Trademark Logo Goes Up in Smoke To Save Australians? Let's Check The HK-Australian Bilateral Investment Treaty

How to warn people
against blindness who
 cannot do not want to see?

Cigarette manufacturer Philip Morris was not amused when Australia announced last November 2010 that it would prohibit brand logos on cigarette packets, to prevent exposure to children that might be lured to the flames of eternal damnation. Smoking kills 15,000 deaths in Australia each year.

According to the BBC: "Health Secretary Andrew Lansley said "glitzy designs on packets" attracted children to smoking and it made sense to look at "less attractive packaging". Read here. As you can see the substitute for the
brand logo is less than attractive, unless you are a masochist. So "plain packaging law" as the Australian law is described is quite a euphemism.

The proposed ban would be implemented in 2012, and made the cigarette manufacturers worry that this would jeopardise their financial health. 

Philip Morris Brands: Marlboro, Virginia Slims, Merit, Parliament, Benson & Hedges, L&M, Chesterfield, Lark, Cambridge, Basic


If a cigarette manufacturer such as Philip Morris can no longer use their trademarked logos on its cigarette packets (including the heraldry with the slogan "veni-vidi-vice", which is Ceasar's phrase meaning I came, I saw and I conquered) it becomes more difficult to distinguish its brand of cigarettes from other brands of cigarettes. The personality of the brand, the carefully cultivated associations with the brand, will partly go up in smoke. Then again all Philip Morris' competitors deal with the same problem. Cigarette manufacturers such as Philip Morris and British Tobaccco, that have advertised for decades to gain name recognition and brand associations will probably lose relatively more market share than more generic brands.

But can Australia really prohibit the use of trademarked logos and only allow the trademarked brand name on a packet full of warnings?

According to a BBC article, Philip Morris Asia, based in Hong Kong, is now considering a case against Australia for violating the Bilateral Investment 'Agreement between the Governments of Hong Kong and Australia for the Promotion and Protection of Investments' signed in 1993, see here. 

Intellectual property rights falls, according to article 1 (e) iv of the Bilateral Investment Treaty, within the scope of the definition of investment ("intellectual property rights including rights with respect to copyright, patents, trademarks, trade names, industrial designs, trade secrets, know-how and goodwill").

The first sentence of article 6 (1) of the Bilateral Investment Treaty is: "Investors of either Contracting Party shall not be deprived of their investments nor subjected to measures having effect equivalent to such deprivation in the area of the other Contracting Party except under due process of law, for a public purpose related to the internal needs of that Party, on a non-discriminatory basis, and against compensation."

This means that Australia cannot subject an investor in Hong Kong to "measures having effect equivalent to such deprivation", such as the prohibition of the use of a trademarked logo on cigarette packets, except for a public purpose related to the internal needs of Australia. To prevent 15,000 people in Australia each year from dying caused by smoking I think falls within this definition. So the exception can only kick-in in case there is a public purpose, check, and compensation for the expropriation of the use of the logo.

Claimant = company       respondent = state

Bilateral Investment Treaties can be a vehicle for companies to get a binding tribunal judgement against a non-compliant state via for example the Arbitration Rules of the United Nations Commission on International Trade Law. In case a company wanted to change a law or regulation in a state that is not in compliance to the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPs), it could lobby its government to bring the case to the Dispute Settlement panel of the World Trade Organization, (which was done collectively by the copyright industries for example in case of DS 362) which is a less direct and less efficient route for a company to take. 

Interested in Bilateral Investment Treaties?

This time I wrote about Bilateral Investment Treaties because it touches upon the protection of intellectual property rights and Hong Kong. At the Chinese University of Hong Kong there are, however two experts in this field who deal with the subject in a broader sense. Professor Bryan Mercurio, Chinese University of Hong Kong (CUHK) has written extensively about the subject. For example two books: 'Bilateral and Regional Trade Agreements: Commentary and Analysis' (Cambridge University Press, 2009)(edited with Simon Lester) 'Bilateral and Regional Trade Agreements: Case Studies' (Cambridge University Press, 2009)(edited with Simon Lester). This year the following book chapter will be published about a particularly fascinating region: Bilateral and Regional Trade Agreements in Asia: A Sceptic’s View’ in Ross Buckley, Richard Hu and Douglas Arner (eds), The Economic and Financial Integration of East Asia (Edward Elgar, forthcoming 2011). See more of Professor Mercurio's publications here.

Another expert is Professor Julien Chaisse (CUHK), who specialises in Foreign Direct Investments, and therefore also writes about Bilateral Investment Treaties: 'Do bilateral investment treaties increase foreign direct investment flows - Revisiting the role of legal parameters in economic empirical research’ as co-investigator with Prof. Christian Bellak (Forschungsprojekt ‘Vielfalt von Bilateralen Investitionsverträgen‘), supported by the Vienna University of Business and Economics (WU) & Arbeitskammer Vienna (Austria) (March 2010-March 2012). See more of Professor Chaisse's publications here.

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Best of Google's White Paper: Censorship is Hurting China's Economy

Intellectual property and market access are interdependent subjects. If there is a barrier to the free flow of information (the market access is challenged, regulated or censored when it refers to copyrighted goods), no intellectual property can be exploited and this will feed a demand for pirated works and counterfeit products.

Google has problems accessing the market in China, because it cannot offer its users unrestricted access via its search engine and other applications. In the hope of solving this problem it published a white paper of 25 pages, see here: Enabling Trade in the Era of Information Technologies: Breaking Down Barriers to the Free Flow of Information, in which it appeals to basically everyone:

• "Focus on and publicly highlight as unfair trade barriers those practices by governments that restrict or disrupt the flow of online information services.
• Take appropriate action where government restrictions on the free flow of online information violate international trade rules.
• Establish new international trade rules under bilateral, regional, and multilateral agreements that provide further assurances in favor of the free flow of information on the Internet."

