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Published : August 28, 2012 | Author : vishal vijayvargiya
Category : Intellectual Property | Total Views : 5286 | Rating :

  
vishal vijayvargiya
Vishal Vijayvargiya, V Year, Amity Law School, Delhi
 

There is probably more misinformation about China than about any other country in the World” - - Aaron Schwabach

It has been seen over the years that there has been constant dispute that has arise related to IPR between the most developed & the most rapidly developing nation of the world i.e. the USA & China. Post-Cold War the U.S. and China are also becoming the key players in Asian regional security and stability. China is the most populous nation possesses the world's largest military, and is an emerging economic power. Therefore, it is in the best interests for both nations to work for a common agenda since both nations could benefit from trade cooperation in addition to regional stability. Although both nations have tried to weaken their adversarial relationship, the U.S. is currently concerned with China's response to several bilateral trade and security issues. On the issue of U.S.-China trade policy, the U.S. is concerned with the PRC's policy of protecting U.S. copyrights. When discussing the U.S.-China copyright disputes, Shao (2006), a renowned scholar of intellectual property rights (IPR), commented that the United States "has been aggressive in pushing for a universal intellectual property regime. IPR refers to "the legal rights concerning intellectual activity in the industrial, scientific, and artistic fields". To guard its trade interests abroad, the United States established the Office of the United States Trade Representative (USTR) as early as in 1962 based on the U.S. Trade Expansion Act. As part of the Executive Office of the President, the USTR is the key U.S. government agency empowered with the authority to take charge of trade agreement programs and U.S. bilateral trade policies (Office of the USTR, 2008). Annually, the USTR reviews the protection of the U.S. IPR in its trading-partner nations and announces the results in its "Special 301 Report." Depending on the violation degrees of the Special 301 provisions, countries are categorized and put on a list of Watch List, Priority Watch List, Section 306, or Priority Foreign Country. China has been on the Priority Watch List, Section 306 Monitoring, and Priority Foreign Country during the past decade. Besides, China has also been under the World Trade Organization (WTO) Dispute Settlement Pursuit as a result of the U.S. charges in recent years. As China is now the world’s third largest trading power and the fourth biggest export market for the United States, its protection of the U.S. IPR has attracted increasing concern and efforts from the USTR and the U.S. businesses. Since 2001, U.S. exports to China have grown five times faster than they have to the rest of the world.

The U.S. Congress estimates that counterfeit trade in China is worth from $19 billion to $80 billion a year in terms of loss for us. When you apply the general rule of thumb that $1 billion in economic activity equals 12,000 to 14,000 jobs, that means we are talking anywhere from 240,000 to a million jobs a year that are being impacted, opportunities for Americans to earn, opportunities for the income and taxes off of that earnings, opportunities to create a future.

Thus, there has been increasingly higher pressure on China for its ineffective protection of the U.S. IPR from the U.S. side during several rounds of U.S.-China IPR negotiations. As a result of the negotiations, the Chinese government has been making compromises and cooperating with the U.S. side in a variety of ways, but the results have been far less than satisfactory to the U.S. copyright holders and the USTR negotiators. China’s violations of United States intellectual property rights costs the US tens of billions of dollars in economic activity and millions of jobs, according to a report released today from the US International Trade Commission.

The report’s release led leaders of the Senate Finance Committee, which has jurisdiction over international trade, to demand action by China to end these violations.

“Time and time again, China has failed to protect and enforce American intellectual property rights, and it continues to discriminate unfairly against American businesses,” committee Chairman Max Baucus (Democrat, Montana) said in a statement. But it was not clear what specific action the senators were calling for.

According to Senate statement, the ITC report showed that China’s IP rights infringement: “cost the US economy approximately $48 billion in 2009 alone. Of that total, more than $26 billion came from the information and service sector and more than $18 billion came from the high-tech and heavy manufacturing sector, in addition to billions more from other sectors. Although IPR infringement most commonly affects large firms, small and medium-sized firms are also affected.”

The ITC report said that “if China complied with their current international obligations to protect and enforce IPR, 2.1 million jobs could be created in the US,” they said. “The most direct jobs impact would come in high-tech, innovative industries.” The U.S. International Trade Commission said in May.

