Written by Mark Cohen.

One of the most significant recent developments in China’s efforts to develop an innovative economy was the decision on August 31, 2014 by the Standing Committee of the National People’s Congress to establish specialized Intellectual Property (IP) courts in three cities: Beijing, Shanghai and Guangzhou. The decision speaks loudly to the commitment of China’s leadership to promote innovation and their perception of the role of IP in that environment, notwithstanding relatively weak legal protections for technology-related intellectual property, particularly patents, technical trade secrets and related rights.

China has previously had specialized IP tribunals, but has not had specialized IP courts. Beijing’s No.1 Intermediate People’s Court set up China’s first intellectual property division in 1993. Since then, specialized IP tribunals have been established across the nation. As of the end of 2012, there were 420 IP divisions in the courts at various levels, with 2,700 specialized IP judges.

Discussions and experiments around specialized IP courts had previously considered a range of options. China had previously been experimenting with combining civil, criminal and administrative jurisdiction involving IP adjudication, in part to better handle copyright piracy and trademark counterfeiting where judicial knowledge of civil infringement could contribute expertise to a rapidly growing criminal docket. Basic level IP tribunals had also been established to handle IP-related cases arising on a more “grass roots” level, including in districts in Beijing, Shenzhen and Shanghai which have a concentration of high tech enterprises. Perhaps most germane to innovation was that China has also been proposing amendments to its patent law to improve its administrative enforcement systems, which levies fines against infringement, in an effort to stimulate innovative activity by reducing costs for enforcement. Former Chief Judge Randall Rader of the US Court of Appeals for the Federal Circuit, had also been actively engaging with the Chinese judiciary to promote a CAFC-style approach to improved patent litigation, where there would be one national appellate patent court that could serve to unify patent adjudication, reduce local influence, and help to improve patent adjudication generally. These plans took further shape with the Decision on Major Issues Concerning Comprehensively Deepening Reforms adopted by the Third Plenum of the 18th Communist Party in 2013, when additional plans were set into place “strengthen IP application and protection and explore ways to set up IP court[s].”

The NPC, for reasons that remain largely unknown, and despite significant dissent, initiated a three year experiment with three IP courts in these three cities, not as an appellate national court, or a national circuit court. The geographic jurisdiction of these courts corresponds to the municipal/provincial boundary of where they are situated; they thus offer little hope of reducing local influence by providing a neutral national forum. As their jurisdiction excludes most copyright and trademark cases, they are also unlikely to offer much relief for the more numerous copyright and trademark litigants who are suffering from sophisticated cross-border counterfeiting and piracy matters. Moreover, if this three year experiment become a basis for further development of the Chinese judiciary, the result could be a weakened momentum for a specialized appellate patent court.

A key to the interests of the legislatures however lies in the jurisdictional basis of this court and the kinds of appointments being made to it. The jurisdiction of the court includes:
1. Civil and administrative cases involving patents, new plant varieties, layout designs of integrated circuits, technical secrets, computer software and other technology cases;
2. Administrative cases involving copyright, trademark, and unfair competition against the administrative action of the State Council department or above the county level departments; and
3. Civil cases involving the affirmation of well known trademarks.  To call this court a specialized “IP court” is therefore a bit of a misnomer.  Jurisdictionally, it is a technology-related IP court.
The inclusion of trade secrets is especially telling, as the jurisdiction of the court presumably excludes non-technical secrets, such as client lists or marketing plans.

The Supreme People’s Court has issued guidance regarding the selection of judges for the Specialized Court. The judges can be selected either from those judges engaged in IP or related trials, or the judges can be selected if they have the same qualifications and conditions and are engaged in law practice, legal research or are law teaching professionals:
1. A judge should also have the following qualifications: more than 6 years of relevant trial work experience; a bachelors or higher degree in law; a strong capacity for leading trials and drafting judgments; and Senior judge qualifications.
2. The standards for other legal professionals as judges of the Specialized IP Court are referenced in further comments.

