faced during the compliance rectification process:Pain point 1: Lack of internal understanding of systems used and data flowsWithout knowing which systems are used, what data is transferred to whom and the roles played by different entities, it is not possible to identify the rectification actions needed. This is particularly critical where personal, personal sensitive or important data is transferred.Pain point 2: Uncertainty about whether to establish a standalone China data handling systemFor some, the best solution is to stop transferring the data outside of China. To make the business management decision, the balance between the burden of becoming compliant versus the additional cost of establishing new IT systems, personnel and processes needs to be considered.Pain point 3: Securing alignment between China and global data complianceTo comply with China regulations, new agreements are likely to be needed with other internal entities or outside service providers. Need to ensure they sit alongside and not conflict with existing international arrangements. Stakeholder management may also be required for those who may push back on the need for changes.Pain point 4: Ensuring a proportionate response to tackling the risksThe real risks and how to prioritize rectification actions can be unclear. Desire to identify the “must-dos” to effectively manage the risks without undertaking lengthy and costly exercises. Additional pressures for those operating in more sensitive industries, who have CIIO clients or significant numbers of employees or customers in China.Action needed to address paint points and ensure complianceDeveloping and implementing a regulatory compliance strategy for cross-border transfer of data will enable businesses to identify key data compliance pain points; rate the potential risks against their commercial goals in China; and develop appropriate strategies and prioritised rectifications.Process to develop regulatory compliance strategy:&nbsp;<img src="https://rouse.com/media/q1xhcrqi/cross-border-4.png?width=480&amp;height=140&amp;mode=max" alt="" width="480" height="140">&nbsp;SummaryThe time has come for businesses to be compliant with the cross-border data transfer regulations. Any international business in China who shares or gives access to personal data (employee, customer or business partner) with other internal entities overseas or third parties is exposed. Lengthy and costly exercises are not necessarily needed to deliver effective compliance. An experienced based assessment of the situation enables identification of the key risks and how to mitigate potential negative business impacts in the short, medium and longer-term.&nbsp;Need support with data regulatory compliance in China?<a href="https://rouse.contentour.com/video/Questnaire/questionnaire?qid=1055&amp;managerid=1412" data-anchor="?qid=1055&amp;managerid=1412">&nbsp;Leave your details</a>&nbsp;and a member of the team will be in touch.</div>

Cross-border data compliance in China for international businesses

<!DOCTYPE html><html><head></head><body>This Briefing is a summary of a more detailed Memo that is available for clients of the firm. The Briefing and Memo have been updated to April 28th 2023 may be used as general guidance on legality of evidence gathering methods that are typically used in China to investigate IPR infringement. This Briefing does not constitute legal advice. It is important that you check with us for any legislative changes that may have occurred since the date of this Briefing, and seek legal advice in relation to any specific evidence gathering activities you plan to conduct in China.Key Takeaways in this Briefing:- There is no regulation in China for private investigations, however it is an industry which operates the open. For evidence gathering of IP infringement, the use of private investigators is well known and tolerated by courts and law enforcement authorities.- The fundamental methods of evidence gathering by investigators, namely, use of an alias, purchase of samples, covert audio and video recording, are all supported by legislation and precedential cases. However, certain equipment, such as tracking and listening devices, are banned, and investigators should not make use of these tools.- Legislation provides that evidence can not be admitted if it seriously infringes the legitimate rights of others. In practice, this provision is not triggered by the use of ordinary investigative methods described above, including covert video and audio recording without permission, provided that there was no illegal means (ie trespass, coercion) used to obtain them.- The practice of whistleblowing (ie, voluntary reporting of unlawful activity by someone within an organization) is protected and encouraged in China, regardless of whether the whistleblower is paid a reward.- Another investigation method commonly used, especially in anti-counterfeiting, is paid informants – that is, investigators who aim to be hired by the target company to pinpoint acts of infringement. While companies that are found to be engaging in IP infringement do not enjoy legal protection for their infringing acts, informants and IP owners who engage them must operate within certain boundaries to avoid potential legal risk. <h4>1.Background - Private Investigations In China</h4> For cases of IPR infringement in China, it is commonplace for the IP owner (or its law firm) to engage investigators to gather evidence of infringement. This evidence may be the basis for filing a complaint to administrative or criminal authorities, or to file a civil lawsuit. While all of these enforcement bodies have powers to search for evidence, the IP owner typically has to make its own efforts to collect evidence in order to file a case.China does not have a standalone law of evidence, which means that the legal boundaries for lawful and admissible evidence must be found in other legislation, as explained below. Neither is there any legal recognition or regulatory framework for the conduct of private investigations. Self-collection of evidence by IP owners is the norm, and widely accepted. However, there are some explicit prohibitions on certain forms of information gathering, as detailed below.For IP infringement cases, the typical activities that investigators engage in to collect evidence of infringement include: - Undercover approach to a target using an alias and business pretext;- Covert audio and video recording, which may include notarization of the recording;- Sample purchase, which may include notarization of the purchase;- Surveillance of people or premises;- Working with whistleblowers or informants.We cover each of those activities in more detail below. <h4>2.Legal Framework For Evidence Gathering</h4> Firstly, the Civil Procedure Law sets out general principles for evidence, but does not provide guidance specifically on investigations.A more relevant item of legislation is the Interpretations of the Supreme People's Court on Application of the Civil Procedure Law of the People's Republic of China” ("Civil Procedure Interpretations”) which state, in Art.106, that evidence shall not be admitted if it seriously infringes upon the legitimate rights and interests of others, violates prohibitive provisions of the law, or is against public order.There are also “Several Provisions of the Supreme People’s Court on Evidence for Civil Actions” (Revised 2019) (“Civil Evidence Provisions”). These Provisions do not contain much of direct relevance to evidence gathering, although they contain some articles relating to audio-visual evidence which is discussed further below.The Civil Evidence Provisions also establish that evidence properly notarized can be taken as true unless the other litigant has evidence to rebut its accuracy. While notarization does not per se prove that the evidence has been lawfully obtained, it provides a high level of legitimacy. Notarization of video and audio recording, or of purchase of a sample, is therefore a core competency of investigators.The most directly relevant piece of legislation for investigations in IP cases is found in another set of SPC Provisions: “Several Provisions of Supreme People's Court on Evidence for Civil Lawsuits Involving Intellectual Property” (2020) (“IP Evidence Provisions”).  Art.7 of these IP Evidence Provisions, states:“The physical objects, receipts, etc. obtained by the rights owner from the accused infringer by himself or by entrusting others to purchase the infringing articles in the name of an ordinary purchaser for the purpose of discovering or proving intellectual property infringement may be taken as evidence to sue the accused infringer for infringement.”We discuss below how these provisions affect the methods used by investigators. 2.1 Prohibited Investigation Methods & EquipmentThere are various pieces of legislation banning the use of “specialized” equipment for detective work, such as signal interception devices, pinhole cameras and tracking devices. Not surprisingly, impersonation of law enforcement or other government agencies, trespassing, forced entry, circumvention of digital or physical security controls, coercion, bribery, or other means of obtaining information by force are also unlawful. In addition, there is criminal liability for illegally gathering, selling or buying personal information.However, making covert audio or video recording per se is not prohibited, as explained further below. Provided they are not using prohibited equipment, private investigators can make audio or video recordings using ordinary smartphones. 2.2 Use of AliasesIt is normal practice that investigator will use an alias, such as a fictitious or real company, to pose as a potential customer of the target company to obtain information from the suspected infringer. The use of an alias to collect evidence of IP infringement is permitted under the IP Evidence Provisions set out above.Indeed, the SPC has supported the use of undercover aliases for over sixteen years, dating back to a precedent known as the “Founder” case<a name="_ftnref1" href="#_ftn1">[1]</a>, published in the SPC Gazette in 2006, in which the plaintiff, Founder, a Chinese software company, arranged for an undercover purchase of a hardware device on which infringing software was loaded at the point of purchase, which was the normal mode of sale by the infringer. The SPC ruled that there was nothing that prohibited this form of evidence gathering, nor did it harm public interest or the legitimate interests of the defendant.Art. 7 of the IP Evidence Provisions were tested again in a 2021 appeal before the SPC of a patent infringement suit<a name="_ftnref2" href="#_ftn2">[2]</a> during which the patentee had conducted a notarized purchase of an infringing product using an alias. The defendant challenged the use of an alias, but the SPC found that there was nothing unlawful about this method to obtain the evidence. 2.3 Sample PurchaseThe legal authority for sample purchase is the same as that for use of aliases, namely, Art.7 of the IP Evidence Provisions. The Founder case is also authority here – it was not deemed inducement for the plaintiff to have the infringing software loaded onto a device at the point of purchase, because that was consistent with the way the defendant normally sold the infringing software to other customers.An important point to note, however, is that the infringer must have been engaged in the selling of the infringing items prior to the investigator’s purchase, and was not induced to infringe when it otherwise would not have done (ie, the investigator must not act as an agent provocateur). 2.4 Covert Video & Audio Recording & SurveillanceThe Civil Procedure Law and the Civil Evidence Provisions specifically provide for digital audio and video recording to be admitted as evidence, provided that the medium in which it is fixed can be verified as true. Digital notarization tools are an admissible form of evidence capture, and now commonly used. Such recording must also meet the provisions of the Civil Procedure Interpretations, Art. 106, requiring that the collection method not be specifically prohibited (see 2.1 above) and not “seriously harm the legitimate interests” of the other party.One of these “legitimate interests” may be the right to privacy, enshrined in the Civil Code Art.1032, which provides that “no organization or individual may infringe upon any other’s right of privacy by spying, intrusion, divulging, public disclosure or other means”.These provisions are broad, so does “serious harm to the legitimate interests” in Art. 106 of the Civil Procedure Interpretations include violation of the right of privacy in Art. 1032 of the Civil Code? In practice, covert recordings do not appear to cause much difficulty for investigations. There are several cases in various courts around China (not IP-related) that have supported the plaintiff’s use of covert recordings against challenges by the defendant. These cases indicate that where the investigator may be conducting recording to gather evidence of infringement - for instance during a meeting at the invitation of the subject - no serious harm to the legitimate interests of the subject would be found. Moreover, use of such material in court proceedings would not be deemed public disclosure.The same principle would apply to surveillance (ie, following the movement of personnel, vehicles etc at a target’s premises), which is is also a commonly used method of investigation, particularly for anti-counterfeiting. While we have found no published precedents, we believe such activities would be treated similarly covert video and audio recording.Investigators should be very cautious, however, about any activity, whether recorded or not, that involves observation of individuals at a residential property, as this is more likely to be treated as an invasion of privacy. 2.5 The Personal Information Protection LawThe new Personal Information Protection Law (“PIPL”) which entered into force in November 2021 requires that, where personal information is to be gathered, there is a requirement for the subject to give consent. However, the PIPL is not intended to inhibit the ordinary conduct of business, and where the subject themselves provides their contact information to the investigator, or it is provided by their employer, this would either not be considered “personal”, or fall within the exceptions for obtaining express consent (Art.13). This scenario should apply equally to an investigator using a business pretext as it does to a genuine business transaction. Nevertheless, it is advisable for IP owners to take advice on compliance with the PIPL in respect of (a) any information gathered that may be deemed personal and (b) export of personal information overseas. 2.6 Evidence Gathering by LawyersIt should be noted that China’s Lawyers Law gives lawyers the right to collect evidence from law enforcement or other government bodies or individuals who may have the relevant information, provided that they show their credentials. This is obviously not a covert evidence-gathering method, but can be useful as a supplemental means of legitimately obtaining information which is not available to the general public.  2.7 Whistleblowers and Paid InformantsIP investigations also frequently rely on information from whistleblowers or paid informants. “Whistleblowers”, as the term is commonly used, means individuals who voluntarily report information of unlawful activity, often within their own organization, whether for a reward or other motivation. “Informants”, in the context of IP investigations, usually refers to people who work on a professional basis to collect information from within target organizations.A typical mode of operation is that the informant will aim to be employed (formally, or as casual labor) by the target company, and then report on any infringing activities he / she finds. This method is most often used in anti-counterfeiting cases where the infringer is operating very secretively and the only practical way to pinpoint counterfeit products is by having someone working on the inside. The informant may be working as a freelancer, contractor or employee of an investigation agency.China’s Labor Contract Law, which governs employment relations, requires “good faith” as a basic principle for both parties to an employment relationship. However, the good faith principle is not breached where the employee reports wrongdoing by his or her employer.Other provisions of the Labor Contract Law, relating to fraudulently obtaining employment, or dual employment, are not relevant to the typical situation of informants hired as casual labor, nor are they likely to apply in the case of an employer committing acts of infringement.Equally, the Civil Code under the law of Torts (Book VII), where an informant discovers IP infringement at their employer and reports it, the employer would not have any right to claim that a tort had been committed against them.Overall, Chinese judicial and enforcement bodies are well aware of the use of informants to uncover unlawful activities and appear to tolerate the practice. There are several anecdotal cases mentioned through news reports, although we have not found published judicial decisions specifically addressing the use of informants in the context of IP or other commercial disputes.In relation to trade secrets, however, the IP owner making use of informant’s information should exercise some care. China’s Anti-Unfair Competition Law provides protection for trade secrets, including imposing liability both on the direct act of theft of trade secrets, and on a party that induces another to do so. In a typical situation, an informant is working as a manual labor in a production line or warehouse, and is not exposed to any confidential commercial information about the target organization. However, in the event that the informant has access to broader information about the employer’s business, collecting and passing on that information may open the informant and, ultimately, the IP owner, to liability for infringement of trade secrets. Of course, information is only eligible for protection as a trade secret where it meets China’s legal threshold for protection, and which it is itself lawfully created or obtained<a name="_ftnref1" href="#_ftn1">[1]</a> by the target. That threshold is not met where information is simply internal to a company, but not specifically protected, and is accessible to all employees. Nevertheless, the lack of legal merit would not stop an alleged infringer making a claim against the IP owner for tactical purposes. It is highly advisable that, the IP owner, its outside counsel and informant keep records to show the information gathering was focused on suspected acts of infringement and excluded any non-relevant commercial information. As a practical matter, informants are not likely to be discovered, as they generally do not provide formal evidence that would expose their identity.The leeway afforded to “informants” in the IP infringement investigation context is also predicated on the assumption that the IP owner has reasonable suspicion or some actual evidence of infringement. If that reasonable suspicion proves to be unfounded, the informant should withdraw within a brief period of time. Provided that the IP owner has not made use of any commercial information obtained from the target not related to IP infringement, the target has not suffered any loss. Again, it is important that the IP owner and its outside counsel make use of informants within a properly managed compliance framework. ConclusionsIn short, Chinese law and practice provides explicit or implicit support for typical practices used by undercover investigators to discover IP infringement. These include using an alias and business pretext to purchase samples or gather relevant information provided by the target company, covertly recording business interactions and formalizing this evidence through notarization. Another common method, which is to make use of information from informants working within the target company, is also acceptable provided that it is conducted within certain boundaries.It is important to bear in mind that, given that the profession is not regulated and has no recognized professional standards, the investigator, or informant, is limited to acting as a ”civilian sleuth”. They may use only ordinary tools such as a mobile phone to record audio and video, and rely on his or her wits to persuade the target to provide information itself, but must be careful to avoid using any equipment or tactics that are prohibited for civilian use. They should ensure that the scope of their investigations remain focused on the discovery of infringing activity, and avoid straying into the use of illegal methods, or engaging in information gathering beyond the scope of discovering IP infringement.Ideally, IP investigations should be instructed and supervised by a Chinese qualified law firm, to ensure that the methods and scope of the investigation fall within this legal framework.  [1] (2006) Minsantizi No.1[2] (2021) SPC Zhimin Zhong No. 776[3] See (2006) Hugaominsan (Zhi) Zhongzi No. 92  China Litigation Group28th April 2023.</body></html>

Lusheng briefing – Legal framework for evidence gathering activities

in respect of intellectual property infringements

With China’s relaxation of cross-border data transfer requirements still in draft form – how should MNCs in China approach their data exports? China recently released a set of draft rules which purport to relax some of the burdensome requirements on data exports. Amidst a yearslong tightening of data security laws and an anti-espionage campaign over the summer, the move was widely welcomed by foreign businesses as a signal that regulators were willing to temper national security objectives with the need to support economic growth. With the rules still in draft form, we explain their significance and how companies should respond until they are finalised and effective. What are the key changes proposed in the draft rules?On 28th September 2023, the Cyberspace Administration of China released the draft version of the <a href="http://www.cac.gov.cn/2023-09/28/c_1697558914242877.htm">Provisions on Regulating and Promoting Cross-Border Data Flows</a> for public comment. They establish exemptions for a number of key data export activities, as well as adjust the thresholds by which the three main mechanisms for cross-border data transfer (government assessment, standard contract and certification) become mandatory. Among other proposals, the following data export activities are exempted from the cross-border data transfer mechanisms: <ul><li>HR management – Where it is necessary to transfer the personal information of internal employees overseas.</li><li>Less than 10,000 individuals – Where a company expects to transfer the personal information of less than 10,000 individuals overseas in one year.</li><li>Contractual necessity – Where personal information is transferred overseas in order to perform a contract to which the individual is a party, including for cross-border shopping, cross-border remittances, air ticket and hotel reservations or visa processing. </li></ul>What this means for data exports from China? A significant number of foreign companies will benefit from reduced compliance burdens, particularly those operating in B2B industries with smaller amounts of personal information. The exemptions covering employee data and contract performance reflect a recognition that certain cross-border business activities present a relatively low risk to national security. Notably, the draft rules maintain that “important data” must undergo a security assessment before being provided abroad, but only where it has been expressly identified by the relevant authorities as such.Furthermore, whereas previous rules mandated regulators to determine whether data exports were truly “necessary”, the draft rules suggest that companies are to make this determination for themselves. This important change in wording reflects a regulatory shift from ex ante supervision (i.e. mandatory government approval before data export) towards ex post scrutiny (i.e. permitting some data flows subject to continued scrutiny). This should help to relieve administrative burdens on both the regulators and the wider business community.How should MNCs respond in the interim? Though it was anticipated that the draft rules would become effective before November 30 2023 (the deadline of the grace period for data exporters to file their standard contract with the authorities where the original thresholds have been triggered), they have yet to be finalised at the time of writing. Nonetheless, we expect the final version to be released in the coming months which retains many of the draft’s key features.In the meantime, companies should closely assess their position under the draft rules’ proposed thresholds and exemptions. This includes estimating the volume of data likely to be transferred overseas within the one-year timeframe. Furthermore, implications may vary based on the current progress of a company’s existing government assessments or standard contract filings, for example: &nbsp;<ul><li>for operators in a sensitive industry (such as healthcare, financial services), proceed with the government security assessment or the standard contract filing;</li><li>for operators in a less sensitive B2B industry not meeting the new thresholds within the draft rules, adopt a “wait and see” approach to developing legislation;</li><li>for less sensitive B2B operators which exceed the new thresholds (for example, transferring more than 10,000 individuals’ personal information overseas in one year), proceed with standard contract preparation, but hold off on the filing. </li></ul>Lastly, it is worth underlining the remaining requirements for cross-border data transfer that companies will still need to adhere to after the draft rules come into force, including:<ul><li>Legal basis for processing – Data processors are required to have a lawful basis for processing personal information such as individual consent, as well as obtaining “separate consent” for cross-border data transfer.</li><li>Contractual arrangements – When transferring data overseas to a third party, this needs to be governed by a detailed contractual agreement which is compliant with the relevant PRC regulations.</li><li>PIA – China’s <a href="https://digichina.stanford.edu/work/translation-personal-information-protection-law-of-the-peoples-republic-of-china-effective-nov-1-2021/">Personal Information Protection Law</a> requires an impact assessment to be conducted when providing personal information abroad.</li><li>Internal Data Security and Privacy Protection Measures – MNCs shall implement proper data security management and technical systems, establish regular internal data protection audit procedures, and prepare for government supervision under certain circumstances.</li></ul>&nbsp;Forward LookOverall, the draft rules represent a positive development in China’s data governance regime. Restrictions on cross-border data transfer have long been a cause for concern for MNCs operating in China. By reducing the compliance burden and permitting a wider range of cross-border data flows, this will provide a significant boost to foreign investment in China.Looking forward, the draft rules also authorise China’s free trade zones to develop their own “white lists” for data exports that are exempt from the cross-border data transfer mechanisms. This could see the incremental growth of permitted categories of data to be exported with ease from China’s free trade zones, which may eventually be adopted on a regional or national level. As ever, it remains important to keep abreast of regulatory and policy developments in this fast-moving space, as well as to ensure that existing data compliance protocols are fit for purpose. Please feel free to reach out to us if you would like to discuss the impact of China’s data compliance requirements on your company.&nbsp; &nbsp;&nbsp;This article is a joint publication by Lusheng Law Firm and Lusheng's strategic partner Rouse.&nbsp;Authors: Ling Jin, Sunny Su, Jonathan Dove (Rouse)&nbsp;Our global Digital &amp; Commercial Services line supports brand and technology companies to navigate the evolving digital landscape and deliver commercial objectives. Our business-driven advice enables clients to effectively manage IP, legal and regulatory risks to successfully deliver their next round of innovation.

Regulatory alert: With China’s relaxation of cross-border data transfer requirements still in draft form

How should MNCs in China approach their data exports?

<!DOCTYPE html><html><head></head><body><div class="newsSummaryContent">From 7 November 2023 the Convention abolishes the traditional requirement of legalisation</div><div id="content-detail">The Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents (the “Convention”) facilitates the use of public documents abroad. The purpose of the Convention is to abolish the traditional requirement of legalisation, replacing the often long and costly legalisation process with the issuance of a single Apostille certificate by a Competent Authority<a name="_ednref1" href="https://rouse.com/insights/news/2023/the-apostille-convention-officially-takes-effect-in-china#_edn1">[i]</a> in the place where the document originates.China officially acceded to the Hague Conference on Private International Law – Conférence de La Haye de droit international privé (HCCH) 1961 Apostille Convention on 8 March 2023, which comes into effect tomorrow, 7 November 2023. Changes under the Convention include:<ol><li>Chinese Embassies and Consulates in member countries of Apostille Convention will stop accepting legalisation service applications from 7 November 2023.</li><li>Courts in China will accept public documents with an Apostille certificate, made by a Competent Authority (see endnotes) in member countries<a name="_ednref2" href="https://rouse.com/insights/news/2023/the-apostille-convention-officially-takes-effect-in-china#_edn2">[ii]</a> (see endnotes) of the Apostille Convention, and legalisation is no longer required.</li><li>For a private document (such as a Power of Attorney from a company or individual), notarisation must still be carried out to make it a “public document”. The Apostille authority confirms the qualification of the notary, then the document can be used in the destination country.</li></ol> Authors: Landy Jiang, Fan Liu <a name="_edn1" href="https://rouse.com/insights/news/2023/the-apostille-convention-officially-takes-effect-in-china#_ednref1">[i]</a> Competent authorities for Apostille service of the member countries could be found at <a href="https://www.hcch.net/en/instruments/conventions/authorities1/?cid=41">https://www.hcch.net/en/instruments/conventions/authorities1/?cid=41</a><a name="_edn2" href="https://rouse.com/insights/news/2023/the-apostille-convention-officially-takes-effect-in-china#_ednref2">[ii]</a> List of member countries to Apostille Convention could be found at <a href="https://www.hcch.net/en/instruments/conventions/status-table/?cid=41">https://www.hcch.net/en/instruments/conventions/status-table/?cid=41</a></div></body></html>

The Apostille Convention officially takes effect in China

<!DOCTYPE html><html><head></head><body>PrefaceIn September 2022, Lusheng Law Firm won a landmark final judgment in a foreign-related OEM case for trademark dispute for its client Juratek Ltd. This trademark infringement proceeding was instituted by Laizhou Baoyi Machinery Co., Ltd. (‘Baoyi'), which first registered the "<img src="https://media.umbraco.io/lusheng/2oljeojw/img_8352784489214747601_picture4.jpg" style="width: 102px; height: 24px;">" trademark in China against Juratek's OEM processor in the country. Lusheng, on behalf of the accused infringer, claimed that Baoyi's acquisition and exertion of the registered trademark rights violated the principle of good faith and was supported by the final judgment of Zhejiang Provincial Higher People's Court.Winning this case was a huge milestone for Juratek and its partners in the Chinese original equipment manufacturer (OEM) sector. Matt Robinson, the General Manager of Juratek, said: "We are very pleased with the final decision. When our goods were detained (on charges of trademark infringement), we suffered and were highly disillusioned. I've been doing business in China for 20 years and have been satisfied with everything, but the recent maters caused me to harbor doubts. Fortunately, Chinese legal experts advised us to be patient and confident, and we ultimately achieved our goal. "The case "Juratek" has the typical characteristics of OEM cases for trademark disputes, and the victory involved complex evidence collection and presentation of legal argument. The team endured the process and won the case. Here, the attorney involved discusses the focus, difficulties and challenges of foreign-related OEM cases regarding trademark disputes.Conflicts and Challenges from Judicial ViewsThrough more than two decades of  judicial practice evolution, foreign-related OEM legal matters have the following core characteristics: First, the domestic processor produces products for the overseas client under its authorization, and affixes the trademark on the product in a form consistent with legal provisions; Second, the products are not sold in the domestic markets in China, but exported, typically, to the country where the client is located; Third, the client must have legal trademark rights at the place of receipt. Since OEM products are produced in China and shipped overseas, the transaction process involves two trademark systems at home and abroad, which can lead to conflicts between domestic and overseas trademark rights.In the People's Republic of China, there have been changes and conflicts in the judgment standard about such cases, which mainly focus on "trademark use", "obfuscation", "subjective fault" in the elements of trademark infringement, as well as the "regional" principle and "good faith" principle of trademark rights. In 2019, the Supreme People's Court clarified in the "Honda Case" that the act of attaching a trademark to OEM products is equivalent to use the trademark, emphasizing the geographical principle of trademarks, and clarifying that domestic registered trademark rights have priority over overseas trademark rights. The decision made in the Honda case posed a huge challenge for OEM managers' claim of non-infringement.Case Background Juratek, the overseas OEM client of the disputed product in this case, is a leading supplier of automobile brake products. It was established in the United Kingdom in 1982 and renamed as JURATEK LIMITED in March 2000. Juratek applied for the registration of the European Union trademark "JURATEK" in September 2004 and was approved in May 2006. At the end of 2013, the company upgraded its brand, creating and using a new brand identity: such as <img src="https://media.umbraco.io/lusheng/wzjhrkll/img_5887363988039227189_picture5.png" style="width: 78px; height: 18px;"> and <img src="https://media.umbraco.io/lusheng/jmndt0wr/img_4603467589089098860_picture3.png" style="width: 42px; height: 36px;">. Since 2000, Juratek has been continuously engaged in OEM business in China, commissioning Chinese manufacturers to produce and export automotive brake products with its commercial logo.The Plaintiff in the first trial is Baoyi. Baoyi was established in Laizhou, Shandong Province, in June 2011, engaged in producing and selling automobile brake products. In April 2017, the company applied for registration of the trademark <img src="https://media.umbraco.io/lusheng/2oljeojw/img_8352784489214747601_picture4.jpg" style="width: 102px; height: 24px;"> in China. It was approved in March 2018, and was designated to be used on Class 12 brake discs, brake pads, and other products. It immediately filed a trademark protection record with the General Administration of Customs, P. R. China. The Defendant in the first trial is Suzhou Kingrun Auto Parts Co., Ltd. ("Kingrun Company"). In 2018, Kingrun Company and Juratek began to cooperate in OEM, and Juratek issued a letter of authorization to authorize Kingrun to use its "Juratek" trademark and <img src="https://media.umbraco.io/lusheng/wzjhrkll/img_5887363988039227189_picture5.png" style="width: 78px; height: 18px;"> logo. In 2020, Baoyi applied to Ningbo Customs to check and detain the brake callipers declared by Kingrun Company for export. It immediately sued Kingrun Company for infringement of its <img src="https://media.umbraco.io/lusheng/2oljeojw/img_8352784489214747601_picture4.jpg" style="width: 102px; height: 24px;"> registered trademark right. The first trial was tried in Ningbo Intermediate People's Court. It was ruled that Kingrun Company infringed the registered trademark right of Baoyi, and should stop the infringement, destroy the related products and compensate Baoyi RMB 200,000. Kingrun Company appealed to Zhejiang Provincial Higher People's Court. In September 2022, Zhejiang Provincial Higher People's Court issued the final judgment, revising the first trial judgment, and determining that Baoyi violated the principle of good faith in applying for and using the trademark right involved, and Kingrun Company did not infringe.In this case, the attorney focused on the legal rights of "Juratek" company and the improper acquisition and exertion of trademark rights by "Baoyi". It is challenging to prove these two aspects.Difficulties and Obstacles of Overseas Clients in Foreign-related OEM Cases for Trademark Dispute <ul><li>The difficulty in protecting overseas intellectual property rights in China </li></ul>Juratek has created the word mark "Juratek" and the graphic and word mark <img src="https://media.umbraco.io/lusheng/wzjhrkll/img_5887363988039227189_picture5.png" style="width: 78px; height: 18px;"> involved in the case, and used "JURATEK" as its corporate name. It has used these intellectual property rights worldwide and built goodwill and influence.The attorney collected previous materials of Juratek creating and continuously using the trademark involved and accumulating popularity and influence on the trademark involved, which includes the design background and design drawings of the trademark, news, and pictures published in overseas newspapers and internet media at its first use, previous web pages of Juratek's website (www.juratek.com), and continuous reports on Juratek and its brands and products by internationally renowned auto parts and after-sales service websites. The collection of this evidence is challenging. On the one hand, it takes effort and even "luck" to find and obtain previous materials. Furthermore, evidence adduced from overseas requires costly notarization, authentication and translation procedures to meet the formal evidence requirements. However, based on the territorial principle of intellectual property protection, overseas rights will often not be protected in China judicial cases.<ul><li>The difficulty in proving the prior use right of trademarks in China. </li></ul>Based on the prior use right of the trademark, before the application date of a domestic trademark, if the overseas client has used the same or similar trademark in good faith and continuously on similar goods or services and enjoys certain influence, it shall have the right to continue to use the trademark in the original scope.Besides, OEM business is a transaction between the client and processor, and the relevant transaction documents are not made public. In this case, the attorney collected many documents and materials that Juratek engaged in OEM business in China before the application date for the trademark of Baoyi. However, these were questioned as internal information of both parties to the transaction.Besides, since the OEM products do not appear in China market, there was no report on the "Juratek" brand in the Chinese media, so it was difficult for the attorney to obtain public information to prove that "Juratek" has certain influence due to its OEM use in China. Due to the characteristic of the transaction, it is more difficult to collect persuasive evidence of previously use by Juratek's OEM business in China.<ul><li>The difficulty in claiming the domestic registered trademark holder violating the principle of good faith </li></ul>It is challenging to claim the application of the principle of good faith in a given case. The principle of good faith is a basic principle of law and serves as the "king clause". Article 7 of the Civil Code of the People's Republic of China:"When conducting a civil activity, a person of the civil law shall, in compliance with the principle of good faith, uphold honesty and honour commitments";Article 32 of the Trademark Law of the People's Republic of China:"An application for the registration of a trademark shall not create any prejudice to the prior right of another person, nor unfair means be used to pre-emptively register the trademark of some reputation another person has used."The principle of good faith in trademark law can be embodied in this clause. However, the high abstraction and generality of the principle of good faith lead to difficulties in judicial practice. As a legal principle, it is general, somewhat subjective and, covering a wide range. However, its applicable standards are vague and difficult to uniformly express. The situation leaves excessive leeway for judges to decide cases, and also uncertainty to the process.As far as this case is concerned, to prove that Baoyi had violated the principle of good faith use, it was first necessary to prove that Baoyi had known the relevant logo of JURATEK before applying for registration, but that it still continued to use it for improper purposes Moreover, it was necessary to prove that Baoyi maliciously exerted a right to use the trademark obtaining the trademark right. In Chinese judicial precedents, it is often necessary for the claimant to provide direct evidence that the preemptive registrant "knew" the claimant's prior rights, such as, there was a commercial or former agency relationship between the preemptive registrant and the trademark creator. Yet here there was no such fact in this case.Persistence and Breakthrough In the face of difficulties, the attorney did not stop but improved the evidence chain around the principle of "good faith" through multi-angle evidence.Based on the evidence that the overseas client created and used the trademark involved and continuously uses the relevant trademark in the form of OEM in China, the attorney collected the evidence that Baoyi obtained and exerted the trademark involved by improper means from various angles, including: Baoyi and Juratek are located in the same region as many OEM partners in China where gathers China's automobile brake products industry cluster. The local government attaches great importance to relevant industries and continues to organize peer managers to participate in domestic and overseas exhibitions; Baoyi is engaged in the same industry, and its legal representative Xiaobin Lou is the deputy secretary-general of the local industry association. He has also set up a company engaged in this industry in the United Kingdom, and has sufficient channels to contact domestic and overseas brands and operators; Juratek logo has inherent distinctiveness, and the trademark registered and used by Baoyi is the same as that created and previously used by Juratek. We won't know if it is a coincidence; More coincidentally, the company also uses the same packaging on its products as Juratek's. In addition, Baoyi has registered other overseas famous brands in this industry, and its registration motive is hard to say if it's a goodwill. The above evidences, as well as the fact that Baoyi demanded high compensation from Juratek, comprehensively proved that Baoyi "knew" Juratek's trademark, still registered and used the same trademark subjectively and maliciously, and then claimed that the infringement of the goods of the legal obligee for illegitimate interests.A Hard Victory in Final Judgment In September 2022, the final judgment from Zhejiang Provincial Higher People's Court overturned the first trial judgment from Ningbo Intermediate People's Court. In the judgment, the Court held that:"In the process of obtaining and using trademark rights, the subject of trademark rights shall abide by the principle of good faith. Violation of the purpose and spirit of the law, to harm the legitimate rights and interests of others, improper exertion of trademark rights is abuse of rights, and its related claims should not be protected and supported by law. Based on the comprehensive research and judgement on the situations including overseas use of "JURATEK" series logo and relevant trademark registering by Juratek Ltd., its business cooperation with domestic foreign-related OEM enterprises, Baoyi's cognition of Juratek Ltd. and its "JURATEK" series logo, Baoyi's subjective intention, its use of the trademark involved after registration and application for registration of several trademarks identical or similar to well-known auto parts brands in other countries and regions, the court held that the way Baoyi exerted the trademark right involved violated the principle of good faith. Looking back at Kingrun Company, it has fulfilled its prudent and reasonable duty of care in this case. "Given this, the Court held that Baoyi's filing an infringement lawsuit against Kingrun Company authorized by Juratek Ltd. for the alleged infringing OEM goods in China on the basis of the trademark right involved violated the principle of good faith. Therefore, its exertion of the registered trademark right was hardly justified, and its claim should not be supported.Pay Tribute to Zhejiang Provincial Higher People's Court After two trials, the final judgment finally confirmed that Baoyi's behavior of obtaining and exerting the trademark right involved in the case was hardly in good faith, constituting a violation of the principle of good faith, which is not easy. During these two trials, the attorney has submitted about 80 items of evidence and dozens of attorney opinions, which means that the court needs to spend a lot of labor and time trying, identifying, and determining each item of evidence and its supporting matters in turn.The attorney of this case now pays tribute to Zhejiang Provincial Higher People's Court. An ancient Roman jurist once said, "Law is the art of goodness and justice". The judges handling this case are professional and dedicated, safeguarding social fairness and justice and carrying forward the values of honesty and credit.Conclusion Through acting as the attorney in the case, we deeply felt that foreign-related OEM traders often face extremely difficult proof obstacles, some of which are difficult to overcome, when encountering infringement proceeding.The author thinks that what Trademark Law protects is the goodwill of the trademark, the purpose of which is to urge producers and managers to guarantee the quality of goods and services, maintain the trademark's reputation and promote the development of a socialist market economy. China's trademark laws, regulations and judicial precedents have set up specific and clear standards for trademark infringement judgment. Still, these standards lead the OEM processor to bear excessive burden of proof when facing the special transaction mode such as foreign-related OEM, which leads to the imbalance of rights and obligations of market traders.Foreign-related OEM trade is a common transaction form, which has greatly contributed to the national economy. However, the heavy burden of proof and too strict protection conditions for OEM traders do not conform to the long-term strategic planning of related industries, nor do they meet the needs of national economic development. The author appeals that the legal judgment standard of foreign-related OEM trademark disputes should not be limited to the specific standard of trademark infringement judgment but should focus on the comprehensive investigation of the related OEM subjects and the characteristic of their respective rights, to reasonably balance the legal effect of trademarks at home and abroad in processing trade.In a separate piece, the author also shares her <a href="https://www.lushenglawyers.com.cn/awards-press/a-reflection-on-judicial-decisions-of-oem-related-trade-mark-infringement-cases-in-china/" title="A Reflection on Judicial Decisions of OEM-related Trade Mark Infringement Cases in China">reflections on the judicial decisions of the OEM-related trade mark infringement cases in China.</a>For more information on the Juratek case, please see our press release piece <a href="https://www.lushenglawyers.com.cn/awards-press/landmark-win-for-oems-in-china/" title="Landmark win for OEMs in China">Landmark win for OEMs in China</a> and case study article <a href="https://www.lushenglawyers.com.cn/awards-press/bet-the-house-trade-mark-battles-in-china/" title="‘Bet the house’ trade mark battles in China">‘Bet the house’ trade mark battles in China.</a> </body></html>

