China Law Insight : China Law Insight: China Commercial and Intellectual Property Lawyers and Attorneys, Full Service Law Firm: King & Wood

Article 5 of the Draft Rules state that AML private actions may be filed in three forms: (a) by way of a "separate" or individual applications; (b) by way of "joint" applications and (c) by way of "combined" applications.  The term "joint applications" refer to situations where there are multiple applicants who wish to file joint suits for common causes of action.  The term "combined applications" refer to a situation where applicants file a suit against a common respondent (or common respondents) in different courts.  In this situation, the courts (which have been designated by the Supreme Court as possessing jurisdiction to hear AML applications) would have the power to "combine" or consolidate these applications.

China's Civil Procedure Law also provides for a joint application regime.  The following are the salient points to note in relation what China's Civil Procedure Law says about joint applications:

• applicants may apply to courts jointly, if they have a common cause of action or if their action belongs to the same "category".  This right to file joint applications is contingent upon the court approving such a joint action and contingent upon the applicants agreeing to file such an action together; 
• in a situation where there are numerous applicants (within a joint application), representatives may be selected by the applicants.  Actions undertaken by such representatives will be effective in relation to all joint applicants – save for certain situations including confirmations, modifications and waiver of claims of actions;
• the court possesses the right to issue a public notice – which states the particulars and claims (in respect of joint applications), instructing other potential applicants to file with the court within a certain time; and 
• judgments or orders rendered by the court are effective for all joint applicants. The same judgments or orders are binding on applicants who have not filed with the court but instituted legal proceedings within the court's time limit mentioned above.

Thus far (and as far as we are aware), there haven't been any public joint AML applications before the courts in China.  This is despite the fact that there have been a significant number of AML actions to date.  According to the Supreme Court, between 1 August 2008 to 2010, approximately 29 AML actions have been concluded, among the total 43 AML actions accepted by courts in China. 

It remains to be seen to what extent AML litigants in China would take up the "joint action" route.  Such joint actions are akin to the US class action regime.  We expect such joint applications to consist of mostly small to medium enterprises – as such actions provide the opportunity to pool resources.
 

¹For a holistic and detailed introduction of the salient provisions within these Draft Rules, please refer to our articles entitled "Supreme People’s Court Issues Draft Rules Governing Private Actions under the Anti-Monopoly Law" and "A Further Look At The Draft Rules Governing AML Private Actions".

1.Objective

The objective of the Draft Rules is to "to ensure the proper judgment of civil antitrust disputes, prevent monopolistic conducts, protect fair competition in the market, and safeguard the interests of consumers and social public interest" 

2.Overview of the provisions

  The Draft Rules has 20 provisions in total, these cover the following matters:

 Articles 1 to 3 deal with jurisdiction issues;
 Articles 4 deals with the issue of standing;
 Articles 5 to 6 provide outline the different forms of AML civil litigation;
 Articles 7 to 14 outline the rules of evidence;
 Articles 15 to 16 outline the link between AML investigations and litigation;
 Articles 17 to 19 deal with remedies; and
 Article 20 provides for a statute of limitations.

3.Jurisdiction

  The Draft Rules provide that first instance AML cases will be heard by:

• intermediate people's courts located in the capital cities of the provinces and autonomous regions;
• intermediate people's courts in municipalities which fall under the purview of the State Council or in cities listed in the   State Plan¹ ; and
• intermediate people's courts which have been designated by the Supreme People's Court.

The Court was interviewed about the draft recently²  and during this interview, a spokesperson from the Court said that only certain intermediate people's courts were given jurisdiction to hear AML cases because their experience with AML cases are that these are highly complex and "technical" in nature.  The spokesperson also said that China is still at its infancy re AML litigation and thus far the courts haven't had the opportunity to become experienced AML courts.  It was also disclosed during the interview that AML cases (along with Anti-Unfair Competition Law cases) will be heard by the Intellectual Property Rights Tribunals within the courts possessing jurisdiction.

4.Standing

The Draft Rules echo Article 50 of the AML.  Article 50 of the AML provides that business operators which implement monopoly acts and thereby causing others to suffer losses will bear civil liability.  The Draft Rules state that "natural persons, legal persons and other organisations who have suffered harm as a result of monopolistic conduct, including business operators and consumers, may file a civil suit".  From the relatively broad way in which the Draft Rules are phrased, it would appear that persons who are directly or indirectly harmed by a monopoly act may sue.

