In December 2014, the Chinese State Council’s General Office issued the Action Plan for Deepening the Implementation of National IP Strategies (Guo Ban Fa (2014) No. 64), which outlines the major targets and action items for promoting the country’s intellectual property capabilities between 2015 to 2020. This article tracks the notable legal developments in 2014 to see where China currently stands in this important area.

New regulations governing employees service inventions and Revisions to the PRC Patent Law

In March 2014, the State Intellectual Property Office (“SIPO”), the state organ in­charge of coordinating the nationwide protection of IPRs and the administration of patent protection, issued the Draft Regulations on Employees Service Inventions for public comments. These new regulations build on and supplement existing provisions scattered in the PRC Patent Law (2008), the New Plant Varieties Protection Regulations (2013) and other relevant regulations. They follow the principle of “freedom of contract” and allow Chinese companies and employees to agree between themselves the relevant matters (eg who owns a service invention, the amount of remuneration and the means of payment) by means of either a specific agreement, or through a company’s internal rules and policies (after consultation with the employees).

In the absence of express agreements or rules, the statutory remuneration requirements will apply. For example, for every service patent invented, an employee should be paid 200% of the average monthly salary of all employees in the company. That represents a significant increase from the RMB 3,000 amount provided under current regulations. In addition, the draft regulations also provide for a reporting system, through which an employee inventor can report an invention to the company and state whether he considers it to be a service invention. Such report will trigger the company’s obligations to protect the invention and/or reward the inventor. Although the new regulations have yet to be passed by the State Council, companies operating in China ­ especially those focus on technical innovations – should take them into consideration in planning and setting up their rules and policies for service inventions.

On a related note, the draft revisions to the PRC Patent Law (2008) submitted for approval in 2013 are still waiting for review by the National People’s Congress, which normally will announce its annual schedule of legislative work for the current year around April.

Revised Trademark Law

The third round of amendments to the PRC Trademark Law started in 2003 and had taken 10 years to complete

– the new law finally came into effect in May 2014.

The revised PRC Trademark Law expands the registrable subject matters to include sound. China followed the trend since sound mark has been registrable in many other countries. Meanwhile, the revised law allows multi­ class application, so that applicants no longer have to file multiple applications when they apply to register one mark under different classes. Together with the new way of filing – electronic filing – Chinese trademark applications are expected to be more efficient.

What also helps to speed up the registration process is the introduction of statutory time limits, eg 9 months for examination on preliminary approval and 12 months for investigating an opposition application. Time­limits relating to invalidation and cancellation proceedings are also stipulated in the revised Trademark Law.

The opposition procedure has also been streamlined. The parties eligible to file an opposition on relative grounds are limited to the owners of prior rights and interested parties. The previously available appellate procedure has been abolished ­ if an opponent’s application is rejected, he can only file for invalidation after the disputed mark has been registered (instead of stalling the registration by appealing against the rejection). These changes likely will reduce bad faith opposition, shorten the opposition timeframe and force the opponents to prepare their cases better.

The regime for the protection of “well­known” trademarks has been in place in China since 1996. It recognizes and protects unregistered well­known trademarks, as well as giving cross­class protection to registered well­ known trademarks in disputes. Under the revised PRC Trademark Law, any claim for the “well­known” status will be decided on a “case by case” basis under the “passive protection” approach. That means a trademark can only be recognized and protected as a “well­known” mark when a PRC court, TRAB or the PRC Trademark Office handles a trademark dispute and the recognition will only be effective for that particular case in dispute. The relevant provisions also prohibit the trademark owner from including references to a trademark having the “well­ known” status on goods, packages or containers of goods, or in advertising, exhibiting or any other business activities.

Draft Copyright Law

In June 2014, the draft amendments to the PRC Copyright Law (2010) were published for public comments. The draft amendments introduce a new category of “works of applied art” and consolidated the existing 17 copyrights into 13. Similar to the proposed patent law revisions, enforcement measures is a major area of focus. For instance, the cap of administrative fines will be increased from RMB100,000 to RMB250,000, and a copyright owner will be able to select the basis for determining the amount of damages amongst actual losses, illegal gain of the infringer, reasonable multiples of license fees or an amount below RMB1,000,000.

The “QQ” trademark battle between Tencent and Chery Automobile

Tencent, one of the biggest internet service providers in China, finally lost its “QQ” trademark in class 12 (“disputed trademark”) for goods covering autos in September 2014 when the Beijing Higher People’s Court upheld the PRC Trademark Review and Adjudication Board (“TRAB”)’s decision to revoke the disputed mark’s registration. TRAB did so upon the application by Chery Automobile Co., Ltd., who asserted that the “QQ” brand was already an established brand for its famous “QQ” car before Tencent applied to register the disputed trademark.

The “QQ” car has certain reputation in the car industry and Tencent, as a famous internet service provider, should have known this fact, the Beijing High Court so ruled. In other words, Tencent was held to have used illicit means to register the disputed trademark with bad faith and infringed Chery’s existing prior rights.

