New Ways to Combat Counterfeiting and Piracy in China

Note: This article is published by IP Law360 on March 11, 2014. The content is reproduced below.

New Ways to Combat Counterfeiting and Piracy in China

Lei Mei, Managing Partner, Mei & Mark LLP

Linfeng Qiu, General Counsel, Hangzhou IP Protection & Management Center

E-commerce sales in China have skyrocketed in recent years. For example, on a single day, November 11, 2013, the leading Chinese E-commerce website, Taobao.com, sold a record-breaking 35 billion RMB ($5.77 billion) worth of merchandise online. Unfortunately, many Chinese websites have online merchandise that include counterfeit and pirated products, as noted in the 2013 list of Notorious Markets by the United States Trade Representative Office (“USTR”). Therefore, IP owners, including U.S. consumer products companies, must develop a new effective strategy in combating trademark counterfeiting and copyright piracy in China in this digital age.

As an initial matter, it is worth noting that China does have comprehensive trademark and copyright laws and regulations that may be used to combat trademark counterfeiting and copyright piracy, and China’s central government has made it a high priority to protect intellectual property rights. For example, if there is a dispute regarding trademark or copyright rights, the owner of the registered trademark or copyright may bring a lawsuit in a People’s Court or request a local administrative department for industry and commerce (i.e., the local commerce department) to handle the matter.

Unlike the United States, local commerce departments in China have the authority to order an infringer to cease infringing upon that right immediately, to confiscate and destroy the goods involved and the tools used to manufacture the said goods and counterfeit the representations of the registered trademark or copyright, and to also impose a fine, without a court’s order. A party dissatisfied with the commerce department’s decision may bring a lawsuit in a People’s Court in accordance with the Administrative Procedure Law of the People’s Republic of China.

Despite these laws and regulations, it is still questionable as to the effectiveness of enforcement by local courts and commerce departments in specific cases. As the United States International Trade Commission noted in a 2010 report, “[s]ignificant structural and institutional impediments undermine effective enforcement, including the protection of IPR infringing industries by local Chinese officials, a lack of coordination among government agencies, insufficient enforcement resources and training, and non-deterrent civil and criminal penalties.” Today, local protectionism is still a legitimate concern in many parts of China, although enforcement efforts are more effective in big cities.

U.S. companies have traditionally used local Chinese law firms and/or investigative agents to crack down on physical counterfeiting activities. The problem, however, has always been that when a small factory is shutdown, another one springs up elsewhere. There have also been instances where some rogue investigative agents manufactured fake infringing activities to crack down on in order to collect more fees from IP owners. As a result, it could be very difficult for IP owners to achieve desired enforcement results in China.

In addition, traditionally, the burden of obtaining admissible evidence is upon IP owners, as China’s law does not require a civil defendant to voluntarily produce relevant documents or provide relevant information (although a new amendment to China’s trademark law, taking effect on May 1, 2014, does allow burden of discovery to be shifted in certain circumstances).

Interestingly, the solution to the traditional challenges of cracking down on physical counterfeiting activities lies with the digital evolution. With the emergence of websites like Taobao.com, online marketplace has become the main sales channel for counterfeit and pirated products in China. Therefore, IP owners could develop new enforcement mechanism to combat trademark counterfeiting and copyright piracy in China in this digital age.

Surprisingly, it is actually easier and more effective to combat trademark counterfeiting and copyright piracy online for several reasons. First, e-commerce websites typically show off product photos to the public, which can be easily and safely downloaded as evidence of infringement. This removes the obstacle of gathering evidence in a traditional physical marketplace in China, which not only is difficult but also could be dangerous at times.

 

Second, IP owners can easily obtain pricing and sales data of counterfeit and pirated products from e-commerce websites and use those for damages calculation. In general, damages are based on the amount of the profits that the infringer has earned as a result of the infringement or the amount of the losses that the infringed party has suffered as a result of the infringement. In a traditional physical marketplace, it is very difficult to prove damages because of the difficulty in obtaining relevant evidence from infringers.

Third, many leading e-commerce websites are operated by established Chinese companies in China’s more developed regions where IP enforcement has been more effective. For example, Taobao.com is operated by Alibaba Group, a leading Chinese e-commerce company in Hangzhou, the capital of Zhejiang province in Eastern China. For obvious reasons, it is easier to demand these established companies to remove counterfeit and pirated products from their online e-commerce websites.

Indeed, USTR has removed Taobao.com from its Notorious Markets List since 2012, noting that although “Taobao.com was included in previous Notorious Markets Lists for the widespread availability of counterfeit and pirated goods in its electronic marketplace,” it was removed from the List in 2012 “in recognition of [Taobao.com’s] efforts to address these problems.” According to USTR, “Taobao.com has assured the United States that it will continue to work with rights holders and law enforcement officials in China to address remaining issues raised by software, publishing and apparel and footwear companies.”

Finally, several Chinese provinces have established semi-governmental IP protection and management centers for cracking down on trademark counterfeiting and copyright piracy. These centers provide an efficient platform for IP owners to serve notices to e- commerce website operators and demand removal of the counterfeit and pirated products. Typically, these centers function similar to private firms, but due to their semi-governmental status, their involvements could make enforcement efforts more efficient and cost-effective.

