2020 is a landmark year for China. This year, China will continue to improve and strengthen the intellectual property protection system. Especially with the signing of the Phase one US-China Trade Deal, China's system construction in the areas of patents, trade secrets, copyrights, and trademarks will be further accelerated and strengthened. China will focus on addressing the issues of “difficulty of proving, long cycle, high cost, and low compensation” for rights holders of intellectual property rights.

I. Patent system

The fourth revision of China’s Patent Law marks an important part of the development and construction of China's intellectual property system in 2020. In December 2018, the State Council's executive meeting passed the draft of the Fourth Amendment to the Patent Law. After that, the Standing Committee of the National People's Congress promulgated the Patent Law of the People's Republic of China (Draft) and publicly solicited opinions. The content of the revised draft mainly involves the following three aspects:

1. Further strengthening the protection of the legitimate rights and interests of patentees.

(1) Increasing the compensation for patent infringement and providing for a punitive compensation system. The draft stipulates that: if the intentional infringement of the patent right is severe, the amount of compensation can be determined within one to five times of the amount calculated based on the loss suffered by the right holder, the benefit obtained by the infringer, or the multiple of the patent license fee; In cases where it is difficult to calculate the amount of compensation, the court may determine at its discretion, with the amount increased from 10,000 to 1 million yuan under the current Patent Law to 100,000 to 5 million yuan.

(2) Perfecting the burden of proof. The draft adds a provision: In order to determine the amount of compensation, the people's court may order the infringer to provide the account books under the circumstance that the right holder has tried his best to prove that the account books and materials related to the infringement are mainly held by the infringer. If the infringer fails to provide or provide false account books or materials, the people's court may, given the reference to the claims and evidence provided by the rights holders, determine the amount of compensation.

(3) Clarifying the joint liability of network service providers for network infringement. New regulation added as: Patentees or interested parties may notify the network service provider to take down, block or disconnect infringed products links or other necessary measures based on the judgment, ruling, mediation, or decision made by the People’s court, or the order to stop infringing made by the administrative department of patents. If necessary measures are not taken in a timely manner, the network service provider shall bear joint liability.

(4) Establishing a system for extending the duration of drug patent protection. Unlike the United States, China's current Patent Law does not include a drug patent extension system. The draft adds a provision: in order to compensate for the marketing review and approval time required for the patented drugs, the State Council may decide to extend the term of the patent right for innovative drug patents that are simultaneously applied for marketing in China and abroad. The duration of extension shall not exceed five years, and the duration of the total effective patent right of an innovative drug shall not exceed fourteen years after its marketing.

2. Promote Patent Enforcement and Application.

(1) Specifying the work-unit's right of disposal to service inventions. The draft adds a provision: Work-units can dispose the service inventions applying right and patent rights in accordance with the law. By implementing property rights incentive, taking equity, options, dividends, etc. to enable inventors or designers to reasonably share innovation gains, and promote the implementation and applications of related inventions.

(2) Strengthening patent conversion services. The provision stipulates that the patent administration department of the State Council should strengthen the construction of a public service system for patent information, providing basic data and promoting the dissemination and utilization of patent information; the patent administration department of the State Council and the departments of local people's governments that manage patent work should take measures in conjunction with their relevant counterparts, strengthening public patent services and promoting patent implementation and application.

(3) Establishing a new patent licensing system. The draft refers to the practice of the United Kingdom and other countries and adds the provision that if the patentee declares in writing to the patent administration department of the State Council that he/she is willing to authorize anyone to implement his/her patent and specifies the method and standard of payment, the patent administration department of the State Council should then make a public announcement and implement open license; anyone who wishes to implement an open license patent shall notify the patentee in writing and pay the license fee in accordance with the announced method and standard, and then obtain the patent implementation license.

3． Improve the patent authorization system.

(1) New domestic priority system for design patent applications. Provisions rule that an applicant who has filed a patent application on the same subject in China within six months from the date of the first domestic patent application for a design enjoys the priority right.

