Zhonglin He, Bangkok[1]

I  The Development of the Chinese Intellectual Property Law

The idea of conferring a market monopoly as an incentive to innovate has old roots.[2] Patents, trademarks and copyright are the major classifications of IP throughout the world. IP protection has been developed more than three hundred years in the western world, and the relevant legal system has already been quite advanced. On the other hand, the history of a relatively complete IP protection in China has been in existence for no more than thirty years. However, the Chinese IP legal system has already caught up with international standards, regardless that some people may urge that the enforcement of IP laws still needs to be effectively strengthened.

It was well-known that, in very ancient China, one of the oldest Chinese great contributions to the human civilization was type printing, which permitted a system for publication or type-setting of a particular book. The Chinese practice of using proprietary symbols and marks to distinguish goods in commerce and to identify the source of goods dates back to at least the Han Dynasty (206 BC - AD 220).[3] It is often cited as the earliest known example of a trademark in China in which a mark with a 'White Rabbit' image was used by Liu family to identify sewing needles produced at their shop in Jinan, Shandong province of eastern China, during the Sung Dynasty (AD 960-1279).[4] However, unfortunately, all those achievements did not lead to a modern system of intellectual property.

Prior to the twentieth century, essentially all efforts by the Chinese state to provide protection for IP concerned the protection of imperial power. [5] It was not until the 1900s that the modern legal system was eventually introduced into the country which was triggered by the movement called "Legislation in the end of the Qing Dynasty" (1902-1911)[6] and IP laws dealing with the interests of persons and entities other than the state was then enacted.

Precisely, it was since the late 1970s that the modern legal system including the IP law system has been continuously and effectively enforced in China. Before 1949 when the People's Republic of China was established, there did exist a couple of IP statutes promulgated by the Nationalist Government (i.e., so-called Kuomingtang Government), but they were cancelled by the shift of government. After the founding of the P.R. China, the new government issued some regulations to protect copyright and trademarks. Unfortunately, all these efforts for establishing a modern IP system in China came to a standstill after 1957, especially during the Cultural Revolution from 1966 to 1976.

Since 1978, China adopted a remarkable policy known as "the policy of reform and opening up" and started to set up an overall modern law system including IP law system. China began re-drafting its IP laws in the late 1970s as a response to new policies geared towards modernizing science and technology, towards developing a market economy and attracting foreign investment, and in response to a need for enhancing the position of intellectuals in China after the Cultural Revolution.

Since the early 1980s, Chinas has taken active and continuous steps to develop a comprehensive IP framework governing trademarks, copyright, patents, etc. There were roughly three major IP legislative campaigns in the past two decades. The first step was taken from 1982 to 1984 when the Trademark Law and the Patent Law were enacted. At the second stage (between 1990 and 1993), the Copyright Law was passed into force and the Trademark Law and the Patent Law were revised under a political pressure mainly from the United States. The latest fundamental changes of the Chinese IP laws were occurred only before the accession to the World Trade Organization (WTO) on December 11, 2001. The three major IP laws and other regulations concerning the matter of IP were all amended according to the rules set in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement).

So far, China has acceded to most international IP-related conventions and treaties and incorporated basic requirements of these conventions and treaties into its domestic laws. China's IP regime now provides a broad range of protection, besides the conventional IP rights, also including, inter alia, the protection of computer programmes, audio and video products, New Varieties of Plant, layout of integrated circuits (topographies), domain names, internet and enterprise names, trade secrets, etc.

The Chinese IP legal system is quite similar to the Civil Law system, as a result that the Chinese modern legal system has been essentially influenced by the Continental Law theories and legislative models. For example, the German Patent Law has huge impact on the Chinese Patent Law. Nevertheless, the judicial practice, to some extent, differs from the European continental countries.

With each trade-related confrontation, particularly those involving the United States during the early and mid 1990s or even the last two years, China has made great efforts to develop a more transparent and strong legal system. Specialized tribunals handling IP cases have been established in all Higher Courts of provinces and most Intermediate Courts of provincial capital cities and economically advanced cities. A wider range of legal remedies for IP violations is now available, including increased fines, statutory damages, injunctive orders and prison sentences of up to seven years for egregious counterfeiters.