As China’s e-commerce websites continues to gain popularity with estimated sales of 1.85 trillion RMB ($305 billion) in 2013, there are new and effective ways for U.S. IP owners to combat trademark counterfeiting and copyright piracy in China. With proper counseling and favorable local support, U.S. IP owners can achieve success in enforcing and protecting their IP rights.

Three Tips For Protecting Patent Rights At Chinese Customs

The article co-authored by Mei & Mark's Jiwei Zhang and titled “3 Tips For Protecting Patent Rights At Chinese Customs” has been published in IP Law360 and International Trade Law360.
 
A copy of the article is reproduced here:

Law360, New York (July 18, 2013, 1:22 PM ET) — Many intellectual property owners are familiar with functions of the U.S. Custom and Border Protection in protecting their IP rights at the U.S. border. CBP is authorized to exclude, detain and/or seize imported merchandise that infringes federally registered and recorded trademarks and copyrights and/or is covered by an exclusion order issued by the U.S. International Trade Commission in patent cases. Many IP owners do not know, however, that they can also take actions before infringing merchandise arrive in the U.S.

The Customs of the People’s Republic of China (“CPRC”) is one good example. It has procedures in place to protect IP rights. Article 3 of the “Regulation of the People’s Republic of China on the Customs Protection of Intellectual Property Rights” states that “[t]he People’s Republic of China forbids import or export of goods that infringe intellectual property rights.” Since the procedures for protecting trademarks and copyrights are well established, we focus on how patent owners can take advantage of this regulation. Here are three practice tips for patent owners.

1) Obtain Chinese Patents and Record Your Chinese Patents With CPRC

Article 2 of the Regulation states that “[c]ustoms protection of intellectual property rights used in these Regulations refers to protection of the exclusive right to use a trademark, copyright and related rights, and patent right (referred hereinafter as ‘intellectual property rights’) over imported or exported goods that are protected by laws and administrative regulations of the People’s Republic of China.” This means that only Chinese patent rights are protected by the regulation. To become a Chinese patent owner, you could file an original patent application, or you could file a patent application based on your U.S. or Patent Cooperation Treaty application.

After you obtain a Chinese patent, you should consider recording your Chinese patent with CPRC to protect your rights before any infringing products are being exported from China. There are two types of protection procedures provided by CPRC — application protection procedure (“APP”) and duty protection procedure (“DPP”). APP is a case-by-case procedure and does not require recordation of patent right. Patent owners have to take initial action to initiate this CPRC procedure.

DPP, however, requires recordation. Once recordation is complete, CPRC will take initial action and inform patent owners when it finds that suspected infringing products are about to be imported or exported.

The requirements for recordation are as follows:
• CPRC requires that only patent owners and their agents can apply for recordation.
• Licensees are not qualified to apply for recordation.
• Either patent owners or their agents must be located in mainland China.
• One recordation could include one patent only.
• There cannot be more than two contact persons.
• The contact person(s) must be standby 24/7 to be contacted by the local CPRC office.

2) Keep an Eye on Your Competitors

It is crucial for patent owners to know their competitors well, especially when they use APP without first recording their patents with CPRC.

For example, in a 2011 case regarding APP, a well-known printing supplies company in Zhuhai, China (“Company N”) found that another local company (“Company S”) manufactured a large number of printer cartridges for export to Japan using Company N’s patented technology. [Note that the identities of the companies are withheld for confidentiality reasons.] Although Company N did not record its patent with CPRC, it still requested CPRC to detain Company S’s suspected products and supplied supporting evidence.

On Nov. 24, 2011, CPRC suspended Company S’ clearance of products. After further examination, CPRC confirmed that the infringing products are over 40,000 in number. CPRC then seized these products. Consequently, Company S and its Japanese client signed an agreement with Company N and promised that they would not infringe Company N’s patents in the future.

Even in DPP, a patent owner’s knowledge can help CPRC expedite the process. For example, in a 2008 DPP case, an electronic technology company (“Company A”) owns a patent regarding circuit breakers and recorded the patent with CPRC. Company A exported most of its circuit breakers to the U.S. When Company A noticed an unusual decease of its market share, it investigated and found another company (“Company B”) in Guangdong province that manufactured similar products for export to the U.S. In January 2008, Company A purchased Company B’s suspected products in the U.S. for evaluation. In May 2008, Company A filed a request to CPRC in Shenzhen and CPRC subsequently detained the suspected products.

3) Patent Owners Should Consider Obtaining Court Orders

In APP, once a patent owner’s detention application is accepted, CPRC will issue a notice to detain suspected products. Meanwhile, the patent owner needs to request a local court to issue a preliminary injunction order to enjoin infringement or preserve evidence. If a court order is issued within twenty business days after the detention, CPRC will continue detaining the suspected products while assisting the local court to make a final decision on infringement. Otherwise, CPRC will release the suspected products.