There is also an argument raised by Tencent that its “QQ” mark is a well­known trademark in class 38 for services such as information transmission and computer terminals, and therefore should be protected cross­class. The conflict between cross­class protection for a well­known trademark and an existing prior right can be balanced from the different industries the trademarks are used for. In this case, customers are not likely to confuse Tencent’s “QQ” mark with that of Chery since these two trademarks are used in completely different industries, ie, internet service and cars respectively. Therefore, the cross­class protection for a well­known trademark is not a strong argument for Tencent.

Establishment of specialized intellectual property courts

If the above case happened more recently, it could have been adjudicated by a completely new court. China’s legislature approved the establishment of specialized IP courts in Beijing, Shanghai and Guangzhou in August 2014. Subsequently, the Supreme People’s Court issued regulations regarding the appointment of intellectual property judges and the jurisdiction of the IP courts in October 2014.

The IP courts have jurisdiction to hear:

  • first instance civil and administrative cases related to patents, new plant varieties, layout design of integrated circuit, technology secrets and computer software;
  • first instance judicial appeals against administrative decisions involving copyrights, trademarks, unfair competition, etc.;
  • first instance civil case regarding the recognition of well­known trademarks.

The IP courts can also hear appeal from civil and administrative IP cases rendered by basic people’s courts. The Guangzhou IP court even has cross­regional jurisdiction to hear cases over the entire Guangdong Province.

Appeals against judgments from the IP courts will be heard by the Higher People’s Courts of their respective, which is evident of the new IP courts status as intermediate courts. These three IP courts are expected to make judicial disposal of IP cases more consistent and the efficient in the relevant regions – previously, 13 intermediate courts in these three regions all have the power to hear first­instance patent cases. The parties may, by written agreement, subscribe to the relevant IP court’s jurisdiction provided the court chosen is connected to the dispute, such as the infringer is registered in or the infringing act is committed within the relevant locality.

Another highlight for the new IP courts is the more stringent eligibility requirements for appointment as judges. Whereas a judge with two years of work experience is eligible for appointment to an ordinary intermediate court, the new courts require their judges to have at least six years of experience in adjudicating IP cases. Furthermore, since the new courts will mainly focus on patent cases which often involve technical knowledge, the Supreme People Court has committed to train technical investigation officers to provide judges with professional technical support.

In keeping with the “China speed”, the Beijing IP court already heard its first case on 16 December 2014.

New judicial interpretations on network infringement

The “safe harbor rule” is an effective tool for Internet Service Providers (“ISPs”) to defend themselves so that, as long as they take appropriate measures in response to complaints by aggrieved IPR owners, they generally are not liable for infringements caused by infringers using their network services. However, if the ISPs fail to take remedial actions promptly, they will have joint and several liabilities for the additional losses resulting from the delay.

The China’s highest court issued the Regulations on Certain Issues Concerning the Application of Law in the Hearing of Cases of Civil Disputes over the Use of Information Networks to Infringe upon Personal Rights and Interests, which came into effect in October 2014, to clarify several practical aspects of the safe harbor rule.

Firstly, they specify the information that IP owners have to lodge for the purposes of notifying ISPs about infringing articles, including the names of IP owners, the information regarding the infringing articles and the reasons. Upon receipt of such notice, the ISPs will have to delete, block or disconnect the subject articles promptly.

The new regulations also list the objective factors to consider for determining whether the ISPs have taken remedial measures “promptly” and whether the ISPs have “knowledge” of the infringement. For instance, an ISP will be more likely to be imputed with “knowledge” if it manually processes a series of TV drama and recommends the TV series on its front page, the infringement is of a more damaging nature and severe extent, or if the infringement creates a more extensive social impact or a more substantial online traffic, etc.

Other than the safe harbor rule, the new regulations cover many other important issues, such as the potential liability for network users when they re­post infringing materials and for defaming business operators.

Illustrative IP cases

Along with the judicial interpretations noted above, the Supreme People’s Court (“SPC”) released eight “illustrative cases” concerning network infringement of personal rights. The SPC issued such illustrative cases almost every month in 2014, covering criminal cases, consumer protection and trials regarding juveniles, etc. In its Regulations on Case Guidance (2010), the SPC defines “illustrative cases” as decided cases that receive extensive attention from the general public, involve fundamental legal provisions, have illustrative effects, involve difficult/complicated or innovative legal issues, and have been selected and approved by the SPC for publication as such. Although technically these illustrative cases do not constitute a source of law in the Chinese legal system, the People’s courts at all levels are expected to follow them when adjudicating similar cases.

In one of the eight illustrative cases mentioned above, the SPC explained that ISPs should not be presumed to know about an infringement merely because the actual occurrence of an infringement. Therefore, in a similar case a court cannot find an ISP liable only because infringement already occurred on the internet. This also supplements the judicial interpretations on whether an ISP may be fixed with “constructive knowledge” of an infringement.

Yuan Zhuang