During the interview mentioned above, the spokesperson from the Court explained that victims of monopoly acts often do not come into direct contact with entities who breach the AML – for instance consumers.

5.Forms of AML civil litigation

The Draft Rules provides for both stand alone and follow on rights of actions. 

The Draft Rules also provide that there are only follow on rights of actions in relation to breaches of the AML by administrative agencies ³.

6.Rules of evidence

Burden of proof on plaintiff.  Pursuant to PRC Civil Procedure Law, the burden of proof always lies on the plaintiff.  This is also the case in the Draft Rules.  Specifically, the Draft Rules state that plaintiffs will bear the burden of proof in the following respects:

•the existence of the alleged monopolistic conduct;
•the existence of damages;
•the causal link between the alleged monopolistic conduct and damages.

Cartel cases.  In relation to cartel cases, the plaintiff bears the burden in relation to proving how the cartel arrangement has eliminated or restricted competition (i.e. the effects test).  However, in relation to specific conduct outlined pursuant to Articles 13(1) to (5) and 14(1)-(2) of the AML, the plaintiff does not have to prove effects.  Article 13 of the AML prohibits cartel agreements and arrangements and parts (1) to (5) outlines examples of cartel agreements and arrangements such as price fixing, restricting supply and dividing markets.  Article 14 of the AML prohibits anti-competitive vertical agreements and arrangements including resale price maintenance.  The Draft Rules make it clear that one does not need to prove "effects" in relation to these examples of cartel agreements or anticompetitive vertical agreements.

Abuse of dominance cases.  In relation to abuse of dominance cases, the plaintiff bears the burden of proof in relation to proving: what the relevant market is, dominance of the defendant in the relevant market and the alleged abuse. 

Defences.  The defendant would bear the burden of proof to prove the legitimacy of his actions, after the plaintiffs are able to prove the above mentioned elements.

The Draft Rules also address "pass through" defences – in relation to pass through defences, the defendant would have the burden of proof that the plaintiffs have passed through all their damages or part of their damages to other entities.

Special sectors.  The Draft Rules also provide that so long as there is sufficient evidence, the courts would be able to provide a "preliminary" determination that dominance exists in respect of:

•public enterprises including the suppliers of water, electricity, heat and gas;
•business operators other than public enterprises, who are entitled by the relevant laws,  regulations and rules to be the   dominant operator in relation to specific commodities and services;
 in markets which lack efficient competition and where business operators provide commodities or services to others who place  great reliance on these business operators.

Type of evidence.  Evidence to prove dominance may include: economic analysis, statistical results put together by a qualified and independent third party and "confessions" by the alleged dominant entity.

Court order to provide evidence.  There is also a provision within the Draft Rules which give courts the power to instruct defendants to provide evidence.  Specifically the Draft Rules state that plaintiffs may apply for a court order to instruct defendants to provide further evidence, provided the a number of elements are satisfied, including: that plaintiffs are able to prove the "probable existence" of damages due to the monopolistic conduct and plaintiffs have used "reasonable means" to obtain evidence but to no avail.

Expert Evidence.  The Draft Rules provide that plaintiffs and defendants may apply to the courts if they wish to submit expert evidence.

7.Link between AML investigations and litigation

The Draft Rules provide that there is a link between AML investigations and litigation.  Specifically, in situations where monopolistic conduct has been investigated by but not yet determined by the antitrust authorities, the courts may still make determinations based on these investigations.

The courts may also decide to grant a stay to cases in which investigations into alleged monopolistic conduct has not been concluded by the antitrust authorities.

8.Remedies

The Draft Rules state that business operators who commit monopolistic conduct should bear civil responsibilities pursuant to civil law, tort liability law and the AML.

These remedies include: an order to stop the infringement; an order to eliminate the “danger” of causing losses to others and damages for loss caused to others.

9.Statute of limitations

The Draft Rules provide that the statutory limitations for civil antitrust actions are:

•in relation to stand alone actions, two years commencing from the day when the aggrieved party is aware of or should be aware of the infringement;

•in relation to follow on actions, the two year limit is calculated from the day when the aggrieved party either is aware of or should be aware of the determination by the antitrust authorities.

10.Concluding remarks

These Draft Rules are very comprehensive and cover many aspects of AML litigation.  Going forward and especially after these rules are enacted, we expect to see a rise in terms of AML litigation as plaintiffs become familiar with and confident with what they can expect and need to prove to establish a breach of the AML.
 

¹Currently, there are 5 cities separately listed on the State Plan. These are: Shenzhen, Dalian, Qingdao, Ningbo and Xiamen.