The government is now making further efforts in enhancing the enforcement of law and the public is more aware of the importance of intellectual property protection. The Special Campaign for Protection of IPR was launched by the central government in August, 2004, to crack down the rampant piracy and counterfeit in some areas and industries, and will last at least till the end of 2005. The State Council set up a standing working organ - the National Working Group for IP Protection - in 2004, to coordinate the various IP administrations. The Judicial Interpretations on IP Crimes which were issued jointly by the Supreme People's Court (SPC) and the Supreme People's Procuratorate in the end of last year, prominently reduce and further clarify the standards for constituting IP crimes. Now it is much easier to put IP infringers in jail than before. To fundamentally strengthen the IP system, the National Strategy of IP is under drafting. An important research project on improvement of the judicial system for IP protection is currently undertaken by the SPC. All in all, the future development of IP protection in China should be promising.

II  The Institutional and Legal Framework for Protection of Intellectual Property in China

In a broad sense, the IP legal system comprises two major aspects. One is the procurement of intellectual property rights (IPRs), namely, the recognition,[7] granting and maintenance (or revocation) of IPRs. And the other is the enforcement of IPRs, i.e., mainly dealing with infringements.

1. Acquisition and Maintenance of IPRs

As far as the procurement of IPRs is concerned, it is a common practice in the world that the central government rather than local authorities exercises the power of granting IPRs. However, unlike many countries which centralize the administrative power in a single governmental agency, the current framework in China is quite a complex. There are many separated authorities under the China's Central Government (the State Council) holding the granting power in terms of different categories of IPRs. The State Intellectual Property Office (SIPO), the State Administration for Industry & Commerce (SAIC) and the National Copyright Administration (NCA) are three major IP organs that have exclusive authority to administer respective matters relating to patents and integrated circuits, trademarks and trade names, and copyright. More precisely, the Patent Office and the Patent Re-examination Board (PRB), which both were set up by the SIPO but independent to each other, are in charge of granting and maintenance (i.e., revocation) of patent rights respectively. Similarly, the Trademark Office and the Trademark Review & Adjudication Board (TRAB), which are independently divisional parts of the SAIC, are responsible for the granting and maintenance (i.e., opposition & cancellation) of trademark rights respectively. The NCA administers the voluntary registration of copyright. Besides the three major agencies, the Ministry of Agriculture and the National Administration of Forest also practice the exclusive power for granting and maintenance of rights of new variety of plant.

In China, all disputes concerning the validity of IPRs should initially go to the corresponding re-examination boards, before being brought as administrative lawsuits before a specific court - the No.1 or No.2 Intermediate Court of Beijing, and may be finally concluded in the Beijing High Court which will be acting as a court of appeal. Before 2001, there was no judicial review for cases involving granting or maintenance of utility model patents, design patents and trademarks, i.e., decisions made by the re-examination bodies were final. There does not exist such question of validity in the cases in relation to copyright, trade secrets, goodwill, domain name on the Internet and special name, package and decoration of well-known commodity.

2. The Mechanism of IP Enforcement

1) Two Parallel Approaches - Judicial and Administrative

In terms of the enforcement of IP, again, unlike most jurisdictions where civil cases are normally dealt with by courts, arbitrators and mediators, China has set up a quite unique model by which, besides the judicial approach, IP infringement cases can also be proactively or passively dealt with by designated IP administrations. Such unique device is called “The Way of Two Legs” which is a Chinese idiom. This special model was firstly set up for patent cases in 1985 when the first Patent Law came into force. Eventually it has covered all kinds of IP case.[8]

The designated IP administrations involving in dealing with IP infringements are as follows:

• State Intellectual Property Office (SIPO) and local IP (Patent) Administrations in provincial capitals and coastal open cities for patent cases;
• Administration for Industry and Commerce (AIC) at all levels above county (SAIC and local AICs) for cases of trademark, trade name and unfair-competition;
• Agricultural Administrations (provincial AAs and the Ministry of Agriculture) and Forest Administrations (provincial FAs and the National Administration of Forest) for cases of new varieties of plant;
• State Intellectual Property Office (SIPO) for cases of integrated circuits;
• National Copyright Administration (NCA) and local Copyright Administrations at provincial level and in big cities for certain copyright cases.

Other administrations may also involve in dealing with serious IP infringements, such as the Customs General Administration and local Customs, the Ministry of Public Security (MPC) and local Public Security Bureaus (PSBs), the General Administration of Quality Supervision, Inspection and Quarantine of the State (AQSIQ) and local Technical Supervision Bureaus (TSBs) and the Ministry of Culture (MC) and Culture Bureaus (CBs), etc.