In DPP, after recordation, CPRC will inform the patent owner when it finds that suspected infringing products are about to be imported or exported. Upon receiving the notification, the patent owner needs to file an application requesting CPRC to detain the suspected infringing products within three business days. CPRC will then determine whether these products are indeed infringing products within 30 business days after the detention. Once CPRC finds infringement, it will seize infringing products and issue penalties. If CPRC cannot determine whether there is infringement, the patent owner would then need to request a local court to issue a preliminary injunction order to enjoin infringement or preserve evidence. If a court order is issued within 50 business days after the detention, CPRC will continue detaining the suspected products while assisting the local court to make a final decision on infringement. Otherwise, CPRC will release the suspected products.

Therefore, in addition to working with the U.S. Customs and Board Protection, IP owners, including patent owners, could also try to stop infringing products at the country of production. If used properly, it can be an effective option to protect one’s IP rights.

–By Mandy Wei, Ninestar Image Tech Limited, and Jiwei Zhang, Mei & Mark LLP. Mandy Wei is a legal counsel at China-based Ninestar Image Tech Limited. Jiwei Zhang is an attorney with Mei & Mark in Washington, D.C.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Three Lessons from Apple’s “iPad” Trademark Dispute in China

NOTE: This article was published by IP and Technology Law360 in a slightly modified form on March 6, 2013.

One of the high-profile intellectual property (“IP”) cases in 2012 was the dispute between Apple and Proview Technology of Shenzhen, China regarding Apple’s use of the “iPad” mark in China. Apple eventually paid $60 million to settle the dispute. The implications from this dispute, including how it may impact Apple’s business in the U.S. and how Samsung missed a golden opportunity in its patent war against Apple, are less understood. This article discusses three general lessons that U.S. companies and IP professionals can learn from this dispute.

First, understand potential risks of doing business in China. Doing business in China can be very rewarding, but one must also understand the possible risks. This article focuses on risks involving trademarks.

In Apple’s case, Apple, through an intermediate company, purchased the right to use the “iPad” mark in various countries from a Proview entity in Taiwan. Later, however, Proview filed a trademark infringement lawsuit against Apple in China, claiming that the purchase agreement does not cover China.

It appears that the purchase agreement was not clear as to whether it covers the “iPad” mark in China. Since China is a civil law country, parol evidence regarding the parties’ intent carries little or no weight even if the agreement is ambiguous. To effect a transfer of the right, the agreement itself must comply with the statutory requirements. After a court initially ruled in Proview’s favor, the Chinese authorities began seizing iPads in several Chinese cities.

Luckily for Apple, Proview only sought to stop Apple’s sales of iPads in China, but did not seek to stop Apple’s manufacturing of iPads in China that would be shipped to the U.S. and other countries. Essentially, Apple may have dodged a lethal bullet because a less-known aspect of China’s Trademark Law is not even on the radar of many Chinese trademark lawyers.

Specifically, China’s Trademark Law does not explicitly say whether the manufacture of trademark-bearing products in China exclusively for export infringes the trademark rights of the party that has registered the trademark in China. Several Chinese courts have ruled that such manufacturing activities in China constitute trademark infringement regardless of whether the products are bound exclusively for export.

For example, in 2002, a Chinese court found that manufacturing branded products exclusively for export in China constitutes infringement of the Chinese trademark owner’s rights. Nike Int’l Ltd. v. Cidesport, Dec. 10, 2002, Civ. No. 55 (Shenzhen Intermediate People’s Court) (in Chinese). In that case, Nike and Cidesport owned the exclusive-use rights to the “NIKE” mark in China and Spain, respectively. Cidesport authorized a Chinese manufacturer to produce men’s ski jackets bearing the “NIKE” mark for export to Spain. Nike alleged that the Chinese manufacturer’s production infringed on Nike’s exclusive-use rights of the trademark “NIKE” in China despite the fact that the ski jackets would be exported to Spain. The Shenzhen Intermediate People’s Court ordered Cidesport and its Chinese manufacturer to halt production, destroy all branded products, and compensate Nike.

Therefore, it is important for U.S. companies that have their products manufactured in China to have a proper clearance procedure for trademarks in China, even if they do not sell such products in China. Obviously, if Proview had requested an order prohibiting Apple from manufacturing iPads in China, it would have posed a much bigger threat to Apple since it could affect Apple’s business internationally. This leads to our second general lesson.

Second, appreciate the international aspects of today’s IP practice. In today’s global business environment, IP practice has also evolved. One must appreciate the international aspects of today’s IP practice in order to properly manage and minimize risks for companies doing business internationally. As discussed above, Proview’s claim of ownership of the “iPad” mark in China could have threatened Apple’s business not only in China, but in other countries as well.

Therefore, for contentious IP matters such as patent litigation, optimal solutions often require global strategies. For example, as companies protect their inventions worldwide by filing for patent protection in different countries, patent litigation can turn into global warfare. Hypothetically, when a company sues its competitor for patent infringement in the U.S. and seeks an injunction to stop the competitor from selling competing products in the U.S., the company may also choose to sue its competitor for patent infringement in China, where the competitor’s products are manufactured. Note that under China’s Patent Law, manufacturing activities constitute patent infringement even if the products are bound exclusively for export.

