A Confucian Analysis on the Evolution of Chinese Patent Law System [1st ed.] 9789811390265, 9789811390272

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Nan Zhang

A Confucian Analysis on the Evolution of Chinese Patent Law System

A Confucian Analysis on the Evolution of Chinese Patent Law System

Nan Zhang

A Confucian Analysis on the Evolution of Chinese Patent Law System

123

Nan Zhang College of Comparative Law China University of Political Science and Law Beijing, China

ISBN 978-981-13-9026-5 ISBN 978-981-13-9027-2 https://doi.org/10.1007/978-981-13-9027-2

(eBook)

Jointly published with Intellectual Property Publishing House The print edition is not for sale in China (Mainland). Customers from China (Mainland) please order the print book from: Intellectual Property Publishing House. ISBN of the Co-Publisher’s edition: 978-7-5130-3710-5 © Intellectual Property Publishing House and Springer Nature Singapore Pte Ltd. 2020 This work is subject to copyright. All rights are reserved by the Publishers, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publishers, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publishers nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publishers remain neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Contents

1 Introduction . . . . . . . . . . . . . . . . . . 1.1 Clarifications of the Arguments 1.2 Literature Review . . . . . . . . . . 1.3 Research Methodology . . . . . .

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2 A Brief History of Chinese Innovation . . . . . . . . . . . . . . . 2.1 Changes of Social Group and the Booming of Patents 2.1.1 The New Social Changes Brought About by Industrialisation . . . . . . . . . . . . . . . . . . . . . . 2.1.2 The British Industrialists and Patents . . . . . . . 2.1.3 Chinese Industrialists and Patents . . . . . . . . . 2.2 Industrialism and International Trade . . . . . . . . . . . . . 2.2.1 What Happened in the Past . . . . . . . . . . . . . . 2.2.2 What is Happening Now . . . . . . . . . . . . . . . 2.3 The Rise of a Creative Group . . . . . . . . . . . . . . . . . . 2.4 Cultural Strategies for Legal Enforcement . . . . . . . . .

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3 A Consideration of IP Through a Confucian Exploration . . . . 3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 The Origin of Chinese Civilization . . . . . . . . . . . . . . . . . . 3.3 Confucius . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1 Confucius and His Historical Background . . . . . . . 3.3.2 “Four Books and Five Classics” . . . . . . . . . . . . . . 3.3.3 Confucius’s Social, Educational and Moral Impact . 3.3.4 His Moral Impact: “Ren”, “Lun”, and “Li” . . . . . . 3.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4 The Ancient Innovation and Early Chinese Patent Law . . . . . . . . . . 4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Examples of Ancient Innovations . . . . . . . . . . . . . . . . . . . . . . .

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5 China’s Updates in Patent Law . . . . . . . . . . . . . . . . . 5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 The 1992 Amendment . . . . . . . . . . . . . . . . . . . . 5.3 The 2001 Amendment . . . . . . . . . . . . . . . . . . . . 5.4 The 2009 Amendment . . . . . . . . . . . . . . . . . . . . 5.5 The Entry into Patent Cooperation Treaty (PCT) . 5.6 International Trainings . . . . . . . . . . . . . . . . . . . . 5.7 Patent Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7.1 Types of Patent Rights . . . . . . . . . . . . . . 5.7.2 Examination on Invention, Utility Model and Design Patents . . . . . . . . . . . . . . . . . 5.7.3 Patent Licences . . . . . . . . . . . . . . . . . . . 5.7.4 Injunctions . . . . . . . . . . . . . . . . . . . . . . . 5.7.5 Preservation of Evidence . . . . . . . . . . . . 5.7.6 Patent Infringement Actions . . . . . . . . . . 5.7.7 Non-infringement Actions . . . . . . . . . . . . 5.7.8 False Marking Actions . . . . . . . . . . . . . . 5.7.9 Non False Marking Defence . . . . . . . . . . 5.7.10 The Civil Liabilities and Remedies . . . . . 5.7.11 Administrative Liabilities and Remedies . 5.7.12 Criminal Liabilities and Remedies . . . . . . 5.8 Chinese IP Tribunals . . . . . . . . . . . . . . . . . . . . . . 5.9 Compulsory Licensing . . . . . . . . . . . . . . . . . . . . 5.10 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4.2.1 The Armillary Sphere . . . . . . . . . . . 4.2.2 The Compass . . . . . . . . . . . . . . . . . 4.2.3 The Development of Paper Making . 4.2.4 Printing . . . . . . . . . . . . . . . . . . . . . 4.2.5 Gun Powder . . . . . . . . . . . . . . . . . . Early Chinese Patent Law . . . . . . . . . . . . . . 4.3.1 Introduction . . . . . . . . . . . . . . . . . . 4.3.2 The Seed of Chinese Patent Law . . . 4.3.3 Patent Legislation 1912–1949 . . . . . 4.3.4 Patent Legislation 1949–1963 . . . . . 4.3.5 Chinese Patent Law 1984 . . . . . . . .

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6 New Waves in Chinese Patent Law System . . . . . . . . . . . . . . . 6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 New Article 6 of the Draft of the Fourth Amendment and the Draft of the Regulation on Employment Inventions 6.3 New Article 43 of the Draft of the Fourth Amendment . . . . 6.4 New Article 50–52 of the Draft of the Fourth Amendment . 6.5 New Article 69 of the Draft of the Fourth Amendment . . . .

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6.6 6.7 6.8

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New Article 70 of the Draft of the Fourth Amendment . . . New Article 71 in the Draft of the Fourth Amendment . . . Chinese Patent Enforcement Measures 2011 and Its 2015 Revision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 New Article 72 of the Draft of the Fourth Amendment . . . 6.9.1 Increase of Statutory Compensation . . . . . . . . . . . 6.9.2 The New Adoption of Punitive Compensation . . . 6.9.3 Increase of the Judicial Power in Collecting Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10 The Establishment of New IP Courts . . . . . . . . . . . . . . . . 6.11 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 Conclusion: Cultural Strategies for IP Enforcement . . . . . . . . 7.1 Key Principles in Each Chapter of This Book . . . . . . . . . 7.2 Enforcement is the Agenda: Five Strategies . . . . . . . . . . . 7.2.1 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.2 Creating an IP Culture in China . . . . . . . . . . . . . 7.2.3 Benefits of Both Local and Overseas Patent Right Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2.4 Creative Group and IP . . . . . . . . . . . . . . . . . . . . 7.2.5 Patent Portfolio and Branding . . . . . . . . . . . . . . . 7.3 A More Detailed Plan for Action . . . . . . . . . . . . . . . . . . .

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Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Abbreviations

A2K AD ALM ARV AVS BC CAD CEO CNIPA CPC CSPP CTU DNA DVD Ed. Eds. EPO EU F.2d FDA FDI Fed. Cir. GDP Ibid. IBM IGRS IP IPR IT Jr.

Access to Knowledge Anno Domino Additive layer manufacturing Antiretroviral Audio Video Standard Before Christ Computer-aided design Chief Executive Officer National IP Administration, People’s Republic of China Communist Party of China Chinese Supreme People’s Procuratorate China Television Union Technology Ltd. Deoxyribonucleic acid Digital video disc Editor Editors European Patent Office European Union Federal Reporter, 2nd Series (US) Food and Drug Administration (US) Foreign Direct Investment Federal Circuit (US) Gross domestic product Ibidem International Business Machines Corporation Intelligent Grouping and Resource Sharing Intellectual property Intellectual property right Information technology Junior

ix

x

JVC Ltd. No. NPC MSG ODM OEM op. cit. p. PCT PNY PRC PSI R&D S&P SAIC SC SFDA SPC SMEs TRIPS TV UK UN US USD v. WIPO WTO

Abbreviations

Victor Company of Japan Limited Number National People’s Congress, People’s Republic of China Monosodium Glutamate Original Design Manufacturer Original Equipment Manufacturer opere citato page Patent Cooperation Treaty PNY Technologies of Parsippany, New Jersey People’s Republic of China Platform Solutions, Inc. Research and Development Standard and poor State Administration of Industry and Commerce (China) Supreme Court State Food and Drug Administration (China) The Supreme People’s Court, People’s Republic of China Small and medium-sized enterprises (agreements on) Trade-related aspects of IP rights Television United Kingdom United Nations United States United States Dollars (US currency) versus World IP Organization World Trade Organization

List of Charts

Chart 2.1 Chart 2.2

Chart 2.3 Chart 2.4

Chart 2.5 Chart 7.1

English patent sealed in every decade from 1750 to 1850 (Ibid.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chinese patent granted 1912–1923 (Hongji Qin, A Brief Analysis of Patent System, Commercial Press, 1946, p. 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventions Praised by the Beiyang Government (Ibid.) . . . . . . Patents Granted between 1928 and 1944 (This chart was made from the figures displayed from Hongji Qin, op. cit., p. 27. It should be noted that the figure of 1931 was missing because the record of patent granted in this year was not kept to date) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Patent applications in wind power generation between 1985 and 2009 (Ibid.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Possible methods of training in the enterprises (This chart is literately described in the Caiping Qin, Chunhui Su, JuanWang and Shuhong Liu, op. cit., p. 6. The visualization of this chart is designed by the author of this book.) . . . . . . . . . . . . . . . . .

..

8

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10 10

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12

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13

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xi

Chapter 1

Introduction

1.1 Clarifications of the Arguments and Contributions This book fully discusses the features of the Chinese patent law system that it does not only legally transplant the international treaties, but also maintains Chinese legal culture and satisfies domestic economic growth. This is the foundation of encouraging creativity and improving patent protection. Meanwhile, based on the classic principles of the Confucianism, this book provides constructive suggestions on further improving the Chinese patent law system. Through a thorough study of the Chinese patent system, the main contribution made by this book will be the analysis of new trends and future strategies for local industries in the legal, cultural and sociological sectors within China. For example, this chapter provides the clarification and hypothesis of this book with a thorough literature review and discussion on the legal system in China. Chapter 2 will point out that industrialization is the main reason behind social change and the boom of patents in China. Chapter 3 analyses the effects of traditional Chinese culture and reveals the Confucian emphasis on creativity and innovation which is different from most of the previous scholarship in the same field. Chapter 4 not only discusses the ancient innovation in China, but also examines the early history of Chinese patent law. Chapter 5 focuses on China’s Updates in Patent Law, analysing relevant factors in the patent enforcement. Chapter 6 discusses patent infringement challenges and new enforcement measures adopted by China. The new amendment of Chinese patent law and the emphasis on rewarding intellectual work are analyzed as new waves in the field. Chapter 7 reviews the discussion throughout the book and outlines the five key themes of IP policy and development: namely, education and access to knowledge, culture, benefits of local and overseas patent right holders, social and creative group; and commercial strategy. These themes are the fundamental basis for developing a successful program of patent system in China.

© Intellectual Property Publishing House and Springer Nature Singapore Pte Ltd. 2020 N. Zhang, A Confucian Analysis on the Evolution of Chinese Patent Law System, https://doi.org/10.1007/978-981-13-9027-2_1

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2

1 Introduction

1.2 Literature Review The first literature in this field that needs to be discussed is Professor William Alford’s book To Steal a Book Is an Elegant Offense—IP Law in a Chinese Civilization in 1995.1 The propositions in this book have limitations because they do not foresee the new progress and development of IP law and enforcement in China after 1995. Professor Alford examined the development of Chinese patent system starting from the late Qing Dynasty to the period around 1995 in his book.2 In the next two decades, Chinese patent law system has been improved by the 2001 amendment, 2009 amendment and the undergoing current amendment.For China’s international trading partners to build trust in China, international trading partners, upgrading the local legal system is inevitable if the trade is to be sustained. The reality is the latest figures showing that direct foreign investment into China has increased 5.25% in 2013 than 2012.3 Both Chaps. 5 and 6 analyze current attempts to reconcile the concept of patent with China’s present and future and find this reconciliation getting better. Professor Wei Shi discussed Cultural Perplexity in IP: Is Stealing a Book an Elegant Offence? in his 2006 article4 that Confucianism valued the concepts of communal property which is different from the Western ideas emphasizing the importance of personal rights and property.5 Also, he noted that Confucianism reflects the natural order and emphasizes the obligation necessary to maintain it.6 Furthermore, Professor Wei Shi foresaw that China’s WTO accession would lead to a decrease in the infringement of IP.7 He specified the reasons as follows: “When economic growth creates the development of more sophisticated and competitive home grown enterprises, and the domestic enterprises display entrepreneurial enthusiasm to protect their own IP rights, the IP infringement levels will reach a plateau and start to decrease”.8 This view will receive further consideration in the analysis of the history of Chinese innovation in this book and the rise of creative group in the final chapter. Professor Peter Yu from Texas A&M University analyzed the main issues occurring in the Chinese patent system’s development in his 2013 article Five Oft-Repeated

1 William Alford, To Steal a Book Is an Elegant Offense—IP Law in a Chinese Civilization. Stanford

University Press, 1995. Alford, op.cit., pp. 9–94. 3 The Ministry of Commerce, ‘The Usage of Foreign Investment of January to December 2013’, Statistics and Data, the official website of Ministry of Commerce, 20 January 2014. http://www. fdi.gov.cn/1800000121_33_3918_0_7.html. 4 Wei Shi, ‘Cultural Perplexity in IP: Is Stealing a Book an Elegant Offence?’, North Carolina Journal of International Law and Commercial Regulation, Volume 32, 2006, p. 4. 5 Ibid., pp. 8–9. 6 Ibid., p. 9. 7 Ibid., p. 31. 8 Ibid., pp. 31–32. 2 William

1.2 Literature Review

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Question about China’s Recent Rise as a Patent Power.9 In particular, he discussed the attitudes of industries and commentators about the rise of China’s indigenous innovation; in other words, the need to develop a critical mass of local stakeholders to help promote stronger IP protection from the inside became the key argument over the last decade.10 In this article, he also pointed out the advantage of this change. The advantage is that many nations now realize the importance and benefits of indigenous innovation.11 The more local innovation there is, the more likely Chinese policymakers and the general public will support more massive IP reforms in the future.12 A recent official opening speech of Chinese Vice Premier Yang Wang at the 18th China International Fair for Investment and Trade13 provides three clear messages on 8 September, 2014.14 Firstly, the long-term policy of international investment cooperation in China will not change.15 Secondly, this investment cooperation system will be further opened.16 Thirdly, the environment for investment will continue to improve.17 In this speech, he pointed out that the foreign direct investment in 215 national economic and technical development zones in China occupies 1/8 of the overall Chinese GDP and China will further open the areas of foreign investment such as finance, education, culture and medical care.18 Furthermore, the procedure of examination and permit will be bettered and simplified to welcome the entry of more foreign enterprises into the Chinese market.19 Thus, the foreign enterprises and investment will not be ignored or repelled.20 Furthermore, in July 2019, the National Development and Reform Commission and Ministry of Commerce of People’s Republic of China co-issued the National Catalogue of Industries Encouraging Foreign Investment, which promotes foreign investment in the whole country throughout different industries. It also includes a regional catalogue of foreign-invested superior industries in the central, western and northeast regions.21 This new announcement signals that foreign investment continues to be welcomed in China. 9 Peter

Yu,‘Five Oft-Repeated Question about China’s Recent Rise as a Patent Power’, Cardozo Law Review, De Novo, 2013, p. 88. 10 Ibid., pp. 91–92. 11 Ibid., p. 92. 12 Ibid. 13 See the official website of the 18th China’s International Fair for Investment and Trade. http://www.chinafair.org.cn/china/index/index.aspx. 14 Yang Wang, ‘The Road of China’s International Investment Cooperation Will Be Wider’, News Release, the official website of Ministry of Commerce of People’s Republic of China. http://www. mofcom.gov.cn/article/ae/ai/201409/20140900723575.shtml. 15 Ibid. 16 Ibid. 17 Ibid. 18 Ibid. 19 Ibid. 20 Ibid. 21 The National Catalogue of Industries Encouraging Foreign Investment, The National Development and Reform Commission and Ministry of Commerce of People’s Republic of China, No. 27, 30 July, 2019.

4

1 Introduction

Professor Peter Yu pointed out in his recent article The Confucian Challenge to IP Reforms that the IP enforcement concerns both law and policy and China’s social and cultural systems.22 He also pointed out there was a long tradition of judging Confucianism for being antithetical to Western modernity.23 He believed the research of Confucianism in the IP regime is important because it has a good illustration of the complex interface between IP and culture. He also related this research to an important fact that the attention on China’s rapid technological growth has continually been rising.24 Inspired by Professor Peter Yu and Professor Wei Shi’s observation and discussions, this book researches on Chinese patent system, with the examination of new trends and future strategies for local industries in the legal, cultural and sociological sectors within China. Especially, the function and impact of Confucianism on creativity and innovation is thoroughly examined throughout this book. The findings echoes with Professor Peter Yu’s observation as follows: “As shown by Confucius and others, the ability to make transformative use of preexisting works can demonstrate one’s comprehension of and devotion to the core of the Chinese culture as well as the ability to distinguish the present from the past through original thoughts.”25 The discussion in the previous section demonstrate the major schools of theories and observation in Chinese IP development and the relationship between law, culture and society. Most of them have observed the impact of Confucianism on Chinese societies and how Chinese people understand the concept of IP. However, issues regarding the specific relations between the evolution of industry and the rise of patent power, the consequence of the rise of local creative group and the practical enforcement methods derived from Confucianism which improving patent enforcement have not been considered or discussed. This book will fill in these gaps in the scope of previous literature of the field and bring up original discussions through different chapters.

1.3 Research Methodology In this work, both qualitative method and quantitative method are adopted. Quantitative method is carried out with charts and tables of data mainly collected from official resources. For example, the data from official websites of the Chinese Ministry of Commerce and State IP Office are frequently used in Chap. 2 and the final chapter. The rest of the book is written with qualitative method.

