The recently released U.S. Chamber of Commerce 2020 International IP Index placed the U.S. first in overall intellectual property protection and praised the recent U.S–China Economic and Trade Agreement (Trade Agreement) the countries entered on Jan. 15.
The Chamber president noted the Trade Agreement will “help protect consumers across the globe by strengthening IP protection and enforcement” in China.
Notably, while the U.S. is obligated to cooperate with China with respect to enforcement changes, for the most part, the Trade Agreement affirms that existing U.S. measures afford treatment equivalent to that which is required of China in the agreement.
The U.S. has long been concerned with China not taking trade secret theft seriously, as evidenced by China being a perennial placer on the U.S. Trade Representative’s priority watch list.
Under Article 1.5 of the Trade Agreement, China is required to make a number of improvements on trade secret issues, including shifting the burden of production of evidence or the burden of proof, as appropriate, to the defendants in civil cases when trade secret owners have a reasonable indication of trade secret misappropriation.
Patents and Pharmaceutical-Related IP
The Trade Agreement also impacts patent-related IP. Notably, Article 1.12 mandates that China, at the request of the patent owner, will extend the term of a patent to compensate for unreasonable delays, not attributable to the applicant, that occur in granting the patent beyond four years from the filing date of the application in China, or three years after a request for examination, whichever is later.
Further, Article 1.10 stipulates that China will permit pharmaceutical patent applicants to rely on supplemental data to satisfy relevant requirements for patentability, including sufficiency of disclosure and inventive step, during patent examination proceedings, patent review proceedings, and judicial proceedings.
Trademarks and Geographical Indications
The Trade Agreement provides a general framework for the two countries to provide adequate and effective protection and enforcement of trademark rights, particularly against bad faith trademark filings in China and combating Online infringement.
Specifically, Article 1.13 requires China to require expeditious takedowns and penalizing notices submitted in bad faith.
Enforcement Against Pirated and Counterfeit Goods
A significant focus in the Trade Agreement from an IP perspective is in respect to enforcement against pirated and counterfeit goods.
Among other points, the Trade Agreement provides that China will:
- take effective action against e-commerce platforms that fail to take necessary measures against IP infringement (Article 1.14);
- take effective enforcement action against counterfeit pharmaceuticals and biologics, including active pharmaceutical ingredients, bulk chemicals, and biological substances (Article 1.18);
- take effective enforcement action against counterfeit goods with health and safety risks (Article 1.19); and,
- provide that its judicial authorities will order the forfeiture and destruction of pirated and counterfeit goods, as well as the materials predominantly used in their manufacture (Article 1.20).
Deterrent-Level Penalties and Remedies
The Trade Agreement focuses on deterrent level penalties and remedies. Notably, under Article 1.27, China shall, as an interim step, deter future IP theft or infringements and strengthen the application of existing remedies and penalties by imposing a heavier punishment at or near the statutory maximum permitted under its laws related to IP to deter IP theft or infringement.
Thereafter, China, will increase the range of minimum and maximum pre-established damages, sentences of imprisonment, and monetary fines to deter future IP theft or infringement.
Article 1.28 also requires China to implement expeditious enforcement of any fine, penalty, injunction or other remedy for violating infringement of IP rights when ordered in a final judgment by a Chinese court.
Another notable improvement under Article 1.29 is directed at fundamental copyright law where China is required to provide for a legal presumption that, in the absence of proof to the contrary, the person whose name is indicated as the author, producer, performer, or publisher of the work, performance, or phonogram in the usual manner is the designated right holder in such work, performance, or phonogram and that the copyright or related right subsists in such subject matter.
The Trade Agreement covers nearly the entire IP landscape and is notably ambitious in terms of China’s commitments. The changes to the anti-counterfeiting and penalty/remedy schemes are—on their face—a significant move in the right direction for IP rights’ holders and could have a long-lasting impact on the trade harmony between the U.S. and China.
Ultimately, however, the impact of this agreement from an IP rights perspective will come down to the Chinese government’s desire to institute compliance and provide meaningful action to the agreed-upon wording.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Charles F. Hauff Jr. is a partner at Snell & Wilmer LLP. His professional background includes intellectual property counseling, patent, trademark and copyright prosecution, related litigation, and licensing. He has technical experience in, among other fields, the chemical, biotechnical, mechanical, electromechanical, computer software, medical products, acoustics, and life sciences disciplines.
Jeffrey D. Morton is a partner at Snell & Wilmer LLP. He represents start-up and large enterprises for their intellectual property and commercial law needs. He serves as external IP counsel to dozens of companies around the world, and also represents numerous leading international law firms to protect their clients’ intellectual property rights in the U.S.
Yingchun Ni is an associate at Snell & Wilmer LLP. He focuses his practice in intellectual property law with an emphasis on patent preparation and prosecution in the biotechnology, life science and pharmaceutical industries.