In this manner, the company can manage its litigation risks in the U.S. by hedging its bets in China. In other words, even if the company loses the lawsuit in the U.S., it may win the lawsuit in China under China’s Patent Law to stop the manufacturing of the competing products, thus potentially obtaining the same business goal — stopping the competitor from selling competing products in the U.S.

Conversely, the competitor, when facing a patent infringement lawsuit brought by the first company in the U.S., could proactively sue the first company for patent infringement in China, where the first company’s products are also manufactured. In this manner, the competitor manages its own litigation risks by creating leverage. For example, if the competitor loses in the U.S., but prevails in China to stop manufacturing of the first company’s products, neither company may be able to sell its products in the U.S. and each would then be more willing to reach a business compromise to settle their dispute. This leads to our third general lesson.

Third, leverage competitors’ legal trouble in China for one’s own competitive business advantage in the U.S.  For the reasons below, Apple’s legal trouble in China regarding the “iPad” mark actually was an opportunity for a number of Apple’s competitors, such as Samsung and HTC. Unfortunately, no one seized this opportunity.

For example, another high-profile IP dispute in 2012 was the global patent war for smartphones and tablets between Apple and Samsung, which resulted in a verdict of over $1 billion in damages against Samsung (NOTE: the court since has vacated a portion of the verdict). The two have litigated and continue to litigate in many countries.

Because China’s Trademark Law likely prohibits manufacturing of products in China that would infringe someone else’s mark, as discussed above, the “iPad” mark in China could have been a huge bargaining chip for Samsung. Indeed, Proview was in a bankruptcy proceeding when it sued Apple for trademark infringement in China. Had Samsung stepped in and purchased the “iPad” mark in China from Proview, Samsung could have extracted much more value from this mark. This could have helped Samsung gain leverage in its global patent war with Apple.

The lesson here, therefore, is to monitor competitors’ legal troubles in key countries. And  be prepared to seize the opportunity for one’s own competitive business advantage.

            Overall, in today’s global economy, IP practice has become increasingly multi-faceted and multi-national. Even if a dispute arises in one specific country, it might impact a company’s business elsewhere. Therefore, a company doing business globally should think about a global strategy for resolving localized disputes. There are many lessons that a company can learn from Apple’s “iPad” trademark dispute in China.

About the Author:

Lei Mei is the managing partner of Mei & Mark LLP, an Intellectual Property and Litigation law firm based in Washington, DC.  He is the author of a new book ConductingBusiness in China: An Intellectual Property Perspective (Oxford University Press 2012).

China IP Watch: World-class High-Tech Zone Rising in the West

Source: China Daily

World-class High-Tech Zone Rising in the West

By Li Fusheng (China Daily)

Since its establishment in 1991, the Xi'an High-Tech Industries Development Zone in Northwest China's Shaanxi province has made big strides toward its goal of becoming a world-class zone in the sector.

Official statistics show that the 307 square kilometer zone is now home to 16,800 enterprises that generated 328.36 billion yuan ($52.2 billion) in revenues in the first seven months of 2012, 30 percent more than the same period last year.

"Another big stride has been made with the arrival of Samsung Electronics," said Zhao Hongzhuan, director of the zone.

The South Korean consumer electronics maker began construction on its $7 billion flash memory chip plant earlier this month, just five months after the contract was signed.

The project, the largest foreign investment in the information and electronics industry China has ever received, is already attracting others to follow suit.

A US-based chemical engineering company, which once refused the invitation to invest in Xi'an, has decided to build a $2 billion project in the zone after Samsung's arrival, Zhao said.

In addition to luring companies with the help of giants like Samsung, the zone has long been attracting them through its own advantages.

"We have good infrastructure and we are spending to improve it," Zhao said, noting that the zone invested 22.47 billion yuan in infrastructure from January to July alone.

The zone now 17 national-level industrial parks for opto-electronics, software and integrated circuits, as well as 23 business startup parks.

With a combined area of more than 1 million square meters, the startup parks have now produced more than 1,200 companies, according to a report from the high-tech zone.

The zone's administrative committee also encourages engineers and college graduates to start businesses by offering free administrative services.

"This means that combined they can save around 20 million yuan per year," said Zhao, adding that the measure is expected to help add around 3,000 new companies each year her established in the zone.

"We will try to help around 10,000 new startups in five years so that they can ensure the zone's sustainable development," Zhao said.

As part of the campaign to drive growth in new companies, the zone authorities also help facilitate access to loans.

The local Chang'an Bank has set up a branch to offer financial support to small and medium-sized technology enterprises.

Others including Bank of Xi'an, China Merchants Bank and China Construction Bank, are expected to soon follow, according to Zhao.

Since many new companies have few hard assets - a frequent prerequisite for banks to lend money - the zone has negotiated with Standard Chartered Bank's local branch to offer small, unsecured loans to micro and small enterprises.

"Such loans, usually ranging from 300,000 to 1.5 million yuan, can provide them with the funds they require to go ahead," Zhao said.