22 Peter

Yu, ‘The Confucian Challenge to IP Reforms’, WIPO Journal, Issue 1, 2012, p. 2. p. 3. 24 Ibid., p. 2. see also Peter Yu, ‘The Rise and Decline of the IP Powers’, Campbell Law Review, Volume 34, 2012, p. 525. 25 Ibid., p. 5. 23 Ibid.,

Chapter 2

A Brief History of Chinese Innovation

2.1 Changes of Social Group and the Booming of Patents 2.1.1 The New Social Changes Brought About by Industrialisation In the 1990s, the research literature, such as New Horizons? Third World Industrialization in an International Framework, was concentrating on the Industrialization of Singapore, South Korea and some other active sites in Asia.1 However, the openness to international trade in the past thirty years has expanded Chinese industrialization nationwide, and domestic industries such as electrical household appliances, automobile, textile, IT and new energy have emerged. This is similar to what happened during the British Industrial Revolution. Professor T. S. Ashton describes the social changes during this time in his 1948 book The Industrial Revolution 1760–1830. Changes as follows: Fresh sources of raw materials were exploited, new markets were opened, and new methods of trade were devised. Capital increased in volume and fluidity; the currency was set on a gold base; a banking system came into being. Many old privileges and monopolies were swept away, and legislative impediments to enterprise removed. The state came to play a less active, the individual and the voluntary association a more active, part in affairs. Ideas of innovation and progress undermined traditional sanction: men began to look forward, rather than backward, and their thoughts as to the nature and purpose of social life were transformed.2

1 Robert

N. Gwynne, New Horizons? Third World Industrialisation in an International Framework, Longman Scientific & Technical, Longman Group UK Ltd., 1990, p. 10. 2 T. S. Ashton, The Industrial Revolution 1760–1830, Oxford University Press, 1948, p. 2. © Intellectual Property Publishing House and Springer Nature Singapore Pte Ltd. 2020 N. Zhang, A Confucian Analysis on the Evolution of Chinese Patent Law System, https://doi.org/10.1007/978-981-13-9027-2_2

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6

2 A Brief History of Chinese Innovation

Meanwhile, Professor Ashton also describes the harvest of innovation as follows: Innovation appears at every stage of human history, but it rarely thrives in a community of simple peasants or unskilled manual laborers: only when division of labor has developed, so that men devote themselves to a single product or a process, does it come to harvest. Such division of labor already existed when the eighteen century opened, and the industrial revolution was in part cause, and in part effect, of a heightening and extension of the principle of specialization.3

Furthermore, Professor Aston observes the formation of British industrialists caused by the social mobility during the Industrial Revolution as follows: Inventors, contrivers, industrialists and entrepreneurs—it is not easy to distinguish one from another at a period of rapid change—came from every social group and from all parts of the country … Lord Lovell, initiated improvements in agriculture … A barber, Richard Arkwright, became the most influential of the cotton–spinners … but anyone who looks closely at English society in the mid- and late eighteenth century will understand how it was possible for it to be said, for at this time vertical mobility had reached a degree higher than that of any earlier, or perhaps any succeeding age.4 The textile industry is the earliest example of a developing peasant economy.5 The firstly well-known silk industrialist in contemporary China was Qiyuan Chen who set up the first modern silk filature factory in Guangdong Province in 1873.6 However, he came across many difficulties in setting up his business. For example, because his low-cost filature technology attracted jealousy from other competitors and he was the first one to hire both male and female workers in his factory,7 the local council of Nanhai County banned his factory in 1881.8 Luckily, in 1883, he reopened his factory and improved the machines from foot-pedal operation to steam machine operated.9 Qiyuan Chen was not the only silk filature industrialist who made his fortune during late nineteenth century China. Gradually, when Guangdong locals got used to their female family members working in the local factories, other industrialists in Guangdong Province successfully developed their filature business by encouraging local female peasants to step out of their family workshops and start work in the massive filature factories. What’s more, the “filature lady” became a highly respected 3 Ibid.,

p. 15. pp. 16–17. 5 Ibid., pp. 28–29. 6 Yufeng Yang, ‘The Firstly Chinese Domestic Industrialist—Qiyuan Chen’, China Green Newspaper, 2004, Issue 10. 7 In late nineteenth century, women working in the society were regarded as a very disgraceful phenomenon in their families. In Guangdong Province, it was a common worry among the people if their female relative left their home and work outside and stayed overnight at the factory accommodation. See Tianjie Chen and Qiutong Chen, ‘The Firstly Steam Machine Silk Factory Ji Chang Long and Its Establisher Qiyuan Chen’, Guangdong Literature and History Collection, 1962, Issue 2, p. 60. 8 Yufeng Yang, op. cit. 9 Ibid. 4 Ibid.,

2.1 Changes of Social Group and the Booming of Patents

7

and proud occupation.10 At the beginning of the twentieth century, the average yearly expense of a five-person peasant family was about 195. 8 Yuan, and the yearly income of a filature lady was about 200 Yuan.11 This occupation became very popular among the peasant families in Guangdong. The massive movement of filature ladies stepping outside their family workshops and moving into the filature factories actually led to the decline of these small workshops and the expansion of the filature factories in Guangdong Province. Professor Ashton describes the development of Britain’s wool industry in detail: In Britain wool from the backs of sheep had, for many generations, provided the material for an activity second only to agriculture in the number of people it employed and the volume of trade it supported. The importance of this industry in the eyes of government is attested by a long list of measures which sought to prevent the export of raw wool, the emigration of skilled workers, and the import of fabrics that might compete with woollen cloths in the home market. People were exhorted, or constrained, to dress in English materials, and even the dead were not allowed to be buried in any fabric other than wool.12

He also reminds readers that this particular field in which innovation took place was only a part of the British economy; it covered the industries concerned with appliances and those intermediate products like yarn and cloth. The varied trades that provided things for the ultimate consumer were (apart from the pottery trade) hardly affected in the beginning.13

2.1.2 The British Industrialists and Patents Joel Mokyr comments on the influence of technology on the British Industrial Revolution in his 2002 book The Gifts of Athena: Historical Origins of the Knowledge Economy as follows: The key to the Industrial Revolution was technology, and technology is knowledge. Moreover, whatever its initial role, it would be hard to deny that extensive technological change has been responsible for major increases in productivity during the past three centuries.14

In 1750, only seven patents were registered in England; by 1855, this number had increased to 455 annually; between these two dates (which was almost a century), 10 Maoyuan Zhang and Zeqi Qiu, ‘Why Did Some Technology Application Fail?—A Comparative Study of Filature Industry in Changjiang River Delta and the Pearl River Delta’, China Social Science, 2009, Issue 1, p. 127. 11 Ibid., p. 128. 12 T. S. Ashton, op. cit., pp. 28–29. 13 Ibid., p. 93. 14 Joel Mokyr, The Gifts of Athena: Historical Origins of the Knowledge Economy, 2002, Princeton University Press, p. 29.

8

2 A Brief History of Chinese Innovation 600 400 English Patent Sealed 200 1850

1830

1840

1820

1810

1800

1780

1790

1770

1760

1750

0

Chart 2.1 English patent sealed in every decade from 1750 to 1850 (Ibid.)

13,227 patents were granted.15 England didn’t build up its first patent office until 1852; before that, there was only a route through the royal bureaucracy granted by the Crown.16 With no formal examination on novelty or utility, many patent applications were granted.17 The following chart of yearly English patents sealed from 1750 to 1850 shows the stable increasing numbers of patents being granted during the British Industrial Revolution (Chart 2.1)18 : From the statistics above, it can be observed that between 1750 and 1830, the figures of patent sealed in England grew slowly and steadily from 7 in 1750 to 180 in 1830. From 1830 to 1850, the statistics jumped from 180 in 1830 to 440 in 1840 and reached 513 in 1850. Some prominent British patent right holders and inventors had been very active in patent legislative activities during that time. For example, in 1875, the inventor of the steam machine James Watt proposed three very important changes in the patent reform. Firstly, inventors should draw up two specifications; secondly, these two specifications should not be disclosed during the lifetime of the patent; and thirdly, all the specifications should be examined by a Commission.19 Although Watt’s proposal during this period of English Patent Reform is very different from today’s patent system, it can be seen that his focus was to secure the inventors’ interests in the patent as much as possible.

15 Harold Irivin Dutton, The Patent System and Inventive Activity during the Industrial Revolution 1750–1852, Manchester University Press, 1984, p. 1. 16 Christine Macleod and Alessendro Nuvolari, ‘Patent and Industrialization—A Historical Overview of the British Case 1624–1907, p. 8, the official website of SSRN.com, 25 December 2010. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2019844. 17 Ibid. 18 In his 1984 book The Patent System and Inventive Activity during the Industrial Revolution, Harold Irvin Dutton designed a chart which displayed the yearly English patent sealed from 1750 to 1851. To analyse the increase of patent sealed during this century, the author of this book referred Dutton’s chart and statistics and designed a chart selecting the number of patent sealed in every 10 years. The statistics of this new chart are cited from Harold Irivin Dutton, op. cit., p. 2. 19 Ibid., p. 39.

2.1 Changes of Social Group and the Booming of Patents

9

2.1.3 Chinese Industrialists and Patents 2.1.3.1

The First Golden Time

In the last two centuries, Chinese industrialists have had three “Golden Times”.20 One of the representatives among the entrepreneurs was.21 Wu came from a teacher’s family and graduated with a chemistry diploma from a school in Shanghai.22 He became an apprentice in a lab working for Hanyang Steel Factory.23 After the apprenticeship, he established several unsuccessful businesses such as an Alkali factory and a glue factory.24 In the 1920s, A Japanese Monosodium Glutamate (MSG)25 called AJINOMOTO was very popular among Chinese customers. After experiments at home, Wu found that the main component of AJINOMOTO MG was sodium glutamate which he was able to make at home himself.26 He then developed his own brand of MSG containing sodium glutamate called Heavenly Cooking (Tian Chu).27 It became a very popular brand in the 1930s and 1940s among Chinese customers and Wu received Certificate of Qualified MSG Products from the Ministry of Industry and Commerce of the Beiyang Government in 1923.28 Wu also applied and was granted UK and US patents in 1926 and French patent in 1927.29 However, after a market survey done by himself, Wu thought that his manufacturing capacity could not satisfy the growing demand in the Chinese market. Therefore, he decided to give up his patent right on his MSG and allow other competitors to manufacture similar products.30 Although Wu was the first domestic private entrepreneur to make MSG products, besides keeping the running of his business and making profits, he must have come across many difficulties such as negotiating with the local councils, foreign competitors, work unions or other regulations and restrictions. Therefore, he might have needed a strong industrial association such as an MSG manufacturers’ association 20 Ibid.,

p. 85. Wu Yunchu Wu (1891–1953), a Chinese chemist and entrepreneur. 22 Guoyong Fu, ‘The King of MSG—Yunchu Wu’, The History of Creating Wealth, National Economic and Financial News official website, 7 March 2011. http://www.ennweekly.com/2011/ 0307/694.html. 23 Ibid. 24 Ibid. 25 Monosodium Glutamate (MSG) is the sodium salt of the common amino acid glutamic acid. Glutamic acid is naturally present in our bodies, and in many foods and food additives. US Food and Drug Administration, ‘Questions and Answers on Monosodium Glutamate’, Food Additives & Ingredients, official website of U.S. Food and Drug Administration, 19 November 2012.https:// www.fda.gov/food/ingredientspackaginglabeling/foodadditivesingredients/ucm328728.htm. 26 Ibid. 27 Ibid. 28 Shanghai Archive, History of Yunchu Wu’s Enterprises—The Volume of Heavenly Cooking MSG Factory, Documents Publishing Press, 1992, p. 2. 29 Ibid., pp. 43, 46, and 47. 30 Ibid. 21 Yunchu

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15 10 Patent Granted 5 1923

1922

1921

1920

1919

1918

1917

1916

1915

1914

1913

1912

0

Chart 2.2 Chinese patent granted 1912–1923 (Hongji Qin, A Brief Analysis of Patent System, Commercial Press, 1946, p. 21)

Chart 2.3 Inventions Praised by the Beiyang Government (Ibid.)

to support him. This might be the reason why he decided to give up his monopolist right on his MSG patent and let others to manufacture. This introduced his future competitors and would have allowed for future alliances in the industry. The Beiyang Government issued its firstly Provisional Regulation of Rewarding Industrial Products in 1912. In the next ten years, the government granted a few patents and praised some inventions according to this Provisional Regulation. The following two charts demonstrate the figures of patents granted and inventions praised during this period (Charts 2.2 and 2.3): The Beiyang Government has been regarded as a transitional period between China’s bridging feudal time and modern society.31 From 1913 to 1921, Beiyang Government issued more than 40 laws and regulations to promote its economy. Their main contents include encouraging mining activities, domestic industry, reducing taxes collected from domestic industrial products and restructuring the financial orders with a better legal system.32 This is a huge contrast to feudal legislation which mainly protected the property rights of land owners and increased taxes.33 The procedure of Beiyang Government legislation also included many domestic 31 Jianlin Guo, ‘The Transition of Chinese Contemporary Society—Beiyang Government Period’, Historical Education, Issue 2, 2002, p. 43. 32 Jicang Yi, ‘The Important Milestone of Chinese Contemporary Economic Law—The Economic Legislation of Beiyang Government’, Social Science in Guizhou, Volume 189, Issue 3, 2004, p. 99. 33 Ibid.

2.1 Changes of Social Group and the Booming of Patents

11

industrialists which advocated the policy of promoting domestic industry.34 The Provisional Regulation of Rewarding Industrial Products allowed industrialist to establish factories anywhere in China and abandoned the Qing Government’s policies of granting exclusive patent licences to certain factories. Dr. Jicang Yi regarded these changes as a development to break the monopoly in patent licences and create a better environment for the advancement of the modern patent system.35 If we compare these two charts above with the Chart of British Patents Granted in Every Decade between 1750 and 185036 (which was discussed earlier in this chapter), it can be observed that between 1912 and 1923 there were 97 patents granted, far more than the British patents granted between 1750 and 1760. Britain during the 18th Century was still in the early stages of the Industrial Revolution; people might not have been very familiar with the patent system and not many foreigners filed patents. In 1920s China, inventors were more familiar with the patent system and thus filed more. Beiyang Government did not last long and collapsed in 1928. Thus the Provisional Regulation of Rewarding Industrial Products issued was also lacking in authority and therefore short-lived. The first golden time of filing patents did not regain its glory until 1938.

2.1.3.2

The Second Golden Time

The second golden time in Chinese patent history came between 1920 and 1940s. In Hongji Qin’s book, A Brief Analysis of Patent System, published in 1946, the author calculated the patents granted between 1928 and 1944. These patent figures can be observed as follows (Chart 2.4): From the chart above, it is apparent that the patents granted during this period were more than the ones granted during the Beiyang Government. In 1941, 91 patents were granted; in both 1943 and 1944, 94 patents were granted. If these statistics are compared with the patents granted between 1912 and 1923 during the Beiyang Government, it can be seen that in the most productive year, 1915, only 14 patents were granted, which was 80 patents fewer than the figures for 1943 or 1944.37 The reason for the second patent boom is heavily related to the preparation for the outbreak of the Anti-Japanese War in 1937. By 1936, 2441 factories and mines were registered nationwide.38 After 1937, many factories were relocated to Western China to support the Chinese defence against the Japanese army.39 Meanwhile, many new heavy industrial factories and mines were established which were related to national

34 Ibid. 35 Ibid.,

p. 100. statistics are cited from Harold Irivin Dutton, op. cit., p. 2. 37 Ibid., p. 21. 38 Ibid. 39 Ke Chen, ‘The Economic Force Before the AntiJapanese War’, Journal of Changsha University, Volume 25, Issue 1, 2011, p. 80. 36 The

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Chart 2.4 Patents Granted between 1928 and 1944 (This chart was made from the figures displayed from Hongji Qin, op. cit., p. 27. It should be noted that the figure of 1931 was missing because the record of patent granted in this year was not kept to date)

defence, such as the steel industry, aircraft manufacturing, electrical device and chemical industry.40

2.1.3.3

The Third Golden Time

In the last several decades, Chinese people who benefited from business generated by international trade have realized the importance of patents and have become more vocal on the promotion of patent awareness and increased protection on patents and inventions. The Chinese patent system has entered into the third golden time. Since the implementation of Chinese Patent Law 1984, patent filing has been booming in China in many fields and industries. For example, patent invention applications accounted for the majority of patent applications in the late 1980s when Chinese Patent Law had only been implemented for a few years.41 In 1990s, patent applications increased steadily.42 There are different stages involved in the development of the Chinese patent system in the third golden time. Patent applications in wind power generation can be studied as a good example to illustrate the features in this period. The patent application statistics in the wind power generation industry between 1985 and 200943 can be seen as follows (Chart 2.5): From the chart above, it can be seen that patent applications in wind power generation rise sharply after 2003. This echoes the features of different development stages

40 Ibid. 41 Yuzhuo An, ‘The Comparative Analysis of Chinese Patent Application’, Management of Science and Technology, Volume 9, 1999, p. 23. 42 Ibid. 43 The Research Centre of IP Development of CNIPA (Maoshen Jin edit.), The Patent Analysis in the Wind Power Generation, 2012, China IP Publishing House, p. 49.

2.1 Changes of Social Group and the Booming of Patents 1800 1600 1400 1200 1000 800 600 400 200 0

13

Patent Application in Wind Power Generation between 1985 and 2009 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Chart 2.5 Patent applications in wind power generation between 1985 and 2009 (Ibid.)

of this industry. In a publication of the National IP Administration, PRC (CNIPA)— The Patent Analysis in the Wind Power Generation, the three stages of development are categorized as Early Demonstration Stage (1986–1993), Industrialization Stage (1994–2003) and Enlargement and Localization Stage (post 2003).44 Furthermore, this publication also thoroughly analyses the features of these three stages and the reasons behind the changes of the patent application statistics. In the Early Demonstration Stage, the wind power industry in China mainly relied on the overseas loans or donations and few wind power factories were built for research or demonstration instead of commercial purpose. Patent applications were few and, although the statistics show some fluctuations, it generally remains steady because this technology was still in the stage of trial and exploration.45 In the Industrialization Stage, patent applications in the wind power generation increased almost five times. The innovation in this field started to receive support from comprehensive laws and regulations such as The Development Plan of New Energy and Re-Generated Energy in China 1996–2010, The Wind Surfing Project, Electricity Law of People’s Republic of China (PRC), Certain Opinions on Further Promoting the Wind Power Generation and the Guidance of Accelerating the Localization of Technical Equipment in Wind Power Generation.46 The series of law and regulations above encouraged the patent right holders to file more patents in this industry.47 In the Enlargement and Localizations Stage, the average increase percentage of patent filing was 39.75% which has been regarded as the outcome of several more direct and detailed laws such as Re-generated Energy Law of PRC, The Mid and Long Term Development Plan of Regenerated Energy, The 11th Five Year Development Plan of Re-Generated Energy as well as the Compendium of National IP Strategy 2008.48

44 Ibid. 45 Ibid.,

p. 50.

46 Ibid. 47 Ibid., 48 Ibid.,

p. 51. p. 50.

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2 A Brief History of Chinese Innovation

From the example of wind power generation development above, it shall be observed that in the third golden time applications flourished in the field of new technology especially in areas which contributed to the resolution of the new challenges in China’s development, such as the need for new energy. This trend of patent applications received full legislative support and was planned according to China’s economic demands.

2.2 Industrialism and International Trade 2.2.1 What Happened in the Past In the twentieth century, different trade strategies were adopted by different developing countries. In Industrial Structure and Policy in Less Developed Countries, the authors defined two types of trade strategies of industrialization: production for the domestic market of previously imported manufactured goods (import-substituting industrialization—ISI); and the production of manufactured goods for external markets (export-oriented industrialization-EOI).49 The authors also observed the trends of changing trade strategies from the 1950s to more recent times: In the 1950s and 1960s, ISI dominated the industrialization strategies of the larger Latin American economies and a number of large countries in South and South-East Asia. In the early to mid-1960s, ISI began to be adopted in a number of the more important sub-Saharan African economies and in the smaller Latin American and South-East Asian countries. Since the mid 1960s, an increasing number of LDCs have adopted EOI strategies.50

China, obviously, had adopted the EOI strategy. Since 1978, China has embraced the Open Door Policy. Peter Howard Corne commented on the function of such legitimacy in Chinese economic reform in his book, Foreign Investment in China: “Law is now perceived as a key element of regime legitimacy as it serves to institutionalize economic reform.”51 China passed the Patent Law in 1984 to encourage inventions and to promote science and technology.52 To promote international trade, this law provided equal status to both the domestic and foreign IP right holders. Article 18 of the Implementing Regulations 2010 of Chinese Patent Law designates that any foreigner, foreign enterprise or other foreign organization shall be treated under this law in accordance with any agreement concluded between the Country to which the applicant belongs and China, or in accordance with any international treaty to which both 49 Colin Kirkpatrick, N. Lee and Frederick Nixson, Industrial Structure and Policy in Less Developed Countries, George P. Allen and Unwin, 1984, p. 197. 50 Ibid. 51 Peter Howard Corne, Foreign Investment in China—The Administrative Legal System, Hong Kong University Press, 1977, pp. 33–34. 52 Article 1, Chinese Patent Law 1984.

2.2 Industrialism and International Trade

15

countries are parties, or on the basis of the principle of reciprocity.53 Furthermore, Article 6 of Chinese Patent Law 1984 requires that foreign investment enterprises shall enjoy patent rights for a service invention made by any staff member of joint ventures or wholly foreign-owned enterprises in China. For any non-service invention, individual inventors shall enjoy patent rights. Article 6, Chinese Patent Law 1984. In 1990, China received Foreign Direct Investment (FDI) of USD 5.5 billion.54 China entered the World Trade Organization (WTO) in 2001. In 2003, the FDI in China grew to USD 57 billion which made China the largest FDI recipient in the world.55 By 2004, it was the 4th largest exporter with overseas record of USD 480 billion in 2003.56

2.2.2 What is Happening Now On 18 November 2014, a prominent Chinese media Can Kao Xiao Xi published an article called The Change of the Global Role—Chinese Investment Abroad is Almost the Same with the Amounts of FDI in China.57 This article reviews the figure published by Chinese Ministry of Commerce that the Chinese investment abroad reached 81.9 billion USD between January and October 2014.58 This figure increased 17.8% of that in the same period in 2013.59 There are two reasons to cause this increase, the first one is Chinese enterprises were encouraged to seek business opportunities abroad; the second one is China wanted to enlarge the scope of the use of RMB overseas.60 There are several prominent overseas acquisitions of Chinese enterprises, such as Lenovo purchasing Motorola and San Bao Ltd. purchasing the famous British department store group House of Fraser.61 Thus, we can see that China not only remains as a major receiver of FDI, but is also becoming a major world investor in the global market and international trade. Foreign Investment Law of the PRC was passed on the March 15 2019. Article 1 sets up the legislation purpose that this law is adopted in order to further expand opening up, actively promote foreign investment, protect the legitimate rights and interests of foreign investment, standardize foreign investment management, facilitate the formation of a comprehensive and new opening-up pattern, and promote 53 Article 54 Ron

18, Implementing Regulations 1985 of Chinese Patent Law. Matthews and Yan Zhang, ‘The Great Leap Upward’, Financial Management, 2004, p. 16.