If this does not sound very innovative to you, it is because it is not.

The most persuasive argument: internet censorship is bad for the economy of the censoring country, because it is a restraint on global trade. The other arguments (trying to stop violation of international trade treaties such as WTO's TRIPs, unfair competition and favouring indigenous industry) might all be laudable and valid, but not as compelling to China right now.

Therefore it would be interesting to elaborate how censorship is hurting China's economy and stifling innovation. More about this subject later.

UPDATE November 18, 2010:

Ronald Yu pointed me to an interesting The Register article by Cade Metz 'Baidu boss: Google don't know China' that the problems Google is facing are not only related to market access. Thanks Ron.

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What Can A Famous Food Brand Do Against Footwear Using Its Mark?

As a vegetarian I do not frequent the many McDonald's fastfood joints that can be found in China and which turn the slim people obese, just as they did with the American and European populations. I am not really certain what is on sale inside a McDonald's, but when I was in Shenzhen near the beach I was surprised to see that McDonald's has been diversifying into toe slippers. You could say, well that is not really diversifying, because toes could be considered meat too, although not dead meat. Then again, maybe it was not the fast food chain's idea to put its trademark on the slippers. Let's assume that they did not. What could a(n) (in)famous company such as McDonald's do against such unauthorised use of their mark?

April 23, 2009, China's Supreme People's Court promulgated the 'Interpretation on the Application of the Law Concerning Several Issuels Regarding the Trials of Civil Disputes Relating to the Protection of Famous Trademarks' (Judicial Interpretation on Famous Trademarks judicial interpretation).

So since that time the judicial interpretation clarifies that a famous trademarks registered in certain product/service classes is protected against a mark that is identical or similar but on products/services that are dissimilar.

See Article 10 Judicial Interpretation on Trademarks:

"If the plaintiff files a motion to enjoin the defendant from using a trademark, which is identical with or similar to its famous registered trademark, or enterprise name on dissimilar commodities, the people's court shall, in light of the concrete circumstance of the case, make a ruling after comprehensively taking into account the following factors:

1. the distinctiveness of the said famous trademark;

2. how well the famous trademark is known by the relevant general public that use the commodities using the trademark against which the lawsuit is filed or using the enterprise name;

3. the connection between the commodities using the famous trademark and the commodities using the trademark against which the lawsuit is filed or using the enterprise name;

4. other relevant factors."

This is based on China's WTO obligations to comply to TRIPs.

See Article 16 (3) TRIPs:

"Article 6bis of the Paris Convention (1967) shall apply, mutatus mutandis, to goods or services which ar not similar to those in respect of which a trademark is registered, provided that use of that trademark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered trademark and provided that the interests of the owner of the registered trademark are likeley to be damaged by such use."

This goes further than article 6bis of the Paris Convention of which China is a member since 1985.

See 6bis Paris Convention:

(1) "The countries of the Union undertake, ex officio if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration, and to prohibitthe use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential partof the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

(2) A period of at least five years from the date of registration shall be allowed for requesting the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be requested.

(3) No time limit shall be fixed for requesting the cancellation or the prohibition of the use of marks registered or used in bad faith."

So if we apply article 10 Judicial Interpretation on Famous Trademarks.

(1) I think we can come to the conclusion that McDonald's is a distinctive mark;

(2) And that it is well known to the relevant general public (because of its ubiquitous existence); (3) So what exactly is the connection between the commodoties of the famous mark and the dissimilar commodities of the mark that might infringe upon it? What is the connection between food and footwear? McDonald's could argue that the association with toe slippers is not conducive for fueling an appetite for its food, save for some foot fetishists. And this could dilute the brand.

(4) Other relevant factors, could be perhaps the popularity of the McDonald's toe slippers. Are they sold all over China, or just at the beach of Shenzhen. In other words the extend of the (potential) damage for the fast food chain.

Photo/text Danny Friedmann

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Murdoch, Procrustus and the WTO Copyright Cases

October 12, Sky Canaves of the Wall Street Journal has an article about Rupert Murdoch who is urging China to enforce copyright piracy and open up its market for copyrighted products. See here (or on page 8 of the printed WSJ). Mr Murdoch used the World Media Summit in Beijing to tell the Chinese leadership present that these two points are crucial if China wants to achieve their ambition to develop a global media industry.

Mr Murdoch's advice is similar to the two claims the US made against China at the WTO dispute settlement body: DS 362 (China - Measures affecting the protection and enforcement of intellectual property rights) and DS 363 (Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment products), based on the minimum enforcement levels of the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPs) an integral part of the Agreement Establishing the World Trade Agreement (WTO Agreement).

Thinking about TRIPs, and the divergent views it provokes, IP Dragon was reminded about the story of Procrustus. Procrustus was a "hospitable" man who invited guests to his home. There was one problem. If the bed was too big for the guest, Procrustus simply stretched the guest by brute force. And if the bed was too small for the guest, Procrustus would amputate the parts that could not fit in the bed. And because Procrustus had in fact two beds, no guest was ever fitting for both beds. If you are in an imaginative mood, you can see the Greek myth as a metaphor for China that was invited over to do trade under the WTO system, of which TRIPs is an integral part. Some argue that TRIPs is too demanding and that countries such as China are stretched to the limit, while some argue that TRIPs' ambition level is just too low and that more needs to be done like cutting off IPR infringing activities in China. And the two beds can be seen as a double standard in historic perspective: when the developed countries were developing, for example when the US broke free from Brittain, they were infringing IPR as well, and now that they are a developed country to expect developing countries to protect and enforce the same minium standards of IPR rights. Even though TRIPs has built in some flexibilities, it is considered by some as a straight jacket, a "one size fits all", "take it of leave it" treaty.

