China, the world’s second largest economy, has become a top destination for Intellectual Property (IP) protection and with the recent establishment of courts dedicated to intellectual property matters in Beijing, Shanghai and Guangzhou, the country is rapidly emerging as a leader in the world of IP. In this article, first ion a series of articles, we examine statistics that reflect the growing recognition of the value of IP in China and provide an update on the new IP courts.
The recent establishment of dedicated IP courts in Beijing, Shanghai and Guangzhou, represents an acknowledgement of the growing recognition of the value of IP in the rapidly growing Chinese economy and among both foreign and domestic companies doing business in China. And indeed, the recent decade saw a dramatic rise in filing of applications for patents and trademarks. In fact, in 2014 – a year that saw the country’s numbers of patent applications increase by more than tenfold over a decade prior – China had the highest number of patent applications worldwide. As the IP courts in Beijing, Shanghai and Guangzhou begin setting precedent, it will be important for businesses with a presence or intention to do business in China to stay abreast of the latest developments.
Applications for Registering IP rights in China are on the Rise
Patent filing in China has increased significantly in recent years. In 2000, China’s State Intellectual Property Office (SIPO) received 26,445 foreign and domestic invention patent applications – placing it in sixth globally in terms of number of filings. In 2010, China reached the number one ranking with more than 293,000 filings. In 2014, that number swelled to over 928,000. The most prevalent technologies for which patent protection is sought are: electrical machinery, computer technology, and digital communication.
Chinese trademark, copyright and industrial design applications have increased dramatically as well – although not quite at the same rate as patent filings. Trademark filings increased from roughly 188,000 to more than one million between 2000 and 2010, before ballooning to more than two million applications in just the first nine months of 2015. Over the same time period, industrial design applications grew from less than 50,000 to nearly 700,000 from domestic and foreign filers combined. The National Copyright Administration received approximately 2.83 million applications from 2011 through 2014, with preliminary numbers suggesting a steady filing rate in 2015.
China’s New IP Courts are Open for Business
As we have previously discussed, in October 2014, the Supreme People’s Court (“SPC”) issued regulations establishing three new courts dedicated to hearing civil and administrative intellectual property cases. The intellectual property courts are staffed with some of the country’s judges most experienced in IP matters; and, interestingly, the SPC’s regulations also call for the appointment of investigators who will assist the courts’ judges in addressing the technical aspects of complex patent and other cases. The specific role of these investigators and the weight to be afforded to their opinions remains to be seen.
The IP courts have been granted exclusive jurisdiction over certain more-complex matters, and appellate (or intermediate) jurisdiction over run-of-the-mill cases that will continue to be heard in the general courts. The Chinese IP courts’ areas of original jurisdiction are:
- Cases involving complex technology patents, technical trade secrets, computer software, plant varieties and semiconductor layout designs;
- Cases involving well-known and famous trademarks; and,
- Administrative review of decisions relating to copyrights, trademarks and unfair competition made by certain government agencies.
The Beijing IP Court has also been granted exclusive jurisdiction over administrative appeals from the Trademark Review and Adjudication Board (“TRAB”) and Patent Review Board (the “PRB”). While the Beijing court has already taken on a large caseload, a significant portion of its cases involve TRAB and PRB appeals.
With its exclusive jurisdiction over TRAB and PRB decisions, the Beijing IP Court is likely to be of greatest interest to foreign firms doing business in China, although the IP Courts in Shanghai and Guangzhou will be of interest to those doing business there.
IP Litigation Activity in the Chinese Courts is Increasing as Well
Along with the increase in applications for registering IP rights, court filings involving IP matters in China are on the rise as well. From 2010 to 2014 the number of civil and administrative cases filed in China has increased from 42,931 to 105,440. The vast majority of these cases – more than 95,000 in 2014 – are civil lawsuits involving allegations of infringement and other commercial disputes. The number of IP suits in China far exceeds that in any other country.
While nearly two-thirds of all civil IP-related cases filed in 2014 involved copyrights, more than 90 percent of all administrative cases involved trademarks. The large number of trademark litigation, which is in line with the huge number of trademark applications, as well as and that of copyright-related litigation can be attributed to the prevalence of counterfeiting and misappropriation of IP rights in China and also suggests that owners of IP rights are nor reluctant to protect their rights. Patent cases accounted for just ten percent of IP-related civil lawsuits, and just five percent of all administrative proceedings. It is to be noted that a large percentage of the patent cases are infringement cases filed by non-Chinese. It is also important to mention that foreign IP rights holders prevail in about 70% to 80% of the infringement cases filed by them.
As for the new IP courts, between November 2014 and April 2015, approximately 3,200 cases were filed with the Beijing IP Court. Roughly ten percent of these cases have been decided. The Shanghai IP Court accepted 300 cases between its opening on January 1, 2015 and the end of March 2015 and the Guangzhou IP Court received more than 1,200 cases between its December 21, 2014 opening and the end of March 2015. At least 199 of these cases has been decided, most of them involving trademarks.
China, the second largest world economy, has a government-set strategic goal to convert the Chinese economy into one in which growth leans heavily on IP and thereby become a center of world innovation in strategic important fields. This is echoed in the very large volume, second to none, of applications for the registration of various IP rights. This strategic goal has also led to the remarkable advances we have witnesses in recent years. While there is still room for progress, the current IP regime already stands in par with many Western economies.