Is the Chinese IP Law Effectively Protecting IP Owners Rights - Essay Example

Deakin University Faculty of Business and Law MLM703 Chinese Commercial Law Assignment: Intellectual Property Protection ‘Is the Chinese IP law effectively protecting IP owner’s rights?’ Unit Chair: Name: Student ID: Due day: Word count: Introduction IP law and its importance IP which is an intellectual property Intellectual property (IP) refers to the individual rights awarded by various authorities and protected by laws governing intellectual property. IP take into consideration any intangible property which is made by individual’s mostly through creative and intellectual work. People whose intellectual properties are stolen feel violated by law. Individuals and authorities should be awarded rights to safeguard their intellectual property just the same as people value their home possessions1. Movie studios would not be willing to spend multiple-millions of dollars on a making film if other studios could copy it upon release and send it to the video rental stores under their own label. Books publishers feel violated when their property is stolen and sold for less than the required value. IP law evolvement in china IP protection is very essential and remains a challenge in China2. Whenever China enacts trade agreement with other countries, IP protection is a highlight part in discussion. The reason for this is that China is original place for many different pirated and fake products that run into international markets. Intellectual property term became of use in the 19th century although many of the legal principles governing it have evolved over centuries 3. In the late 20th century, it became known in many countries4. However, the British statute of Anne in 1710 and the Statute of monopolies of 1623 are today seen as the origins of copyright and patent law 5. Early years In the early years of patent law in china, the Tang Dynasty made the beginning the law in patent. However, it became evident that the patent law was to effectively enacted by 1889. However, the modern Chinese patent law stated with the issuance of the Provisional Regulations on the Protection of Invention Rights and Patent Rights in 1950. This was not well received as it left the ownership of intellectual property in the hands of the State. China’s Cultural Revolution in the which happened in the 1960’s brought an end to the modest recognition of intellectual property6. Later, the patent law was revived in the 1980’s. The country sends scholars to other countries so that they could learn more on the intellectual law application. They came back to revive the intellectual property law and this made the country to enact it. The law was later enacted in 1984. In 1985, china attended the Paris convention Protection of Industrial Property and later became its member. The Patent later was to be amended in 1992. China by the virtue of being in the fore front in spearheading the patent law enactment became a signatory to the Patent Cooperation Treaty (PCT) in 19947. The Patent Law was amended lastly in 2001. This was in an effort to bring the law in line with the relevant provisions of the WTO agreement8. Today China boost of being an industrialized and modernized. As the country strives toward modernization, its attention to the importance of patents has grown9. Over the years, there ahs been thousands of new applicants of patent applications who fill for protection. In 2003 the applications rose to 38% alone. This has been revealed by the countries statistics. The move has not gone unnoticed as more and more individuals and organizations has been filing patent protection rights every year. Foreign and domestic patent owners continue to have problems with piracy in China. China has been having the problem of piracy and this is violation of patent owner’s rights. Many investors have feared working with china markets for they believe that most of their goods are not original. They often see the country lacking in enforcement of intellectual property laws10. Fake products are found easily in the china markets that eventually run into international markets. Some countries like US have had a first hand experience on the pirated goods. For instance, while carrying out an investigation on fake their Customs realized that more than half of the china’s products were not genuine. These products ranged from car parts, toys and even pharmaceuticals. Getting deep into Chinas internal market, it’s evident that pirated music and movies are available anywhere and latest movies can be obtained in any language. This has encouraged any individual considering working with china market to be vigilant and seek legal advice in matters related to IP protection11. Legislation It is god to note that China has strived forward in the legislation of patent law. This has evolved over several years and it has been marked by changing the law severally to perfect it as the years progressed. The year 1984 made headlines as the original version of the Patent Law was adopted. The law was to be later made public 198512. Making of the law to be public made it possible for patent owners to be granted IP protection effectively. 