Comment on the case for trademark dispute of "Juratek" OEM

<!DOCTYPE html><html><head></head><body>Due to the regional nature of trade mark rights, the rights of trade marks registered by original equipment manufacturer ('OEM') entrusting parties abroad can neither automatically be enjoyed nor exclude that vested in owners with identical or similar trade marks in China. If relevant trade marks have been registered by Chinese owners in the Intellectual Property Protection System of the General Administration of Customs of the PRC ('the GACC'), the OEM-related products may hurt these domestic owners during export declaration. Moreover, the OEM-related product might be detained by customs due to suspected trade mark right infringement. The latter event would be very costly to OEM entrusting parties abroad, trustees in China, and other participants, such as customs clearance agents (i.e., OEM operators).Here, the application and adjudication rules of the Chinese judicial circle for the determination of OEM-related trade mark right infringement will be discussed. As part of this, the reasoning of Chinese courts in typical cases of OEM-related trade mark rights infringement will be analyzed. The aim is to help OEM operators in the PRC take effective measures to prevent in advance and deal with potential infringement.Reflection on judicial decisions of OEM-related trade mark infringement cases in China Judicial precedent in China has witnessed a long evolutionary transition regarding applying laws for addressing OEM-related trade mark infringement. For example, judicial decisions made by the Supreme People's Court of the PRC ('the SPC') on three (3) retrial cases, namely, the PRETUL case in 2015, the Dong Feng case in 2017, and the Honda case in 2019 have together provided guiding significance to the judicial adjudication in such matters.The figure following illustrates the transition of judicial decisions of OEM-related trade mark infringement cases in the PRC:<img src="https://media.umbraco.io/lusheng/dy5fb3nv/img_3485365409740019776_微信图片_20230228124525.png" style="width: 643px; height: 144px;">The shift in judicial decisions in China is illustrated below:<ul><li>Before 2010, most Chinese courts found trade mark infringement of OEM-related products bearing identical or similar trade marks registered in China. However, from 2010 to 2015, the legal application of such trade mark infringement attracted more attention among Chinese judicial circles. The upshot was that OEM trustee's behaviour of processing in several judicial precedents had not been ruled as infringement.</li><li>In 2015, the SPC made a retrial judgment in the 'PRETUL' case and held that trade marks affixed to OEM-related products neither fulfill the trade mark function of distinguishing the origin of commodities nor cause confusion and misidentification among the relevant public in China, which cannot be found infringing. </li><li>In 2017, in a retrial procedure on the Dong Feng case, the SPC reiterated that trade mark use in the OEM manufacturer's activities not purported for source-identifying or distinguishing functions does not constitute trade mark infringement.</li><li>In 2019, the SPC made a retrial judgment in the 'Honda' case that the act of affixing trade marks to the product constitutes the use of a trade mark according to law, and the ossified way of thinking that the OEM process is determined as an exception of trade mark infringement should be avoided. Therefore, for the circumstance where a trade mark is registered outside the PRC, it cannot enjoy the exclusive right of a registered trade mark in China. Correspondingly, the licensee in China of such a foreign registered trade mark not protected by Chinese trade mark laws cannot use the right to use the trade mark as a defense against the infringement. </li><li>After the 'Honda' case in 2019, Chinese courts adopted the judgment that affixing trade marks on OEM-related products constitutes trade mark use, and thus expressed cautious optimism about the defense of noninfringement by OEM activities.</li></ul> Limitation of judgment on OEM-related trade mark infringement based on the specific elements constituting trade mark infringement To some extent, the transition of Chinese judicial decisions reflects the balance maintained between trade mark owners and OEM trustees for protecting the interests in different historical stages. By summarizing key judgments of Chinese courts in different periods, major debates on determining OEM-related trade mark infringement in Chinese judicial circles reflect different understandings and applications of specific elements constituting trade mark infringement. For the reasoning of noninfringement, trade marks affixed to OEM-related products do not fulfill the function of distinguishing the origin of commodities. The said products are distributed in foreign countries, which cannot cause confusion and misunderstanding among domestic consumers. The OEM-related products are not sold in China and do not substantially harm owners of trade marks registered in the country. These reasonings are somewhat farfetched against the regional nature of trade mark rights. For the reasoning supporting infringement, it emphasizes that the infringement determination is mainly based on the similarity of trade marks and commodities because foreign trade mark rights cannot be protected in China. Yet, the particularity of OEM processing and the interests of Chinese and foreign merchants engaged in OEM activities out of good faith has not been taken into consideration if the infringement is determined in an oversimplified and crude way, which may lead to the imbalance of interests between trade mark owners and market participants.For example, in OEM-related trade mark infringement cases, many Chinese registered trade mark owners who claim to be infringed by OEM activities obtain the trade mark right under the first-to-file principle and the regional nature of trade mark rights. However, it is more typical that the trade mark owner acquires a trade mark that has not been registered in China but was previously used by a foreign enterprise through rush registration or improper means. Companies or individuals who acquire trade mark rights in this way are often called trade mark squatters. Aiming at selling the registered trade mark to the OEM operator at a high price or producing, selling, or exporting the products bearing the OEM operator's trade mark or brand in China, the trade mark squatters may apply for customs seizure of OEM-related products through the Intellectual Property Protection System of GACC, or sue the operator for infringement through the judicial system, which may cause an extremely passive situation or high price to good faith OEM operators.Thus, it is difficult to maintain the balance of interests between market participants under specific circumstances due to judgments limited to the specific elements constituting trade mark infringement. The principles of good faith and prohibition of abuse of rights may be the key to solving the problem.Application of principles of good faith and prohibition of abuse of rights in OEM-related trade mark infringement cases The principles of good faith and prohibition of abuse of rights have long been established in the Chinese legislative system and applied in judicial practice. Article 7 of the 'Civil Code of the ‘PRC': ‘When conducting a civil activity, a person of the civil law shall, in compliance with the principle of good faith, uphold honesty and honor commitments'; Article 132: ‘No person of the civil law shall abuse his civil-law rights and harm the interests of the State, the public interests, or the lawful rights and interests of others'. Article 7 of the ‘Trade mark Law of the [PRC]’：’The principle of good faith shall be complied with in applying for the registration of and using trade marks.'As early as 2014, the SPC in the ‘Ellassay' case [(2014) Min Ti Zi No. 24] held that: ‘It is the basic principle that all market participants and civil litigation activities should comply with the principle of good faith. Thus, relevant claims cannot be protected and supported by law because any malicious acquisition and exercise of trade mark rights against the purpose and spirit of the law and aiming at harming the legitimate rights and interests of others is an abuse of rights'. By applying the principle of good faith, the court can review and affirm the legitimacy of acquiring the trade mark by the owner in individual cases and refuse to provide legal relief to the claims of malicious trade mark squatters.All rights should be regulated. The principles of good faith and prohibition of abuse of rights are the key to solving disputes over the legitimacy of acquisition and exercise of rights regarding trade mark infringement cases. However, applying the principles of good faith and prohibition of abuse of rights in specific OEM-related trade mark infringement cases is not easy. In this respect, the Zhejiang Provincial Higher People's Court is at the forefront among Chinese courts.In January 2022, the Zhejiang Provincial Higher People's Court invoked the principle of good faith in a retrial procedure on the ‘STAHLWERK' case. The court found that: An affiliate of Shenzhen Stahlwerk Welding Technology Co., Ltd. (i.e., the trade mark registrant in China) was entrusted by Stahlwerk (Germany) (i.e., the OEM entrusting party abroad) to design and process products of the brand in China. Though knowing the existence of Stahlwerk (Germany) and the ‘STAHLWERK' trade mark registered in Germany, the company registered the same trade mark on the same commodity in China in October 2011 and filed an infringement lawsuit against Zhejiang Laosdun Technology Co., Ltd. entrusted by Stahlwerk (Germany) for OEM processing of the accused infringing goods within the territory of China by virtue of rights based on the trade mark. The court ruled that the OEM operators did not infringe the trade mark rights for the reason that the trade mark rights exercised by Shenzhen Stahlwerk Welding Technology Co., Ltd. was improper and violated the principle of good faith, and based on Article 7 of the ‘Trade mark Law of the PRC' that ‘the principle of good faith shall be complied with in applying for the registration of and using trade marks’. In this case, the agency relationship between the Chinese trade mark registrant and the OEM entrusting party abroad is the key fact that the Chinese trade mark registrant knows the existence of the trade mark owned by the OEM entrusting party abroad and violates the principle of good faith.In September 2022, the Zhejiang Provincial Higher People's Court, making still further progress, determined that how the trade mark rights involved were exercised violated the principle of good faith by Laizhou Baoyi Machinery Co., Ltd. according to a comprehensive investigation and review of various facts in the final judgment of ‘JURTEK' case [(2022) Zhe Min Zhong No. 352], under the circumstance that there was no direct evidence to prove that Laizhou Baoyi Machinery Co., Ltd., the Chinese trade mark registrant, had applied for the registration of the same trade mark in China though knowing the business marking of JURATEK (British), the OEM entrusting party abroad.Being no longer entangled in whether the defendant's behavior accords with the elements constituting the infringement and directly applying the ‘principle of good faith' regarding the two cases mentioned above, Zhejiang Provincial Higher People's Court protected the OEM operators who use trade marks in good faith and maintain the interest balance between trade mark owners and market participants, which worth learning from and promoting.The principles of good faith and prohibition of abuse of rights have been included in the draft amendment of the ‘Trade Mark Law of the ‘PRC' The China National Intellectual Property Administration (CNIPA) has released the ‘Draft Amendment of the Trade mark Law of the ‘PRC' and solicited comments from all sectors of society. It is pleasing to notice that the provisions on the principle of good faith in Article 7 of the ‘Trade mark Law of the ‘PRC' revised as Article 9 are improved in the draft amendment: ‘The principle of good faith shall be complied with in applying for the registration of and using trade marks. The trade mark registrant shall not abuse trade mark rights and harm the interests of the State, the public interests, or the lawful rights and interests of others'. The revised provisions are expected to provide a more comprehensive solution to problems, such as trade mark squatting and abuse of rights in the trade mark field of China.Advices for OEM operators Though the ‘STAHLWERK' and ‘JURATEK' cases determined by Zhejiang Provincial Higher People’s Court are big shoes to fill, it is often costly and difficult to assert the principle of good faith in specific cases. OEM enterprises should apply for trade mark registration as soon as possible, with the registration of strategy combination of overseas trade marks and corresponding Chinese trade marks, phonetic transliteration, and free translation. Once confronted with customs seizure, OEM operators should respond actively and take various measures to protect rights. Companies should also familiarize themselves with various legal tools to protect their trade mark rights, including declaring nullity to a registered trade mark, filing noninfringement defenses, initiating affirmative noninfringement proceedings, negotiating for settlement, etc. Finally, do understand the strategic advice on participating in the Chinese market provided by local professionals specialized in the PRC market.In a separate piece, the author also shares her <a href="https://www.lushenglawyers.com.cn/awards-press/comment-on-the-case-for-trademark-dispute-of-juratek-oem/" title="Comment on the Case for Trademark Dispute of " juratek" oem">comments on the case.</a>For more information on the Juratek case, please see our press release piece <a href="https://www.lushenglawyers.com.cn/awards-press/landmark-win-for-oems-in-china/" title="Landmark win for OEMs in China">Landmark win for OEMs in China</a> and case study article <a href="https://www.lushenglawyers.com.cn/awards-press/bet-the-house-trade-mark-battles-in-china/" title="‘Bet the house’ trade mark battles in China">‘Bet the house’ trade mark battles in China.</a></body></html>

A reflection on judicial decisions of OEM-related  trade mark infringement cases in China

Lusheng Law Firm and our strategic partner Rouse were delighted to contribute to this special report from the The Patent Lawyer Magazine and The Trademark Lawyer Magazine. Ling Jin and Holly White discuss the IP risks in the new digital world.<img style="width: 0px; height: 0px;" src="/media/1890/rouse_nft-pdf-1_page3.png?width=0&amp;height=0" alt=""><img src="https://media.umbraco.io/lusheng/goabnn3r/img_1831552243913904851_rouse_nft-pdf-1_page3.png" style="width: 1123px; height: 1586px;"><img src="https://media.umbraco.io/lusheng/foep45ud/img_7270007312197253406_rouse_nft-pdf-1_page4.png" style="width: 1124px; height: 1587px;"><img src="https://media.umbraco.io/lusheng/zsmncq3o/img_3130501073751271799_rouse_nft-pdf-1_page5.png" style="width: 1123px; height: 1584px;"><a href="https://patentlawyermagazine.com/wp-content/uploads/2022/11/NFT_1_interactive.pdf">NFTs, Cryptocurrency &amp; the Metaverse: A new dimension for IP&nbsp;</a>

NFT, Cryptocurrency & the Metaverse

<!DOCTYPE html><html><head></head><body>China becomes the 77th member of the Hague Union - comes into effect on 5 MayThe Hague Agreement enters into force in China on 5 May 2022, and China becomes the 77th member of the Hague Union. This milestone indicates that China has deeply participated in the global intellectual property governance under the WIPO framework and China’s design patent registration system is officially going global.Why design registrations in China?Industrial designs play an important role in helping build strong, competitive and resilient protection. According to McKinsey’s survey, “Companies that excel at design grow revenue and shareholder returns at nearly twice the rate of their industry peers”. In addition, design rights can be applied to a wide range of innovations covering almost all visible products in life. Design is a type of patent in China, and only registered design patents can be protected and enforced. For more than ten years, the number of design applications in China has maintained the fastest growth in the world. Especially in recent years, the number of design applications from China has exceeded 50% of the global design registration volume each year, which is mainly contributed by Chinese domestic companies and individuals. China has become the top receiver for design registrations and is almost seven times of the EUIPO in second place.<img src="https://media.umbraco.io/lusheng/l1ink2us/img_2355866498228279681_微信图片_20220811171323.png" style="width: 811px; height: 407px; display: block; margin-left: auto; margin-right: auto;">Data source: WIPO Statistics Database, February 2022Why the Hague System?The Hague System provides a straightforward solution for international design protection without the need for filing individual design applications in each country. Even before China joined the Hague System, some large Chinese companies with subsidiaries or operations in the Hague member states, such as Xiaomi and Lenovo, had been using the Hague System to file international design applications, which confirms the benefits of the system to China based multinational companies. With the accession to the Hague System, applicants from China will benefit from a more time-efficient and cost-effective solutions to obtain design protections not only in China but worldwide. This is especially true for SMEs without subsidiaries or operations abroad which will use the system to protect their designs overseas. It will be beneficial to foreign applicants as well - if the design application filed through the Hague system meet the requirement of the China Patent Office (CNIPA), the design application would become valid in China without the need of entrusting China local agents.  What do you need to know?A summary of key points about the basics for filing international design registrations. Filing: The international design registration can be filed directly with WIPO or before CNIPA, which was appointed as the Patent Office for indirect filing.  Chinese is not yet an official language for international design registration and applicants may choose one language from English, French and Spanish. Official fees are payable to WIPO at the time of filing. International examination / publication: WIPO will conduct a formality examination of the design application and standard publication will take place in twelve months from filing, which was recently extended from six months from January 1, 2022. This will allow designers more time to plan marketing strategy whilst keeping designs confidential.  National examination: CNIPA continues independent examination on novelty and unity of the international design applications. The national examination will be initiated upon the publication of the international design application and CNIPA will notify WIPO of the examination result in 12 months. It is possible to cover up to 100 designs in one international design application but only up to 10 similar designs are allowed to be incorporated in one design application. Therefore, applicants may need to file divisional applications for the international design applications with more than 10 designs. These divisional design applications will be dealt with the same as domestic applications. A remedy procedure is available and is similar to a domestic design application if the CNIPA issues objections to an international design application.  In addition, ownership transfer will be examined independently by the CNIPA even after it is registered with WIPO in the international examination stage. Grant: An international design certificate will be issued by WIPO where design applications are allowed. The objection of a design application in other countries will not impact the validity of the international design registration in China, and vice versa. CNIPA will publish the grant of the international design registration in Chinese after the grant of the international design registration.   Enforcement: Only a granted design patent can be enforced before a court in China. There is no procedure available for the current stage to seek for temporary protection after the publication of an international design application and prior to its grant, as it does to invention patent applications.<img src="https://media.umbraco.io/lusheng/zu5op1wf/img_7368909329016426207_微信图片_20220811171316.png" style="width: 874px; height: 390px; display: block; margin-left: auto; margin-right: auto;">The process of filing an international design application designating CNIPAConclusionIn general, design registration through the Hague system is more time efficient and cost effective for designers seeking protection of a unique design worldwide, and with China’s accession to the Hague Agreement, international design applications in and from China will therefore be quick and simple. However as some countries may have specific requirements on formal and substantive aspects of a design application, it is critical to assess these potential issues prior to filing, in order to select the appropriate sets of designs to take advantage of this international design registration system. Beyond the benefits, it is critical for applicants to be aware that they may incur a relatively large expense at an early stage because designation fees covering all the countries of interest will need to be paid at the time of filing. Therefore, applicants should consider all the facts to form a consolidated and complex filing strategy. But now design applications through Hague system is one of the options. Li Mi■ Principal & Head of Patent ■ Lusheng Law Firm </body></html>

China’s design patent registration system going global

<div class="newsSummaryContent">The fourth amendment to the China Seed Law (“Amendment”) will come into force on 1 March 2022.</div><div id="content-detail">The Amendment, released on 24 December 2021, focuses on the protection of intellectual property rights in new plant varieties (“PVR”), extends the scope of protection to harvested materials, adds the concept of essentially derived varieties (“EDV”) and increases the amount of civil compensation for infringement. The farmers’ right to plant granted varieties for their own consumption remains unchanged. Although China has not yet agreed to&nbsp;<a href="https://upovlex.upov.int/en/convention">1991 Act of the UPOV Convention</a>&nbsp;(“UPOV 1991”), the Amendment addresses some of the key contents of the UPOV 1991 for PVR protection.&nbsp;What is the benefit for PVR holders to extend protection to harvested materials?The scope of protection for PVR is extended from propagating material to harvested material obtained through the unauthorized use of propagating material of protected varieties, unless the PVR holder already had a reasonable opportunity to exercise its rights in respect of the propagating material. This change is in line with UPOV 1991, except that protection is not extended to products made directly from infringing harvested materials.Previously, PVR holders could only claim infringement over propagating material for protected varieties. The important changes in the Amendment enable PVR holders to act against unauthorized harvested material. In order to prove non-infringement, the suspected user/distributor of harvested material will need to prove their material came from a legitimate source. The Amendment also provides avenues for PVR holders to collect evidence of infringement from harvested material that is being sold or stored, which is likely to be much easier than collecting evidence from the propagating material.Protection for PVR under the Amendment has been extended from production, breeding and sale to production, breeding and processing for breeding, offering for sale, sale, importing, exporting, and storing. This means that PVR holders can act against the different stages in the supply chain and have greater ability to decide which jurisdiction to bring actions in by joining multiple co-defendants from different links in the supply chain.&nbsp;What is the impact on EDV breeders?The Amendment adopts definitions from the UPOV 1991 and the ease of obtaining PVR registrations is likely to be increased. Under the Amendment, EDV will be protectable as soon as PVR is granted, while seeds bred simply by imitation and embellishment may not be approved as PVR.China has developed technologies for identifying EDV and evaluating infringing plant material, such as DNA fingerprinting based on molecular markers, a DNA fingerprinting database of more than 10,000 varieties and molecular evaluation standards for 35 species. This will mean that evaluations can be completed more quickly and with simpler procedures than DUS testing.An officer of the Ministry of Agriculture and Rural Affairs Science and Technology Development Center’s New Plant Variety Testing Division mentioned at an international seminar that the government is revising its new variety protection regulations, preparing EDV evaluation guidelines and establishing dispute resolution procedures. All of this will improve the impact and efficiency of PVR protection. The Regulations on Protection of New Varieties of Plants has not been amended since 2014 and so an updated version is expected. In the meantime, the government released a draft of the revised Regulations in 2019, which for the first time addressed the concept of EDV.&nbsp;Deterrence against infringement by increasing damage capThe China Civil Code explicitly provides that punitive damages shall apply in IP cases when the infringement is deemed “serious”. The Amendment increases those punitive damages from 1-3 times to a maximum of 5 times of the basic compensation in “serious” cases of PVR infringement. Basic compensation would consist of the actual losses suffered by the PVR holder or the gains of the infringer.&nbsp; When either of those amounts is difficult to determine, the compensation may be determined at a reasonable multiple of the royalty for the PVR in dispute. &nbsp;The Amendment also increases maximum statutory damages from CNY 3 million to CNY 5 million (approx. USD 460,000-770,000) where the profits from infringement are difficult to determine. From 2016 to 2020, Chinese courts concluded a total of 781 civil cases concerning disputes involving new plant varieties, including disputes over ownership, infringement and contract disputes. 85% of those cases involved PVR infringement and more than 70% of these infringement cases were decided in favour of PVR holders. The Amendment’s increase in the punitive damages and the statutory damage will further strengthen deterrence against infringement.&nbsp;How farmers’ rights will be limited?UPOV 1991 leaves it to contracting parties’ discretion to decide whether farmers are permitted to use infringing plant varieties for propagating purposes on their own land. China has adopted the farmers’ rights to use propagating material of protected varieties for self-consumption without license from the PVR holder.Although the Seed Law remains unchanged in terms of the farmers’ rights, the second “Several Provisions on the Specific Application of Law in the Trial of Dispute Cases of Infringement on the Right to New Plant Varieties” issued by the Supreme People’s Court on 5 July 2021 limits the farmers’ rights. It states that farmers can reproduce and use the propagating material of protected varieties for self-consumption, so long as this is carried out on their own land and is agreed to by the rural collective economic organizations, village committees or village groups. If farmers deviate from the scope of use, the court will determine if it is an exceptional situation by considering all relevant factors such as the purpose, scale, and presence of profit. These court provisions are aimed at preventing infringements from the abuse of farmers' rights.China is improving the PVR protection environment. The scope of protection, the criteria for evaluating the approval of PVR grants and for evaluating infringement are all more specific. With the increase in PVR grants and the development of new testing technologies, whether China will join UPOV 1991 and what implementing measures will adopted after accession may soon become a hot topic. We are keeping a close eye on the legislative developments and will provide updates in future articles.&nbsp;<div id="authorBottomWrap" class="row"><div class="col-md-12 author-detail"><div class="wrap-author-detail"><div class="detail"><div class="author-name"><a href="/who-we-are/xu-yi/">Xu Yi</a></div><div class="author-phone">Principal</div><div class="social-network"></div></div></div></div><div class="col-md-12 author-detail"><div class="wrap-author-detail"><div class="detail"><div class="author-name"><a href="/who-we-are/jacqueline-zhao/">Jacqueline Zhao</a></div><div class="author-phone">Associate</div><div class="social-network"></div></div></div></div></div></div>

China’s new seed law with IP protection over plant variety

As trade secrets become increasingly important in business competition, enterprises are suffering from endless emerging issues, from research and development achievements leakage, technical secrets pilferage , to theft of new product designs or clone of moulds, leakage of customer list and confidential information leakage by former employees. In contrast with patent protection, trade secret calls for protective measures taken by right holders instead of public disclosure in exchange for  a certain amount of years of monopoly by state protection, and once disclosed by reverse engineering or leaked because of infringements, right holders will lose the monopoly permanently and irreversibly. Quite a lot of enterprises worldwide have suffered a huge loss, bankruptcy, and even a total shutdown because of trade secrets leakage. Though right holders, faced with trade secrets infringements, can resort to litigation redeeming some losses, they can be more proactive and pay greater attention to pre-relief measures of trade secrets to safeguard their core strengths, which is a matter of survival nowadays.  Based on our experience with providing trade secrets protection consultancy for the local Chinese suppliers of a multinational enterprise, this article introduces the risks of trade secrets leakage in business management and proactive and specific measures to prevent the leakage, so that enterprises can stay proactive in trade secrets management and maintain competitiveness.The represented enterprise, Company A—a multinational footwear company with its huge investment in human resources, materials and finance, would do a yearly release of new footwear models after R & D and had built itself as a world-renowned hot brand embodying fashion and quality. In a March,  Company A discovered two of its summer sandals, which were to be officially released globally in July of that year, were being sold in Thai market as counterfeit products, depriving the genuine products their market entry opportunity. Company A's legal counsel realized this was more than the infringement of counterfeit trademarks,  yet worse, its market leading edge—trade secrets were leaked, and there would be more irreparable losses if no measures taken against this.Trade secrets are mainly leaked via internal employees, external personnel, and former employee in violation of a NDA. To find out leakage source in the supply chain  and prevent more leakages of  new footwear designs, entrusted by Company A's legal counsel, we carried out a three-phase work for four consecutive years covering 1) risk assessment, 2) risk control, and 3) tracking and improvement on protection measures. For Company A’s main Chinese suppliers, we assessed the risks of trade secrets, built trade secrets protection systems, provided confidentiality training for employee, assisted in trade secrets management and control, and provided investigation, evidence collection and enforcement services, which significantly reduced trade secrets leakage risks in upstream and downstream of the supply chain and achieved a satisfactory result.<h5>1. Risk Assessment of Trade Secrets in Supply Chain</h5>Re Company A’s new products, research and development, mould setting, sample production, material preparation, pre-release advertisement, mass production, transportation, wholesale and retail  were achieved by a complex network of supply chain consisting of R&D departments, suppliers, and distributors located in different countries around the world. New footwear were mainly designed by designers from R&D departments in Europe and the US, then moulded, prototyped, and produced by suppliers in China.Trade secrets management in the supply chain depends greatly on its weakest link.New footwear design was a trade secret unknown to the public from the time it was designed to the time of pre-market promotion or mass production. The new design during this period included several stages as follows:<img src="https://rouse.com/media/yitmqdg3/image.png?width=621&height=278&mode=max" alt="" width="621" height="278">At these stages, all employees of the suppliers involved were secret-related personnel, and anyone could be a source of leakage. However, the purpose of trade secrets protection is neither aiming for perfection nor objectively possible, instead is to take appropriate protective measures for the weak links to minimize the risk of trade secrets leakage.Representing Company A as an IP attorney, our first work was to assess all the suppliers involved in the development stage of the new footwear, including the mould factory, shoe factory, plastic injection moulding factory, and the whole shoe assembly factory, and made a comprehensive inspection and evaluation of their current situations about trade secrets management. We reviewed their trade secrets rules and systems and confidentiality agreements, paid onsite visits to their offices and production sites and talked with relevant employee and secret-related personnel to identify all the weak links  along the information flow in the development stage. By implementing these measures, we diagnosed the risks of leakage faced by the suppliers and the loopholes in trade secrets protection, and classified the risks into three levels: high, medium, and low so that we could develop a risk solution plan based on the specific situation of each factory to get the maximum protection of trade secrets.Inspection and assessment included but not limited to:<ul><li>Existing trade secrets rules and systems of the suppliers, contracts and confidential agreements with Company A, labor contracts, employee handbook, confidential agreements for secret-related employees, confidential clauses of subcontracting contracts, and other relevant documents.</li><li>Lists of all secret-related suppliers and its employees, and their job descriptions.</li><li>Circulation of design drawings.</li><li>Control of sample development: quantity of sample at all stages including shoe mould, trial samples and confirmed samples, confidentiality labels, lending, and destruction records, etc.</li><li>Control of mould’s development: circulation, storage, and lending.</li><li>Physical security: access control, surveillance, the physical isolation of the R&D department from other departments, the physical isolation of confidential documents, USB, camera, cell phone control, etc.</li><li>Computer system security: network structure, internal and external access control, network equipment security configuration, user accounts, permission setting on trade secrets, encryption settings, computer maintenance, disposal of obsolete computers, etc.</li><li>Relevant staff interviews: executives, R&D staff, HR, IT, security, sample development staff, mass production line staff, warehouse manager, mould manager, etc.</li></ul><h5>2. Risk Control of Trade Secrets in Supply Chain</h5>After risk assessment of suppliers' trade secrets, we diagnosed the major weak links and provided suggestions as follows:a. Confidentiality System and Confidentiality UnitOur assessment found that most factories did not have any trade secrets management system while a few had some sporadic requirements regarding trade secrets protection in different regulatory documents or contracts: a. these requirements were all vague and general lacking  specific contents, definitions and scopes, which would bring potential difficulties for the enterprises seeking remedy afterwards; b. labour contracts between some factories and employees only included the non-compete clauses but no confidentiality provisions; c. there was no additional confidentiality agreement for secret-related personnel apart from the general confidentiality clauses stipulated in labour contracts; d. most enterprises did not set up special units or personnel responsible for trade secrets management and the management lacked related knowledge and expertise and had not received any confidentiality training.We suggested that enterprises attach great importance to their own and right holders’ trade secrets protection, be aware of the serious consequences of the leakage, and the urgency for enterprises to establish a systematic confidentiality system in line with the actual situation. Confidentiality rules and regulations should be comprehensive, standardised, and practical, and updated timely with changing situations. Enterprises may hire professional attorneys to assist building a comprehensive confidentiality system: a. drafting confidentiality agreements based on the scope of confidentiality and the level of personnel involved, confirming the scope of confidentiality, confidentiality period and liabilities of violating confidentiality obligations; b. drafting non-compete agreements stipulating former employee shall not work in any competitive peer companies or start their own businesses engaging in any competitive business activities in a certain period of time and specifying the legal liabilities for damages and other related damages; c. setting up a confidentiality unit to implement the confidentiality system; d. getting supervised and inspected by professionals or external attorneys regularly to get precautions in advance, prevent leakage and make sure the burden of proof fulfilled  in the legal remedy after the leakage.b. Confidentiality AwarenessDuring staff interviews, we identified an urgent need of confidentiality awareness. Enterprises in the supply chain mainly focused on ramping up production and improving efficiency for greater benefits while all secret-related personnel from executives to the workers on the production line had thin confidentiality awareness despite the signed confidentiality agreements when they got the job.  Our interviews disclosed the following major risks of leakage: a. R & D staff may exchange sensitive information with other internal or external personnel; b. some design drawings and moulds were lent out and returned without records; c. some IT did not install any confidentiality settings on the laptops of secret-related personnel; d. and design drawings were sent and received without encryption settings, and etc.Strengthening staff's confidentiality awareness is the root of enterprises’ trade secrets protection. Enterprise should have regular confidentiality trainings organized by Confidentiality Unit to enhance confidentiality awareness and make sure staff maintaining a high degree of sensitivity and vigilance to confidential information at work by practising  ‘No Nosing-around’ and abide by professional ethics to lower the risks of leakage.After conducting risk assessment, I, as the external attorney provided trade secrets management training for relevant personnel of the suppliers. The training covered a comprehensive introduction to trade secrets protection including the importance of trade secrets to the survival and development of enterprises, China's laws and regulations over trade secrets, disclosure of legal consequences infringing trade secrets via case analysis, burden of proof on right holders, leakage channels and protective measures, and empowered all participants with a clear understanding of trade secrets and liabilities of leakage.c. Physical SecurityPhysical isolation is the most basic measure to protect trade secrets. Our risk assessment found that most of Company A’s suppliers did hire professional securities and set up physical isolation such as access control and surveillance for offices, production lines and warehouses. However, there was no comprehensive confidentiality system over trade secrets or any confidentiality units to protect trade secrets in relation to drawings, development samples, materials, moulds, cell phones, cameras, computers, etc. Some enterprises even did not have any measure thereof and purely managed all trade secrets by trusting staff integrity, leaving them many loopholes to be worked on.Our professional solution was that physical protection measures should cover the whole life cycle of trade secrets, from generation, continuation to destruction. For all carriers of trade secrets and in all aspects encompassing generation, use, preservation, transfer, disposal, and destruction, there should be assigned professionals to take effective physical protection measures to minimise risks of leakage.d. Computer System SecurityRapid development of computer and network technology also brings plenty of problems and security risks in computer information systems. Chinese enterprises have suffered from frequent leakage and theft via computer systems in recent years, and undergone irreparable losses. Strengthening computer system security and prevention management has become the top priority in protecting trade secrets.In our case, after reviewing suppliers’  computer information system management system and spot checking computers and laptops of secret-related  personnel from offices and production lines, many risks of leakage were identified. We then proposed they should update the management system and strengthen management at the executive level to control the risk of leakage to a minimum. Our proposed measures included:<ul><li>Developing a computer security management system and establishing a computer registration system managed by an assigned administrator applying the rule of Registration and Recordal—user bearing responsibility.</li><li>Setting physical isolation from the international Internet for secret-related computers, and confirming to the code—Surfing without confidential information and vice-versa.</li><li>Setting passwords and screen protection passwords for secret-related computers.</li><li>Encrypting confidential information.</li><li>Strengthening confidentiality management of storage media and establishing a registration rule for the use of storage media (such as floppy disks, USB disks, CD-ROMs, removable hard disks, etc.) managed by an assigned administrator.</li><li>Dismantling the hard disk and transferring and deleting all confidential information before any maintenance, and supervising and recording the whole maintenance process with both security and maintenance personnel’s presences.</li><li>Conducting physical destruction for all scrap secret-related computers by assigned employee.</li><li>Forbidding any instalment employee self-purchased software to prevent attack of Trojan horses, virus programs, and any hidden danger of network security caused by the backdoors of the software.</li></ul><h5>3. Tracking and Improvement on Protection Measures</h5>After issuing a detailed risk assessment report for each supplier and providing solution proposals with specific confidentiality measures, we made annual or biannual visits to the suppliers to inspect their implementation and the improvement on trade secrets, check the measures taken against all weak links and re-evaluate and make  further suggestions accordingly to ensure their trade secrets protection were in place and got strengthened. My work also enabled Company A to have more confidence for its Chinese suppliers especially when it came to the new product release.<h5>Conclusion</h5>According to the data from <a href="https://wenshu.court.gov.cn/">China Judgments Online</a>, the plaintiff's success rate of civil cases of trade secrets is substantially low. The main reason is the plaintiff cannot prove the core and scope of its trade secrets, reasonable confidentiality measures taken over their rights, the infringing activities implemented by the defendant and the damage caused. This indicates that enterprises failing to keep records of evidence and duly protect trade secrets shall not be legally protected. Nevertheless, trade secrets are the most crucial intangible assets of enterprises, over which a sound trade secrets protection system should be proactively established and implemented to win enterprises leading edges in fierce competition, rather than resorting to attorneys with post-leakage remedies claiming for compensation or criminal liabilities against the infringers.