Picture is taken by exo_sh

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Supreme People's Court of China: "Current Economic Situation Makes Granting IPR Injunctions More Difficult"

December 2008, I dealt with the 'Influence of the Financial Crisis on the Enforcement of Intellectual Property in China'. In this post I wrote:

In China there are still villages dependent on the production of counterfeit and pirated goods. The incentive for the Chinese government to enforce intellectual property and make these people de facto unemployed and thus prone to protest is not very likely. The Chinese government might temporarily look the other way when it comes to intellectual property infringement.

Well, the Chinese Supreme People's Court does not look the other way: they came up with an opinion (Opinion on Certain Issues with Respect to Intellectual Property Judicial Adjudication Under the Current Economic Situation) that says for example that courts should consider other measures than injunctions in case an injunction would run counter to the public interest.

This this not contravene China's obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs): Articles 7 and 8 TRIPs, taken together may provide, "a basis for seeking waivers to meet unforeseen conditions of hardship," J.H. Reichman, The TRIPs Agreement Comes of Age: Conflict or Cooperation with the Developing Countries, 32 Case W. Res. J. International Law, 2000, pp. 441 and 461.

Drastic times call for drastic measures, what do you think? And how temporary is the Opinion?

Read Peter Ollier's article about the opinion at Managing Intellectual Property Magazine here.

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Taylor Wessing Global Intellectual Property Index and China: The Last Shall Be The First

The People's Republic of China was ranked last (24th position) in the Taylor Wessing Global Intellectual Property Index 2009, see here. The methodology of the GIPI rating is a calculation by a factor assessment model with jurisdiction assessments and instrumental factors as input. See the methodology here. 

About China's trademark system Taylor Wessing complains about the delay in adopting the new Trademark Law which it sees as the solution to the registry delays and backlogs. The time from application to publication of trademarks in China is according to Taylor Wessing currently three years and the duration of opposition procedures up to five years. It says that there is an "absence of any protection for unregistered marks, save the 230 or so marks held to be “famous” (of which only about 20 are foreign), remains a concern for respondents." Taylor Wessing is more positive about China's National IP Strategy and an electronic application system which has cut costs and allocated filing receipts and application numbers quite quickly.

About China's copyright system Taylor Wessing wrote: "China trails overall, as well as for each

of the attacking, enforcing, exploiting and cost-effectiveness subindices." The lack of effective enforcement of copyright is respondents' primary concern, as is bureaucracy associated with giving evidence, and criminal remedies that are perceived as too low, underused and with thresholds set too high, civil and administrative remedies inadequate. Taylor Wessing mentioned also the harsh criticism China received from the USTR in the Special 301 Report. The supporting argument that China faces the "the harshest and most in-depth criticism" because it was covered in 24 pages while the other 45 countries only got 16 pages is not very convincing. It is not the quantity but the quality of the commentary that counts. On a positive note Taylor Wessing acknowledged that the US government considers that progress is being made because China is fulfilling its WIPO Copyright Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT) and WTO TRIPs obligations. 

About design Taylor Wessing wrote that "China’s courts have awarded $3 million to the German

bus maker, Neoplan, in one of the biggest design patent infringement awards since China joined the WTO in 2001." China’s design system which requires annual renewals of designs (plus renewal fees) is seen by respondents as onerous and in need of reform, according to Taylor Wessing.

About China's domain names system Taylor Wessing wrote that although China has liberal registration rules it ranked low, because domain names are extremely cheap to register in China, which has encouraged domain name squatters. Taylor Wessing: "It remains to be seen whether the recent exponential increase in numbers (nearly 90% last year) is an ongoing trend or a spike, and also whether brand owners’ awareness of the issue and increasing interest in doing business in China will lead to them registering more pre-emptive .cn domain name." 

About China's Patent system Taylor Wessing was quite positive: "China certainly has also made significant efforts over the past few years to improve its IP systems." The respondents appreciated China's new specialist IP courts, that are relatively much speedier than before and anticpate the Third Amendment to the Patent Law which will take effect October 1st, 2009 and will introduce the absolute international novelty standard and the possibility of compulsory licensing for patents unused within 3 years of grant. 

I am not sure whether Matthew 20:16 (King James Bible) can bring any consolation for China's low score, but here goes: "So the last shall be first, and the first last: for many be called, but few chosen."

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Do ACTA Member Countries Want to Confront China With A Fait Accompli?

Since April 9, when I blogged 'China and ACTA: Why the problem is not made part of the solution', new information about the Anti-Counterfeiting Trade Agreement (ACTA) has leaked, see Wikileaks here. It makes you realise how transparent the founding parties to ACTA want to be. Compare the United States Trade Representative posting a 6 page Summary, April 6, 2009 with the 48 page draft that leaked.

I know some lawyers who will be exuberant with the most conspicious provision of the ACTA draft you can find:

Section 3: Criminal Enforcment; article 2.14:

"Willful copyright or related rights piracy on a commercial scale includes:

a. significant willful copyright or related rights infringements that have no direct or indirect motivation of financial gain; and

b. willful copyright or related rights for purposed of commercial advantage or private gain."