2. Development of IPR in China:
China has not been alien to IPR in its history. First, even pre-modern China developed an IPR practice in tune with its cultural, commercial, and technological evolutions such as the Civil Servant Examination system, family craft secret, and the inventions of paper and printing. Exclusive rights were granted on creative intellectual products associated with creativity and monetary investment. Second, pre-modern China’s IPR practices, which are immature compared with those of pre-modern Europe, accommodated the IPR and the public interests. While there was a strong property-focused approach in the IPR rhetoric created by the London booksellers in the early 18th-century England, more emphasis was laid on "the benefits of the society and the interests of the community in creative works in the Chinese history" (Shao 2006: 10). With the expansion of the commercial publishing industry following the invention of the printing technology in China in the 9th century, copyright protection came into being as an exclusive right granted to authors to protect their reputations against plagiarism and unauthorized reprinting. However, copying enjoys a long tradition in China and does not carry a stigma. Thus, "copying a masterpiece was historically considered an art form in its own right while Chinese students have been taught for centuries to copy their teachers as accurately as possible before attempting to create". Furthermore, free publishing and reprinting earlier books flourished throughout the major part of China’s publishing history. Even the government made public a decree in the tenth century, which stated: "If anyone wishes to transcribe the Classics, he must copy the printed editions offered by the government". Obviously, the classics, which were the main sources of learning, could be printed and reprinted freely by anybody. In fact, books other than the classics were also largely available for reprinting and copying, thus expanding and enriching the public domain in China (Shao 2006).

Both foreign scholars like Swanson (2005) and Chinese scholars like Yuan (2001) noticed this phenomenon and pointed out that Chinese artists historically sought to mimic acknowledged masters in painting and calligraphy because the act of copying did not necessarily carry negative connotations. Wingrove (1995) also noted that the Chinese educational system has been mostly based on the principle of copying. For over 2,000 years in imperial China, the highest academic attainment was demonstrated by faultless reproduction of the classical works of the past. At a very young age, Chinese children were taught to memorize and copy the classics.

Nevertheless, due to its domestic needs in the transformation from a labour-intensive society to a knowledge-oriented economy and its membership commitment to the WTO, China has been shaping its IPR practice in accordance with the strategy of one base, two goals, and three principles. The one base of China’s IPR system is to respect and reasonably protect IPR. The two goals are: China’s IPR regime will first benefit the transmission of knowledge and second facilitate human beings to share the welfare of knowledge accumulation. The three principles are: first, China’s IPR system will be in line with the status quo; second, the public interests will take precedence over private rights; and third, national interests will take priority over private ones (Shao 2006). From the above, we see that since ancient times the Chinese have emphasized the functions of creative works for the benefits of the society and the interests of the community. The immature IPR system in the past and the strategy of one base, two goals, and three principles today both aim at transmitting information and sharing knowledge, in which individual interests of creators or authors usually give way to those of the group.

Patent:
China’s first patent law was enacted in 1984 and has been amended twice (1992 and 2000) to extend the scope of protection. To comply with TRIPs, the latest amendment extended the duration of patent protection to 20 years from the date of filing a patent application. Chemical and pharmaceutical products, as well as food, beverages, and flavourings are all now patentable. China follows a first to file system for patents, which means patents are granted to those that file first even if the filers are not the original inventors. This system is unlike the United States, which recognizes the “first to invent” rule, but is consistent with the practice in other parts of the world, including the European Union. As a signatory to the Patent Cooperation Treaty in 1994, China will perform international patent searches and preliminary examinations of patent applications. Under China’s patent law, a foreign patent application files by a person or firm without a business office in China must apply through an authorized patent agent, while initial preparation may be done by anyone. Patents are filed with China’s State Intellectual Property Office (SIPO) in Beijing, while SIPO offices at the provincial and municipal level are responsible for administrative enforcement.

Trademark.
China’s trademark law was first adopted in 1982 and subsequently revised in 1993 and 2001. The new trademark law went into effect in October 2001, with implementing regulations taking effect on September 15, 2002. The new trademark law extended registration to collective marks, certification marks and three-dimensional symbols, as required by TRIPs. China joined the Madrid Protocol in 1989, which requires reciprocal trademark registration for member countries, which now include the United States. China has a ‘first-to register’ system that requires no evidence of prior use or ownership, leaving registration of popular foreign marks open to third party. However, the Chinese Trademark Office has cancelled Chinese trademarks that were unfairly registered by local Chinese agents or customers of foreign companies. Foreign companies seeking to distribute their products in China are advised to register their marks and/or logos with the Trademark Office. Further, any Chinese language translations and appropriate Internet domains should also be registered. As with patent registration, foreign parties must use the services of approved Chinese agents when submitting the trademark application, however foreign attorneys or the Chinese agents may prepare the application. Recent amendments to the Implementing Regulations of the Trademark Law allow local branches or subsidiaries of foreign companies to register trademarks directly without use of a Chinese agent.

