Amendments to Civil Procedure Law to come into effect on January 1 2013

China

On August 31 2012 the Decision on Amending the Civil Procedure Law of the People's Republic of China was adopted by the Standing Committee of the National People’s Congress (NPC). This revision covers a wide range of topics and is scheduled to come into effect on January 1 2013.

Below are listed some of the changes to the Civil Procedure Law that concern IP litigation:

  • 'Person with expertise' - the Provisions of the Supreme People’s Court on Evidence in Civil Proceedings, which were issued in 2001 and came into effect in 2002, already included the concept of a 'person with expertise'. According to Article 61 of the provisions, a party concerned may apply to the people’s court to have one or two person(s) with expertise appear in court and give explanations on specific issues involved in the lawsuit. If the court assents to such application, the applicant shall bear the relevant expenses.

    The new Civil Procedure Law introduces the concept of a 'person with expertise' in Article 79, which provides that, upon request by a party, the people’s court may ask a 'person with expertise' (commonly called an 'expert', 'expert assessor' or 'judicial expert') to appear in court and offer an opinion regarding an 'identification opinion' issued by an 'identifier' or regarding a technical issue. The opinion of the expert may help the judge to obtain a clear understanding of the facts. Importantly, the expert’s appearance must be requested by a party and approved by the court.


  • Litigation representative - Article 58 of the new law closes the door on the possibility for ordinary citizens to serve as litigation representatives. This modification seems to be intended to prevent certain abuses. Therefore, the question arises as to whether patent or trademark attorneys will have difficulty serving as litigation representative in the future, which would not be in line with the abovementioned principle of encouraging experts to participate in litigation.

    However, according to the explanation of the Legislative Affairs Commission of the NPC's Standing Committee, Paragraph 3 of Article 58 can be understood as meaning that an ordinary citizen is allowed to serve as a litigation representative if he/she has been “recommended by the community of (a party)”, by “the entity employing a party” or by a “relevant social group”. Therefore, a trademark attorney or a patent attorney could be trusted as litigation representatives when recommended by the China Trademark Association or the All-China Patent Agent Association.


  • Third-party opposition to a judgment, ruling or consent judgment - a third paragraph has been added to Article 56, allowing a third party who has failed to participate in the litigation - for a reason not attributable to that third party - to institute an action in the people’s court which has entered the judgment, ruling or consent judgment at issue in order to have that decision rescinded, if the third party considers that it is entirely or partially erroneous and causes damage to its civil rights and interests. The action must be instituted within six months from the day on which the third party became aware or should have become aware of the decision.

    In IP cases, it is not rare that, if the plaintiff sues the seller of infringing goods for damages, the seller - without warning its supplier or the producer of the goods, or even colluding with the plaintiff in bad faith - submits to the court an acknowledgement that it has committed an infringement in order to have the lawsuit closed as soon as possible. On the basis of such acknowledgement, the court may enter a judgment or order a settlement on the grounds that the defendant’s act constituted an infringement. However, such judgment may deprive the producer of the goods from the possibility of entering a defence or counterclaim based on its own IP rights. In such a situation, the newly added paragraph provides the producer with an opportunity to defend itself.


  • Timing for production of evidence - the new law states that it is necessary to provide evidence in a timely manner. The parties are still allowed to provide new evidence in the first and second instance or during the retrial procedure. However, Article 65 provides that, if a party submits evidence after the expiry of the time limit, the people’s court shall order that party to give an explanation; if the party refuses to explain its actions or the explanation is not acceptable, the people’s court may, based on the circumstances of the case, (i) deem the evidence inadmissible or (ii) accept the evidence but impose an admonition or fine on the party. This should help to avoid the production of 'surprise evidence' at the last moment. The new law also requires the court to issue and send to the relevant party a receipt corresponding to each piece of evidence provided.