Although a lot is in flux, these are some of the other interesting things in the draft:

- Higher damage awards;

- Mandated information from infringer;

- The right holder is not liable for payment of any storage or destruction;

- Right to block or detain goods at the border for up to one year.

By excluding countries such as the People's Republic of China, it seems that the ACTA members first want establish a high IPR enforcement standard, and make this standard the global standard. But this makes all the other fora less significant. As Professor Michael Geist put it: "there will be a concerted effort to transform a plurilateral agreement into a multilateral one, though only the original negotiating partners will have had input into the content of the treaty". Read Professor Geist's column for Intellectual Property Watch: 'The ACTA Threat To The Future Of WIPO'. Of course ACTA is not only threatening the World Intellectual Property Organization (WIPO), but also World Trade Organization (WTO)'s Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPs). One of the advantages of WTO's TRIPs in comparison to WIPO treaties is that WTO has an effective dispute resolution mechanism. It will be interesting to see how the ACTA members will resolve disputes.

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China and ACTA: Why Is The Problem Not Made Part Of The Solution?

Medio December 2008 IP Dragon wrote about the controversial genesis of the China-less Anti-Counterfeiting Trade Agreement (ACTA) by Japan and the US (joined by Australia, Canada, the European Union, Mexico, Morocco, New Zealand, Republic of Korea, Singapore and Switzerland) whose goal it is to stem the tide of counterfeit and pirated goods that originate for the lion share from China, read here.

ACTA is not only controversial because it was born in darkness (then again out of darkness beautiful flowers grow), but also because:

- Why start a new multilateral trade agreement when the international community has already the World Trade Organization (WTO)'s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs). Then again it is hard to reform TRIPs because there are many WTO members. So the way of least resistance is to start a new trade agreement with pre-selected countries that think the same about a TRIPs plus level of IPR enforcement;

- If the People's Republic of China causes the initiators of ACTA such headaches, should they not involve this country in some way with ACTA? In the philosophy of Yin and Yang, the problem (China's lack of IPR enforcement) is existent in the solution (multilateral trade agreement) and vice versa;

- ACTA's content is unknown, so this opens the gates to speculations.

Now the United States Trade Representative has posted ACTA's 'Summary of Key Elements Under Discussion' (Summary) which gives the countours of the draft structure:

• Chapter 1. Initial Provisions and Definitions;

• Chapter 2. Legal Framework for Enforcement of Intellectual Property Rights;

Section 1. Civil Enforcement

Section 2. Border Measures:

Under discussion is whether border measures should apply not only to importations (as TRIPs prescribes) but also to export and transit of goods;

Another possible point of contention is whether travelers can import counterfeit or pirated goods for their personal use (de minimis exception);

It is no surprise that ACTA tries to solve some of the points, which especially has frustrated the US (which among other reasons brought a claim against China at the WTO: DS 362): measures to ensure that infringing goods are not released into free circulation and the destruction of goods that have been determined to infringe intellectual property rights.

Section 3. Criminal Enforcement; the holy grail (overestimated to my taste) remains criminal enforcement of IPR. In the leaked out version of the ACTA proposal of 2007, see below on page 2 here, it was proposed to apply criminal sanctions to IPR infringements on a commercial scale "IPR infringements for purposes of commercial advantage or financial gain. This sentence that I could not find back in the Summary was a bit unclear, because either you apply criminal sanctions if a commercial threshold of the infringed goods is reached (problem: which threshold is not arbitrary and what to do with infringers that keep their activities just under the threshold) or you sanction the intention of commercial advantage/financial gain plus the infringement of minimal one product.

Section 4. Intellectual Property Rights Enforcement in the Digital Environment: surprisingly no draft proposal has been tabled yet.

• Chapter 3. International Cooperation;
• Chapter 4. Enforcement Practices; I cannot stress the importance of the exchange of best practices enough. Transparence of IPR enforcement information, including statistics is key;
• Chapter 5. Institutional Arrangements;
• Chapter 6. Final Provisions.

Expect a lot more discussion when the first draft provisions are disclosed (or leaked).

UPDATE: First draft leaked; read 'Do ACTA Member Countries Want to Confront China With A Fait Accompli?'

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Professor Daniel Gervais' New Book Includes: Confidential Interim Report DS 362

Who won the IPR dispute at the WTO between China and the U.S.? That was the name of my blog posting in October 2008 and gave some leaked information. But what does the official information say? According to WTO document WT/DS362/9, that can be found at the site of the WTO dedicated to DS 362 the Panel expected to issue its final report to the parties to the dispute by November 2008. After that IP Dragon understood that the final report would be ready somewhere in 2009.

I just got an email from Rogier Creemers who has recently started a PhD Research Project at Maastricht University concerning the political and legal side of copyright piracy in China, under the auspices of professor Kamperman Sanders. Sounds very interesting. Mr Creemers pointed me to 'TRIPs Agreement - Drafting History and Analysis', 3rd Edition, November 30, 2008, written by professor Daniel Gervais (Vanderbilt University Law School) in which the main conclusions of the Dispute Settlement Body confidential interim report concerning DS 362 can be found:

• Article 4 Copyright Law is a violation of articles 5 and 9(1) Berne Convention and article 41(1) TRIPs;
• The panel found that the criminal thresholds are not acceptable, however the U.S. did not present enough evidence of actual harm;
• The sale of confiscated goods is a violation of article 46 TRIPs.

These conclusions look lapidary, however, they represent professor Gervais' version of the interim report, not the final report. I was already familiar with Daniel Gervais' 'TRIPs Agreement - Drafting History and Analysis, 2nd Edition and even 1st Edition (both at the excellent Library of the Institute for Information Law (IViR) and recommended by professor P. Bernt Hugenholtz). Updates of good books are important, indeed. Thank you Rogier Creemers.