Copyright.
China’s copyright law was established in 1990 and amended in October 2001. The new implementing rules came into force on September 15, 2002. Unlike the patent and trademark protection, copyrighted works do not require registration for protection. Protection is granted to individuals from countries belonging to the copyright international conventions or bilateral agreements of which China is a member. However, copyright owners may wish to voluntarily register with China’s National Copyright Administration (NCA) to establish evidence of ownership, should enforcement actions become necessary.

Unfair Competition.
China’s Unfair Competition Law provides some protection for unregistered trademarks, packaging, trade dress and trade secrets. The Fair Trade Bureau, under the State Administration for Industry and Commerce (SAIC) has responsibilities over the interpretation and implementation of the Unfair Competition Law. Protection of company names is also provided by SAIC. According to the TRIPs Agreement, China is required to protect undisclosed information submitted to Chinese agencies in obtaining regulatory approval for pharmaceutical and chemical entities from disclosure or unfair commercial use. China’s State Drug Administration and Ministry of Agriculture oversee the marketing approval of pharmaceuticals and agricultural chemicals, respectively.

3. IPR development & Protection in the USA:
The United States stands out as having established one of the most successful intellectual property systems in the world. Secure patents were universally acknowledged as an important factor in early economic growth. At least one part of its industrial and economic success owes to a democratization of access to intellectual property. To give just one example: fees were deliberately set at an affordable level and encouraged broad-based participation in the inventive activity. When Britain followed the U.S. example and reformed its system to facilitate patenting by the working class, the benefits were immediately evident. In England, the vast majority of patents were obtained by urban inventors, in part because the complexity of the system gave an advantage to those who were actually resident in London. In contrast, the United States implemented policies such as transparent and predictable rules, and the prompt publishing of information regarding patent grants and expired patents. Patent volumes were made freely available to public institutions such as libraries, the patent office established branches throughout the country, and the records were meticulously kept. As a result, when markets expanded in America, the major response came from relatively ordinary individuals living in rural areas, who contributed a plethora of important and incremental inventions that enhanced productivity growth in both capital-intensive and labour-intensive industries.

The first Article of the U.S. Constitution included a clause to promote the progress of science and useful arts by securing for limited times to authors and inventors the rights to their respective writings and discoveries. But, despite their common basis in the Constitution, the United States has always followed very different policies towards patents and copyrights. The scope of copyrights was more abbreviated in the United States relative to the European countries and the American term of copyright was one of the shortest in the world next to Greece. Copyrights were always more circumscribed because of concern about the protection of the public interest.

Although American copyright laws were adopted directly from the British Statute of Anne, there were significant differences that were related to the undeveloped state of American literature. Today the United States is notorious for denouncing acts of copyright piracy in country like China. This is somewhat ironic, since the US itself was notorious as a copyright pirate for a hundred years. In the paper I discussed the costs and benefits, and conclude that the US likely benefited from its piracy. In short, the continual expansion of copyright grants today at the prompting of producers threatens longstanding efforts to balance private and social interests in a direction that promises to reduce social welfare and learning in developing countries.

The United States has strenuously opposed policies such as compulsory licences that limit patents, although copyright policies allow for compulsory licences in certain industries. At the same time, these policy instruments have been widely used by the majority of other developed countries since the earliest years of the Venetian patent grants. Germany stipulated both working requirements and compulsory licences; and so did Britain in the early twentieth century. Moreover, even the U.S. enforces quite stringent antitrust remedies that have overturned corporate rights not only to patents, but also to trade secrets and know-how, in order to ensure the assimilation of the technology. The moral here is obvious. The discussion of appropriability tends to be somewhat myopic in its focus on state provided patents and copyrights. American copyright piracy during the 19thCentury did not lead to ruinous competition. Publishers were able to appropriate returns through a number of strategies, including first mover advantages, reputation, and price and quality discrimination. The dominant firms cooperated in establishing private rights of exclusion in foreign-authored books, which were tradable. Such practices suggest that publishers were able to simulate the legal grant through private means, although at higher cost since such rights were not enforceable at law. Courts were also able to offer more individualized protection through alternative doctrines in contract laws, misappropriation, and unfair competition.