In addition, the high-tech zone itself has earmarked 1 billion yuan per year to boost development of some industries including IT and electronics, according to reports in Xi'an Daily.

Official statistics from 2011 show that 13 companies had revenues of more than 10 billion yuan each, 64 generated 1 billion yuan and 265 had 100 million yuan.

The zone is now home to 50 listed companies, 60 percent of all publicly traded companies in Shaanxi province. The figure is expected to reach 100 by 2015, Zhao said.

lifusheng@chinadaily.com.cn

(China Daily 09/25/2012 page 6)

China IP Watch: Zhongguancun Aims at Another "Silicon Valley"

Source: China Daily

Zhongguancun Aims at Another "Silicon Valley"

(Xinhua)

BEIJING - Zhongguancun, a technology hub in Beijing, will be as synonymous with IT innovation in ten years as Silicon Valley is, according to a draft of the country's 12th Five-Year Plan.

Zhongguancun will be built into an innovation center that would be known internationally, according to the draft plan, the blueprint of China's development in the coming five years, which national legislators are deliberating.

The State Council, China's Cabinet, has recently approved a Development Plan for the Zhongguancun National Innovation Demonstration Zone (2011-2020) that allows the area to try out new measures and pilot projects, said Zhang Gong, a deputy to the National People's Congress (NPC).

According to the zone's development plan, the total revenue of Zhongguancun is targeted at 10 trillion yuan ($1.5 trillion) in 2020, a big jump from the 1.3 trillion-yuan-revenue in 2009.

To reach this goal, Beijing's municipal officials said that in the next five years the city would use 50 billion yuan from the fiscal revenue to help commercialize scientific and technological innovations.

In addition, the government would procure 30 billion yuan of independently innovated products made in the zone.

Beijing will also help at least 300 companies to grow capital to at least 1 billion yuan, which, in turn, can push forward the development of the entire industry.

Zhongguancun's growth will go a long way toward repositioning Beijing as the national innovation center, which is also stated in the municipal 12th Five-Year Plan.

"It will also play a strategic role in putting China on the track of innovation-based development," said Fang Xin, a deputy to the NPC.

Liu Chuanzhi, chairman of the board of Lenovo Group Limited, said, "As Zhongguancun embarks on its new endeavor, we will also see a new group of entrepreneurs."

The total revenue of nearly 20,000 companies in Zhongguancun was 1.55 trillion yuan last year, up by 20 percent year on year. The area accounted for 19.2 percent of Beijing's GDP.

China IP Watch: Latest Draft of New Copyright Law Released

Source: China Daily

After Long Review,  Latest Draft of New Copyright Law Released

By Hao Nan ( China Daily)

he third version of a draft amendment to the copyright law is finally complete after long public review and repeated discussions among experts, according to the National Copyright Administration.

"We are now working on the legislative explanation for the draft amendment and will submit it to the State Council by the end of the year," said Wang Ziqiang, director of the NCA's legal affairs department.

If approved, the draft will be presented to the National People's Congress Standing Committee, China's top legislature, for consideration, Wang noted.

According to the copyright official, the draft has 90 clauses, 29 more than the existing law, and more protection for copyright holders.

He said major changes include protection of artists' rights to profit from the resale of their works and more avenues for statutory compensation to copyright owners.

New measures in the draft also include punitive compensation for copyright violations and increased monetary awards.

The scope of presumption of fault has also been expanded.

The draft also has a clause mandating so-called statutory licensing that sets a standard fee and permits use of a work without seeking the copyright holder's prior consent.

"It is a restriction on copyright holders to satisfy the demands of the public for artistic works. It promotes information dissemination, but needs improvement in remuneration protection for the copyright holders," said Zhang Hongbo, secretary-general of China Written Works Copyright Society.

The draft mandates formation of a copyright management administration to collect fees even if copyright holder cannot be found.

It also references the country's other intellectual property laws and copyright laws in other countries and regions.

The first version of the draft was published in March to seek public feedback. The administration received more than 1,600 suggestions from government sectors, courts, the music industry, website operators and software companies. The second version was published four months later.

Wang said many suggestions have been adopted in the third version, but drafters were careful to avoid bias.

Reasonable suggestions that were not adopted in the draft will also be given to the State Council along with the draft, he said.

haonan@chinadaily.com.cn

(China Daily 11/07/2012 page11)

China IP Watch: Revisions Give Trademark Law More Teeth

Source: China Daily

Revisions Give Trademark Law More Teeth

By Zhang Zhao ( China Daily)

Sounds, smells, colors and moving objects can become trademarks under the latest draft amendment of China's Trademark Law, approved at an executive meeting of the State Council on Oct 31.

The amendment is "a response to emerging problems", said Zhang Jianhua, an official with the Legislative Affairs Office of the State Council.

The law was previously amended in 1993 and 2001, and Zhang said the current amendment mainly focuses on three aspects - making trademark registration more convenient, maintaining fair market competition and increasing punishments for infringement.

The State Administration for Industry and Commerce has taken a series of measures since 2008 to improve procedures for trademark examination. The process formerly took up to three years to complete, but the time required has been reduced to less than 10 months, and Zhang said there is still a possibility the period can be further shortened.