How to protect core secrets in the supply chain?

Risk assessment and control measures on trade secrets

<!DOCTYPE html><html><head></head><body><div class="newsSummaryContent">China’s ambition to become an intellectual property nation in 15 years</div><div id="content-detail">Witnessing the great changes to the intellectual property landscape in ChinaAt the end of September 2021, China released “<a href="https://rouse.com/insights/news/2021/china-ip-updates-september-2021-issue-4">The Outline of Building an Intellectual Property Rights (IPR) Powerhouse (2021-2035)</a>” (“Outline”) . The Outline serves as an important milestone policy through a top-down design at the state level in the intellectual property system, which includes two dates:<ul><li>By 2025, China to achieve clear results in its positioning as an intellectual property rights powerhouse;</li><li>By 2035, China’s intellectual property rights to occupy leading positions in the world.</li></ul>Over the past decade, China’s role in the worldwide innovation landscape has been evolved; from a labour intensive heavy-industry producer supplying labour, raw materials, plants and equipment, transitioning to a commercial economy, then transforming to a knowledge-based economy, and even becoming a high-tech country  known for "smart" manufacturing and powered by domestically led next-generation technologies such as quantum computing, artificial intelligence and semiconductor chips. As intellectual property practitioners, we believe that intellectual property rights are an effective way to improve one’s bargaining power under international rule. In parallel with these industrial developments, we’ve also witnessed the great changes to the intellectual property landscape in China.Establishing a sound legal system for intellectual property rightsThe Outline provides a strong legal framework to stimulate innovation and protects intellectual property rights.Since China joined the WTO in 2001 and gave its commitment for WTO Accession in 2006, it has made comprehensive and systematic improvements to its intellectual property legal system.  The core intellectual property legal system has undergone several rounds of significant amendments, especially in recent years, to keep pace with the rapidly changing social development and bring China's intellectual property legal system further in line with international standards, reflecting the Chinese government's determination and effort to strengthen intellectual property protection, including :<ul><li>“The Trademark Law” was amended for the third time in 2019, including enhancing the obligation to use trademarks and strengthening penalties for bad faith applications for trademark registration and bad faith litigation activities.</li><li>“The Patent Law” was amended for the fourth time in 2020, introducing the concept of a pharmaceutical patent linkage system to provide an early resolution mechanism for pharmaceutical patent disputes, adding the compensation for the duration of patents, and improving the design patent protection system.</li><li>“The Copyright Law” was amended for the third time in 2020, introducing open-ended provision on the types of works, which left room for new types that might emerge in the future, and adding a "digitization" approach to the "reproduction right".</li><li>“The Anti-Unfair Competition Law”, which had not been amended for 20 years since its enactment in 1993, was amended twice in 2017 and 2019. In 2019, the scope of protection of trade secrets was expanded, the reversal of the burden of proof in infringement cases was introduced and the subject of trade secret misappropriation was expanded.</li></ul>All of the above have been amended to include additional deterrent provisions against infringement, such as punitive damages for intentional infringement, the maximum amount of statutory damages increased to five million RMB (approx. 770,000 USD), and the burden of proof for illegal income related to infringement shifted to infringers, etc.Supporting regulations, including the implementation regulations of these intellectual property laws, are also seeing gradual improvement, such as “Regulations on the Collective Administration of Copyrights”, “Regulations on the Customs Protection of Intellectual Property Rights”, “Regulations on the Protection of New Varieties of Plants”, “Regulations on the Protection of Layout Designs of Integrated Circuits”, “Regulations on the Protection of Computer Software”. The Supreme People's Court and the Supreme People's Procuratorate have also formulated judicial interpretations of the application of the laws in intellectual property cases. Local governments have also enacted local regulations and rules in various intellectual property matters including patent administration. In addition, the penalty for criminal offences relating to intellectual property have been strengthened in amendments to the Criminal Law.After more than three decades, the fundamental construction of China's intellectual property legal system is nearing its completion. With the implementation of the Outline, we expect a further improvement and refinement of the intellectual property laws and regulations, a legal system that covers a full range of intellectual property categories with a rigorous structure that integrates internally and externally. We believe such system can adapt to social progress and technology development and enable China to actively participate in the formulation of international norms for the protection of intellectual property.Transforming China into an intellectual property powerhouseWhile innovation is the primary driving force for development, patents are often considered one of the most important indicators of innovative activities. By the end of 2020, mainland China had 2.1 million valid invention patents (excluding Hong Kong SAR, Macao SAR and Taiwan), which means 15.8 invention patents per 10,000 population, exceeding the expected target of 12 per 10,000 as stated in the <a href="http://www.gov.cn/shuju/2021-01/23/content_5582035.htm">13th Five-Year Plan</a>.Based on the 13th Five-Year Plan, the Outline updates the strategic quantitative target for patents at the national level, i.e., to reach 12 high value invention patents per 10,000 population by 2025. It must be emphasized that the Outline specifies the target to those patents that best represents technology advancement, and only to those of high value.The number of patent applications filed through the Patent Cooperation Treaty (PCT) of the World Intellectual Property Organization (WIPO) is also one of the most widely used indicators to measure innovative activities. China surpassed US in the number of PCT patent applications in 2019 and maintained an annual growth of 16% in 2020.  Meaning <a href="https://www.wipo.int/edocs/infogdocs/en/ipfactsandfigures/">China  is the world's top international patent filing country</a> for the second consecutive year. Simultaneously, domestic filings in China have shown an accelerated growth, as shown respectively in the charts below.<img src="https://rouse.com/media/p2kdoytj/picture1.jpg?width=427&height=268&mode=max" alt="" width="427" height="268">(Source: WIPO, Facts and Figures, February 2021) <img src="https://rouse.com/media/u2ga3jq5/picture2.jpg?width=438&height=310&mode=max" alt="" width="438" height="310">(Source: Internal analysis made by Lusheng Law Firm)On 20 September 2021, WIPO released “Global Innovation Index (GII) 2021”, in which China ranked 12th (two places up from the year 2020), and it was the first place among middle-income countries and surpassed developed countries such as Japan, Israel and Canada. In terms of innovation output, China's advantages can be found in intangible assets, knowledge creation, and the influence of knowledge. China is in the world leading position in many segmented indexes such as the number of patent and trademark applications by domestic applicants, and proportion of exported creative products in total trade, which indicates that <a href="https://www.cnipa.gov.cn/art/2021/9/21/art_53_170272.html">China is gradually transforming from an intellectual property importer to a major creator of intellectual property </a>.Intellectual property management: from pursuing quantity to enhancing qualityThe Outline further points out that promoting high quality development is an inevitable requirement for maintaining sustainable and healthy economic development and makes it clear that China's intellectual property management is changing simply increasing the numbers to improving quality.The number of intellectual property applications in China has continued to grow rapidly year-on-year under incentive policies such as government funding for patent applications and tax benefits for high tech companies. However,  filing that deviates from the purpose of protecting innovation, such as irregular patent applications and bad faith trademarks squatting, has become an increasingly serious and unique problem and China has adopted various policies to promote the quality of intellectual property rights. Since 2020, the Chinese government abolished all incentives and subsidies for utility model and design patents to promote and encourage high value innovation and R&D, and to change the international perception of China’s poor patent quality.At the implementation level, the China National Intellectual Property Administration (CNIPA) has been vigorously combating irregular patent applications. CNIPA issued a series of regulations including:<ul><li>“Regulations on Standardizing Patent Application Activities (Order No. 45)” in 2007,</li><li>“Regulations on Standardizing Patent Application Activities (Order No. 75)” in 2017,</li><li>“Measures on Standardizing Patent Application Activities (Announcement No. 411)” in 2021 and</li><li>“Regulations on Standardizing Patent Application Activities (Draft for Soliciting Opinions)” in 2021.</li></ul>The latest draft regulations expanded the definitions of irregular patent applications from six to nine types and standardized the examination procedures for these applications. In 2019, CNIPA launched "Blue Sky" special action, specializing in combatting irregular patent applications and bad faith trademark squatting carried out by intellectual property agencies. <a href="https://www.cnipa.gov.cn/art/2021/3/19/art_53_157884.html">In 2018</a>, 92% of the notified irregular patent applications were withdrawn by the applicants themselves, 7% were deemed withdrawn or rejected, and the remaining 1% were under examination procedures after the applicants’ supporting statements had been approved by CNIPA.Improving intellectual property protectionThe Outline stated that a fair and efficient protection mechanism and linkage mechanism where judicial and administrative systems go hand in hand should be established. China has carried out a number of reforms and investigation in administrative and judicial adjudications.Shortening duration of trialsBeijing took the lead in 2019 by proposing and forming a "joint oral hearing" mechanism for examination on patent infringement and patent invalidation. A “Joint oral hearing” meant that the administrative adjudication of a patent infringement case accepted by the Beijing Municipal Intellectual Property Office and the case of patent right invalidation filed with the CNIPA against the same patent in question were jointly heard in the same place and on the same day, in order to achieve the linkage and consistency between the standards for infringement and invalidation decisions. This improves efficiency and shortens the period for examination, which in turn saves the cost of intellectual property rights holders in safeguarding their rights and interests. In the same year, the Supreme People’s Court also jointly heard civil litigation for patent infringement and administrative litigation for patent invalidation (Supreme People’s Court, April 5, 2021, SPC IP and Civil Tribunal No. 369).Patent litigationWe have collected and analysed patent infringement litigation cases in the last five years and the results show that the success rate of Chinese domestic entities or individuals in three types of patent infringement litigation actions has always been lower than that of foreign companies or individuals. The average amount of infringement damages obtained by Chinese domestic companies or individuals has gradually increased in recent years. According to “China Patent Survey Report (2020)” published by CNIPA, the value of patent infringement damages received by Chinese domestic companies were generally low, with the range categories of “no damages” and “less than 100,000 RMB” accounting for over 60% of the total, and the range “1 million RMB to 5 million RMB” accounting for 1.9% of the total, while foreign-invested companies generally received higher damages, with 32.7% of the total falls between the range of “1 million RMB to 5 million RMB”.<img src="https://rouse.com/media/vshnsq3z/picture3.jpg?width=500&height=246.87800192122958" alt="" width="500" height="246.87800192122958">(Source: CIELA, Intellectual Property Litigation Database, Rouse Network, <a href="http://www.ciela.cn/">www.ciela.cn</a>)<img src="https://rouse.com/media/skzozg2p/picture4.jpg?width=500&height=187.5589066918002" alt="" width="500" height="187.5589066918002">(Source: CIELA, Intellectual Property Litigation Database, Rouse Network, <a href="http://www.ciela.cn/">www.ciela.cn</a>) Intellectual property rights transactionsChina bought in a total of 300,000 patents in 2020, of which 120,000 are worth more than USD 10,000, accounting for 38% of the total; those worth more than USD 100,000 accounted for 15% of the total; and those worth more than USD 200,000 accounted for 7% of the total. It shows that the higher the value of the patent, the lower the number of purchases, which makes sense as there is a smaller number of high value patents available in the market. The most popular technical area for patent licensing was basic electrical elements, with 682 patents licensed in this technical area in 2020, accounting for approximately 9% of the total number of all licensed patents and ranking first in popularity (according to Guangzhou Intellectual Property Exchange, in their study “2020 Financialization Index Report on China Intellectual Property”). Chinese companies are increasingly aware of the importance of patents. Good patents can not only bring great economic value, but also ensure the appreciation of company asset value, maximizing the economic interests of companies.ConclusionIt is expected, with the implementation of the Outline, China will focus more on the quality of intellectual property development, including technology / patent transfer and enforcement systems, transforming from a major Intellectual property rights creator into a major intellectual property rights exporter and in parallel, transforming from an exporter of physical products to an exporter in the knowledge economy.  It is also assumed that China will promote the in-depth integration of intellectual property with economy, science and technology, culture, society and other aspects.Western intellectual property right holders will enjoy a fairer and high-quality intellectual property legal environment and meanwhile, but on the flip-side they may face more challenges in dealing with potential intellectual property risks with their Chinese business operations with the expected changes of the intellectual property landscape in China.</div></body></html>

From “big” to “powerful"

On the legitimacy of antitrust remedies for abuse of trademark administrative procedures

The <several provisions="" (ii)="" of="" the="" supreme="" people's="" court="" on="" issues="" concerning="" application="" law="" in="" hearing="" cases="" involving="" disputes="" over="" infringement="" upon="" rights="" new="" plant="" varieties=""> recently issued by the Supreme People's Court shall come into effect on July 7, 2021.</several>&nbsp;Previously, the Supreme People's Court made interpretations and provisions on specific application of laws on disputes over new plant varieties in 2000 and 2007 respectively. Then the interpretations and provisions were revised with the newly promulgated PRC Civil Code and implemented simultaneously with the PRC Civil Code. It summarizes the main types of cases of disputes over new plant varieties, clarifies the jurisdiction of the corresponding case types, the way of determining the defendant, the right of the interested person to sue, the infringement determination of using the granted variety for the production of another variety, the selection of the infringement forensic agency, the forensic method, the pre-litigation preservation, the determination of the amount of compensation, the way of handling the infringing objects, and growers entrusted by others to propagate on behalf of the growers do not know the infringement of the substitute breeding material exemption. These two interpretations and provisions continue to be valid.&nbsp;To a certain extent, this Judicial Interpretation continues the previous provisions on specific application of law and makes supplementary improvements. It absorbs the legislative and judicial experience accumulated in recent years in the field of intellectual property and civil litigation in China, and refines and implements a series of institutional designs such as prior judgment, obstruction of proof, defence of legitimate source, order to provide documents, punitive damages, etc. into the cases of new plant varieties. It increases the strength of protection and speed of remedy for the right holder, improves the efficiency of case trial, and reflects the extended application of legislative and judicial techniques already implemented in other branches of intellectual property law in the case of new plant varieties.&nbsp;I. Define the exceptions to infringement&nbsp;It stipulates under the Seed Law of the People's Republic of China that the use of granted varieties for breeding and other scientific research activities can be carried out without the permission of the owner of the new plant varieties and without paying royalties. This Judicial Interpretation further emphasizes that the use of granted varieties to cultivate new varieties and the use of granted varieties to cultivate the formation of new varieties, for new plant varieties application, new plant varieties validation, new plant varieties registration needs and repeated use of granted varieties of reproductive materials are scientific research activities. It is worth noting that the breeding here is different from the repeated breeding with other parents using the propagation material of the granted variety as the parental material as stipulated in the Supreme People's Court's "Several Provisions on the Specific Application of Law in the Trial of Dispute Cases of Infringement on the Right to New Plant Varieties", which will be deemed the use for commercial purposes. Regarding the right of farmers to reproduce for their own use, this Judicial Interpretation defines it. Farmers reproduce and use their own land within the scope of the land agreed in household contract for the contracted operation of rural land. Beyond the scope of use, the court will consider the purpose, scale, whether profit-making and other factors before determining whether it is an exceptional situation. This interpretation strikes a balance between protecting the interests of farmers and preventing the abuse of farmers' rights and considers the boundaries of farmers' and variety rights holders' rights.&nbsp;II. Responses to Improve the Obstruction of Proof&nbsp;It is normally difficult for right holders to collect evidence of infringement and compensation. Asking the court to go to the field to preserve the evidence of infringing plants is a procedural measure used frequently in such cases. Since the plants are completely under the control of the alleged infringer, the successful, accurate and complete preservation and post-preservation maintenance of the condition of the preserved object in practice depend on a high degree of cooperation from the alleged infringer and may have a significant impact on the infringement determination of the case. Article 16 of this Judicial Interpretation provides that where the alleged infringer resists preservation, unseals, transfers or destroys the preserved property or commits other acts of obstruction of proof, resulting in the failure to ascertain the relevant facts of the case, the court may presume that the claim of the right holder in respect of the matter of proof involved in the evidence is tenable. This provision, combined with the Civil Procedure Law, provides further institutional safeguards for this procedural measure in terms of legal consequences through the creation of a burden of proof. It plays a positive role in guaranteeing the normal operation of the judicial procedure and reducing the difficulty of proof for rights holders. In addition, Article 15 of this Judicial Interpretation introduces the rule of writ of certiorari and obstruction of proof. This makes clear that the obligation of the alleged infringer to provide account books and materials and the legal consequence of refusing to provide or providing false account books and materials in new plant variety cases. This provision achieves uniformity with the design of the corresponding system in other IPR cases, and clarifies the allocation and shifting of the burden of proof on the issue of compensation in such cases. It is also conducive to the identification of the calculation base by the court in the process of trial, thus improving the efficiency of the application of punitive damages in practice and reflecting the organic combination between the systems.&nbsp;III. The combination of theory and practice of forensic&nbsp;The comparative forensic of the granted variety and the infringing plant is one of the important parts in the case of new plant variety dispute. In order to determine whether the alleged infringing plant has the identity with the granted variety, it is necessary to judge through professional forensic. The common forensic methods are field observation detection (DUS detection) which requires breeding and long detection time, and gene fingerprinting detection (DNA detection) which has a short detection time and simple procedures but requires higher technology. In practice, the owner of the new plant varieties may delay the proceedings because of the lack of such testing methods for the variety or the inability to find the appropriate testing agency. Based on the previous provisions of the Supreme People’s Court on the Specific Application of Legal Issues in the Hearing of Disputes Over the Infringement of the Right to New Plant Varieties on the selection of forensic agencies and forensic methods, this Judicial Interpretation more clearly states that the forensic institutions should be selected from expert directory of the relevant fields or the forensic experts referred by agriculture or forestry authorities to the court. Several previous provisions have made it clear that if the infringing plant being sued has the same characteristics and features as the granted variety or the differences in characteristics and features are due to non-genetic variation, the infringing plant being sued shall be deemed to belong to the production, breeding or sale of propagating materials of the granted variety. This interpretation allows the use of industry-specific methods to determine the uniformity of characteristics between granted verities and the object being sued for infringement if the varieties cannot be identified by means of genetic fingerprinting or other detection methods. This gives effect to the judicial status of this mode of comparison. The results of the DNA tests are generally accepted, but that does not mean they are 100% accurate. In this Judicial Interpretation, those who have objections to the forensic opinion may apply for re-examination. This provision gives the possibility of re-examination or additional forensic to the objector. It makes no further provisions on the re-examination method. In other words, the re-test can use other forensic methods, and is not limited to the original test method. At the same time, the interpretation of the application for re-examination also made the restriction for the re-examination. It requests that the re-examination may only be requested based on reasonable grounds and evidence to prevent deliberate delay in the proceedings. The officer in charge of the Intellectual Property Tribunal of the Supreme People's Court further elaborated on the above "reasonable grounds" in an interview with the reporter: if the forensic institution or forensic expert does not have the corresponding forensic qualifications, the forensic procedure seriously violates laws, the source of the comparative sample is unknown, the basis of the forensic method is obviously insufficient, etc., and the applicant provides the corresponding evidence, in principle, it should be considered that there is ‘reasonable grounds’ for re-examination, supplemental test or re-test. For the inconsistency between the DUS test and the DNA test results, this Judicial Interpretation clearly stipulates that the DUS test result shall prevail. The DUS (Distinctness, Uniformity and Stability) test is a substantive examination step in the application for new plant variety rights. It is used as the basis for judicial forensic and has stronger proving power.&nbsp;IV&nbsp; The new listing of serious infringement&nbsp;Article 73 of the Seed Law stipulates that punitive damages may be imposed if the infringement of new plant variety rights is ‘serious’. However, there is no specific description of what constitutes a "serious" situation. &nbsp;Article 17 of the Judicial Interpretation explicitly lists six infringement that can be considered as "serious" for such disputes in view of the characteristics of the infringement of new plant variety rights:&nbsp;<ul><li>Committing the same or similar infringement again after being imposed with administrative punishment or taking liability as ruled by a court due to infringement;</li><li>Engaging in infringement of new plant variety rights as main business;</li><li>Forging certificates of new plant variety right;</li><li>Selling granted varieties in packages without marks or labels;</li><li>Violating Items (i), (ii) and (iv) of Paragraph 1 of Article 77 of the Seed Law; or</li><li>Refusing to advise the places of production, reproduction, sale and storage of the alleged infringing products.</li></ul>&nbsp;And it is clear that for five of them, the amount of punitive damages can be determined in accordance with more than two times of the calculation base. In addition, Article 17 also pointed out that provisions concerning punitive damages under other laws and judicial interpretations are also applicable to disputes over infringement of new plant variety rights. According to the Interpretation of the Supreme People's Court on the Application of Punitive Damages in Hearing Civil Cases of Infringement upon Intellectual Property Right released in March 2021, the other circumstances in which punitive damages may be applied include at least: where the defendant has forged, destroyed or concealed the infringement evidence; where the defendant has refused to perform the ruling on preservation; where the defendant has made huge gains from the infringement or the right holder has suffered huge losses; where the infringement may endanger national security, public interests or personal health. The above provisions provide certain standards and bases for the determination of "serious circumstance" in disputes over infringement of new plant variety rights, and play a positive role in improving the application of punitive damages and reflecting the efforts to combat infringement.&nbsp;In view of the Judicial Interpretation issued by the Supreme Court, it appears that the handling of new plant variety dispute cases has been gradually improved through continuous judicial practice. From the initial explanation of procedural issues and infringement determination, it extends to a number of aspects such as right protection, proof, extent of protection, and gives very operational guidelines.&nbsp;Author:<h1>Xu Yi</h1>Principal<div class="intro intro-profile">Xu Yi has rich experiences in IP litigation. She is based in Shanghai.</div>Xu Yi has a bachelor and masters degrees in law from Peking University. She worked as a judge in the IP Tribunal of Shanghai Pudong New District Court for 6 years prior to joining Lusheng, and has since handled numerous groundbreaking IP litigation cases, including patent litigation, copyright, trademark, unfair competition, parallel importation cases, licensing agreement disputes, etc.Xu Yi provides tailored enforcement strategies. She has particular expertise in patent cases, new types of unfair competition, conflict between different kinds of IP rights, protection of collective trademarks and complicated copyright infringement. She has helped clients reverse unfavourable prior judgments in multiple complicated second instance and Supreme Court retrial cases. She has obtained high compensation of more than tens of millions for clients in many large-scale lawsuits. She has also successfully applied for preliminary injunction orders for clients in multiple courts.&nbsp;<h1>Jacqueline Zhao</h1>ConsultantJacqueline Zhao is a consultant at Lusheng Law Firm.Jacqueline advises clients on technology transfer, incorporation and acquisition of China business, regulatory requirements for advertising and product packaging and labeling, enforcement of intellectual property rights, plant variety application, copyright prosecution and domain name prosecution and domain name dispute.&nbsp; She also has extensive experiences in drafting such legal instruments as intellectual property related agreements like assignment, license and evaluation of IP, commercial agreements like sales, service, non-disclosure and e-commerce agreements, corporate documentation like equity joint venture contract and articles of association, employment and corporate administration related documentation like employment contracts, premises lease contract and cease and desist letters to infringers.Jacqueline has participated in joint venture and acquisition projects (e.g. incorporation of a joint venture company invested by an overseas company and a PRC listed company), IP transfer and licensing projects (e.g. purchasing trademarks and copyrights from an overseas company by a domestic Chinese stock company), provided legal services in connection with IP online and offline enforcement (e.g. enforcement of trademark registered in China by an overseas company via domestic e-commerce platforms), &nbsp;provided retainer legal services (e.g. rendering services to foreign-invested

Highlights of the latest judicial interpretation of disputes over new plant variety rights

