China and Intellectual Property: Historic Review and Future Policy Considerations

Transcription

1 Looking Back, Looking Forward, 30 Years of US-China Relations China and Intellectual Property: Historic Review and Future Policy Considerations The Confucius Institute Arizona State University Tempe, Arizona September 13, 2009 Karen Dickinson Quarles & Brady LLP 2009 Page 1

2 Agenda Intellectual Property Rights IPR in China Then and Now Practical Tips Quarles & Brady LLP 2009 Page 2

3 Intellectual Property Rights Quarles & Brady LLP 2009 Page 3

4 IPR in World History Venice 1474 "Any person in this city who makes any new and ingenious contrivance, not made heretofore in our dominion, shall, as soon as it is perfected so that it can be used and exercised, give notice of the same to our office of Provveditori de Comun [State Judicial Office], it being forbidden up to 10 years for any other person in any territory and place of ours to make a contrivance in the form and resemblance thereof, without the consent and license of the author. England Statute of Monopolies United States 1787 U.S. Constitution, Art. 1 Congress shall have power... to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. Rationale IPR protection a natural right OR to reward innovation and diffusion of technology Quarles & Brady LLP 2009 Page 4

5 Intellectual Property Laws Trade Secrets Patents TM Owner gets exclusive right to copy, distribute, display, perform and create derivative works; does not protect underlying ideas Protects material which is not generally known - value is in keeping the information secret; protects underlying ideas Owner gets exclusive right to prevent others from making, using, or selling the patented technology; protects underlying ideas Signifies ownership and quality of goods and services sold under the mark; protects owner s rights to mark Controls use of intellectual property through agreement between parties; necessary for preservation of trade secrets and licensing intellectual property rights Quarles & Brady LLP 2009 Page 5

6 Intellectual Property in China Quarles & Brady LLP 2009 Page 6

7 Rule of Law in Chinese History Confucian ideal of selfdiscipline Above all, help the family Bureaucracy and Guanxi Quarles & Brady LLP 2009 Page 7

8 IPR in Chinese Culture Chairman Mao intellectual property creations are tools for the common good Quarles & Brady LLP 2009 Page 8

9 China Today 11 th Five Year Plan (2005) Now a "Strategic Program" Goals harmonious society, social justice, self-innovation Method "scientific development" From cheap labor and natural resources to educated workers and science & technology Restructure economy to emphasize technology, services and consumer spending Focus on middle and western Provinces Brand Value Increasing More than 1000 foreign brands entered China retail in 2006 more than previous 12 years Chinese brands gaining fame inside and outside China Lenovo, Haier, Tsingtao, DongFeng Motors, Huawei Technologies, NetEase Chinese software industry generated 7573B Yuan in sales revenue in 2008 Quarles & Brady LLP 2009 Page 9

10 Chinese IP Law Development No Protection to "Full Protection in 30 years 1976 intellectual property creations not considered individual assets 1978 no Chinese intellectual property laws in existence 1979 Nixon-Deng meeting 1982 first-ever trademark law 1984 first-ever patent law 1990 first-ever copyright law 1993 first-ever law against unfair competition protects trade secrets 2005 Most Chinese intellectual property laws comply with World Trade Organization Trade-Related Aspect of Intellectual Property Rights (TRIPS) 2008 New National Intellectual Property Rights Strategy 2008 Amended Patent Law 2009 New Draft Amendments to Trademark Law Actual IP Protection getting better, but not there yet Chinese intellectual property laws comply with TRIPS BUT... USTR filing WTO cases against China claiming ineffective enforcement Prediction: China's IP enforcement across country likely consistent with world standards in 5-10 years Quarles & Brady LLP 2009 Page 10