Under the current law, applicants must submit separate applications to register the same trademark under several different categories.

If the draft amendment takes effect, only one application can cover the same trademark in all categories.

"Now, if a company wants to apply for a trademark in all of the 45 categories, it needs 45 applications," explained Yuan Qi, a senior official of China Trademark Association. "But in the future, it will need only one."

Rather than rejecting entire applications outright if there are issues with the materials submitted by an applicant, the authority will issue a position paper under the new law.

The second amendment of the law in 2001 allowed 3D objects to be used as trademarks. The new amendment has also removed requirements that trademarks must be composed of visual elements, meaning sounds and smells can now be registered as trademarks in addition to words and graphics.

Similar rules were added as early as 2003 to the trademark law of Taiwan, where the legal system is different from that of the mainland. According to the rules, "words, graphics, signs, colors, sounds, three-dimensional shapes and their combinations" can be registered as trademarks.

The protest mechanism has also been improved in the latest amendment. Under the current law, anyone can file a complaint for any reason against a trademark over the three-month review period, which allows the applicant's competitors to raise protests with the malicious intent of stopping it from acquiring the trademark, Yuan said.

To prevent abuse of the law, the amendment will specify the grounds for a legitimate protest and limit who can lodge one.

Greater penalty

"Trademarks play a crucial role in improving a company's competitiveness," said Zhang.

Abuse of the trademark system will damage the market environment, Zhang said.

"Malicious trademark registration not only does harm to the rights of the trademark owners and consumers but is also a waste of resources," he added.

The new amendment is expected to increase the ceiling of fines imposed on trademark infringement from 500,000 yuan ($80,250) to 1 million yuan. Those who have infringed on trademarks more than once will receive even heavier penalties.

Using other people's trademarks as company names will also be regarded as infringement.

zhangzhao@chinadaily.com.cn

(China Daily 11/16/2012 page17

China IP Watch: Patents a Deciding Factor in Technology Awards

Source: China Daily

Patents a Deciding Factor in Technology Awards

By Hao Nan ( China Daily)

The number of patents owned by scientists is playing a more significant role in determining whether or not they will be awarded China's science and technology prizes, experts say.

For his achievements in the development of safer pesticides, Song Baoan, a professor from Guizhou University, recently won a Science and Technology Innovation Award this year from the Hong Kong-based Ho Leung Ho Lee Foundation. It is the most influential non-government prize in China.

He also owns eight related invention patents.

In fact, nearly all the 50 winners of the foundation's prize this year are holders of invention patents, and on average they each own 17.8, which is an increase of about 50 percent compared to the last session.

It is also a common phenomenon in China's other major science and technology awards, experts say.

For example, the gold prize winner of the 2011 National Science and Technology Progress Award had 21 related invention patents.

"Invention patents reflect the level of a country's technological innovation. More importance has been attached to patents in China since the central government implemented a state intellectual property strategy in 2008," said Duan Ruichun, secretary-general of the foundation.

The number of patent applications has increased too. In 2011, the State Intellectual Property Office recorded more than 1.63 million patent applications, including some 526,000 for invention patents, ranking first in the world.

Gao Wen, member of the HLHL Foundation awards selection committee, believes the increase in the number of invention patent shows China is making a progress in terms of its indigenous innovation capacity.

China's leaders are calling for more indigenous innovation, which means the country must develop its own technologies and proprietary products to help enterprises across the nation transform from manufacturers into innovators and product designers, government officials have said.

The patent boom also indicates that China is developing a good environment for scientific innovation. The central government is helping research staff enhance their capabilities in terms of patent utilization, protection and management, Gao told China Intellectual Property News.

While analysts recognize that invention patents are surely vital to a country's core competitiveness, they say it is hard to make real profits without commercialization.

Converting research ideas into marketable products is the dream of most inventors. For Song, the dream came true.

His highly efficient and low-toxicity pesticides can help China decrease its dependence on imports as well as ease the pollution and other negative effects from pesticide residue on soil. Farmers can also enjoy a much lower price compared to imports.

But, commercialization is too uncertain for many inventors, and often a bridge is needed, experts say.

Fortunately, Chinese government agencies at all levels have started to promote patent commercialization.

A patent operation center was established in Jiangsu province this year to help companies find potential buyers of their patents. And similar services can also be found in Zhejiang, Shanghai, Tianjin and Beijing.

In addition, many provincial governments provide financial support to help local companies turn their patented technologies into marketable products.

For individual inventors, the China Association of Inventions will serve as the bridge.

"China has a large number of individual inventors - about 400,000 on record," said Lu Dahan, secretary-general of the association, at a forum. "And, we have been helping them explore paths toward commercialization in recent years."

In addition to monetary awards, Lu said the association will also help inventors cooperate with companies by transferring their patents or contributing the patents as equities.

Moreover, "the association will introduce more risk investment institutions to provide financial support", Lu said.

haonan@chinadaily.com.cn

(China Daily 11/16/2012 page17)

China IP Watch: Official Views from China

In this series of blog entries, we will present a number of interesting articles regarding intellectual property from China Daily, the official state-run English newspaper. The articles are intended for informational purposes only, reflecting official views from China.