A Review of Judicial Practices in Recent Years in China It is said that a trade secret is to a business is what blood is to a man. This is true for companies or individuals with trade secrets as their core competitive advantage in the market. However, trade secret misappropriation by people is very common due to high profits that can be used for little or no cost in R&D. The damages caused to the holder of the trade secret is irreversible once the trade secret is leaked because of the loss of exclusivity. Due to the inherent challenges in collecting evidence for trade secret misappropriation, not many right holders are able to bring a court case, or if they do, win and be awarded with substantial damages. According to statistics published on China Judgement Online, from 2013 to 2017, there were only 610 trade secret misappropriation cases concluded, with a losing rate of 63.19%, 27.5% of claims partially upheld by the court and only 9.27% of cases were fully won by the trade secret holders.[1] This data is in line with our experience where many clients asked for advice on trade secret protection, but few cases could be filed to court or brought to the police for investigation due to the difficulties in collecting evidence to meet statutory requirements. The main challenges include proving the confidential features and boundaries of the alleged trade secret, confidentiality, the amount of damages caused or illegal profit made in order to meet the statutory criminal threshold of RMB 500,000 (USD$77,654), the basis of the claim for damages, and evidence that the alleged infringer has used the trade secret. In recent years, China has launched a series of legislative reforms on trade secret protection to protect and encourage innovation and to ensure a healthy competitive environment. Most notable changes in the laws are the lowered requirements on the burden of proof of the right holder, raising maximum statutory damages from RMB 300,000 (USD$46,593) to RMB 500,000 (USD$77,654), adding punitive damages into the law, lowering the threshold for criminal liability from RMB 500,000 (USD$77,654) to RMB 300,000 (USD$46,593), and a longer sentence for imprisonment. The Supreme People’s Court (SPC) also recently published two case judgements in which the highest damages was awarded to the plaintiff and severe punitive damages were imposed for trade secret infringement. In this article, we will examine how a trade secret holder can fulfill the burden of proof for a trade secret misappropriation action under the current law.  I.  Burden of Proof The first two questions for a right holder to ascertain in a trade secret misappropriation action are: 1) what is the trade secret in concern? and 2) Has there been infringement?  According to Article 14 of Interpretation (II) of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Civil Cases Involving Trade Secret Infringements (adopted on 23 December 2020 and issued on 29 December 2020) (the “SPC Interpretation”), the plaintiff has the burden to prove that: <ol class="list-paddingleft-2"><li>they legally own the trade secret;</li><li>that the information allegedly misappropriated by the defendant is identical to or substantially similar to that of the trade secret; and</li><li>that the defendant obtained the trade secret through illegal means.</li></ol><h5>1. Proving the trade secret right</h5> According to Article 9 of the Anti-Unfair Competition Law (effective 23 April 2019) (“AUCL”), trade secret is defined as commercial, technical or business information that is not known to the public and has commercial value for which the right holder has adopted corresponding confidentiality measures. It is usually not difficult to categorize trade secrets as technical, business or commercial information that has commercial value. Unlike other IP rights such as trademarks, the confidential features and boundaries of a trade secret is usually vague and requires the right holder to carefully specify them so that it falls within the statutory definition. To protect their trade secrets, right holders usually adopt protective measures such as establishing confidentiality regulations in employee handbooks and signing non-disclosure agreements . The most challenging element lies in proving confidentiality. Article 9 of the AUCL appears to impose the burden of proof on the plaintiff. Meanwhile, Article 14 of the SPC Interpretation states that evidence to prove a trade secret has met statutory conditions includes the carrier, specific content, commercial value and the specific confidentiality measures taken to protect the trade secret. It should be noted that the element “unknown to the public” is not included. This has caused disagreements in judicial practice as some judges believe that the plaintiff should bear the burden to prove the confidentiality of the trade secret, while other judges are of the opinion that the burden lies with the defendant to prove that the trade secret is not confidential. Case examplesIn Wang vs Beijing East Petrol Chemical Co. Ltd.& Others [Beijing HPC (2011) Gao Min Zhong Zi No. 220], the defendant failed to prove when the alleged trade secret had been created, nor could he prove his technology was not known to the public. It was held not to be a trade secret. In the case of Hangzhou JINDA Electric Technology Company vs Chen [Zhejiang HPC (2004) Zhe Min San Zhong Zi No. 156], Zhejiang Higher People’s Court held that the ultimate burden of proof was on the defendant to prove the alleged trade secret was known to the public. Article 9 of the SPC Interpretation also specifies that if the relevant information is not generally known to and easily obtainable by the relevant personnel in the field, it shall be deemed as “unknown to the public”. With this definition, it may be more difficult for the plaintiff to prove that the “relevant information” is not generally known than to prove it is “not easily obtainable” by the relevant personnel.Case exampleIn the appeal of Chengdu JiaLing Electric Manufacturing Co.Ltd vs Chengdu Hope Electric Research Institute [SPC (2001) Min Zhong Zi No.11], the court held that the plaintiff’s use of the publicly known technology for its design and components constituted as a trade secret. In summary, it is necessary to prove that there is a trade secret before claiming that it is misappropriated. The right holder should be clear about the commercial value and scope of the trade secret and take proactive methods to prevent the trade secret from being revealed to the public. Given there are no precise standards for deciding whether a technical or commercial information is unknown to the public, the right holder should utilize any means to establish that the information misappropriated is confidential and therefore a trade secret. 2. Proving identical or substantially similarWith the right to the trade secret ascertained, the plaintiff should then prove that the information used by the defendant is identical or substantially similar to that of the trade secret. For example, technical information is often used in a product to gain competitive advantage in the market. A notarized purchase and a comparative analysis of the technical characteristics between the infringing product and the original product are usually required for the plaintiff when collecting evidence. In many cases, the plaintiffs claimed that all the information they had rights for should be protected as trade secrets, but this was not accepted by the court because they failed to exclude the publicly known information and therefore overestimated the scope of protection offered. The plaintiff should bear in mind that only the technical characteristics of the innovative part are protected as trade secrets. When making an analysis, the plaintiff shall compare each corresponding technical characteristic between the infringing and original product to confirm if they are the same or substantially similar. If the technology involved is complex, technical verification by a certified third-party agency is required. Case example In the appeal of Shanghai Jiaoda AngLi Holdings Ltd vs Shanghai GaoBoTe Biological Health Care Product Co. Ltd [Shanghai PC (2005) Hu Gao Min San (zhi) Zhong Zi No. 33], the court held that only where it was determined that the products of the two parties were identical or substantially similar, was there the necessity to compare the technologies used to produce the products. 3. Proving access to trade secrets by defendant Trade secret misappropriation is incorporated into unfair competition law in China because the infringer has violated the principle of good faith by illegally obtaining or using the trade secret to make profit. The new AUCL has reduced the burden of proof on the plaintiff who only needs to provide prima facie evidence to show that trade secret has been infringed upon. The burden is then shifted to the defendant to prove that there was no infringement.  Article 32 of the AUCL states that where the right holder provides prima facie evidence to demonstrate that the trade secrets are infringed upon and provides any of the following evidence, the alleged infringer shall prove the absence of such infringement: <ol class="list-paddingleft-2"><li>the alleged infringer has the means or opportunity to obtain the trade secret, and the information used is substantially similar;</li><li>the trade secret has been disclosed or used, or there is a risk of disclosure or use, by the alleged infringer; or</li><li>the trade secret is otherwise infringed upon by the alleged infringer.</li></ol> The alleged infringer is usually an employee, former employee or licensee of the right holder. The plaintiff can rely on documents like employment contracts, non-disclosure agreements and licensing agreements to prove that there is misappropriation. For infringers without access to the trade secret but have misappropriated it, the plaintiff needs to prove that they obtained it through illegal means like stealing, coercion, or deception. Obtaining information through reverse engineering or research and development is not considered as infringement. Case exampleIn the appeal of Shenzhen Qinghua SiWeiEr Software Technology Co.Ltd vs Chen, Zhong & Others [Guangdong HPC (2004) Yue Gao Fa Min San Zhong Zi No. 284], the court held that there was trade secret infringement, as the defendants were both employed by the plaintiff and another company, and had access to the information on the trade secret.II. Proving damages The difficulty in estimating damages is also a key factor that deters many right holders from taking civil action or reporting a case to the police. However, the new AUCL provides guidelines for calculating damages, introduces punitive damages and increases the maximum statutory damages for compensation. According to Article 17 of the AUCL, the amount of compensation for the damage caused to a business shall be determined in accordance with the actual loss suffered from the infringement. Where it is hard to ascertain actual loss, the compensation shall be determined in accordance with the profit made by the infringer from the infringement. For serious cases, the compensation may be determined in accordance from one up to five times the amount determined using the aforesaid method. The compensation shall also include reasonable expenses made by the business to prevent the infringement. Where a business operator violates Article 6 and Article 9 of the AUCL, and it is hard to ascertain the actual loss suffered by the rights holder or to ascertain the profit made by the infringer, the People’s Court shall, in accordance with the extent of the infringement, award compensation of an amount no less than RMB 5,000,000 (USD$776,542) to the rights holder. The article provides general principles on compensation for trade secret misappropriation, but with the difficulty in providing evidence, obtaining the maximum amount of compensation is on a case-by-case basis. <h5>1. Proving losses</h5> The right holder is required to prove all the losses calculable for compensation. In practice, the court usually considers three types of losses: <ol class="list-paddingleft-2"><li>Costs incurred for research and development of the trade secret. These include purchases of material, employees’ salaries and benefits, rent and loans.</li><li>Reasonable loss of profit incurred during the infringement. This includes the economic value that the trade secret has been bringing to the right holder, such as the increase of sales revenue and profit.</li><li>The third is the loss of competitive advantage due to the leak of the trade secret. Factors considered may include its economic value, market longevity and prospects in the market. However, these factors can be difficult to prove in practice.</li></ol> <h5>2. Proving illegal profits by infringer</h5> In practice, the loss incurred by the trade secret holder is usually very difficult to calculate, and the court would instead review evidence of illegal profits made by the alleged infringer from the misappropriation. The illegal profits are often calculated by multiplying the total sales revenue with the average profit rate. If the average profit rate cannot be ascertained, third party experts can be called to evaluate and provide a market average profit rate. As the evidence for the illegal profits is in the hands of the alleged infringer, the plaintiff must apply to the court for evidence preservation.Case examplesIn the case of Xi’an Heavy Machinery Research Institute vs Pei & Zhongye Company [Xi’an IPC (2005) Xi Xing Er Chu Zi No. 93], the illegal profits could not be figured out by reviewing the two contracts and accounting books of the defendant. The court relied on the expert opinion of the China Heavy Machinery Industry Association to work out the average sales revenue of the product, which determined the amount of damages to be awarded <h5>3. Punitive damages</h5> The new AUCL introduces punitive damages on trade secret misappropriation. To implement punitive damages, the Interpretation of the Supreme People's Court on the Application of Punitive damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights (effective on 3 March 2021) further specifies what constitutes as malicious intention and what can be considered as “ serious infringement”.Case examplesOn 24 November 2020, the SPC ruled in the case [SPC (2019) Zhi Min Zhong No.562] that Anhui Newman Fine Chemicals (“Anhui Newman”) was to pay RMB 30,000,000 (USD$465,925) as compensation, the first time the SPC awarded punitive damages for trade secret misappropriation.The SPC determined the punitive damages multiplier should be increased to a factor of 5 times because: (1) Since 2014, Anhui Newman did not stop creating the infringing products even under criminal proceedings; (2) the scale of production was large, with products exported to over 20 countries. On 19 February 2021, the SPC awarded the highest ever damages of RMB 159,000,000 (USD$24,694,042) for trade secret misappropriation [(2020) SPC Zhi Min Zhong N0. 1667], which highlights the SPC’s attitude on the crackdown of IP infringements.III. Criminal thresholds and penalties Along with taking civil action, right holders should also report to the police in order to further deter infringers. Proving the amount of damages caused or illegal profit made in order to meet the statutory criminal threshold of RMB 500,000 (USD$77,654) has been a key obstacle for right holders when collecting evidence. However, the Interpretation (III) of the Supreme People’s Court and the Supreme People’s Procuratorate of Several Issues Concerning the Specific Application of Law in the Handling of Criminal Cases Involving Infringements upon Intellectual Property Rights (effective 14 September 2020) has lowered the statutory threshold by reducing the amount to RMB 300,000 (USD$46,593). The 11th Amendment to the PRC Criminal Law (effective on 1 March 2021) also makes significant changes to crimes associated with intellectual property, including increasing the imprisonment sentence from 3-7 years to 3-10 years for committing trade secret misappropriation. IV. Conclusion With comprehensive improvements in legislation and judicial interpretation, along with the increasing judicial practice in trade secret disputes, there is no doubt that there will be more cases brought to the courts in the coming years. Right holders will have confidence in the judicial system and seek remedy for their losses to bring justice to infringers in the market.

How to prepare evidence in trade secret disputes

IP enforcement at the Canton Fair in China: before and after the COVID pandemic

The Guangzhou High Court has upheld a decision involving copyright in the streaming of the Fantasy Westward Journey Online MMORPG.&nbsp;Jacqueline Zhao&nbsp;explains how the new matters of intellectual property protection of online games, mobile games and e-sports will affect Chinese copyright law. On December 26, 2019, the Guangzhou High Court upheld at the court the decision of the first instance on Guangzhou Huaduo Network TechnologyCo.’s (Huaduo) infringement of Guangzhou Netease Computer System Co.’s (Netease) copyright in its MMORPG (massively multiplayer online role-playing game) Fantasy Westward Journey Online with compensation in amount of Rmb20 million (US$3.1 million). Case BackgroundOn November 24, 2014, Netease initiated a lawsuit at the Guangzhou Intellectual Property Court against Huaduo’s copyright infringement and unfair competition as a result of its live streaming and recorded broadcast of Fantasy Westward Journey Online via YY Game Live Streaming (currently named Huya Live Streaming) or YY Voice Client App and claimed Huaduo to cease infringement, make apology and compensate Rmb100 million(US$15.5 million). Netease claimed that it has computer software copyright of Fantasy Westward Journey Online II and has the right to the continuous pictures demonstrated in the process of the game running, which shall be deemed works created by a process analogous to cinematography, whilst Huaduo defended that Netease is not the copyright claimant and the live streaming pictures are resulted from gameplayers’ real-time operation during the game and that the live streaming shall be regarded as fair use by individuals for personal study and appreciation. The Guangzhou Intellectual Property Court ruled on October 24, 2017, for the first instance. The court believed that, although the continuous pictures of the game are outcome of users’ participations in interactions, the entire pictures may still be deemed works created by a process analogous to cinematography, copyright in which shall remain the property of Netease. Evidence such as profit-sharing mechanism and program parade of livestreaming and ranking, remarks and recommendations of streamers have certified that the live streaming of Fantasy Westward Journey Online onthe platforms operated by Huaduo are not only the users’ utilization of the platform but also Huaduo’s setup of live streaming windows and organization of streamers to live stream the game. Huaduo thus has infringed Netease’s right to the game pictures protectable as works created by aprocess analogous to cinematography. Netease’s claim on unfair competition, computer software copyright infringement and other copyright infringement were not reviewed by the court since its claim on copyright infringement of works created by a process analogous to cinematography has been upheld. By reference to Huaduo’s profit from the live streaming and prevalence state of the game, the court decided that Huaduo shall compensate Rmb20 million to Netease. Both parties appealed the decision. Netease appealed that Huaduo shall publicize an apology to Netease and eliminate the affect so caused taking into consideration Huaduo’s egregious infringement and believed that the compensation in amount of Rmb100 million claimed by Netease shall befully upheld, whilst Huaduo appealed to revoke the first instance decision and turn down Netease’s entire claims or retrial and believed that the court of the first instance did not consider the facilitation of the game brought by live streaming and the actual profit based on which the ruled compensation was calculated is not accurate. The Guangzhou High Court, which is the court of the second and final instance, was live broadcasting the court hearing on December 26, 2019, and upheld the decision made in the first instance and confirmed that the continuous motion pictures of Fantasy Westward Journey Online are protectable by copyright as works created by a process analogous to cinematography and that Huaduo’s livestreaming shall not be deemed fair use and were not the service solely concerning network technology given its unauthorized organization of streamer to live stream the game and share profit therefrom. Netease’s claim for Huaduo to make apology were not supported due to lack of reason&nbsp;and evidence. The amount of compensation remains the same as the first instance taking into consideration the type of the game and its fame, the infringement and severity, market states of licensing of game live streaming, contribution by the game in profitability of the live streaming platformand the cost associated with the enforcement. General CommentsNetease’s cause of action covered: 1. Copyright infringement of:<ol class="list-paddingleft-2"><li>Computer software;</li><li>Characters, scenes and props of the game as artistic works;</li><li>Music in the game as musical works;</li><li>Plot design, interpretation, activity schemes of the game as literal works; and</li><li>Continuous pictures in running the game as works created by a process analogous to cinematography; and</li></ol>2. Unfair competition on the grounds of Huaduo’s exploration of Netease’s competitive advantage in the market regarding the game. The case discussed the subject of protection (aka type of works), attribution of rights, infringement, unfair competition and legal liabilities. The court confirmed the original idea of the game developer represented by the game’s abundant plot, vivid characters, scene and unique style, which are reproduceable in tangible form and share the same pattern of manifestation as cinematographic work. Copyrightability of Continuous Motion Pictures in a&nbsp;GameThe process of creating the game included planners’ integrated design of the plot and the game rules, art designers’ design of the materials like original painting, scenes and characters and programmers’ coding based on the functions to be archived which is similar to the means of creation ofworks created by a process analogous to cinematography which is defined by the Implementation Regulations for the Copyright Law of China as aggregate of visual images embodied in a form which can be shown as a moving picture with or without a soundtrack associated with such visual images. Creation of the motion pictures by players are not protectable from copyright perspective because the characters, scenes, music, deduction of plot and relationship of characters were pre-set by the game developer and the motion pictures are merely the results from operation or selection of the game by different users.Infringement, Fair use and Unfair CompetitionThe live streaming windows mainly show the continuous pictures of the game, certain function settings and streamers’ icon. The real-time broadcasting of the continuous pictures through users’ operation of the game made available to the viewers infringes Netease’s copyright in the game protectable as works created by a process analogous to cinematography. The Chinese Copyright Law provides that copyright includes rights such as reproduction right, distribution right and other rights enjoyed by a copyright claimant, amongst which “information network transmission right” is defined as right to provide a work to the public through cable orwireless method so that the public may have access to the work at their individually selected time and venue. However, such real-time transmission of the continuous pictures of the game does not allow the public to access the work at their selected time and thus shall be categorized as other rights enjoyed by a copyright claimant. Protection of developer’s right to MMORPG encourages creation of new works. The restrictions of rights as provided under the Chinese Copyright Law include but are not limited to use of a work for personal learning, research and appreciation. Live streaming of the game and sharing of profit gained from the streaming apparently exceed the restriction set forth by fair use and affected copyright claimant’s right to license the game pictures and damages the potential market of the game. On a separate note, in a preceding case between Shanghai Yaoyu and Guangzhou Douyu, Douyu live streamed an e-sports tournament, the AsianDOTA2 Invitational Competition, on its live streaming platform without authorization. The Shanghai Intellectual Property Court did not regard pure competition pictures of a game as copyrightable works due to randomness and lack of reproducibility and did not uphold defendant’s claim of theright of transmission through information network as protectable under the Chinese Copyright Law. This case was finally decided on grounds of unfair competition based on the plaintiff and the defendant’s competitive relationship as both parties are game live streaming platforms and the defendant’s damage to the plaintiff’s competitive advantage in the market (aka exclusive right to live streaming the tournament in dispute) and tothe regular industrial order. CompensationThe claim of unfair competition and right to computer software, artistic works, literal works and musical works were not reviewed by the court given they are competing with the right to the works created by a process analogous to cinematography that has protected Netease’s rights and interests claimed in this case. Huaduo’s liability is restricted to infringement of copyright of works created by a process analogous to cinematography. Noevidence certifies that Huaduo’s infringement depreciates Netease’s fame or adverse social influence that may entitle Netease to request apology from Huaduo or elimination of infuence by Huaduo. The Chinese Copyright Law provides that, in the case of infringement of copyright or copyright-related rights, the infringer shall make compensation based on the actual losses of the rights holder; where it is difficult to compute the actual losses, compensation shall be made based on the illegal income of the infringer. The court awarded damage in amount of Rmb20 million, although Netease claimed Rmb100 million as compensation. The awarded compensation was calculated based on:<ol class="list-paddingleft-2"><li>An estimation of Huaduo’s revenue of its live streaming business;</li><li>An estimation of Huaduo’s revenue of its broadcasting of the game in dispute;</li><li>An estimate of income of Huaduo’s streamers; and</li><li>Taking into consideration the work type of the game in dispute, the categories of rights concerned and continuation, size and subject intent of Huaduo’s infringement and also enforcement cost incurred by Netease.</li></ol>To note, the financial documents in connection with profit sharing of streamers, special audit and conclusion on revenue submitted by Huaduo werenot admissible by the court due to lack of corroborative evidence and significant deviation from the above estimation based on which the awardedcompensation was computed. ConclusionIntellectual property protection in terms of online games, mobile games and e-sports are new and challengeable issues that entails consideration from various perspectives, including but not limited to copyright in game software, patent in algorithm of game software, right to plot and even original author of plot or original version of its story, music and artistic pieces in game, license of right to merchandize, right to live stream play or e-sports of game which is probably extendable to streamers’ right to oral works, players’ related right of performer, players’ right to their names,portrait, unfair competition as a result of taking advantage of game developers’, streamers’, players’, teams’ and leagues’ reputation. The right claimant standing for a different position in the industry shall not only obey the business norm but also keep a watchful eye on new trends on the legal regime concerning protection of own rights and precaution of infringement of third-party rights.&nbsp;* this article was first published on Asian IP

China: court rules on copyright infringement involving online games and live streaming

Case study: IP protection in live streaming e-commerce platforms

Overview of administrative copyright enforcement in China

In 2019, China accepted a total of 7032 applications for new varieties of agricultural plants and 802 applications for new varieties of forestry plants, of which overseas applicants accounted for 5.65% and 18.2% respectively. Compared to 2018, the total number of applications increased by 36% and the total number of grants increased by 13.86%, with an overall year-by-year increase in &nbsp;the volume of applications and grants of overseas entities. With the increase in the volume of applications for new plant variety rights by overseas entities, the difficulties and challenges encountered in its application process are worthy of understanding in advance.<img src="https://media.umbraco.io/lusheng/44hdhgrj/img_3055495107563358640_jacqueline-zhao-2.png" style="width: 500px; height: 332.968px; display: block; margin-left: auto; margin-right: auto;">The agricultural and forestry industries are both highly regulated in China. The provision of germplasm resources by Chinese entities to other countries and the cooperation with overseas institutions on the use of germplasm resources must be approved by the agricultural or forestry authorities. The introduction of germplasm resources from abroad shall go through procedures for approval, plant quarantine, and registration in accordance with the different agriculture and forestry requirements.&nbsp;1. Plant New Variety Protection Catalogue and RegistryAmongst the many plant varieties, only the new plant variety rights of genera or species of plants included in the National Plant Variety Protection Catalogues can be applied for. As of August 2020, China has issued 11 batches of Protection Catalogues of agricultural plant varieties which contain 191 genera and species, and six batches of Protection Catalogues of forestry plant varieties, which contain 206 genera or species.China has been a member of the International Union for the Protection of New Varieties of Plants (UPOV) and a party to the 1978 Act since April 1999. In early 2017, UPOV launched an international e-filing system for plant variety rights called UPOV PRISMA, in which China joined in July 2017. Among the filing for new plant variety rights in China, only lettuce (Lactuca sativa L.) can be applied for through this system. The remaining varieties must be applied to the China State Forestry Administration Office for the Protection of New Varieties of Plants and the Plant Variety Protection Office of the Ministry of Agriculture of China (collectively, the “PVR Offices”).Foreign individuals, overseas companies and other overseas organizations cannot apply for plant variety rights in China by themselves and must entrust an agency to handle the application.&nbsp;2. Denomination of Candidate VarietyThere are certain criteria for naming a candidate variety that will be filed in China. The variety’s denomination shall be distinguishable from the names of already-known botanical genera or species.&nbsp;The denomination of the candidate variety shall not only be comprised of numbers and shall not mislead a person on the characteristics and features or the identity of the breeder(s) of the new plant variety. The denomination must also not include country names or overseas geographic names known to the public, nor be similar to the denominations of renowned international organizations.Although the denomination will become a generic name of the new plant variety once the plant variety right (“PVR”) is granted in China, such denomination is allowed protection upon granting of the PVR.&nbsp; Sales of granted varieties without their registered denomination will be subject to administrative punishment by China State Forestry Administration or the Ministry of Agriculture and Rural Affairs of China.&nbsp;3. DUS TestThe Distinctness, Uniformity and Stability (DUS) test must be carried out pursuant to the ‘DUS Testing Guidelines Concerning the Relevant Breeds of Plants’ issued by the China State Forestry Administration and the Ministry of Agriculture and Rural Affairs of China.&nbsp;There are two stages in a PVR filing in China: preliminary examination and substantial examination. During the substantial examination, the applicant may choose to conduct the DUS at a test center designated by the PVR Offices or engage a local organization to conduct a third-party DUS test that will be verified onsite by the PVR Offices. For forestry PVR filings, there is an additional choice of purchasing a test report from overseas authorities if a DUS test has been conducted overseas.&nbsp; Such alternative is not applicable to agricultural PVR filings. A major benefit in carrying out a DUS test in a designated test center is that the test is taken free of charge, while the main benefit in engaging an organization to conduct the test is that it would be more flexible in time and venue. It should also be noted that the PVR Offices have ceased charging filing fees and annuities for PVR since April 2017.If an applicant opts to conduct the test in a test center designated by the PVR Offices, the PVR Offices will specify a period during which the propagating materials of the candidate variety and the comparative variety shall be submitted to the test center.&nbsp; Therefore, overseas applicants have to carefully calculate timelines for shipping the propagating materials to the Chinese importer and test center, and also take into account quarantine trial growth periods required for certain specified genera or species.&nbsp;&nbsp;For tests conducted by a local organization engaged by the applicant, the time and venue for onsite verification must be reported to the PVR Offices after completion of the preliminary examination and publication of the application. Before engaging the local organization, it is best to set out an appropriate written agreement.&nbsp; The agreement shall specify terms in relation to the transfer, disposal, testing and return or destruction of the propagating materials, limit the purpose for the use of intellectual property relating to the materials and information disclosed by the applicant and the test data. In particular, the agreement must prevent the testing organization from leaking the propagating materials to protect the novelty and commercial value of the candidate variety.&nbsp;4. Importation of Propagating MaterialsThe PVR Offices will set a deadline for the submission of propagating materials to designated test center where the applicant selects the DUS test to be conducted at.&nbsp;It would be advisable for an overseas applicant to have imported the propagating materials of both the candidate variety and the comparative variety before filing the PVR application, provided it will engage a local organization to conduct the DUS test or to temporarily help to cultivate the materials for later submission to the designated test center.&nbsp;It is recommended for the applicant to engage an importer to get an import permit from Chinese Plant Quarantine Administration.&nbsp; The permit is an important prerequisite for importing propagating materials into China and the valid term and port will be specified on the permit.&nbsp;The materials must be reach a designated port in the valid term with other supporting documents, such as a plant quarantine certificate of the export country.&nbsp; The material is likely to be conducted phytosanitary tests and quarantine trial growth upon its arrival at the designated port.&nbsp;5. Novelty RequirementUnder relevant Chinese laws, the novelty requirement is met if: i) the propagating materials of the candidate variety have never been sold prior to the filing date; ii) with the approval of the breeder, have been sold within the PRC for not more than 1 year; iii) in the case of lianas, forest trees, fruit trees and ornamental trees, the propagating materials have been sold outside the PRC for not more than 6 years; or iv) in the case of other varieties of plants, the propagating materials have been sold outside the PRC for not more than 4 years.Notwithstanding the novelty requirement, the PVR Offices are very likely to refuse an application for a variety that is close to the expiration of its novelty period.&nbsp; Therefore, an earlier application is recommended to prevent the potential risk of refusal.&nbsp;

Challenges of overseas entities in filing for plant variety right in China

Wensen An analyses protection standards for AI-generated inventions set by the world's major IP bodies&nbsp;Inventorship Looking at the current patent laws of various countries, there are no laws recognising AI systems or machines as inventors. Major global intellectual property authorities such as China, the United States, Japan and Korea all regard inventors as natural persons, and Lithuania and Estonia, contracting states of the EPC, also explicitly limit inventors to natural persons that created the invention. EPO&nbsp;In October and November 2018, Dr Stephen Thaler filed two European patent applications, listing an AI machine named DABUS as the inventor. Mr Thaler designated the AI machine as the inventor for two reasons: 1) the European Patents Office (EPO)does not explicitly state that the inventor must be a natural person; and 2)the invention was created by an AI and the applicant is obliged to disclose the true inventor to the public. The EPO rejected both applications on the basis that listing an AI as an inventor is not in compliance with Article 81 of the EPC and Rule 19(1) of its Implementing Regulations, which require the designation of an inventor. In its decision, the EPO held&nbsp;that a machine has no rights and legal personality to exercise rights, cannot be employed, nor can it have any legal title over its output that can be transferred by law or by agreement. United Kingdom&nbsp;A review of the patent application process in the United Kingdom shows that the UK Intellectual Property Office (IPO) does not accept the designation of an AI machine as an inventor. The IPO believes that even if the AI machine is regarded as the inventor, it is unclear how the applicant would obtain the ownership of the invention from the machine because the AI machine is in capable of owning any rights. The EPC supports and further expands the position held by the UKIPO. In&nbsp;Thaler v The Comptroller-General of Patents, Designs and Trade Marks, the EPC held that merely inventing something would not result in a patent being granted to an inventor. For an invention to be granted, a patent must be applied for, which can only be done by a person. As an AI machine is incapable of submitting patent applications for their inventions, it could not be regarded as an inventor under existing UK patent laws. The EPC also holds that an AI machine is incapable of holding and transferring property rights, which an invention,an application for the grant of a patent and the patent itself all are. The court did leave open the question of if the owner of the machine (as a person)could apply and then rely on the invention having been devised by the machine. Dr Thaler had expressly declined to make this argument and the judge left the matter by saying the argument was not an improper one. China&nbsp;Article 17 of the PRC Patent Law states that the inventor or designer has the right to indicate that he is the inventor or designer in the patent document. Rule 13 of the Implementing Rules stipulates that the ‘inventor or designer' refers to a&nbsp;person who has made creative contributions to the substantive characteristics of the invention. The Patent Examination Guidelines specifically state that the‘inventor should be an individual'. United States&nbsp;Title 35 of the United States Code, Section 100(f) (35 USC §100(f)) stipulates that the ‘inventor' means the individual or collective group of individuals who invented or discovered the subject matter of the invention. 35 USC §115 also stipulates that each inventor must also execute an oath or declaration in connection with the patent application. A machine will be incapable of making such an oath or declaration. Japan&nbsp;In Japanese patent law, though the inventor is not clearly defined, the interpretation of the relevant provisions of the Japanese Patent Act and&nbsp;judgement of the courts show that Japan adopts the principle that ‘inventors are limited to natural persons who have actually performed the creative activity'. David Brinck argues there is a pressing need for a change in the law to recognise AI entities as inventors Summary of inventorshipIn relation to inventorship, all the countries discussed have adhered to ‘inventor­ centrism'and clearly delineated between machines and humans. In fact, the five major offices of China, the United States, Europe, Japan and South Korea reached a consensus on AI in the IP5 expert roundtable held in October 2018that although it may be difficult to determine whether a specific invention was made by a human or machine, the inventor must be a natural person. Patent-eligible subject matterPatent applications in the AI field are usually significantly different from those in other fields. For example, solutions usually include algorithms and other intellectual activities and methods that are considered non-technical features. Such intellectual activities and methods are generally excluded by patent laws of various countries. In order to provide clearer guidelines and rules, major global IP organisations that handle most AI patent applications have taken steps to modify and improve patent examination rules to cope with the rapid developments in technology. China&nbsp;In December 2019, The China National Intellectual Property Administration (CNIPA)issued a revision of the Patent Examination Guidelines, which came into effect on 1 February 2020. The revised Guidelines focus on the examination rules for patent applications involving algorithm features or business rules and methods. In order to determine subject-matter eligibility, the CNIPA refers to Articles25.1(2) and 2.2 of the PRC Patent Law (in this order). Specifically, claims that do not contain any technical features but involve abstract algorithms that fall within rules or methods for intellectual activities under the scope of Article 25.1(2) will not be considered as patent-eligible subject matters. However, if the claim contains technical features in addition to the algorithm and is overall not a rule or method of intellectual activity, it should not automatically be denied subject-matter patent eligibility. Instead, it is then necessary to examine whether the claim falls within the ‘technical solution'described in Article 2.2 of the PRC Patent Law. If the claim states that the technical problem to be solved uses technical methods utilising the laws of nature, and achieves a technical purpose in line with the laws of nature, then the solution described in the claim is within the scope of the ‘technical solution' described in Article 2.2 of the PRC Patent Law. EPO&nbsp;In November 2018, the EPO revised its Guidelines for Examination, adding guidelines for AI and machine learning. According to the EPO, AI and machine learning are based on computational models and algorithms, and such models and algorithms are of an abstract mathematical nature. Since certain terms that refer to abstract models and algorithms do not necessarily imply the use of technical means, it can be considered when examining if the claimed subject matter has a technical character. In addition, the EPO considers that if a classification method serves a technical purpose, the steps of generating the training and training the classifier can contribute to the technical character of the invention. United States&nbsp;The US Patent Act does not limit subject matter eligibility of patents but provides exceptions through judicial precedents, namely the exclusion of abstract ideas, laws of nature and natural phenomena. This is shown by the Mayo case in 2012 and the&nbsp; Alice case in 2014, which sets the standard for judging patent-eligibility subject matter. In order to make the application process more consistent, the US Patent and Trademark Office (USPTO) subsequently issued the 2019 Revised Patent Subject Matter Eligibility Guidance in January and the October 2019 Update: Subject Matter Eligibility. The revisions elaborate more on Step 2A of the Alice-Mayo test, which determines whether a claim recites a judicial exception. Japan&nbsp;The Points of Revision of the Examination Guidelines and Examination Handbook for Computer Software-Related Inventions issued by the Japan Patent Office (JPO) classifies AI-generated inventions as computer software-related inventions. The JPO sets out two main considerations in examining subject-matter eligibility in computer software-related inventions: (1) the general rule, which is to consider the invention as a ‘creation of a technical idea utilising the laws of nature' or as those that utilise the laws of nature as a whole; and (2) the special criteria, which is to consider the invention from a computer software viewpoint. Sufficiency of disclosureThe&nbsp;particularities of AI patent technologies, such as support vector machines and artificial neural networks that are commonly used in AI algorithms, are black box models, difficult to explain and naturally contradict the basic principle that an invention must be made public to be entitled to be in the patent system. Therefore, the sufficiency of disclosure of AI patent applications is of great interest. China&nbsp;Article 26.3 of the PRC Patent Law states that the specification should provide a description of the invention or utility model sufficiently clear and complete that a person skilled in the relevant technical field can carry it out. According to the latest revision of the Patent Examination Guidelines, the specifications of a patent application of an invention containing algorithm features shall clearly and completely describe the solution adopted by the invention to solve its technical problems. When describing the specifications of a solution including technical features, algorithm features that support and interact with technical features of the solution can be included. The description should state how the technical features and the algorithm features work together to produce beneficial effects. EPO&nbsp;Article 83 of the European Patent Convention states that a European patent application shall disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art. In addition, Section 1,Chapter III of Part F of the Guidelines for Examination points out that since the application is addressed to the person skilled in the art, it is not necessary nor desirable to give details of well-known ancillary features, but the description must disclose any features essential for carrying out the invention in sufficient detail to render it apparent to the skilled person how to put the invention into practice. United States&nbsp;35 USC §112 states that the specification should meet three general requirements: written description, clear directions for implementation and best mode. The Computer- Implemented Functional Claim Limitations Guidance,which came into effect in January 2019, refines and explains the general requirements. Japan&nbsp;Article A36 (4) (I) of the Japanese Patent Act states that the description shall be clear and sufficient as to enable any person ordinarily skilled in the art to which the invention pertains to work the invention. According to the JPO, training data with multiple types of data for machine learning is used in AI-related inventions. Conditions for determining sufficiency of disclosure include the condition where it can be recognised that there is a certain association between the various types of data, such as a correlation or where it can be presumed that there is a certain correlation between the multiple types of data in view of a common general technical knowledge. Inventive step/non-obviousnessInventiveness is the most important patentability requirement and plays an important role in the patent system. The judgment of inventiveness is often relatively subjective. In addition, due to the differences in legislative history and societal values among the countries, there are differences in judging inventiveness, particularly for AI patents. China&nbsp;Article 22.3 of the PRC Patent Law sets out the general criteria to determine inventive step. To show inventive step, the invention or utility model must have prominent substantive features and not able progress compared to the prior art. For AI-related patent applications, examination of inventive step still follows the general approach for assessing inventive step; namely, the ‘three-step method' used to determine whether the technical features of the invention is obvious to a person skilled in the art or not. The latest revision of the Patent Examination Guidelines further provide that when examining the inventive step of a patent application that contains both technical features and algorithm features, both the technical features and algorithm features must mutually interact and support each other in the functioning of the invention,and should be considered as a whole. EPO&nbsp;Article 56 of the European Patent Convention states that an invention shall be considered to have inventive step if, having regard to the state of the art, it is not obvious to a person skilled in the art. Section 5, Chapter VII of Part G of the Guidelines for Examination establishes the ‘problem-solution approach', which sets out three main stages to assess inventive step in an objective and predictable manner. In particular, when assessing the inventive step of a claim containing technical and non-technical features (often the case with AI-related inventions), the problem-solution approach is applied in such a way as to ensure that all the features which contribute to the technical character of the invention are taken into account, while features which do not contribute to the technical character of the invention should not be considered. Japan&nbsp;Article 29(2) of the Japanese Patent Act states that if a person ordinarily skilled in the art of the invention could easily make the invention based on a prior art or an invention that is publicly known, then the invention lacks inventive step. According to its Guidelines for Examination, all claims described in the invention (whether technical or non-technical features) will be considered in determining inventive step. United States&nbsp;35 USC §103 sets out the requirement of non-obviousness but does not clearly define it. Guidance can, however, be found in the 1962 case&nbsp;Graham u John Dwre&nbsp;and in the 2007 case&nbsp;KSR International u Teleflex, where the US Supreme Court set out four elements in resolving the question of non-obviousness and refined the determination of non-obviousness to increase the flexibility in judging it, respectively. Summary of inventive step/non-obviousness&nbsp;It can be seen that there is a difference between the EPO and the JPO and CNIPA in treating non-technical features when evaluating inventive step in AI-generated inventions. The EPO explicitly does not consider non-technical features without technical contribution, while the JPO and CNIPA explicitly consider both technical and non-technical features described in the claims. Though the USPTO does not make clear the distinction between technical and non-technical characteristics,in practice, it makes a judgement on non-obviousness after examining all the evidence. ConclusionAs AI-generated inventions become more common in the future, the existing patent legal framework and system may be unable to fully meet the demands of such inventions. As a consequence, major intellectual property authorities have responded to the emergence of AI-generated inventions by revising and clarifying existing patent laws and guidelines. Though standards of protection and examination rules between the countries may differ,there is an open and positive attitude towards patent protection of AI-generated inventions. Wensen An is a patent lawyer and director of the Lusheng law firm. * This article was initially published on Robotics Law Journal.