1985 amendments made the protection of the IP easier. However, in 1992, the Patent Law was again amended to make it inline with Standing Committee of the Amending the Patent Law of the People's Republic of China during its 27th Meeting. Today’s current version of the Patent Law was amended in 2000, together with new Implementing Regulations. The amendments were made in an effort to bring the Patent law in line with WTO Agreement trade13. These amendments became effective on July 1, 2001. IP owner’s rights Does china have IP protection law? Over time, china has recognized intellectual property. Today, the country authorizes patent protection as a way of protecting the progress of science and useful arts. Intellectual property (IP) refers to a number of distinguished types of creations of the mind for which rights of owners are recognized in the field of law14. Under the umbrella of intellectual property law, IP owners are given in their intangible goods. These goods range from musical, discoveries and inventions , literary, and artistic works and words, phrases, symbols, and designs15. The most common types of intellectual property rights are copyright, trade secrets, patents, and industrial design rights. This is only in certain jurisdiction. Protecting Intellectual Property Rights in China In every business, protection of the IP should be a given priority. Overtime, it has been established that china has a poor record in the area of IP protection. This is mainly due to the fact that local companies openly infringe IP rights for their own benefit. But all this has changed as there has been recognition on the face value of IP rights. It’s good to note that IP protection still yet to reach the level of security that is normally enjoyed in various developed countries but the country is heading on the right direction. Patent Protection In patent protection, patents are divided into three types. These types are as follows; Invention which is referred to as any new technical solution relating to a product, a process or improvement thereof; Design patent gives the product a new design which gives it better appearance to fit in the market for industrial application and finally the utility model which is the new technical solution relating to practical use 16. Relatively, substantive and procedural requirements for invention patents are more stringent than for all the other categories. This makes the protection provided in an invention patent more extensive among the three types. However, the process for obtaining an invention patent may take over 2 years and longer. Trademark Protection Trade mark registration should not b taken lightly. Failure to do so have costed traders of their genuine trading products as it has given non original owners a leeway to sell trademark unprotected goods. Protection of trademark has been given propriety as China’s Intellectual Property Rights recognizes trademarks protection just as in many countries. A trade mark should be distinguished from other goods and services. This is inform of trademarks and service marks which are generally words, names, symbols, or devices used by manufacturers and service providers to specifically identify their goods and services and to distinctively differentiate their goods and services from those manufactured and sold by other traders. In addition, a trademark that also resemble a trademark already used in Intellectual Property Rights in China may likely cause confusion in the registration17. Additionally, in china, characteristics of goods or services must meet special requirements before they become protected. A special mark which is either in Roman letters, Cyrillic letters, or Chinese characters, is registered with the Chinese Trademark Office, which grants the owner a proprietary right in the mark to the exclusion of all others for use any registered product18. Filing a trademark in china is very essential. This is because the holder of a trademark in a foreign jurisdiction has voice in china. However an exception is allowed for the well-known foreign trademarks such as Coca-Cola or McDonalds. All investors who seek to invest in China must ensure that all foreign trademarks are registered in china19. Domain Name Protection As a country, china has made domain name protection a priority. They normally advise any foreigh investor to make proper registrations before beginning any trade in the country. Any foreign investor is always advised to register all their domain names with the Chinese country codes. Legal framework for its own domain registration is still underway and this is why foreign investor should register their domain name both in Chinese and English in china. This is good for protection effectiveness. Protection for the Trade Secret Trade secrets form the heart of any organization20. Trade secrets are very essential for any organization survival. They include information, formulae, patterns, compilations, programs, devices, methods, techniques, databases, or processes. Trade secrets give the organization a chance to commercialize their inventions after much research in the organization. They provide an individual with valuable information that is not known to the outside world and that has been kept secret over time21 . They form trade strategy for a growing organization. This is the reason why they subject to reasonable efforts to maintain secrecy. Though the practice is hard to maintain, a secret owner has all the rights to prevent others from misappropriating and using the trade secret. Sometimes misappropriation is a result of industrial espionage. Trade secrets shield innovations from being duplicated by other firms. However not all company secrets can be kept secret. Trade secret owners have recourse only against misappropriation as discovery of protected information through independent research or reverse engineering is not considered misappropriation. However, the trade secret confidentiality protection is deemed lost when the owner fails to maintain the information's secrecy22. Strategies for IP Enforcement What is more, China is a high power-distance orientation society. It generates personal and high-handed