Recent Development in IP Protection in China

There have been several interesting recent developments relating to intellectual property (IP) protection in the People’s Republic of China.

USTR Report

In April, the Office of the US Trade Representative (USTR) released the 2022 Special 301 Report on Intellectual Property Protection and Enforcement, including a section on new Chinese laws on IP protection and their enforcement.

The Special 301 Report is an annual report on the “global state of IP protection and enforcement,” with some countries labeled as “Priority Watch List” or “Watch List.”

This year, 27 countries were designated as either “Priority Watch List” or “Watch List,” including China, which was again designated a priority watch list country.

As the Report states,

China continues to be the world’s leading source of counterfeit and pirated goods. For example, a recent report identified China and Hong Kong as the largest exporters of counterfeit foodstuffs and cosmetics, accounting for approximately 60% of counterfeit foodstuffs customs seizures and 83% of counterfeit cosmetics customs seizures. As in prior years, China and Hong Kong account for over 83% of U.S. IP seizures.

Since the last Special 301 Report, China has amended its Patent Law, Copyright Law, and Criminal Law, and has taken other measures to protect IP.

As the USTR noted,

The United States is closely monitoring China’s progress in implementing its commitments under the United States-China Economic and Trade Agreement (Phase One Agreement). In 2021, China enacted amendments to the Patent Law, Copyright Law, and Criminal Law, as well as other measures aimed at addressing IP protection and enforcement. While right holders have welcomed these developments, they continue to raise concerns about the adequacy of these measures and their effective implementation, as well as about long-standing issues like bad faith trademarks, counterfeiting, and online piracy. Also, statements by Chinese officials that tie IP rights to Chinese market dominance continue to raise strong concerns.

Among other concerns,

Right holders have noted these legislative and judicial reforms as positive developments. However, these changes have introduced new concerns. For example, according to right holders, the replacement of “income” with “gains” for purposes of establishing thresholds for criminal prosecution under the amended Criminal Law could allow counterfeiters to contend that they did not make substantial profits because of their expenses

Also,

Strong concerns remain about obstacles to patent enforcement, such as lengthy delays in courts, lack of preliminary injunctions, competition law concepts in the Patent Law, and undue emphasis on administrative enforcement.

The Report noted that

draft Guiding Opinions on Strengthening the Protection of Trade Secrets and Confidential Business Information in Administrative Licensing were published for public comment in August 2020 by the Ministry of Justice but have not been finalized. The draft guiding opinions and other reforms are needed to limit government requests for trade secrets and confidential business information and prevent the unauthorized disclosure of such information submitted to government authorities, including unauthorized disclosure by third-party experts and advisors. Such unauthorized disclosures continue to be a serious concern for the United States and U.S. stakeholders in industries such as software and cosmetics.

Secrecy Review

In May, the Reexamination and Invalidation Department of the China National Intellectual Property Administration (CNIPA) invalidated a patent due to “not filing a request secrecy review with the CNIPA before filing outside of China.”

In China, a secrecy review is required for any invention or utility model developed in China (except for Hong Kong and Macao) before filing an application for patent in a foreign country, even if the patent was already filed in China.