Law360: "Fed. Circ. Clears Chinese Electrical Devices In 337 Suit."

Law360 interviewed Lei Mei of Mei & Mark LLP for its report on two opinions issued today by the United States Court of Appeals for the Federal Circuit in favor of Mei & Mark client Wenzhou Trimone Science & Technology Electric Co., Ltd. Click here for a copy of the article.

ITC Investigates Intellectual Property Rights Infringment in China

From ITC's website:

May 25, 2010
News Release 10-055
Inv. No. 332-519
Contact: Peg O'Laughlin, 202-205-1819

USITC BEGINS SECOND OF TWO INVESTIGATIONS ON THE EFFECT OF INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT IN CHINA ON U.S. ECONOMY AND JOBS

The U.S. International Trade Commission (USITC) has launched the second of two investigations into the effect on the U.S. economy and U.S. jobs of intellectual property rights (IPR) infringement in China.

The investigation, China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy, is the second report requested by the Committee on Finance, U.S. Senate, in a letter received on April 20, 2010.

In its letter requesting the investigations, the Committee stated: "Despite widespread evidence of the harm to U.S. industries, authors, and artists resulting from IPR infringement in China, the U.S. Government has not conducted a comprehensive economic analysis of the effect of China's ineffective IPR protection and enforcement on the U.S. economy and U.S. jobs." As requested, the USITC will deliver two reports to the Committee. The first investigation, China: Intellectual Property Infringement, Indigenous Innovation Policies, and Frameworks for Measuring the Effects on the U.S. Economy, was instituted on May 5, 2010.

In the second investigation, the USITC, an independent, nonpartisan, factfinding federal agency, will describe the size and scope of reported IPR infringement in China; provide a quantitative analysis of the effects of reported IPR infringement in China on the U.S. economy and U.S. jobs; and discuss actual, potential, and reported effects of China's indigenous innovation policies on the U.S. economy and U.S. jobs, and quantify these effects to the extent feasible. The second report will build upon the qualitative findings described in the first report. The USITC expects to deliver the second report to the Committee by May 2, 2011.

The USITC will hold a public hearing in connection with the two reports at 9:30 a.m. on June 15, 2010. Requests to appear at the hearing should be filed no later than 5:15 p.m. on June 1, 2010, with the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. For further information, call 202-205-2000.

The USITC also welcomes written submissions for the record. Written submissions (one original and 14 copies) should be addressed to the Secretary of the Commission at the above address and should be submitted at the earliest practical date, but no later than 5:15 p.m. on November 16, 2010. All written submissions, except for confidential business information, will be available for public inspection.

Further information on the scope of the investigation and appropriate submissions is available in the USITC's notice of investigation, dated May 25, 2010, which can be obtained from the USITC Internet site (www.usitc.gov) or by contacting the Office of the Secretary at 202-205-2000.

USITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the House Committee on Ways and Means, or the Senate Committee on Finance. The resulting reports convey the Commission's objective findings and independent analyses on the subject investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the USITC submits its findings and analyses to the requester. General factfinding investigations reports are subsequently released to the public, unless they are classified by the requester for national security reasons.

IP Law360 Article: IP Enforcement In China Still A Work In Progress

On April 9, 2010, IP Law360 published an article "IP Enforcement In China Still A Work In Progress," which contains an interview with Lei Mei, a founding partner at Mei & Mark LLP.

Please click here to view the article.

Lexis Nexis Published Case Study on the Trimone Case

On March 26, 2010, Lexis Nexis published a case study by Lei Mei, a founding partner at Mei & Mark LLP, in its China Legal Review in English and Chinese. Click here for a copy of the article. The English version is reproduced below.

The Trimone Case: The First Ever Win for a Chinese Company in an ITC-Related U.S. Customs Proceeding

Lei Mei, Managing Partner, Mei & Mark LLP

On May 12, 2009, U.S. Customs issued a ruling that Zhejiang Trimone’s re-designed TGM ground fault circuit interrupters (GFCIs) fall outside the scope of the exclusion orders issued by the United States International Trade Commission (ITC) in Investigation No. 337-TA-615. This case was reported by national media in China to be the first ever win for a Chinese company to obtain a favorable ruling from the U.S. Customs after it had lost at the ITC.

This article describes the background of the Trimone case, and offers practical advice regarding post-ITC U.S. Customs proceedings. For many Chinese companies, the U.S. Customs proceedings may be a cost effective option to overcome the trade barriers created by ITC exclusion orders.

I. Background

The ITC instituted an investigation of certain GFCIs and products containing same on September 18, 2007, based on a complaint filed by Pass & Seymour, Inc. (“P&S”). The complaint alleged that Trimone and other respondents violated Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337, by selling for importation certain GFCIs that infringed P&S’ patents.