55 Ibid. 56 Ibid. 57 Jing Lei, The Change of the Global Role—Chinese Investment Abroad is Almost the Same with the Amounts of FDI in China, Can Kao Xiao Xi, 18 November 2014. http://finance.cankaoxiaoxi. com/2014/1118/568504.shtml. 58 Ibid. 59 Ibid. 60 Ibid. 61 Ibid.

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2 A Brief History of Chinese Innovation

the healthy development of the socialist market economy. Article 21 allows foreign investors’ IP licensing fees to be freely remitted to overseas in RMB or foreign currency. Article 22 is very important for foreign investors and foreign invested enterprises stating the State protects the IP rights of them, protects the legitimate rights and interests of IP right holders and related rights holders, and holds intellectual right infringers legally accountable in strict accordance with the law. The Implementation Regulation of Foreign Investment Law of the PRC was passed in December 2019 and implemented on January 1 2020. Article 22 of the Implementing Regulation designates that foreign investors’ IP licensing fees may be freely remitted in or out of China in RMB or foreign currency and no work organization or individual may illegally restrict the currency, amount or frequency of inward or outward remittance. Article 23 of the Implementing Regulation designates the State shall increase the punishment for the infringement of IP rights, continue to strengthen the enforcement of IP rights, promote the establishment of a mechanism for rapid and coordinated protection of IP rights, improve the diversified settlement mechanism of IP disputes, and equally protect the IP rights of foreign investors and enterprises with foreign investment. Where a patent of a foreign investor or enterprise with foreign investment is involved in the establishment of the standards, the relevant provisions on the administration of the standard patent shall be followed. These new legislative activities demonstrate that China’s determination of protecting IP of both overseas and domestic right holders and carrying on a further opening up policy.

2.3 The Rise of a Creative Group The study of a creative group in China is an interesting topic that this book must discuss. Although the whole book is based on the patent regime, it still needs to spare some of the attention analyzing the influence of people—that is, those who create innovation and innovative output in China. What is perhaps more interesting is the concept of “a creative group” in the Chinese academies. For example, a search of the term “a creative group” (in Chinese characters) in the largest Chinese academic data base is Artistic Synusium Creates Urban Creative Group written by Feng Leng.62 This article is an introduction to a US professor Richard Florida’s book, The Rise of the Creative Class, which examines the definition of “a creative group”. Apart from this entry, however, there is little literature studying whether the same group exists in China. At first, it is better to find the definition of a creative group from Professor Florida’s book. He describes this class vividly as follows: The economic need for creativity has registered itself in the rise of a new group, which I call the creative group. Some 38 million Americans, 30% of all employed people, belong to this new class. I define the core of the creative group to include 62 Feng Leng, ‘Artistic Synusium Creates Urban Creative Group’, Entrepreneur World, Issue 2, 2006, p. 36.

2.3 The Rise of a Creative Group

17

people in science and engineering, architecture and design, education, arts, music and entertainment, whose economic function is to create new ideas, new technology and/or new creative content. Around the core, the creative group also includes a broader group of creative professionals in business and finance, law, health care and related fields. These people engaged in complex problem solving that require high levels of education or human capital.63

2.4 Cultural Strategies for Legal Enforcement Patent infringement cases will often be more complex than cases involving other types of IP rights. As a result, important issues in patent enforcement will be discussed in this book throughout different chapters towards an outline of what I propose are the five themes or strategies for patent enforcement in China, as set out and analyzed in the final chapter Cultural Strategies for Legal Enforcement. In examining the development of the legal and enforcement environment, in the context of the historical and social legacy of Confucianism, five key themes in addressing the legitimacy of Chinese IP law have emerged: education (including IP awareness), culture (creating an IP culture), industry (and the needs of local industry and forces of industrialization), a social group (in particular, the development of a Chinese creative group) and commercial strategy (including patent portfolios and branding). These will now be considered in detail towards developing a comprehensive recommendation for patent development, legitimacy and enforcement in China. Regarding the culture strategies, a detailed plan of reform analyzing these five themes together will be put forward.

63 Richard

Florida, The Rise of the Creative Class—And How It’s Transforming Work, Leisure, Community and Everyday Life, Basic Books, 2002, p. 8.

Chapter 3

A Consideration of IP Through a Confucian Exploration

3.1 Introduction As discussed in the previous chapter, a modern IP framework has been established in China for more than thirty years1 and the general public is becoming more familiar with the concept of IP rights.2 Our President Xi Jinping regards the Confucianism as the core influence on the Chinese civilization and an important part of the Chinese tradition.3 Inspired by the Confucianism as a crucial Chinese “soft power”, this chapter will analyze the effect of traditional Chinese culture on the notion of innovation and the legitimacy of patent law, with a particular focus on Confucianism and how Chinese society has valued knowledge throughout history. When studying a nation, one of the first topics to consider is how great figures from her history have affected the development of her culture. With this in mind some additional information should be provided. Firstly, there are 56 ethnic groups living in China with a total population of more than 1.3 billion.4 Inevitably, each Chinese person carries the characteristics of the local racial, cultural and geographical environments. Currently, people from the Han Race make up China’s and the world’s largest ethnic group which is 91.9% of the country’s population.5 Therefore, my analysis of cultural factors affecting innovation will be based on the characteristics

1 Professor

Zheng Chengsi was the first person to translate foreign trademark law materials into Chinese language in 1979. The first Chinese trademark law was issued in 1982 and the first patent law was issued in 1984. 2 IP is initially an imported concept. However, with the speedy economic development in China, the general public is grasping a clearer IP concept than ever before while there are many points in need of improvement. 3 Tao Gui, Xiaopeng Wang and Baosen Liu, ‘China Highly Commemorated the Birth of Confucius’, Xinhua News, September 24, 2014. https://news.xinhuanet.com/2014-09/24/c_1112614342.htm. 4 The State Council, ‘The Chinese’, An Overview of China, Chinese government’s official website, 26 July 2005. https://www.gov.cn/test/2005-07/26/content_17366.htm. 5 Ibid. © Intellectual Property Publishing House and Springer Nature Singapore Pte Ltd. 2020 N. Zhang, A Confucian Analysis on the Evolution of Chinese Patent Law System, https://doi.org/10.1007/978-981-13-9027-2_3

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3 A Consideration of IP Through a Confucian Exploration

of the Han Race. As Peter M. Mitchell emphasized in his book, China: Tradition and Revolution: Ideas and traditions passed on from generation to generation represent an essential part of any culture. Variations in religious beliefs, philosophical ideas, and social and economic values may separate the elite and the commoners in a particular society. But certain of these beliefs, ideas, and values are likely to be shared by all members of a culture, and it is these elements held in common that distinguish members of one culture from another. To understand China’s history, an examination of the major features of its traditional patterns of thought is essential.6

In the culture of the Han, Confucianism is regarded as the major philosophy in ancient Chinese history. For instance, the elementary criterion for entry into the imperial bureaucracy was the mastery of Confucianism.

3.2 The Origin of Chinese Civilization 3500 years ago, the historical birthplace of the Chinese civilization flourished in the middle part of the Yellow River. However, the ancient Chinese developed land communication and transportation instead of boat traffic since the turbulent Yellow River was not suitable for shipping.7 Gradually, the early Chinese population spread out following the pattern below. In China: Tradition and Revolution, Peter M. Mitchell gives a detailed description as follows: Compare the topographical and population-density, three large river valleys support the highest density of population. In the north, the turbulent Yellow River flows from Tibet to the Pacific Ocean. In central China, the Yangtze covers a distance of more than 51,000 km and forms, in its lower reaches, a flat delta, crisscrossed by elaborate secondary networks of canals and smaller streams. In the southwest, the Pearl River is less extensive than the two more northern river systems, but forms an important delta region around the city of Guangzhou. Through history, these three rivers and their surrounding valleys provided the main environmental influences on China’s way of life.8

These geographical barriers resulted in China’s distinctive and unique culture as they provided seclusion from potential rivals. For instance, the cold of the far north or the deserts and mountains in the west held little attraction to the ancient Chinese.9 The conditions in the southwest were unsuitable for growing crops as they were too hilly and the weather was too humid. Therefore, the middle reaches of the Yellow River with its rich soil and sufficient irrigation fostered the development and unity of the Chinese civilization.10 6 Peter

M. Mitchell, China: Tradition and Revolution, the Macmillan Company of Canada Limited, 1977, p. 35. 7 Ibid. 8 Ibid., pp. 3–4, 9. 9 Ibid., pp. 11–12. 10 Ibid.

3.3 Confucius

21

3.3 Confucius 3.3.1 Confucius and His Historical Background Confucius, according to Chinese tradition, was a philosopher, educator, and founder of the philosophy bearing his name, Confucianism.11 His teachings were the foundation of standards of Chinese traditional values.12 He was born in 551 BC in the city of Qufu in the State of Lu.13 He lived during the late Zhou Dynasty.14 It was documented that he was one of the descendants of a noble family from the State of Song.15 As a young man he was self-educated and worked in several administrative positions.16 At 51 he was appointed as a magistrate and minister of justice. After this appointment, he began to advocate his theories in different states but none of them seemed willing to adopt his philosophy.17 Five years later he and some of his disciples started to travel between states and taught in private classes open to talented students regardless of their social background.18 In his late life, he devoted himself to teaching.19 He died in 478 BC. When analyzing Confucianism, it is important to have a thorough understanding and examination of Confucius’s historical background. This will enable insight into 11 Qian Sima, ‘Confucius’ Family’, Historical Records, Zhonghua Book Company, Volume 47, Issue 17, 1982. 12 Kaixian Dong, ‘Confucianism and Its Modern Significance’, The Research of Confucianism, Issue 2, 2001, p. 47. 13 Qian Sima, op. cit. Confucius lived in the late “Spring and Autumn Period” (722 BC–481 BC). The name of this period came from a chronicle book The Spring and Autumn Annals edited by Confucius. 170 smaller states carried out battles and annexations with each other. The house of Zhou was the emperor but its power had been decentralized. Qufu is a city in Shandong Province, China. It was the capital city of the State of Lu during the “Spring and Autumn Period”. Lu was a state during the “Spring and Autumn Period” and it occupied the central and southwest parts of Shandong Province, China. Its power declined and split between three nobles Jisun, Mengsun and Shusun. Later Lu was annexed by the State of Chu in 256 BC. 14 Ibid. A dynasty was often controlled by a royal family lasting several decades or centuries. The Zhou Dynasty (1122 BC–256 BC) was the longest dynasty in the Chinese history and it was divided as the Western Zhou (1122 BC–771 BC) and the Eastern Zhou (770 BC–256 BC) by a royal coup. In the Zhou Dynasty, the Chinese feudal system had been established and the agriculture was improved. The origin of Chinese philosophy developed such as Confucianism. In the later Zhou, because of the disputes in the royal family, the kings of Zhou didn’t have the actual power. The nobles of small states rose up and engaged in chaotic battles until the Qin Shi Huang unified the all states in China in 223 BC. 15 Ibid. Song was a state in the “Spring and Autumn Period” and it was annexed by the State of Chu in the fifth century BC. 16 Ibid. 17 Ibid. 18 Ibid. 19 This short paragraph of Confucius was summed up from Confucius’ biography in Weibin Zhang, Confucianism and Modernization: Industrialization and Democratization of the Confucian Regions, Macmillan Press, 1999.

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why Confucianism came into existence. The administrative system of early Zhou Dynasty, as Xueqin Li described in the introduction of his book, Eastern Zhou and Qin Civilizations,20 was feudal in structure, with the lords occupying influential positions: In the view of some scholars, the states of the lords under the Zhou dynasty, were not, as it is sometimes believed, independent; instead, the lord were rather similar to local officials of local districts of later period who would be given a specified territory of rule and served as representatives of the central government to carry out authority in their own territories, collect tax, and maintain social order.21

Due to the weak control and decay of the House of Zhou, the rulers of each state under its throne became active in increasing their power and paid less and less in the way of proceeds to the central royal family.22 In his book, Xueqin Li also expounds upon this disordered period: And the Zhou rule was not particularly successful … Following the removal of Pingwang23 ’s capital to Luoyang,24 the Zhou royal house no longer possessed the power to control the lords, and the lords’ power increased. Those who were strong economically and militarily competed to subjugate the neighboring weaker lords. The King had no power to interfere with this, and had to recognize the fait accompli. As a result, the powerful lords became increasingly more powerful and gradually developed into the so-called hegemonies, with the power to affect the national scene of all China.25 Furthermore, the rulers of the Zhou Dynasty were the first to enforce the system of enforcement to give nobles land in exchange for their pledge of service.26 This system combined consanguinity and relative relationship closely.27 In the enforcement system, nobles had very powerful sovereignty and the power of the emperor of Zhou was spread out from the highest to the lowest nobles in a pyramid structure.28 The relationship between the emperor and the nobles was similar to an alliance rather than a tight engagement.29 It is suggested that the chaos in the late Zhou Dynasty was actually due to the wars and conflicts among the powerful nobles of feudal states who wanted to harness their power, wealth, population and territory to exceed each

20 Xueqin

Li, Eastern Zhou and Qin Civilizations, Yale University Press. 1985, pp. 7–9. pp. 3–4. 22 Ibid., pp. 5, 7. 23 King of Ping Wang was the thirteenth sovereign of Zhou Dynasty and the first of the Eastern Zhou Dynasty. 24 Luoyang is a city in Western He Nan Province, China and was the capital city of the Zhou Dynasty. 25 Xueqin Li, op. cit., pp. 5, 7. 26 Mingde Wang, ‘The Analysis of the Change from Aristocratic Politics from Bureaucratic Politics during the Spring and Autumn Period’, Theoretical Guidance, 2009, p. 104. 27 Ibid. 28 Ibid., p. 105. 29 Ibid. 21 Ibid.,

3.3 Confucius

23

other.30 This unstable time in history provided the right environment for the birth of one of the earliest Chinese philosophies with the hope to stop the chaos and create a peaceful and stable society—Confucianism.31 This chaotic period in history resulted in several distinct features to the innovation, development and spread of knowledge. Firstly, access to knowledge was spreading from the nobles to commoners although most of the knowledge was still controlled within the aristocracy. Confucianism was not the only school of philosophy to emerge at this time; others such as Taoism32 and Legalism33 started to flourish as well.34 Witnessing the constant wars among the kingdoms and seeing the suffering of the commoners, a group of philosophers with strong personalities and high social responsibilities aiming to save the world with their philosophical and idealistic beliefs, including Confucius himself, emerged.35 Secondly, due to the competitions among the nobles’ kingdoms, the progress of productive forces was incredibly important to increase their capabilities in both military and economic competition.36 As a consequence, knowledge resources, scientists and intellectuals played a key role as impetus for increasing the strength among these competitions.37 Thirdly, talented people immigrated among kingdoms more frequently than before, which led to more frequent exchange and diffusion of knowledge and skills.38 At the beginning of the Spring and Autumn Period (770 BC–403 BC), individuals were allowed to travel freely. However, at the end of this period, in the chaotic war time, the gap among the social groups started to be bridged and people with talents

30 Guohong Bai, ‘The Rise of Noble Families and the Change in the Spring and Autumn Period—The Example of Zhao Family in the Jin Kingdom’, Qinghai Social Sciences, Issue 1, 2006, pp. 93–96. 31 Lilin Liu, ‘The Analysis of Thoughts in the Confucianism’, Hunan Social Science, Issue 4, 1995, p. 7. 32 Taoism promoted the ideas of human and nature replies on each other by the way of Tao which means “rules”. By Taoism, man and nature are able to live in a harmony and flourish together. See Qiliang Yang, ‘The Naturalist View on the Education of Taoism’, Journal of Nanjing Normal University, Issue 6, 2001, pp. 50–57. 33 Legalism represented the newly emerging class of landlords who advocated and promoted reforms and establishment of a complete legal system in a nation in the Warring State Period. See Bofu Xiao and Jianhua Tang, ‘The Brief Discussion on the System of Legalism’, Legal Comments, Issue 4, 2003, p. 140. 34 Xuepu Chen, ‘On the Innovation of Chinese Culture’, Innovation, Issue 5, 2007, p. 17. 35 Jinhua Zhou, ‘The Unique Personality of Intellectuals in the Period of Spring and Autumn and the Warring States’, Journal of Guizhou University, Issue 6, 2004, pp. 83–84. 36 Bofu Xiao and Jianhua Tang, op. cit., p. 143. 37 Xiusheng Qi, ‘The Immigration of Talents during the Spring and Autumn Period and the Warring State Period’, Qilu Journal, Issue 2, 2006, p. 42. 38 Ibid.

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were more willing to serve the noble rulers who appreciated their brilliance.39 The nobles also regarded the recruitment of brilliant people to be among the top tasks because “One talented person is more valuable than a thousand acres of land”.40 This recruitment was based on the merits of the persons’ talents regardless of their nationalities. For example, in the strongest nation Qin during the Spring and Autumn period, 14 prime ministers were not Qin locals.41 Furthermore, during this time, intellectuals were promoted as officials to take charge of astronomical observation, agriculture, pasturage, medicine and medical care.42 However, innovation and knowledge did not always receive respect for a whole. Qin Shi Huang’s “burning the books and burying Confucian scholars alive” was a typical example.43 Qin Shi Huang’s Prime Minister Si Li believed in legalism that forbade any different voice and ideas from the general public and believed that only absolute obedience enabled long-lasting ruling.44 When a senior official admonished the emperor and pointed out his faults, Si Li thought this disobedience was the outcome of Confucian education and influence. Thus, he suggested to Emperor Qin Shi Huang that all Confucian books should be burnt except those about the history of Qin, medical, divination and planting.45 Later, Emperor Qin Shi Huang ordered to bury more than 460 Confucian scholars who complained about his ruling.46 However, this cruel ruling did not manage to last long. Six years after this tragic event (207 BC), Qin Dynasty perished.47

39 Ibid. 40 Ibid.,

p. 43.

41 Ibid. 42 Wusan Dai, ‘The Governmental Positions for Scientists’, Scientific Chinese, Issue 7, 2001, p. 42. 43 Chengxi Chen, ‘Why Did Emperor Qin Shi Huang Burn the Books and Bury the Scholars Alive?’,

The Journal of Nankai University, Issue 3, 2011, p. 125. 44 Ibid. 45 Ibid., p. 126. 46 Ibid., p. 128. 47 Ibid., p. 132.

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3.3.2 “Four Books and Five Classics”48 3.3.2.1

“Four Books”49

The Han Dynasty replaced the Qin Dynasty. Han Wu Di, the Han Emperor, went to the extreme opposite of what the Qin emperor did: He only canonized Confucianism and dispelled all the other philosophies.50 During the Song Dynasty,51 a Confucian scholar Xi Zhu52 selected “Four Books” from many Confucian works: The Great Learning, The Doctrine of the Mean, The Analects of Confucius and The Mencius. Together with “Five Classics”, they became the official reference books in the education.53 Since the Song Dynasty, they were appointed as the reading materials for royal princes.54 A particular analysis of the concepts of innovation, knowledge and property (and the fundamentals of modern IP inhering in those principles) in the “Four books” will be carried out in the following sections.

