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What China’s new IP courts will mean.

China’s legislature passed a bill on August 31 announcing that three specialised IP courts are to open in Beijing, Shanghai and Guangzhou. The Supreme People’s Court is in charge of the actual operational details and has vowed to have the courts up and running by the end of 2014. All three will be intermediate-level courts, meaning that they will handle many cases as the court of first instance and their decisions may be appealed to provincial-level higher people’s courts.

The establishment of these courts is designed to address technology-centric matters such as patent and trade secret cases. The new courts will act as the court of first instance for civil infringement cases involving patents, new plant varieties, layout designs of integrated circuits and trade secrets. In addition, the Beijing Specialised IP Court will act as the court of first instance for reviewing all patent validity and patent prosecution decisions issued by the Patent Review Board. The rationale is that a specialised court will deliver more consistent decisions because cases will be heard by a small number of specialised judges.

The new courts are very relevant to the trademark world. The Beijing Specialised IP Court will take over from the Beijing No 1 Intermediate Court in reviewing all decisions of the Trademark Review and Adjudication Board (TRAB). The specialised IP courts in Beijing, Shanghai and Guangzhou will act as the courts of second instance for appeals of trademark cases within Beijing, Shanghai and the Guangdong area, respectively. As more foreign-related trademark cases are being litigated at district level, foreign brands may come to the specialised IP court for final decisions in the future. This will be particularly important for trademark cases in Guangdong, as foreign brands often find that more infringements occur here than anywhere else in China. Foreign brands used to seek a final outcome for trademark cases in forums such as the Shenzhen Intermediate Court or the Foshan Intermediate Court. Now they will be able to appeal directly from district-level courts to the Guangzhou Specialised IP Court.

The idea of the specialised courts goes back as far as the mid-1990s, when Chinese IP judges and professors first proposed the establishment of specialised patent courts. The idea was researched and much discussed between 2006 and 2008 – at the time, China was also planning a third amendment to the Patent Law. Many people advocated the concept of establishing a higher-level IP court, similar to the US Court of Appeals for the Federal Circuit, the Japan IP High Court or the Taiwan IP High Court. However, the government dropped the plan, as it would have required substantial changes to various laws and consumed a significant amount of political capital.

While almost nobody believed that specialised IP courts would ever become a reality in China, the government announced its new reform roadmap in the Third Plenum Resolution in October 2013, which stated that it would “explore” the establishment of specialised IP courts as a way of improving IP protection. This led to a surge in momentum, which directly resulted in the swift launch of the new IP courts.

Debate is ongoing about what form the new IP courts should take. The general feeling is that the launch of the new courts is indicative of the government’s pro-IP policy. At the same time, many observers strongly advocated that the new specialised IP courts be appellate courts at the provincial level. Under the current model, an IP court at intermediate court level has no power to render final judgments in high-stakes cases, including TRAB cases. Some argue that the fact that IP court decisions can be appealed to provincial higher courts compromises the purpose of having specialised courts at all.

At a practical level, the new specialised IP courts should still be a positive development for brand owners or at least give them better opportunities for trademark litigation. The development proves that China continues to have a strong interest in improving the quality of IP rights enforcement. The new courts may have some incentives to deliver positive results. For trademark owners, two particular issues to watch for are:

  • whether the new Beijing court will improve the way that bad-faith trademark applications are handled; and
  • whether the courts will be more aggressive in awarding damages and remedies such as preliminary injunctions and evidence preservation.

China Premier Li Ke Qiang announced at the Davos Forum that China will impose a “massive sum” of damages against IP infringers. The specialised IP courts should be the place where this new trend emerges.

At a deeper level, the new courts may be indicative of upcoming judicial reforms in China. The government has commenced pilot programmes for judicial reforms in Shanghai and other cities. One key measure is to increase staff support for judges and improve budgeting and other benefits for the courts. Another is to increase the independence of the judges who are assigned to specific cases, to minimise interference from third parties. The specialised IP courts may be just the place for implementing such pilot programmes at full scale.

The same bill that launched the courts requires the Supreme People’s Court to report back on the outcome in three years. Feedback from the trademark world may be helpful in deciding whether and how the specialised IP courts should evolve to the next level.

He Jing ([email protected]) is a senior consultant at AnJie Law Firm

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