Legislative Changes

In terms of the IP-related legislation, all of the major laws were subject to at least one change or amendment during this period from 2005 to 2015. The PRC Trademark Law was amended on 30 August 2013, with the updated version taking effect from 1 May 2014.2 The newly amended law aimed to streamline the trademark registration procedures and to strengthen the legal protection of trademarks in China, as well as clarifying minor uncertainties such as whether OEM (Original Equipment Manufacturers) in China making goods solely for export to foreign markets may nevertheless be infringing the trademark of the Chinese rights-holder. Another key change is the raising and tightening of the threshold for well-known trademarks in China as a result of the perception that the status of well-known trademark was previously too easily granted:

This is quite a substantial change and actually creates some panic to the trademark

owners.3

In addition, the revised law also prohibits the use of the phrase “well-known trademark” on promotional materials such as packaging and advertising. This prohibition aims at restoring the status of well-known trademark as a purely legal one instead of the marketing tool it had become to many domestic Chinese companies (Tan and Cui 2014).

One respondent suggested that the latest amendments to the Trademark Law were at least partly motivated by “fixing the TRIPS compliance gap.”4 For example, the amended provisions dealing with cancellation of a registered trademark for non-use consecutively for three years appears to directly parallel the relevant provision in Article 19 of the TRIPS Agreement with regards to whether a justifiable reason has to be given to explain the non-use of the trademark. However, it was also acknowledged by the same respondent that there were still some areas of the amended Trademark Law which may potentially fall short of full TRIPS compliance. For instance, paragraph 2 of Article 60 allows a seller of infringing goods to claim that they were not knowingly selling counterfeit products and escape from punishment. Providing that such sellers can produce a contract with a supplier, they will merely be ordered by the Administration for Industry and Commerce (AIC) to stop selling the infringing goods. However, producing such a contract and claiming lack of knowledge of infringement seems a low hurdle for a counterfeiter to meet to avoid any penalties and thus this provision has clear scope for abuse and provides a “very big loophole.”5

Similarly, the PRC Copyright Law was amended by a Decision of the Standing Committee of the National People’s Congress (NPC) on 26 February 2010, with the changes coming into effect on 1 April 2010.6 These changes made to the Copyright Law in 2010 were minor, with the key change being the amendment of Article 4, following the WTO dispute with the United States (US) about whether works awaiting content review or failing content review would still be subject to protection under the Copyright Law. Consequently, the 2010 revisions were aimed primarily to give effect to the WTO dispute settlement body’s ruling in case DS362 (World Trade Organisation 2010). In this dispute, the panel had ruled that China’s failure to protect copyright in prohibited works (in other words, that are banned because of their illegal content) was inconsistent with TRIPS Article 9.1, as well as with TRIPS Article 41.1, as the copyright in such prohibited works could not be enforced (World Trade Organisation 2009). Consequently, the 2010 amendment to China’s Copyright Law made it clear that works awaiting or denied approval would still be subject to copyright protection. The amended Article 4 now states: “Copyright holders shall not violate the Constitution or laws or jeopardise public interests when exercising their copyright. The State shall supervise and administer the publication and dissemination of works in accordance with the law.” Accordingly, the state is reserving the power to only approve works following a stringent content review process; however, such works should still be able to claim protection under the amended Copyright Law.

Further amendments to the Copyright Law have also been drafted and released for comment on 6 June 2014, although they have not yet been finally passed into legislation (PRC Legislative Affairs Office of the State Council 2014). Nevertheless, the 2014 draft amendments are of interest because they propose wider reaching changes than the minor amendment made in 2010. The 2014 draft amendments would increase the damages available for infringement as well as increasing enforcement powers. The categories of works to which copyright may apply would also be expanded under the amendments to include “works of applied art” and “three-dimensional works.” The protection period for photographic works would also be extended to the life of the creator plus 50 years which would bring such works in line with the period of protection offered to other copyrighted works. There may be a potential extension to the fair use exceptions under which copyright infringements are permissible by the addition of “other circumstances” to the list of exceptions; however, this vague category would very much depend on how it was applied in practice.

Finally, the draft amendments also deal with safe harbours for internet service providers (IsPs); new provisions on copyright licensing; and employee rights to copyrighted works created during their employment and would confirm the principle that the contract between employer and employee is paramount for the allocation of such rights. It is clear that by both increasing damages for infringement and broadening the potential categories of works which may be subject to copyright, the draft amendments to the PRC Copyright Law would continue to improve the copyright environment for rights-holders. This shift is echoed by several respondents who also noted significant changes in the copyright field: “in copyright, for copyright it has improved a lot, a lot. You see more and more people using the genuine Microsoft software.”7

I think that the most prominent changes are in the copyright area... I think more people are thinking that it is okay and it is reasonable for me to pay the authors for their effort to create those films, TV shows and books. And the IP as a whole in those areas, entertainment, film industry, it is just booming and people are more respecting those efforts.8

However, as the draft amendments have not yet been finalised and passed into legislation, it is too early to say how the amended Copyright Law might further shape the creative industries in China.9

Turning to patent protection, the PRC Patent Law was amended for the third time in late 2008, with the amended law coming into force on 1 October 2009,10 following the unofficial but perceptible pattern previously established of reviewing the patent law every eight years. The Implementing Regulations for the Patent Law were also consequently amended and entered into force from 1 February 2010. The amendments show that the substantive law in China is still closely connected to the TRIPS Agreement; one of the key changes to the patent law was concerned with compulsory licensing which had been the subject of a 2005 protocol amending the TRIPS Agreement to take account of public health concerns in developing countries (World Trade Organisation 2005). In order to implement this Protocol into domestic law, Article 50 was added to the Patent Law enabling the process of compulsory licensing for pharmaceuticals (State Intellectual Property Office of the PRC 2010).11

On the other hand, the 2008 revision to the PRC Patent Law also illustrates the adaptation of the formal law to local domestic conditions; the revision process was initiated in 2005 with the first draft amendments released in August 2006 for comments. Thus, the revision process was not rushed and could be seen as attempting to respond to the feedback from relevant stakeholders in the IP system. This responsiveness to rights-holders’ concerns was applauded by several respondents, for example: respondent 15PHARMA01 discussed the latest proposed amendments and stated that “last week I just attended a seminar organised by the Chinese Patent Office to talk about it because they just published the draft amendment to the patent law. So they had the seminar to listen to the comments from companies.” However, the same respondent tempers the positive view of the frequent interaction between rights-holders and law-makers by relaying their experiences of trying to get trade secrets removed from employee compulsory remuneration regulations; it took several rounds of comments and amendments before this specific suggestion was heeded.

In addition, the amendments to the Patent Law overall were widely viewed by external commentators as the first in China which were led through domestic demands rather than in response to external pressure from trading partners or in response to international legal obligations, such as those arising from WTO accession (Yang and Yen 2009). As a result, there was a wide degree of satisfaction with the patent-related legislation amongst respondents with one commenting that the system was now “very close to European practice in terms of acquiring IP rights.”12 Thus, all of the major IP-related legislation has been amended over the past decade and the majority of these revisions have been driven by the desire to better adapt the law to domestic conditions, although some minor amendments have also been motivated by closer compliance with provisions of the TRIPS Agreement.

 
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