The Great Learning55 Before its selection as one of the “Four Books and Five Classics”, The Great Learning was a chapter in The Book of Rites. The main aim of The Great Learning was to teach the basic principle of conducting oneself. In the first chapter, the importance of “Three Creeds” and “Eight Items” was emphasized. They were “Ming Ming De, Qin Min and Zhi Yu Zhi Shan” and “Ge Wu, Zhi Zhi, Cheng Yi, Zheng Xin, Xiu Shen, Qi Jia, Zhi Guo and Ping Tian Xia”.56 In this book, the main text was attributed to 48 “Four

Books” refers to four Confucian works such as The Great Learning, The Doctrine of the Mean, The Analects of Confucius and The Mencius which was selected by a Song Dynasty Confucian scholar Xi Zhu. “Five Classics” refers to The Book of Records, The Book of Odes, The Book of Rites, The Book of Changes, The Spring and Autumn Annals and The Book of Songs edited by Confucius. The term of “Four Books and Five Classics” was confirmed in the Northern Song Dynasty. See Jinglun Wang, ‘The Reading Life of Princes in the Northern Song Dynasty’, Forbidden City, Issue 9, 2008, p. 194. 49 Ibid. 50 Huailun Guan, ‘This History of Dispelling All Philosophies except Confucianism’, Jiangsu Social Science, Issue 1, 2008, pp. 192–195. Since then on, Confucian works became dominant in the governance. Ibid., p. 195. 51 Song Dynasty (960 AD–1279 AD) was rising time point of Confucianism in ancient China. 52 Zhu Xi (1130 AD–1200 AD) was a Confucian scholar in Song Dynasty who became an important figure in Neo-Confucianism in China. His selection of The Four Books was the main contribution to Chinese philosophy. 53 Jinglun Wang, op. cit., p. 194. 54 Ibid. 55 The Great Learning was a chapter in The Book of Rites written by Confucius. See Renpeng Zhong, ‘The Origin of Four Books and Five Classicsand Three Rules and Five Moralities’, Publication Reference, Volume 35, 2006, p. 27. 56 The “Three Creeds” and “Eight Items” are both in Chinese Pin Yin. Ming Ming De means flourishing the bright virtues, Qin Min means cherishing the public and Zhi Yu Zhi Shan means

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Confucius and nine chapters of commentaries were written by one of Confucius’s disciples, Zeng Zi.57 In ancient and modern China, many philosophical thoughts were derived from The Great Learning. Whenanalyzing the moral foundation of IP in China, it is important to note that many Chinese ethical concepts of social welfare come from this book. In particular, “Qin Min” from “Three Creeds” and “Ping Tian Xia” from “Eight Items” are important in Chinese patent law. “Qin Min” means cherishing the public. “Ping Tian Xia” means keeping the balance of the world. Article 25 of Chinese Patent Law 1984 is a good example to study two concepts. According to Article 25 of Chinese Patent Law 198458 and Decision of Amending the Chinese Patent Law 1984,59 most genetic products are patentable except for new animals, plant varieties and genetic medical treatment. In taking a new plant variety as an example, it is possible to observe the reasons behind the scenes. China is an agricultural country where peasants make up 48.7% of the population.60 Thus, the current economic issues for China are “Agriculture, Countryside and Peasants”61 and “Reducing the gap between the rich and the poor”.62 These principles and their influence in the development of IP and related rights, and their relationship to the specific economic issues raised by bridging agricultural and industrial communities and innovation, are also illustrated in particular by the development of protection for plant variety rights in China. China issued Regulation of Protection of New Plant Variety Rights63 in 1997. China joined the International Union for the Protection of New Varieties of Plants (UPOV)64 in March 1999. Plant variety rights thus became a new type of IP right in China. China issued Implementing

improving one’s morality to the best; Ge Wu means investigating things; Zhi Zhi means finding out the right solution; Cheng Yi means being sincere and down to earth; Zheng Xin means correcting one’s heart; Xiu Shen means self-cultivation; Qi Jia means renovating one’s family and maintaining it in harmony; Zhi Guo means contributing to state’s affairs; Ping Tian Xia means keeping the peace of the world. 57 Zeng Zi (505 BC–436 BC) was one of Confucius’ disciples. He wrote nine commentary chapters of The Great Learning including its foreword. See Renpeng Zhong, op. cit., p. 27. 58 Article 25, Chinese Patent Law 1984. 59 Decision of Amending Chinese Patent Law 1984, 1 January 1993, Standing Committee of the NPC, PRC. 60 Farmers Daily, ‘The Chinese Urban Population Exceeded the Peasant Population for the First Time’, Farmers Daily official website, 18 January 2012. https://szb.farmer.com.cn/nmrb/html/201201/18/nw.D110000nmrb_20120118_2-01.htm?div=-1. 61 Article 6–10, CPC Central Committee for Formulating the “11th Five-Year” Plan, the 16th CPC Central Committee Plenary Session of the 5th, 11 October 2005. 62 Ibid., Article 15 and 35. 63 Regulation of Protection of New Plant Variety Rights was issued by the Chinese State Council in March 1997. 64 International Union for the Protection of New Varieties of Plants (UPOV) is an intergovernmental organization established by the International Convention for the Protection of New Varieties of Plants.

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Regulations of Protection on New Plant Variety Rights65 in June 1999 and Chinese Seed Law66 in July 2000. In 2001, Regulation on the Examination of the New Plant Variety Appeal Board67 was issued by the Ministry of Agriculture. In the same year, the Supreme People’s Court of the People’s Republic of China (SPC) issued Notice of Decisions on New Plant Variety Right Dispute.68 After China joined the WTO in 2001, Article 6 of the Agreement on Trade Related IP Rights (TRIPS Agreement) applied to China as an annex to the WTO Agreement, and obligations to meet the transitional provisions for implementing IP rules were created across the various categories of rights.69 These series of laws and regulations thus constitute the protection on new plant variety rights in China. It can be presumed that Chinese lawmakers tailored patent law in this way in order to achieve “Qin Min” and “Ping Tian Xia”. Furthermore, in Regulation of Protection of New Plant Variety Rights 1997, Article 6 designates that the entity or person who has accomplished the breeding enjoys an exclusive right on its protected variety. Except otherwise provided in this Regulation, no other entities or people shall, without the authorization of the owner of the variety right, produce or sell for commercial purposes the propagating material of said protected variety, or use repeatedly for commercial purposes the propagating material of the said protected variety in the production of the propagating material of another variety.70 While assuring the exclusive rights of the new plant variety owner, this Regulation also provides restriction and balance to this exclusivity. Article 10 designates that without prejudice to other rights of the variety right owner under this Regulation, the exploitation of the protected variety may not require authorization from, or payment of royalties to, the variety right owner for the following purposes: (1) exploitation of the protected variety for breeding and other scientific research activities; (2) the use by farmers for propagating purposes, on their own holdings, of the propagating material of the protected variety which have obtained by planting on their own holdings.71 Article 11 pronounces that the examining and approving authorities may, in the national interest or the public interest, make a decision to grant 65 Implementing Regulations of Protection on the New Plant Variety Rights was issued by Chinese Ministry of Agriculture in June 1999 and revised in September 2008. It includes the content of plant variety rights, the requirements of granting, the application and examination of the rights and the terms of the rights. 66 Chinese Seed Law was passed by the Chinese NPC in 2000 and revised in 2004. It includes the protection of seed resources, the breeding, selection and determination of seed types, the production, operation and usage of seeds, the quality control, international trade and administration liability of seed. 67 Regulation on the Examination of the New Plant Variety Appeal Board includes the function of the board, the composition and responsibilities of the board, the appeal procedure and the validity of the decision of the appeal board. 68 Notice of Decisions on New Plant Variety Right Dispute includes the types of cases accepted by the courts and the jurisdiction of courts. 69 Article 6, TRIPS Agreement. 70 Article 6, Regulation of Protection of New Plant Variety Rights 1997 of the PRC. 71 Ibid., Article 10.

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a compulsory licence72 to exploit new varieties of plants, which shall be registered and announced.73 These three articles demonstrate the “Qin Min” (cherishing the public) and “Ping Tian Xia” (keeping the balance of the world) principles in the legislative purpose.

The Doctrine of the Mean74 This 33-chapter book was also from The Book of Rites. The main purpose of The Doctrine of the Mean was in educating people to conduct self-tutelage to achieve the highest level of virtue. It consisted of three major principles. Firstly, “Shen Du Zi Xiu” means careful self-tutelage. It requires that one needs to be cautious about their words and deeds according to Confucian morality, even at places where other people could not see their behaviors.75 Secondly, “Zhong Shu Kuan Rong” means loyalty and tolerance. This principle obliges people to be open-minded and caring about each other.76 The last one is “Zhi Cheng Jin Xing” which means purporting supreme loyalty and perfect virtue.77 These three moral principles have similarities with legal obligations. In the present day, any IP right-holder is supposed to bear both rights and obligations. China is one of the countries implementing compulsory licensing.78 One particular situation is specified in Article 49 of Chinese Patent Law 1984. It regulates that compulsory licences can be issued in cases of national emergency, extreme urgency or public non-commercial use.79 This Article complies with the requirements in Article 31(b) 72 Compulsory licensing is when a government allows someone else to produce the patented product or process without the consent of the patent owner. It is one of the WTO’s flexibilities on patent protection. WTO, ‘Compulsory Licensing of Pharmaceuticals and the TRIPS’, TRIPS and Health: Frequently Asked Questions, WTO official website, September 2006. https://www.wto.org/english/ tratop_e/trips_e/public_health_faq_e.htm. 73 Article 11, Regulation of Protection of New Plant Variety Rights 1997 of the PRC. 74 This book was also a part chosen from The Book of Rites written by Confucius. See Renpeng Zhong, op. cit., p. 27. 75 Chapter 33, The Doctrine of the Mean (Zhong Yong). The original Chinese Pinyin was “Shen Du Zi Xiu”. 76 Ibid., Chaps. 13 and 30. The original Chinese Pinyin was “Zhong Shu Kuan Rong”. 77 Ibid., Chap. 21. The original Chinese Pinyin was “Zhi Cheng Jin Xing”. This principle did not give an extremely high moral standard towards common people. Instead, it promoted a positive mood or virtue stimulation among human being and it emphasized a harmonious relation between human and nature. The content of Chap. 21 can be translated as follows: Only by insisting the principle of supreme sincerity, one can be able to fully display his good instinct in order to stimulate others to do the same good things; Once all the people’s good instincts have been fully displayed, so will the myriad things; Therefore, one will find their right position in the universe. Balance between mankind and universe can be achieved. 78 Chapter 6, Chinese Patent Law 1984. 79 Ibid., Article 49.

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of the Agreement on Trade Related Aspects of IP Rights (TRIPS Agreement). Under the conditions of national emergency, extreme urgency or public non-commercial use, the patent right holders are supposed to bear the compulsory obligations towards their nation and society.

The Analects80 This book was also called The Analects of Confucius.81 It is the first work written in the style of collected sayings in the history of Chinese literature. It has been regarded as the representative work of Confucianism with great influence in China and other eastern Asian nations. It was written by Confucius’s disciples and second-generation disciples and contains 20 volumes comprising 492 chapters. It reflects Confucius’s thoughts on social criteria, philosophy and education and it faithfully records the words and behaviors of Confucius. In the last two thousand years, The Analects has been the major educational material for children who has just started their elementary schooling. Also, The Analects formed the basic content of imperial examination in Chinese history.82 In this book, the essential features of creativity and innovation were revealed in the conversations of Confucius and his disciples. Confucius said: “One is able to become a teacher if he is able to create new thoughts when reviewing old knowledge.”83 In the present world, many new technologies are based and developed from existing technologies. For example, cameras, the Internet, electronic organizers, music players and mobile phones are all accessible technologies used by humankind. Building upon these innovations, the recently popular 3D printing technology starts from Computer Aided Design (CAD) software and the Additive Layer Manufacturing (ALM) technology together.84 It demonstrates a significant feature of creativity revealed in The Analects: innovation is an evolutionary process based on creativity in reviewing previous technology. Dating back to the Spring and Autumn Period, this incremental characteristic of creativity was previously appreciated in The Analects.

80 Renpeng

Zhong, op. cit., p. 27. Chinese name is Lun Yu which means the discussion over Confucius’ words. 82 Please refer to a further analysis on the “Imperial Examinations” in the following part of this chapter. 83 Verse 11, Chap. 2, The Analects. The original Chinese Pinyin is “Wen Gu Er Zhi Xin, Ke Yi Wei Shi Yi”. The official translation comes from James Legge (translated), The Analects. The full text is available at: https://www.confucius.psu.ac.th/TH/pdf/ANALECTS_1.pdf; https://www.confuc ius.psu.ac.th/TH/pdf/ANALECTS_2.pdf; https://www.confucius.psu.ac.th/TH/pdf/ANALECTS_ 3.pdf; https://www.confucius.psu.ac.th/TH/pdf/ANALECTS_4.pdf. 84 Jon Excell and Stuart Nathan, ‘The Rise of Additive Manufacturing’, The Big Story, official website of theengineering.co.uk, 24 May 2010. https://www.theengineer.co.uk/in-depth/the-bigstory/the-rise-of-additive-manufacturing/1002560.article. 81 The

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The Mencius85 Mencius (372 BC–289 BC) was a great thinker during the Warring State Period and was also one of Confucianism’s main representatives. Mencius wrote the 7-chapter book The Mencius by his own name. In this book, he inherited and developed the “Humanity” thought of Confucius into the principle of benevolence. He adopted this principle in order to harmonies between different social groups.

3.3.2.2

“Five Classics”86

Confucius was not entitled to write regulations since all the laws and regulations were supposed to be designated by the King of the Zhou Dynasty during his time. The regulations of the King of Zhou were full of authoritative provisions and people were expected to conduct their daily activities strictly according to them. On the one hand, Confucius wanted to advocate his philosophy. On the other hand, as a commoner, he had no legislative rights to write down his philosophy of life. Therefore, he chose to study from the time of Yao and Shun to the Zhou Dynasty and edited ancient books87 and mixed his own asserts.88 Meanwhile, he spread his theories through his teaching in different states. Most of his teachings were recorded in 5 books by other Confucian scholars. By these five classic books, the formation of traditional Chinese knowledge and the attitudes towards knowledge can be studied and analyzed in the following sections.

The Book of Records89 The Book of Records was Confucius’s first edited book and its Chinese name was Shang Shu. It was the earliest historical work which has survived until modern days.

85 This book was written by Mencius who inherited and developed the “Humanity” thought of Confucius into principle of benevolence. See Renpeng Zhong, op. cit., p. 27. 86 “Five Classics” refers to The Book of Records, The Book of Odes, The Book of Rites, The Book of Changes, The Spring and Autumn Annals and The Book of Songs edited by Confucius. See Jinglun Wang, op. cit., p. 194. 87 Actually, Confucius edited The Book of Records, The Book of Odes, The Book of Rites, The Book of Changes, The Spring and Autumn Annals and The Book of Songs. But The Book of Songs has been destroyed in the conflagration of Qin Shi Huang who was the first emperor of China from the State of Qin and annexed all the other states in his time. Therefore, the rest five books were called “Five Classic Books in Confucianism” (Wu Jing) and this title lasts till modern days. 88 This paragraph was summed up from the Introduction Section of “Five Classics” introduction in Richard Wilhelm, Confucius and Confucianism, Routledge, 1972. 89 This book was the first historical book that Confucius edited. See Renpeng Zhong, op. cit., p. 27.

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The content started at the ruling of Yao90 and Shun91 and ended with the Duke Mu of Qin in the “Spring and Autumn Period”. The Book of Records contains 28 volumes containing no fewer than 20,000 Chinese characters. It is not only a significant classic in Confucianism, but also a comprehensive material for studying Chinese traditional knowledge such as ancient Chinese language, characters, literature, philosophy, legends, social life, astronomy and geography. Meanwhile, ancient ruling and methods passed down from ancient kings are also written about in detail. Thus, the traditional knowledge compiled in The Book of Records became an essential part of Chinese civilization. Through this work, the way Chinese society thought of nature, humankind and the universe can be observed, providing particular insight into modern societal frameworks and perspectives, including those impinging upon the patent system.

The Book of Odes92 The Book of Odes was the earliest collection of poems in China. There are a total of 305 odes in this book most of which are written in lyrics. This book describes natural disasters including flood, drought,93 earthquakes,94 insect damage,95 famine96 and the methods of fighting against natural disasters.97 The method of fighting against natural disaster included selecting the good seeds or relocating homes to avoid the natural disasters.98 The book’s impact has extended into many aspects of Chinese society, especially in forming the collective consciousness and collective actions within the ancient Chinese population. Firstly, it created a collective consciousness among groups of people, especially peasants in traditional Chinese society. This collective consciousness, which formed in the agricultural production activities against natural disaster for their survival, to some extent, is the key element of the lasting sense of community in Chinese history.99 90 Yao (2258 BC–2358 BC) was a legendary ruler in ancient China. Because of his diligence and sincerity, he was regarded as a role model in morality. 91 Shun (23rd—twenty-second century BC) was a king of ancient China. The virtues of Yao and Shun especially Shun’s filial piety were highly praised by Confucius. 92 This book contains 305 odes selected by Confucius from more than 3000 poems and folklores. See Renpeng Zhong, op. cit., p. 27. 93 Da Ya Yun Han, The Book of Odes. See also the description in Fu Li and Yahong Cui, ‘The Description of Natural Disaster and the Spirit of Fighting the Natural Disasters’, Journal of Liaoning Administration College, Issue 1, 2010, p. 147. 94 Ibid., Chapter Xiao Ya Shi Yue Zhi Jiao. 95 Ibid., Chapter Da Ya Sang Rou and Chapter Da Ya Zhen Yang. 96 Ibid., Chapter Xiao Ya Yu Wu Zheng, Chapter Xiao Ya Shao Zhi Hua and Chapter Xiao Ya Jiao Gong. 97 Ibid., Chapter Da Ya Sheng Min. 98 Ibid., Chapter Da Ya Sheng Min and Chapter Da Ya Wen Wang You Sheng. 99 Dashuang Sun, ‘The Interests and the Collective Awareness in Ancient China’, Academic Exchange, Issue 8, 2002, p. 52.

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Families were the basic productivity unit in society.100 Production materials belonged to the families, individuals were not allowed to process properties.101 In addition, Confucius’s philosophy of emphasizing morality played a key role in strengthening the collective awareness. Confucius said “When talking to a gentleman, one should emphasize morality. When talking to a villain, one should emphasize interests.”102 In Confucianism, the core ideas in the traditional Chinese ethic are loyalty, filial piety and moral integrity.103 Furthermore, the agricultural life style demonstrated in this book led to strong beliefs in visible goods, as distinct from intellectual resources. In this agricultural society, ancient Chinese were relying on lands and natural materials such as plants and animals for reproduction.104 Working on those visible goods and resources by instruments, the ancient Chinese led their agricultural life by their physical work.105 Meanwhile, this physical work on visible goods brought them a secured trust of rewards and incomes as a steady circle of life.106 Finally, many songs in this book demonstrate the tradition that expressing one’s feelings towards the other (or towards one’s community) was more important than the possession or authorship of ideas, to the exclusion of the other.107 The major form of songs is lyrical poetry instead of narrative poems. In the narrative poems, things and events are usually described like a story written in metered verse using objectives, diverse characters and meter.108 The contents and structures of ideas are often clearly expressed.109 On the contrary, containing few narrative descriptions, Chinese lyrical poems were mainly focused on expressing general human emotions and feelings rather than the possession of ideas.110

100 Ibid. 101 Ibid. 102 The original Chinese Pinyin is “Jun Zi Yu Yu Yi, Xiao Ren Yu Yu Li”. See James Legge (trans.),

The Analects, op. cit., Chapter of Li Ren. Jun Zi can be translated into “gentleman” in English which means members of the ruling nobles. Xiao Ren can be translated into “villain” which means immoral people. See Guojie Luo, ‘Thoughts on Morality and Interests in Confucianism’, Academic Studies, Issue 3, 1994, pp. 51–52. 103 Lin Shi, ‘The Respective Embodiment of Collective and Individual Awareness’, Journal of Yangzhou University, Issue 4, 2006, p. 35. 104 Dazhong Yu, ‘The Features of Agricultural Society and Ecological Culture’, Agricultural Archaeology, Issue 4, 2010, p. 1. 105 Ibid. 106 Ibid., p. 2. 107 Most poems in The Books of Odes were romantic lyric poems and expressed the general human feeling such as love and loyalty. 108 Michael Meyer, The Bedford Introduction to Literature, Bedford/St. Martin’s, 2005, p. 2134. 109 Ibid. 110 Guosheng Qin, ‘The Love Poems in the Book of Odes’, The Art of the Public, Issue 20, 2009, p. 150.

