On 31 August 2014, the Standing Committee of the National People’s Congress (NPC) approved a proposal to establish three specialised IP courts in Beijing, Shanghai and Guangzhou. The Decision marks the culmination of almost 2 decades of discussion regarding the establishment of special courts to handle IP matters, in particular, technically difficult patent disputes. On 3 November 2014, the Supreme People’s Court (SPC) has also released the “Provisions on the Jurisdiction of the IP Courts in Beijing, Shanghai and Guangzhou”. These clarify the jurisdiction of the three IP courts.

The passing of the Decision, following an expedited legislative process, is an indication of the Chinese Government’s commitment to the protection of IP, as well as to judicial reform. The Government has already indicated that it expects the new IP courts to be in operation by the end of 2014.

What are the Key Provisions?

  • ƒƒThe new IP courts will serve as the court of first instance for:
    • technically complex civil and administrative IP cases such as patents, new plant varieties, integrated circuit layout designs, technology secrets and computer software;
    • administrative cases arising from legal actions involving copyright, trade mark and unfair competition etc conducted by departments of the State Council or local people’s governments at county level or above; and
    • civil cases involving the recognition of well-known trade marks.
  • ƒƒThe Beijing IP court will have exclusive jurisdiction over first instance appeals against decisions of the IP Administrative Authorities such as the Patent Review Board and the Trade Mark Review and Adjudication Board.
  • ƒƒAn IP court's decision in these matters can be appealed to the higher court of the province or city in which the IP Court is located.
  • ƒƒThe IP Courts will serve as the appellate court for civil and administrative decisions made by local basic people’s court in copyright, trade mark and other intellectual property rights.
  • ƒƒThe SPC will be responsible for the structure, organisation and detailed implementation of the IP courts. The SPC has been given three years to report on the progress to the NPC.
  • ƒƒFor the first three years after their establishment, it is clearly provided that the IP Courts, in particular the Guangzhou IP Court, will have “cross-territorial” jurisdiction in the province or city in which the relevant court is located. However, it is envisaged that eventually “cross-territorial” jurisdiction will be extended to other provinces or cities.
  • ƒƒThe IP courts will be under the supervision of the SPC and the higher people's court in the place where it is located. The IP courts will also be under the legal supervision of the people's procuratorates.
  • ƒƒThe jurisdiction of the IP Courts will not extend to criminal matters.
  • ƒƒThe intermediate people’s courts of Beijing and Shanghai municipalities and the Guangzhou Intermediate People’s Court will no longer accept IP-related civil and administrative cases.

Key Benefits of Specialised IP Courts

The lack of IP expertise in any judicial system is a major obstacle to the effective enforcement of IP rights. China joins a growing number of jurisdictions that have created specialised IP courts. The benefits of having such courts include:

  • ƒCreating expertise - IP laws and technology can be complex. Having cases decided by experienced, specialist judges should result in higher quality decisions and greater consistency.
  • ƒƒEffectiveness and efficiency - A specialist IP court can make quicker and more effective decisions because the judges will be more familiar with the legal issues and technologies involved. This will save time and money.
  • ƒƒKeeping up with developments - Having specialised IP courts can help produce more knowledgeable judges and practitioners who can adapt to rapidly evolving IP issues and technologies.
  • Promoting the independence of the judiciary - The judges of a specialized IP court should have better training particularly on technical patent matters and should be more professional and autonomous.
  • ƒƒIndication of Governmental commitment - The establishment of specialised IP courts raises the profile of IP and signals the commitment of the Government to protecting IP rights.

The Jury is Still Out…

The Decision consists of 8 short articles and only sets out a high level framework for the setting up of the IP courts. The SPC provisions add a little more detail but many questions remain:

  • ƒƒThe jurisdictional divisions of the courts is complicated and it is not clear where some areas may fall e.g. cases involving computer software will be heard by the IP courts but other copyright disputes but will still be heard by a basic court in the first instance. However, copyright cases can often be as technically complex as patent cases.
  • ƒƒWhat does “technology secrets” mean? Is this distinct from confidential business information generally?
  • ƒƒThe Decision provides that the IP courts can hear appeals from the basic courts on copyright, trade mark and other intellectual property rights. What does this mean and what is the extent of the courts’ jurisdiction over other important IP-related areas such as unfair competition or issues arising under the Anti-Monopoly Law?
  • ƒƒWill the specialist IP courts result in more substantial awards of damages, or more robust interim protection measures, such as preliminary injunctions and evidence preservation orders?
  • ƒƒWill special rules and procedures unique to IP issues be established?
  • ƒƒWill the specialized IP courts function in a more independent manner than the IP tribunals? Local protectionism and political influence in IP adjudication are continuing concerns for foreign IP owners.
  • ƒƒAlso, it seems that except for trade mark cases involving the recognition of well-known status, the local basic people’s courts will be the court of first instance in most civil copyright and trade mark cases involving a foreign party; currently foreign parties normally initiate civil matters in the intermediate people’s court or higher. However, there is a lot of debate on this issue, and it is envisaged that further detailed guidelines will be made to specify whether or not the IP Court will be the court of first instance in normal civil copyright and trade mark cases involving a foreign party and the threshold for jurisdiction.
  • ƒƒThe selection of these three jurisdictions is not a surprise since between then they already handle the most IP cases in China. In Guangdong Province, it has been confirmed that the IP court will replace the IP division of the Guangzhou Intermediate Court which has been established since 1994. However, the jurisdiction of the Guangzhou IP Court will not extend to Shenzhen. The Shenzhen Intermediate People’s Court will still have jurisdiction over intellectual property cases in Shenzhen.

During the transitional period, generally, for cases which are accepted for hearing by the basic people’s courts in any of the provinces (or municipality directly under the Central Government) in which the IP courts are located, if such cases are not concluded prior to the establishment of the IP courts then they shall continue to be heard by the relevant basic people’s court. For cases which are accepted for hearing by the intermediate people’s court, with the exception of the Guangzhou Intermediate People’s Court, if such cases are not concluded prior to the establishment of the IP courts, then they shall continue to be heard by the intermediate people’s court.

  • ƒƒThe exclusive jurisdiction of the IP Courts may, to a certain extent, reduce a plaintiff’s choices of forum. However, a client may still choose to bring a technically complex patent case in a different court if it suits them for other reasons.
  • ƒƒThere is concern that the IP courts in fact have no power to deliver final judgments in what are meant to be technically complex cases. The decisions of the IP courts can be appealed to the higher court which could mean that their ability to ensure consistency in IP jurisprudence may be limited.

The way forward

Clearly, in spite of the details that need to be ironed out, the establishment of the courts is a welcome sign that China is intent on judicial reform and improving IP enforcement as well as promoting the development of technological innovation in China. Further judicial interpretations are expected soon and it is rumoured that jurisdictional monetary thresholds may be introduced. We will report on further developments as soon as they are available.