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Drafting An Anti-Counterfeiting Trade Agreement: Where is China?

The drafting of the Anti-Counterfeiting Trade Agreement (ACTA) was, and to a lesser extent still is, shrouded in secrecy. There has been a lot of criticism about the lack of transparency in the negotiation process and drafting of ACTA. Only a leakage in 2007 provided a draft version of ACTA, see here (4 pages pdf).

This September a lot of stakeholders signed a protest letter that to withhold the citizens of countries participating in the negotiation process is undemocratic. The Chinese Domain Name User Alliance in Beijing was the only Chinese signatory of the protest.

It became clear in October 2007 that the United States, the European Community, Switzerland, and Japan are participants. After that Australia, Republic of Korea, Mexico, Jordan, Morocco, Singapore, the United Arab Emirates and Canada joined.

The goal is to establish a new international legal framework and to set a new, higher benchmark than TRIPs for the enforcement of intellectual property rights that countries can join on a voluntary basis.

Although China is not participating in the drafting process (either because China was not invited or it declined an invitiation), it is the ultimate objective of ACTA that "large emerging economies, where IPR could be improved, such as China and Russia" to sign up to the global act. Read more in the November 2008 Fact Sheet of the European Commission about ACTA, here. However, one can doubt whether China wants to adhere to a global act if they did not participated in the negotiation process.

So why did the United States and European Community shift the forum from WTO's TRIPs to this new forum, that has no ties with WTO, WIPO or anything we already know? I take it that if you have ambitions to increase the minimum protection/enforcement level of intellectual property, the WTO is a forum with many members so it is likely that the participants have to strike a compromise.

The drafting process of ACTA is in full swing and will continue in 2009.

Read more about ACTA here.

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"Free Trade Agreement China-Peru Effective 2009"

A Free Trade Agreement (Tratado de Libre Comercio Perú – China) was announced at a summit in Lima, Peru, between President Alan Garcia and Hu Jintao, read CNN article about it here. Bi Mingxin of Xinhua wrote that a spokesperson of the Ministry of Commerce (MOFCOM) told that the Free Trade Agreement (FTA) between the People's Republic of China and Peru will become effective in the second half of 2009, read here.

"The two sides also reached consensus on a variety of issues including investment, intellectual property rights and customs regulations, the MOC [MOFCOM] official added."

First the Ministry of Foreign Trade and Tourism of Peru and the Ministry of Commerce of China did a feasability study, see here. The pages 137-141 are about intellectual property rights.

You can find more about this FTA at Wikipedia, here.

Whether China and Peru have agreed to go beyond the minimum requirements of TRIPs is unclear to me at this point. To be continued.

Read also in Spanish Aurelio Lopez-Tarruella Martinez' article about it on IP Tango: here.

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China's National IP Strategy 2008: Feasible Commitments or Road to Nowhere Paved With Good Intentions

This article by Danny Friedmann is also published at the site of Duncan Bucknell Company, the consulting firm that specialises in global intellectual property strategy, see here.

China's State Council promulgated a National Intellectual Property Strategy [1]. In the policy document there is a lot of talk about doing everything more efficient and more effective. Great, but how to achieve these laudable goals?

Over the last two decades, and especially around the time China ascended to the World Trade Organisation (WTO) in 2001, China impressively improved its system of IP protection and enforcement. However, it’s aspirations to make the enforcement “hard as steel and definitely not soft as bean curd” as China’s premier Wen Jiaobao aspired for in 2006 [2], have not yet materialised. In the so called Compendium of China's National Intellectual Property Strategy [3], an extensive list of aspirations and measures, China is vowing to develop itself into a country with a relatively higher level of intellectual property right creation, utilisation, protection and administration by 2020.

So what exactly is a national IP strategy? Are all desired goals and commitments in there? What is missing? And how to achieve the goals set out in the strategy?

What is a national IP strategy?

National IP strategies are en vogue. The World Intellectual Property Organisation (WIPO) has gathered the summary of the national IP strategies of 21 countries, plus the African Union and the European Union [4]. WIPO’s definition of a national IP strategy is: “a set of measures formulated and implemented by a government to encourage and facilitate effective creation, development and management of intellectual property.” Professor Daniel Gervais [5] points out to the fact that to make a proper policy analysis is impossible or inherently unreliable, because theoretical models are inadequate or valid empirical data unavailable. Despite this correct observation the promulgation of a national IP strategy can clarify common goals. In this case the national IP strategy is a product of the National Working Group for IPR, made up of 13 officials from 12 IP-related agencies and ministries, including the Ministry of Commerce (MOFCOM), the State Intellectual Property Office (SIPO), Customs, the Supreme People’s Court and the State Administration for Industry and Commerce (SAIC) [6]. So the commitments set in the national IP strategy will be broadly embraced, which increases its chances to be realised.

What stands out in the national IP strategy?