According the relevant IP laws, the designated administrations should, without request of the IPR owners, actively investigate and decide on administrative punishment (administrative liability) against serious IP infringement cases including those involving piracy, counterfeiting or with other nature which harm the public order. On the other hand, except for copyright, the IP owners can initially choose to where they will bring an action - court or IP administration. The IP administration has the power to order the infringer to stop infringing act immediately, but has no power of making decision on damages. If the party concerned is not satisfied with the decision, it may, within 15 days from the receipt of the notification of the order, institute legal proceedings to the court against the IP administration, according to the Administrative Procedure Law. The administration may, upon the request of the parties concerned, mediate on damages. If the mediation does not work, the parties may lodge an infringement civil lawsuit with the court according to the Civil Procedure Law. The administrative and civil lawsuits can be concurrently brought to courts.

The various IP administrations have so far handled a great amount of IP cases. The local patent administrations have dealt with nearly one third of the patent infringement cases. According to the statistics, from 1985-2004, local patent administrations have docketed 8,755 cases related to patent infringement, whereas 18,654 patent infringement disputes were handled by courts. With regard to trademark, about 20,000-30,000 cases were dealt with by local AICs per year. In 2003, the AICs across the country investigated and decided 26,488 trademark infringement and/or counterfeiting cases, whereas only 926 trademark infringement cases were handled by courts. Most copyright infringements were tried by courts (4,264 in 2004), but major piracy cases were generally handled by local copyright administrations (23,013 in 2003).

Nevertheless, courts certainly play a vital role in IP protection and hold the power of final decision-making for all cases. There are three kinds of litigation in courts, namely, civil litigation, administrative litigation and criminal litigation, respectively corresponding to three procedural codes, namely, the Civil Procedure Law, the Administrative Procedure Law and the Criminal Procedure Law respectively.

Based on the nature of a case and the approach the right owner will choose, an IP case may be brought to the court under different action forms. In a civil action, generally, the IPR owner is plaintiff and the alleged infringer is defendant. For an administrative litigation, i.e., a judicial review case, the administration which has handled the infringement and made the decision is always the defendant and parties of the dispute, i.e., the IPR owner and the alleged infringer, are respectively the plaintiff or the third party. As to a criminal case, the prosecutor is the plaintiff and the alleged infringer is the accused. The different actions concerning a same infringement can be launched separately or simultaneously. (As to the basic procedure of administrative litigation, see Appendix 1)

In China, one always needs to bear in mind that in an IP infringement, the infringer may be ordered to exclusively or concurrently bear three categories of liability, –namely, civil, administrative and criminal liability. The civil liabilities for IP infringement normally include cessation of infringements, compensation for losses, elimination of ill effects and dangers, and making apology. Administrative liabilities are ordered by administrations upon IP infringers including immediate cessation of infringing act, confiscation, destruction of infringing goods and tools specially used for manufacturing the infringing goods, and fine. Offenders committed IP crimes may be punished with imprisonment of no more than 7 years or criminal detention[9] along with a fine, or a separate fine. Among the above, the administrative liability is less common around the world.

Notably, according to the Article 134.3 of the General Principles of Civil Code of China, when hearing civil cases, in addition to imposing civil liabilities upon infringers, the court may also take civil penalty measures, such as serving admonitions, ordering the offender to sign a pledge of repentance, and confiscating the property used in carrying out illegal activities and the illegal income obtained therefrom. It may also impose fines or detentions as stipulated by law.

2) IP Civil Protection

The hierarchy of the Chinese court system consists of four tiers of courts. The Supreme People's Court (SPC) is the highest judiciary of the state. Its IP Division was founded in October 1996 and changed the name to the No.3 Civil Division in October 2002. Generally, the Division deals with around 100 to 200 IPR cases per year inclusive of about 10 to 30 second instance cases.

China does not have a Patent Court or an IP Court specifically dealing with all patent or IP civil cases. Since 1993, Chinese courts have made positive efforts on establishing special trial chambers of IP.  In the year of 2000, China launched a modest judicial reform. In the light of the guidelines of the reform, all High Courts, Intermediate Courts in all provincial cities and many big cities, and even a few District Courts have set up a special and independent division – namely, No.3 (or No.5) Civil Division, to exclusively deal with all IP related civil cases and some administrative cases. However, many scholars and practitioners including judges are inclined to set up separate IP court other than the IP divisions under the general fora.