Discussions to harmonize patents have reflected American efforts. The first international patent convention was held in Austria in 1873, at the suggestion of U.S. policy makers, who wanted to be certain that their inventors would be adequately protected at the International Exposition in Vienna that year. Subsequent revisions of international patent legislation have been towards the American model, such as the introduction of examinations, lower fees, and the weakening of provisions for compulsory licences and working requirements.

In contrast, France took the lead in the harmonization of copyright laws. France was at the foremost of all nations in the protection it accords to literary property. During the Ancient Regime, the rhetoric of author rights had been promoted by French owners of book privileges as a way of deflecting criticism of monopoly grants and of protecting their profits. Publishers in Britain and America had tried the same strategies but were defeated by the courts in the landmark cases Donaldson v. Beckett and Wheaton v. Peters.

The Berne Convention has drawn from French laws, most notably in the declaration of moral rights. Today Berne recognizes the right of disclosure, the right of retraction, the right of attribution, and the right of integrity. These rights all infringe on the public domain relative to economic rights. In short, the self-interested rhetoric of the owners of monopoly privileges in 17th century France now shapes international copyright laws in the twenty first century. History has its ironies.

In yet another irony, the United States for over one hundred years resisted foreign pressures to alter its international copyright laws in order to protect its infant publishing industry and in so doing provides a model for developing countries in the 21st century. It should be clear that, if outcomes are held to be efficient when they are aligned with the preferences and interests of the constituent members of the global economy, developing countries today should resist harmonization as not only inefficient, but harmful to their interests.

4. Dispute arises as to Trade, Piracy & IPR between China & the USA:
The debate over certain elements of intellectual property rights (IPR), a contentious issue here in the States, has now spilled over into the macroeconomic forum between the US and China. It’s long been known that Chinese pirating of copyrighted works, for example, is commonplace, but this is the first time that a federal-level investigation will try to put a quantitative stamp on the extent to which IPR infringements in China can devastate US business there. This comes from one of two reports, released by the US International Trade Commission (USITC).

China has been robustly advancing “indigenous innovation” policies, which the US sees as undermining its firms’ business opportunities in China’s economy. “This “web of policies” often embedded in government procurement, technical standards, anti-monopoly, and tax regulations may make it difficult for foreign companies to compete on a level playing field in China,” the USITC’s news release states. The graph and table below show the extent of China’s involvement at every stage of the supply chain.

Source:
USITC
The first report found that the extremely weak or even non-existent enforcement of IPR leads to “widespread infringement” upon “U.S. firms’ copyrights, trademarks, patents, and trade secrets in China.” (The second report, a more quantitative analysis of the effect of IPR infringement on US jobs will come out in May 2011.) For metals companies doing business with China, this can certainly cause harm beyond simple exports – the firm’s brand image, for example, or proprietary information, even if not explicitly shared, may become easily compromised. (Manufacturing equipment or processes are also targets.) As we’ve seen through the Wiki Leaks cables, the Chinese have few qualms when it comes to hacking US corporations’ databases. Who’s to say this doesn’t extend into IPR?

Reuter’s intelligence in the Business Standard pointed to a recent report by PwC that said “the urgent need to protect intellectual property has forced 92 per cent of surveyed companies operating in China to plan budget increases on information security in the next 12 months.” Chinese firms and the government have been under fire for either forcing companies to hand over patents and designs (or simply stealing them) when it comes to products such as high-speed trains, auto designs, mobile phones and wind turbines. The International Intellectual Property Alliance estimates US trade losses due to piracy in China of at least $3.5 billion in 2009, according to the article. For context, that is nearly the total value of the US aluminium extrusions market. There has been increasingly higher pressure on China for its ineffective protection of the U.S. IPR from the U.S. side during several rounds of U.S.-China IPR negotiations. As a result of the negotiations, the Chinese government has been making compromises and cooperating with the U.S. side in a variety of ways, but the results have been far less than satisfactory to the U.S. copyright holders and the USTR negotiators.

