IP judicial reforms require more for agents

By Wang Yadong and Han Yufeng, Rui Bai Law Firm
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With the upgrading of Chinese industry and the implementation of intellectual property (IP) strategy, demand for IP protection is increasing and the rapidly increasing difficult and complex IP cases involving cutting-edge technologies are continuing to test the adjudication capabilities of the courts. With a view to responding to social needs, the courts are continually exploring systems that place more stringent requirements on IP agents ad litem. This column looks at the reforms and innovations in the IP judicial field and their impact.

Wang YadongPartnerRui Bai Law Firm
Wang Yadong
Partner
Rui Bai Law Firm

Specialized and cross-territorial centralized adjudication. From the initial implementation of the Patent Law in 1985, the number of courts competent to try patent cases increased from 30 to 93 at one time. As marked by the establishment of the Beijing, Guangzhou and Shanghai IP courts in 2014, IP adjudication has shown a tendency towards cross-territorial centralized adjudication, centralizing the trial of IP cases mainly involving technology.

The territorial jurisdiction of the Guangzhou Intellectual Property Court covers all of Guangdong province, except Shenzhen; and the centralized acceptance of technology cases in the Beijing, Tianjin and Hebei regions by the Beijing Intellectual Property Court is currently being implemented. In 2017, the Nanjing, Suzhou, Wuhan and Chengdu cross-territorial IP courts that have centralized jurisdiction over technology cases and other major IP cases and the Hangzhou Internet Court that has centralized jurisdiction over online purchase-related disputes, online finance disputes and online copyright disputes in Hangzhou have been established in succession. As a result, the number of courts competent to hear patent cases has dropped to 67. This process serves as the best indicator of cross-territorial centralization of IP adjudication.

Han YufengSenior AttorneyRui Bai Law Firm
Han Yufeng
Senior Attorney
Rui Bai Law Firm

Greater precision in determining the measure of IP damages. IP actions often entail the problem of the difficulty of adducing evidence, resulting in a low measure of damages, and even the imbalance between the compensation awarded and the cost for the protection of rights. In this respect, relevant laws provide specifically for statutory compensation but, in judicial practice, increased statutory measures do not directly lead to intensified protection. In major cases, the court’s maximum statutory damages award may still be far less than the compensation that the plaintiff ought to receive, and when dealing with trivial infringements, a damages award rendered based on the minimum statutory measure of damages is still overly harsh for individual proprietorships and other such vulnerable groups.

In the past, despite the occasional rendering of judgments awarding high amounts, there was no consistency to them. In recent years, the IP courts have constantly set new records for the amounts awarded in judgments. For example, both the “Qianggu” trademark case, in which compensation of RMB10 million (US$1.48 million) was awarded, and Watchdata v Hengbao, an invention patent infringement case in which compensation of RMB50 million was awarded, reflect the reform with respect to the reasonable allocation of the burden of proof – namely, on the basis of the plaintiff’s active adducement of evidence, the court should reasonably allocate the burden of proof, ascertain such factors as the profit from the infringing product, the quantity, etc., and then award a compensation amount very close to the loss incurred by the rights holder, or the profit made by the infringer.

Such endeavours in improving the precision and professionalization in the ascertainment of relevant facts can provide guidance for future adjudications. In contrast, in the Watchdata v Hengbao utility model patent infringement case, the court had previously upheld only RMB200,000 in compensation and RMB10,000 in reasonable expenses on the basis of statutory damages.

Guiding cases will play an important role in assuring adjudication consistency. The absence and ambiguity of statutes are particularly pronounced in the IP field. Before the implementation of the guiding case system, the deviation from preceding judgments is inconsequential on later judgments. Different disposals of disputes of identical nature are frequent. Therefore, IP became one of the first fields to apply guiding cases.

With the issuance of the Provisions of the Supreme People’s Court on Case Guidance Work, on 26 November 2010, and the milestone of the establishment by the Supreme People’s Court of the Intellectual Property Case Guidance Research (Beijing) Base in the Beijing Intellectual Property Court, on 24 April 2015, the IP case guidance system has begun to take shape. By participating in the selection of a large number of guiding cases in the past two years, the authors have come to a profound appreciation that the use of guiding cases is helpful in the effective application of existing laws, not only contributive to the protection of rapid innovation and unification of judicial standards, but also to the cultivation of proper social behaviour.

More stringent requirements

More professional adjudication imposes more stringent requirements on agency services. Traditional IP agents ad litem can broadly be divided into two types: the first is patent prosecutors, with strong technical background and well-trained in patent prosecutions; and the other is the traditional attorneys with extensive litigation experience and abundant management skills. Generally speaking, patent prosecutors usually approach technical facts from a scientific/engineering perspective, and will sometimes experience difficulties communicating with the collegiate bench, whereas traditional attorneys have the challenges to understand the technical details of a case.

In the past, as the damages awarded by the courts were low, attorneys’ fees were also often overly low. Now, with a surge of high damages supported by the IP courts, the attorney fees will necessarily increase, which will be followed by the demand for better skills and services by agents.

New generation IP agents ad litem are required to have the combined capability to understand technical facts while also commanding a solid basis in the law, extensive litigation experience, an ability to flexibly, effectively and lawfully secure evidence of the alleged act in the case and in support of the damages, and to skillfully convert technical facts and other such objective facts into the legal facts required for the trial of the case by the court, having a strong capacity to analyze and judge guiding cases, and having the capacity to accurately foresee and guide the trial of the case by the court. Only such agents and their teams can effectively safeguard the legal and commercial interests of parties.

Author: Wang Yadong is a partner and Han Yufeng is a senior attorney at Rui Bai Law Firm

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