²http://www.rmfyb.com.cn/paper/html/2011-04/26/content_26384.htm

³The AML prohibits an abuse of administrative powers by administrative agencies which result in the elimination and restriction of competition (see Chapter 5, AML).

As set out in its preamble, the Draft Rules are promulgated in accordance with the AML ¹, the General Principles of Civil Law, the Tortuous Liability Law, the Contract Law, and the Civil Procedure Law.  In fact, even before the AML formally came into force on August 1, 2008, the Supreme Court showed its efforts in paving the way for upcoming AML private actions by recognizing monopoly dispute as a cause of action under the section of intellectual property disputes².   In late July 2008, the Supreme Court explicitly provided in a notice that anti-monopoly cases shall be handled by the intellectual property division of the courts. 

The current Draft Rules addressed some of the most important unresolved issues.  It confirms that civil antitrust cases of first instance shall be heard by specified intermediate people's courts ³.  It recognizes the standing of indirect customers to bring an action.  The Draft Rules also make some break-through in respect of the rules for allocation of the burden of proof.  Noticeably, the current Draft Rules do not contain provisions on representative actions and punitive damages, which had existed in previous drafts.

We understand that the Supreme Court commenced the drafting of these Draft Rules sometime in 2009 (i.e. a year after the enactment of the AML).  We also understand that the Supreme Court has held several rounds of consultations and workshops to discuss preliminary drafts. 

It is the first time the Supreme Court officially published the Draft Rules for public comments.  It suggests that the Supreme Court sees the Draft Rules as a rather mature product and it is reasonable to expect that the finalized provisions will come out in the foreseeable future.  According to a press interview with the Supreme Court judge, from the period August 1, 2008 to the end of 2010, the local courts in China have accepted 43 private actions under the AML and have closed 29 of them.  We anticipate that more private actions will come up when the Draft Rules come into force.

¹ Article 50 of the AML provides the source power for private actions. Article 50 states that business operators who engage in monopolistic conduct and cause damage to other shall bear civil liabilities.

²See the 2008 Provisions on the Cause of Action of Civil Cases. The 2010 Provisions on the Cause of Action of Civil Cases sets out further three categories of monopoly disputes, i.e., monopoly agreement disputes, abuse of dominance disputes, and concentration of undertakings disputes.

³Intermediate courts having jurisdiction over antitrust cases are those in capital cities of the provinces and autonomous regions, municipalities directly under the State Council or cities separately listed on the State plan, or those specifically designated by the Supreme Court.

As such, several guidelines have been issued to explore the possibility of establishing specialized IPR Tribunals which would hear all types of IPR-related cases. In this regard, on June 5, 2008, the “Outline of the Nation's Intellectual Property Rights Strategy” promulgated by the National Council requested that courts “look into the establishment of specialized IPR tribunals and IPR appellate courts which have jurisdiction over all IPR civil, administrative and criminal cases.” Furthermore, on March 23, 2009, the Supreme People;s Court promulgated the ”Opinions of the Supreme People;s Court on Several Issues Regarding the Implementation of the National Intellectual Property Strategy” (hereinafter, the “Opinions”) which provided that “research shall be carried out regarding the appropriate adjudication model for IPR-related cases; research on the establishment of specialized IPR tribunals to hear IPR civil, administrative and criminal cases”.
 

In line with the Opinions noted above, at the “China High-Level Forum on IPR Protection” held on April 24, 2009, the Chief Justice of the IPR Tribunal of the Supreme People’s Court announced a list of test courts for the establishment of specialized IPR Tribunals to hear IPR civil, administrative and criminal cases. This list includes three (3) High People’s Courts (in Chongqing, Jiang and Fujian), twelve (12) Intermediate People’s Courts and fifteen (15) District Courts.
 

On July 1, 2009, the Supreme People's Court (“SPC”) released a Circular providing guidelines for courts exercising jurisdiction over cases involving patent and trademark rights grants and rights determinations (hereinafter known as the “Circular”). From July 1, 2009, IP Tribunals of intermediate courts in Beijing and the Beijing High People’s Court will have exclusive jurisdiction over IPR administrative cases of the First and Second Instance for rights grants and rights determinations for patent, trademark, layout design of integrated circuit and new varieties of plants cases. If parties are dissatisfied with the rulings after they have been rendered, parties may file a re-trial application to the court of the next higher level. The re-tried case shall be examined and heard by the IPR Tribunals of the court of the next higher level.
 

