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

Before the promulgation of the Tort Law, the relevant IP laws, such as the Trademark Law of the People's Republic of China ("Trademark Law"), the Patent Law of the People's Republic of China ("Patent Law"), and the Copyright Law of the People's Republic of China ("Copyright Law"), do not address issues in relation to contributory infringement and consequential liability.

Contributory infringement of IPRs refers to an act where a party provides assistance to another party in their IPR infringement, for example, intentionally providing an operations site for counterfeiters or intentionally providing materials or components to counterfeiters for manufacturing patented products. In  practice, there is also no consensus on how to determine legal liabilities for contributory infringement. For example, Paragraph 2 of Article 50 of the Implementing Regulations of the Trademark Law of the People's Republic of China ("Implementing Regulations") listed a number of acts which can be deemed as contributory infringement of trademark rights. However, the list cannot cover all types of such infringement. Similarly, the Beijing Higher People's Court issued the Opinions on Patent Infringement Issues (Trial Implementation) ("Opinions") in 2001, in which the Court provided more specific descriptions on determination of contributory infringement of patents.

In practice, the Opinions may only be used as reference in local patent infringement trials, and lack legislative authority in all patent infringement trials nationwide. Furthermore, the Interpretation of the Supreme People's Court on Issues Relating to Application of Law in the Trial of Copyright Disputes over Computer Network ("Interpretation on Copyright Disputes") and the Regulations on the Protection of the Right to Network Dissemination of Information ("Regulations on Information Dissemination") regulate contributory infringement acts in cases in relating to internet copyright infringement, but there are also insufficiencies in relation to the applications of these laws and regulations.

An increasing number of IPR infringement lawsuits involve claims against infringers for contributory infringement. For example, in Louis Vuitton v. the Beijing Xiushui Haosen Clothing Market Company and Taiyuan Heavy Machinery Group Company v. Taiyuan Electronic Systems Engineering Corporation, there were no statutes which provided direct reference to contributory infringement. As such, the judges could only rely on the provisions regarding contributory infringement of civil rights in the General Principles of the Civil Law of the People's Republic of China ("General Principles"). However, the General Principles merely address contributory infringement in principle and does not provide clear indications as to whether the party in contributory infringement who provide help to the infringers of if direct infringement  bears legal liability or the type of such liability. In short, there is a lack of a legislative framework the People's Courts can apply when determining the legal liabilities of contributory infringement in IPR infringement trials.

The Tort Law fills the legislative void and solidifies the legal basis in preventing contributory IPR infringement. Paragraph 1 of Article 9 of the Tort Law provides that "[a] person who abets or assists another person in committing a tort shall be jointly and severally liable with the tortfeasor." This is to say that, a person who assists another person's tortious infringement conduct in relation to IPR will constitute contributory infringement and shall be jointly liable. Compared with the listing methodology used in the Implementing Regulations, the expression of "assist" enables judges to significantly expand the room for judicial application of this law.

In addition, many regional Arbitration Commissions have also started paying more attention to the importance of IPR arbitration and some have set up their own Intellectual Property Arbitration Centers in an attempt to provide an effective means for IPR disputes resolution, in addition to judicial and administrative remedies. For example:

• On February 15, 2006, the first intellectual property arbitration center was set up by the Xiamen Arbitration Commission.
• On April 15, 2007, the Intellectual Property Court of Arbitration was officially set up by Wuhan Arbitration Commission.
• On April 25, 2008, the Intellectual Property Arbitration Center of Guangzhou Arbitration Commission was officially set up.
• On October 29, 2008, the Shanghai Intellectual Property Court of Arbitration was officially set up.
• Nevertheless, IPR arbitration in China is just at its infant stage and still facing the following problems:

a. Unbalanced Development among Regions in China

There are over 170 regional arbitration commissions at various levels in China. However, in addition to the Domain Name Dispute Settlement Center set up by the CIETAC, only four regional commissions, including Xiamen, Wuhan, Guangzhou and Shanghai, as mentioned above, have set up arbitration organs specializing in IP disputes. It is clear that the development of IPR arbitration is not balanced among different regions.

b. Lack of International Regard

Since the first PRC Arbitration Commission was set up in 1956, Chinese arbitral practitioners have strived to be professional, fair and efficient. In the past decade especially, the amount of arbitration cases involving foreign parties has increased every year, an indication that foreign parties have more confidence in Chinese arbitration institutions. On the other hand, IP cases accepted by the arbitration institutions are actually still quite rare from what one would expect given the number of IPR disputes. Chinese arbitration institutions must lift their arbitration standards in IP arbitrations, promote China's IP protection system to the rest of the world, and establish a series of IP arbitration centers that are internationally recognized.

c. Lack of Supplementary IP Arbitration Rules

Since intellectual property is knowledge-based, IPR arbitration is special and different from general commercial arbitration. Therefore, the procedural rules for general arbitration cannot be entirely applied to IPR arbitrations. In this aspect, the WIPO Expedited Arbitration Rules has provided a good reference point but unfortunately, to date none of the Chinese arbitration institutions has issued its own arbitration rules specific to IPR disputes.

Conclusion

Under the background of globalization, utilization of intellectual property has also become more internationalized and commercialized as can be seen through a variety of cross-border cooperation arrangements, such as through licensing, technology transfer and co-operative research and exploitation arrangements. This has raised the demands of the rights holders for dealing with IPR disputes at an international level. When seeking mechanisms for dispute settlement, more and more parties take their commercial interests as the primary concern, i.e. they require the dispute procedure to be personal, highly flexible and efficient so that the cross-border disputes can be solved without ruining the commercial relationships. As an alternative means for dispute resolution, arbitration can avoid parallel litigations and has its inherent advantages in dealing with commercial disputes in respect of flexibility, confidentiality, finality.

China has taken steps to promote and encourage IPR arbitration. In June, 2008, the State Council issued the Outline of the National Intellectual Property Strategy, which indicates that intellectual property is becoming a strategic resource in national development and a core element in international competitiveness, and therefore the development of an IP protection and arbitration system should be an important focus of the national development plan.