22 October 2016
China has been taking steps to improve protection for copyrights, trademarks and other intellectual property. Photo:
China has been taking steps to improve protection for copyrights, trademarks and other intellectual property. Photo:

China IP law revisions will help attract foreign firms

After making amendments to its Trademark Law last year, China is on track to revise its other laws relating to intellectual property (IP).

A draft of amendments to the Copyright Law was recently submitted to the State Council for consideration, and public consultation on proposed amendments to the Patent Law has begun.

Such efforts are “very positive for overseas businesses owners who are looking into China”, Edward Chatterton, a partner of law firm DLA Piper in Hong Kong, told EJ Insight in an interview last week.

Chatterton highlighted as big steps forward the proposed increase of maximum statutory damages for copyright infringement from 500,000 yuan (US$80,700) to one million yuan and a provision for statutory damages to be doubled or tripled in case of serious infringement.

Unlike other jurisdictions, for example Britain or the United States, China lacks a discovery process for lawsuits, he said.

At the discovery stage, a court would order the accused infringer to disclose all the documents relevant to the case.

However, Chatterton said, “generally speaking, the [Chinese] court is quite conservative about ordering disclosure of documents. They tend to [impose] more specific disclosure orders”.

This makes it difficult for IP owners to claim actual damage. As a result, many IP infringement lawsuits in China have ended with judges deciding statutory damages, which may be much lower than the amount claimed.

China has made many efforts to strengthen IP protection in recent years.

These includes setting up specific courts for IP cases in Beijing, Shanghai and Guangzhou.

The proposed amendments are likely to encourage many IP owners to take action against infringement, Chatterton said.

Partly owing to the introduction of the revised Trademark Law last year, the amount of newly filed IP lawsuits for 2014 increased nearly two-and-a-half times from the previous year, Xinhua reported Monday, citing government data.

Chatterton said many western brand owners don’t have enough awareness of the unique trademark registration rules in China, such as the first-to-file rule, and so may be targeted by trademark pirates in the Chinese market.

Besides the improvements in the law, implementation is also key, he said.

He recalled that after the new Trademark Law came into force, China’s Trademark Office failed to successfully update its computer system, leading to about four months of system failures beginning in May last year and a “massive backlog” of applications for licensing or other permissions.

Many IP owners suffered losses from the delays.

In other comments, Chatterton said that although Hong Kong has the best practices in IP protection in the region, he is taking a wait-and-see attitude toward the city’s attempt to be a regional IP trading center.

“The IP litigation system in Hong Kong could be significantly improved by making it faster, cheaper” and with more specialized judges with genuine understanding of IP issues, he said.

Chatterton cited the size of the population as a reason why many IP owners choose to sue in China instead of Hong Kong: there, “they can get an injunction against 1.4 billion people”.

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EJ Insight reporter

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