The scope of civil judicial protection of IP covers infringements of all IPRs, unfair competition (including trade secret), technology contract disputes and non-infringement declaration. From 1985 to 2004, there were totally 69,636 first instance IP civil cases dealt with by courts. The annual number of IP civil case has increased steadily by more than 10-20% or so. In 2004, the court accepted 9,329 first instance IP civil cases.

The jurisdiction over IP infringements is generally limited to the intermediate courts. The jurisdictional power in relation to patent, plant variety and integrated circuits cases is more strictly limited to those experienced and specifically designated intermediate courts.[10] As for trademark, copyright, unfair competition and technology contract cases, general intermediate courts have the jurisdiction.[11]

The time period and costs for IP civil actions vary in different proceedings. Under the Civil Procedure Law,[12][13] PRC domestic cases at first instance should generally be concluded within 6 months from the date of filing, but may be extended another 6 months under special circumstances. Cases at second instance should generally be finalized within 3 months but the time limit may also be deferred under special circumstances. In practice, the trials of most IP cases can be finished within 6 months in first instance and 3 months in second instance respectively. Generally speaking, the time and costs of IP litigation required in China is less than in many other countries. As for cases involving foreign factors, such as involving foreign parties or disputed assets located outside China, there is no such time limitation explicitly stipulated in law, but in practice, will generally be concluded in a quite reasonable term.

However, the trial of patent infringements may go beyond a modest  time period, since a number of defendants may lodge a counterclaim against the validity of the patent requesting for protection, which may  lead to a suspension of the proceedings till the invalidation claim is concluded. The SPC has taken some measures to resolve the problem with the issuance of two judicial interpretations in 2001 regulating the discontinuation of action.

The lengthiness of the term of litigation is the prevalent problem faced by courts worldwide. Statistics show that most civil cases in China were concluded within statutory period and cases exceeding the prescribed period just cover a small percentage. In this regard, compared with many countries, the efficiency of litigation in China is relatively higher or at least, not very low. It does not seem to demonstrate the true story that some people complained about the long and tedious legal procedure in China.

The procedural rules of general proceedings for IP civil litigation are provided by the Civil Procedure Law. They are quite similar to general civil cases and also to many other countries. However, two special issues should be emphasized, i.e., pre-trial provisional measures and calculating compensation, which are probably the most concerned issues by parties in addition to preventing an alleged infringement to continue. I will introduce these two aspects in separate papers (See Appendices 2 & 3).

3) IP Criminal Protection

The 1997 Amendments of the Criminal Code of the PRC define seven kinds of crime in relation to IP:

    Article 213  Crime of counterfeiting the registered trademark;

    Article 214  Crime of selling merchandise under a faked trademark;

    Article 215  Crime of forging or manufacturing representations of the registered trademark without authorization or selling such presentations;

    Article 216  Crime of counterfeiting the patent (maximum 3 years imprisonment);

    Article 217  Crime of infringing the copyright;

    Article 218  Crime of selling the infringed duplicate works (maximum 3 years imprisonment);

    Article 219  Crime of infringing the trade secret.

(Article 220  Corporate crime[14])

Like many countries, there are no criminal sanctions for general patent infringements.

Offenders committed IP crimes may be punished with imprisonment of no more than 7 years or criminal detention[15] along with a fine, or a separately imposed fine.

According to the Criminal Procedure Law (1996) and relevant judicial interpretations, the claimant may report a suspicious IP crime to the police to lodge a following public prosecution. The administrations which actively or passively investigate and handle IP infringements shall hand over the cases to the police as long as the infringers are suspected to have committed IP crimes. Alternatively, except for the crimes that seriously harm the social order or national interests and shall be prosecuted by procuratorate, a simple way is private prosecution in which the victim directly brings a criminal lawsuit or a civil lawsuit collateral to criminal proceedings to court.

Moreover, in light of the Criminal Procedure Law, generally the primary court (lowest court) deals with IP criminal cases (by its Criminal Divisions) and the intermediate court will deliver the final decisions.

From 1998 to 2004, there were 2,076 IP criminal cases concluded by the courts in first instance, among which, the majority is related to trademark crimes.