Paragraph 13, 14 and 15 give the contours of strengthening IPRs protection, preventing abuses of IPRs and fostering a culture of IPRs. After that is becomes more interesting, because the more specific tasks are announced. The key industry sectors where China wants to obtain strategic patents are given in paragraph 16. They include: biology, medicine, information, new materials, advanced manufacturing, new energy, oceanography, resources, environmental protection, modern agriculture, modern transportation, aeronautics and astronautics. It is safe to predict that one can expect a lot of patent activities in China in these industry sectors.
Paragraph 17 is about setting technology standards. Chinese national standards, such as AVS in the audio-visual industry [7], the Chinese version of the RFID standard [8] or the TD-SCMDA in the telecoms industry [9] have a chance of developing into de facto international standards, because of China’s growing economical significance in the world.
Paragraph 19 deals with patent examination. It is clear that patent quality in China has enough room for improvement [10]. In the document one cannot find surprising new strategies for trademarks or copyright protection and enforcement. “Stealing trade secrets it to be severely punished according with law”, paragraph 29 stipulates. But as we will see below, sometimes this bland language is a prelude to concrete change, although it is unclear when this will happen. Until now trade secrets are dealt with in China’s Labour Contract Law [11].
China wants to establish or improve upon a protection system for geographical indications (paragraph 32), genetic resources (paragraph 33), traditional knowledge (paragraph 34), folklores (paragraph 35) and layout-designs of integrated circuits (paragraph 36). The wording of these goals and commitments is vague, because how do you measure whether a system is strengthened or sound, and when can you say that the utilisation of rights is more effective?
More promising is paragraph 45 which stipulates that the trial system for intellectual property should be improved upon, the allocation of judicial resources optimised and remedy procedures simplified. In this paragraph the need for studies to establish special tribunals for civil, administrative and criminal cases involving intellectual property rights is articulated. Also the centralisation of jurisdiction involving patents or other highly technical cases will be studied. This makes a lot of sense, since it will build expertise and bring experience together. Although, this concept is not really new: since 1993, Chinese courts have made efforts to establish special trial chambers of IP. In 2000, China set up special and independent divisions to exclusively deal with all IP related civil cases. These so called No. 3 (or No. 5) Civil Divisions, can be found at the Supreme People’s Court, all High People’s Courts, Intermediate People’s Courts in all provincial cities and many big cities, and even a few Basic People’s Courts. Judges on the panels have science or engineering backgrounds and experience in dealing with IP cases. Such courts include the Intermediate People’s Courts in Beijing, Shanghai, Guangzhou and Shenzhen [12].
Another good development mentioned in paragraph 45 is that China explores to set up courts of appeal for IP cases. This will improve the uniform and consistent application of laws, which will increase the certainty for all stakeholders in the legal process. Paragraph 52 states the commitment to get high quality databases for patents, trademarks, copyrights, layout-designs of integrated circuits, new varieties of plants and geographical indications. This could dramatically add to the transparency of intellectual property rights in China.

What is lacking in the national IP strategy?

To achieve any goal, one has first to know exactly where one stands. Therefore one needs to be able to measure in an objective way the enforcement and infringement levels in China. For this purpose one could use the Enforcement/Infringement Ratio this author has proposed in his thesis [13]. When the position is known one can set goals, which are well defined and attainable. The vague language in the national IP strategy is not very conducive for this purpose and it remains silent about what the level of IP enforcement compared to the level of infringement should be. The following concepts; effective enforcement and deterrent remedy should be precisely defined.

There is a paragraph about an interdepartmental coordination mechanism to make overall plans for the development of IP human resources (paragraph 59), but there is no plan for a better coordination between the different administrative authorities with overlapping capabilities, such as the State Administration for Industry and Commerce (SAIC) and the Administration of Quality and Security Inspection and Quarantine (AQSIQ) concerning the enforcement of infringed trademarks. In addition to this, there is no plan for a better coordination between the administrative authorities and the Public Security Bureau (PSB) so that criminal cases will be transferred to the PBS, which hardly happens at this moment in time.
One of the most fundamental challenges IP enforcement in China faces is that there is state by law instead of state of law. The law is used to achieve government policies, instead that government policies are used to apply the law. Therefore the administrative route of enforcement is preferred by the Chinese government, so that the judicial enforcement route has still to be developed more fully.

How to implement the national IP strategy?

Annually China comes up with action plans on the enforcement of IPR which have to implement the national IP strategy. March of this year China launched the Action plan on IPR protection 2008 [14]. It deploys 280 detailed measures and announced 16 massive campaigns to fight IP piracy and infringement. Every year these campaigns get names such as ‘Fight Piracy Every Day’, ‘Zero Counterfeiting in Ten Thousand Shops of One Hundred Cities’ and ‘Special Operation Thunderstorm’ on patent protection.
Action Plan 2007 [15] also launched this kind of campaigns with imaginative names and so did Action Plan 2006 [16, 17] Are these massive, temporal, top-down initiated campaigns effective? They might draw attention to the case of IPR protection and enforcement and educate the public at large. However, temporal campaigns that crackdown on piracy and infringement fight the symptoms, but do not seem to solve the fundamental extra-judicial problems of IPR enforcement in China [18].

On a positive note Action Plan 2008 [19] shows that it takes the coordination of criminal cases between administrative authorities and the PBS very serious. Another good omen is that it states that “the People’s courts in central and western parts of China where IPR cases have serious quality problems and the legal team relatively weak” need targeted supervision, inspection and training [20]. This is a probably a good way to fight the prevalent legal protectionism [21]. Other good news in Action Plan 2008 is that China wants to do special research to build a trade secret system and come up with a judicial interpretation about trade secrets [22].

Well who knows, maybe we can “greet the spring of IP cause” soon, as Tian Lipu, SIPO’s commissioner, put it so optimistically and poetically at the beginning of this year [23].

