China Law Insight : China Business and Intellectual Property Lawyers & Attorneys : King & Wood Law Firm : IP, Arbitration, Litigation, Securities, Foreign Investment

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.
 

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。
 

In the Opinion, the Supreme People's Court notes that if, “[t]he injunctive order, if granted, would significantly harm the interests of one of the parties concerned; or is contrary to the public interest; or would be impractical to enforce, the Court may, after considering the specific circumstances of the particular case, not grant the injunctive relief, but instead settle the dispute by awarding sufficient compensation, economic damages or through other alternative means.”
 

Traditionally, injunctive relief was available in all cases where infringement is established. The abovementioned guidelines offered by the Opinion will likely change such commonly-accepted practices under the premise of economic stability. The Supreme People's Court also emphasized that the courts shall evaluate the losses suffered by the rights holder and award damages so as to sufficiently compensate for such losses. The Supreme People’s Court proposes to strike a balance between the public interest in economical stability and the private rights of Intellectual property right holders by suggesting that “sufficient compensation” is a viable alternative for injunctive relief.
 

As the Opinion is newly-issued, its implementation and its impact upon judicial practice in China will need to be further monitored.
 

在知识产权案件中可以经济补偿替代停止侵权
最高人民法院于2009年4月21日 发布《关于当前经济形势下知识产权审判服务大局若干问题的意见》（以下简称“意见”）。最高人民法院在该《意见》中首次明确，对于知识产权民事侵权案件，停止侵害不再是必须的救济方式。最高人民法院认为，在一定条件下，可以以合理的赔偿代替停止侵害的诉求。最高院在《意见》中指出，“如果停止有关行为可能造成当事人利益失衡，或有悖社会公共利益，或实际上无法执行，可以根据案件具体情况进行利益衡量，不判决停止有关行为，而采取更充分的赔偿或者经济补偿等替代性措施了断纠纷”。
在中国司法实践中，停止侵权通常被认为是认定侵权后必须适用的救济手段，该《意见》提出的上述指导原则很有可能突破这一传统观念，这显然与最高人民法院力图稳定既有的社会经济秩序的理念相契合。最高人民法院在该《意见》中也强调了综合评价权利人遭受的损失，并给予其足够赔偿的指导原则。通过同时运用上述原则，最高人民法院试图在维护经济秩序稳定这一公共利益和通过建议足够的经济赔偿保护权利人权益之间寻求一种平衡。
鉴于该指导意见刚刚发布，它在实践中的运用以及对具体案件的影响还有待于进一步观察。
 

“Legal Entity Work”
The NCA Circular recognized a three-point standard concerning “legal entity work.” I.e., creation of a “legal entity work” should at least satisfy three conditions: (i) supervised by the legal entity; (ii) developed according to the intentions of the legal entity; and (iii) the legal entity is responsible for the work.

This standard sheds some light on the issue but is far from clear. Point (ii) is especially difficult to apply due to uncertainties regarding a legal entity's intention. Three issues are often considered in practice to identify the existence of a legal entity's intention:
 

(a) Signature on the work. According to Article 11 [paragraph (4)] of the Copyright Law, so long as the legal entity’s name is mentioned in connection with a work and there is no proof to the contrary, the legal entity should be deemed to be the author of the work and therefore the work should have reflected the intention of legal entity.
 

(b) Content of the work. Does the content of the work likely reflect the legal entity’s intention or only the employee's own creative expression?
 

(c) The nature and purposes of the work. Given the nature and intended purposes of the work, in which party’s name will the work be published? For example, the advertising and explanatory materials created by a governmental agency for policy making, or an agency’s declaration or statement on certain events or actions (such as the “China's Situation in IPR Protection” issued by the Press Office of the State Council of PRC)—are all considered having reflected the intention of the legal entity.
 

“Occupational Work”
According to the NCA Circular, “occupational work” should meet two criteria: (i) the citizen who created the work should have an employment relationship with the legal entity; (ii) the work is created to fulfill tasks assigned by the legal entity employer. While criterion (i)--existence of employment relationship is to be decided in accordance with the labor law of China, Article 11 of the Implementation Regulations interpreted the term “work assignment” in criterion (ii) as –“a work within the scope of the duties that a citizen should fulfill for the legal entity or body.”
 

Two issues are often considered in practice to identify whether a work falls within the scope of the duties to be fulfilled by the employee: (a) whether the duties are specified in the employment contract or labor rules & regulations of the company, or reflected in the company's long term work planning; (b) whether the work has significant and direct correlations with the normal business of the legal entity employer.

2. Simplifying and Improving Flexibility of Litigation Procedures

For example, on December 17th of 2008, the Supreme Court promulgated the Circular on Application of the Provisions on Time Limit for Evidence Production under Several Provisions on the Evidence for Civil Actions. Such an interpretation allows for more flexibility on the time limits in evidence production and requires the court to adjudicate cases in a more just and efficient manner. This development is also applicable to all types of IPR litigations.