The “Circular” is a first step in legislation to establish specialized IPR Tribunals to hear IPR civil and administrative cases, while the “test courts”, as designated by the IPR Tribunal of the Supreme People’s Court, will address, concurrently, civil, administrative and criminal claims. Based upon the success of the adjudications in the “test courts”, IPR criminal cases will be exclusively adjudicated by IPR Tribunals throughout China. With the guidelines set forth in the Circular, as well as the establishment of the “test courts”, the judiciary in China is taking steps towards improving the efficiency of adjudication in IPR cases and unifying the judicial practices.
 

知识产权民事、行政、刑事案件“三审合一”审判模式
徐静 张海若
在中国，传统上知识产权民事、行政、刑事案件分别由知识产权庭、行政庭以及刑事审判庭审理，其中，针对专利、商标授权确权类知识产权行政案件，北京市第一中级人民法院行政庭及知识产权庭均有权受理。上述知识产权案件的审理模式容易出现裁判标准不一的问题。
为解决上述问题，国务院以及最高院先后出台文件，要求探索设立知识产权三审合一的法庭。2008年6月5日，国务院出台《国家知识产权战略纲要》，要求法院“研究设置统一受理知识产权民事、行政和刑事案件的专门知识产权法庭。探索建立知识产权上诉法院”。2009年3月23日，最高院出台《最高人民法院关于贯彻实施国家知识产权战略若干问题的意见》（“意见”），提出要“积极探索符合知识产权特点的审判组织模式，研究设置统一受理知识产权民事、行政和刑事案件的专门知识产权审判庭”。
为贯彻上述“意见”，2009年4月24日举行的中国知识产权高层论坛上，最高院知识产权庭审判长颔中林公布了三审合一试点法院的名单，进行“三审合一”试点的高院有3个：重庆市高级法院、江苏省高级法院、福建省高级法院。中院“三审合一”的有12个，基层法院进行“三审合一”的有15个。
2009年7月1日，最高院出台《关于专利、商标等授权确权类知识产权行政案件审理分工的规定》（“规定”），明确规定“专利、商标、集成电路布图设计和植物新品种案件4种授权确权类知识产权行政案件，自7月1日起将统一 由知识产权审判庭审理。”根据该规定，北京市有关中级人民法院知识产权审判庭将作为专利、商标等授权确权类知识产权行政案件的一审法院，北京市高级人民法院知识产权审判庭作为此类案件的二审法院。同时，该规定还明确了专利、商标等授权确权类知识产权行政案件再审分工，即当事人对于人民法院就此类案件所作出的生效判决或者裁定不服，向上级人民法院申请再审的案件，由上级人民法院知识产权审判庭负责再审审查和审理。据悉，对于7月1日之前已经受理的案件，原由行政审判庭审理的，将继续由行政审判庭审理完结，如上诉，也仍然由上级人民法院的行政审判庭审理。
此次最高院正式发文，确定知识产权行政案件和民事案件统一由知识产权审判庭审理，已经迈出了三审合一的第一步。同时，最高院指定的试点法院也已开展了三审合一的审判试点工作。基于试点结果，最高法将考虑是否将刑事案件统一归属知识产权庭审理。上述规定的出台以及试点法院的建立，有助于法院逐步提高知识产权案件审判效率、实现知识产权审判标准的统一。
 

促发这次改革的最直接、最根本原因是新民诉法关于再审程序的修订。修订前的民诉法中规定，当事人申请再审的，可以向原审法院或上一级法院提出。而依据新民诉法第178条的规定，当事人对已经发生法律效力的判决、裁定，认为有错误的，只可以向上一级人民法院申请再审。这就意味着大量的再审案件将涌入上一级法院，并直接导致各高级法院和最高法院工作量的增大。新标准的实施可以减少高级法院和最高法院受理一、二审案件的数量，一定程度上缓解了其办案压力，这样才能够更好地发挥上级法院的审判监督职能。该标准将与新民诉法同日配套实施。

这次新标准的出台虽然对保障新民诉法的顺利实施，完善我国各级法院的功能分工有着积极意义，但同时也存在一些令人担忧的地方。目前很多地方的基层法院的法官已是超负荷工作，新标准的出台必将导致基层法院的工作量继续显著增加，且基层法院受理的案件也将涉及标的额更大、法律关系更复杂、审理难度更大，如何保证基层法院的审判质量？可以说，这些问题对基层法院法官的素质和基层法院的建设都提出了更高的要求，亟待于最高法院出台进一步的措施来规范。