Opinion: Reforming patent enforcement

Empowering administrative authorities

Article 60 enables the administrative authority to award damages for losses suffered. The authority is further allowed to act, on its own initiative, against patent infringement that is suspected of disrupting market order and to issue injunctions, seize illegal earnings, seize and destroy any infringing products and equipment used in the infringement, and impose fines up to four times the illegal earnings or up to Rmb200,000 ($32,000), where there are no illegal earnings or the earnings are difficult to calculate.

Compulsion of evidence

Article 61 allows people's courts, at the patentee's request, to compel production of evidence, including an alleged infringer's books and records and other materials, from the alleged infringer. People's courts shall also take compulsory measures where the alleged infringer refuses to cooperate or destroys evidence. This mirrors similar provisions found in the PRC Civil Procedure Law (中华人民共和国民事诉讼法), see page 28 for analysis and full translation online. Article 64 also empowers the authorities to issue a warning and impose penalties where an alleged infringer refuses to cooperate with investigations and produce evidence.

Punitive damages

The amendment introduces a system of punitive damages to deter intentional infringements. It is proposed that Article 65 be amended to enable the administrative authority or the court to increase damages up to three times of the regular amount in cases of wilful patent infringement.

Enhancing the administrative authority's role has caused much concern among the IP community. Patent disputes have always been difficult because of the technical and legal expertise required by the adjudicator. Developing the IP Tribunal and designating special courts with patent jurisdiction has been a major contributor to IP enforcement. Enhancing the power of the administrative authority seems to contradict the trend of centralising patent enforcement cases. It also contradicts earlier efforts to mould China into a system that would primarily protect IP as private property, by relying on an increasingly expert judicial system. The amendment can be contrasted, for example, with the development in the Trademark Law which removes the right of the administrative authority in awarding damages and the centralisation of the courts which are allowed to award well-known trademark status in order to improve on legal certainties.

Encouraging innovation

China's IP policy is crucial to change the country from an importer of technology to an exporter. IP protection is an important driver to realise this goal and encourage innovations. However, caution must be exerted to ensure changes are in the right direction and to achieve what they set out to do. In a country where IP litigation cases are growing faster than the GDP, will the proposed changes shorten litigation time or lead to an impossible amount of administrative appeals lodged with people's courts, which will cause longer delays? More clarification and safeguards, particularly concerning the roles of the administrative authorities and the courts, as well as the interplay between them and parties' rights, are needed for the proposed amendments to achieve its objective.

Alison Wong, Christine Yiu and Fanny Siu, Bird & Bird