The exact piracy rate in China and the U.S. trade losses can be obtained from the annual Special 301 Reports of the International Intellectual Property Alliance (IIPA). Representing around 1,900 U.S. copyright-based industries, IIPA is one of the U.S. IPR associations that supply the USTR with information concerning foreign market access and foreign protection of U.S. copyrighted materials. According to IIPA (2001, 2003, & 2008), we have arranged the relevant statistics in the following table:

Table 1: IIPA Estimated Levels of Piracy and U.S. Trade Losses in China from 1995 to 2007

Year

Levels of Piracy (%)

Trade Losses (in millions of U.S. dollars)

Year

Levels of Piracy (%)

Trade Losses (in millions of U.S. dollars)

1995

87.25

2,323.0

2002

92.50

1,849.3

1996

82.50

2,309.3

2003

93.10

2,859.2

1997

80.75

2,792.3

2004

90.90

2,530.9

1998

84.00

2,553.5

2005

89.00

2,643.9

1999

93.00

2,137.7

2006

83.10

2,430.0

2000

91.75

978.7

2007

90.00

2,975.2

2001

90.50

1,932.5

2007

90.00

2,975.2

Source: IIPA Special 301 Reports, 2001, 2003, and 2008

From the above table, we can see that from 1995 to 2007, the piracy rate in China grew from 80.75% to as high as 93.10%, and the U.S. trade losses due to piracy in China range from $978.7 million to $2,975.2 million. The Chinese side refutes the U.S. statistics and claims they are exaggerated. For instance, the Chinese government released a survey result of 45.5% piracy rate in 2005 and a 2% annual decline as provided by the Chinese Institute of Publishing Science. Thus, there is a tug-of-war during the bilateral negotiations while the United States has been pushing China in the establishment of its IPR regime and reinforcement of its copyright law. The purpose of the present paper is to examine the U.S. hegemonic role in imposing its copyright standards as a universal rule onto the Chinese who hold fundamentally different cultural perceptions of copyright in terms of innovation, fair use, and the public domain.

Though there has been a constant uprising that has arisen in the 2008 presidential election has brought on a wave of China-bashing from presidential candidates. On August 7, 2007, Hillary Clinton declared “I do not want to eat bad food from China or have my children having toys that are going to get them sick. While voters may be accustomed to taking everything said by candidates for office with several grains of salt, when Ms. Clinton expressed this concern, her only child, Chelsea, was 27 years old. in the same debate, Barack Obama declared, somewhat more moderately, “China is a competitor, but they don’t have to be an enemy. Someone who hijacks airplanes and flies them into buildings full of people is an enemy. Someone who sells pirated copies of Rush Hour 3 is not. Apparently, though, political discourse in the U.S. has grown so irrational that concerns about intellectual property rights, currency exchange rates and leaded paint add up to enmity. And China bashing, like Japan bashing before it, has become an industry from which people can make money. When it comes to intellectual property rights, Business Week magazine has been among the reliable beaters of the China-scare drum. A sample of headlines from the past few months includes China: Putting a Stop to IP Piracy; Chinese Fakes: Tough to Police; U.S. Takes Piracy Pushback to WTO – Intellectual-Property Rights Violations in China Cost the U.S. Billions Each Year, Leading to Complaints to the World Trade Organization; Deaf to Music Piracy: Chinese Search Engines Make It Easy to Steal Net Tunes; and How to Win the China Piracy Battle. Business Week often portrays IP piracy as an Asian issue, even when China is not specifically mentioned: Asia: The Steep Cost of Software Piracy; Software Piracy Still a Scourge in Asia; Asia’s Digital Music Free-For-All; Asia’s Maddening Music Biz – Universal Music Is on a Star Search for Hot Acts in China and Japan, but Illegal File-sharing and CD Piracy Woes Present Major Headaches .Russia also merits mention: Software Piracy: Will Russia Crack Down? It is rare, however, to see piracy linked to a developed European or North American country, although there are occasional exceptions: Software Piracy Still Rife in Britain.

5. Role of India & the relationship or strife with USA & china on IPR:
India and China face profound, perhaps even existential, economic challenges as they seek to continue providing growth for the hundreds of millions of impoverished citizens who demand economic opportunity and empowerment. As low- and middle-income countries, respectively, the desirability of policies that prove charitable to other countries, especially developed ones, is minimal. Yet, evidence from India shows that intellectual property enhancement involves the transfer of rents from poor countries to rich ones. Although proponents of increased IP believe the process is mutually advantageous, the small absolute market size of developing countries like India and China does not provide adequate incentives to change the level or direction of total R&D experience

Intellectual property harmonization actually allows foreign rights holders to capture profits, obtain jobs, decrease the balance of payments, and cause dependency. The anti-competitive, monopolistic nature of intellectual property makes it harder for developing countries to gain access to the most valuable technologies needed for economic convergence. One study showed that even if stronger intellectual property could accelerate FDI, it would limit the imitative capability of indigenous firms. Other work found that there is a strong positive effect of intellectual property on domestic imports, leading to a decrease in the balance of payments. Moreover, stronger global IP encourages American exports, something India and China should not necessarily favour. The world’s most successful economies, such as Japan or the United States, rose to prominence by specifically limiting the scope and breadth of patents.

