2012 Review: IP – reforms, famous trademarks, top cases and patent marking

January 04, 2013 | BY

clpstaff &clp articles &

The Trademark, Copyright and Patent Laws were all up for review in 2012, which shows China's commitment to strengthening IP rights. But are the changes enough to protect businesses and what can IP practitioners expect for the year ahead?

Expectations from Copyright Law amendments

Public opinion on amendments to the PRC Copyright Law (中华人民共和国著作权法) closed on July 31 2012 and the National Copyright Administration is working on a third draft. Uncertainty remains as musicians and artists wait to see whether their concerns relating to controversial provisions, especially Article 46, will be taken into account.

Article 46 states that, pursuant to Article 48, any record producer has the right to make a recording of musical works owned by another, without needing authorisation from the original owner, provided the content has been published for three months or longer.

Under Article 48, the royalties for this use will be collected within one month through collective copyright management organisations, who will transfer payment to the copyright owner. The user is not liable as long as they submit usage fees to these organisations. This holds true regardless of whether the owner is a member of the organisation, according to Articles 60 and 70.

Many musicians and artists were critical of the provision, arguing that it ultimately encourages unfair use of other people's work. The sentiment is that a compromise of at least six months or a year can be implemented instead of the three month time-limit.

However, Ma Xiaogang, managing director of China Copyright Association, who is also a member of the expert panel looking at the Copyright Law amendments, said that the criticism is due to a lack of understanding of the Law and the ambiguity of the concept of copyright owners.

Ma points out that the existing Law did not lay down any time limits, so three months is an improvement. In practice, songs can at present be reused immediately after publication.

Since the announcement in July, controversy surrounding the Law has peaked and many are now wondering whether the State Council Legislation Affairs Office (SCLOA) will incorporate any of the concerns voiced in the public domain into the final version.

IP veteran, He Jing from ZY Partners says: “The SCLAO might take a lot of things out, and may add things in, we just do not know yet. I don't expect dramatic changes, but I won't be surprised if the SCLAO has its own opinion in some critical areas”.*

Those who are expecting the Law to come into force in early 2013 may be disappointed. It may take a year or even longer before the SCLOA sends it to the NPC for final approval, because the SCLAO's focus in the IP field is amendments to the PRC Trademark Law (中华人民共和国商标法).

The time factor is also due to the complexity of the Copyright Law. With so many comments from local music and film companies, the SCLAO will have a more demanding job and will need to spend more time on the Law.

The purpose of the Law is to provide wider protection to copyright owners. However, importance should not only be placed on the details of the proposed provisions, but also on the reforms to the way the Law is enforced.

“Protection not only comes from the statute itself, but also comes from the way the enforcement system is constructed – the courts have to keep reforming and police need a more dedicated team for enforcement,” said He Jing.

Top IP cases of 2012

The Supreme People's Court released its Top 10 IP Cases of 2011 (2011年知识产权保护十大案件发布) and the Annual Report on Intellectual Property Cases (2011) (最高人民法院知识产权案件年度报告 (2011)) in April 2012. The June 2012 issue of China Law & Practice saw five law firms provide comments on five of the top 10 cases and analyse the precedence set for future cases. Since then, practitioners have indicated cases that have also set precedents in China's IP regime.

Life imprisonment for counterfeiting

In response to a crackdown on counterfeiting in China, the Heyuan Intermediate People's Court in Guangdong sentenced the leader of group manufacturing counterfeit Hermes goods to life imprisonment in September 2012.

This is the first case where a defendant who is guilty of counterfeiting goods has received such a harsh sentence. The average criminal sentence for this offence ranges from three to seven years.

The judgment highlights China's intention step being seen as a counterfeit goods haven. The Court decision has helped practitioners clarify what exactly is a counterfeit product and how this is different from a product that infringes IP.

A precedent for judges

Judges sitting on trademark litigation cases were of the view that they were only permitted to review facts predetermined by the Trademark Office (TMO) or the Trademark Reexamination and Appeal Board (TRAB).

The 2011 IP Case Report issued by the Supreme Court made it clear that judges can now review evidence previously unseen by the TMO and the TRAB.

“The SPC also stressed through at least two cases that the TMO's Classification Chart could not be the sole basis for determining the similarity of goods,” said He Jing of ZY Partners. “It is disappointing though that the Report fails to condemn bad faith filings. This does not help change Chinese courts' reluctance to hold applicants accountable for obvious bad faith filings,” he added.

Patent marking

On June 18 2012 the State Intellectual Property Office (SIPO) promulgated the Measures for the Administration of Priority Review of Invention Patent Applications (发明专利申请优先审查管理办法), taking effect from August 1 2012.

The scope of the Measures encompasses invention patent applications that involve energy, conservation, new energy, alternative energy and low-carbon technology.

Perhaps of most interest within the Measures is the hefty fine manufacturers could face for selling falsely marked products. The Measures empower local IP offices to enforce these fines. Article 6 of the Measures specifies that this involves marking on packaging and on instructions for use.

Under the Measures, claimants do not have to prove that manufacturers have a malicious intent in falsely marking products. This emphasises the importance for manufacturers of ensuring that their marked products comply with the requirements, as manufacturers may find themselves unknowingly liable within the Measures' scope.

Shanghai famous trademarks

After 16 years, the Shanghai Municipality, Measures for the Recognition and Protection of Famous Trademarks (上海市著名商标认定和保护办法) was finally adopted on February 20 2012, effective from May 1 2012. In 2011, there were sixteen batches of famous trademarks recognised.

Its promulgation into law is welcomed as these granted marks raise the profile of the brand and the region that they originate from, compared with the system of well-known trademarks under the Trademark Law.

While famous trademarks offer greater protection under the Measures, they do not have the same reputation or reward as well-known trademarks. Well-known status is the ultimate accolade for a domestic company on the international stage, but for those companies not seeking business outside of China, a famous trademark could be the perfect solution.

For foreign companies, well-known trademarks are the only option if they do not satisfy the three categories available for famous recognition.

*Since publication, He Jing has joined AnJie Law Firm as a founding member.

By Nickie Yeung

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