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The Book of Rites111 This book was firstly compiled by Confucian disciples and scholars in the late Zhou Dynasty. Two Confucian scholars, De Dai112 and Sheng Dai,113 compiled the texts of this book into 49 chapters during the first century BC. The content contains many ritual manners, rules and hierarchies114 in ancient China. However, in today’s creative industries and knowledge economy, sometimes overemphasis on the manners and rules risks affecting the productivities and increasing dis-communication.115

The Book of Changes116 This is the earliest book of the Five Classics and its Chinese name is Yi Jing. It is not as simple as an ancient book of divination. The core thoughts of Chinese culture, the balance in the disputes, the development in the events and the way of change in cosmology were revealed in this book. It contains 64 symbols and each symbol is a combination of six divided or undivided lines. The divided lines present the negative factor while the undivided lines are the positive ones. The rules and commentary for combinations of different symbols are also written in this book. Regarding its historical influence on legislation, the theory of change and evolution can be seen in the modern Chinese patent law-making process. In the late 1970s, the fact that China needed to attract FDI to develop the domestic economy was realized. Therefore, a mature patent law system was necessary to promote technology and to ensure a good investment environment.117 The CNIPA was established in January 1980.118 The present Chinese patent law was issued in 1984 and many patent law practitioners have been trained. As a positive result, the promulgation of Chinese Patent Law 1984 speeded up economic and technological development in China. Lawmakers in the early 1980s made the correct decision when coping with social changes. The Book of Changes reveals the relationship between man and nature. “Sheng Sheng Zhi Wei Yi” is the core ideology in this book which means the creator 111 This

book was a collection of articles of Confucian commentaries in rites, manners and ceremonies that was compiled by two Confucian scholars De Dai and Sheng Dai. See Renpeng Zhong, op. cit., p. 27. 112 De Dai was a Confucian scholar in West Han Dynasty (202 BC–8 AD). 113 Sheng Dai was a nephew of De Dai, a Confucian scholar in West Han Dynasty. 114 Hierarchy can be defined as a structured mechanism of control designed to run large and complex organization. It often contains a layered structure placed in a sequence of super ordination and subordination of authority. See Grahame F. Thompson, Between Hierarchies and Markets: The Logic and Limits of Network Forms of Organization, Oxford University Press, 2003, pp. 23–24. 115 Richard Florida, op. cit., p. 129. 116 It was regarded as a book of divination with the core thoughts that the world always evolved in different movements. See Renpeng Zhong, op. cit., p. 27. 117 Thomas Pattloch and Peter Ganea, IP Law in China, Kluwer Law International, 2005, p. 4. 118 The CNIPA, ‘They Witnessed This History’, Media Focus, the CNIPA official website, 4 April 2005. https://www.sipo.gov.cn/mtjj/2005/200804/t20080401_362619.html.

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of life is change.119 The development of society and man both rely on the changes of time, venue, characters or environment.120 In other words, the result will change according to the changes in conditions.121 For self-development, humanity shall recognize the changes and follow the rules of changes in nature.122 The making of Chinese Patent Law 1984 can be regarded as the result of the recognition and the following action of the economic development.

The Spring and Autumn Annals123 The Spring and Autumn Annals contains the chronicles of Confucius’s home state Lu. It covers events from the years 722 BC to 481 BC in chronological order.124 The writing style is very brief in most cases as 70 Chinese characters were used to describe events.125 However, in some instances Confucius merely used a single character to describe an event. Hence, the whole text of the book is around 16,000 Chinese characters and to comprehend it properly it requires commentaries written by other scholars.126 In Chinese history, there were massive commentaries to interpret The Spring and Autumn Annuals. Si Ku Quan Shu is a good example which was completed in Qing Dynasty including 114 chapters and 1838 volumes.127

3.3.3 Confucius’s Social, Educational and Moral Impact 3.3.3.1

His Social Impact

In Confucius’s time, the Zhou Dynasty was in a turbulent situation consolidation.128 The dukes of strong feudal states were fighting each other for more territory and new wealth.129 Meanwhile, among the feudal states themselves, family members of the 119 Huaqiong Dai, ‘The Development Theory in the Book of Change’, Journal of Xiaogan University,

Issue 4, 2012, p. 66. 120 Ibid. 121 Ibid. 122 Ibid.,

p. 69.

123 The name of the book comes from the ancient tradition in China. “Spring and Autumn” represents

a whole year and they are also the reasons for nobles of feudal states to worship the central royal family. See Renpeng Zhong, op. cit., p. 27. 124 Jia Tan, ‘The Structure of Literary Interpretation and Culture—The Unique Features of Spring and Autumn Annals’, Journal of Xiangtan University, Issue 8, 2006, p. 109. 125 Ibid. 126 Ibid. 127 Ibid. 128 Zheren Dai, ‘A Brief Discussion on the Political Ideology of Confucianism’, Journal of Anhui Institute of Education, Issue 1, 2006, p. 11. 129 Ibid.

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nobles and even their ministers were competing.130 Common people in that period, as Weibin Zhang describes in his research on Confucianism, carried heavy burdens of high taxation and wars.131 What was worse, the social and moral standards had broken down and many criminal activities were taking place.132 Therefore, on both levels, a stable social environment with strong consolidation was in great need. The downward movement of regime power from the kings to the ministers caused Confucius to bring forward his thoughts of re-centralization in the power of the kings. He said: “When the world has peace, ceremonies, music, ruling and conquering shall come from the kings. When the world is chaotic, ceremonies, music and conquering come from lords.”133 It is at this juncture that the link between society and IP development may be more usefully and closely examined. Social consolidation paves the foundation for the development of creativity and innovation, and the implementation of IP as a framework for those industries.134 When people are living in a stable environment, they will settle down and creativity will gradually flourish and the whole community would have extra energy to carry out creativity and innovation.135 The peak of Chinese literary enterprise that occurred during the Tang Dynasty (618 AD–907 AD) is a good example to support this point. This Dynasty was also the peak time of Chinese paintings.136 Thus, the social consolidation brought forward by Confucius is a key condition for the development of creativity.

3.3.3.2

His Educational Impact

Better Educational Opportunities Education plays an important role in the development of a nation. In Chinese history, Confucius was regarded as a great educator and teacher. He was the first person to introduce the concept of education into the public sphere and devoted his late life to teaching. His educational impact can be studied from three aspects. Firstly, he initiated equal opportunity in education. Education is a basic form of access to knowledge. Nowadays, IP right holders possess the legal entitlements in terms of their IP because these properties are the outcome of their intellects. Their 130 Ibid. 131 Weibin

Zhang, op. cit.

132 Ibid. 133 The

original Chinese Pinyin is “Tian Xia You Dao, Ze Li Yue Zheng Fa Zi Tian Zi Chu; Tian Xia Wu Dao, Ze Li Yue Zheng Fa Zi Zhu Hou Chu”. Ibid. 134 Guanming Chen, ‘The Environment for the Literary Creativity in the Tang Dynasty’, The Research on Tang Literary—The Essay Collection of 12th Annual Conference of China Tang Dynasty Literary Research, 2004, p. 1. 135 Ibid. 136 Qixing Wang, ‘Tang Poems and Paintings—The Spiritual Life of Tang Artists’, The Research on Tang Literary—The Essay Collection of 8th Annual Conference of China Tang Dynasty Literary Research, 1996, p. 1.

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social or parentage origins are unable to affect their lawful entitlements. However, in ancient times, education was a privilege available only to nobles and the royal family.137 It can be imagined that the educational rights of common people were ignored. Hence, the productivity and knowledge of the non-aristocratic was weakened. Conversely, the small circle of nobles had a monopoly on education. Today, we can see this contradicts the principle functions of a contemporary IP system—that is, the functions of rewarding creativity and encouraging competition. When Confucius conducted his own classes, he taught many students regardless of their social background or status, and he decided to accept one as his disciple or student only based on merit, which is, only in terms of that individual’s morality and intelligence.138 His open attitude urged ancient society to accept the new idea that educational opportunities should be granted to anyone with intellectual merit. In modern times, it also leaves a possibility that the public might fully accept the concept of IP once they realize the values in rewarding creativity and stimulating competition. Secondly, Confucius’ method of teaching demonstrated the simple and practical ways of creativity. For instance, Confucius complimented one of his students: “He was of an active nature and yet fond of learning, and he was not ashamed to ask and learn of his inferiors.”139 This comment shows his emphasis on devotion to seeking new knowledge as being crucial in innovation. Another famous verse of Confucius was “Learning without thought is labor lost; thought without learning is perilous.”140 This shows that education is not pedantically remembering and reciting the existing knowledge; instead, it is an integrated and creative process of learning and thinking. Through unceasingly learning and examining existing knowledge, people generate deeper thoughts deriving from their understandings and experiences. Thus, the continual learning and thinking made great contribution to creativity and innovation by infusing current knowledge resources with interpretive diversity. Thirdly, Confucianism embedded in Chinese culture a tradition of respect and esteem for intellectuals and knowledge. Confucius has been highly respected by the Chinese as the “Teacher of the Ten Thousand Generations”,141 and a memorial temple has been built in the Forest of Confucius in Qufu, Shandong Province.142 The affection for Confucius has been extended to all teaching professionals with the 10th September celebrated each year as the National Teacher’s Day in China.143 Nevertheless, this tradition has been interrupted several times in history. For instance, 137 Mu

Qian, ‘Confucius and the Spring and Autumn Period’, Review of Liang Han Works and Philosophies, Tongtai Publication, 1954, pp. 247–248. 138 See the questions and answers of Confucius and his different disciples. 139 The original Chinese Pinyin is “Min Er Hao Xue, Bu Chi Xia Wen”. James Legge (trans.), The Analects, op. cit., Verse 14, Chap. 5. 140 The original Chinese Pinyin is “Xue Er Bu Si Ze Wang, Si Er Bu Xue Ze Dai”. Ibid., Verse 15, Chap. 2. 141 John and Evelyn Berthrong, Confucianism—A Short Introduction, One World Publication, 2000, p. 46. 142 This temple also contains the burial ground for Confucius’ family members in the last two thousand years. Each year, many visitors from China and overseas went there to worship Confucius. 143 Author Unknown, ‘China Marks Teachers’ Day’, People’s Daily, 11 September 2001.

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“Burning of the books and burial of the scholars”144 took place during the ruling period of Qin Shi Huang.145 Confucianism was one of the victims in Qin Shi Huang’s book burning until the rehabilitation of Confucianism in the Han Dynasty.146 The very fact of the rehabilitation and resilience of Confucianism demonstrates its exuberant vigor deeply rooted within Chinese society.

The Imperial Examination To obtain a healthy and well-run administrative system, the selection of wise and trusted officials is of great importance and significance. Although Confucianism did not emphasize what specific form is the right form for the selection, Confucianism itself became the core content of Imperial Examination for more than one thousand years in Chinese history and even spread to Japan147 and Korea.148 Before undertaking the Imperial Examination, all candidates must have been recommended or introduced by the aristocrats and it was common knowledge that the applicants must be chosen from the aristocrats. Therefore, we can see two typical trends in this selection. Firstly, many commoners did not have equal opportunities to serve in the administration. Secondly, the ruling emperor in ancient China was easily depowered as a result of the appointment of officials by the aristocrats. Thus, a relatively open and fair examination would be the best solution. Professor Ichisada Miyazaki analyzed the reasoning of the Imperial Examination in his book: He (The Emperor) achieved this revolution when he enacted the examination system, kept at hand a reserve of such officials, and made it a rule to use only them to fillvacancies in central and local government as they occurred. This was the origin of the exam.149

Meanwhile, it can be demonstrated that the adoption of the Imperial Examination was a wise and rational method for three reasons. Firstly, it created a comparatively equal environment for access to education. Before the Imperial Examination, education was limited to only the nobles. The innovation and regeneration of knowledge would become less diverse as it derived from only the aristocrats. This resulted in the overall reduction of the quality of innovation. After the Imperial Examination was adopted, as a result of openness and fairness in the examinations, it became possible 144 David

W. Koeller, ‘The Burning of the Books’, China and East Asia Chronology, 1996. This article was posted online by a historian Professor David W. Koeller at North Park University. https:// www.thenagain.info/WebChron//China/BookBurn.html. 145 Qin Shi Huang (260 BC–210 BC) was the king of the State of Qin and the first emperor to unify China in 221 BC. After the Unification of China, he established Qin Dynasty (221 BC–206 BC). 146 John and Evelyn Berthrong, op. cit., p. 46. 147 Guanghui Wu, ‘The Imperial Examination and Japan’, Southeast Research, Issue 4, 2005, pp. 53– 59. 148 Hanglun Zhan, ‘An Example of Poem in the Imperial Examination of Korean Li Dynasty’, Journal of Southwest University for Nationalities, Issue 1, 2012, p. 167. 149 Ichisada Miyazaki, translated by Conrad Schirokauer, The Civil Service Examination of Imperial China, Weatherhill, 1976, pp. 111–112.

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for anyone to get into public service based on their academic results in the Imperial Examinations. For instance, E. A. Kracke Jr. concludes in his article regarding the Chinese Imperial Examination that a majority of the men passing the examinations on the two lists of 1148 AD and 1256 AD came from commoners’ families.150 Secondly, the adoption of the Imperial Examination by ancient rulers represented a creative way of “Ren”151 to balance the interests of different social groups. Gradually, by the Tang Dynasty, it had been accepted by the public that the Imperial Examination was beneficial overall because of its quality and fairness.152 The acceptance of the Imperial Examination by different social groups proved its success in mitigating between the different social groups in a moderate way. Thirdly, Confucianism, as the core value of the Imperial Examination, had a relatively positive impact on Chinese culture for a long time in terms of rewarding creativity. Confucianism was not popular during Confucius’s lifetime, but it was used and strengthened by Emperor Wu Di153 during the Han Dynasty in addition to other different types of philosophical schools. From then on, Confucianism was taught throughout the ancient education system and became the initial standard of the Imperial Examinations. Professor Ichisada Miyazaki presents a lively description on the position of Confucianism when the pupils received their elementary education: The Great Learning and the Book of the Mean, which together with the Analects and the Mencius constitute the Four Books, are not counted separately, since they are included in the Book of Rites. And of course, those were not 431,286 different characters; most of the ideographs would have been used many times in the several texts. Even so, the task of having to memorize textual material amounting to more than 400,000 characters is enough to make one reel. They required exactly six years of memorizing, at the rate of two hundred characters a day. After the students had memorized a book, they read commentaries, which often were several times the length of the original text, and practiced answering questions involving passages selected as examination topic.154

Some Chinese scholars have analyzed the development of the Imperial Examination and found that this model of examination started to impose a negative effect on creativity in the late period of ancient China such as Ming and Qing dynasties.155 The main negative effects include the over-simplicity in the knowledge structure of the examination.156 Furthermore, many strange and meaningless exam questions

150 E.

A. Kracke Jr., ‘Family vesus Merit in Chinese Civil Service Examination under the Empire’, Harvard Journal of Asiatic Studies, X, 1947, pp. 103–123. 151 “Ren” is the Chinese Pin Yin. In English, it can be regard as the same meaning of “Humanity” or “Compassion”, and Ren is the main social theory in Confucianism. 152 Ichisada Miyazaki, op. cit., p. 113. 153 Emperor Wu Di (156 BC–87 BC) with the name Liu Che, was the seventh emperor in the Han Dynasty. He stepped onto the throne at 16 year old and ruled the regime for 54 years. Because of his great efforts, the Han Dynasty became one of the strongest dynasties at his time. 154 Ichisada Miyazaki, op. cit., pp. 7–8. 155 Haiming Wen, ‘The Evaluation on the Imperial Examination and Its Impact on Education in China’, Journal of Chifeng University, Issue 9, 2012, p. 213. 156 Ibid.

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appeared in the examination papers.157 In the Ming dynasty, due to the strong promotion of the “Eight-Episode Essays”158 in the examination, candidates were only allowed to select certain verses or paragraphs in the “Four Books and Five Classics” to write essays within the word limit and the requirements of the writing format.159 Thus, students only concentrated on cramming the examinations and, ultimately, the trends in the Imperial Examination were going against its original goal of selecting the most capable candidates.160 Although the Imperial Examination system has its drawbacks as discussed above, it is nevertheless worth comparing this system with the reference system in ancient China, adopted before the Han Dynasty, in order to see the relative advantages of the Imperial Examination.161 A good reference system needs one condition, that is the selection standards in this reference system shall be fair, specific and practical.162 But this conditions is very subjective due to the referees’ own interests in their career paths.163 Thus, selecting candidates through a relatively transparent and fair system such as examination would be a more effective mechanism by which to recognize the talented and capable candidates. To see the positive effects of Confucianism in creativity, the similarity and connection between Confucianism and the creativity rewarding system can be examined together. The preceding discussion has shown that the Confucian values of family and society have been taught and repeated many times when the applicants started their early education. Once the applicants had passed the Imperial Examination, they would be guaranteed the reward of a post in the administration. Therefore, the Confucian way of rewarding intellectual work had been enhanced and developed towards a communal or collective acceptance in Chinese society, especially among the educated people. The reward system in modern patent law may be understood to function in the same way, despite the rivalrous nature of the rights granted. The inventors devote a great deal of their intellectual work, time and capital to developing a new invention. Many experiments and tests are carried out. The question to be asked then is how does the society and IP system reward these inventors? The most direct and practical method is to grant exclusive patent rights within a certain amount of time to these inventors and to ensure their interests. Thus, we can see through history that Chinese society, especially the educated people, believed that intellectual work will result in corresponding rewards. Today, in the society, the effective implementation of 157 Ibid. 158 “Eight-Episode Essays” (“Ba Gu Wen” in Pinyin) refers to a writing style in the Imperial Exam-

ination of Ming Dynasty (1368–1644) and Qing Dynasty (1644–1912). It has restriction in words and format and the examinees have to fill the content of the essay into this format. 159 Jiaying Cui and Hongsheng Che, ‘Comparative Research on the System of Recommendation and Imperial Examination in Ancient Chinese Civil Service Selection’, Comparative Management, Issue 1, 2012, p. 76. 160 Ibid. 161 Ibid., p. 73. 162 Ibid. 163 Ibid.

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a functioning IP framework ensures the contribution to a “communal” knowledge through guaranteeing publication of innovation. Understanding this balance requires the same strong promotion and popularization as Imperial Examinations to make people believe that the IP system will ensure their lawful entitlements.

3.3.4 His Moral Impact: “Ren”,164 “Lun”,165 and “Li”166 3.3.4.1

“Ren”

During the Confucius’ time, dramatic technology development occurred and the intellectual economy started to improve. New roads were built between cities; many farmers moved to these cities and made the urban areas develop rapidly; iron tools and hardware were invented and used in agricultural activities; many philosophical schools came into existence including Confucianism; and the dukes of states employed many merchants, hand craftsmen, scholars and scientists. This recognition of intellectuals and intellectual assets helped each state increase its economic power.167 This new population motivated a new form of economy—the intellectual economy. In the intellectual economy, many people did business, increased new wealth and their social status based on their intellectual work and knowledge rather than physical work. Confucius observed the rapid rise of the new intellectual economy and the difference among the social groups. He claimed a solution was “Ren”, the central idea behind Confucianism. Ren delivers a method of “compassion” or “loving other people”.168 There are two golden rules in Confucianism: “Not to do to others as you would not wish done to yourself”169 and “For the man of perfect virtue, wishing to be established himself, he also seeks to establish others; wishing to be enlarged himself, he also seek to enlarge others”.170 Today, the industrial cooperation among companies in the IP field reflects the principle of “Ren”. For their own development, companies have to learn to support each other’s IP strategies or licensing. In a recent speech, Gerard Kleisterlee the President and Chief Executive Officer (CEO) of Royal Philips Electronics referred to the importance of collaboration as follows: 164 The

original Chinese Pinyin is “Fan Chi Wen Ren. Zi Yue: Ai Ren”. James Legge (translated), The Analects, op. cit., Verse 22, Chap. 12. 165 The original Chinese Pinyin is “Yin You San Ren Yan”. Ibid., Verse 1, Chap. 18. 166 The original Chinese Pinyin is “Ke Ji Fu Li Wei Ren” and “Fei Li Wu Shi, Fei Li Wu Ting, Fei Li Wu Yan, Fei Li Wu Dong”. Ibid., Verse 1, Chap. 12. “Li” can be interpreted as manners, or a code of reasonable behavior. 167 Ichisada Miyazaki, op. cit., p. 20. 168 Ibid., p. 103. 169 The original Chinese Pinyin is “Ji Suo Bu Yu, Wu Shi Yu Ren”. James Legge (translated), The Analects, op. cit., Verse 2, Chap. 12. 170 The original Chinese Pinyin is “Ji Yu Li Er Li Ren, Ji Yu Da Er Da Ren”. Ibid., Verse 28, Chap. 6.