(2) Optimizing the priority right procedure. Extending the time limit for patent applicants to submit a copy of the first patent application document.

(3) Extending the term of protection for design patent rights. Adapting to China's need to join the Hague Agreement on Design Protection, the protection period for design patent rights is extended from ten years to fifteen years under the current Patent Law.

Although the content mentioned above to be modified may still subject to change, considering that the content is basically consistent with the Phase I Economic and Trade Deal that China and the United States have reached, the main content should remain unchanged. The Chinese legislative body has reviewed the Patent Law of the People's Republic of China (Draft Amendment) for more than a year. On the basis of gathering suggestions from various parties and further revising and perfecting it, it is possible to speed up its review in 2020 and even get itself a pass card then.

II. Protection of trade secrets

The protection of trade secrets is a major content of the Sino-US Phase I Economic and Trade Deal. In China, the Anti-Unfair Competition Law is the most important law for protecting trade secrets. In order to strengthen the protection of trade secrets, and also to respond to US concerns in Sino-US economic and trade negotiations, in fact, as early as April 2019, the Standing Committee of the National People's Congress revised the Anti-Unfair Competition Law whose main content was to further strengthen the protection of trade secrets, Followed  are three major aspects of this amendment:

1. To expand the scope of trade secret infringement.

(1) The act of obtaining trade secrets through electronic invasion is clearly included in the scope of infringement of trade secrets. Traditionally, the primary way to illegally obtain trade secrets is to steal the carrier that stores trade secrets or obtain trade secrets through bribery, fraud, or coercion. With the development of the Internet, it is much easier for competitors to use hacking techniques to get other people’s trade secrets. Therefore, this amendment lists obtaining trade secrets through electronic intrusion as a new infringement.

(2) Bringing indirect infringement into the scope of infringing trade secrets. The amendment adds that indirect infringements, including soliciting, seducing, or helping others violate the obligation of confidentiality or the right holder's requirements for maintaining business secrets, and obtaining, disclosing, using, or allowing others to use the right holder's business secrets are also violations of trade secrets.

2. To increase punishment for violations of trade secrets.

(1) Adding a punitive compensation system. The amendment adds that if the operator maliciously commits an act of infringing on trade secrets and the circumstances are serious, the amount of compensation may be determined in accordance with the loss of the right holder due to the infringement or one to five times of the amount of the infringing gaining. The amount of compensation shall also include the reasonable expenses paid by the operator to stop the infringement.

(2) Increasing the maximum amount of statutory compensation. The original Anti-Unfair Competition Law stipulated that: if the actual loss suffered by the rights holder and the benefits obtained by the infringer is difficult to determine, the people's court shall compensate the right holder less than three million yuan based on the circumstances of the infringement. The amended version increases the maximum compensation limit from three million yuan to five million yuan.

(3) Increasing administrative penalties. The amendment stipulates that if business operators, other natural persons, legal persons, and unincorporated organizations infringe on trade secrets, the supervision and inspection department may order the suspension of illegal acts, confiscate the illegal gains, and impose a fine of more than 100,000 yuan but less than 1 million yuan; if the circumstances are severe, a penalty of 500,000 to 5 million yuan shall be imposed.

3. To add a provision to transfer the burden of proof.

In order to reasonably distribute the burden of proof in a trade secret infringement lawsuit, the amendment adds that in the civil trial procedure of infringement of trade secrets, the owner of the trade secret provides preliminary evidence to prove that he/she has taken confidentiality measures for the claimed trade secret, and reasonably show that trade secrets have been violated, while the alleged infringer should prove that the trade secrets claimed by the right holder do not belong to the trade secrets stipulated by law.