11 Chinese IP Law Today Since 2000, China has begun to set up special and independent divisions at courts to exclusively deal with IP related civil cases. Increase of IPR infringement cases being brought before the courts or administrative agencies foreign and Chinese companies as plaintiffs Increase in the frequency and amount of judicial damage awards Chinese court upheld Pfizer s Viagra Chinese patent (overturning prior decision of China patent review board) In 2008 Zhejiang courts ordered Samsung to pay 50M yuan (US$7.3M) patent infringement and HK company to pay 20M yuan (US$2.9M) for trademark infringement Beijing court ordered three Chinese automakers to pay 20M yuan (US$2.92M) compensation and 1.16M yuan (US$169k) in legal costs to German automakers for patent infringement Shanghai court ordered Sohu.com to pay author 100K yuan and issue a public apology for copyright infringement Chinese Basketball Association litigation over trademark infringement and use of athlete images Amended Patent Law increases upper limit of statutory damages to 1M yuan (US$150k) High-visibility counterfeiting raids by Public Security Bureau e.g. Electric Guitar Anti- Counterfeiting Coalition 2008 National IPR Strategy (2008) Commitment to develop China into higher level of intellectual property right creation, utilization, protection and administration by 2020 Annual action plans to implement the national IP strategy 280 detailed measures 16 announced massive campaigns to fight IP piracy and infringement Quarles & Brady LLP 2009 Page 11

12 IPR in Chinese Culture Premier Wen Jiabao The competition of the future world... is the competition of IPR. Quarles & Brady LLP 2009 Page 12

13 China - IPR Limitations Amended Patent Law (2008) SIPO may grant a compulsory license for patented drugs where the public health interest so requires New Anti-Monopoly Law Review Does not impede exercise of "legitimate" IP rights unless IP rights "abused" to eliminate or restrict competition similar to U.S. "patent misuse", but open to broader interpretation Licensor restrictions on acquisition of competing technology may be considered illegal unless agreement "enables the consumer to share the benefits derived Court recently refused to issue an injunction of infringement because job losses at the Chinese infringer would result Quarles & Brady LLP 2009 Page 13

14 China - IPR Limitations Technology Licensing: prohibited, restricted and permitted License for permitted technology must be registered to provide for full enforcement and to complete formalities of foreign exchange, banking, taxation and customs License for restricted technology must be approved prior to registration (16 categories: e.g. biotechnology, chemical technology, petroleum refinery technology, currency production) Confidentiality and non-compete obligations difficult to enforce Some prominent legal academics Chinese courts should treat foreign IP differently from Chinese company IP Argue China cannot keep developing when a small number of foreign companies control so much IPR in China Quarles & Brady LLP 2009 Page 14

15 U.S. Response Bilateral Discussions U.S. agencies U.S. China Joint Commission on Commerce and Trade (JCCT) U.S.-China Strategic Economic Dialogue (SED) Technical Assistance Programs Training for China central, provincial and local officials on TRIPS rules and enforcement methods WTO Enforcement Actions US claims: China IPR enforcement and penalties insufficient Famous Brands program unfair trade distortion Quarles & Brady LLP 2009 Page 15

16 IPR in China Practical Tips Quarles & Brady LLP 2009 Page 16

17 Protecting Your IP in China Taking advantage of Chinese intellectual property protections critical If you don t not legally protect your intellectual property, the Government is more likely to protect the Chinese party's interests e.g. registration required to protect trademark rights e.g. copyright registrations may be "sealed" to protect trade secrets e.g. patent law the strongest protection As China becomes a knowledge economy, look for more aggressive intellectual property law enforcement - Chinese Central, Provincial and Municipal governments e.g. State Office of Intellectual Property Protection, Cross-Province Coordination, BUT... Heaven is high and the emperor is far away. Contractual license provisions are a critical additional means of protection e.g. software use restrictions The 80% e.g. public apologies The 20% Quarles & Brady LLP 2009 Page 17

18 When in... Guangzhou Practical Tips Industry check is Chinese party a member in good standing of applicable industry associations? Background checks of both the Chinese party and its owners Mark information Your Company Confidential and Proprietary Do not leave laptop or sensitive information at the Chinese facility or sitting near copy or fax machines Use technology to your advantage - tracking numbers, encryption technologies, security mechanisms, flaws Contract for liquidated damages and public apologies if your products show up on the black market or outside of China Register your trademarks with U.S. and Chinese customs Join others - American Chamber of Commerce ( International Intellectual Property Alliance ( Require (and perform) periodic on-site audits by you or your agent; take actions such as raids, seizures, administrative or legal actions have a reputation for protecting your rights Quarles & Brady LLP 2009 Page 18

19 China The Rise of a Superpower China offers great opportunities Laws and business climate evolve rapidly and change from region to region What you don't know will hurt you Having competent legal counsel in the U.S. and China is critical Quarles & Brady has the knowledge, experience and relationships to help you meet your objectives In China.... everything is possible.... nothing is easy! Quarles & Brady LLP 2009 Page 19