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To create this intellectual economy, we need a healthy dose of collaborative competition. Every company wants to win with the top inventions and the best products, but there are some issues on which companies and governments must come together. Firstly, my company or your company is not always the one most qualified to develop a new technology or bring it to market. To survive, companies have to gain access to ideas, technologies and designs they do not generate themselves. They need to complement their own IP. Philips, for one, is not only a seller but also a buyer of IP. We trade with big names such as Hitachi, Sanyo, Sony and IBM.171

The remarks above tell us that in various industrial sectors companies need to sell and purchase IP from other companies, even their competitors. This sell-and-buy circle helps enterprises to maximize their own interests. In the same way, crosslicensing agreements between patent right holders also encourage the exploitation of technology through a pooling or “communal” relationship in resources. This collaboration among companies echoes one of the principles of “Ren”: “For the man of perfect virtue, wishing to be established himself, he also seeks to establish others; wishing to be enlarged himself, he also seek to enlarge others.”172

3.3.4.2

“Lun”

In Confucianism, “Lun” means relationship among the social members and represents social order and justice. When Duke of the State Ji asked Confucius what was a good society, Confucius replied that each member of society should behave in the way he should, and thus the country would be in good order.173 For example, this relationship can be explained in the principle that a father should love his son while the son should respect his father. This needs trust in this relationship and the obedience of one’s social role. In this society, family is the basic social working unit. Peter M. Mitchell presented his observation of the function of Chinese family as follows: The family and the society were organized along status levels which had at least one distinct advantage—a person always had the security of knowing just where he stood within the family and the society. A person saw himself as a temporary holder and transmitter of a family heritage much greater in importance than any particular generation, not to mention any particular individual.174

Through legal analysis, the principle of “Lun” might be further strengthened in the current IP enforcement in China.175 To ensure the fulfillment of IP rights, “Lun” 171 Gerard

Kleisterlee, ‘Managing the Intellectual Economy—Chief Concern’, Newsletter, Chief Executive, 1 August 2003. Gerard Kleisterlee is president and chief executive officer of Royal Phillips Electronics. This is one of his public speeches. The full text of the speech is available at: https://chiefexecutive.net/managing-the-intellectual-economy. 172 Ichisada Miyazaki, op. cit., p. 113. 173 The original Chinese Pinyin is “Jun Jun, Chen Chen, Fu Fu, Zi Zi”. James Legge (translated), The Analects, op. cit., Verse 11, Chap. 12. 174 Peter M. Mitchell, op. cit., p. 62. 175 This is my own point which I have not find reference in the precious literature review. The connection of “Lun” and IP enforcement has not been explored very often in the academic analysis before.

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grants an enforcement officer both authority and obligation. A police officer Wenpeng Liu wrote in his article about several ways to provide a good enforcement. Firstly, making the enforcement process known to the public and more transparent so that the enforcement officers will receive more supervision from its upper enforcement authorities, the public and social media, and would ensure greater accountability and efficiency.176 Secondly, improving the understanding of laws and regulations, work ethic of the enforcement officers will be the key.177 For instance, in Fuzhou City Police Bureau, where Wenpeng Liu worked, constant training in work ethic was undertaken by its enforcement officers.178 From this example, it can been seen the emphasis on obedience in “Lun” is extremely significant in modern China.

3.3.4.3

“Li”

“Li” means rites, manners and the code of reasonable behaviors. Confucius held that “Li” was a necessary quality of a good man.179 In this case, it can be found that “Li” is regarded as equally important as “Ren” and “Lun”. In Leonard Shihlien Hsu’s book, the function of “Li” is described as encompassing the following three positive effects: The practical program of “Li” in achieving the ideal of a harmonious moral order consists of three steps. In the first place, “Li” provided principles for the establishment of a social fabric in which people are ranked in a consistent order of superiority and inferiority … in the second,“Li” provides a code of morality … third,“Li” provides an ideal of social harmony emphasizing the individual’s obligation to the society. And it is a principle of moral idealism and gives a new set of values to be cultivated in the practical world in which we live. Accordingly, it established a faith of moral appreciation.180

176 Ibid.,

p. 21.

177 Ibid. 178 Ibid. 179 The original Pinyin is “Jun Zi Jing Er Wu Shi, Yu Ren Gong Er You Li”. James Legge (translated),

The Analects, op. cit., Verse 5, Chap. 12. Shihlien Hsu, The Philosophy of Confucianism—An Interpretation of the Ideas of Confucius, His Forerunners, and His Early disciples, Routledge, 2005, pp. 95–96.

180 Leonard

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3.4 Conclusion In this chapter, Confucianism has been reviewed and studied in its social, educational and moral influence. This understanding of Confucianism is crucial to a complete comprehension of the traditional characteristics in Chinese civilization. The fundamental principles of respecting intellectuals and knowledge is compatible with modern principles of IP. Family is the basic unit in Chinese society so the concept of collective awareness has been strong for a long time in history. Confucianism provides positive influences on concepts of creativity, innovation and IP management. Through studying and analyzing the interesting reflections in the modern society, it can be seen that Confucian culture has influenced many aspects of social life. Using this basis in Chinese cultural history, the next chapter turns to the growth in Chinese ancient innovation, the early Chinese patent law and the relationship to these historical and philosophical foundations.

Chapter 4

The Ancient Innovation and Early Chinese Patent Law

4.1 Introduction The first part of this chapter focuses on the China’s ancient innovation. Ancient Chinese populations developed relatively advanced inventions in agriculture, meteorology, navigation, paper-making and printing. These inventions were made by people in ancient China to improve the productivity and convenience of their daily activities. For a long time, these inventions were world leading technologies. This section will also analyze the origin and history of early Chinese patent law.

4.2 Examples of Ancient Innovations 4.2.1 The Armillary Sphere Heng Zhang,1 an Astronomer in the Han Dynasty invented the Armillary Sphere. It contains a celestial globe carved with stars, ecliptic, equator, south and north poles, solar terms, circle of perpetual apparition and circle of perpetual occultation. The celestial global was connected with a clepsydra by a mechanical device. The water running from the clepsydra controlled the celestial globe to turn at the same pace with the heavenly sphere.2 It is the first recorded water-generated armillary sphere in the world.3

1 Heng

Zhang (ADI 78–ADI 139) was an astronomer and inventor in East Han Dynasty, China.

2 The introduction of this Armillary Sphere comes from Ji Na, ‘Heng Zhang Invented the Armillary

Sphere and Seismograph’, Newsletter of Confucianism, Chinese Confucianism official website, November 2006. https://www.confucianism.com.cn/html/A00030007/758466.html. 3 Weichang Qian, The Science and Invention in the Chinese History, University of Shanghai Press, 2009, p. 49. © Intellectual Property Publishing House and Springer Nature Singapore Pte Ltd. 2020 N. Zhang, A Confucian Analysis on the Evolution of Chinese Patent Law System, https://doi.org/10.1007/978-981-13-9027-2_4

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At Heng Zhang’s time (100 AD), he already named 320 stars and found 11,520 planetesimals.4 The ancient Chinese also built an observatory—Si Tiantai in Nanjing in the 5th century AD.5 In 1279, an official observatory was built in Beijing and 5 sub-observatories built in Luo Yang and other locations.6 Professor Weichang Qian observed that the Chinese have been leaders in astronomy for many centuries.7

4.2.2 The Compass The ancient book Gui Guzi8 recorded that a compass had been used in finding directions in jade mining during the Warring States Period (475BC-221 BC). The compass was called Si Nan during that time which means “pointing to the South”. Si Nan was constructed with a magnetic spoon and a square plate carved with 24 directions. The tail of the magnetic spoon was always pointing to the South (See Image 2 below).9 In the Song Dynasty, the first use of a compass in navigation was described in an ancient book Ping Zhou Ke Tan which was written in 1123 AD. The author Yu Zhu observed the use of a compass on Chinese ships in Guangzhou.10 He wrote “In order to know the geography, one shall observe the stars at night time, watch the sun at daytime and check the compass when the weather was overcast”.11 Furthermore, during the Song Dynasty, an ancient book Song Shi described an invention called the Compass Chariot used in the royal parade of the Song Emperor.12 The chariot contained a vertical wooden stick with a wooden man perched on the top of it and pointing with one of his arms. No matter which direction the chariot turned, the arm of the wooden man always pointed to the South.13 Hidden inside the chariot there was a big gear connecting to the wooden stick and ensuring that it always pointing to the South. Four smaller gears were attached to the big one. This set of five different gears made sure that the big gear always turned to the same direction with the turn of the chariot. In this case, the wooden man’s arm always pointed to the South.14 This detailed description comes from the first recorded attempt to describe 4 Ibid.,

p. 49. p. 60. 6 Ibid., p. 61. 7 Ibid. 8 Gui Guzi was ancient book written by a scholar Shan Wang in the Warring States Period. This book was full of military strategies and negotiation skills. 9 The Cultural Promotion Division of State Ethnic Affairs Commission,‘The Compass’, National Technology, official website of China.com.cn, 19 June 2009. https://mz.china.com.cn/?action-vie wnews-itemid-308. 10 Wei Chang Qian, op. cit., 2009, p. 64. 11 Ibid. 12 Chapter Yu Fu Zhi 102, Song Shi. Song Shi is a book of the history of Song Dynasty (960 AD–1276 AD) compiled and edited between 1343 and 1345 AD. 13 Ibid. 14 Ibid. 5 Ibid.,

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this invention in Chinese ancient history. The use of physical theory of differential gears was very advanced at that time.

4.2.3 The Development of Paper Making In the late 19th century, early scripts of Chinese characters were found in Yin Tomb in An Yang, the Henan Province. These scripts were carved onto the oracle bones recording the divination of Shang Dynasty (the 14th–11th Century BC).15 150,000 pieces of bone were found. The contents were related to divinations in astrology, calendar, history and medicine which were an accurate record of history.16 However, interest on the part of the public to learn the oracle scripts and their teachings did not spread. For a long time, only few people who knew how to read and write understood the oracle scripts. This restricted the spread of culture and ideas. From the Warring State Period, people started to use bamboo books which were made from strips of bamboo connected to each other by hemp rope. This was a revolutionary invention making the recording of history and cultural communication much easier. Ancient Chinese used hair pens to write on bamboo slips vertically. Many of the preserved famous bamboo books have become good resources for studying the thoughts and deeds of the ancient Chinese. For example, the bamboo book of The Art of War was found in the Han Tomb of Yin Que Mountain17 on 10 April 1972. This resolved the historical and academic debates of the origin of this famous strategic book. And it was listed as one of the Top 30 archaeological discoveries in new China.18 Another well-known material for books was silk. Cheap bamboo strips were massively used for literature writing, expensive silk was more often adopted in paintings or for writing.19 At first, these silk paintings were mostly related to important matters such as divination or worships to the ancestors20 or private communication such as letter writing.21 Compared with bamboo slips, silk had many advantages. Firstly, it was a light fabric which was easy to carry, preserve and absorb the ink; 15 Li Zou,‘The Originator of Chinese Characters—The Oracle Script in Yin Tomb of Anyang’, News Centre, China International Broadcasting Network official website, 20 April 2011. https://city.cri. cn/29464/2011/04/20/3866s2574009.html. 16 Ibid. 17 Qin Que Mountain is located in the Linyi city of Shandong Province. It has famous family tombs dated back to the West Han Dynasty (202 BC–9 AD). 18 Chinese Antique Web,‘The Amazing Discovery in the Han Tomb’, The Archaeological Findings, Chinese Antique official website, 15 August 2012. https://www.wenwuchina.com/news/detail/201 208/15/174289.shtml. 19 Huang Chen, ‘From Silk Drawing to Silk Painting—Discussion of the Origin of Ancient Silk Drawings and Paintings’, New Arts, Issue 4, 2002, p. 46. 20 Qiang Liu, ‘The Brief Discussion of Silk Book’, Academic Journal of Sichuan Library, Issue 5, 1998, p. 77. 21 Ibid., p. 78.

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secondly, the white surface of silk was good enough to keep the writing clear; thirdly, the silky fabric were easy to stretch and difficult to decay; finally, the width and height of silk was much more flexible than bamboo strips, such that it was often used in painting rather than writing.22 However, since silk was too expensive and bamboo was too heavy, the ancient Chinese invented a new material for writing and painting. The first production of real paper was recorded in an ancient book called Han Shu and occurred in 12 BC.23 This type of paper was a side product of silk making. When ancient Chinese rinsed silk in water, the left-over silky fabric was filtered and coagulated on a bamboo mat. This thin and sticky layer of silk fabrics was dried under the sunshine and become the silk paper. This was regarded as the earliest form of paper making.24 Lun Cai (61 AD–121 AD) was the inventor of real paper in the Han Dynasty. He observed the production process of silk paper (introduced above).He boiled, smashed and blended barks, fishnets and faxes to produce real paper.25 Later on, different materials were used in paper-making including straws, wood and plant fabrics.26 From West Jin Dynasty (265 AD–316 AD), bamboo fabrics were massively applied in paper making. Ibid. This method of paper making spread from China to Mid Asia around 650 AD, Arabia around 707 AD and Spain around 950 AD.27

4.2.4 Printing Before the invention of printing, the reproduction of books relied on copying by hand. This method of reproduction was time-consuming and prone to error. Thus, before the Song Dynasty, only 1–2% of the Chinese population had a collection of books at home.28 People started to use stamps in the Qin Dynasty to identify their literature or painting work with their names on the silk or bamboo slips.29 These stamps contained characters carved in relief. The ancient Chinese developed this carving style into block printing. The recorded earliest work was a Buddhist book Diamond Sutra carved by block printing in 868 AD in the Tang Dynasty.30 The Tang rulers were very keen in promoting Buddhism and the reproduction of Buddhist 22 Ibid. 23 Han Shu was an historical record book written by Gu Ban recording the important matters between 206 BC and 23 AD. 24 Qiang Liu, op. cit., pp. 78–79. 25 Weichang Qian, op. cit., pp. 72–73. 26 Ibid., p. 73. 27 Ibid., p. 74. 28 Weimin Jia, Four Great Inventions in the Ancient China, Beijing Science and Technology Publishing House, 1995, p. 22. 29 Ibid., p. 23. 30 Tongwen Li, ‘The Reprinting of Diamond Sutra Appeared in the India Exhibition’, Shenyang Daily, 16 September 2008.

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scriptures was massively demanded. Thus, this demand led to the invention of the new printing technology.31 The most printed work during this dynasty included the Buddhist scriptures and calendars which were popular along the Changjiang River32 area.33 In Wu Dai34 period, governments started to run printing workshops along with the private ones. Furthermore, Confucian works became highly popular. Thus, block printing started to spread throughout China.35 In the North Song Dynasty,36 an inventor Sheng Bi37 invented the well-known movable-type printing. Terracotta patches were carved with individual letters. After treating with flames, the patches were put into categories of letters. When printing, the patches were placed on an iron board according to the script of the books with turpentine, beeswax and paper ash.38 After treatment with flames, this combination coagulated into a printing board.39 In Yuan Dynasty,40 an inventor called Zhen Wang replaced Sheng Bi’s terracotta patches with wooden blocks. This improvement was made due to the fact that terracotta was too fragile and the colouring on it was uneven.41 Zhen Wang invented the rotary composing table which contained wood blocks allocated into different frames in the table. The selected blocks would be put into a wooden frame the same size as the book. When the wood frame was full, thin wooden battens would be place among font lines. After proof-reading, this wooden frame complete with blocks would be ready for printing.42

4.2.5 Gun Powder Gun powder in ancient China was a mixture of saltpeter, sulphur and spodium.43 The invention of gun powder was a result of the ancient alchemists’ gold and elixir seeking and exploring activities.44 The core concept of alchemy came from the theory of “Yin and Yang” of an ancient book The Book of Changes. This book held the opinion that 31 Weimin

Jia, op. cit., p. 27. Changjiang River is the longest river in China which is 6397 km. 33 Weimin Jia, op. cit., p. 28. 34 Wu Dai (907 AD–959 AD) were five dynasties after the fall of Tang Dynasty. 35 Weimin Jia, op. cit., p. 29. 36 The North Song Dynasty (960 AD–1127 AD) was founded by Kuangyin Zhao. 37 Sheng Bi (970 AD–1051 AD) was an inventor who invented the movable-type printing technology. 38 Weichang Qian, op. cit., p. 79. 39 Ibid., p. 80. 40 Yuan Dynasty (1271 AD–1368 AD) was founded by Mongolians which was the first dynasty not founded by Han people. 41 Weichang Qian, op. cit., p. 80. 42 Ibid., p. 81. 43 Jing Ding, ‘A Short History of Gun Powder’, Explosion and Shock Waves, Volume 3, 1983, p. 1. 44 Ibid. 32 The

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the movement of Yin and Yang was the reason of changes in life; different chemical elements represented Yin and Yang respectively; combination, effect and restriction of Yin elements and Yang elements on each other would produce new substance.45 Gradually, the recipes of alchemy were passed from alchemists to civil and military use. The main function of gun powder was to produce fireworks for entertainment and festivals which was a huge contrast to the fact that gun power was mainly used by the military when it was exported to the West in the 13th century.46 Gun powder started to be used by the military during the Song and Yuan Dynasties (late 10th–14th century) and many fireworks makers were recruited into the army.47 In the North Song Dynasty, many border disputes occurred between the Song army and the nomadic tribes. Thus, improving and inventing new weaponry became very important.48 Several well-known weapons with gunpowder applied helped the Song army to defeat the invasion of the nomadic tribes.49 From the preceding discussion, it can be seen that innovation in ancient China was very active and has been influential throughout the world.

4.3 Early Chinese Patent Law 4.3.1 Introduction With the understanding of Confucian principles underpinning Chinese concepts of creativity and the glory of ancient Chinese innovation, this section focuses on the brief history of early Chinese patent law. The seed of Chinese law was planted in the middle of the 19th century when the Qing ruler was keen to learn from the West. During the war-time in the early 20th century, different patent regulations were issued. In the early stage of the New PRC, various attempts to reward inventors were tried.50 The implementation of Chinese Patent Law 1984 opened up a new era in the Chinese patent system. This patent law is the first modern one in Chinese history.2

45 This theory from The Book of Changes was explained in Naichang Meng, ‘The Practice and Theory of The Book of Changes’, The Academic Newspaper of Taiyuan Science University, Issue 3, 1983, p. 129. 46 Shaoyi Zhong, ‘Military Application of Gun Powder and Its Influence on the Development of the Firearms’, Studies of History in the Natural Science, Volume 17, 1998, p. 91. 47 Ibid., p. 91, 93. 48 Chinese Economy Network,‘The Development of Gunpowder in the Song Dynasty Part I’, Chinese Civilisation, Chinese Economy Network official website, August 2007. https://cathay.ce. cn/history/200,708/03/t20070803_12415494.shtml. 49 Ibid. 50 The State Council of the PRC decreed the Provisional Regulations on Protecting Inventive and Patent Rights in 1950 and the Regulations was abolished by the State Council in 1963.