At the recent National Symposium on the Court Trial of Intellectual Property Rights held at the end of November 2008, the Supreme Court specially held a discussion on how to make it more convenient for plaintiffs (especially foreign plaintiffs) during legal proceedings, and clearly indicated that all the cases which meet the acceptance requirements shall be heard in a timely manner in accordance with the law. Currently, foreign rights owners usually delegate a representative within China to initiate the legal proceedings, and the court has a more complex set of procedures for such an arrangement. Some courts even require the rights owners to sign on the bills of complaints personally, and prohibit the local representative to sign on their behalf. The Supreme Court now, however, has standardized the process, allowing authorized delegates to initiate legal proceedings on behalf of foreign rights owners. Thus, the inconvenience currently faced by foreign rights owners may be minimized in 2009.

3. Taking into Account the Interests of All Parties and Carefully Sustaining Claims for Injunction

It is foreseeable that in 2009, the courts will place a stronger emphasis on the balance between the interest of the rights owners and the interest of the public, and prevent IP right owners from abusing their power. This means that the standards applicable to patent infringement determination, especially to equivalence infringement, may be tightened; in cases where the rights owners have allowed their rights to be infringed and take no action over a lengthy period of time, should they finally do take action and seek an injunction and if the order of injunction could potentially tip the balance between the interest of the parties, or impact economic activity so as to go against the public interest, the court may consider not granting the injunction. For some infringing acts, if public interest may be affected, the court may rule for compensation to be paid rather than grant the injunction. At present, the application for injunction can usually be granted by the court if the claim of infringement may be established by the rights owners.

In summary, it is foreseeable that due to the publication of the Outline of the National Intellectual Property Strategy in China, judicial protection will play a leading role in safeguarding IPRs. Furthermore, China’s intellectual property rights protection policy is undergoing change and adjustment in order to integrate further with the development trends of global IPRs protection.
 

在2009年即将到来、而全球经济危机正给世界大部分国家造成巨大影响的时刻，中国最高人民法院正在研究调整知识产权的司法政策。这些新的政策导向为我们勾绘了2009年可能出现在中国知识产权司法保护领域的一些新气象：

一、 加大知识产权侵权赔偿力度，贯彻全面赔偿原则

最高人民法院近期数次强调，在知识产权审判中，应运用灵活多样和合理可行的损害赔偿计算方法，使权利人受到的损害获得足够的赔偿，彻底剥夺侵权行为人因侵权而获得的利益，切实提高侵权代价；对于受害人正当合理的维权成本要给予赔偿；在适用法定赔偿时，对于合理的维权成本应另行计赔，不列入法定赔偿额之内。而目前，中国的法定赔偿最高额是五十万元（于2008年12月27日颁布、2009年10月1日生效的第三次修改后的《专利法》已将最高金额调整到人民币一百万元），并且包含了对权利人因维权所发生的费用的补偿。由于损害赔偿的举证难度较大，而法定赔偿的金额较低，不能得到足够的、实质性的赔偿是权利人普遍面临的难题。这一问题可望在2009年得到改善。

二、 简化或放宽诉讼程序

例如，今年12月17日，最高人民法院颁布了关于适用《关于民事诉讼证据的若干规定》中有关举证时限规定的通知，该通知对举证期限等问题做出了更加灵活的规定，有利于人民法院以更加公正高效的方式进行案件的审判。该通知同样适用于各类知识产权诉讼。

最高人民法院在此次全国法院知识产权审判座谈会上特别讨论了如何便利当事人（尤其是外国当事人）诉权的行使，并明确指出符合受理条件的起诉均应依法及时受理。目前，外国权利人通常授权我国境内代理人代为提起诉讼，法院的相关程序性要求比较繁琐。部分法院还要求权利人必须在起诉书上签章，不得由代理人代为签署。此次最高人民法院明确统一，凡经权利人明确授权代理提起诉讼的代理人，均可以权利人名义提起诉讼。因此，该等不便可望在2009年得以免除。

三、 兼顾社会各方利益，审慎适用停止侵权责任形式

可以预计，在2009年，法院在知识产权案件的审理中将更加注重知识产权权利人与社会公共利益的平衡，防止知识产权权利人滥用权利。这体现为，专利侵权的判定标准，尤其对等同侵权的情况，可能会适度从严掌握；权利人长期放任侵权、怠于维权，在其请求停止侵权时，倘若责令停止侵权会在当事人之间造成较大的利益不平衡，或者影响经济活动从而违反公共利益，法院可以审慎地考虑不再责令停止行为；对于一些侵权行为，如果要求其停止侵权可能导致违反公共利益，则可能仅判令侵权人承担损害赔偿，而不必停止侵权。而目前，如果权利人提起的侵权诉讼可能成立，则停止侵权的申请一般能获得法院支持。

综上，可以预见，由于中国《国家知识产权战略纲要》的颁布，司法手段将成为知识产权保护的主导角色。而中国知识产权保护的司法政策正在酝酿着调整和转变，更融于全球知识产权保护的发展趋势。
 

B. IPRs and abuse of dominance

Article 55 also subjects the exercise of IPRs to the abuse of dominance conduct rule (Article 17 of the AML). This is similar to the approaches of the competition laws of the US, Singapore, EU and Australia.