The philosophy of India’s Patent Act of 1970 varies enormously from the framework being established under TRIPs. There are several knowledge and information areas which India considers unpatentable. India has a large community of scientists and researchers among whom publication rather than gaining patents has been a concern. G.V. Ramakrishna, Chairman of the Disinvestment Commission points out that in India, “We (Indians) are accustomed to the notion that knowledge is free. Our whole orientation has to change from one that stresses intellectual attainment to one that protects intellectual property.” Industrialised nations conceive of patents as a fundamental right comparable to the right of physical property, whereas developing nations view it as “fundamentally as an economic policy question.”From the perspective of developed countries, intellectual property is a private right that should be protected as any other tangible property, but for developing nations, intellectual property is a public good that should be used to promote economic development. The following table illustrates the basic differences between India’s patent system and TRIPs:

It is important to note that divisions domestically also began at this time. Watal also points out that business interests within India became sharply divided, with industry associations dominated by MNCs demanding amendments in India’s patent laws and others rejecting any suggestion of India even joining the Paris Convention. The shift was perceived in India as a “surrender” to US interests. Domestic criticism within India was sharp against this policy change on the part of India.

Table 1
Comparison of India’s Patent Act and TRIPs

Indian Patent Act of 1970 TRIPs Only process not product patents in food, medicines, chemicals

Process and product patents in almost all fields of technology

Term of patents 14 years; 5-7 in chemicals, drugs

Term of patents 20 years

Compulsory licensing and license of right

Limited compulsory licensing, no license of right

Several areas excluded from patents (method of agriculture, any process for medicinal surgical or other treatment of humans, or similar treatment of animals and plants to render them free of disease or increase economic value of products)

Almost all fields of technology patentable. Only area conclusively excluded from patentability is plant varieties; debate regarding some areas in agriculture and biotechnology

Government allowed to use patented invention to prevent scarcity

Very limited scope for governments to use patented inventions

*Source: Adapted from Patent Office Technical Society, Indian Patent Act, 1970 and Rules, 1991 and MVIRDC, GATT Agreements: Results of the Uruguay Round, World Trade Centre, January 1995

These differences in patent systems led to disputes in the GATT negotiations on the inclusion of IPRs in the WTO. The type of patent system that India established was clearly against the global IP regime promoted by the US. The main objection of the US is to the provision in India's patent law that allows for process but not product patents in the area of food, drug or medicine. The United States terms the activities of India to find alternative processes as “piracy”. According to the US, Indian firms are copying technology developed by advanced nations. This is leading to large-scale losses for the US. The Pharmaceutical industry in the US has been especially vocal on this issue. Phrma, the association that represents US based pharmaceutical company’s points out, “Based on the refusal of the Government to provide pharmaceutical patent protection, India has become a haven for bulk pharmaceutical manufacturers who pirate the intellectual property of the world’s research- based pharmaceutical industry.” In 1989 India made a surprising move gave up its opposition to including IPRs in the negotiations. In April meeting in Geneva in 1989, India made a shift in policy and agreed to include IPRs in the negotiations. India's about turn on the issues was due largely in part to pressure from the US. Analysts have drawn linkages between the threat of US special 301 laws against India and India's charge of stance on the issue in GATT. . At the time when India made the switch the Times of India reported that "India reportedly decided against taking a firm stand on issue lest the United States invoked Article 301 to retaliate."BM in the Economic and Political weekly wrote that India compromised its position on IPR in the hope that it would case the direct US pressure on which India food being designated "unfair trader" in the super 301 process. Eric Wolf hard writes that "In retrospect India's April accession seems merely strategic. Elaborating on the reasons for India's change of position he points out that at the time India was a victim of a series of unilateral measures introduced by the US to deal with some of the major developing countries. He also notes that India required support from US to borrow from IMF and World Bank to meet the depleting foreign exchange crises caused during the Gulf war.