Of particular note, the two deputies in charge of the court, Chen Jinchuan 陈锦川 and Song Yushui 宋鱼水 are well known to the IP community. Song Yushui comes from the Zhongguancun District Court, which is in the heart of China’s “Silicon Valley”-type high tech zone.  While having experienced judicial professionals is important, this improvement may have more to do with experiments in overall efforts of China to improve its judicial system than with IP specifically.

Equally important to patents and innovation is that the Beijing’s Specialized IP Court will also include “Technology Experts,” (技术调查官) who will help resolve technology issues that come up in the cases. The use of such technology experts may also help reduce the burden that the courts face in adjudicating final decisions of China’s patent office, where “reversal rates” of final patent office decisions to grant or deny a patent are typically quite low, and judges are under considerable pressure to render informed decisions quickly. Moreover, the foreign technology community is likely to be a significant beneficiary of this change, as it plays a proportionately much larger role in that docket of appeals from China’s patent office, than it does in overall infringement cases.

From the perspective of promoting innovation through IP, the absence of jurisdiction over most trademark and copyright infringement cases underscores how much this experiment in IP adjudication is also geared towards promoting patents. There are numerous non-patent cases that are quite technically complicated, including those involving on-line copyright.  In addition, there are numerous patent cases that often less technically complicated, such as design patent cases. Moreover, new company or brand formation through trademark prosecution can also be an important indicator and promoter of innovation and as such is worthy of high quality judicial procedures to promote innovation.[i] Indeed, one may argue that without addressing other major problems, such as the rapid growth in unexamined, low quality patents, which are often subsidized by local governments, this judicial experiment may be hamstrung in achieving its goals.

The decision to establish the IP courts will also have little direct impact on rampant piracy and counterfeiting. From an IP adjudication perspective, one of the biggest challenges facing the IP Chinese judiciary has been the rapid explosion in copyright cases, particularly on-line copyright cases. The decision to create specialized IP courts does little to address this challenge. During 2012, copyright cases and trademark cases in China both increased by approximately 53% to 53,848 and 19,815 respectively. Patent cases showed a more modest growth of 24% to 9,680, and were a fraction of copyright cases and approximately one half of trademark cases. In Guangdong alone,  from 2010-2013, the online copyright infringement docket in the Pearl River Delta of Guangdong increased from 4058 to 9449, or from 21% to 38% of the overall IP docket. To put this in perspective: these numbers compare to several millions of civil and commercial cases each year (7,906,401 in 2011). Thus, China is further focusing a minority of important IP cases, to the exclusion of other areas that may be imposing important challenges to China’s overall IP and innovation environment.

China today has the largest patent office in the world, with the largest patent docket of any single country. Like the US CAFC, these improvements in China’s patent adjudication system may have positive impacts globally by insuring higher quality judicial decisions, expertise and provide more informed training for the courts, which can be beneficial for the global innovation system. Indeed, the concurrent decision of the SPC to establish The Chinese Courts International Exchanges Base (Shanghai) for Judicial Protection of Intellectual Property Rights in conjunction with the establishment of these specialized IP courts, may also be a sign that China intends these courts to play an important role on the global stage.

Abraham Lincoln once famously said that the patent system “added the fuel of interest to the fire of genius, in the discovery and production of new and useful things.” China’s experiment in specialized IP courts is an experiment with a limited focus, that appears intended to add the “fuel of interest” to the fire of innovation through patenting in China.

Mark Cohen is an Adjunct Professor at Fordham Law School and Senior Counsel at the U.S. Patent and Trademark Office. The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the U.S. Government. Image credit: CC by Herald Groven/Flickr

Notes

[i] Although the new courts have jurisdiction over well known trademark matters, new products and start-ups may not so easily achieve well-known mark status, which include duration of the use of the mark as a relevant factor.