US IP Attachés: China’s IP Policy ‘Hijacked’ By Local Interests In 2018; Bad Faith Filings A ‘Cancer’ 21/12/2018 by William New, Intellectual Property Watch Leave a Comment Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window)WASHINGTON, DC – Two out of three United States intellectual property attachés based in China last week had tough words for China’s manipulation of IP policy and law over the past year, suggesting they at times “hijack” the legal process in favour of local interests, and are in a mad rush to become the world’s top patent and trademark filers regardless of quality to the point that it has become a “cancer” on the IP registration system. A third US IP attaché, however, took a friendlier and more patient view of China’s actions, downplaying concerns and urging US companies to allow it to continue. The annual United States Chamber of Commerce US Patent and Trademark Office IP Attaché Roundtable took place on 12 December in Washington, DC. The IP attachés from around the world come back at this time each year to report on activities in their region. The event is organised by the Chamber’s Global Innovation Policy Center. The US has three IP attachés in China. The China panel included Michael Mangelson in Shanghai, Duncan Willson in Beijing, and Conrad Wong, soon to be in Guangzhou. The panel was moderated by Anna Dalla Val, vice president, intellectual property counsel at Ralph Lauren. The past year was “obviously a very hectic and interesting year for intellectual property in China,” Willson told the audience of industry lobbyists and government officials. They had companies continue to express their “very strong concerns” that China’s IP policy appeared in the end to be “bent to the will of the party’s economic objectives.” The year saw a reorganisation of IP enforcement and protection agencies, where the IP office was renamed the IP Administration and moved under a new “massive market regulator” called the State Administration for Market Regulation, he said. The IP office now also reviews and examines trademarks and geographical indications along with patents and integrated circuit designs, he said. Interestingly, he added, enforcement authority was moved out of the State IP Office. It is still too early to know the effect of the changes, said Willson, but the new IP administration demonstrates increased confidence in China’s own system, and less reliance on foreign assistance in IP. On IP legislation, there were a “couple of disappointments” on IP and technology legislation, he said. They did not see a draft of the patent law that was approved last week, sending it on to the People’s Congress. And no copyright legislation draft in 2018 as well, for which the US has been waiting for years. There was an e-commerce draft legislation and the US has been pressing China to “get the balance right” between its ecommerce platform and brand owners, to protect their rights, he said. Unfortunately, the draft that was ultimately approved contained provisions which the US had not seen, which seemed to tip the balance in favour of China’s ecommerce platform, he said. Also, last March, the State Council issued scientific data administration measures – “broad, vague measures that appear to give control over data and possibly intellectual property coming out of research and development inside China,” he said, particularly if funded by the Chinese government. “That is concerning,” he said. And then just last week, they saw new punishments in regards to patents, in what appears to be an extension of China’s social credit system to the IP space, and appears to take China in the direction of less transparency and far more discretion in punishing actors in the space, he said, adding: “That’s for us not so good.” On the courts, he noted Qualcomm’s recent obtaining of interlocutory injunctions against Apple on the iPhone in China, but said damages are still “very low,” with damages for patent infringement of around US$ 20,000. Among the changes, as of 1 January, the Supreme People’s Court will start hearing cases of technically complex IP matters, which will be a significant change in how companies litigate their IP in China, he said. He summed up by saying that the treatment certain US technology companies this year and in years past have received at the hands of Chinese enforcement authorities, including patent infringement lawsuits, suggests that “China’s increasingly advanced IP enforcement system can be at times hijacked to advance national and local industrial policy goals.” Mangelson based in Shanghai said it was his fifth and possibly last year making a presentation at the annual Chamber event. He said the Section 301 case the US has brought against China for IP violations has come to the forefront, especially in the press. Probably the most common issue rights holders are facing is bad faith trademark filings, the inability to protect brands, which leads to the inability to stop counterfeiting, he said. Looking back on his five years in China, Mangelson said, “2018 has definitely been a rough year for IP in China, and probably the most disappointing year.” He echoed Willson in saying it was disappointing to see a number of amendments to copyright and patent law and other measures they view as unfavourable, and not see measures they had hoped for. The State Council last week approve amendments to patent law that now head to the People’s Congress, he said. The US still had not received a draft of that, but they understood preliminarily that it would not include patent linkage, data protection, patent term extension, and were also rumours it would not include protection of partial designs, despite having been in a prior draft, he said. “To see these things being watered down is obviously very disappointing,” he said. He also said the US has had perhaps the “least amount of engagement in cooperative programmes we’ve had in my tenure.” As well, US officials are being denied access to events where “like-minded friends” are participating and speaking. A recent example was the large China import-export event held in Shanghai. Fortunately, he said, they do still have good engagement at the local levels. And he said optimistically that he thinks they are “going to have the most effective team we’ve ever had in China,” with three attachés and a team of specialists. But it also has been disappointing, he added, to see the “narrative” China has tried to use to counter some of the criticism that has come out. The narrative seen repeated in media and international organisations is that China is characterising itself as a world leader in IP by focusing on the numbers, referring to the high number of patent and trademark filings it has. They are trying to legitimize those numbers through international organisations by subsidising filings with a focus on Patent Cooperation Treaty (PCT) filings, Mangelson said. The subsidies are focusing more on patents than on utility models, which he said is positive, but does not consider the commercialisation aspects. It is not enough just to have those patents, how are you using them, he asked. China giving the highest subsidies for filings worldwide, much higher than Paris Convention filings, he said, in an effort to become number one in PCT filings. They are doing the same with the Madrid Protocol (for international trademark registration). Unfortunately, he said, international interlocutors are touting this in China, saying, ‘look at China, number one in IP’ – without any discussion of quality. Yet it is known that more than 74 percent of trademark filings in China are bad faith. “If a majority of your filings are invalid, we have to shine a light on that,” he said. It’s a cancer on the registry in China, and now it’s affecting our Patent and Trademark Office registry, as there is an explosion of bad faith applications coming from China, in order to show China as the global leader in brands, he said. Third US Attaché Takes Softer Stance on China Wong, who will be moving to Guangzhou in 2019 from the central office in the Washington, DC area, took a noticeably different stance on each of the concerns raised by his colleagues, downplaying the issues and offering explanations for the Chinese government. For instance, on the charge of subsidies, he said there “may be some,” but that the government has a policy and wants to “put itself on the stage in terms of intellectual property.” On bad faith filings, he said, “I would remind everyone” that when you see some of the marks they seem like just “an amalgamation of letters on a typewriter,” but that “Kodak” was just a “coined term” which became synonymous with photography in the United States. “Where this is all going is hard to say, but we’re witnessing it, we’re dealing with it, we’re on top of it,” he assured the audience on the extraordinary number of filings from China. He also painted a hopeful picture of engagement, saying they are still in dialogue mainly at the provincial levels, at the staff level. “It’s not that there is no dialogue or anything like that going on,” Wong said. “It’s still occurring.” Wong said what they see now is China’s theme of IP commercialisation, the use of IP as a “tool of industrialisation policy.” He said the “narrative is always there about piracy, counterfeiting, all those issues, [but] they are trying to learn more” about for instance, the Bayh-Dole Act, or how to use IP as collateral in commercial transactions. There is an “increasing sophistication and appreciation” of China in the way they are using their intellectual property, he said, moving more toward an innovation economy. In addition, he praised the Chinese IP courts and tribunals, contrary to the concerns of his colleagues, saying that they hear the IP courts are “staffed by professionals” who are trained in patents, trademarks and copyrights. “The decisions are based on fact, they are not speculation,” he insisted. Whether there is local bias, that is a subjective assessment, he asserted. “In general, it is positive for rights holders,” Wong said. Asked about the trade tensions between China and the US, Willson said it is not really coming up in the IP area. There may be individuals who make biased decisions, but they have not seen a systemic issue, he said. Mangelson said he thinks there is a “lot of pressure on China” to prove that it is protecting IP. He listed positive signs at the highest levels of an emphasis on enforcement, and reviewed some of the issues rights holders say they are facing in courts. Wong, meanwhile, said if there are any tensions, they are “very subtle,” and they are still receiving requests for meetings in the USPTO office in Alexandria, Virginia. The relationship between the two countries is “very pleasant, not combative. No one is stabbing fingers in the air,” he said. There is more central government control in the regions, he said, and this sometimes there can be last-minute changes in panels or events. This may be from concern about “optics” on the Chinese side, he said, but “we have no idea.” But the programme is continuing, they don’t see a shutdown like happened after a World Trade Organization case in 2007, which he was on hand to observe, he said. Separately on the e-commerce legislation, Willson said it has a strict liability for erroneous notices for damages caused to the merchant. It also includes a 15-day window to challenge a decision or have the takedown lifted, but these are not business days and might be too narrow a window and making it a “huge potential loophole,” he said. Wong also raised concern about the ecommerce law for its highly burdensome requirements for rights holders. Image Credits: US Chamber of Commerce Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related William New may be reached at email@example.com."US IP Attachés: China’s IP Policy ‘Hijacked’ By Local Interests In 2018; Bad Faith Filings A ‘Cancer’" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.