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4.3.2 The Seed of Chinese Patent Law In the middle of the 19th century, both the peasant regime of Tai Ping Tian Guo and Qing Dynasty had concerns about patent rights. Renxuan Hong, an important peasant leader of Tai Ping Tian Guo wrote the following in his book Zi Zheng Xin Pian.51 If someone is able to produce a train as fast as foreign trains, which can exceed 2000 Li52 per day, we will grant him a patent right53 … small invention will be granted 5 years, while bigger inventions will be granted 10 years protection. If the common people have benefited from it, it will be granted for more years, and we forbid others making duplicates.54

Hong’s policy was aimed at encouraging innovation and technology. However, Tai Ping Tian Guo was jointly besieged by the Qing, British and French armies.55 It fell in 1864 and the thoughts of building a patent system never became reality. The earliest form of patent appeared in the Guang Xu Period (1871–1908)56 of the Qing Dynasty. In 1881, Guanying Zheng57 wrote a request to the Bei Yang Minister Hongzhang Li58 asking for a 10-year patent right for the Shanghai Machinery Weaving Bureau regarding its machinery weaving technology. This request was permitted by the Emperor Guang Xu. Shortly after, paper-making and wine-brewing were also granted 10-year patent rights.59 At the request of the Wei Xin Movement60 Emperor Guang Xu issued the first patent regulation in Chinese history, Regulation on Rewarding the New Technology 1898.61 In this Regulation, patent rights were granted for 10, 30 or 50 years and the inventors would receive promotions according 51 Renxuan Hong (1822–1864) was the younger brother and counsellor of Xiuquan Hong, and wrote the Zi Zheng Xin Pian containing the thoughts of capitalism. But due to the fall of Tai Ping Tian Guo in 1864, his thoughts had not been implemented. 52 Li is a Chinese measurement of distance and one Li is five hundred meters. 53 Sifeng Wang, ‘Renxuan Hong and the Sprout of the Chinese Patent System’, Brightness Daily, 29 January 2014. 54 Ibid. 55 During the late Qing period China was a half colonial society and was experiencing the fall of its feudal system. The Qing government made The Beijing Agreement with Britain and France to jointly besiege Tian Ping Tian Guo. 56 Guang Xu is the name of the ruling period of an emperor in the Qing Dynasty, so this emperor was also called the Emperor Guang Xu (1871–1908). 57 Guanying Zheng (1942–1922) was a reformist in the late Qing dynasty. 58 Hongzhang Li (1823–1901) was a reformist and a famous minister in the late Qing Dynasty. He was appointed by the Emperor Guang Xu to supervise a number of new industrial constructions in shipping, weaving and steel. 59 Xiucheng Han, ‘The Legislative History of Chinese Patent Law’. https://www.fxkj.gov.cn/zscq/ zlsh.html. 60 Wei Xin Movement was a reform movement led by the Emperor Guang Xu. It last only 103 days, and it was thus called the Hundred-Day Reform. 61 Although the implementation of this Regulation was relatively short, it remained as a historical turning point in the Qing Government’s attitude from “restraining the commerce” to “encouraging the commerce”.

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to the different levels of technical progress. In the circumstance of a 10 year patent right, the inventor shall successfully copy any advanced foreign devices that China did not have62 ; in the circumstance of 30 year patent right, the inventor shall invent daily necessities that none of the countries have63 ; in the circumstance of 50 year patent right, the inventor shall invent new processes to produce ships, guns and cannons which exceeded the technical level of western countries or initiate massive construction benefiting the country and the people.64 However, it was abandoned after only two months. This Regulation is therefore considered merely one of the sprouts in the Chinese patent system.65 From this part of patent legislative history, we can make several observations. Firstly, the patent legislation of both the Qing Dynasty and Tai Ping Tian Guo was not realistic. It can be assumed that at that time people started to understand the concept of a “patent” but there are no reliable records showing the number of patent applications made or granted during that time. Secondly, some legislators were concerned about the monopoly effects of a patent and ignored its other social and economic benefits.66 For instance, novelty or industrial applicability was not considered fundamental criteria to make something patentable. Thirdly, a good patent law needs a stable regime. In the late 19th century, the Qing Dynasty itself was threatened by the rapid decline of feudalism in China and international pressure from industrialized western countries at that time. Consequently any emerging patent law would not be turned into reality as the Qing Dynasty concentrated on greater problems.67

4.3.3 Patent Legislation 1912–1949 From 1912 to 1944, there were 692 patent applications and 175 patents granted to the patent right holders, giving an average of 21 patent applications and 5 honorary certificates granted annually. Continuous warfare during this period means that reliable statistics relating to the growth in patent applications are not easily obtained.68 The quality of inventions and research and development at this time was also poor. A company such as the Huang Hai Chemical Industry Research Institute, which was sponsored by Yong Li Ltd.,69 was among the few companies which could compete with the levels of research and development being produced in other countries. 62 Article

3, Regulation on Rewarding the New Technology 1898. Article 2. 64 Ibid., Article 1. 65 Xiucheng Han, op. cit. 66 Ibid. 67 Ibid. 68 Baichun Zhang, ‘The Choices of Strategies of the Development of Science and Technology in Modern China 1607–1966’, Journal of China Science Academy, Volume 21, Issue 6, 2006. 69 Linying Tang and Wansuo Lou, ‘The Efforts and Failures between 1927–1937’, Jianghai Academic Journal, Issue 4, 1999, p. 147. 63 Ibid.,

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In addition, it remains questionable how many of the patents granted during this period would realistically become commercial products. Internally, there was no sufficient income to fund major research projects. For instance, two thirds of its yearly income came from agriculture, but this endured frequent interruptions due to wars. Yearly financial budgets also gave priority to military defence spending and debt repayments. Externally, the invasion of Japan required the whole country to engage in the war against Japan. During the war years it would have been difficult to implement any law effectively.

4.3.4 Patent Legislation 1949–1963 In Xiucheng Han’s article The Chinese Patent Law Legislative History,70 Mr. Han gave a very vivid description of the patent system during this period. In 1950, the State Council of the PRC decreed the Provisional Regulations on Protecting Inventive and Patent Rights. The principle of the Regulation was that an inventor would be able to apply for inventive or patent rights according to his/her own will. The exception was that inventions related to national defence, medicines, agriculture products related to public interest, inventions created within the scope of the inventors’ occupation, or commission inventions, would only be granted the Invention Certificates instead of the Patent Certificates.71

The PRC was established in 1949.72 At the beginning, a planned economy was established in which priority was given to heavy industry, financial, human and natural resources.73 The policies between the 1950s and 1960s demonstrated that patent rights were adopted by China during that time.74 The meaning of “patent right” then was different from what it means today. It meant a personal right, an honor or a title to ensure the legal status of the patent right holders, and did not reward the individuals economic rights. Patents and inventions became property of the state.75 This patent policy was influenced by the planned economy.76 A Chinese IP practitioner, Zhengfa Wang, recalls that it was commonly seen that inventors invested lots of money but gained little or even no rewards, and the inventions could be used for free by anyone because they were property of the state.77 In other words, the inventions lost their commercial value and the rights were not 70 Xiucheng

Han, op. cit.

71 Ibid. 72 The

national laws and regulations in China are passed by the National Congress.

73 Zhikai Dong, ‘The Existing Conditions and Structure of Investment in Capital in Construction in

the 1950s, Contemporary China History Studies, Issue 6, 2005, p. 19. 74 Xiucheng Han, op. cit. 75 Ibid. 76 Zhengfa Wang, ‘The Men Who knocked the Door of Chinese Patent System’, China Invention and Patent, Issue 3, 2009, p. 8. 77 Ibid.

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exclusive. This in turn had an effect on the motivation of inventors as they had little incentive to further develop their work when they found out they would only be rewarded an honor with no associated commercial return.78 Also, the fact that only “4 patent rights and 6 inventive rights were granted”79 shows us that rewarding individuals with certificates or honors instead of commercial rights was not able to maintain the enthusiasm of the inventors, and was not a practical and realistic method of encouraging scientific development or innovation.80

4.3.5 Chinese Patent Law 1984 Before the 1978 “Opening Up Policy”, a “One Invention, All Can Use”81 policy was implemented, meaning that all the inventions belonged to the state and could be used by any work unit, organization or individual for free. Under this policy, the inventors received rewards such as certificates of commendation, medals and premiums. The inventors were not able to obtain any long-term economic benefits or even recoup their previous investments from the inventions.82 Today, the economic policy is very different and it can be described as follows. The reform and opening up policy should be deepened and strengthened. We should carry on the reforming direction towards a socialist market economy and better elaborate the basic function of the market in allocating resources. Meanwhile, we should better the state macroscopically planning function.83

In the late 1970s, the demand to establish a patent system in China increased dramatically for two reasons.84 Firstly, after the implementation of the opening up policy, there was general agreement that “To Make Law Is Better than No Law, Faster Legislation Is Better than a Slower One”.85 Secondly, China needed a proper

78 Zhikai

Dong, op. cit., p. 19. Han, op. cit. 80 Author unknown, ‘The Change in the Rewarding System of Technology in China’, Railway Technical Innovation, Issue 2, 2003, p. 11. 81 The original version of this policy in Chinese Pinyin is “Yi Jia Kai Hua, Bai Jia Yin Jin”. The literal translation from Chinese into English is “One flower blooms, hundreds of people can pluck it up” which was considered as a metaphor commonly seen in Chinese culture. To obtain a more direct expression for the convenience of the readers, the author of the book has translated it as a simpler phrase “One Invention, All Can Use”. 82 Division of Legislation of CNIPA, Guide to the Newly Amended Patent Law, IP Publishing House, 2001, p. 4. 83 This policy was the official policy of “PRC’s National Economy and Social Development 11th Five-Year Plan Compendium” passed by 4th Meeting of the 10th National Congress on 14 March 2006. https://www.chinanews.com.cn/news/2006/2006-03-16/8/704065.shtml. 84 Xiucheng Han, op. cit. 85 This phrase was said by Deng Xiaoping in the late 1970s regarding the new legislative activities. 79 Xiucheng

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patent law to stimulate technology and innovation.86 This resulted in the creation of a modern patent system.87 One important scholar, Professor Chengsi Zheng, was the first Chinese legislator studying foreign IP law abroad since 1949,88 being supervised by Professor William R. Cornish while completing a diploma in IP law at the London School of Economics and Political Science between 1981 and 1983. He introduced the concept of a modern IP law into China. The legislative decisions to build a new IP law system were not easily agreed upon. As two Chinese IP scholars, Jinqing Zhu and Sun Wu, have observed, in China, as a country adopting more than thirty years of planned economy, the system of a modern patent law as derived from a market economy seemed alien.89 Furthermore, a heated debate as to whether China would benefit from such a system arose during that time.90 Xiucheng Han describes the conflict between the conservatives and the reformists in the patent legislative procedure, showing how difficult it was for a traditional country to accept the notion of a patent. There were nationwide stormy debates and arguments on whether to establish a proper patent system in China between the reformists and the conservatives. Some reformist and scientists such as Daxing Wang91 and Sanqiang Qian92 urged that a proper patent system was imperative given the situation. The State Technology Committee carried out a questionnaire. Enterprises, research and development (R&D) organizations and international trade organizations answered the questionnaire in terms of the issues of the patent system, and provided positive feedback. A survey regarding the patent legislations in more than ten developed and developing countries was also carried out. Therefore, the Report of Suggestions on Establishing a Patent System in China was submitted to the State Council in 1979. It was permitted thereafter and the National Patent Bureau was established. But many conservative people started to advocate: a patent system was only a monopoly protecting the giant foreign companies’ interests and it did not reveal the reality that technologists and scientists would be heavily exploited by the entrepreneurs.93 As above, Zhengfa Wang also observes similar feedback from the conservative people that “a patent system means to adopt principles from other patent systems 86 Xikai

Wen, ‘The Revisions of Chinese Patent Law towards Completion’, Annual Report of Chinese IP Law 2000, IP Publishing House, 2000, p. 172. 87 Jinqing Zhu and Sun Wu, ‘Criteria of Patentability and Scope of Protection of the Chinese Patent Law’, American IP Law Association Quarterly Journal, 1985, p. 117. 88 The Law Institute of Chinese Academy of Social Science,‘The Profile of Professor Chengsi Zheng’, Scholars’ Columns, Law Institute of Chinese Academy of Social Science official website. https://www.iolaw.org.cn/showscholar.asp?id=81&type. 89 Jinqing Zhu and Sun Wu, ‘Criteria of Patentability and Scope of Protection of the Chinese Patent

Law’, American IP Law Association Quarterly Journal, 1985, p. 117. 90 Ibid. 91 Daxing Wang was former Vice Chairman of the Chinese Science Commission. 92 Sanqiang Qian was a well-known Chinese physicist. 93 Xiucheng Han, op. cit.

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around the world to solve the issues in technology development in a socialist country”.94 Here, the uncertainties of the conservatives towards the patent system can be observed.95 The facts spoke the truth. Xiucheng Han notes that on the first day of accepting patent applications, the National Patent Bureau received 3455 applications.96 The figures strongly show the necessity of a proper patent legislation. Many inventors rushed to the Patent Bureau to secure their patent rights.97 The Patent Law 1984 can be regarded as a milestone that satisfied the great needs of inventors. Now the discussion turns into the development of modern Chinese patent system in an international trade environment.

94 Zhengfa

Wang, op. cit., p. 12. Dong, op. cit., p. 15. 96 Xiucheng Han, op. cit. 97 Ibid. 95 Zhikai

Chapter 5

China’s Updates in Patent Law

5.1 Introduction This chapter focuses on China’s updates in patent law. China amended her patent law for the first time in 1992. The second amendment was regarded as a legal preparation for China’s entry into WTO in 2001.1 The 2009 amendment was based on the need of development of domestic economy. Furthermore, this chapter analysis the types of patent rights, examination on invention, utility model and design patents, patent licences, injunctions, preservation of evidence, patent infringement and noninfringement actions, false marking actions, non-false marking defence, the civil, administrative and criminal liabilities and remedies in the Chinese patent system.

5.2 The 1992 Amendment China amended her patent law in 1992. There were two external reasons, the first is that China wanted to join the WTO. Since the implementation of the opening up policy in 1978, China faced a dilemma: whether to join more international treaties and open her domestic market or to remain isolated from the international trade. As a huge developing nation, China took both the development of domestic industry and the access to domestic markets for foreign ventures into consideration2 and became one of the Uruguay Round observers in 1982. Today China is regarded as the “World’s

1 Changli Liu, ‘One World Factory in China and Our Countermeasures’, China Industrial Economy,

Issue 10, 2002, p. 44. Wang, ‘Entry into WTO is a Second Opening Up Policy of China towards the World’, Newspaper of Xinjing, 1 December 2004.

2 Wenxiang

© Intellectual Property Publishing House and Springer Nature Singapore Pte Ltd. 2020 N. Zhang, A Confucian Analysis on the Evolution of Chinese Patent Law System, https://doi.org/10.1007/978-981-13-9027-2_5

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Factory”.3 This means China has obtained more intensive manufacturing capabilities and created more local employment opportunities.4 The second external reason is IP Rights Memorandum of Understanding in 1992 between US and China.5 China amended the Patent Law 1984 and a series of IP regulations according to the requirements in this Memorandum of Understanding between the two countries.6

5.3 The 2001 Amendment China joined the WTO in 2001. The second amendment of the Patent Law can be regarded as further legal preparation for the Chinese entry into the WTO. China has now been in the WTO for nearly20 years. Patrick Low discusses the function of WTO in his article Is the WTO Doing Enough for Developing Countries?7 He points out that the “Commitment” value of international cooperation as follows. By making an international commitment to a policy change at some future date, a government is transmitting a credible signal about the intended direction of policy, as well as protecting the policy commitment more effectively from domestic interest group for reversal.8

The positive effects of joining the WTO may seem obvious. A credible world image could be built up and it is good for the country to be active in international trade and technology transfer. Meanwhile, the outside world would have a chance to see the new development inside China.9 International cooperation and modifications of domestic laws improved the transparency and credibility in the international trade step by step. Patrick Low discusses the further factor of trading behavior in his article. He asks if “by participating in the WTO whether the developing countries can influence the behavior of their trading partner in their favors” and whether “if they cannot influence the behavior of trading partners, certain guarantees and protection can be enjoyed simply through the rights of membership”.10 Low answers the second question by stating that “The fact that trading partners are required to subscribe to a set of trading rules is intrinsically advantageous because the rules are based on precommitment and confer greater certainty and less arbitrariness on the trade policy 3 Changli

Liu, op. cit.

4 Ibid. 5 PRC

IP Rights Memorandum of Understanding 1992. Cai, ‘The Co-operation in Conflicts: The Game in US-Sino IP’, China WTO Tribune, Issue 3, 2005. 7 Patrick Low, ‘Is the WTO Doing Enough for Developing Countries?’ in George A. Bermann and Petros C. Marvroidis (eds.), WTO Law and Developing Countries, Cambridge University Press, 2007, p. 326. 8 Ibid. 9 Zhikai Dong, op. cit., p. 9. 10 Patrick Low, op. cit., p. 327. 6 Wei

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behavior of partners.”11 This analysis is reasonable since the international treaty provides a certain degree of stability in trade policies for each participant. The entry into WTO and the updates of Chinese patent law to achieve compliance with TRIPS also reflects the core spirits of the Confucian books The Book of Rites and The Book of Changes. As discussed earlier, the collective awareness from The Book of Rites taught Chinese people that to improve the Chinese economy is not a task only accomplished by China. China regards its role as the world’s manufacturing factory and exports many goods that other countries need. This cooperation benefits both China and its trading partners. All the nations have a shared future in mankind. The WTO, as a trade organization with participation from many members, is a system of rules that China joined in order to improve trade with other members and increase trust. On the other hand, the evolution theory of change and development written in The Book of Changes taught us that the laws shall change according to the evolution of the domestic economy. Two economists Lin Sun and Qifang Wang note that from 1996 to 2000, exports contributed around 8.4% of the overall economic growth which exceeds the contribution of importation to the economy.12 This means China’s economy was turning into a demand-oriented economy around the late 1990s. At that time, due to the lack of domestic consumer demand, China manufactured extra goods which were sufficient to supply the trade demand.13 The entry into the WTO and adoption of the TRIPS rules will increase the trust among its members in the worldtrading environment. Thus, this 2001 amendment of Chinese Patent Law was a must.

5.4 The 2009 Amendment On 24 May 2006, Chinese former Prime Minister Wen Jiabao raised the goal of “nourishing creativity and establishing a creative country” during the 7th National Representative Conference of Chinese Scientists’ Association.14 Based on this goal, the State Council issued a Guideline of National IP Strategy requesting the patent law to be amended according to the goal of nourishing creativity. After around three years of preparation and drafting, the Standing Committee of the National Congress passed the third amendment of Chinese Patent Law on 27 December 2008 and the new amendment was implemented on the 1 October 2009. This amendment has its own legislative features which are different from the previous two amendments. Firstly, it has a different legislative background. The

11 Ibid. 12 Lin

Wang and Qifang Wang, op. cit.

13 Ibid. 14 The

original Chinese Pinyin of this goal is “Jian Chi Zi Zhu Chuang Xin, Jian She Chuang Xin Xing Guo Jia”.

