On Wednesday, September 20, 2006, Enoch Liang, Benjamin Qiu and Stacy Yuan from the
Beijing office of Lovells gave a two and a half hour presentation to the Intellectual Property Law
Delegation to China of People to People International, held at the American Chamber of
Commerce in Beijing. The presentation focused on the protection of intellectual property rights in
China, and consisted of four main parts.
PART I: OVERVIEW OF IPR PROTECTION IN CHINA
Companies should proactively manage their IP rights in China for one simple reason: Money.
While it costs money to set up an IP protection system, that money is well spent, as it could cost
significantly more money down the road, for example, if it becomes necessary to recover your hijacked IP rights.
The IP laws in China are quite comprehensive, and consist of the Trademark Law, Copyright
Law, Patent (Patent, Utility Models, and Designs) Law, Anti-Unfair Competition Law and Product
Quality Law, as well as accompanying regulations. A rights holder can enforce its IP rights in the
People's Courts or with various administrative agencies.
The process of managing IP rights in China is similar to those elsewhere in the world: (1)
understand and register IP rights, and periodically conduct audits; (2) maintain the IP portfolio by
continuously clearing and registering; (3) beware of hi-jacking of IP rights by monitoring relevant
publications; (4) monitor partners, subcontractors and licensees; and (5) adopt effective
enforcement strategies and actually taking action.
Lovells then offered two real life scenarios to apply the above principles.
The first topic of discussion focused on trademark registration strategies for China. Lovells
recommends that rights holders: (1) be pre-emptive by registering more rights than actually used
(as there is no intent to use system or use requirement in China); (2) consider opposition and
cancellation actions and act promptly; and (3) consider buying back rogue registrations. This is
especially important when choosing Chinese language trademarks; if the rights holder does not
choose one, then the Chinese consumers will, and the rights holder may find that "assigned"
Chinese mark hi-jacked.
Other topics of discussion included: (1) ensuring ownership of R&D results should a company
decide to conduct R&D in China; (2) various wrinkles in the Chinese IP laws, such as "right to
reward" an inventor of a patent; and (3) numerous examples of hi-jacking of IP rights, including
trademarks, company names, domain names, designs and patents.
The final topic of discussion in this section related to enforcement of IP rights. Lovells stressed
the restrictions on evidence and the necessity of using good investigators. Lovells also discussed
the steps for enforcing before the administrative agencies, as well as the People's Courts, and
the pros and cons of each. Though, in the past, administrative enforcement was quite common,
today, the penalties imposed by administrative agencies are increasingly viewed by infringers as
simply a cost of doing business. Civil actions are becoming increasingly common.
PART II: BRIEF INTRODUCTION TO PATENT LAW IN CHINA
The Chinese Patent Law was first promulgated in 1984, and was amended in 1992 and 2000 to
comply with the requirements of WTO and TRIPs. Though China is a civil law system, the Patent
Law is starting to borrow more and more U.S. legal doctrines.
Lovells then showed some statistics for patent filings over the last ten years or so, which should
be included in the hand-outs administrative remedies for patent infringement. SIPO has strong government backing and
continues to grow each year. Simultaneously, the Supreme People's Court, Higher People's
Court and Intermediate People's Court also have jurisdiction to handle patent infringement
With respect to patent litigation, there are two features that are very different than U.S. patent
litigation: (1) there is no discovery; and (2) the People's Courts cannot rule on the issue of
The Chinese legal system does not have a rule of binding precedent and Chinese courts
generally do not have to follow interpretations of the law made by other courts, even
higher courts, in earlier cases. This is particularly so where the other court is located in a
different province. However, decisions of some courts, such as the Beijing People’s
Higher Court, usually have persuasive authority. Another unusual feature of the Chinese
system is that the Supreme People’s Court and Higher People’s Court, as well as deciding
cases (on appeal and in some cases at first instance), also issue guidelines to lower
courts over which they have authority.
In July 1993, the Supreme People’s Court began to set up special panels of courts to hear the
increasing number of intellectual property cases brought before the lower courts. The first
Intellectual Property panel was established within the Beijing Intermediate People’s Court. Since
then, these panels have been established within the Intermediate and Higher People’s Courts of
the central municipalities of Beijing, Shanghai, Tianjin and Guanzhou as well as in some
provinces such as Jiangsu, the coastal Special Economic Zones (SEZs), such as Zhuhai and
Judgments of the People’s Court can be enforced against defendants based anywhere in China.
However, enforcing an award of damages depends on whether the defendant has sufficient
assets or has taken steps to hide its assets. There is no guarantee when the time comes for
enforcing any judgment for damages that the defendant will have sufficient assets to pay.
Investigations can be carried out into the financial status of the infringer. Much will depend on the
type of company involved and the actions of those people in control of the company. However, if
the patentee’s main concern is to stop the infringements and to send a message to other
infringers, possible difficulties in recovering damages should not dissuade it from taking action.
PART III: PICTURES OF RAIDS FOR COUNTERFEIT PERFUME AND VALVES
Lovells presented pictures taken during raids against manufacturers of counterfeit perfumes and
counterfeit valves. Counterfeiters in China are increasingly sophisticated, often operating out of
"black" unmarked factories and using "just-in-time" manufacturing techniques in order to avoid
being caught with large stock of infringing products.
PART IV: CONCLUSION – WHERE ARE WE NOW
Lovells presented many quotes from various Chinese government officials, which should be in the
packets of materials. From these quotes, it is clear that protection of IP rights is becoming a
priority of the Chinese government, not just to help protect foreign rights holders, but also to
encourage R&D and innovation in domestic companies.