Ministry of Agriculture Formalizes Processes for Handling PVR Infringement Cases

Only "cases of infringement", as distinct from claims involving counterfeiting, will be accepted under the Infringement Provisions. Article 2 of the Infringement Provisions specifies that "cases of infringement" refer to cases involving the undertaking for commercial purposes of unauthorized production or sale of the propagating material of a PVR or the repeated use of such propagating material in the development of other propagating varieties. Article 4 stipulates certain other pre-conditions that a claimant must satisfy in order that the relevant agricultural department will handle the claim. Among other things, the claimant must be able to clearly identify an alleged infringer, be able to support the claim with detailed facts and evidence and must lodge a claim within two years from the date upon which it either acquires actual knowledge of the infringing activity or would be deemed to have constructive knowledge of the infringement.

Consistent with Article 39 of the Plant Variety Regulations, Article 4 (vi) makes clear that a request by a claimant for administrative action by an agricultural administrative department at the provincial level or above will only be entertained where neither the claimant nor the respondent(s) have filed a suit with the People's Court in relation to the same claim. Thus, the Infringement Provisions clarify that while a claimant may choose to seek a judicial remedy through the court system, a judicial action will preclude both administrative action and administrative review. However, the reverse is not true. Decisions taken by the relevant agricultural administrative department arising from its handling of the claim may be subject to administrative and/or judicial review. In fact, under Article 10 (5) the relevant agricultural administrative department must, in rendering a written decision, include in the decision particulars of the avenues through which, and the relevant time limits during which, a party may appeal the decision.

Who May File a Claim?

The rights holder, in whose name the PVR has been registered, and certain other "interested parties" may file a claim. Interested parties are not exhaustively defined, but include licensees of a PVR. Only licensees under a sole licence contract may directly file a claim as of right, while licensees under an exclusive licence contract may file a claim only where the rights holder has not itself filed a claim. General licensees must either seek the consent of the rights holder or rely on contractual provisions in their licence contracts in order to file a claim. It is likely that only where such provisions are clear and unequivocal will general licensees be granted standing to file a claim as of right. An eligible claimant may be represented by an authorized agent.

How is a Claim Filed?

An eligible claimant must submit a letter of request (the Request Letter) conforming to the provisions of Article 6 and specifying inter alia the nature of the claim, the reasons for the claim and relevant facts in support of the claim. The Request Letter must be signed or stamped with the claimant's seal. In addition, the PVR certificate originally issued to the rights holder must be submitted. In the absence of the rights holder's cooperation, it is not clear how this requirement may impact a licensee who would otherwise be an eligible claimant, but whose standing may be compromised if they are unable to submit an original PVR Certificate together with the Request Letter.

A Request Letter filed by an eligible claimant with the relevant agricultural department having appropriate jurisdiction, and which conforms to the provisions of Article 6, will result in successful filing of the claim. If a case is not accepted, the relevant department must inform the claimant within seven days of the filing of the Request Letter and the department must provide reasons for rejecting the case.

How is an Infringement Case Handled?

Once a case is accepted, the administrative department of agriculture at the provincial level or above will appoint a three or more person odd-numbered panel to handle the case.

In terms of procedure, the panel will generally assess the merits of the claims based on the written submissions from the claimant(s) and respondent(s). However, Article 9 contemplates that a hearing may be held if deemed necessary. In such circumstances, the parties will be given seven days prior notice of the hearing. Failure to attend the hearing may result in a claimant's case being deemed to have been withdrawn or in the respondent being subject to decision by default. Pursuant to Article 8, failure on the part of a respondent to submit a written letter of defence to a claim against it, prior to a hearing, will not, in theory, "affect the handling of the case" by the panel. In practical terms, it is difficult to imagine how this could be the case unless, perhaps, the claim was of a wholly spurious nature.

The Infringement Provisions specify various time limits following acceptance of the case in which the relevant agricultural department must serve a copy of the claim on the respondent (seven days) and in which the respondent may file a defence (15 days). A copy of the defence must be provided to the claimant within a further seven days. These provisions appear to be aimed at ensuring that claims will be dealt with in a fairly quick timeframe. However, significantly, there is no timeframe imposed on the panel within which it must render a written decision. This is a distinct and unfortunate oversight.

What Substantive Issues of Fact and Law are taken into Account?

The Infringement Provisions are silent on what substantive issues the panel must consider. Accordingly, the panel has significant discretion as to how it handles the substantive issues arising in an infringement case and in deciding what importance it will attach to certain arguments or evidence put before it.

However, pursuant to Article 10, decisions rendered by the panel must be in writing, the panel must disclose its reasons for determining whether the claim has been established or not and, further, given that decisions may be subject to administrative or judicial review, the panel will be bound to act reasonably, carefully and with due regard to all relevant laws and regulations applicable to infringement of PVRs. The procedural transparency required under the Infringement Provisions ensures that decisions made by a panel will be subject to scrutiny and review, thereby reducing the scope for overtly improper conduct during the course of handling a case.

Nature and Effect of a Decision

Decisions must be in writing and state the "reasons and legal basis" upon which they have been made. The decision shall specify how the claim is to be handled, and may include the imposition of certain penalties, as set forth in Article 11. Such penalties may include an order to cease infringement activities and to destroy any propagating material in the possession of the infringer. A decision may also include punitive measures such as the confiscation of illegal income derived by the infringer or the imposition of a fine. However, a decision may not impose an award for compensation (although Article 14 of the Infringement Provisions specifies the basis upon which compensation, payable to a successful claimant, should be calculated). A successful claimant may seek compensation through the court system or, where both parties agree, the relevant agricultural administrative department at the provincial level or above may mediate an agreement between the parties for compensation of losses caused by the infringement.

Decisions may be subject to administrative review or judicial review upon application by a party that disagrees with the decision. Moreover, enforcement of binding decisions requires an application to the people's court.

Remedies and Enforcement

Article 11 provides for a range of measures that an agricultural administrative department may take, ranging from the imposition of an order to cease the infringing activity, to fines of up to five times the amount of illegal income or forfeiture of illegal income (and Article 16 sets forth principles for the determination of "illegal income"). These are useful sanctions and may be imposed concurrently or selectively, but all such orders, as with any decision on whether infringement has been established, are subject to administrative and judicial review. Moreover, while a losing party should theoretically implement an administrative decision against it immediately, in practice, given that agricultural administrative departments have no inherent enforcement authority, a claim for infringement that is vigorously defended and then appealed through each step of the administrative and/or judicial appeal process by a respondent, could result in a long and frustrating delay before a successful claimant sees effective action taken. Claimants will therefore need to consider carefully the respective merits of seeking administrative action under the Infringement Provisions or directly seeking redress through judicial channels, depending on the specific circumstances of their situation.

Conclusion

The Infringement Provisions make an important contribution to the overall regulatory framework for protection of PVRs by establishing certain criteria that must be satisfied before a claimant can make a prima facie case of infringement and in establishing clear and transparent procedures through which administrative action for infringement may be taken. While the Infringement Provisions contain some inherent problems, as identified above, they broadly conform to China's TRIPs obligations and are a useful step towards a more complete regulatory framework for protection of PVRs. It may be expected that some type of counterpart legislation will be issued in due course by the State Forestry Bureau with respect to forestry PVRs.

By Dene Yeaman and Jiang Chen, Sidley Austin Brown & Wood, Hong Kong and Shanghai