The lay of the land: patent law and AI inventors

<ol><li> General Comments&nbsp;</li></ol>We believe that the draft amendments to the Patent Law are generally in line with the trend towards strengthening patent protection.&nbsp; They include provisions extending the scope and term of design patent protection; &nbsp;increasing the amount of statutory damages and adding punitive damages for patent infringement; and reducing the evidentiary burden on patent owners in patent infringement litigation . &nbsp;They also provide for a pharmaceutical patent linkage system dealing with the interests of drug market authorization applicants and drug patentees, and extensions of term in relation to pharmaceutical patents, with the aim of encouraging drug innovation and creation.&nbsp;<ol start="2"><li> Detailed Comments&nbsp;</li></ol>&nbsp;<table border="0" width="869"><thead><tr><td width="75" style="width: 77px;">Article #</td><td width="406" style="width: 400px;">Article/Clause</td><td width="387" style="width: 382px;">Comments</td></tr></thead><tbody><tr><td width="75" style="width: 77px;">Article 2</td><td width="406" style="width: 400px;">Designs mean, with respect to a product, new designs of the shape in whole or in part, pattern, or the combination thereof, or the combination of the color with shape and pattern, which are rich in an aesthetic appeal and are fit for industrial application.</td><td width="387" style="width: 382px;">The amendment is consistent with the regulations in major jurisdictions. The introduction of protection to new designs of the shape of part of a product allows better protection of the product’s innovative design element and will aid design patent enforcement.</td></tr><tr><td width="75" style="width: 77px;">Article 16</td><td width="406" style="width: 400px;">The unit that is granted the patent right shall reward the inventor or designer of an employment invention-creation. After such patent is exploited, the inventor or designer shall be given a reasonable amount of remuneration according to the scope of application and the economic results.The state encourages the unit that is granted the patent right to implement property rights incentive mechanism and adopt methods including equity, options, and dividends, etc. to enable inventors or designers to reasonably share the proceeds of innovation.</td><td width="387" style="width: 382px;">The first item of the article obliges the patent owner to provide reasonable remuneration to employee inventors. We do not consider the addition of the second item, listing certain remuneration methods, is necessary.&nbsp; Further, it may, in practice, give unintended importance to the forms of remuneration listed. We suggest a further review of the article.&nbsp;</td></tr><tr><td width="75" style="width: 77px;">Article 20</td><td width="406" style="width: 400px;">Any abuse of patent rights, which exclude or restrict competition thus constituting monopolies, shall be dealt with in accordance with the Anti-monopoly Law of the People's Republic of China.</td><td width="387" style="width: 382px;">It is not clear whether patent infringement litigation may be suspended as a result of the initiation of an anti-monopoly lawsuit; however, a judge in patent infringement proceedings is likely to have more power to determine the issue. It is also not clear whether this added article may cause more obstacles in enforcement to patent owners.</td></tr><tr><td width="75" style="width: 77px;">Article 29</td><td width="406" style="width: 400px;">or within six months from the date on which any applicant first filed in China a patent application for an industrial design, he or it files with the Patent Administration Department Under the State Council a patent application for the same, he or it may enjoy the priority right.</td><td width="387" style="width: 382px;">We support the extension of domestic priority to design patents.</td></tr><tr><td width="75" style="width: 77px;">Article 42</td><td width="406" style="width: 400px;">The duration of invention patent shall be twenty years, the duration of utility model patent shall be ten years, the duration of design patent shall be fifteen years, as of the date of application.</td><td width="387" style="width: 382px;">The extension of the term of protection for design patents is consistent with the regulations of Hague Agreement and will facilitate China’s accession. The patent owner may choose to maintain the design patent right for a longer period at its discretion.</td></tr><tr><td width="75" style="width: 77px;">Article 42</td><td width="406" style="width: 400px;">If an invention patent has been granted after four years from the filing date of the invention patent application and three years from the request for substantive examination, the patent owner may request compensation for the unreasonable delay in granting the invention patent, except for the unreasonable delay caused by the applicant.&nbsp;</td><td width="387" style="width: 382px;">This article does not provide that an extension of patent term may be granted as compensation for unreasonable delay Further, it does not make any provision for unreasonable delays occurring during the examination period e.g. that a patent applicant can, in that event, request acceleration of the examination.We suggest further review of the article.</td></tr><tr><td width="75" style="width: 77px;">Article 42</td><td width="406" style="width: 400px;">The State Council may make a decision to extend the duration of invention patents of innovative pharmaceuticals which have been approved for marketing in China, to make up the time used for drug approval, and the extension period shall not exceed five years and the net effective duration of such innovative pharmaceuticals which have market launches shall not exceed fourteen years.</td><td width="387" style="width: 382px;">The addition of this article aims to provide a reasonable term of protection to innovative pharmaceutical patent owners given the requirements of the marketing approval procedure and pharmaceutical patent examination. This amendment is consistent with the law in major countries especially the US. It will help encourage drug innovation and creation. We support the amendment.</td></tr><tr><td width="75" style="width: 77px;">Article 65</td><td width="406" style="width: 400px;">For willful patent infringement with serious circumstances, the amount of compensation shall be determined ranging from one to five times&nbsp;the amount of compensation determined by the preceding methods.</td><td width="387" style="width: 382px;">The addition of punitive compensation will strengthen the protection granted to patent owners</td></tr><tr><td width="75" style="width: 77px;">Article 65</td><td width="406" style="width: 400px;">Where it is difficult to determine the losses suffered by the patentee, the profits which the infringer has earned through the infringement and royalties, the people’s court may set an amount of compensation of no more than RMB 5,000,000 in light of factors such as the type of the patent right, the nature of the infringing act and the circumstances.</td><td width="387" style="width: 382px;">The increase of statutory damages to 5 million RMB will help protect the interest of patent owners.&nbsp; It is an appropriate figure given current economic growth.</td></tr><tr><td width="75" style="width: 77px;">第65条Article 65</td><td width="406" style="width: 400px;">In order to determine the amount for compensation, under the circumstances in which the right holder has endeavored to present evidence, and the related account books or materials are mainly in control by the accused infringer, the people’s court may order the accused infringer to provide account books and materials relating to the infringing conduct; if the accused infringer does not provide or provides false account books or materials, the people’s court may refer to the right holder’s claims and evidence to rule on the amount of compensation.</td><td width="387" style="width: 382px;">We support the addition of this article. It reduces the evidentiary burden on patent owners to prove the amount of unlawful profit made by the infringer, which in practice is difficult, as long as the rights owner has endeavored to present evidence.&nbsp;</td></tr><tr><td width="75" style="width: 77px;">Article 69</td><td width="406" style="width: 400px;">If the patentee or interested party believes that the relevant technical solutions of a drug in market approval application fall within the scope of protection of the relevant patent rights posted on the China Patent Information Registration Platform for Listed Drugs, the patentee or interested party may file a lawsuit with the people's court or apply for an administrative ruling with the patent administrative department of the State Council within 30 days from the date the drug administration department of the State Council announces the application for market approval. If the patentee or interested party fails to file a lawsuit or request&nbsp; an administrative ruling, the applicant for market approval of the drug may request the People's Court or the patent administrative department under the State Council to confirm that the relevant technical solution of the drug in the market approval application does not fall within the scope of protection of the relevant patent rights listed in China Patent Information Registration Platform for Listed Drugs.</td><td width="387" style="width: 382px;">This article contains general provisions in relation to establishment of the Pharmaceutical Patent Linkage system, but more detail will be required in relation to procedure in order to avoid possible confusion in practice. We suggest that the article be further reviewed.The Patent Linkage system will be beneficial to pharmaceutical patent owners, but does give a quasi-judicial power to the Patent Administration, allowing it to determine whether&nbsp; or not a product falls within the scope of a patent, similar to the determination of patent infringement, which, under the current law, is determined by the court.&nbsp;&nbsp;The article provides that patent owners may make a request to the Patent Administration or the Court within 30 days of the date the drug administration department of the State Council announces the relevant application for market approval. In practice, the Drug Registration Platform publishes the listed drugs for market approval and associated patent information from time to time, not regularly.&nbsp; A period of 30 days for checking the publication of listed drugs, carrying out an initial analysis and initiating the relevant procedure, may place undue pressure on patent owners. We would propose extending the period.</td></tr><tr><td width="75" style="width: 77px;">第69条Article 69</td><td width="406" style="width: 400px;">Where the People's Court or the patent administrative department under the State Council makes an effective decision or administrative ruling within nine months from the date on which the request of the patentee or interested party is accepted, with respect to the application for market approval of the chemical drug that has passed the technical review, the Drug Administration under the State Council may make a decision on market approval, based on the decision of the people's court or the administrative ruling of the patent administrative department under the State Council. If the party concerned is not satisfied with the administrative ruling of the patent administrative department under the State Council, he/she may sue in the people's court within fifteen days from the date of receiving the administrative ruling.</td><td width="387" style="width: 382px;">This article aims to limit the time for a court decision or administrative ruling to nine months. The Drug Administration can then decide, on the basis of that decision or ruling, whether or not to grant market approval. The article will be beneficial to generic drug manufacturers, allowing them to get their products to market more quickly.&nbsp; Pharmaceutical patent owners will be prevented from utilizing the procedure in bad faith to delay market launch.</td></tr></tbody></table>&nbsp;

Comments on the amendments to the Patent Law (second draft for review)

On the importance of IC layout designs to chip design firms in China’s IP development

Not long ago, two European patent applications triggered intense debate within the industry as to whether inventorship status can be conferred on AI (artificial intelligence). With the widespread application of AI, the question of whether a machine can qualify as an inventor of an invention has posed a significant challenge to the current patent law regime.The applicant, Stephen L. Thaler, filed two patent applications with the United Kingdom Intellectual Property Office (UKIPO) in October and November 2018, respectively, entitled “Food Container” and “Devices and Methods for Attracting Enhanced Attention”. At the same time, he filed corresponding European patent applications under Article 75(1)(b) of the European Patent Convention (EPC), and designated an AI machine known as DABUS as the inventor. The applicant’s main reasons for designating DABUS as the inventor were: (1) the European Patent Office (EPO) does not explicitly prohibit that an inventor must be a human being; and (2) since the invention was created by AI, the applicant is under an obligation to disclose the true inventor to the public. After a non-public oral hearing on 25 November 2019, the EPO issued a decision on 27 January 2020 refusing the world’s first patent applications designating an AI as inventor. In that decision, the EPO held that listing a machine as inventor does not comply with Article 81 EPC and Rule 19(1) of the Implementing Regulations, and further considered that a machine does not possess legal personality to hold rights and exercise rights, cannot be a party to an employment agreement, and cannot acquire or transfer rights by way of inheritance or assignment.In this case, the EPO considered that the status of inventor is safeguarded by various rights conferred under different provisions of the EPC. For example, Article 62 EPC and Rule 20(1) of the Implementing Regulations provide that, vis-à-vis the applicant or proprietor, the inventor has the right to be mentioned; Article 81 EPC provides that a European patent application shall designate the inventor; and Article 81 EPC provides that the European patent shall belong to the inventor or his successor in title. The EPO also pointed out that the legislative history of the EPC shows that the term “inventor” refers only to natural persons, and that the EPO Boards of Appeal have recognized that inventors are natural persons.The prosecution history of the applications in the United Kingdom likewise shows that the UKIPO does not accept the designation of AI as inventor, and considers that even if AI were regarded as an inventor, since AI cannot own property rights it is unclear how the applicant could have acquired ownership of the invention from the AI. It is worth noting that in October 2019 the UKIPO amended its Formalities Manual, and in section 3.05 explicitly stated that an “AI inventor” is not acceptable because it does not identify a “person” as required by law, which will result in the patent application being deemed withdrawn.In fact, a review of the current patent laws of various countries shows that no law has yet recognized AI systems or machines as inventors. Major intellectual property authorities worldwide, such as those of China, the United States, Japan, and the Republic of Korea, all interpret “inventor” as a natural person, and EPC Contracting States such as Lithuania and Estonia likewise explicitly limit inventors to natural persons who have made the invention.For example, in United States patent law, 35 U.S.C. §100(f) provides that the term “inventor” means the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention, and 35 U.S.C. §115 further provides for an oath or declaration from each individual who is the inventor.Article 17 of the Patent Law of the People’s Republic of China provides that inventors or designers have the right to be named as such in the patent documents; Article 13 of the Implementing Regulations of the Patent Law provides that the term “inventor” or “designer” as used in the Patent Law refers to a person who has made a creative contribution to the essential features of the invention-creation; and the Guidelines for Patent Examination further state that “the inventor shall be a natural person”.In Japanese patent law, although “inventor” is not expressly defined, the interpretation of the relevant provisions of the Japanese Patent Act and court decisions indicate that Japan in practice adopts the principle that “inventors are limited to natural persons who have actually performed the creative act”.From the above it can be seen that, with respect to the issue of inventorship, all countries currently adhere to a position of “inventor centralism”, clearly delineating the essential distinction between machines and humans. In fact, at an expert roundtable on AI held on 31 October 2018, the five major intellectual property offices of China, the United States, Europe, Japan and the Republic of Korea reached a consensus that, although it may be difficult in certain cases to determine whether a specific invention was made by a human or a machine, all five offices require that the inventor be a natural person.As inventions made by AI machines become increasingly common in the future, the existing patent law framework and system may not be able to adequately accommodate such inventions. There is reason to believe that discussions concerning the fundamental doctrinal principle of the dichotomy between subject and object in jurisprudence will become more extensive, and that the seemingly insurmountable divide between subject and object may be shaken, thereby potentially allowing AI to be recognized as an inventor.*This article was published on page 7 of China Intellectual Property News on 19 February 2020.

Brief analysis of inventor qualification for AI-related patents

<!DOCTYPE html><html><head></head><body>The is a co-write article of Rouse and Lusheng Law Firm.Duong Vu, Patent Specialist in Vietnam, Dr. Wensen An, Director and Patent Attorney in China, and Arifia Fajra, Head of Patent Group in Indonesia, of Rouse, examine the approaches taken towards blockchain in China, Vietnam and Indonesia. Blockchain technology has become a global “hot” trend in recent yearsand is believed by leading researchers to bring a commercial benefit of 1 trillion USD for SMEs, especially those in emerging markets in Asia. This technology has large utilizations in modern life, from financial technology, manufacturing, public services, and supply chains, to education and energy.In this article, we investigate the patent landscape of blockchain-related inventions in Asia and the key players in the region in its development. Blockchain can be explained simply as a distributed, shared, encrypted database that serves as an irreversible and incorruptible public repository of information1. Blockchain is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block’s timestamp, and transaction data. Blockchain is resistant to modification of the data, and it carries no transactional cost2. Blockchain creates a trusted, secure ledger through a mix of peer-to-peer technology, cryptographic functions, distributed storage, and decentralized consensus mechanisms3. Most patent filings in blockchain technology have taken place in China (40%) and the United States (20%). The leading global applicants include IBM, Alibaba and Coinplug. The top EPO applicants include Visa, Mastercard, Siemens and Nokia. Blockchain in AsiaRelatively speaking, blockchain technology in Asia is still in its early stages, but has a strong start-up community showing great potential. The majority of the domestic market is only aware of a proportion of blockchain’s potential utilizations, such as cryptocurrencies (eg. bitcoin). However, blockchain is widely regarded as the technology transforming daily processes across the world, and is one of the motivations of the 4.0 industrial revolution. The capacity of this technology is potentially huge in Asia in financial technology (Fintech), manufacturing, public services, supply chains, education and energy.China, the United States, Japan, South Korea and Finland are the leading patent applicants in the blockchain technology. In Asia, however, the number of blockchain inventions filed has been increasing rapidly in the last decade, particularly in China, Vietnam and Indonesia. ChinaThe technology of blockchain is attracting more and more attention from the Chinese central government, and blockchain industrial policy in China has indeed taken many positive steps forward. On 24 October 2019, the Political Bureau of the CPC Central Committee conducted the 18th collective study on the current status and trends in the development of blockchain technology. Xi Jinping, the General Secretary of the CPC Central Committee, stressed that the integrated application of blockchain technology plays an important role in new technological innovation and industrial reform. The suggestion was that blockchain is an important breakthrough for the independent innovation of core technologies and this has set off a research boom in blockchain in China.In terms of its application, blockchain technology has great potential in many respects, such as technology depository, copyright protection, commodity traceability and supply chain, finance, credit collection, charity, advertising, insurance, IoT, and digital asset transaction.In the last three years, Chinese companies have been actively accelerating the patent layout in the blockchain field, ranking in the top two in the world in terms of patent applications. In particular, it shows by the statistical ranking on the number of global blockchain inventions published from 1 January to 25 October 2019 that, compared to 2018, the total number of invention applications of enterprises has increased significantly.The top 100 companies are mainly from 10 countries and regions, with China accounting for 63%, the United States 19% and Japan 7%. VietnamVietnam has also been at the forefront of development in patenting blockchain inventions from both foreign and domestic patent applicants. The blockchain technology industry in Vietnam has the capability to become a major Asian hub in the future. This has been encouraged by domestic and foreign investments, as well as the government’s supporting programs and research into a new regulatory framework to create a dynamic blockchain ecosystem.Vietnam does not currently have a system that protects blockchain-related inventions adequately. The IP Law provides that mathematical methods, methods for doing business, methods for playing games, computer programs, and presentations of information are unpatentable subject-matters as inventions or utility solutions4.Although computer programs are not patentable under current IP Law, if the claimed subject-matter has a “technical character” and is a technical solution for resolving a technical problem by technical means to create a technical effect, such a subject matter is patentable.Accordingly, a computer program, when it is run on a computer that can attain a technical effect beyond the “normal” physical interactions between the program (software) and the computer (hardware), can be patentable5.As such, if a claimed subject-matter comprises of unpatentable matters, for example a computer program, but it additionally describes an apparatus or a technical process to perform methods with additional technical features, it may be patentable when considered as a whole.In summary, blockchain-related inventions may be patentable if the claimed subject-matter has a “technical character” and is a technical solution for resolving a technical problem by technical means to create a technical effect. Moving forward, Vietnam will need a transparent legal infrastructure in place to facilitate the industry’s growth for future applicants and emerging technologies in the country. IndonesiaIn the last two years there have been significant developments in blockchain technology in Indonesia. The current Indonesian president Joko Widodo has set a positive tone for the introduction of blockchain technology to help with the country’s business growth, and to prompt overseas investment.As a result, there has been a huge increase in patent filings, demonstrated in the Online Database maintained by the Indonesian Patent office6 which shows that the most prominent increase over the past two years has come from China. Nichain Holdings Limited, one of the top 10 international patent owners, are just one of many to enter into the Indonesian Market7. Another example is ALIBABA, a Chinese multinational conglomerate holding company specializing in e-commerce, retail, internet and technology, which filed about 100 patent applications per year in Indonesia over the last two years, many of which were related to blockchain technology.The Blockchain Innovation Centre, Blocktech Indonesia and the Indonesian Blockchain Network are amongst the most significant private blockchain organizations in Indonesia8. Funding and research into blockchain technology is a national priority, with one of the biggest local universities, Badung Technology Institute, contributing to blockchain innovation and filing applications for blockchain technology. With such a supportive environment being developed by both new and well-established non-governmental entities, it’s no wonder that so many promising startup companies have emerged from Indonesia, such as Indoda and Triv. ConclusionWhile blockchain developments in Asia are still at a relatively early stage, it has quickly become a hugely disruptive technology on the continent due to its vast range of applications and utilizations. As a result, Vietnam, China and Indonesia have all seen a surge in blockchain-related patent filings, and as government support and domestic and foreign investment continue to increase, so too will the number of patent filings. 1 Monique Clarke, Blockchain – a new frontier or a new type of internet. Available at https://www.blockemledger.world/blog/blockchain-andsmart-contracts2 Ameer Rosic, What is Blockchain Technology? A Step-by-Step Guide for Beginners. Available at https://blockgeeks.com/guides/what-is-blockchaintechnology/3 Wright, Aaron and De Filippi, Primavera, Decentralized Blockchain Technology and the Rise of Lex Cryptographia (10 March 2015). Available at SSRN: <a href="https://ssrn.com/abstract=2580664">https://ssrn.com/abstract=2580664</a>4 Articles 59, the IP Law5 Article 5.8.2.5 of the Guidelines6 Online database maintained by Indonesian Patent office <a href="https://pdkiindonesia">https://pdkiindonesia</a>. dgip.go.id/7 Who are the patent leaders in blockchain?, available at https://www.iammedia.com/who-are-patentleaders-blockchain8 As Indonesia Emerges As An ASEAN Force, Blockchain Is the X Factor, available at <a href="https://www.entrepreneur">https://www.entrepreneur</a>. com/article/342828 * This article was initially published on The Asian Patent Lawyers Annual.</body></html>

Patenting blockchain technology in Asia: trends and patentability

Written by Ling Jin and Elizabeth Shi&nbsp;Some of the biggest barriers to licensing deals and other patent transactions have nothing to do with IP law. Ling Jin and Elizabeth Shi break down the top three pain points.&nbsp;<div class="paywall"><div class="paragraph paragraph--text mb--md">The differences in IP licensing practice between western countries and China give rise to several “hidden” issues that can impact&nbsp;a cross-border IP deal, and it can be a challenge to identify practical solutions acceptable to both sides.When advising our international clients on IP transactions in China, we often observe that cross-border taxes, foreign exchange control and contract registration formalities are the three most frequent issues not taken into consideration, which could lead to difficulties achieving a satisfactory deal structure, performing the license agreement or the re-negotiation of the terms and conditions.The major bottleneck affecting all is China’s unique foreign exchange control regimeChina adopts a foreign exchange control system - funds which flow in and out of China are monitored by the State Administration of Foreign Exchange (SAFE).When the Chinese licensee makes a royalty payment at the bank, the bank requires a list of documents on behalf of SAFE to verify whether the transaction is genuine and reasonable.&nbsp;Failing to provide any of the required documents, will result in the bank not executing the payment. Although the requirements on foreign exchange control are public, the practices of different banks, in different locations and at different times may vary significantly. In recent years when China’s foreign currency reserves dropped continuously, SAFE tightened the restrictions on the flow of funds going out of the country. &nbsp;&nbsp;&nbsp;For example, the list of documents for outbound payment of patent/technology royalties, includes “technology import contract registration certificate” issued by a provincial commerce authority and tax payment certificates (for withholding income tax, VAT and surtaxes) against the royalties (these two issues are elaborated on below). The lack of a registration document could halt the payment.Why it is difficult to register the licensing agreement?Import or export contracts for technologies free to be imported or exported must be registered with the Commission of Commerce for statistical purposes.&nbsp;But there are no legal consequences if the parties choose not to do so.However, as the bank sometimes requires the registration document to progress the payment, registering the licensing agreement is in the interest of the licensor.The registration of the contract could be unsuccessful for different reasons. If the licensee is a university or other organization not incorporated as a company, it is not qualified to be an applicant for registration through the government’s online system.&nbsp;Therefore, an agent specialized in import and export of technology should be included as a third party to the licensing agreement.&nbsp; However, this causes concerns for the licensor because of confidentiality and control risks.While the registration is not a pre-condition for the effectiveness of the licensing agreement, the government official reviewing the agreement during registration could “suggest” a change to certain clauses, such as the governing law to be Chinese.&nbsp; Not following the advice could lead to the failure of getting the registration done.Tax could be an obstacleA big frustration caused to a foreign licensor closing a deal or even after deal signing, is that China taxes at a rate of 16% have to be taken.&nbsp;The Foreign licensor then discovers, for a cross-border transaction, a withholding of income tax (usually 10%), VAT (6%) and surtaxes (on top of VAT) are applicable and the licensor is legally liable for them.&nbsp;The licensor will find itself in a very awkward and unfavorable position to renegotiate to negate the impact. The VAT may be exempted, but it lies with the licensee to take steps to make a successful application with the tax authority. Sometimes the licensor may negotiate down the VAT, as the licensee could utilise it as future credit.&nbsp; But withholding tax will be difficult, since the licensor may claim it as foreign tax credit in its home country theoretically.All these issues should be considered before or during the negotiation of the licensing agreements. When an IP counsel advises its clients on a cross-border IP transaction, it isn’t just about drawing up the commercial, legal and IP terms. These hidden issues need to be considered, and advice provided to clients to guide them down the right path.&nbsp;*This article was firstly published on IAM website&nbsp;</div></div>

Three "hidden" issues that could affect your China transaction

Trade Mark LawThe Standing Committee of the National People's Congress (NPC) approved the amendments to eight laws including the Trademark Law, Anti-Unfair Competition Law and Administrative Licensing Law on 23 April 2019.The amendments to the Trademark Law will be effective from 1 November 2019.&nbsp;The rest are effective immediately upon announcement.The main changes to the Trademark Law aim at taking action against bad faith filings and hoarding. For the bad faith filings that are filed not for the purposes of use will be rejected by the trademark office.&nbsp;Lacking the purpose of use has been added as the absolute grounds for opposition and invalidation filed by any party.&nbsp;Applicants for the bad faith filings, will face administrative penalties such as a warning, fine etc. For trade mark lawsuits filed in bad faith, the court can punish (the parties raise the lawsuits).&nbsp;The amendment also highly raised the statutory compensation to RMB five million.&nbsp;The changes to the laws are positive and in favour of trademark owners.For trade mark agents who know or should know the applications to be filed are not for the proscribed purpose, the agents should not accept the authorization from the applicants. If the agents violate this article, the records will be added to the industry and commerce’s database.For serious cases, the trademark office and the review and adjudication board will refuse to accept the cases handled by these agents. If the agents violate the principle for honesty and credibility and hard the interests of the entrusting party, the agents should be liable for civil responsibility and punishment by the industrial association.The amendments also add heavy punishment on infringers. For the malicious infringement, the compensation shall be determined for one to five times of the losses suffered by the trademark owners or gains of the infringers. In addition, the statutory compensation is also raised from RMB three million to five million (around USD 0.45 million).For trademark lawsuits, the court shall order to destroy the goods bearing the counterfeit trademarks following the request of the trade mark owner, except for special circumstances.&nbsp;For the materials and tools mainly used to manufacture the goods bearing a counterfeited registered trademark, the court shall order to destroy them, without any compensation; or in particular cases, the court shall prohibit the said materials and tools from entering commercial channels, without any compensation.&nbsp;The goods bearing a counterfeit registered trade mark shall not enter commercial channels even though they do not bear the said trade mark any longer.Anti-Unfair Competition LawThe changes to the Anti-Unfair Competition Law, are mainly with respect to trade secret protection. It has broadened the definitions of trade secrets and the relevant infringing activities, increased the statutory damages up to RMB 5 million, which is entirely consistent with the&nbsp; Trademark Law as well as specified in the civil procedure rules regarding trade secrets.The trade secrets used to refer to technology and business information. The new law has extended this to other commercial information in addition to what was previously covered.The new law adds the infringing activities&nbsp;that any party, either individual or entity, who have been engaged in teaching, inducing, assisting others in obtaining, disclosing, use or allowing others to use the trade secrets should be considered an infringement. This means those who facilitate the trade secrets infringement will also be pursued.For a long time, the trade secret holder has struggled to file lawsuits as they were often lacking evidence to prove their “trade secret” or another party’s infringement. The new law seems to address this issue by adding the clauses to facilitate the right holders’ burden of proof.If the trade secret rights holder has the prima facie evidence to prove they have taken steps to protect their trade secret and reasonably demonstrate their trade secret has been infringed upon, the suspected infringer should prove the claimed trade secret is not that which is defined in the law.In addition, if the trade secret rights holder has prima facie evidence to show their right has been infringed upon, the suspected infringer is liable to prove they have not conducted such infringing activities. The prima facie evidence includes: a) the suspected infringer has the channel or opportunity to obtain the trade secret, or the information they have used is substantially similar with the claimed trade secret. b) the trade secret has been disclosed, used or has the risk of being disclosed or used and c) any other evidence that can show the trade secret has been infringed upon.Clearly the quick amendment of the two important laws have demonstrated China is reinforcing the IP protection alongside with its economic development. It is predicted that some ambiguous terms in the laws will be further construed in the implementation regulations.We will producing further analysis of these changes very soon and will share them with you.