Danny Friedmann/IP Dragon 知識產權龍

Notes and links:

[1] - National Intellectual Property Strategy issued by the State Council of the People’s Republic of China on June 5, 2008, available at http://www.law-now.com/law-now/sys/getpdf.htm?pdf=outlineofthenationalintellectualpropertystrategy1.pdf.
[2] - ‘Full manuscript of The Times interview with Wen Jiabao’ during his visit to the ASEM, in Helsinki, Finland, The Austalian, September 6, 2006.
[3] - ‘Compendium of China National Intellectual Property Strategy issued’, Intellectual Property Protection in China, SIPO.gov.cn, June 6, 2008, available at http://english.ipr.gov.cn/ipr/en/info/Article.jsp?a_no=214475&col_no=925&dir=200806.
[4] - ‘IP Strategies and Innovation Intellectual Property and New Technologies Division’, WIPO, updated until January 2007, available at http://www.wipo.int/ip-development/en/strategies/national_ip_strategies.html#what.
[5] - Daniel J. Gervais, ‘The TRIPS Agreement and the changing landscape of international intellectual property’, Chaper 3 of Intellectual Property and TRIPs Compliance in China, Edward Elgar, 2007, pg. 65.
[6] - Peter Ollier, ‘China releases national IP strategy, Managing Intellectual Property, June 13, 2008, available at http://www.managingip.com/Article/1945806/China-releases-National-IP-Strategy.html.
[7] - ‘China is developing new standard to own IP’, IP Dragon, February 22, 2006, available at http://ipdragon.blogspot.com/2006/02/china-is-developing-new-standard-to.html.
[8] - ‘China develops own RFID standard to own IPR’, IP Dragon, March 14, 2006, available at http://ipdragon.blogspot.com/2006/03/china-develops-new-rfid-standard-to.html.
[9] - ‘China’s wish to circumvent 3G royalties has its price’, IP Dragon, June 20, 2007, available at http://ipdragon.blogspot.com/2007/06/chinas-wish-to-circumvent-3g-royalties.html.
[10] - ‘Patent quality in China: “You could patent a wheel”, July 3, 2008, IP Dragon, available at http://ipdragon.blogspot.com/2008/07/patent-quality-in-china-you-could.html.
[11] - ‘What has Labour Contract Law in China to do with IP?”, November 15, 2007, IP Dragon, available athttp://ipdragon.blogspot.com/2007/11/what-has-labour-contract-law-in-china.html.
[12] - Danny Friedmann, ‘Paper Tiger or Roaring Dragon, China’s TRIPs Implementations and Enforcement’, July 10, 2007, pg. 98, available at http://www.nfprojects.nl/ipdragon/Paper_Tiger_or_Roaring_Dragon.pdf.
[13] - Data key on road to IPR transparency, IP Dragon, December 19, 2007, available at http://ipdragon.blogspot.com/2007/12/data-key-on-road-to-ipr-transparency.html.
[14] - Action Plan on IPR protection 2008, March 18, 2008, available at http://english.ipr.gov.cn/ipr/en/info/Article.jsp?a_no=197210&col_no=925&dir=200804.
[15] - Action Plan on IPR protection 2007, April 6, 2007, available at http://zgb.mofcom.gov.cn/aarticle/az/k/200704/20070404541058.html.
[16] - Action Plan 2006 on IPR Protection – I, available at http://sbj.saic.gov.cn/english/show.asp?id=460&bm=sbyw.
[17] - Action Plan 2006 on IPR Protection – II available at http://sbj.saic.gov.cn/english/show.asp?id=461&bm=sbyw.
[18] - Friedmann, see note 11, pg. 58.
[19] - Action Plan on IPR protection 2008, Chapter IV Institution Building, paragraphs I (3) and III (1), (3) and (4), see note 13.
[20] - Action Plan on IPR protection 2008, Chapter VI Training and Education (II)(13), see note 13.
[21] - Friedmann, see note 11, pg. 69.
[22] - Action Plan on IPR protection 2008, Chapter X (I)(V)(1) and Chapter VII (X)(I)(2), see note 13.
[23] - Tian Lipu, ‘To Greet the Spring of IP Cause’, 2008 New Year Address, SIPO, January 3, 2008, available at http://www.sipo.gov.cn/sipo_English/about/commissioner/200801/t20080103_229110.htm.

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TRIPs Amendment; China's Medicine For A New Pandemic?

It is good to be prepared for the worst. Zhu Zhe of the China Daily reports that last Sunday, during the 30th session of the National People's Congress (NPC) Standing Committee, China's legislature accepted an amendment to the World Trade Organization Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) to enhance access to medicines when dealing with public health emergencies, such as SARS and bird flu. Read Zhu Zhe's article here.

Xinhua wrote: "The Chinese government hopes that approving the bill will help China tackle public health emergencies like SARS and bird flu more effectively." Read the Xinhua article here. This legislation might help, but one could say that there is probably no alternative for transparency in case of pandemics or epidemics.

Agreement on the 'Implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health of Decision of the General Council' was made August 2003, see here. This agreement was incorporated as an amendment to the WTO TRIPS Agreement on the eve the Hong Kong Ministerial Conference in December 2005, see here.

The amendment will be formally built into the TRIPS Agreement when two thirds of the WTO members have ratified it. The WTO said members have set themselves until Dec. 1, 2007 to do this. The waiver remains in force until then.

So how will TRIPs look like if the amendment is incorporated?

• "Five paragraphs come under Article 31 “bis” (i.e. an additional article after Article 31). The first allows pharmaceutical products made under compulsory licences to be exported to countries lacking production capacity.Other paragraphs deal with avoiding double remuneration to the patent-owner, regional trade agreements involving least-developed countries, “non-violation” and retaining all existing flexibilities under the TRIPS Agreement.


• A further seven paragraphs are in a new annex to the TRIPS Agreement. These set out terms for using the system, and cover such issues as definitions, notification, avoiding the pharmaceuticals being diverted to the wrong markets, developing regional systems to allow economies of scale, and annual reviews in the TRIPS Council.