Trade pressure through Special 301 is an important factor that explained India’s shift in position. US trade pressure also led to divisions within developing countries. Several related explanations have also been forwarded as reasons for India’s change in position. Ms. Jayashree Watal, who was part of the negotiating team for India in TRIPs, explained that at the time the U.S. questioned India’s needs to block the negotiations. The US position was that India could object to any aspect of the treaty, but did not need to refuse discussing the issue of IPRs altogether. This appeared at the time to be rational to Indian leaders. She explained that India was isolated during the negotiations and had to agree to the discussions. Muchkund Dubey stated, “Unity collapsed at the resumed mid-term review of negotiations in Geneva in April 1989. Developing countries also believed that they could get concessions in other fields such as textiles. As the Uruguay Round included an entire host of issues such as Services, Agriculture and many others, developing nations were hard pressed to negotiate strongly on all aspects, and could not ignore an agreement that covered such extensive aspects. India and other developing nations also felt multilateral forum may be better than dealing bilaterally with the U.S.

6. Conclusion & the New Chinese Patent:
The new Chinese patent that has been passed in the year 2009 has perhaps the biggest change will be felt in the move to an absolute novelty regime compared to the current novelty requirements. Under the current law, prior public use outside of China or other non-publication forms of prior disclosure outside of China do not count against the novelty of a Chinese patent. Accordingly, under the current law a patentee is able to publicly demonstrate a product outside of China before obtaining a valid Chinese patent for an invention embodied in the product. However, the current law is also susceptible to abuse by parties who rush to file a patent in China after having been alerted to the patentee’s efforts outside of China, in effect ‘hi-jacking’ the invention in China. Under the new CPL any public disclosure of any kind anywhere in the world prior to the filing date (or the priority date if any) of a Chinese patent application will count against it, so this kind of abuse by hi-jacking an invention in China will no longer be possible. The change to an absolute novelty requirement will also have far-reaching implications when attempting to invalidate Chinese patents. For example, for patents granted in technical fields where the earliest disclosures were unlikely to have been formally published, an example being early advances in the field of Internet-related inventions which were not routinely documented by formal publication, under the new CPL evidence of all prior public disclosure will be relevant. Of course, even though the amount of relevant evidence may be greatly increased under the new CPL, to be admissible all foreign-sourced evidence will still have to satisfy the onerous administrative regulations regarding legalisation and notarisation. The new CPL also formalises the current SIPO practice of only allowing one granted IP right (invention patent or utility model) for a single invention. Under current Chinese law there is no statutory bar to prevent the grant of both a patent and a utility model for the same invention if both were filed on the same day by the same patentee. To

Prevent abuse of this procedure, current SIPO practice requires that before allowance of an application for an invention patent, the patentee must surrender any already-granted utility model still in force. The new CPL formalises this rationale and will bring the legislation in line with current SIPO practice. Under the current law, for inventions made by a Chinese applicant in respect of an invention completed in China a patent application must first be filed in China before patent applications may be filed abroad. The current law is silent on the case where the applicant is non-Chinese. Under the new CPL all inventions completed in China are no longer required to be first filed in China, but there is a new requirement for the application to be submitted for a secrecy examination before a foreign patent application can be filed, where that foreign patent application is the first patent application for that invention. Unfortunately, there is no statutory definition in the new CPL of what is meant by “completed in China”, though it is thought that this term extends to cover inventions made in China by Chinese and non-Chinese co-inventors, a common scenario for joint venture agreements or companies such as foreign multinationals with research facilities in China,.

As the penalty for non-compliance with this new requirement is severe – the refusal to grant a patent for such an invention, and/or the possibility that the patentee would have to surrender any patent granted on such a patent application - it may be prudent to submit to the new secrecy examination procedure in all cases where there may be any doubt at all as to Chinese inventor ship. The new examination guidelines are expected to provide guidance on how SIPO will handle secrecy examinations as well as the level of detail that is required to be submitted for this approval procedure.

Though the changes coming into effect on 1st October 2009 in the new CPL will radically alter the landscape of Chinese patent law and will likely require changes to how both legal practitioners and applicants approach Chinese patents. There will be some obvious changes, for example, the change to an absolute novelty regime will be a fundamental shift that will finally require the validity of Chinese patents to be scrutinised wholly in the light of global knowledge, rather than an outdated hybrid model of part-local and part-worldwide knowledge. From a patent prosecution viewpoint, whilst the change will require applicants to reassess their patent filing strategies it is not likely to result in major changes as China is merely now joining the already established practice for most countries. From a litigation angle, the change to absolute novelty will increase the pool of prior art available for attacking weak patents, and likely mean that patents that were previously considered at risk of invalidation, but were not attacked for lack of applicable prior art, may now be invalidated. Similarly, patents which were formerly considered not worth asserting may now be reconsidered following the increase in statutory damages available.