leadership manner in the political and business area. The degree of equally in IP rights is changed by some privileged class. They abuse the power in manipulate the laws to govern foreigners and tradesmen. And those privileged people do not have to obey the laws. 23Before ‘Open-Door’ policy, there are only domestic laws in China and they can be arbitrated by the leader. ‘Culture Revolution’ that initiated by Mao Zedong is an explicitly example. Therefore, in matters of IP rights, judicial results would be wielded by personal power. In reality the government officials who command personal power could manipulate the results. Compared with Western’s following legal laws strictly, China has tolerance of ambiguity in apply the legal laws. Chinese society pays more emphasis in relationship building, sensitivity, and concern for others. Chinese prefer to strengthen the relationship; it is an essential factor in business activities. This kind of orientation get less outcome when quantifiable the IP rights. The worldview has influence in the legal provisions drafting, ambiguous terms are existing. Such as “the public interest”, it is amorphous and permits the government officials manipulate the laws without specific defining. 24 Administrative powers enforcement In china, IP infringement is handled at a local level. The Administrations for Industry and Commerce (AICs) handle trademark and unfair competition cases; copyright cases are handled by the Copyright Administration Bureaus (CABs) handle while Intellectual Property Offices formerly Patent Administration Bureaus, or PABs) handle patent cases. All these organizations are empowered to check counterfeits and the payment of administrative fines. The money that spent on normally enforcement is practical (less than AUD6, 500) and those counterfeit goods being seized mostly are destroyed. Inspection power that the AICs and TSBs have is inadequate; hence most IP owner would take the preliminary investigation by themselves or hire some private investigators. If there is a sample of counterfeit goods and a copy of registered trademark certification, the administrative agencies are likely would start investigation and seizure for owner. Depending on the industry, recourse may also be sought from other agencies such as the Quality and Technical Supervision Bureau (QTSB), the Administration for Quality Supervision, Inspection and Quarantine (AQSIQ), and the Food and Drug Administration (FDA)25. In countries where administration arm of government take responsibility of enforcing IP protection, there exists growth in industries especially in technology related areas. Countries like US , have strict measures for IP enforcement through administration and this is why its ranked as one of the best countries t trade in original products. However, administration of IP protection should be enforced wisely as strict measures may scare away investors who may otherwise offer genuine solutions to the vice. Customs enforcement In the case where infringement crosses borders, customs enforcement plays an important useful role. This gives owners of patents customs enforcement. There are two options for this; Passive Protection which is a Protection by Application. An IP owner may apply to customs authorities directly incase he/she learns of an infringing shipment, This is makes the customs to detain the shipment provided that the IP owner puts up a guarantee equal to the value of the goods in question. After that the IP owner is granted 20 working days in which to go to court and apply for judicial protection. This is important because as for the protection by application, customs authorities do not have the right to determine infringement and will not take any action without an IP owner making a specific request26. Criminal enforcement Criminal enforcement in IP protection is very reliable. Criminal liability for intellectual property infringement in China is limited to repeat cases of commercial counterfeiting. Many criminal cases are taken to the police public prosecutors although the possibility of private prosecution exists. Since there are no direct benefits to an individual IP owner, criminal enforcement does not normally feature highly in most intellectual property strategies. Remedies against infringement in china .An enforcement strategy is driven by the type of remedies desired. Injunction Injunctions serve as the most important enforcement remedies for the majority of intellectual property owners in china. Compensation Compensation is very important in any law suit involving intellectual property. Compensation is a way to deter the infringe activities, including make a public apology in copyright case or infringement in criminal prosecutions. The compensation of money is based on simple calculation. For instance, the plaintiffs pay the money that is enough to make up the profits under consumption that the sale of rights holders are keep at the same rate before violation started. However such assumption cannot be proper calculate the loss of IP owners. And compared with US, UK, Australia, New Zealand etc, awards for the rights owners in China are much lower. Due to the low damage awards, technology will be used more commonly and design-around would likely be employed. Companies would expect that even if they are verified as infringement for designing around a patent, the compensation would not be large and design-around is a good way to avoid infringement. Low compensation awards are considered as a way to balance the interests between the innovators and design-around companies. China want not only provide protection to innovators, but also not curb companies to try design around others. 