China: TM Law and Anti-Unfair Competition Law amendments approved

An examination of Chinese National Emissions Trading System under International Climate AgreementsForeword: After a four-year pilot in provinces and municipals, China launched its national emissions trading system (ETS) in December 2017. It has attracted worldwide attention. This national level carbon market is expected to cover more than 3 billion tons of carbon emissions, overtaking the EU as the world’s largest carbon market with almost 15% of global market share<a name="_ftnref1" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftn1">[1]</a> . This article will discuss the background of global climate agreements and expands on carbon emissions trade under carbon pricing mechanism as well as the status quo and prospect of China national carbon emissions trading system. International ETS AgreementThe implications of global warming have put climate change centre stage as the greatest threat facing humanity. The emissions of greenhouse gases (GHG), especially the continuously increasing levels of CO₂ emitted to the atmosphere, is the main reason for Earth’s temperature rising. Meteorologists from various countries published a joint report in the Proceedings of the National Academy of Sciences claiming that the Earth will enter the “greenhouse Earth” era from current “ice – interglacial period” if the temperature rises more than 2 degrees Celsius without any carbon emission decreasing. In the worst case, sea levels will rise 60 metres, caused by melting glaciers, resulting in no more than 1 billon people being able to live on the planet.The control of carbon emissions and curbing global warming is a shared global problem. The international community has been actively negotiating and discussing the problems for more than 25 years reaching three climate agreements.<ul><li>1992 United Nations Framework Convention on Climate Change (UNFCCC)</li></ul>In 1992, countries joined an international treaty laying the foundation of dealing with climate change internationally.<ul><li>1997 Kyoto Protocol</li></ul>The Kyoto Protocol entered into force on 16 February 2005 linked to UNFCCC. It is the first time in history that GHG were regulated, especially CO₂ emissions.<ul><li>2015 Paris Agreement</li></ul>The Paris Agreement entered into force on November 2016 as the second legally binding climate agreement reached by Parties of UNFCCC. The Paris Agreement charges countries to keep global temperature rises this century well below 2 degrees Celsius above pre-industrial levels and pursuing more efforts to limit the temperature increase even further to 1.5 degrees Celsius.China has joined the all three agreements and has actively developed comprehensive climate policies to take measures against climate change. After President Trump abruptly announced the United States’ withdrawal from the Paris Agreement in June 2017, China and the EU became the most important advocates of the Agreement and the leaders in international climate change policies. As the largest developing country and super carbon emitter, China has put forward an ambitious commitment to the international community to reduce emissions:<ul><li>By 2030, CO₂ emissions per unit of GDP decreased from 65% to 60% compared with 2005.</li><li>The proportion of non-fossil energy increases to 20% of total energy used by 2030.</li><li>CO₂ emissions will peak around 2030 and will strive to reach its peak as early as possible.</li><li>Forestry reserves will increase by 4.5 billion cubic metres in 2030 compared with 2005.</li></ul>Carbon PricingPricing CO₂ emissions is an important policy approach generally adopted by the international community to combat climate change. The carbon pricing mechanism makes manufacturers bear the cost for carbon emissions as a result of their activities and transforms carbon emission into a tradable commodity in commercial activities, achieving a reduction in carbon emissions through market leverage. In general, “carbon emission trading” and “carbon tax” are two forms of carbon pricing.Carbon Tax, also known as emission tax, is levied on the emitted amount of GHG (mainly the carbon content). Countries set their own taxes and tax rate accordingly and adopt price interventions to encourage enterprises to take measures to reduce emissions.Emission Trading System (ETS) is often referred to as the “cap-and-trade system”. The government establishes a tradable carbon emission market and imposes a limit (cap) on total emissions.  Since the market can guarantee the lowest cost of reducing emissions, this system ultimately encourages and promotes investment, research and development and trading on clean low-carbon technologies.According to the World Bank Group’s 2018 report, 51 countries and regions around the world have implemented or plan to implement carbon pricing mechanism, including 25 ETS and 26 carbon tax systems at national level. It is worth mentioning that even though the Federal US government withdrew from the Paris Agreement, there are still many state governments and regions in the US participating in and implementing ETS or carbon tax schemes, including Chicago Climate Exchange and regional GHG emission reduction projects. China believes a carbon trading market based on total emission control is the most cost effective and efficient market tool in realising emission reduction. It has not levied carbon tax separately despite discussions to embed the tax into an environmental tax or resource tax.Carbon TradingParties with commitments under the Kyoto Protocol have accepted targets for limiting or reducing emissions and they distribute the target to domestic enterprises. Countries that meet or exceed their targets can purchase emission permits from countries with excess capacity or emission permission (usually developing countries) to meet their targets.The Kyoto Protocol offers three flexible mechanism for carbon trading, i.e. Clean Development Mechanism (CDM), Joint Implementation (JI) and International Emissions Trading (IET). The first two mechanisms are based on projects and the third one on permits. In the project trading market, emission-reduction projects can earn saleable certified emission reduction (CER) credits. Unit trading market is focusing on enterprises’ emission permits distributed by policy-makers.The Clean Development Mechanism allows developed countries to cooperate with developing countries on emission-reduction projects by means of investment and technologies to realize “verified emission-reduction amount”.Joint Implementation (JI) allows a country to earn emission reduction permits from another country’s co-operated emission-reduction project. Both Parties should be under the Kyoto Protocol framework and have emission targets.In International Emissions Trading (IET), a developed country is allowed to sell its spare emissions permitted but not “used” units to developed countries that are over their targets. Both Parties should be under the Kyoto Protocol framework and have emission targets.<img style="width: 0px; height: 0px;" src="/media/1280/搜狗截图_2018-12-21_16-47-20.png" alt=""><img src="https://media.umbraco.io/lusheng/tjgb3txe/img_7753661267423135854_image-1.jpg" style="width: 500px; height: 159px; display: block; margin-left: auto; margin-right: auto;"> Resource: Analysis on Sino-Global Carbon Trade Market Development Status, ZHANG Ying, Sino-Global Energy, 2014, Volume 19 Issue 3At present, the carbon market is developing regionally and has not formed a unified international emission trading market. Larger ETS’s includes that of the European Union, established in 2005 as the first international ETS in the world; RGGI, covering the electricity industry of nine states in the north-eastern United States; the California ETS, covering 85% of state emissions; Korean ETS (KETS), covering two-thirds of the country’s GHG emissions. Jurisdictions with established ETS’s occupies 50% of global GDP and nearly one-third of the world’s population.ETS in ChinaChina, a developing country as defined in the Kyoto Protocol, started to assume CO2 emissions reduction obligations after 2012, including the launch of a ETS at national level and limiting carbon emissions. China announced the official launch of the national ETS at the end of 2017, the first year when the Paris Agreement went into force, to gradually replace pilot ETS’s at provincial and municipal levels. This is an important milestone for the Chinese government in actively controlling emissions and fulfilling its emission reduction commitment.<ol><li>National ETS</li></ol>From 2013, China has successively established seven pilot ETS’s at provincial and municipal level, across steel, cement and other industries. According to the data on the China ETS website, the cumulated carbon trade volume in the seven pilot projects almost 200 million tons, with a turnover of more than 4 billion Yuan by the end of 2017<a name="_ftnref2" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftn2">[2]</a>. Both Chinese government and businesses amassed relevant experience in carbon emissions trade after several years of the pilot operation. Although the national carbon market only covers the power industry, less than expected by the outside, it still regulates almost all major thermal power companies (numbering 1,700) defined by entry requirement. The total amount of carbon emissions reaches to more than 3 billion tons, accounting for 10% global CO2 emitted from fossil fuels. The Chinese national ETS surpasses the EU as the largest carbon market. By that time, the global coverage of carbon emissions has increased 3 times compared with 2005.China has begun discussions with the EU, Japan, Korea, Canada and other countries and regions on emission reduction cooperation and carbon trading market infusion. The picture below depicts international dialogues and cooperation status on global carbon emissions trading, including Chinese ETS<a name="_ftnref3" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftn3">[3]</a>.<img src="https://media.umbraco.io/lusheng/qdvmvvvr/img_5049243543595711820_image-2.jpg" style="width: 442px; height:500px;"><ol start="2"><li>Development Roadmap of National ETS</li></ol>China adopted a three-phases roadmap in building a national ETS: development of market infrastructure; simulation trading; and deepening and expanding phase. Ideally, permits spot trading will be initiated around 2020, only for the purposes of fulfilling China’s commitment. By then, it is expected that China will meet its commitment of reducing carbon emissions to 40% - 45% of 2005 level.Development Roadmap of National ETS<a name="_ftnref4" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftn4">[4]</a><img style="width: 0px; height: 0px;" src="/media/1282/搜狗截图_2018-12-21_16-51-35.png" alt=""><img src="https://media.umbraco.io/lusheng/yd0h1aus/img_5349834030475945233_image-3.jpg" style="width: 500px; height: 224px; display: block; margin-left: auto; margin-right: auto;"><ol start="3"><li>Permits of Carbon Emission</li></ol>The draft of National ETS Market Total Permits and Distribution Plan has been finalized but has not been announced and implemented by Chinese government. According to the experience of the EU and other carbon markets, a reasonable number of permits for carbon emission is crucial to the success of a carbon market. Distribution also plays a vital role. Auctioning and giving permits for free are two general practices of distribution.<img src="https://media.umbraco.io/lusheng/yd0h1aus/img_5349834030475945233_image-3.jpg" style="width: 500px; height: 224px; display: block; margin-left: auto; margin-right: auto;">As we have seen from the pilot projects in China, the government is likely to adopt the “for free” method when distributing all or most of the permits to power industries at the beginning of the EST building phase. Later, it will increase the portion of permits auctioned to realise the competing demands of economic growth and emission reduction.<ol start="4"><li>Development Prospect</li></ol>Power industry emits 30-40% of national energy consumption related to CO2. In the short term, building a nationwide carbon market will not place too much pressure on the power industry. Since China’s electricity price has not been fully marketized, the carbon trading cost will not be directly passed onto end users. In the long term, the effect of controlling carbon emission and lowering carbon reduction emission cost will be realized over time. It is anticipated that low-emission and relatively clean power companies as well as high-energy consumption but emission reducing technology companies will benefit the most from the carbon market, ultimately promoting the development of clean energy.Chinese policies will gradually grow from just the power industry and build a national ETS covering all industries. In this way, China could fulfill its international commitment to address climate change and achieve carbon emission reduction domestically.According to a survey conducted by the University of East Anglia (UEA), China’s GHG emission has enjoyed three-years of consecutive reductions with the emission volume of CO2 becoming stable by the end of 2016. It shows China’s determination and efforts in pollution control<a name="_ftnref5" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftn5">[5]</a>.“We believe a carbon market will provide committed countries under the Paris Agreement with the most cost-effective tool,” states International Carbon Action Partnership (ICAP) Co-Chair Mr Marc Allessie, Director of the Dutch Emissions Authority (NEa). <a name="_ftn1" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftnref1">[1]</a> 2018 Emissions Trading Worldwide ICAP Status Report, ICAP, February 2018<a name="_ftn2" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftnref2">[2]</a> <a rel="noopener" href="http://www.tanjiaoyi.com/article-23835-1.html" target="_blank">http://www.tanjiaoyi.com/article-23835-1.html</a><a name="_ftn3" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftnref3">[3]</a> ICAP Report 2018 – Worldwide Carbon Market Improvement, <a rel="noopener" href="https://icapcarbonaction.com/zh/?option=com_attach&task=download&id=558" target="_blank">https://icapcarbonaction.com/zh/?option=com_attach&task=download&id=558</a><a name="_ftn4" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftnref4">[4]</a> <a rel="noopener" href="http://www.tanjiaoyi.com/article-24481-1.html" target="_blank">http://www.tanjiaoyi.com/article-24481-1.html</a> Tanjiaoyi Website, July 2018<a name="_ftn5" href="https://www.rouse.com/magazine/news/is-china-taking-the-lead-in-the-fight-against-climate-change/#_ftnref5">[5]</a> <a rel="noopener" href="http://www.tanjiaoyi.com/article-24458-1.html%20July%202018" target="_blank">http://www.tanjiaoyi.com/article-24458-1.html July 2018</a>

Is China taking the lead in the fight against climate change?

In this first part of a two-part series, we look at regulatory aspects of the updated e-commerce regime in China.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Following the recent executive meeting of the State Council of China in November 2018, multiple ministries, including the Ministry of Commerce, passed a series of regulations in respect of cross-board e-commerce retail imports.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The&nbsp;Notice of the Ministry of Commerce, the Development and Reform Commission, the Ministry of Finance, the general Administration of Customs, the general Administration of Taxation and the AQSIQ on improving the supervision of cross-border e-commerce&nbsp;（&nbsp;“Notice”）issued on 28 November 2018,&nbsp;will come into effect from 1 January. The current polices on cross-border e-commerce retail imports will continue after the transition period, which started when with an earlier notice jointly issued by the Ministry of Finance, General Administration of Customs and State Administration of Taxation took into effect in April 2016, and whose term have been extended twice until the end of this year.&nbsp;<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In addition to the current preferential tax on imports through cross-border e-commerce platforms, these goods will receive more relaxed regulation as imports for personal use.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">These regulations and arrangements intend to maintain the continuity and stability of the customs regulatory policies in the transition period, and further clarify the responsibilities of government agencies, cross-border e-commerce enterprises and e-commerce platforms, as well as domestic service providers, to strengthen product quality and safety controls as well as safeguard consumer interests.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Some of the key issues addressed in the Notice are:<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Definition of the “Cross-border E-Commerce Retail Import”<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">“Cross-border E-Commerce Retail Import” refers to the consumption behaviour of consumers in China who purchase goods from abroad through cross-border e-commerce third party platform operators and through the "Online purchase bonded import" or "Direct Purchase import".<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Notice makes reference to the “List of Cross-Border E-Commerce Retail Imports 2018 version” (“List“) jointly issued by eleven ministries including the Ministry of Finance. Goods imported under the regime are limited to personal use and must meet the tax policies for cross-border e-business retail imports. Goods included in the List have so far enjoyed zero tariffs within a set quota and had their import VAT and consumer tax collected at 70 percent of the statutory taxable amount. Such preferential policies granted by the Notice will be extended to another 63 tax categories of high-demand goods, which include cosmetics, personal care products, medical devices, electronic products, as well as certain small household appliances among over 1,300 items.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Increase of the single transaction limitation and annual maximum limitation &nbsp;<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The single transaction limit for retail goods imported through cross-border E-commerce channels has been increased from RMB2,000 to RMB5,000 (currently approx. US$290 to US$725) and the annual maximum for products purchased by each person has been increased from RMB20,000 to RMB26,000 (approx. US$2,900 to US$3,770).<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">No requirements for licensing, registration or record-filing for first-time imports<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Retail imports through cross-border e-commerce platforms will not be subject to requirements for licensing, registration or record-filing for first-time imports.&nbsp; &nbsp;The government’s attitude in relation to a number of products has gradually relaxed through a series of polices. For example, when the list of cross-border e-commerce retail imports was first introduced on April 6, 2016, "first imported cosmetics" were excluded from the range of retail imports that benefited from the cross-border e-commerce regime (ie. the first import of cosmetics was required to be licensed or recorded). A notice issued by Customs in May 2016 made clear that they would not enforce the first import licensing requirements on goods such as cosmetics and the practice has continued to date as a transitional policy. &nbsp;In accordance with the latest Notice, "Cross-border e-commerce retail imports are regulated as personal use of imported goods, and the first import licence approval, registration or record-filing requirements for the goods concerned are not implemented". So far, cross-border e-commerce retail import channels of cosmetics and other special commodities continue to not need to submit the first import approval.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">To clarify, the above exemption policy only applies to particular products imported for the first time through cross-border E-commerce. By contrast, those imported for the first time by the&nbsp;general trade, for example, cosmetics,&nbsp;still require applying for licensing approvals or recordals.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Obligations of cross-border e-commerce retail import operators<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Notice imposes a series of obligation on foreign owners of goods to be imported through cross border e-commerce channels.&nbsp; Among others, the main obligations are to:<ul><li>guarantee product quality and safety;</li><li>protect consumer rights and interests, including but not limited to, assuming the related responsibility for product information disclosure, provision of product returns and exchange services, establishment of unqualified or defective product recall system etc.; and</li><li>provide consumers, in conjunction with the cross-border e-commerce platforms, risk notification and to guarantee that consumers confirm their consent before they place an order to purchase. The notification should be in the ordering pages or other prominent location and should contain at least the following statements:</li><li>related goods meet the quality, safety, health, environmental protection requirements of the place of origin;</li><li>marking and other standards or technical specifications but may differ from China's standards. Consumers bear the relevant risks themselves;</li><li>related goods directly purchased from abroad may not have Chinese label. Consumers can view the Chinese electronic label of goods through the website and</li><li>goods purchased by consumers are for personal use only and may not be sold again.</li></ul><p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Broadening the areas for application of new policies<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Implementation of the new regulations and polices will be extended from the 15 cities such as Hangzhou to another 22 cities which have just established comprehensive cross-border e-commerce pilot zones.&nbsp; As such,&nbsp;37 major cities, for example, Beijing, Tianjin, Shanghai, Guangzhou will now be covered. Direct purchase import businesses in a non-pilot city may implement the relevant regulations by reference of the Notice.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In Part 2, we will look at some of the practical implications for brand owners resulting from these changes.<p style="background: none; margin: 15px 0px 0px; padding: 0px; border: 0px currentColor; color: #31333e; text-transform: none; line-height: 1.25em; text-indent: 0px; letter-spacing: normal; font-family: 'Calibri W01 Cust1', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; vertical-align: baseline; white-space: normal; orphans: 2; widows: 2; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">This article was written in conjunction with&nbsp;<a style="line-height: inherit; text-decoration: underline; cursor: pointer;" rel="noopener" href="https://www.lushenglawyers.com/who-we-are/sunny-su/" target="_blank">Sunny Su</a>&nbsp;of&nbsp;&nbsp;Lusheng.

Chinese government expands preferential policies on cross-border e-commerce retail imports

They are the scourge of China’s IP system, but thankfully victims of bad faith registrations have several ways to fight back, explains Sharon Qiao.Bad faith trademark registrations are one of the most significant challenges facing international brands seeking to operate in China. The number of Chinese trademark registrations has grown significantly in recent years, reaching 5,750,000 in 2017. Of these, a substantial proportion are made in bad faith, with one individual having applied for more than 9,000 trademark registrations alone.[1]The incentives for bad faith registrants are clear, whether it be to secure a financial settlement from the legitimate mark holder for the transfer of the mark, or via an infringement lawsuit, or to take advantage of foreign brands’ market reputation.There are typically four types of bad faith registration that foreign companies encounter in China:• Applications for registrations of foreign companies’ unregistered trademarks or transliteration of trade names before the foreign companies apply for relevant registrations.• Applications for a similar trademark registration in a same/similar class.• Applications for registrations of marks in other classes when the marks, which are owned by foreign companies, have an established market reputation in China.• Applications for trademark registration by using the foreign companies’ trade names, newly launched product names or product types.Tackling bad faithEncouragingly, Chinese Trade Mark Law provides several methods through which  foreign companies can seek to fight bad faith registrations, including prior registrations/applications on same or similar goods (Art30), prior right such as copyright, trade name, design patent etc (Art 32)[2], prior use (Art 32), well-known trademark claim (Art 13), clause against trademark squatting by agent/representative (Art 15), clause against trademark obtained by using improper means (Art 44 (1)).Of importance is the recent addition of the principles of honesty and trustworthiness into the Trade Mark Law of China (Art 7 of 2013 Revision). At first, foreign brands regarded this article as a positive and welcome signal that bad faith registrations could now be more effectively constrained. However, the implementation of this law has not been without difficulty or controversy, with the Trademark Review and Adjudication Board (TRAB) and the courts interpreting it as an article that cannot be applied alone. To date, it remains uncertain if (and how) the article can be applied alone. As such, it does not provide a ‘silver bullet’ solution. Nevertheless, what is certain is that the article would be applied in parallel with other relevant articles, or as a consideration in the application of other specific articles by the court – a welcome development for foreign brands seeking to protect their marks.Court trendsSeveral recent trends in court practice give further encouragement to foreign mark holders.Registering a large number of trademarks based on others’ reputable trademarks is deemed as improper means of Art 44(1).In Shiseido Co, Ltd v TRAB, the TRAB judged that, because the cited trademark does not constitute a well-known trademark, the disputed trademark “怡丽丝尔YILISIER and the figure” should be sustained. However the court held that the third party had registered as many as 50 trademarks, within which there are multiple trademarks which are obviously copying others’ reputable marks such as “杜莎夫人Madame Tussauds”, “MeidiQi美第奇” and others – all of which are rarely used. The court further found that the third party should have been fully aware of the fact that the plaintiff’s cited trademarks had gained considerable reputation within the market. As a result, it was judged that the third party’s registration of the disputed trademarks on other classes should be considered as obtaining trademarks via improper means.[3]According to court precedents, registering a large amount of trademarks in this way constituted a clear breach of the principle of honesty and trustworthiness and is thus deemed as using improper means.Of course, this raises the question of how to define a “large amount”. There is no concrete answer thus far, but legal precedents indicate that just a few is insufficient and the court is inclined to adopt a number between 20 and 40.When bad faith exists, the criteria of reputation evidence shall be lowered.In the case of squatting prior used trademarks or trade names of other mark holders, it is generally required that the prior used trademark or trade name should be used in China and have obtained a certain level of reputation in the market. But if the squatter bears obvious bad faith or conducts other infringement or unfair competition, or if the prior used trademark or trade name have gained high reputation abroad, the court will lower the criteria of evidence to prove its use in China.[4]When the applicant’s bad faith is obvious, it is much easier for the applied trademark to be ascertained as similar to the prior trademark – similarly with judgment on goods’ similarities.In the Invalidation of “芭比国际鼎 BABIGUOJIDING”,[5] the infringing mark was designated upon a beverage. Although the prior trademark, BARBIE, was judged by TRAB not to be similar, the court nonetheless held that, given the high reputation of “BARBIE芭比” in the realm of children’s toys, its popularity could feasibly extend to juice beverages. It was further judged that the disputed trademark owner should be fully aware of this and thus cannot be treated as applying the registration with good faith. The court therefore declared the two to constitute similar trademarks.Similarly, the TRAB and courts of both first and second instance all denied the similarity between the disputed trademark ‘Galitt’ and the cited trademark “Garrett盖瑞特”. However, the Supreme People’s Court (SPC) judged that the cited trademark has strong distinctiveness, having gained a significant reputation in China. Furthermore, due to the inability of the Chinese public to easily recognise and differentiate foreign words, it was likely Chinese consumers would confuse the two marks. The SPC therefore held them to be similar trademarks.[6] It is thus evident that the SPC tends to prevent bad faith registration in determining trademark similarity.Besides, the judgments reveal the use of a key judicial principle: if it can be seen from relevant evidence that the applicant’s purpose is to free ride other proprietors, the court will break the limit of classification when determining whether the goods are similar, the criteria of which will also be looser.The bad faith registrant filing an infringement lawsuit will be considered an abuse of right.In the retrial case of “歌力思”,[7] the SPC overturned the judgment of first and second instance and held that the plaintiff’s lawsuit against defendant ELLASSAY, based on its bad faith registration constitutes an abuse of right. The SPC’s reasoning was that trademark No 7925873 “歌力思”, designated on a leather product owned by the plaintiff is, in terms of character composition, identical to the trade name and “歌力思” trademark previously registered on clothes products of ELLASSAY.“歌力思” is a fanciful word without inherent meaning and has strong distinctiveness. As a result, it was deemed impossible for a similar registration to be made with no prior awareness or contact. The plaintiff had been operating in the leather products market in Guangzhou, Guangdong Province, a city located very near Shenzhen, where ELLASSAY is located. Given the geographical proximity and established commercial ties between the two cities, it was deemed highly unlikely that the plaintiff had no knowledge of ELLASSAY. Therefore, the plaintiff’s registration of No 7925873 trademark on a leather handbag – a fashion product closely connected with clothes – cannot be deemed as good faith.The retrial judgment did not deny the effect of the registered trademark and still affirmed its validity. But if the trademark owner files a lawsuit against the party whose trademark right had been squatted, the trademark owner’s behaviour will be deemed as abuse of right and cannot be justified accordingly.An important and current case is Fujian Qiaodan Sports Products Co Ltd v Nike Fujian Qiaodan, which claimed trademark infringement/unfair competition based on the registration of the “乔丹” trademark. The case was tried on 3 March by Jinjiang Court and we await the issuing of judgment. As the SPC concluded in retrial cases initiated by Michael Jordan that Fujian Qiaodan had bad faith by registering “乔丹”, based on previous SPC precedent, it is likely that the court will deem the litigation initiated by Fujian Qiaodan to constitute an abuse of right. We wait to see how this local court will judge.In addition, the China Trademark Office (CTMO) classifies and summarises the typical types and cases of bad faith registration by optimising the process of review. During the review process, the bad faith application for registration (for example, free riding others’ goodwill, high numbers of registrations on dissimilar commodities squatting highpopularity trademarks, bad faith registration on others’ prior rights such as celebrities’ names, repeatable or continuous trademark squatting against the same corporate) will be strictly reviewed and shall be thrown out by the CTMO initially. Moreover, the CTMOalso concentrates on dealing with a group of trademark opposition cases regarding free riding other’s goodwill and trademark hoarding with bad faith, of which the cases are usually incorporated for judgment and the trademarks involved are denied to be registered.[8] Footnotes1. The trademarks in defensive registration are seldom used by the registrant, instead, they are registered to prevent others from registering them in other categories. Some big companies even apply for registration of the same trade mark for goods/services of all categories.2. In the series of cases initiated by Nike v Fujian Qiaodan Sports Products Co, Ltd., Nike lost by using prior registered trademark “Michael Jordon”. However, in the series of cases Michael Jordon v Fujian Qiaodan, the SPC concluded that the disputed mark“乔丹”(Jordon in CC) is the corresponding name of Jordon and shouldn’t be registered, thus the SPC overturned both first, second instance judgment and the TRAB decision.3. Beijing Intellectual Property Court (2016) Jing 73 Xing Chu No 1163.4. Crocs claimed prior trade name right of “卡骆驰” (corresponding Chinese transliteration of Crocs), but no sufficient evidence to prove the prior use in China, the court supported Crocs as the other party had obvious bad faith by imitating Crocs shoes, etc. See Beijing Higher Peoples Court (2016) Jing Xing Zhong No 4.5. Beijing Intellectual Property Court (2016) Jing 73 Xing Chu No 6045.6. Supreme Court(2014)Xing Ti Zi No 337. Supreme Court(2014)Xing Ti Zi No 248. http://ip.people.com.cn/n1/2018/0110/ c179663-29756557.html

Faith and fortune - fighting bad faith registrations

The European Union (EU) and the United Kingdom (UK) have reached a draft agreement about the UK leaving the EU (commonly referred to as Brexit). This will affect Intellectual Property (IP) rights such as trade marks, registered designs (referred to as design patents in China) and plant variety rights that have been filed in the EU but which have effect in the UK. Patents are not directly affected as the European Patent Office is not a EU organization.The draft Brexit Agreement takes what seems to be a pragmatic approach to issues that will arise for rights holders affected by the Brexit process. There will be a transition or implementation period, which will start on the date the Brexit Agreement comes into force and will end on 31 December 2020. This period is important as many of the provisions protecting rights holders are dependent on when the period ends. For example, rights holders will not be required to have a correspondence address in the UK in the 3 years following the end of the transition period (31 December 2020).If you have any questions about your rights in the UK following Brexit please contact August Zhang (<a href="mailto:azhang@lushenglawyers.com">azhang@lushenglawyers.com</a>) or Hatty Cui (<a href="mailto:hcui@rouse.com">hcui@rouse.com</a>).The main points for IP owners are as follows: Trade marksThe holder of an existing registered EU trade mark will become the holder of a registered trade mark in the UK. This will occur without any re-examination.If a registered EU trade mark is declared invalid or is revoked following an administrative or judicial procedure which was ongoing at the end of the transition period, the corresponding registered UK trade mark will also be declared invalid or revoked. However, if the reason for declaring the EU trade mark invalid or revoked does not apply in the UK, there is no obligation on the UK to also invalidate or revoke the UK trade mark.A UK trade mark will not be revoked because the corresponding EU trade mark has not been put into genuine use in the UK before the end of the transition period.The owner of a EU trade mark that has acquired a reputation in the EU by the end of the transition period will be entitled to equivalent UK rights. After the transition period reputation in the UK will be based on the use of the trade mark in the UK.Anyone who has obtained an EU trade mark under the Madrid system before the end of the transition period will have protection in the UK for those international registrations.If you have filed an EU trade mark application before the end of the transition period, you will have 9 months from the end of the transition period to file an equivalent trade mark application in the UK.  The UK application will have the same filing date and date of priority as the corresponding application in Europe. Industrial DesignsThe holder of an existing registered Community design will become the holder of a registered UK design. This will occur without any re-examination.If a registered Community design is declared invalid or is revoked following an administrative or judicial procedure which was ongoing at the end of the transition period, the corresponding registered design in the UK will also be declared invalid or revoked. However, if the reason for declaring the Community design invalid or revoked does not apply in the UK, there is no obligation on the UK to invalidate or revoke the registered design.The term of protection of registered design rights in the UK will be at least equal to the remaining period of protection under EU law.Anyone who has obtained protection in the EU for designs under the Hague system before the end of the transition period, will have protection in the UK for those international registrations.If you have filed an application for a Community design before the end of the transition period, you will have 9 months to file a UK application for an equivalent registered design from the end of the transition period.  The UK application will have the same filing date and date of priority as the corresponding application in Europe. Plant Variety RightsThe holder of an existing granted Community plant variety right will become the holder of a UK plant variety right. This will occur without any re-examination.If a Community plant variety right is declared null and void or is cancelled following an administrative or judicial procedure which was ongoing on the last day of the transition period, the corresponding UK plant variety right will also be declared null and void, or be cancelled. However, if the reason for declaring the Community plant variety right null and void or cancelled does not apply in the UK, there is no obligation on the UK to invalidate or revoke the right.The term of protection of a UK plant variety right will be at least equal to the remaining period of protection for the equivalent EU plant variety right.If you have filed an application for a Community plant variety right before the end of the transition period, you will have a right of priority in the UK during a period of 6 months from the end of the transition period.  This will mean the priority date of the Community plant variety right is the application date for the UK plant variety right for the purpose of determining distinctness, novelty and entitlement to the right. Other Intellectual Property RightsIf you are a holder of EU Geographical Indications (GIs) or Unregistered Community Designs, you will be given an equivalent UK right.If you have a pending EU Supplementary Protection Certificate (SPC) application at the end of the transition period, an equivalent SPC can be granted in the UK.

The draft brexit agreement – what it means for Chinese intellectual property owners

Deciding where to file for patent protection is a critical part of an international patent filing strategy. It is important to understand that this decision should not be driven by cost considerations alone, although this can obviously impact on final decisions. Your international patent filing strategy should also support your business strategy for accessing international markets.In general terms, there are two main approaches to an international filing strategy. The first approach is to file in as many countries as possible and try to get patent claims that are as wide as possible. This allows the maximum opportunities to licence and use the patented technology. The second approach is to file in specifically targeted countries and obtain narrow product-directed patent claims. This reduces the number of filings, reduces patent examination issues, and thus reduces overall patenting costs while still protecting the product in the key targeted markets. &nbsp;&nbsp;There will always be a tension between cost and an ideal international filing strategy, so it is important that you discuss the issues with your patent attorney. Because of this, the actual strategy you decide to use may be a combination of the two main approaches discussed above.If you have questions about your international patent filing strategy please contact Jack Liu in Shanghai (<a href="mailto:jliu3@lushenglawyers.com">jliu3@lushenglawyers.com</a>) or Eric Chang in Beijing (<a href="mailto:echang@lushenglawyers.com">echang@lushenglawyers.com</a>).Some of the issues that should be considered are discussed below.&nbsp;<ol><li>The need to control manufacture and/or sale.</li></ol>Filing in countries in which competitors can manufacture or sell a similar product successfully is a key consideration. Often a country is both a manufacturing centre and a key market (e.g. the USA or Germany). Sometimes a country may be either a manufacturing centre (e.g. Vietnam or Thailand) or a market (e.g. Switzerland) but not both. This consideration will, of course, depend on the nature of your business.Filing in a country that is both a manufacturing centre and a key market will usually be your first choice. This protects the market in that country as well as market that could be supplied from that country.Filing in a country that is a key market will protect the market in that country.Filing in a country that is a manufacturing centre will preserve your ability to use that country as a manufacturing centre. This may force a competitor to go to another, hopefully more expensive, country to make a competing product. This will enhance your cost advantage in those countries you sell your product in but have not sought patent protection (usually secondary markets for your products).&nbsp;<ol start="2"><li>A competitor’s main market or manufacturing base.</li></ol>Filing in a competitor’s main manufacturing base should be considered even if you will not manufacture or sell your product in that country. This is because it will restrict your competitor’s ability to compete in your important markets.Filing in a competitor’s main market is also important as it is likely to be one of your main markets as well. This will protect your product and, if it interferes with your competitor’s products, improve your market share. It may also create some negotiation leverage should that be needed in your future business relationships (see Issue 4. Licensing/Sale below).&nbsp;<ol start="3"><li>Future markets.</li></ol>This will depend on your business strategy about expanding into new markets. Patent protection lasts for 20 years so if there is a country or region that you see as a potential future market you should consider filing there.&nbsp;<ol start="4"><li>Licensing/Sale.</li></ol>If you have patent protection in a country you may choose not to sell your product in that country yourself. You can license another company to sell or make your product or you can sell your patent in that country to another company.A licensing strategy can also include the use of a patent as leverage to obtain a licence from a competitor. A simple example of this would be where you want a licence from a competitor to use its patented technology in one country and that competitor wants a licence to use your patent technology in the same, or in another, country.