The key phrase is “abusing… intellectual property rights”. However, this phrase has not been defined in the AML.

This phrase, is, however used in Article 40 of the World Trade Organisation’s (WTO) Agreement on Trade Related aspects of Intellectual Property Rights (TRIPS). Article 40(2) may shed some light in relation to the AML phrase “abuse of intellectual property rights”:
“…nothing in this Agreement shall prevent Members from specifying in their legislation licensing practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market …a Member may [however] adopt, consistently with the other provisions of this Agreement, appropriate measures to prevent or control such practices, which may include for example exclusive grantback conditions, conditions preventing challenges to validity and coercive package licensing, in the light of the relevant laws and regulations of that Member.”

China acceded to the WTO in 2001 and as such has an obligation to comply with all WTO agreements including TRIPS. In paragraph 286 of the Report of the Working Party on the Accession of China, some members of the Working Party expressed some concern as to the compatibility of China's rules on control of anti-competitive licensing practices or conditions with the corresponding obligations under Article 40 of TRIPS. Notably, the representative of China stated in response that China's legislation would comply with these obligations. The representative of China stated that these rules would apply across the board to all intellectual property rights. The Working Party on the Accession of China took note of this commitment. Hence, there is some suggestion that Article 55 of the AML may not stray too far from Article 40(2) of TRIPS.

On October 11, 2007, the European Communities raised the following question with China during a WTO Council for TRIPS meeting: “…[t]he EC welcomes the recently adopted Chinese Anti-Monopoly Law. This new legislation refers to the concept of ‘abuse of intellectual property rights’ in particular in Article 55. Can China clarify what this concept means in practice? Can China confirm that this concept does not go beyond what the TRIPS Agreement considers as abusive practices under Article 31(k) (compulsory licensing) and Article 40 (competition)?” This question may be indicative of concerns from other WTO members as to whether China will ignore Article 40 of the TRIPS Agreement when defining the term “abuse of intellectual property rights”.

Dominant entities exercising IPRs may still have to be concerned about the following provisions: (a) the prohibition against refusal to deal (without justification) ; (b) the prohibition against exclusive dealing (without justification) ; (c) the prohibition against tying ; and (d) the prohibition against applying differential treatment to parties . In a typical IP licence, it is common to find tying and exclusive dealing provisions. It is also common for IPR owners to refuse to deal with certain entities for various reasons.

Given that no guidelines or regulations have been issued in relation to the AML, there is much uncertainty as to how the dominance provisions (or the rest of the other provisions) of the AML will operate.

In relation to Article 55, the following questions arise: Should dominant entities (exercising IPRs) be subject to the same competition scrutiny as dominant entities selling other goods or services? Or would Chinese competition regulators apply a different standard in relation to IP licences and assignments, in recognition of the fact that IP differs from all other forms of property? Does the Chinese government intend for there to be transitional provisions in relation to the AML? Will the AML apply to IP licences and assignments entered into after 1 August 2008 (the date in which the AML will come into effect) or will it apply retrospectively to IP licences and assignments entered into before 1 August 2008?

C. The Article 15 “improving technology, research and new products” exception

If entities are somehow not able to get their IP related agreements exempt from the AML pursuant to Article 55, then there is a possibility that these agreements may be exempt pursuant to Article 15. Specifically, Article 15 of the AML exempts certain categories of agreements from the “monopoly agreements” conduct rule (located in Article 13 and 14). However, it is important to note that Article 15 does not exempt an agreement from the abuse of dominant position conduct rule (located in Article 17).

The most relevant Article 15 exemption in relation to IP related agreements is the “improving technology, research and new products” exception located in Article 15(1). Specifically, Article 15(1) exempts agreements made “for the purpose of improving technology, researching and developing new products” from the monopoly agreements conduct rule.

The EU has a similar exemption in the form of a block exemption entitled “categories of research and development agreements”. However, in order for an agreement to fall under the EU block exemption, there are several conditions which need to be fulfilled, including the condition that, if the agreement only provides for joint research and development but excludes joint exploitation of the results, then each party conducting the research must be free to exploit the results and any necessary pre-existing know-how independently. In addition, agreements exempt under this block exemption are immune from competition law only for a limited period of time (usually 7 years) and the market share of the participant undertakings must not exceed a particular threshold (for non-competing undertakings, the threshold is 25%).

It is unclear whether the Article 15 exemption will apply in a similar way as the EU’s “categories of research and development agreements” block exemption.

There are still many grey areas to iron out in relation to Article 55 and Article 15 of the AML. Hopefully guidelines or regulations, which are able to shed light on some of the issues and questions above, will be issued before the AML comes into effect.