China Opens A New Chapter in Intellectual Property Protection

December 6, 2021

With the come out of the Outline for the Construction of a Strong Intellectual Property State (2021-2035), active participation in “Global Intellectual Property Governance” has been elevated to the level of national strategy. The Outline is also a clear requirement for “building an intellectual property protection system that supports an international first-class business environment”. On behalf of Beijing Yingke Law Firm, the author recently participated in an exchange with the Japanese Embassy in China on the protection of intellectual property rights, and sorted out the cases of foreign-related intellectual property rights adjudication and the current status of judicial protection in China in the past three years——China has shifted from passive acceptance of international rules on IPRs to active participation in global IPR governance, of which the building of the judiciary is particularly noteworthy.

1.The Chinese government has strengthened its determination to protect legislation

At the legislative level, China has not only established intellectual property provisions in the Civil Code, but also comprehensively revised the Anti-Unfair Competition Law, the Trademark Law, the Copyright Law, the Patent Law and other laws and regulations. China has also significantly increased the upper limit on “statutory damages” and has comprehensively, uniformly and systematically adjusted the cap on statutory damages for intellectual property rights to five million yuan.

2.The Chinese government has improved the construction of the judicial trial system

In terms of judicial work, the Supreme People’s Court established a comprehensive intellectual property tribunal in 2008, and made it a permanent judicial organ in 2019 to collectively hear patent and other intellectual property appellate cases involving technical expertise nationwide. Since 2014, intellectual property courts have been successively established in Beijing, Shanghai, Guangzhou and Hainan Free Trade Port, and special intellectual property judicial organs have also been established in 24 cities including Nanjing, Wuhan and Shenzhen. As a result, China’s all-round judicial protection system for intellectual property has been constantly improved.

3. Chinese Courts Have Become the Preferred Venue for International Intellectual Property Litigation

With the government attaching great importance to IPR protection, the number of cases involving IPR disputes in China is rising rapidly. The number of IPR cases of first instance accepted by courts at all levels across China has increased nearly fivefold from 101,000 in 2013 to 467,000 in 2020, representing an average annual growth rate of 24.5%.

The Shanghai Intellectual Property Court, for example, has received several affirmations from international associations and overseas rights holders. In 2015, the Court received a letter of recognition from Etienne Sanz de Acedo, then President of the International Trademark Association. In 2017, Dart Industries Inc. sent a letter of appreciation to the court after the settlement of its design patent infringement dispute, praising the professionalism and diligence of the court judges and thanking them for the fair and timely trial of the case. In 2018, the German software company SAP AG submitted a letter of appreciation, praising “the Shanghai IP Court’s unbiased respect for the intellectual property rights of multinational companies and its determination to supervise a specialized IP court in China to protect intellectual property rights impressed us.”

China is fully fulfilling the request made by General Secretary Xi Jinping in “Comprehensively Strengthening Intellectual Property Protection, Stimulating Innovation Vitality and Promoting the Construction of a New Development Pattern”: “China’s participation in global IPR cooperation and competition must adhere to the principles of openness, inclusiveness, and balanced and inclusive appearance”. The Chinese government is strengthening IPR protection with unprecedented determination and intensity, actively promoting global IPR governance, and fostering cooperative innovation and prosperous development of all countries.

As the Chinese courts are increasingly becoming the preferred venue for international IPR litigation, the author will share typical cases of litigation in Chinese courts by representative companies from five countries or regions. The following is a case study of “Japanese companies actively litigating intellectual property rights in China” shared in the first issue.

Japanese companies actively file IPR lawsuits in China.

Japan’ s Nikkei Asian Review, Sept. 22, article: China is on an IPR offensive. Subtitled: Tighter IPR legislation in China means foreign companies in China need to be prepared for litigation Foreign companies in China are becoming key targets in the growing number of IPR lawsuits filed by Chinese companies. Some Japanese lawyers even say, “In the past, most IPR cases involving Chinese and foreign companies claimed infringement by the Chinese side, but there has been an increase in the number of cases where the opposite is true. We are receiving more and more legal inquiries from Japanese companies (operating in China).” 

The following litigation cases of Japanese companies in China are more representative and have attracted widespread attention.

1. Sumitomo Denso Corporation v. Delphi Packard Electrical Systems, Inc.

Both parties to the case are multinational companies with huge industry influence, the plaintiff being Sumitomo Denso Corporation, a Fortune 500 Japanese company, and the defendant being Delphi Packard Electrical Systems Limited, a European company involved, with consolidated statement revenues of over US$600 million in China in 2020, and the Chinese market has always been a very important growth point for the company.

Sumitomo Denso Corp. filed three lawsuits with the Beijing Intellectual Property Court, alleging that the technical features of the Dongfeng Qichen D50 and R50 automotive connectors manufactured, sold and offered by Delphi Parker Electric Systems Co., Ltd. fall within the scope of three patents owned by Sumitomo Denso Co. for “lever connectors”. In accordance with the relevant provisions of the Patent Law, Delphi Packard Electrical Systems Co., Ltd. was required to stop manufacturing, selling and promising to sell the relevant products, destroy the equipment and molds used to produce the infringing goods, and claim compensation for economic losses and reasonable expenses in the amount of RMB 9.95 million. Delphi Packard Electrical Systems Ltd. argued that the connectors used in the two automobiles did not fall within the scope of protection of Sumitomo’ s claimed patent rights, and that the said connectors were purchased from affiliated companies and had legal sources. 

2. Ikeda Mohando Co. Ltd. V. Wubidi (Guangdong) Pharmaceutical Co., Ltd. and others in a dispute over infringement of trademark rights and unfair competition.

Ikeda Modeido Co., Ltd. is a Japanese company that manufactures and sells the mosquito bite medicine“MUHI”, and has been selling “MUHI”and“Liquid MUHI”as export products mainly in Hong Kong since 1962. It is said that its“MUHI”products are also widely known in mainland China.

In February 2017, Ikeda Modeido filed a lawsuit for infringement of its trademark rights and unfair competition, including the infringement of its trademark rights by Bumiputra (Guangdong) Pharmaceutical Co. After the first trial by the People’s Court of Tianhe District, Guangzhou, and the second trial by the Guangzhou Intellectual Property Court, the two defendant companies were ordered in July 2021 to stop producing and selling counterfeit products and to pay 3 million RMB in damages.

3. A series of design patent infringement lawsuits filed by MTG Co. 

Founded in 1996, MTG Corporation is a Japanese company mainly engaged in the beauty and health industry, and the company is very active in litigation in China, with its patent applications to defend its rights in China concentrated in the years 2011-2014, while litigation was filed in 2016. Of the nearly twenty lawsuits it filed, only one case of the defendant’ s existing design defense was upheld by the court, and all the rest won. In terms of damages, they varied depending on the merits of the case, with the Beijing Intellectual Property Court hearing a case that made a high award of RMB 3.11 million.

Concluding remarks

China actively participates in international cooperation in the field of intellectual property rights, impartially adjudicates foreign-related intellectual property cases in accordance with the law, protects Chinese and foreign rights holders equally, and promotes the construction of a preferential venue for international intellectual property litigation. China has always adhered to the concept of community of human destiny and actively participated in global intellectual property governance under the framework of the World Intellectual Property Organization. We will continue to promote the improvement of relevant international rules based on justice and promote innovation and creation to benefit more people from all countries. A new chapter has been opened for the protection of intellectual property rights of Japanese companies in China.

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