CMS: China - protecting your IP

China is a significant potential market for oil and gas service companies. As oil and gas equipment becomes increasingly sophisticated, companies will own more valuable intellectual property (IP).

China has historically had a reputation for weak protection and enforcement, which might be a cause for concern for those companies selling or renting equipment into China, but is that reputation deserved? Over the past year or so, a number of changes have been made to IP laws and procedures.

In December 2018, changes were announced to judicial procedures for patent and other IP cases. From the start of this year, the Supreme People’s Court (SPC) has dealt with civil and administrative appeals relating to inventions, utility models, new varieties of plants, integrated circuit designs, technological secrets, computer software, IP monopoly and IP cases involving technology disputes.

In addition, the SPC will also hear retrial petitions and objections brought by prosecutors against judgments of lower courts concerning technology disputes.
For other IP cases, for example, copyright and trade mark disputes, the appellate courts will continue to be the High People’s Courts.

The change is intended to address inconsistencies in appellate decisions and in this regard the SPC intends to release judicial interpretations to clarify its jurisdiction.

To effect this change, the SPC has established its own IP tribunal, which will hear the first stage of civil or administrative cases which are significant or complex as well as jurisdiction disputes.

In December, the National Intellectual Property Administration (CNIPA), the SPC, and a number of other authorities released a Memorandum of Understanding on Taking Joint Disciplinary Actions against Seriously Dishonest Subjects in the Area of Intellectual Property (Patent).

Under the MOU, seriously dishonest IP acts include repeated patent infringement, not enforcing patent infringement or counterfeiting decisions, and tampering with documents during patent application or related procedures. The persons responsible are “dishonest subjects” and will be shamed on official websites.

Dishonest subjects could face stricter reviews of any mergers or acquisitions they engage in and more difficulty in applying for foreign exchange quotas.

In April, the National People’s Congress issued amendments to the Anti-Unfair Competition Law and to the Chinese Trademark Law.

The first of these extends the definition of a trade secret to include not only technical and operational information but also other business information.

The amendment also extends the scope of infringing acts to include instigating, inducing and assisting others to breach confidential obligations, provides new rules on the burden of proof and extends the range of potentially liable persons.

The Amended Trademark Law will take effect on November 1 2019. The most important change is the restriction of bad-faith registration of trademarks. In future, trademark applications can be disallowed, or registrations revoked, if there is no intention to use the trademark.

Businesses may therefore need to reconsider their trademark strategies in China if they have registered certain defensive trademarks, which are not for use.

The amendment also clarifies that no goods bearing a counterfeit trademark may be placed on the market, even if the counterfeit trademark is removed. A victim may apply to the court to destroy the goods as well as the materials and tools used for producing the counterfeit trademarks.

In both cases the amendment has increased the maximum penalty for deliberate infringement from three times to five times the actual loss suffered by the victim.

These recent steps by the Chinese government to improve the landscape for protecting IP may be seen as a response to complaints, particularly from the US, that China lacks a sufficient IP protection regime for fair trade.

However, it remains to be seen whether they will be applied in an even-handed manner, particularly where infringements relate to technology seen as being of value to China.
With thanks to CMS Beijing for assistance with this article.

Penelope Warne, senior partner, CMS

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