International patent filing strategies – deciding where to file

Trade mark squatters in China cleverly exploit the "first to file"&nbsp;vs "first to use"&nbsp;differences by registering international brands'&nbsp;trade marks in China, anticipating their entry into the Chinese market. When these targeted international brands enter China, squatters attempt to sell the registered marks back to the rightful owner for exorbitant sums to turn a profit. &nbsp;&nbsp;Introduction&nbsp;Lusheng Law Firm have won a milestone ruling in favour of its client Bayer Consumer Care Holdings LLC, a manufacturer of over-the-counter medication, dermatology and sun care products. Two cases, heard jointly before the Yuhang District Court in Zhejiang Province were ruled in favour of Bayer for trade mark non-infringement and unfair competition. The decision, handed down on 4 May 2018, marks a positive shift in the previously undefined area of unfair competition law and offers hope not just to Bayer, but to all foreign companies operating in China. &nbsp;&nbsp;International brands and their trade marks in China&nbsp;China has become a huge market for international consumer goods. &nbsp;Many large international brands have established their own brick and mortar retail outlets, but even more foreign companies are reaching Chinese consumers through e-commerce platforms. China is by far the world's largest e-commerce market, with no less than 7% of total retail sales (approximately USD 200 billion) being made online. &nbsp;One key legal challenge encountered by international brands during their entry into the Chinese market is trade mark protection. The problem can be summarized as follows:<ul><li>To protect a trade mark in China, it must be registered in China. Filing for protection abroad does not translate into protection in China, regardless of use or intent to use. &nbsp;</li><li>Unlike many jurisdictions, China is a "first to file"&nbsp;system rather than "first to use". &nbsp;</li><li>As a result , for many international brands entering China, it is very common to find that another party, either a professional trade mark squatter or an ambitious "entrepreneur"&nbsp;in the same or similar industry, has already registered the rights to its brand in China. &nbsp;</li></ul>&nbsp;Trade mark&nbsp;"squatters"in China&nbsp;Trade mark squatters in China cleverly exploit the "first to file"&nbsp;vs "first to use"&nbsp;differences by registering international brands'&nbsp;trade marks in China, anticipating their entry into the Chinese market. When these targeted international brands enter China, squatters attempt to sell the registered marks back to the rightful owner for exorbitant sums to turn a profit. &nbsp;Another common scenario is that trade mark squatters will use the reputation of international brands to establish their own companies and generate profit by leveraging the original brand's value. &nbsp;Though international brands have become better at understanding how to manage their trademark rights in China, many fail to anticipate local challenges arising from the aforementioned risks before entering the market. Even the most famous brands, such as Apple, Google and New Balance, have lost millions of dollars in protracted court battles against trade mark squatters. &nbsp;&nbsp;Selling in China without Chinese trade marks&nbsp;An additional challenge exists for international brands who fall victim to trade mark squatters when entering the Chinese market. If another party has registered their trade mark, the foreign brand owner will face several distinct challenges when selling their products in China:<ul><li>It may not be able to sell its goods on the Chinese market, including Chinese e-commerce platforms. Platforms, such as Tmall, generally require proof of ownership of the relevant trade mark rights in order for a brand to sell its goods. &nbsp;</li><li>Use of the brand's trade mark (by the rightful trade mark owner) can lead to legal action by the trade mark squatter. Actions such as injunctions, customs seizures and expensive civil lawsuits can ensue. The trade mark squatter can freely use the trade mark to compete with the foreign brand owner. &nbsp;</li></ul>&nbsp;Bayer vs Li Qing – A revised approach&nbsp;A recent case heard before the Yuhang District Court in Zhejiang Province involving Bayer Consumer Care is a prime example of the challenges presented by trade mark squatters for brand owners in China. The outcome however, marks a distinct shift in what is generally known to be near impossible. Bayer was successful in claiming that the trade mark squatter's malicious trade mark registration of Bayer marks and their pursuant malicious complaints amounted to unfair competition. The judgment handed down on 4 May, 2018 is a landmark decision and a big step forward for brand owners. &nbsp;&nbsp;Case background&nbsp;Bayer Consumer Care is a manufacturer of OTC medication, dermatology and sun care products, to name a few. One of their offerings is "Coppertone", a well-reputed sun care brand. In September 2016, Bayer discovered that their trade marks "Surfer Boy"&nbsp;and "Sun, Rainbow and Wave"&nbsp;had been the subject of a malicious trade mark registration by a Chinese individual, Li Qing.<img src="https://media.umbraco.io/lusheng/wcfowpyr/img_2750721871200422293_bayer-s-product.png" style="width: 249px; height: 165px; display: block; margin-left: auto; margin-right: auto;">Upon acquisition of the trade mark rights, Li Qing filed a series of trade mark infringement complaints against Bayer's distributors and sub-distributors on Taobao, the e-commerce platform on which a substantial amount of Bayer's sun c a re products a re sold. Subsequently, they made complaints to various AICs in different cities against Bayer's distributors. Of course, what underpinned these actions by Li Qing was the intent to sell the trade marks to Bayer at a heavily inflated price. &nbsp;Bayer, advised by Lusheng, strategized overall legal remedies to protect its brand. This included issuing letters to Li Qing requesting that the complaints cease, opposing Li Qing's complaints and filing actions to invalidate Li Qing's trade marks. Most significantly, Bayer filed non-infringement litigation and unfair competition suits against Li Qing which shifted Bayer from a defensive to an offensive position. By initiating the non-infringement litigation, Bayer petitioned the court that its sales of subject products did not infringe Li Qing's trade marks due to its prior copyrights on the products' designs and prior use in China . With respect to the unfair competition litigation, Bayer was able to claim economic loss and effectively deter malicious trade mark squatters and complaints. &nbsp;&nbsp;Challenges&nbsp;The complexities Bayer and its IP consultants were faced with during the litigation exceeded the standard scope of issues encountered by litigants in China. These can be summarised as follows:<ul><li>Chinese courts have largely followed a strict interpretation of the law. There are no legal rules or regulations clearly defining trade mark "squatting"&nbsp;or malicious trade mark infringement, which means there is no clear forum for a complaint by an aggrieved party. Nor are there constitutive requirements or resultant legal effects of such activities. This environment has led to court judgments largely in favour of trade mark squatters. &nbsp;</li><li>Trade mark acquisition and validation are subject to the Trade mark Examination Board, while trade mark infringement disputes are subject to the court. Chinese courts are generally reluctant to hear and judge issues related to trade mark acquisition and validation. This means in practice it is very difficult for foreign brands to claim bad faith when affected by trade mark squatters. &nbsp;</li><li>Establishing "bad faith"&nbsp;registration and "well-known brand"&nbsp;claims before Chinese authorities has proved difficult and expensive. This has fostered an environment ripe for trade mark squatting whilst at the same time poses challenges for brand protection in China for foreign firms. &nbsp;</li></ul>&nbsp;Litigation strategyPrinciple of Honesty and Good Faith&nbsp;Given the challenges presented in facing trade mark squatters in China, Bayer's legal representation took a more lateral approach, turning to the Principle of Honesty and Good Faith. This was an ambitious endeavour due to the abstract nature and lack of concrete legal elements involved.&nbsp;&nbsp;Bayer and its legal representation successfully established the steps and methods of "materialization"&nbsp;of Principle of Honesty and Good Faith. In order to satisfy these, Bayer submitted precedent judgments, administrative&nbsp;decisions, government forums and Supreme Court's minutes. Below is a brief illustration of major elements in the materialization:<img src="https://media.umbraco.io/lusheng/b3djbl1x/img_339474348324939850_strategy-bayers.png" style="width: 267px; height: 249px; display: block; margin-left: auto; margin-right: auto;">JudgmentsNon-Infringement CaseThe court found that Bayer owned prior copyrights to both the "Sun, Rainbow and Wave"&nbsp;and "Surfer Boy"&nbsp;marks. Consequently, the court held that the Coppertone products using the two designs did not infringe Li Qing's registered trade marks.&nbsp;Unfair Competition Case&nbsp;1.The court found that Li Qing registered Bayer's trade marks maliciously, as they were not intended for use in business operations or IPR protection. Li Qing's intent was to profit by filing complaints against the subject Coppertone products. The court held that such activities damaged Bayer's commercial advantage and led to the direct competitive relationship between Li Qing and Bayer. &nbsp;2.Further, the court found that Li Qing was clearly aware of Bayer's prior rights on the subject designs and prior use of the designs on the Coppertone products. Taking this into consideration, the court held that the trade mark registration was indeed malicious. &nbsp;3.Finally, the court found that Li Qing profited from filing complaints against the subject Coppertone products, anticipated selling the marks to Bayer and was ‘piggybacking'&nbsp;on Bayer's prominent business reputation. Further, the acquisition and application of registered trade mark rights by infringing the other party's prior rights was found to be contrary to the principle of honesty and credit upheld by the court. As such, the court held that Li Qing's intent was to disrupt fair market competition. &nbsp;The court held that all activities undertaken by Li Qing constituted unfair competition pursuant to Article 2 of the Anti-Unfair Competition Law, which states that "a business operator shall, in his market transactions, follow the principles of voluntariness, equality, fairness, honesty and good faith and observe the generally recognized business ethics."&nbsp;&nbsp;&nbsp;Orders1.Li Qing was ordered to cease all unfair competition activity, namely filing malicious complaints; and2.Compensate Bayer's economic losses of RMB 700,000 (approximately USD 110,011).&nbsp;Conclusion&nbsp;The court's decision to recognize "malicious trade mark registration"&nbsp;and "malicious complaints"&nbsp;as amounting to unfair competition is precedent-setting in China. The judgment is highly valuable for both Bayer and rights holders alike.Whilst the practice of malicious trade mark registrations has become increasingly common in China, the Bayer decision will no doubt act as a significant deterrent to potential trade mark abusers, increasing the ability of courts to take effective action, along with the size of applicable fines. &nbsp;Miriam Yang &amp; Guo Tai - the attorneys leading the litigations at Lusheng Law Firm, commented: "In light of this pleasing result, it is now clear that China is taking strong action in this area and that with effective support and advice, brands operating in the country can be confident that protecting their intellectual property is very much possible. The milestone ruling shows that Chinese Courts are making efforts to reach a balance between fast-changing market and stable judicial practice. It also shows that Taobao, the leading e-commence platform in China owned by Alibaba Group, respects intellectual property rights and provides reliable IP protection for operators in good faith."&nbsp;&nbsp;&nbsp;Our advice to rights holders&nbsp;Brands anticipating expansion into China should apply for trade mark registration at the earliest opportunity. Just as pertinent is investing in obtaining the right wording and figures for filing. This can be done by using a strategic combination of literal translation, phonetic transliteration, descriptive adaptations and significant figures. Companies should also acquaint themselves with the various legal tools to protect their trade mark rights, including trade mark invalidation actions, opposition to complaints, non-infringement and unfair competition litigation and negotiation and settlement. And finally, enlist in the services of professionals who truly understand the landscape for strategic advice on China market entry well before any issues can arise.

The best defence is offence — arming yourself against trade mark squatters in China

In 2017 China’s courts handled more trademark infringement cases than the local administrations for industry and commerce. With the enforcement landscape evolving so rapidly, analysis of litigation data can provide unique strategic insight into brand protection efforts.Despite the often-publicised challenges facing IP protection in China, there have been many encouraging developments in recent years. Chinese courts are becoming increasingly sophisticated in handling complex IP disputes, while foreign rights holders continue to engage successfully with – and test the boundaries of – the system. This ongoing interaction is producing rapid growth and an increasingly refined IP protection tool. Analysis of litigation data can be used both to evidence this trend and to inform brand protection strategies going forward.<h4>Encouraging developments</h4>Traditionally, foreign rights holders would bring claims before so-called ‘friendly courts’ in the first-tier cities of Shanghai, Beijing and Guangzhou. Now, there is an emerging trend among rights holders to consider the courts in second-tier cities (eg, Suzhou, Hangzhou and Nanjing) as preferred venues. This is in part due to the efforts made by these courts to build their reputation and compete with their peers in the first-tier cities. Indeed, judges in second-tier cities will occasionally issue more cutting-edge and creative judgments than those handed down by more established venues.The recent government reorganisation also aims to integrate and streamline IP administrative enforcement. The newly established State Administration for Market Regulation (SAMR) aims to replace and combine the enforcement functions previously carried out by the State Administration for Industry and Commerce, the General Administration of Quality Supervision, Inspection and Quarantine, and the State Food and Drug Administration, as well as antitrust enforcement previously carried out under the auspices of the Ministry of Commerce and the National Development and Reform Commission. The SAMR is now the single enforcement agency for trademark, patent, geographic indication, unfair competition, product quality and antitrust matters. The merger has enabled rights holders to bring various causes of action before a united agency. The one remaining outlier is copyright enforcement, which continues to be carried out by the Copyright Office and local cultural enforcement teams.In line with the increasing sophistication of the administrative and legal apparatus surrounding enforcement, rights holders are also seeing a shift in IP infringement from counterfeit and pirated products (although these remain rampant in some regions) towards lookalike products. Many of these products avoid obviously copying protected assets while maintaining sufficient visual cues to connect them to the original. In these cases, administrative enforcement is limited and brand owners must rely on the courts to play a leading role in protecting their IP rights. Along with increasing damages, good win rates and a faster process, the courts are proving a viable enforcement mechanism and acting as a greater deterrent.<h4>Challenges still to face</h4>Despite these developments, many challenges remain. Chinese courts have become some of the busiest in the world – an IP judge may handle hundreds of cases each year, with limited time to thoroughly assess the evidence and merits of the claims before them. This could explain why persuading a court to accept a case has become a difficult stage in many civil proceedings.Enforcing judgments also remains problematic – although the Supreme Court has imposed onerous consequences on parties that shift their assets beyond the reach of the authorities. Such measures include blacklisting and barring individuals from taking airplanes and first-class trains.In addition, there remains a lack of consistency in determining infringement. The establishment of specialised IP courts (or IP tribunals) in 18 cities has helped to standardise practice; however, these courts primarily handle technology-related cases involving patents, rather than trademarks (unless a well-known mark is involved). Therefore, the potential to harmonise their influence has been limited. Complex issues (eg, the status of original equipment manufacturer activity) still vary from court to court – even where the Supreme People’s Court has issued clear judgments on similar or identical issues.<img style="width: 0px; height:0px;" src="/media/1214/figure1.png" alt=""><img src="https://media.umbraco.io/lusheng/au2hihw2/img_3315304539774968678_figure1.png" style="width: 891px; height: 449px;"><img style="width: 0px; height:0px;" src="/media/1215/figure2.png" alt=""><img src="https://media.umbraco.io/lusheng/xc3i3wbi/img_7210483051195632296_figure2.png" style="width: 884px; height: 260px;"><img src="https://media.umbraco.io/lusheng/xtanprwo/img_8314950390634097919_table-1.png" style="width: 557px; height: 305px;"><img src="https://media.umbraco.io/lusheng/ffxfmdxy/img_3908384384895297785_table-2.png" style="width: 407px; height: 306px;"><h4>Trendwatch</h4>Sharp increase in IP litigation casesThe data reveals an inflexion point in 2017, with the courts handling more trademark infringement cases than the local administrations for industry and commerce. Indeed, Chinese courts accepted 37,946 trademark infringement cases at first instance – a 40% increase on 2016 and exceeding the 30,100 trademark cases handled by the administrative agencies in the same year. This was a remarkable development given that just 10 years earlier – in 2007 – only 3,855 trademark cases were filed with the courts.Further, Chinese courts accepted a total of 201,039 IP civil cases at first instance. In the past five years, IP civil cases have increased on average 19% year on year. Most of these cases (68%) have been copyright disputes, with trademark cases accounting for 19%.In addition, most IP civil cases involved domestic companies, with only 2% to 5% of cases involving foreign parties. Instead, foreign parties tend to be more active in appealing registry decisions via administrative litigation. For instance, 28% of administrative appeal cases heard by the Beijing IP Court in 2016 involved foreign parties. Although foreign parties are usually plaintiffs, the number of cases involving foreign defendants is on the rise, as domestic companies are becoming more aggressive and sophisticated in their IP strategies. In particular, domestic companies are increasingly filing suit in order to seek non-infringement declaratory relief in response to warning letters issued by brand owners.Mass litigation and the most litigious trademark ownersSome Chinese and foreign brand owners have adopted the strategy of initiating a large number of simultaneous proceedings against a group of infringers where the disputed infringement is clear and straightforward. This is particularly effective in the context of multiple sellers in shopping malls. The granted damages against each defendant is small, but collectively the total damages may be significant. Some of the most litigious brand owners listed in Tables 1 and 2 have applied this strategy, which results in large filing numbers. As such, the mass-litigation approach is a growing concern for many courts, some of which are now declining to accept such cases.The most litigious Chinese trademark owner is Shanghai Jihwa United Shareholders – a publicly listed company specialising in skincare, personal and household care products. It adopted the mass-litigation strategy as a means of seeking injunctions to protect its core brands. As no significant damages were awarded, it is unlikely that these were a driving factor behind the approach.Puma is the most litigious foreign trademark owner, having filed numerous suits against small targets to create more of a deterrent against infringement than administrative action.<img src="https://media.umbraco.io/lusheng/0yzhw0za/img_5106454850808684268_figure3.png" style="width: 433px; height: 315px;"><img src="https://media.umbraco.io/lusheng/o0ibgfzk/img_6354773231652328812_table-34.png" style="width: 561px; height: 585px;">Plaintiff win ratesBased on official reports, plaintiff win rates in IP civil cases are generally high – at around 70% to 80%. In addition, foreign parties tend to have higher plaintiff win rates.Top venues for infringement proceedingsMost IP cases are filed with the courts in developed regions such as Beijing, Shanghai, Guangdong, Zhejiang and Jiangsu – accounting for around 66% of total IP civil cases nationwide in 2017.<img src="https://media.umbraco.io/lusheng/xpvndjgs/img_7478362135718168473_table-5.png" style="width: 804px; height: 389px;"><h4>Increasing damages</h4>Damages granted by the courts in IP civil cases have been increasing gradually since May 2014, when the Trademark Law - which increased the statutory damages from RMB 500,000 to RMB 3 million - was amended and implemented. In some cases, a court may even grant damages that are higher than the statutory damages if it is convinced by supporting evidence. For example, in a 2016 trademark infringement and unfair competition action filed by Hugo Boss, the Shanghai IP Court granted damages of RMB 4.92 million (approximately $780,900).The amendments to the Trademark Law have also enabled some courts to grant punitive damages in trademark infringement actions, although in practice such awards are rare.Overall, the magnitude of damages remains relatively low in most cases, partly due to the difficulties in proving the illegal profits of infringers. Courts in developed cities generally grant higher damages than those in less developed cities, particularly if the case involves a well-known mark. In 2016 the Beijing IP Court granted average damages of Rmb2.2 million (approximately $349,200) in cases of well-known trademark infringement.<h4>Preliminary injunctions</h4>Previously, Chinese courts would rarely grant preliminary injunctions because the practice is strictly to apply the ‘irreparable harm’ test. However, this has begun to change over recent years, largely due to procedural changes allowing for a preliminary injunction request to be filed after the main case is filed (an injunction granted at the proceedings), as opposed to the traditional pre-filing injunction. The courts are generally more willing to grant a preliminary injunction at the proceedings because they have more time to fully review and respond to the request. Conversely, a court must issue its ruling on a pre-filing injunction request within 48 hours.In 2016 the Shanghai IP Court granted preliminary injunctions (along with evidence/asset preservation orders) in 216 cases, among which only 30 were pre-filing injunctions (along with evidence/asset preservation orders), while the remaining 186 were injunctions (along with evidence/asset preservation orders) granted at the proceedings. In one high-profile litigation case handled by the Suzhou Intermediate People’s Court, plaintiff New Balance successfully obtained an injunction at the proceedings and the court imposed a significant fine of Rmb1.7 million (approximately $269,800) against the infringer, which had copied the ‘N’ device mark on its sports shoes.<img src="https://media.umbraco.io/lusheng/k14fwhgc/img_8760148696848923201_figure4.png" style="width: 500px; height:308.6522462562396px;"><img src="https://media.umbraco.io/lusheng/4y2ngqxn/img_8774906169692700307_figure-5.png" style="width: 500px; height:244.5193929173693px;">Duration of court proceedingsMost trademark infringement cases are handled at a blistering pace. The percentage of concluded cases among the total number of filed cases is a key performance indicator for courts, which usually aim to finalise their target caseloads before the end of each year.For cases involving domestic parties, courts will generally conclude first-instance proceedings within four to six months – the maximum timeframe permitted under civil procedure law. However, for cases involving foreign parties, the time limit imposed by civil procedure law does not apply and in practice the length of proceedings tends to be much longer. For this reason, some foreign rights holders will initiate proceedings through their authorised Chinese subsidiary in order to take advantage of the faster docket.<h4>Conclusion</h4><p class="" data-css="border-bottom-style: solid;border-bottom-width: 2px;border-left-width: 0px;border-right-color: rgb(102, 142, 104);border-top-style: solid;border-top-width: 2px;color: rgb(102, 142, 104);font-size: 16px;font-weight: bold;line-height: 25px;margin: 10px auto;max-width: 100%;padding: 10px;text-align: center;white-space: normal;width: 100%">The increasing sophistication of the China IP ecosystem has produced better tools and fresh challenges for brand owners. As new infringement and litigation trends have begun to emerge, brand owners have adjusted accordingly – leading some to reexamine their approach to enforcement in China and find value in litigation as a strategic tool. Indeed, the data suggests that parties are responsive to the developing risks and opportunities presented by the evolving system.While some challenges persist, and as the courts grapple with their burgeoning IP caseloads, it is hoped that the ongoing development towards an effective and user-friendly system will continue.

China litigation trends: A data deep dive

A robust IP system is strategic to develop an innovative society and a core driver in determining a country’s ability to compete on the global stage. Strong and dependable trade mark laws protect consumers and create valuable assets for brand owners.The current China Trade Mark Law was revised and came into effect on 1 May, 2014.  This year, the China Trademark Office (CTMO) is calling for public comment on the Trade Mark Law with the aim to introduce new revisions sometime between 2020 and 2022.The Chinese trade mark authorities face three main challenges: balancing the need for expedited examination in the face of a massive number of applications, addressing legitimate brand owners’ need for stronger legal provisions to protect against an increasing number of bad faith applications, and addressing the growing demand for registered trade mark rights in an already overcrowded register.  The purpose of any amendment to the law is to balance these needs and to create a healthy environment for trade mark prosecution and enforcement.Mirroring its significant population and growing economy, China has the largest numbers of trade mark filings and registrations in the world.  In 2017, the China Trademark Office received 5.74 million new applications, an increase of 56%<a name="_ftnref1" href="https://www.rouse.com/magazine/news/a-call-for-public-comment-on-further-amendments-to-the-chinese-trademark-law/?tag=trade%20marks#_ftn1">[1]</a>.  By the end of 2017, there were nearly 15 million valid trade mark registrations in China.  The CTMO is legally required to complete the examination of new applications within nine months.  By the end of 2018, that period will be shortened to six months and then shortened again to four months in 2020. The CTMO is also handling a large number of oppositions, with 72,575 being received in 2017 (an increase of 26.9% over the previous year).  The CTMO supported opponents in 20,184 opposition cases, with registrations being prevented in 28.41% of those cases<a name="_ftnref2" href="https://www.rouse.com/magazine/news/a-call-for-public-comment-on-further-amendments-to-the-chinese-trademark-law/?tag=trade%20marks#_ftn2">[2]</a>. In 2017, the CTMO cancelled 28,000 marks for non-use, removed 14,000 marks at the request of registrants, and 16,390 registrations lapsed due to non-renewal.  A total of 33,190 trade mark registrations were removed in 2017<a name="_ftnref3" href="https://www.rouse.com/magazine/news/a-call-for-public-comment-on-further-amendments-to-the-chinese-trademark-law/?tag=trade%20marks#_ftn3">[3]</a>. Against this backdrop, we have recommendations for amendments to the China Trade Mark Law:<ol><li>Whether to remove or maintain substantive examination on relative grounds</li></ol>Driven by the goal of shortening the examination time-frame and clearing the overwhelming backlog, there are voices within the CTMO calling to remove the CTMO’s relative grounds examination and instead allow applications to go directly to publication for opposition.  We do not believe this approach is appropriate for China given the history of trade mark squatting and the still growing number of bad faith applications.  Amongst the over 5.7 million trademark applications filed in 2017, we observed one individual applicant who filed 5,767 trade mark applications, earning the “honor” of applying for more trade marks than China’s “BAT” (Baidu, Alibaba and Tencent, China’s technology giants).  Turning off the “firewall” that the CTMO’s substantive examination process provides, would lead to a flood of bad faith applications and a huge surge in oppositions and increased burden for rights holders.  This would greatly increase the cost of maintaining and protecting trade marks that are legitimately used in commerce while reducing the obstacles for those who already strangle the system with bad faith applications.  Without significant reform to the opposition process, removing the CTMO’s substantive examination procedure would lead to market confusion, an erosion of the value of brands, and an increasing number of disputes and litigation.Allowing applications to publish and register without substantive examination will certainly help to shorten the time needed for examination, but it will give more opportunities to copycats to cause chaos, both on the trade mark register and in the marketplace.  In finding the right balance, we cannot trade small gains in speed and “efficiency” at the cost of protecting the integrity of the trade mark register, the value of intellectual property, and Chinese consumers.  This substantial change in procedure requires serious consideration, thorough statistical analysis, and input from the public and industry.<ol start="2"><li>Inclusion of the “principle of honesty” into substantive clauses of the Trademark Law</li></ol>Under the current law, the legal basis for opposition and invalidation are Article 32 (similar marks on similar goods), Article 13 (well-known trade marks), and Article 31 (prior rights).  Even though Article 7 states that the application and use of the mark should comply with the principle of honesty and credibility, this article is regarded as a precatory general principle rather than a ground of opposition or invalidation.  Where bad faith is involved, if the case does not meet the situations prescribed above, there will be difficulties in winning the case.  This is especially true where the bad faith applicant is not an agent of the true trade mark owner or the true trade mark owner cannot prove the bad faith applicant’s awareness of the mark before the application.  These kinds of “coincidences” happen more frequently than one would ordinarily expect and yet there are few remedies.  Under current practice, apart from Article 44 (1) which applies only to registered marks, it seems no clause can be used for bad faith (other than the above situations) during an opposition procedure.  The lack of sufficient bad faith clauses invites difficulties in the daily work of the CTMO and the Courts.We have seen a positive development in the introduction of the “principle of honesty” into Article 7 “filing in good faith” in the current Trademark Law.  However, it is a mere illustrative concept with no clause citing the same to apply in use.  In the next amendment, it would be far more effective if the “principle of honesty” could be applied directly, which would require the new law to include “filing in good faith” within the substantive clauses such as Articles 32, 44, 45.  This would restrain bad faith trade marks through every examination procedure, from the examination of new applications, to oppositions, invalidations, and administrative litigation.  <ol start="3"><li>Imposing the obligation to file a defence in opposition and invalidation procedures; “default judgment”</li></ol>According to the current Trademark Law, the opposing party in the opposition procedure and the registrant in the invalidation procedure is given the opportunity to respond to the opposition/invalidation within a prescribed time limit.  Given that filing a defence is a right rather than obligation, the opposed party and the registrant can choose whether or not to take part in the proceedings.  If they choose to do nothing, it will not affect the examination of the opposition and invalidation.  The current procedures create an imbalance by placing a far higher onus on the brand owner to actively protect their marks.  Brand owners have an obligation to prove their prior rights in and the use of the marks in China when bringing an opposition or invalidation.  However, once a prima facie case is made, the burden of proof does not shift to the opposed party or registrant.  Even though the opposed party or registrant choose not to respond to the actions or explain how they created the mark in question (especially coined Latin letter marks or devices), they have a decent chance to defend the opposition/invalidation if the brand owners are unable to submit the kind of evidence in the right form expected by the CTMO.Based on Article 4 of the law, a mark should be applied for based on the need to do business.  If a mark is important to its applicant for conducting business, the applicant should have the obligation to respond to the opposition/invalidation in order to obtain or maintain a registration.  For those who willingly forgo the right to respond, they should bear the consequences.   Therefore, if the opposed party or registrant does not file a response within the prescribed time frame, the trade mark authorities should issue a default judgment against them.  This is regardless of whether or not the mark was filed in bad faith.<ol start="4"><li>Trade mark “hoarding”</li></ol>The value of a mark is generated and accumulated by putting it to actual use as legislated under Article 4 of the law.  If brand owners have no intention to use their marks, they should not clog up the register with unused marks which act as obstacles to parties who genuinely need these marks to trade in the Chinese market. Therefore, we suggest adopting the US practice.  When filing an application for a mark, the applicant should submit evidence to prove an “intent to use”.  Once the mark is registered, the registrant should submit evidence of use every three or five years in order to maintain the registration.  If no evidence is submitted, the CTMO should ex officio cancel the registration.  In the meantime, a penalty should be applied if the registrant or its agents forge evidence of use to mislead the trade mark authorities.Alternatively, we may consider adopting an annuity fee policy.  If the registrant no longer intends to use the mark, it can stop paying the annuity fee and abandon its registration.The CTMO welcomes comments to the amendments of the law.  The due date for public comment is 31 July 2018.  We will be submitting detailed comments and hope that brand owners will bring their thoughts and suggestions to the trade mark authorities.<a name="_ftn1" href="https://www.rouse.com/magazine/news/a-call-for-public-comment-on-further-amendments-to-the-chinese-trademark-law/?tag=trade%20marks#_ftnref1">[1]</a> 2 3The numbers are cited from Annual Development Report on China’s Trademark Strategy 2017, China Industry & Commerce Press, edition 1 March 2018.

A call for public comment on further amendments to the Chinese Trademark Law

Since publishing the piece below, it has been confirmed that the term of pharmaceutical patents is not being extended in China. However, this does not mean that patent landscape will remain static.China is part of the Regional Comprehensive Economic Partnership negotiations which may require changes to Chinese IP legislation. Both patent extension of term and data exclusivity have formed part of those negotiations. China also has two important policies which have the potential to benefit patent owners – Made in China 2025 which intends to make China’s manufacturing base more innovative and globally-competitive and Healthy China 2030 which makes public health a precondition for all future economic and social development.<a rel="noopener" data-id="9394" href="https://www.rouse.com/people/tim-jackson/" target="_blank" title="Tim Jackson">Tim Jackson</a>, Rouse’s Head of Patent Strategy & Development, believes that there will be opportunities for patent owners as a result of these initiatives. As the initiatives develop we will report back in later editions of the magazine.Unconfirmed reports are circulating that China will allow extensions of patent term of pharmaceutical patent from 20 to 25 years starting this month. This is said to be in response to U.S. criticism over intellectual property violations.These reports appear to be based on a decision of an executive meeting of the State Council (China’s Cabinet) presided over by Premier Li Keqiang on April 12, 2018 (<a rel="noopener" href="http://www.xinhuanet.com/politics/leaders/2018-04/12/c_1122674781.htm" target="_blank">http://www.xinhuanet.com/politics/leaders/2018-04/12/c_1122674781.htm</a>). This decision refers to the strengthening of protection for intellectual property rights, the removal of tariffs from common imported drugs including cancer drugs, cancer alkaloid-based drugs, and imported traditional Chinese medicines, and allowing for a 5 year extension of patent term for pharmaceutical patents for an innovative medicine (which would ordinarily exclude at least process and composition patents).There is no reference in the decision to any time frames for the introduction of the patent term extension but the removal of tariffs is said to apply from May 1. It is likely that any introduction of a patent term extension will take some time as this would require a change in the current Chinese patent law.If China does introduce patent term extension, it would mean that China is following countries such as Canada who have extended pharmaceutical patent terms as a result of trade negotiations. This is becoming a standard concession as the extension usually only applies to patents filed after the legislation is in force, which allows 20 years for businesses and consumers to adjust. However, it appears from the Chinese language report and the State Council’s decision that China intends to allow the extension to apply to existing pharmaceutical patents but on the condition that the patent owner applies for a manufacturing license in China and overseas. If the patented product is only imported into China, the extension may not be available.This condition is interesting as it fits with the Made in China 2025 policy to improve China’s abilities in the biomedicine area. However it also means that issues of knowledge transfer behind the recent trade dispute between China and the United States remain alive.

China to allow patent extension of term?