• An “appendix” to the annex deals with assessing lack of manufacturing capability in the importing country. This was originally an annex to the 2003 decision.The new Article 31 “bis” and annex of the TRIPS Agreement are attached to a protocol of amendment. This in turn is attached to a General Council decision, which adopts the Protocol and opens it for members to accept it by 1 December 2007."

Source: WTO's article 'Members OK amendment to make health flexibility permanent' see here.

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Chinese Copyright Pirate created interest in subject of Intellectual Property for Joseph Stiglitz, Nobel Laureate

Joseph Stiglitz, 2001 Nobel laureate in economics and professor at Columbia University delivered the 6th annual Meredith and Kip Frey Lecture in Intellectual Property Friday at the School of Law of Duke University.

Naureen Khan wrote for The Chronicle:

"He said his interest in intellectual property began 20 years ago, when a Chinese publisher called to ask if Stiglitz would write a preface to a pirated edition of one of his own textbooks."As a good academic, I was enthusiastic about the idea," Stiglitz joked. "My view was that the reason we write these things is not to make money but to influence ideas, to influence the shape of intellectual debate.""

Stiglitz is a known criticaster of TRIPs.

Read Khan's article here. See the 6th annual Meredith and Kip Frey Lecture in Intellectual Property as video stream here.

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IPR: Overseas Parties Have 60 percent Success Rate at Beijing No.1 Intemediate People's Court

Xie Chuanjiao of China Daily wrote the article International laws applied in local IPR cases, read here. Nothing new really, China has this obligation already since April 12, 1986 when it adopted its General Principles of Civil Law .

When China became the 143rd member of the WTO on December 11, 2001, it automatically entered into TRIPs, which is an integral aspect of the WTO agreement. The supremacy of international treaties concluded by or acceded to China which apply to law in civil relations with foreigners is dealt with by article 142 General Principles of Civil Law [1]. It states that where the provisions of TRIPs differ from those in civil laws of the PRC, the provisions of the international treaty shall prevail. Unless it would concern provisions for which China would have made reservations. This is conform Section 2 Vienna Convention on the Law of Treaties [2]. China did not make any such reservation. This means that a foreign plaintiff can cite TRIPs in a lawsuit against a Chinese entity if no domestic legal recourse were available, or if these were in conflict with provisions of TRIPs.

[1] Article 142 General Principles of Civil Law: (..) where the provisions of an international treaty which the PRC has concluded or acceded to differ from the civil laws of the PRC, the provisions of the international treaty shall prevail, with the exception of those articles to which the PRC has made a reservation. (..).

[2] Articles 19-23 Vienna Convention on the Law of Treaties

However, in the last part of the article Xie gave some statistics about the period 2002-2006:

• Chinese courts dealt with 931 IPR cases involving overseas parties, or a rise of 50 percent each year, according to Jiang Zhipei, chief justice of the Supreme People's Court IPR Tribunal.
• Beijing No 1 Intermediate People's Court alone ruled in favor of overseas parties in 60 percent of the 670 IPR cases.

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China's TRIPs Compliance Five Years Later: What's The Score?

Today the USTR issued the 2006 Report to Congress On China's WTO Compliance, including nine pages (70-79) about China's intellectual property enforcement. Nothing really surprising, but it gives an overview of China's compliance with TRIPs through the eyes of the USTR.

Pages 96-99, about the legal framework, including transparency, uniform application of laws and judicial review are also relevant for those interested in TRIPs compliance.

Read here.

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James Paradise: WTO Case Will Not Start Before North Korean Nuclear Threat Has Ended

James F. Paradise wrote another thought provoking article on AsiaMedia of the UCLA Asia Institute.

The innovation of TRIPS compared to WIPO's conventions (Berne and Paris) is that disputes about enforcement can be dealt with in a binding manner by a panel of the WTO dispute resolution body. In other words WTO's TRIPS is WIPO with teeth (paraphrasing professor Hugenholtz of IViR).

However, the downside of TRIPS is that it is an integral part of WTO, which results in a hybrid treaty: the protection and enforcement of intellectual property law can get entangled with trade interests. Trade tariffs can be traded off for the protection and enforcement of intellectual property and vice versa. This might not always be in the best interest of IPRs.

Paradise points out that geo-political interests such as the North Korean nuclear threat can take priority over trade interests, including intellectual property:

"Recently there has been speculation that the United States, together with the European Union, Japan and Canada, would bring a complaint against China at the WTO because of inadequate enforcement of intellectual property rights. But it appears now that action of that sort -- should it occur -- will not happen immediately, possibly because the United States needs to maintain China's support in dealing with the North Korean nuclear problem. In September, the United States, the EU and Canada did request that a dispute settlement panel examine their complaint that Chinese tariffs on imported auto parts were discriminatory, the first time a dispute with China had risen to this level in the WTO."

Paradise points out a trend in the business community to cope with the rampant infringement of intellectual property proactively by changing their business strategy:

""We need more flexible business models," said George M. Borkowski at a panel primarily focused on copyright at the Los Angeles Asia Pacific Entertainment and Media (APEM) Summit 2006 last week. Borkowski, a partner of the law firm Mitchell Silberberg & Knupp, added that there is not much agreement within the industry itself about how to proceed."

Is this defeatism? I don't think so. As a company you should both try to prevent IPR infringements, but if they do, you should be prepared to protect and enforce your IPRs ferociously.

Read Paradise's article here.

Paradise wrote earlier an excellent review of Mertha's book'The Politics of Piracy: Intellectual Property In Contemporary China', read more here.

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