The above-mentioned amendments to the Anti-Unfair Competition Law have entered into force in 2019. Due to the significant reduction in the threshold for litigation against trade secrets, it is estimated that there will be a large number of cases as such in 2020. At the same time, the Sino-U.S. Phase I Economic and Trade Deal made clear requirements for criminal enforcement thresholds, criminal procedures and penalties for infringing trade secrets. Although China's current criminal legal system can basically meet the above requirements, considering the implementing clarity and accuracy of the Deal, the NPC Standing Committee, the Supreme People's Court, and the Supreme People's Procuratorate may also issue new legal or judicial interpretations of crimes involving trade secrets in 2020.

III.  Copyright and trademark system

1.      Copyright system

China's Copyright Law, enacted in 1990, revised for the first time in 2001 to join the World Trade Organization, and for the second time in 2010 given the results of the China-US WTO intellectual property lawsuit. 2011 marks the third amendment to the Copyright Law. According to the Legislative Plan of the Standing Committee of the 13th National People's Congress, the revision to the Copyright Law belonging to its the first category of projects, that is, the draft to be submitted for consideration is relatively mature and intended to be considered during the term of NPC from March 2018 to March 2023. Hence, 2020 should be a pivotal year for the revision of the Copyright Law.

Meanwhile, the China-US Phase I Economic and Trade Deal stipulates that all government agencies and all government-owned or controlled entities shall install and use only licensed software. Measures that China should take include hiring qualified non-government-owned or affiliated third parties to conduct annual audits within seven months of the entry into force of this Deal, and to publish the audit results online. Therefore, in 2020, the construction of China's copyright system will probably be dominated by the construction of the copyright administrative enforcement system.

2.      Trademark system

The provisions of the Sino-US Phase I Economic and Trade Deal on trademark issues include two main contents: one is to combat malicious trademark registrations; the other is to strengthen trademark protection and enforcement.

In April 2019, the Standing Committee of the National People's Congress made the fourth amendment to the Trademark Law. One of the important amendments is to stipulate that no one can maliciously register a trademark. First, if the applicant does not apply for trademark registration for the purpose of use, the Trademark Office shall reject it. Second, trademark agencies may not represent malicious trademark registrations. Third, for those who do not apply for trademark registration for the purpose of use, even if the registration is obtained, the Trademark Office may invalid the registered trademark, and other units or individuals may request the Trademark Review Board to invalid the registered trademark. Fourth, those who maliciously apply for trademark registration shall be given administrative penalties such as warnings and fines according to the circumstances; those who maliciously file a trademark lawsuit shall be punished by the people's court in accordance with the law.

With regard to strengthening protection and enforcement, the fourth amendment of the Trademark Law mainly rules as follows: Firstly, the amount of punitive damages for malicious trademark infringements shall be increased to more than double or less than five times from the actual loss of the rights holder or the infringer’s illegal gain. Secondly, the maximum legal compensation for trademark infringement is increased from 3 million yuan to 5 million yuan. Thirdly, it is required to destroy goods that are counterfeit registered trademarks or not allowing them entering the commercial channels. In the trial of trademark disputes, the court shall, except in exceptional circumstances, order the destruction of the goods that are counterfeit registered trademarks at the request of the rights holder; destroy the materials and tools that are mainly used to manufacture counterfeit registered trademarks without compensation; Or under special circumstances, the aforementioned materials and tools are prohibited from entering commercial channels without compensation. Products with counterfeit registered trademarks must not enter commercial channels after only removing counterfeit registered trademarks.

The above contents of the fourth amendment of the Trademark Law came into effect on November 1, 2019. Besides, it’s likely that the Chinese Administration of Market Supervision and other relevant units will make more specific regulations in accordance with the relevant provisions of the China-US Phase I Economic and Trade Deal and the fourth amendment of the Trademark Law in order to strengthen trademark protection and law enforcement in 2020.

About the Authors: 

Yin Fenglin, Madina Turdi

Department of Law and Intellectual Property, University of Chinese Academy of Sciences

Source: China IP Magazine, Issue 95