On the other hand, the effects of some of the other changes heralded in the new CPL will be harder to predict. For example, the requirement for a secrecy examination before foreign filing may prove to be no more a burden in practice than the measures already in place in other countries, or it may end up causing impractical delays depending on how it is implemented. Considering that the penalty for falling foul of the requirement is draconian, it may be that some clients will find the cost of always filing in China an acceptable compromise between compliance and expediency for inventions completed in China. There is also hidden in this new requirement the prospect of conflict with other national laws, as although multinational corporations are now no longer required to file their first patent application in China for an invention completed in China, by complying with the secrecy examination requirements required by the new CPL they may be falling foul of their own domestic laws which may preclude foreign disclosure until a domestic patent application has been made. The new provisions concerning assignment of a patented invention to a foreign entity will also likely require careful thought considering the many joint-ventures planned, and already in existence, between multinationals, Chinese universities and other local research establishments. Consideration has to be given to ownership of patent rights from the outset of any agreement. Another change whose effect will be hard to predict will be the impact of parallel importation - the nexus between patent exhaustion, contractual obligations and antitrust issues is a complex area through which companies will need to tread carefully and seek specialist advice.

The Amendment provides a new statutory prior art defence to infringement, which does not exist in the United States. Under the Amendment, there can be no infringement if the accused object is proved to use a technology or design known before the filing date of the patent. The alleged infringer may assert the prior art as a statutory defence to infringement, without the requirement to assert the prior art to demonstrate invalidity of the patent, as is required under current Chinese and U.S. patent laws. Such a provision change is also being considered in currently pending U.S. patent reform legislation. Also note that the prior art definition here should be in accordance with the new absolute novelty requirement in Articles 22 and 23. It remains to be seen whether this defence could be applied retroactively, where an invention used or known abroad before its Chinese filing date is not prior art under the current patent law, but is under the new law. It is not clear yet whether such foreign public use or knowledge may constitute a prior art defence to patents granted under the current law. The Third Amendment includes additional limited provisions for compulsory licensing to ensure the public’s benefit of the invention under the patent system. Under the new Article 48, the Chinese government may grant compulsory licenses to qualified applicants if: (1) the patentee fails to sufficiently use the patent, without appropriate reasons, for more than three years from the date of patent issuance or four years from the filing date, and (2) the patentee’s use is determined to be a negative monopolistic activity. The compulsory license would be granted to alleviate a perceived anticompetitive effect of such a patent misuse under new Chinese laws analogous to U.S. antitrust. It remains to be seen how effectively this provision will be applied in China, given the inherent tensions between patent and antitrust laws.

In particular, the new Article 50 permits the grant of a compulsory license for drugs and medical devices patented in China for the purpose of public health. This also applies to manufacturing in China as well as exporting to qualified countries under international treaties to which China is a member. The United States has similar “march-in” rights where federal funding is used to develop an invention; however, the U.S. government has not yet asserted these rights. It remains to be seen how readily the Chinese government will exercise this compulsory license right; e.g., whether to alleviate a national epidemic or simply provide more common access to generic pharmaceuticals.
~~~~~~~~~~~~~~
# A Survey of Intellectual Property Issues in China- US Trade Negotiations under the Special 301 Provisions: Qiao Dexit.
# CRS Issue brief for congress, China- US Trade Issue: Wayne. M. Morrison
# USA China relation on the protection of Intellectual property: Lloyd. R. Lewis III
# Intellectual Property Rights Loom Large in US- China Trade: Taras Berezowsky
# The politics of piracy: Intellectual Property in contemporary China: Andrew .c. Mertha.
# Intellectual Property perception & Realty in China, US & elsewhere: Journal of the International Media & Entertainment Law.
# The Hegemonic Role of the United States in the U.S.-China Copyright Disputes: Dexin Tian.
# USA China relation on the protection of Intellectual property: Lloyd. R. Lewis III
# India’s Patent Policy and Negotiations in TRIPs: Future Options for India and other Developing Countries

Dr. Anitha Ramanna

Authors contact info - articles The  author can be reached at: vishalvijayvargiya@legalserviceindia.com




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