27This compromise is probably due to China is on the way of shifting and protect Chinese companies. If financial compensation or cost recovery are important goals, an enforcement strategy should include litigation as a prominent option. Damages are intended to make the injured party whole again. This is in line with the general principle of Chinese law that stipulates that it’s better to compensate rather than to punish the wrongdoer. Intellectual property cases are no exception, and the standard quantum of damages is therefore the loss suffered by the rights owner. The NERA’s investigation found that IP cases are mostly tried in either Beijing or Shanghai. Even though the median damage awards in China is around $ 15,000, only take up 15% of the claim. And the average amount of awards does not go higher with the increase number of IP cases. 28However there are some cases involved large amounts of damage awards these years, such as Walt Disney case and Microsoft’s infringement. However, the compensation principle, lack of punitive damages, standards of proof, and historical reasons mean that average damage awards in China remain small. Punishment Punishment is another way of remedies against infringement in china. This is done by the administrative authorities and courts sitting in either a civil or criminal capacity. They are empowered to punish intellectual property rights infringers through fines and confiscation of profits. However, these fines go directly to authorities rather than to the owner or owners of the rights in question. Punitive measures fall under the umbrella of law enforcement, and are not intended to directly benefit a specific IPR owner. So they should not form key focus of most IP enforcement strategies29. Conclusion IP protection is very essential for any individual and organization. Thought its still an evolving practice, it should be emphasized so as to make it possible for businesses to be conducted with ease. As we applaud the measures that china is enacting in order t protect IP and offer individuals and organizations rights, we should handle the practice individually and work towards making it mandatory. Coming form early years of enactment to the present legislation practices, china has moved forward and soon it will eliminate the infringement practices as it embark on putting enforcement measures into practice. In conclusion, it’s very important for any company considering introducing business to China to first begin working with lawyers and security experts before start of business. This is because without authorization, the available remedies may not be sufficient to stop it from continuing or offer adequate redress. Consequently, the regulation and research ability was is inadequate; hence there was barely any IP rights protection. Back then, China’s economy was bad and relied on the manufacturing and copying permits which were cheaper cost for goods and service. In the early years, the weak IP regime promoted the economy development. Today, China is now transforming from manufacturing based production to knowledge based production. The knowledge based production demands innovation and technological development. If there is no proper IP laws and adequate enforcement of IP laws, it’s hard to finish the economy transformation. 30 Although conflicts and challenges would come with a more developed IP rights regime due to the short run costs in early stage. The effective enforce IP laws would shut down or lower the profits for some companies, the consequent would be the unemployment. With the internal regulation of economy, that unemployment would shift to the knowledge based production. In the long term, knowledge based production will be more profitable for the country31. After China joined the WTO, the number of civil cases about violation of IP rights in China courts has increased. This shows the IP rights protection still have long way to go, but also prove from another perspective that the enforcement of IP rights is more and more strengthened. 32 List of references Embassy of the United States Beijing, China – Intellectual, http://beijing.usembassy-china.org.cn/iprpatent. Chinaiprlaw, Judicial Protection of IPR in China: Patent law of the People's Republic of China http://www.chinaiprlaw.com/english/laws/laws4.htm John L. Orcutt, Hong Shen, Hong Shen 2010 (2010), Shaping China's innovation future: university technology transfer in transition, Edward Elgar Publishing, UK Katarina Klaric, Principal Stephens Lawyers & Consultants Level 3, 530 Lonsdale Street Melbourne VIC Katherine Linton China: Intellectual Property Infringement, Indigenous Innovation Policies, and Frameworks for Measuring the Effects on the U.S. Economy :41 DIANE Publishing Kluwer Law International, 2010 China intellectual property law guide, Netherlands Michael Berrell and Jeff Wrathall, Changing Attitudes to Intellectual Property Rights in China: The Nexus between Chinese Culture and the Rule of Law, (2004) http://mams.rmit.edu.au/gbmel0526xzrz.pdf Sherman;Lionel Bently (1999). The making of modern intellectual property law: the British experience, 1760-1911. Cambridge University Press. pp. 207. ISBN 9780521563635. http://www.google.com/books?id=u2aMRA-eF1gC&dq=statute+of+anne+copyright&lr=&as_brr=3&source=gbs_navlinks_s. Richard J. Goossen (1987), Technology transfer in the Peoples' Republic of China: Law and practice, BRILL, UK Veronica Weinstein & Dennis Fernandez (2011) Recent Developments in China's Intellectual Property Laws YI Zhao, Patent Rights Protection, Multinational Companies Investment in China http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=1890283&fileOId=1895838 Read More