Trimone is a privately held company based in Zhejiang. The company develops its own GFCI technologies and owns several Chinese and U.S. patents related to GFCI. In previous cases, many Chinese companies chose not to respond to ITC investigations. Trimone, however, aggressively defended its claim that it did not infringe P&S’ patents, retaining one of the largest international law firms to represent it before the ITC. On March 9, 2009, the ITC found that Trimone infringed U.S. Patent No. 7,283,340 (“the ’340 patent”), but not other P&S patents. As a result, the ITC issued a limited exclusion order, excluding entry of Trimone’s infringing GFCI products.

On March 18, 2009, Trimone retained our firm, Mei & Mark LLP, to find a resolution to allow it to continue to sell products in the U.S. notwithstanding the limited exclusion order. The traditional option, of course, was to appeal to the United States Court of Appeals for the Federal Circuit (“the Federal Circuit”), which could take over a year to resolve. In addition to the appeal, we proposed a little known legal option to bring a design-around product before the U.S. Customs for a quick ruling on whether the re-designed product is subject to the limited exclusion order.

The U.S. Customs option is more cost-effective, because a U.S. Customs proceeding typically takes about three to four months to complete, much faster than the Federal Circuit appeal or an advisory opinion proceeding before the ITC.
We contacted the IPR branch of the U.S. Customs’ headquarters in Washington, D.C., and submitted legal briefs and supporting documents to demonstrate that Trimone’s new GFCI products do not infringe the ’340 patent. On April 3, 2009, we had an in-person, meeting with an U.S. Customs official, who is also an attorney, at the IPR branch. Subsequently, we communicated with the U.S. Customs, providing additional supporting documents.

On May 12, 2009, the U.S. Customs ruled that Trimone’s re-designed TGM series of its GFCI products do not infringe the ’340 patent and fall outside the scope of the limited exclusion order. Therefore, unlike other Chinese respondents in this case, Trimone is the only Chinese company that can sell its GFCI products to the U.S.
As a result, not only has Trimone’s business recovered from its loss at the ITC, Trimone has also received more orders now from U.S. customers than it did before the ITC investigation because of this favorable ruling from the U.S. Customs.

II. Legal Basis

According to the U.S. Federal Regulations 19 C.F.R. Part 177, the U.S. Customs has discretion to issue legal opinions related to imported goods. Because the ITC does not enforce the exclusion orders, the U.S. Customs has the responsibilities for enforcement.

ITC exclusion orders are typically very general and vague. Therefore, the U.S. Customs also has the flexibility in implementing the enforcement mechanism and interpreting ITC exclusion orders.

For example, in the Trimone case, the ITC issued a limited exclusion order, paragraph 3 of which prohibits import of any GFIC products that infringe the ’340 patent, without naming specific products:

3. Ground fault circuit interrupters and products containing the same covered by one or more of claims 14 and 18 of the ‘340 patent, and that are manufactured abroad by or on behalf of, or imported by or on behalf of, Trimone or any of its affiliated companies, parents, subsidiaries, or other related business entities, or its successors or assigns are excluded from entry for consumption, entry for consumption from a foreign-trade zone, or withdrawal from a warehouse for consumption, for the remaining term of the patents, except under license of the patent owner or as provided by law.

As a result, the U.S. Customs must decide what products would infringe the patents in dispute. Obviously, for the specific products named in the ITC investigation, the ITC has already made the ruling, so the U.S. Customs cannot change that. For new or re-designed products, however, the ITC has not ruled on them before. Therefore, the U.S. Customs has the discretion under 19 C.F.R. Part 177 to issue a ruling.

Typically, an ITC exclusion order specifically allows the U.S. Customs to have discretion in the enforcement. For example, in the Trimone case, paragraph 6 of the limited exclusion order describes the U.S. Customs’ role in enforcing the limited exclusion order:

6. At the discretion of U.S. Customs and Border Protection (“CBP”) and pursuant to procedures it establishes, persons seeking to import ground fault circuit interrupters and products containing the same that are potentially subject to this Order may be required to certify that they are familiar with the terns of this Order, that they have made appropriate inquiry, and thereupon state that, to the best of their knowledge and belief, the products being imported are not excluded from entry under paragraphs 1 through 10 of this Order. At its discretion, Customs may require persons who have provided the certification described in this paragraph to furnish such records or analyses as are necessary to substantiate the certification.

Unfortunately, most Chinese companies are unfamiliar with post-ITC U.S. Customs proceedings. Indeed, even American companies have rarely used this legal option until recently, and many U.S. lawyers are not aware of this area of law. Therefore, we hope that more Chinese companies can learn from Trimone’s experience.

III. Conclusion

IP-related trade barriers are not insurmountable. When facing a patent lawsuit in the United States, whether it is an ITC investigation or a federal district court litigation, Chinese companies must consult with competent U.S. patent lawyers and consider all options. It is not necessary to always spend millions of dollars in attorneys’ fees to defend a patent infringement lawsuit. Other legal options, such as U.S. Customs proceedings, could be cost-effective alternatives. If advised properly, more and more Chinese companies can learn from Trimone’s success and become much stronger coming out of IP disputes.

About the Author:

Lei Mei is a partner at Mei & Mark LLP, an Intellectual Property and Litigation law firm based in Washington, DC.