Just in the end of the year of 2004, the SPC issued remarkable Judicial Interpretations on the matters of IP crime to significantly lower down the thresholds of punitive sanctions. Tougher penalties against IP criminals will be imposed. It is a strong signal showing that the Chinese government is actually strengthening the enforcement of IP law and the IP protection will be continually enhanced in future.

3. The IP Legislation of China[16]

China became a member of the World Intellectual Property Organization in 1980. Up to the end of 2004, China has joined 17 IP international conventions and treaties, such as Paris Convention, Berne Convention, Madrid Agreement and its Protocol, Universal Copyright Convention, Phonograms Convention, Patent Cooperation Treaty, UPOV Convention, Washington Integrated Circuits Treaty and TRIPs Agreement, etc. China has not yet acceded to Rome Convention and the WIPO's two Treaties (WCT and WPPT).

The legislation in China consists of national laws (i.e., constitution and laws which promulgated by the National People’s Congress & its Standing Committee and have highest binding force), administrative and local regulations (laid down by the State Council and the Provincial Congresses), rules and measures (issued by the central governmental agencies and local governments), as well as judicial interpretations (stipulated by the Supreme People's Court and the Supreme People's Procuratorate). Each form of legislation has its own function, but only the national laws, regulations and judicial interpretations have binding force to the courts and the rules and measures can be referred when making court decisions. Correspondingly, the Chinese IP legislative framework comprises of a series of laws, regulations, rules at different levels as well as judicial interpretations.

The Constitution (1982) does not expressly grant protection to IPR in China[17]. However, Articles 94-97 of the General Principles of Civil Code (GPCC, 1986) clearly grants IPRs to owners of copyright, patents and trademarks. Under the GPCC, the legal framework for protecting IPRs is built on three national laws, namely the Trademark Law, the Patent Law and the Copyright Law. Based on the three laws, there are a number of regulations, rules and measures and policies for implementing or specifying relevant affairs. Each of the three major IP laws has its Implementing Regulations. Another three regulations are also very important for IP protection, i.e., the Regulations for Protection of Computer Software (2001), Regulations for Protection of New Varieties of Plant (1997), Regulations for Protection of Topographies of Integrated Circuits (2001).

Besides the mentioned above, the Contract Law (1999) provides a chapter to regulate technology contract issues, and is supplemented by the Regulations for Management of Technical Import & Export Contract (2001). Noticeably, the Anti-Unfair Competition Law (1993) provides further protection on IPRs and related rights, such as trade names, trade secret, goodwill, package and decoration of well-know commodity, mainly in Article 5, 9, 10, 14. The Criminal Law (1997) has a special section defines seven kinds of IP Crimes.

The procedures for trying cases are mainly governed by three basic procedural codes, i.e., the Civil Procedure Law (1991), the Administrative Procedure Law (1989) and the Criminal Procedure Law (1996). The Regulations for Customs Protection of IP (2003) provides procedural and substantive rules for border protection of IPRs.

Under the Chinese legal system, the court has no power of law making, i.e. the doctrine of precedent does not exist in China. However, under the Constitution, the SPC is authorized to interpret laws when it is needed and the interpretations themselves are applied as laws. The judicial interpretations, such as opinions, circulars and advice of the SPC, have a special position in the legal framework for IP protection. Up to the end of 2004, the SPC has issued forty-five judicial interpretations for IP protection, among which, thirty-nine pieces remain in force.[18] Regardless the absence of the doctrine of precedent, precedent decisions in China are used as references for later cases in many occasions. The court at a lower level will generally follow or respect opinions or decisions made by its superior courts, especially those decisions made and published by the SPC.

In conclusion, due to historical reasons, China had no written IP statutes until the first decade of the twentieth century. Much shorter than many developed countries, China has only more than twenty years of history for a modern IP legal system. The re-establishment of a legal system including IP protection in China is still a developing process. However, China has already achieved great success in constructing a modern IP legal system which the western countries have experienced for hundreds years to pursue. In order to meet the needs in practice, China now has paid a great amount of attention to enhance its legal enforcement and adopted a series of strong measures including the special administrative approach to strengthen IP protection. It can be foreseen that the IP protection in China will definitely be a prosperous future.

China is learning judicial experiences from all countries to improve its legal system. Exchanges of judicial experiences are significant to the improvement of people's lives and human progress. No matter how different the judiciary systems among countries are, we should follow the common object, ensuring the equity and justice in the whole world.