Applicants for trademark registration in China frequently find their applications are refused because of alleged conflict with prior applications or registrations.  This is perhaps the inevitable result of a system where trademark applications can be filed very broadly without any genuine intention to use and bad faith applications are commonplace.Legitimate brand owners frequently feel obliged to file as widely as possible to protect their interest, and as a result find themselves in conflict with other legitimate brand owners. In this situation, a Letter of Consent may provide a practical and cost-effective solution.  In China, however, Letters of Consent have been problematical.  Brand owners have often experienced difficulty in both obtaining Letters of Consent from local Chinese companies and having them accepted by the administrative authorities or the courts.There are, however, signs that the situation is changing which is good news for brand owners looking to protect their trademarks in China.  This article examines both the current position and important recent Supreme Court decisions that indicate a changing attitude to Letters of Consent.  It also provides some practical tips for brand owners seeking to rely on Letters of Consent in China.<ol><li>Letters of Consent</li></ol>In the context of trademark registration, the term ‘Letter of Consent’ generally refers to a written statement or agreement whereby the owner of an earlier mark consents to a third party’s registration of a later identical or similar mark.In many jurisdictions Letters of Consent are commonly used to overcome trademark registration refusals on relative grounds i.e. where the applied-for mark is identical or similar to an earlier conflicting mark. They can provide a practical and cost-effective solution, even in situations where grounds might exist for cancellation or invalidation of the earlier mark.  In a global context, for example, where maintenance of a unified brand is important, co-operation is more likely than aggression to achieve a commercially satisfactory result.<ol start="2"><li>Current Situation in China</li></ol>Although China’s Trademark Law does not make specific provision for Letters of Consent, brand owners have often sought to rely on them -- with varying degrees of success.  Local Chinese companies are often less likely than their foreign counterparts to agree to a Letter of Consent, certainly in the absence of payment.  It is not uncommon for large amounts of money to be asked in exchange for such an agreement.   And even where it is possible to obtain a Letter of Consent, it may be difficult to have it accepted by Trade Mark Review and Adjudication Board (TRAB) or the courts.  They have often taken the view that co-existence of two marks owned by different proprietors will inevitably cause confusion and be detrimental to the interest of consumers.This is very different from the more liberal approach that has been taken in many other jurisdictions, particularly Europe and the US, where Registrars and the courts take the view that the brand owners concerned are in the best position to gauge the likelihood of confusion and that, in general, their opinion should be respected. <a name="_ftnref1" href="https://www.rouse.com/magazine/news/changing-attitudes-to-letters-of-consent-in-china/#_ftn1">[1]</a><ol start="3"><li>Indications of Change</li></ol>There are signs that the attitude to Letters of Consent in China is changing.  There have been a number of appeal decisions in which rejections of Letters of Consent, on the part of both the TRAB and the lower courts, have been overturned.The first of these is a 2013 decision of the Beijing Higher People’s Court, Deckers Outdoor Corporation v TRAB [Case No. (2012) High Court Administrative Final No. 1043], in which the Court overturned decisions of both the TRAB and the Beijing No. 1 Intermediate People’s Court and held that the Letter of Consent should be respected.The particulars of both the applied-for mark and the cited mark involved, and the services in relation to which they were used, are set out in the table below:<table border="0" width="576"><tbody><tr><td width="115"> </td><td width="215">The Applied-for Mark</td><td width="246">The Earlier / Cited Mark</td></tr><tr><td width="115">Owner</td><td width="215">DECKERS OUTDOOR CORPORATION</td><td width="246">UNICREDIT S.p.A.</td></tr><tr><td width="115">Filing Date</td><td width="215">14 November 2007</td><td width="246">28 September 2007</td></tr><tr><td width="115">TM No.</td><td width="215">6379162</td><td width="246">IR 951748</td></tr><tr><td width="115">TM Image</td><td width="215"> </td><td width="246">UCG</td></tr><tr><td width="115">Claimed Services</td><td width="215">import-export agency services;product quotation; tender price; business information; commercial information agency services; advertising by mail order; sales promotion for others for shoes, boots, sports shoes, clothing, swimsuits, bathing trunks, socks, stockings, pantyhose, caps, and other sports clothing, accessories and devices.</td><td width="246">advertising; business management; advice on business organization and management; business administration; office functions; market research and studies; compilation of statistical information; statistical information services in the commercial and industrial field; import-export agencies; management of computer files and data bases; organization of exhibitions for commercial or advertising purposes; rental of advertising space.</td></tr><tr><td width="115">Class / Sub-Class</td><td width="215">35 / 3501, 3502, 3503</td><td width="246">35 / 3501, 3502, 3503,3504, 3506, 3507</td></tr><tr><td width="115">TRAB</td><td colspan="2" width="461">Letter of Consent accepted?  NO</td></tr><tr><td width="115">Beijing No.1 Intermediate People’s Court</td><td colspan="2" width="461">Letter of Consent accepted?  NO</td></tr><tr><td width="115">Beijing Higher People’s Court</td><td colspan="2" width="461">Letter of Consent accepted?  YES</td></tr></tbody></table>More recently, the Supreme Court adopted a similar approach in two landmark appeal decisions: Google Inc. v TRAB   [Case No: (2016) Supreme Court Administrative Retrial No. 102 & 103] and decided that, in the presence of the Letter of Consent that had been provided, the likelihood of confusion resulting from the co-existence of two identical marks on nearly identical goods was low or manageable.  The particulars of both the applied-for marks and the cited mark involved in these cases are set out in the table below:<table border="0" width="576"><tbody><tr><td width="115"> </td><td colspan="2" width="272">The Applied-for Mark</td><td width="189">The Earlier / Cited Mark</td></tr><tr><td width="115">Owner</td><td colspan="2" width="272">GOOGLE INC.</td><td width="189">SHIMANO INC.</td></tr><tr><td width="115">Filing Date</td><td colspan="2" width="272">November 07, 2012</td><td width="189">May 13, 1999</td></tr><tr><td width="115">TM No.</td><td width="130">11709161</td><td width="142">11709162</td><td width="189">1465863</td></tr><tr><td width="115">TM Image</td><td width="130"> </td><td width="142"> </td><td width="189"> </td></tr><tr><td width="115">Claimed Goods</td><td colspan="2" width="272">portable computer; hand-held computer</td><td width="189">bicycle computer</td></tr><tr><td width="115">Class / Sub-Class</td><td colspan="2" width="272">09 / 0901</td><td width="189">09 / 0901</td></tr><tr><td width="115">Beijing No.1 Intermediate People’s Court</td><td colspan="3" width="461">Letter of Consent accepted?  NO</td></tr><tr><td width="115">Beijing Higher People’s Court</td><td colspan="3" width="461">Letter of Consent accepted?  NO</td></tr><tr><td width="115">Supreme People’s Court</td><td colspan="3" width="461">Letter of Consent accepted?  YES</td></tr></tbody></table> The Court’s reasoning was as follows:<ul><li>A Letter of Consent signed by the owner of a cited mark should be respected, provided there is no harm to the national interest or public interest, or to the interest of a third party.</li></ul><ul><li>The Trademark Law aims to protect the interest of both consumers and producers and dealers. They are equally important: neither should be neglected. In real life, the likelihood of confusion cannot be completely eliminated: similar business symbols may, for example, be simultaneously registered and used in good faith by different parties for specific historical reasons. In these two cases, Google’s registration and use of the NEXUS mark has a more direct and immediate impact on the interests of SHIMANO than on the interests of ordinary consumers. Shimano’s issuance of a Letter of Consent indicates that it has taken a tolerant attitude towards the likelihood of Google’s registration causing consumer confusion. Further, both Google and Shimano are famous companies in their respective industries, and there was no evidence that Google had acted in bad faith or intended to take unfair advantage of Shimano’s reputation when it applied for the NEXUS mark. There was also no evidence that Google’s registration of the NEXUS would harm the national or public interest. Given that, the Letter of Consent should be respected.</li></ul><ul><li>Although the very function that a trademark performs is to identify and distinguish the source of goods or services, in this case Google’s other business symbols, such as corporate and trade names and package designs etc, were also functioning as source identifiers.</li></ul>The reasoning adopted in these very important decisions is similar to that reflected in the USPTO Trademark Manual quoted above.  We expect that, in future, both TRAB and the lower courts will take a more liberal attitude towards Letters of Consent than they have in the past, and that Letters of Consent will generally be more widely used and accepted.<ol start="4"><li>Practical Tips for Brand Owners seeking to rely on Letters of Consent in China</li></ol>These guidelines should be followed when seeking to rely on a Letter of Consent in China:<ul><li>Letters of Consent originating in mainland China should be notarized in China. Letters of Consent originating outside mainland China should be notarized by a Notary Public in the country of the earlier mark owner and then legalized by a Chinese embassy or consulate in that same country.</li></ul><ul><li>A Chinese translation of Letters of Consent written in another language should be provided.</li></ul><ul><li>There is no provision in China’s Trademark Law prescribing the content or form of a Letter of Consent, but it is advisable to include a statement of the earlier mark owner’s belief as to the likelihood of confusion and a statement of the measures being taken to avoid consumer confusion. A Letter of Consent is likely to have higher probative value if the earlier mark owner explicitly states that (i) the applied-for mark and the earlier mark differ in appearance, sound, meaning, and commercial impression; (ii) the marks are used in relation to different goods in different market segments; and (iii) the trade channels for goods of both marks are sufficiently unrelated.</li></ul><ul><li>Given the Supreme People’s Court’s finding that because both parties were famous in their respective industries, the applicant was not intending to take unfair advantage of the reputation of the earlier mark, evidence establishing the general reputation of the applicant will be useful e.g. company history, and reputation of its products/ services, and brands.</li></ul>As indicated above, local Chinese companies have often been reluctant to sign Letters of Consent, or to sign them in the absence of a substantial fee.  While that may well change in the future as Letters of Consent become more widely accepted, it is advisable to be prepared in the event of a refusal or reluctance to sign.<ul><li>In some instances it may be helpful to commence, or threaten to commence, opposition, cancellation or invalidation proceedings.</li></ul><ul><li>Where it looks as though the other party may not co-operate, early consideration should be given to filing a separate application for a re-designed mark that incorporates the current mark, but endeavours to ensure that, in its entirety, the new mark is distinguishable from the cited mark.</li></ul>ConclusionAlthough Supreme Court decisions are not technically binding in China, other than those the Court has specifically approved as ‘guiding cases’, they can, in practice, have a direct influence on practice generally and the decisions handed down by administrative authorities and courts.  The recent decisions in relation to Letters of Consent, which are in line with international practice, are, in our view, likely to influence future decisions of both TRAB and the lower courts.<a name="_ftn1" href="https://www.rouse.com/magazine/news/changing-attitudes-to-letters-of-consent-in-china/#_ftnref1">[1]</a> The Trademark Manual of Examining Procedure (TMEP) issued by the USPTO provides as follows in relation to Letters of Consent:<ul><li>The Court of Appeals for the Federal Circuit has indicated that consent agreements should be given great weight and that the USPTO should not substitute its judgment concerning likelihood of confusion for the judgment of the real parties in interest without good reason, that is, unless the other relevant factors clearly dictate a finding of likelihood of confusion.</li><li>Examining attorneys should give substantial weight to a proper consent agreement. When an applicant and registrant have entered into a credible consent agreement and, on balance, the other factors do not dictate a finding of likelihood of confusion, an examining attorney should not interpose his or her own judgment that confusion is likely.</li></ul> A version of this article was first published in <a rel="noopener" href="http://www.worldtrademarkreview.com/Daily/Detail.aspx?g=04c507cb-fc03-4068-bca4-a9c1541a15a4" target="_blank">World Trademark Review</a> in February 2018.

Changing attitudes to letters of consent in China

<h2>Take Aways</h2>
<ul>
<li>On the same day, Wuxi and Sanya each released a case, marking the first enforcement actions in China involving algorithm filing and security assessment obligations. The summoned companies were ordered to remove services and rectify within a specified period.</li>
<li>The Cyberspace Administration of China (CAC) guided several major platforms to carry out a special campaign to standardize short video content labeling, regulating tag settings and video publishing processes. Six major platforms including Douyin and Kuaishou removed over 37,000 non-compliant short videos (such as fake and staged content), took actions against over 3,400 violating accounts, and applied required labels to more than 600,000 short videos that had previously lacked proper labeling.</li>
<li>Two recommended national standards, the Guidelines for Personal Information Protection of Small Personal Information Processors and Data Security Technology – Capability Requirements for Professional Institutions Conducting Personal Information Protection Compliance Audits, are now officially under development, with their submission for approval expected in September 2027.</li>
<li>Overseas, to implement the restrictions on minors’ access to social media, chatbots and other applications introduced in December last year and March this year, the Office of the Australian Information Commissioner (OAIC) issued a privacy guidance on age verification technology, standardizing data collection activities during the verification process.</li>
<li>Meanwhile, global enforcement actions on data security and personal information protection continue to intensify: Lotte Card in South Korea was fined over KRW 9.6 billion (about USD 6.49 million) for a massive personal information leak; FC Barcelona in Spain was fined EUR 500,000 (about USD 585,000) by the local data protection authority for non-compliant collection of facial recognition data of its members.</li>
</ul>
&nbsp;
<h2>Regulative Highlights</h2>
<h3>Wuxi and Sanya Cyberspace Authorities Respectively Summon Companies Failing to Complete Algorithm Assessment and Filing Obligations</h3>
The Administrative Provisions on Algorithm Recommendation for Internet Information Services, which took effect on March 1, 2022, require providers of algorithm recommendation services with public opinion attributes or social mobilization capacity to complete algorithm filing procedures within 10 days of service launch, carry out security assessments, and fulfill information security management obligations. On March 20 this year, the Cyberspace Administration offices of Sanya and Wuxi respectively made public cases in which they conducted regulatory interviews with local companies that had failed to fulfill those obligations. These actions represent first enforcement activities in China targeting algorithm assessment and filing obligations. Details are as follows:
<ul>
<li>A company in Wuxi provided generative AI services to users by directly invoking the capabilities of a registered large language model through API interfaces on its website. It failed to register its generative AI application and did not conduct security assessments as required. Penalties included a regulatory interview with the responsible person, an order to immediately take the service offline, and a requirement to carry out security assessment and related procedures.</li>
<li>A company in Sanya, prior to providing algorithm recommendation services with public opinion attributes or social mobilization capacity, was found to have violated national regulations by failing to carry out security assessments, failing to complete filing procedures as required, and potentially generating harmful information. Penalties included a regulatory interview with the responsible person, ordering rectification within a specified period, and requiring assessment and filing.</li>
</ul>
&nbsp;
<h3>CAC Releases Two-Year Results of Implementing the Provisions on Promoting and Regulating Cross-Border Data Flow</h3>
The Provisions on Promoting and Regulating Cross-Border Data Flow officially took effect on March 22, 2024, generally easing conditions for cross-border data flow and narrowing the scope of security assessments. Two years on, the main results are as follows:
<ul>
<li>The governance system for cross-border data export security has been steadily improved, with the issuance of rules covering cross-border personal information transfer certification and guidelines for specific industries such as finance and automobiles.</li>
<li>Regulatory processes have been continuously optimized. The third version of the security assessment application guide has further simplified application materials. The pre‑assessment pilot, originally conducted in Beijing, Shanghai, Guangzhou, Tianjin, Jiangsu, and Zhejiang, has been expanded to include eight additional provinces/municipalities such as Fujian and Hainan. Three certification bodies for outbound personal information transfers have been reviewed and approved.</li>
<li>The free trade zones’ negative lists for data exports have continued to expand. Nine FTZs (ports), including Beijing, Shanghai, and Hainan, have filed and published negative lists covering 22 sectors such as automobiles, retail, and civil aviation.</li>
<li>In addition, local capabilities for cross-border data services have significantly improved, public outreach on data export security management policies have been strengthened, and international exchanges and cooperation on cross-border data flow have been further deepened.</li>
</ul>
&nbsp;
<h2>Cross-Border Data Transfer</h2>
On March 1, China’s first national standard on cross-border personal information security management, Data Security Technology – Security Certification Requirements for Cross‑Border Personal Information Processing Activities, officially came into effect. It specifies the basic principles, basic requirements, and protection requirements for the rights and interests of personal information subjects that relevant parties should follow when processing personal information across borders, covering the obligations and responsibilities of domestic personal information processors and overseas recipients, as well as the entire cross‑border personal information processing process.
On March 27, the China Cybersecurity Review, Certification and Market Regulation Big Data Center, together with the Cyberspace Administration of Haidian District, Beijing, issued the Beijing Implementation Guidance on Personal Information Outbound Certification (First Edition). It further clarifies the core elements of personal information outbound certification, including applicable scenarios, application methods, certification requirements, and supervision and management. This is the first local‑level operational guidance document issued since the implementation of the Personal Information Protection Law that specifically addresses the “personal information protection certification” pathway of cross-border personal information transfer.
On March 27, Beijing released the 3.0 Version of the Comprehensive Supporting Reform Plan for Facilitating Cross‑Border Data Flows, focusing on six key sectors including healthcare and artificial intelligence, and adopting a sector‑specific approach. The plan also targets six distinctive areas, such as the International Pharmaceutical Innovation Park and the Law–Business Integration Demonstration Zone, to build “one zone, one brand” cross‑border data service offerings, further advancing reforms to facilitate cross‑border data flows. As of March 2026, 312 enterprises in Beijing have passed data export security assessments or completed filings under the standard contract mechanism.
&nbsp;
<h2>Data Standards</h2>
On March 11, the Standardization Administration of China (SAC) issued a plan for 16 recommended national standards, including Guidelines for Personal Information Protection of Small Personal Information Processors and Data Security Technology – Capability Requirements for Professional Institutions Conducting Personal Information Protection Compliance Audits, scheduled for submission for approval on September 2, 2027.
&nbsp;
<h2>Data Security</h2>
As the open-source AI agent OpenClaw has rapidly gained adoption but presents prominent security risks such as excessive permissions, insufficient default security settings, and a high likelihood of data breaches, multiple authorities including the China National Vulnerability Database of Information Security, the National Computer Network Emergency Response Technical Team, the Data and Technology Support Center of the CAC, CNIPA, and the National Internet Finance Association of China issued risk alerts regarding OpenClaw. On March 31, the National Cybersecurity Standardization Technical Committee publicly solicited comments on the Cybersecurity Standard Practice Guide – Security Guidelines for the Deployment and Use of OpenClaw‑Like Agents (Draft for Comments). This Guide applies to individual users who deploy OpenClaw‑like agents on their own, or to organizations that deploy or use such agents for internal personnel. The security protection of commercial agents shall refer to other relevant policies and standards.
&nbsp;
<h2>Data Enforcement</h2>
On March 3, the Supreme People’s Court released a set of typical cases on lawfully punishing online violence–related crimes, covering issues such as online insults and defamation; exposing others’ personal information through online “doxxing” to facilitate defamation; posting and reposting negative information about enterprises online and engaging in extortion by demanding fees for content removal; and malicious online attacks undermining the reputation of corporates and entrepreneurs.
On March 21, the CAC guided online platforms to fully standardize short video content labeling, regulating the design and use of content labels, requiring labeling as a mandatory step before publishing, and conducting phased retrospective reviews to add or supplement labels for existing short‑form videos. Over the past month, six major platforms (Douyin, Kuaishou, Tencent, Xiaohongshu, Bilibili, and Weibo) removed over 37,000 non-compliant videos (e.g., fake staged content), took actions against over 3,400 violating accounts, supplemented labels to over 600,000 videos, and issued 18 governance reports.
On March 17, Beijing launched the "Clear and Bright Beijing – AI for Good" Special campaign, targeting the use of AI to generate pornographic or vulgar content, fake and infringing information, false rumors, as well as the sale of or instruction on methods to remove AI‑generated content labels. Platforms are urged to improve AI-generated content identification, review, and removal capabilities.
Various authorities continued APP supervision. On March 6, the Shanghai Communications Administration notified 14 problematic apps and removed 10 that refused to rectify on March 20. On March 13, the Ministry of Industry and Information Technology notified 24 non-compliant apps (SDKs). On March 16, the Beijing Communications Administration notified 4 apps for ineffective rectification. On March 31, the National Computer Virus Emergency Response Center reported 71 mobile apps for illegally collecting personal information.
&nbsp;
<h2>Worldwide News</h2>
On March 11, Lotte Card was fined KRW 9.62 billion (about USD 6.5 million) by the Personal Information Protection Commission of South Korea (PIPC). The penalty followed a data breach in September 2025, which compromised the personal credit information of approximately 2.97 million users — including the resident registration numbers of 450,000 individuals. PIPC found that Lotte had committed critical security lapses, specifically storing users’ sensitive data in plaintext, processing ID numbers beyond authorized limits, and failing to implement encryption measures.
On March 5, FC Barcelona was fined EUR 500,000 (about USD 585,000) by Spanish Data Protection Authority (AEPD). The penalty followed the club's collection of facial selfies from approximately 143,000 members - classified as biometric data - during a member census update, with numerous material deficiencies identified in the Data Protection Impact Assessment submitted by the club.
Oklahoma Senate Bill 546 (SB 546) of privacy has been formally enacted and will take effect on January 1, 2027. The law applies to businesses operating in Oklahoma that either process personal data of over 100,000 consumers, or process data of at least 25,000 consumers while deriving most of their revenues from the sale of personal data. It grants consumers the right to access, correct, delete, and obtain copies of their personal data, as well as opt out of the sale of their personal data and certain targeted advertising practices.
On March 17, the Office of the Australian Information Commissioner (OAIC) released privacy guidance on age assurance technologies. Australia has prohibited children under 16 from registering social media accounts since December 2025, and in March 2026 further imposed age verification requirements on a wider range of online services - including chatbots, search engines and games - to shield minors from harmful content, driving a continuous surge in online age verification scenarios and demand. OAIC emphasized that age assurance must not serve as a “blank cheque” to use personal. The guidance requires platforms to first assess the necessity of age checks, adhere to the principles of proportionality and necessity, obtain clear consent when collecting sensitive information, improve privacy notices, and establish accessible complaints mechanisms. Failure to meet these obligations may still trigger compliance or enforcement action.

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<h2>Takeaways</h2>
<ul>
<li>The Cyberspace Administration of China (CAC) has issued the Announcement on Reporting Compliance Audit of Minors' Personal Information Protection, launched an online reporting system and published the filling instructions, with the reporting deadline confirmed as January 31 each year.&nbsp;This marks the official entry of China's compliance audit system for minors' personal information into the phase of regular implementation. Companies that provide products and services for minors and all-age audiences should actively assess their information processing practices and conduct audits as required.</li>
<li>The mandatory national standard Data Security Technology - Technical Requirements for Information Sanitization of Electronic Products has been released and will be formally implemented on January 1, 2027. The new standard requires electronic products to provide an irreversible information erasure function, covering user files, account passwords, encryption keys, etc. It also requires second-hand electronic product operators to fulfill the obligations of information erasure and verification. Manufacturers, third-party developers and recycling operators must strictly implement the standard.</li>
<li>The Ningbo Intermediate Court, Zhejiang has concluded a case involving the crawling of commodity data from e-commerce platforms, with the illegal web crawler service provider ordered to pay a high compensation of CNY 5 million (about USD 716,640).</li>
<li>EU has imposed a fine of EUR 120 million on the X in accordance with the Digital Services Act (DSA) for the first time. Vietnam has adopted the Artificial Intelligence Law to regulate data flows based on risk levels. The Trump’s Administration of the United States has signed an AI executive order, planning to formulate a unified federal regulatory framework with minimal compliance burden.</li>
</ul>
&nbsp;
<h2>Regulatory Highlights</h2>
<a href="https://www.cac.gov.cn/2025-12/29/c_1768735145606358.htm">CAC Issues Announcement on Reporting Compliance Audit of Minors' Personal Information Protection</a> Article 37 of the Regulations on the Protection of Minors in Cyberspace requires personal information processors to conduct compliance audits on minors' personal information either on their own or by entrusting professional institutions each year, with the results submitted to the competent prefectural-level cyberspace authority. On December 29, 2025, CAC issued the Announcement, officially launching an online reporting system and publishing the first version of filling instructions, and clarifying that the annual reporting deadline is January 31. This marks the official entry of China's compliance audit system for minors' personal information into the phase of regular implementation.
According to the original provisions of the Regulations on the Protection of Minors in Cyberspace, an objective judgment standard applies to the subjects obligated to perform compliance audits. Specifically, as long as a product objectively processes the personal information of minors under the age of 18—especially products directly targeting minors as their audience, all-age products without age restrictions, and products or services that process massive amounts of user information on a large scale—operating enterprises are recommended to promptly conduct business assessments to point out whether they involve the processing of minors' information. If so, they shall also clarify basic details such as responsible persons, handling personnel, usage scenarios, and processing scale, subsequently initiating compliance audit procedures and actively conducting risk rectification.
&nbsp;
<a href="https://www.cac.gov.cn/2025-12/13/c_1767269721368254.htm">CAC Issues the Mandatory National Standard Data Security Technology—Technical Requirements for Information Sanitization of Electronic Products</a>
On December 2, 2025, the mandatory national standard related to information erasure of electronic products was released and will be formally implemented on January 1, 2027. The Technical Requirements stipulate that electronic products shall provide users with either a built-in information erasure function or external erasure tools, covering all user data such as user files, applications, contact lists, account passwords, and encryption keys. The erasure shall be irreversible, rendering user data inaccessible and irrecoverable. Also, the Technical Requirements specify specific erasure technical methods for magnetic media and semiconductor media, including data overwriting, block erasure and others. Electronic product manufacturers and third-party erasure function developers shall carry out development in accordance with the Technical Requirements. In addition to those entities mentioned above, the Technical Requirements also clarify the personal information protection obligations of electronic product recycling operators, requiring them to perform information erasure on second-hand electronic products and verify the erasure effect before sale.
&nbsp;
<h2>Cross-Border Data Transfer</h2>
<a href="https://www.cac.gov.cn/2025-12/30/c_1768735664909127.htm">On December 30, 2025, CAC released a list of three professional institutions that have completed the filing for personal information outbound transfer certification.</a>&nbsp;They are: the China Cybersecurity Review, Certification and Market Regulation Big Data Center, the Data and Technology Support Center of CAC, and CESI Certification Co., Ltd. Personal information processors intending to provide personal information overseas via the certification mechanism may apply for personal information outbound transfer certification from the above-mentioned institutions.
<a href="https://www.tc260.org.cn/portal/article/2/3f38914c88dc4b0a8d98d9b8d1757615">On December 22, 2025, the National Technical Committee 260 on Cybersecurity of Standardization Administration of China (TC260) solicited public comments on the Cybersecurity Standards Practice Guide – Requirements for Cross-border Personal Information Processing and Protection in the Guangdong-Hong Kong-Macao Greater Bay Area (Mainland, Macao) (Exposure Draft).</a>&nbsp;The document clarifies the fundamental principles and specific requirements for the mutual recognition mechanism for cross-border personal information transfer between the Mainland and Macao within the Greater Bay Area, which was established under the cooperation memorandum confirmed by both sides in September 2024.
<a href="https://www.samr.gov.cn/zw/zfxxgk/fdzdgknr/rzjgs/art/2025/art_29a93fd6ae2b40d1b2ae15b8c028d0c7.html">On December 12, 2025, the State Administration for Market Regulation (SAMR) and CAC officially announced&nbsp;the new standard basis for the certification of personal information transfer.</a>&nbsp;It specifies that the standards for certifying the protection of personal information in cross-border processing activities are now GB/T 35273 Information Security Technology – Personal Information Security Specification and the new recommended national standard GB/T 46068 Data Security Technology – Security Certification Requirements for Cross-border Processing Activities of Personal Information, which was released on August 29 of last year.
<a href="https://www.fjwx.gov.cn/gs/20251225/3021854.html">Fujian Province issued the Measures for the Management of the Data Outbound Negative List in the China (Fujian) Pilot Free Trade Zone (for Trial Implementation) and the China (Fujian) Pilot Free Trade Zone Data Outbound Management List (Negative List) (2025 Edition),</a>&nbsp;covering four major industries: pharmaceuticals, internet of vehicles, retail, and aviation maintenance. It is worth noting that after companies in relevant fields submit filing materials such as their data outbound business scenarios and data outbound catalogues, each pilot free trade zone area will first review and provide feedback on whether the data falls within the negative list. Companies can then proceed with subsequent compliance work based on the feedback.
&nbsp;
<h2>Data Enforcement</h2>
<a href="https://mp.weixin.qq.com/s/FXITu8RCaE9ethBMgZLrlg">On December 8, 2025, the Guangzhou Intermediate People's Court in Guangdong Province concluded the first case involving the illegal trading of citizens' personal information for profit by utilizing IMEI code to match personal data.</a>&nbsp;Company A and five defendants, without user authorization, illegally obtained encrypted IMEI codes labeled with specific internet preferences from telecommunications Company B. Through technical matching, these codes were decrypted into plaintext mobile phone numbers and sold to downstream companies, resulting in illicit profits exceeding CNY 680,000 (about USD 97,700). The acts constituted the crime of infringing on citizens' personal information. The illegal gains were confiscated, and the defendants were sentenced to fixed-term imprisonment and fined according to law. Notably, Company A had originally engaged in DMP big data business with telecommunications Company B, agreeing that Company A would provide encrypted IMEI codes with users’ authorization, and Company B would match user internet preference labels from its database before returning the desensitized data to Company A. However, the transaction was ultimately not executed as agreed. In its public judgment summary, the Guangzhou Intermediate People's Court did not rule that the original data cooperation contract was illegal.
<a href="https://www.ipeconomy.cn/dongtai/10170.html">The Ningbo Intermediate People's Court in Zhejiang Province announced a first-instance judgment in an unfair competition dispute filed by Taobao and Tmall against eight defendants (including five companies and three individuals).</a>&nbsp;The eight defendants, without permission, used methods such as web crawling or user cookies interception to capture product data from the two platforms and provide paid services, constituting joint infringement and unfair competition. The court ordered them to immediately cease the infringement, jointly compensate CNY 5 million (about USD 717,500), and publish a statement to eliminate the negative impact.
<a href="https://mp.weixin.qq.com/s?__biz=MzI1MDE2OTEyNQ==&amp;mid=2651573265&amp;idx=1&amp;sn=6dc8cd969364130dfe63ebc1d6490525&amp;scene=21&amp;poc_token=HNp4YGmj9hot9CS3Oxb7YRhjyBGd7QWBRPSvBoLB">On December 1, the Cyberspace Administration and Market Supervision Department of Shanghai jointly released five typical cases of failing to fulfill personal information protection obligations.</a>&nbsp;These included instances where companies' inadequate security measures—such as unencrypted storage, failure to conduct cybersecurity level protection assessments, and insufficient log retention—led to data breaches. The cases also covered practices such as compulsory collecting personal information under disguised forms and illegally using consumer personal information for drug sales.
&nbsp;
————Mobile Application Regulation————
<a href="https://mp.weixin.qq.com/s/hQ8bOf5-_OpTRz5wt6EJGQ">On December 4, 2025, the National Computer Virus Emergency Response Center detected 69 mobile apps that illegally collected and used personal information.</a>&nbsp;The three most common violations included incomplete fulfillment of notification obligations, failure to provide convenient methods for withdrawing consent, and lack of security measures such as encryption and de-identification.
<a href="https://mp.weixin.qq.com/s/yRC9C2LeYNzStIweGFM9zw">On December 9, the Ministry of Industry and Information Technology (MIIT) reported 24 apps and SDKs that infringed upon user rights and interests.</a>&nbsp;These were found in frequently used sectors such as education and learning, health management, social entertainment, logistics and freight, and advertising tools.
<a href="https://mp.weixin.qq.com/s/PmNx9dfw1_b5Y1awJlsfVg">On December 29, the Public Security Ministry's Quality Supervision and Inspection Center for Computer Information System Security Product detected 54 mobile apps that illegally collected and used personal information.</a>&nbsp;Among these, 29 apps failed to disclose their rules for collecting and using personal information.
<a href="https://mp.weixin.qq.com/s/6vG3y7OPD8C_k9wy9nesEg">On December 17, the Shanghai Communications Administration announced the removal of 38 apps (SDKs) that infringed upon user rights and interests.</a>&nbsp;These 38 apps had been publicly identified as non-compliant in November 2025 but failed to meet rectification requirements within the given timeframe, leading to their removal by the Shanghai Communications Administration.
<a href="https://mp.weixin.qq.com/s?__biz=MzA3ODE0NDA4MA==&amp;mid=2649403493&amp;idx=1&amp;sn=21eca875262b8e80825146e5ae678902&amp;scene=21&amp;poc_token=HEt5YGmjbOZ7MyVMaMQXOuLztaJp2TVSZ62I4ptD">On December 23, the Cyber Security Association of China issued the Announcement on Releasing the List of Apps That Have Completed Optimization and Improvements in Personal Information Collection and Use (Sixth Batch of 2025).</a>&nbsp;Six apps, including Huazhu Club, Zhihu, and Tencent Meeting, have completed optimizations and improvements in accordance with the Cybersecurity Law, the Personal Information Protection Law and other laws and regulations. These improvements specifically addressed issues related to excessive collection of personal information, overuse of sensitive permissions, inconvenient permission settings, and difficulties in account cancellation.
&nbsp;
<h2>Industrial Support</h2>
<a href="https://www.nea.gov.cn/20251212/f8ee9d3f829641cb9cc4f1e9405e794a/c.html">On December 8, 2025, the National Energy Administration issued the Measures for the Security Management of Data in the Energy Sector (Trial),</a>&nbsp;which will come into effect on July 1, 2026. These measures classify energy sector data into three levels: general, important, and core, for management purposes.
<a href="https://mp.weixin.qq.com/s/637MVYQq-IZujYzud717Mw">On December 29, MIIT, along with three other departments, jointly issued the Implementation Plan for Digital Transformation in the Automotive Industry.</a>&nbsp;The plan prioritizes intelligent manufacturing as the main direction and sets two-phase goals: By 2027, digital and intelligent technologies are expected to be deeply integrated into enterprises' R&amp;D, production, supply, sales, and service processes, driving significant improvements in enterprise intelligent manufacturing maturity and production efficiency, while gradually establishing a robust industry supply and public service system. By 2030, the overall digital and intelligent development of the industry is expected to reach a high level.
&nbsp;
<h2>Worldwide News</h2>
<a href="https://curia.europa.eu/site/upload/docs/application/pdf/2025-12/cp250150en.pdf">On December 2, 2025, the Court of Justice of the European Union clarified that advertising platforms are considered data controllers for personal information contained in user-uploaded advertisements, such as the name, photo, and contact details of individuals referenced.</a>&nbsp;In accordance with the relevant obligations under the General Data Protection Regulation (GDPR), these platforms must verify before publishing advertisements that any included personal information either originates from the advertiser themselves or has been provided with the consent of the data subject. Additionally, they are required to implement appropriate technical measures to prevent those advertisements from being copying and unlawfully published on other platforms.
<a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_25_2934">On December 5, the European Union imposed a EUR 120 million fine on the X under the Digital Services Act (DSA),</a>&nbsp;marking the first non-compliance decision under the DSA. The penalty was issued for three violations of transparency obligations by X: first, its paid verification system grants account authentication badges without real identity verification, constituting deceptive design; second, its advertising database lacks transparency; and third, it fails to provide researchers access to public data. Additionally, the EU’s investigation into X's alleged dissemination of illegal content is still ongoing.
<a href="https://duthaoonline.quochoi.vn/dt/luat-tri-tue-nhan-tao/251009091536864496">On December 10, Vietnam officially passed the Artificial Intelligence Law,</a>&nbsp;which explicitly requires the regulation of data flows based on AI risk levels. High-risk systems must retain operational data logs. The law will officially take effect on March 1, 2026.
<a href="https://www.whitehouse.gov/presidential-actions/2025/12/eliminating-state-law-obstruction-of-national-artificial-intelligence-policy/">On December 11, the Trump administration signed a new executive order on artificial intelligence,</a> explicitly stating that a unified AI policy framework with minimal compliance burdens will be established at the federal level. This aims to prevent varying regulatory systems across states and excessive compliance burdens on enterprises, thereby avoiding the suppression of technological innovation. Additionally, the Trump administration will establish a new artificial intelligence litigation task force to challenge certain overly stringent state-level legislation and curtail the regulatory authority of individual states over technology.

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