  • Preservation of evidence before trial - the preservation of evidence before trial is one of the requirements set forth by the Agreement on Trade-Related Aspects of Intellectual Property Rights and is stipulated in the Trademark Law, the Patent Law and the Copyright Law of China. However, there was no such provision in the Civil Procedure Law. Article 81 of the new law introduces the duty to preserve evidence before trial into the general civil procedure. Three points are noteworthy:

    1) In addition to trademark, patent and copyright cases, the duty to preserve evidence before trial can be applied in anti-unfair competition cases;
    2) If a party is not satisfied with an order to preserve evidence before trial, it is allowed to petition for reconsideration (such petition may be granted only once); and
    3) Whether the applicant is obliged to provide such security, or whether such security is only an option (as in the old civil procedure law), is a complex issue. Article 81 merely refers to “Other procedures for evidence preservation in Chapter IX”, retitled “Preservation and advance enforcement”. Under Chapter IX, a party may be ordered to adopt a certain conduct or the preservation of assets may be allowed. If a party requests such an order before trial, that party must pay a guaranty. However, when applying for evidence preservation under the Trademark Law, the Patent Law and the Copyright Law, the provision of security is only an option. More information is needed on this issue.


  • 'Active conduct' prohibition - the possibility to issue injunctions (prohibition to commit certain act) is already provided in the Trademark Law, the Patent Law and the Copyright Law. Articles 100 and 101 of the new law, which modify the former Articles 92 and 93, introduce into the general civil procedure the concept of 'conduct prohibition'. According to Article 100, the people’s court may, upon request by a party during trial, order the preservation of the assets of the other party, and may also prohibit the other party from committing certain acts (eg, infringing acts). The people’s court may order the applicant to provide a financial security. Article 101 provides for the possibility to apply for the preservation of assets prior to trial, in which case the judge must order the applicant to pay a financial security.

    Since these new measures are now included in the general civil procedure, they may be implemented not only in trademark, patent or copyright cases, but also in unfair competition cases.

    In addition to asset preservation and 'conduct prohibition' measures, the new law introduces the possibility to issue an injunction ordering a party to actively perform certain acts. This measure is inspired by the Maritime Procedure Law, which provides that special circumstances may justify urgent decisions. Whether this new possibility may be used in IP litigation remains to be seen.


  • Summary procedure for small claims - Article 162 of the new law provides for a 'small claims system': if the amount of the subject matter is lower than 30% of the previous year’s average annual wages of workers in a province, autonomous region or municipality directly under the control of the central government, and if “the facts are clear, and the rights and obligations are definite”, the adjudication of the people’s court or detached tribunal shall be final.

    The following question thus arises: what happens in a dispute about IP ownership or about the existence (or non-existence) of infringing acts, in which no amount of money is at stake? Would this qualify as a small claim? Most probably not - in such cases, it cannot be said that “the facts are clear, and the rights and obligations are definite”. Therefore, such cases cannot be tried under a summary procedure.

    With regard to foreign IP cases in which the amount of the subject matter is lower than the above threshold, further explanations are needed as to whether they should be tried by the people’s court under a summary procedure.


  • Time limit to petition for retrial - Article 205 of the new law distinguishes between two situations:

    1) The time limit for parties to petition for retrial is six months from the effective date of the judgment or ruling. This time limit has been significantly reduced compared to the old law (two years from the effective date of the judgment); and
    2) Subject to certain conditions, the six-month period may start at a later date. These conditions are:

    (i) there is new evidence which is sufficiently conclusive to overrule the original judgment or ruling;
    (ii) the main evidence used in the original judgment or ruling was forged;
    (iii) the legal document on which the original judgment or ruling was based has been cancelled or revised; or
    (iv) when trying the case, a judge has committed embezzlement, accepted bribes, practiced favouritism for personal gains or bent the law.

    If one of the above conditions is met, the six-month period starts only on the day on which the party becomes aware or should have become aware of the occurrence of these facts. The old law covered only the situations mentioned in points (iii) and (iv) and, in such cases, the time limit was three months.

    It is not clear whether transitional measures will be stipulated. Therefore, it is advisable to apply for retrial before the new law takes effect (January 1 2013).

Huang Hui, Wan Hui Da Intellectual Property Agency, Beijing

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