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1992 amendment was passed at a time when China had a planned economy.15 A planned economy is an economic system where decisions of production and investment are formulated by a central authority such as a government agency.16 The 2001 amendment was passed while China had a planned commodity economy. A planned commodity economy is a combination of a planned economy and market mechanisms which will lead to the expansion of domestic and international trade in Chinese economic reform. The 2009 amendment was carried out in a socialist market economy which embraces the principle of “protecting the lawful rights of the patent right holder and encouraging invention and creativity”.17 Secondly, this amendment was based on the needs of the developing domestic economy. The previous two amendments both faced international pressures such as the need to meet WTO obligations. However, the third amendment aims to resolve the problems emerging from the Chinese patent system itself in order to keep the balance between the patent right holders and public interests. Thirdly, the legislative procedure is more open and transparent.18 For instance, at the beginning of drafting the new amendment, the Division of Regulations of CNIPA opened research projects covering 19 topics of the amendment to the general public. It held 9 discussion seminars on the amendment draft involving councils, patent offices, patent agencies, law firms, enterprises and universities in Beijing, Ningxia, Shandong and Jiangsu. Two delegations visited Japan and the US for discussions and suggestions on the draft.19 When the 2009 amendment benefits both the domestic and overseas patent right holders. This reflects the belief of “Ren” in Confucianism. In The Analects, Confucius said “For the man of perfect virtue, wishing to be established himself, he also seeks to establish others; wishing to be enlarged himself, he also seek to enlarge others.”20 This is the core spirit of humanity in Confucianism and was discussed earlier. The legitimacy of the 2009 amendment reflects “Ren”. For instance, the revised Article 22 of Chinese Patent Law 2009 changed the requirement of “relative novelty” to “absolute novelty”.21 “Relative novelty” means the requirement of novelty only requires that the patent application has not been disclosed in China before the date of filing.22 15 A planned economy is an economic system in which decisions regarding production and investment are made in a plan by a central government. Please see Alec Nove, ‘Planned Economy’ in Steven N. Dulauf and Lawrence E. Blume (eds.), The New Palgrave: A Dictionary of Economics, Palgrave Macmillan, Volume 3, 2008, pp. 879–880. 16 Ibid., pp. 879–880. 17 Article 1, Chinese Patent Law 2009. 18 Division of Legislation of CNIPA, The Guidelines of the Third Amendment of Chinese Patent Law, IP Publishing House, 2009, p. 2. 19 Ibid., p. 92. 20 The original Chinese Pinyin is “Fu Ren Zhe, Ji Yu Li Er Li Ren, Ji Yu Da Er Da Ren”. James Legge (trans.), The Analects, op. cit., Verse 28, Chap. 6. 21 Article 22, Chinese Patent Law 2009. 22 Qingyuan He, ‘The Predicament and Countermeasure—Solution of the Implementation of the Absolute Novelty in China’, Journal of Guangxi Administrative Cadre Institute of Politics and Law, Issue 1, 2010, p. 72.

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If the technology in application has been disclosed somewhere else outside China, this situation would not spoil the “relative novelty” standard.23 However, “absolute novelty” requires the patent application to be novel within the worldwide scope, which means a higher standard.24 Thus, one could not use technologies disclosed outside China to file for patent rights in China. On one hand, foreign companies do not need to worry that their technology has not been disclosed in China (but disclosed outside China) and would be used by other parties in their Chinese patent application. On the other hand, this amendment actually benefits domestic firms as it urges them to create robust and novel technology to satisfy the higher threshold in their patentability.

5.5 The Entry into Patent Cooperation Treaty (PCT) The first world PCT application was filed on 1June 1978.25 16 years later, China joined the PCT on 1 January 1994 and CNIPA subsequently became a PCT application Receiving Office, International Searching Authority and International Preliminary Examination Authority. Since the second amendment in 1992, it was difficult to revise the patent law again for the PCT requirements. Therefore, PCT related content in the Chinese patent system was issued by a writ of the Commissioner of CNIPA in the mid-1990s. In Implementing Regulations of Chinese Patent Law 2001, sixteen new articles related to PCT as Chap. 10 were issued. It can be seen the entry into the PCT made a huge impact on the development of technology. The Chinese economy boomed after mid 1990s, many traditional industries such as real estate development, construction, manufacturing, retailing, wholesaling and complementary industries are playing the leading roles in Chinese economy.26 For instance, after 30 years of the opening up policy, real estate development becomes the main industry making 5% of the yearly GDP.27 Real estate development and construction work solved the accommodation issues of the escalating population and created more employment opportunities.28 Meanwhile, creative and new technology industries started to file the PCT patents. Between 1994 and 1997, PCT applications from China were around 100 every year; for later years the figures were 11,704 applications in 2004 and 2452 applications 23 Ibid. 24 Ibid.,

p. 71. Davis, ‘A Million Filings Later—A Look at the Patent Cooperation Treaty’, Knowledge Link Newsletter, Thomson Scientific, April 2005. an IP training program. 26 The News Centre of China.com.cn, ‘11th Five-year Plan—the Industrial Structure Is Upgraded’, The Special Topic of 11th Five-year Plan, 2006. https://www.china.com.cn/zhuanti/115/cyjg/ node_6111883.htm. 27 Author Unknown, ‘Thirty Years, Chinese Real Property Development Becomes the Holding Pole Industry!’, Chinese Real Property Newspaper, 25 December 2008. 28 Ibid. 25 Tracy

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in 2005.29 In 2006, the total annual PCT applications from China amounted to 1.8% of worldwide PCT applications.30 In 2006, the company filed the most PCT applications was Huawei Ltd.31 Most Chinese filings came from Shenzhen, Beijing and Shanghai.32

5.6 International Trainings Along with the rise of Chinese patent applications and the development of the Chinese patent legal system in recent years, China has built up many international cooperation in the patent field around the world. For instance, a CNIPA-European Patent Office (EPO) collaborative project called “IPR2” regularly holds patent training classes or tours around China. It shows the efforts to reinforce the capacity of local IP officers to handle patent cases more efficiently. Its aim is to grow communications and operations networks between Europe and China and to link national and local resources for stronger enforcement of IP rights.33 The Chinese and EU experts provide an overview of the status of the protection, best practices and trends of development regarding patent enforcement in China and the EU, including civil and criminal enforcement, customs protection and protection at trade fairs.34 It also provides programs such as the Sino-EU Study Tour on IP management in Science and Technology and workshops in IP and Technology Transfer.35 Meanwhile, IPR2 has published many important books in English that introduce the Chinese patent system and new amendments to overseas readers such as The Revision of China’s Patent Law—Legal Texts and Documents on the Drafting Process 2006—2008 and Updated Patent Protection Roadmap: New Implementing Regulations for China’s Patent Law.

29 Lianyuan Ma, ‘International IP Protection and PCT’, Journal of Invention and Patent, Issue 5, 2006, p. 55. This article is an abstract of Mr. Ma’s speech at an IP training program The Cutting-edge Issues in IP, 27–28 March 2006. 30 Ibid. 31 Ibid. 32 Ibid. 33 IPR2,‘EU-China Training on Patent Enforcement’, Activity and Results, EU-China Project on the Protection of IP Rights (IPR2), IPR2 official website, 23–24 March 2010 Shanghai and 26– 27 March 2010 Fuzhou. https://www.ipr2.org/index.php?option=com_content&view=article&id= 822:eu-china-training-on-patent-enforcement&catid =07:capacity-building&Itemid=82. 34 Ibid. 35 Ibid.

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5.7 Patent Rights 5.7.1 Types of Patent Rights In China, there are three types of patents: invention patent, utility model patent (petit patent) and design patents.36 The invention patent receives 20-year protection and the other two types of patents each receive 10-year protection.37 Article 2 of this Law, “inventions-creations” mean inventions, utility models and designs.

Article 34 where, after receiving an application for a patent for invention, the Patent Administration Department Under the State Council, upon preliminary examination, finds the application to be in conformity with the requirements of this Law, it shall publish the application promptly after the expiration of eighteen months from the date of filing. Upon the request of the applicant, the Patent Administration Department under the State Council publishes the application earlier.38 Article 35 within three years from the date an invention patent application is filed, the patent administration department under the State Council may, upon request made by the applicant at any time, carry out substantive examination of the application. If the applicant, without legitimate reasons, fails to request substantive examination at the expiration of the time limit, such application shall be deemed to have been withdrawn. The patent administration department under the State Council may carry out substantive examination on its own accord, as it deems it necessary.39

From the three articles above, it can be seen that, China follows a principle of “requesting publication and examination as early as possible” for inventions.40 There are many advantages to this policy. The Former Head of the Legislation Division of CNIPA, Mr. Xintian Yin, explains these advantages in his recent book, An Introduction to Patent Law of China. Firstly, since the limit for requesting patent examination is three years, the applicants may file as early as possible.41 Secondly, this policy will save on the administration cost of the patent examination.42 To counter the possibilities of the emergence of immature applications, the applicants are given three years43 to identify if their inventions will have commercial value or to ascertain market potential, after which they have the choice not to request examination.44 The three years period given to the applicants helps to filter out many low quality applications at the 36 Article

2, Chinese Patent Law 2009. Article 42. 38 Ibid., Article 34. 39 Ibid., Article 35. 40 Division of Legislation of CNIPA, Guide to the Newly Amended Patent Law, China IP Publishing House, 2003, p. 235. 41 Xintian Yin, An Introduction to the Patent Law of China, IP Publishing House, 2012, pp. 320–321. 42 Division of Legislation of CNIPA, op. cit., 2003, p. 235. 43 Article 35, Chinese Patent Law 2009. 44 Xintian Yin, op. cit., p. 322. 37 Ibid.,

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first stage. To some extent, this also increases the efficiency of the administration of patent examination.45 It is worth discussing the patent quality here. Chris Dent writes in his 2006 article about patent quality that most of the work in this field has focused on the quality of the outcome of the examination process—the granted patents.46 Chris Dent’s article focuses on the central argument that an assessment of the decision-making processes of examiners may be an important tool for the investigation of the quality of the examination phase of the patent application procedure.47 Jihun Chou argues that the importance of patent quality is fundamental, as set out in his 2011 article Evidence of Patent Quality and Its Implications for Patent Policy. The need for patent quality appears even more fundamental than any other elementary issues, such as the role of the patent system which should play within society and its harmonization with other legal systems, because this goes to the very confidence in the system itself, namely that only those inventions worthy of protection will be patented and the quality of the protection granted will be equivalent to the inventive act that lies behind the invention.48

The Chart of the Domestic Patent Applications in China from 1986 to 2000 in Wei Lyv’s book IPR System Challenge and Countermeasure shows the quantity of inventions, utility models and design applications made each year. Regarding the percentage of utility model applications, it started at 70% in 1986, reached its maximum at around 80% in 1988 and the lowest at 50% in 2001.49 Regarding invention applications, it started as 25% in 1986, reached its lowest at 15% in 1997 and went up to its maximum at around 20% in 2000.50 Regarding design applications, these rose gradually from 5% in 1986 to 30% in 2000.51 From this set of figures we can draw an observation that more patent applications were concentrated into smaller projects such as utility models and designs.52 However, the statistics of design patents will be put aside because they are not comparable with inventions, and deal purely with utility models. Applicants may know that patent management inventions are stronger in quality than utility models, so why did they try to file more utility models than invention patents? There are two reasons that might be put forward for consideration. Firstly, the examination process with regard to utility models is simpler and shorter. This is the legislative and practical advantage of the utility model. The utility model requires only a preliminary

45 Ibid. 46 Chris Dent, ‘Decision-making and Quality in Patents: An Exploration’, European IP Review, 28(7), 2006, pp. 381–388. 47 Ibid. 48 Jihun Chou, ‘Evidence of Patent Quality and Its Implications for Patent Policy’, European IP Review, Issue 9, 2011, p. 565. 49 Wei Lyv, IPR System Challenge and Countermeasure, IP Publishing House, 2004, the chart and the conclusion were both quoted from p. 26. 50 Ibid. 51 Ibid. 52 Ibid.

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examination and the examination process takes around 6 to 8 months.53 If granted the applicant can receive the patent certificate within 11 months. It is reported that the process will be further reduced to less than 6 months in 2009.54 On the other hand, an invention patent applicant has to wait at least three years or longer to see the result of their application. Compared with invention patents, utility model patents are easier and quicker to obtain, and so are perceived as attractive to applicants especially those with limited funds or time. Secondly, applicants may hope to receive the preferential benefits of local policies, and with this in mind the applicants may go for utility models. The tax deduction policy in the mechanical industry is a good example. In this industry, if an enterprise passes a High Technology Enterprise Examination by the provincial examining authority, its annual tax will be deducted from a general 25 to 15%.55 A tax deduction in the public policy like this is designed to encourage the local mechanical industry to use more high technology.56 In addition to the conditions that have to be satisfied, is the requirement that “the enterprise should obtain independent IP rights on its main products or service”.57 We will notice that if the enterprise thinks the ownership of a patent right will best represent its high R&D and innovation capability, the sooner the applicants obtain the patent rights, the higher the probability they will pass the High-Tech Enterprise Examination. Therefore, the application for utility model patents could be viewed as the best answer to this question since its examination requirements are relatively lower and the examination period is shorter. Meanwhile, some other opinions on the quality of utility models are worth analyzing here. Jihun Chou writes in his article that a patent system should produce stable and reliable patent rights, and that patent policy should always be directed to ensuring high patent quality.58 It is questioned by three Chinese scholars Shuhua Wang, Airong Guo and Yanpeng Sun whether China should keep the utility model as one type of patent since its examination requirements are lower and it is easier for anyone to claim it is invalid.59 Furthermore, Professor Handong Wu predicts that this ambiguity will leave a “loophole” in patent quality control that is opposed

53 Xiaoliang Liang, ‘The Examination Period of Utility Model Patent Is Expected to Be Shortened’, The Newspaper of Daily Economy, 19 October 2008. 54 Ibid. 55 Canjin Zhang, ‘The Re-examination of High Technology Enterprises Brings New Investment Opportunities’, Financial and Economic News, Sina.com.cn official website, 6 January 2009. https:// finance.sina.com.cn/stock/report/20090107/10002612881.shtml. 56 The goal of tax deduction policy like this can be found in Notice on Deduction of Income Tax of Technical Innovation Enterprises issued by Ministry of Tax and the General Bureau of Tax, Financial and Tax Policy 2006, No. 88. 57 Article 14 (4), Management Measures on the Examination of High Technology Enterprise, Beijing Municipal Science and Technology Commission. 58 Jihun Chou, op. cit., p. 565. 59 Shuhua Wang, Airong Guo and Yanpeng Sun, ‘The Balance of Interest—The Restructure of Utility Model Patent System’, Social Scientist (Supplement Issue), 2005, p. 142.

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to the fundamental meaning of the legislative purpose. In addition, he predicts and describes this issue as follows. Some scientists will manage to get patent rights for their utility models or designs which do not contain much creativity or commercial value, thus, they can get research funds or awards from organizations… the preliminary examinations do not suit the demand of technology development. The inventor holds the opinion that regarding utility model and design, at least an examination on novelty is necessary. Due to the difficulty of the examinations on creativity and industrial applicability and the legislative policy of efficiency, we can see a substantial examination of inventiveness and practical applicability is not suitable for the current situation.60

However, in an interview with the Newspaper of Daily Economy, Zhihui Liu, the Head of Division of Utility Models explains that the utility model is very useful to protect the patent rights of creative start-ups or individual inventors although it has a narrow protection scope and is less stable than invention patents.61 Meanwhile, the quality of utility model patents has risen recently. The statistics in a report released by CNIPA, The Development of Chinese Utility Model Patent System, appear to prove this point. According to this report, in 2000, China occupied 42% of the worldwide utility model patent applications; in 2010, this figure rose to 83%.62 From 2002 to 2011, 1,667,000 utility models were granted patent rights, 10,044 of them were re-examined by the Appeal Board of CNIPA with invalidity requests amounting to 0.06%.63 In the 9532 invalidity request cases completed and decided by the Appeal Board of CNIPA from 2002 to 2011, 35.6% of them were decided totally invalid and 11.8% of them were decided partly invalid.64 This shows that the quality of utility model patents was relatively good. In 2011, applicants of utility model patents came from 59 countries including China.65 The top six foreign applicants were Japan, US, Germany, South Korea, Switzerland and France.66 This shows that the utility model patents are still very valuable in the view of some patent applicants.

60 Ibid., pp. 148–149. In this paragraph, the term “practical applicability” comes from Article 22 of the official English translation of Chinese Patent Law 2009 and has the same meaning with “industrial applicability”. 61 Xiaoliang Liang, op. cit., 19 October 2008. 62 Qun Li, ‘The Development of Chinese Utility Model Paten System’, China IP Newspaper, 21 December 2012. 63 Ibid. 64 Ibid. 65 Ibid. 66 Ibid.

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5.7.2 Examination on Invention, Utility Model and Design Patents Article 39 and Article 40 of Chinese Patent Law 2009 describe the situation when different types of patent satisfy the requirement of patentability. Article 39 if no reason for rejection is discerned after an invention patent application is substantively examined, the patent administration department under the State Council shall make a decision on granting of the invention patent right, issue an invention patent certificate, and meanwhile register and announce the same. The invention patent right shall become effective as of the date of announcement. Article 40 where it is found after preliminary examination that there is no cause for rejection of the application for a patent for a utility model or design, the patent administration department under the State Council shall make a decision to grant the patent right for the utility model or the patent right for the design, issue the relevant patent certificate, and register and announce it. The patent right for a utility model or a design shall take effect as of the date of the announcement.67

Utility models and designs only require preliminary examination which means a formalities examination. There are two items that need clarification. The first item is whether the subject is consistent with the requirement of Rule 2 of the new Implementing Regulations of the Patent Law 1985 which received its latest amendment in 2010.68 There were some articles needing further clarification within the Chinese Patent Law when it was issued in 1984. As a consequence, the State Council promulgated the Implementing Regulations as a supplementary instrument to further explain the patent law in 1985.69 In Rule 2 of the Implementing Regulations, a utility model is defined as any new technical solution relating to the shape, structure or their combination of a product suitable for practical use.70 So any subject out of this scope would not be granted a patent right as a utility model. The second item is to examine whether the documentary requirements are fulfilled. According to Rule 18 of the Implementing Regulations, the description of an application for a utility model should include technical fields, background art, contents, and description of figures and modes of carrying out the utility model. If any aspect of the application fails, the patent right will not be granted.71 Here it is useful to consider whether the preliminary examination functions better if it includes a patent search. As Internet technology has improved, CNIPA now provides a free on line patent search database in both English and Chinese languages categorized by publication number, date, application number, title, abstract and 67 Article

40, Chinese Patent Law 2009. 2, Implementing Regulations of the Patent Law 2009. 69 The supplementary function of Implementing Regulations of the Chinese Patent Law 2009 is to further explain the legal terms in the patent law, to cover the supplementary issues that the patent law has not covered and to guarantee a good implementation of the patent law. It was issued by the State Council. 70 Rule 2, Implementing Regulations of the Patent Law 2009. 71 Ibid., Rule 18. 68 Rule

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inventor.72 After the issue of Chinese Patent Law 1984, for a long time the patent search activities for both applicants and examiners were considerably more difficult than today. Since the patent applications and granted records were all preserved as paper documents, many inland and overseas applicants were not able to carry out a complete patent search. After the opening of the free on-line search database, this activity has become much easier for both examiners and applicants. However, as prevention is more effective than treatment, putting a patent search into the preliminary examination at an early stage may be more useful than requesting it when the infringement happens. Regarding the preliminary examination of a design, firstly it is necessary to ensure the subject matter is consistent with the requirements of Rule 2 of Implementing Regulations. In Rule 2 a design is defined as any new design of the shape, pattern, or their combination, or the combination of the color with shape or pattern, of a product, which creates an aesthetic feeling and is suitable for industrial application.73 However, it is important to distinguish a design application from a utility model application, which must contain a technical significance or be able to change the function of a product. This is different from the aesthetic significance of a design application. Secondly, unlike a utility model application, a design application requires the essential portion of the design, the colors for which protection is sought and the omission of any view of the product incorporating the design. Furthermore, any brief description or explanation shall not contain any commercial advertising and shall not be used to indicate the function of the product.74 Sometimes a sample or model of the product incorporating the design may also need to be submitted.75 Thirdly, the issue of patent searches during preliminary applications (as per the utility model) is also open for debate. Additionally, regarding the debate on preliminary examination, a Shanghai High Court judge Xiaodu Zhang has pointed out the defects of the preliminary examination system. In a recent article, he reminds us that with the increasing awareness of patent value, the preliminary examination system could be easily used by unscrupulous applicants to obtain patent rights on low quality applications.76 Once the patent rights are granted, they can sue their business rivals for patent infringements. In the patent infringement cases, when the defendants claim that they did not carry out the infringements, it is the defendants’ responsibility to prove the granted patent rights do not fulfill the substantial requirements of the patent law.77

72 Free

Patent Search Database of CNIPA. https://www.sipo.gov.cn/zljsfl/. 2, Implementing Regulations of the Patent Law 2009. 74 Ibid., Rule 28. 75 Ibid., Rule 29. 76 Xiaodu Zhang, ‘Some Suggestions on the Third Amendment of Chinese Patent Law’, A 2006 Research on Chinese Patent Law, Division of Legislation of CNIPA (ed.), IP Publishing House, 2007, pp. 103–104. 77 Ibid. 73 Rule

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5.7.3 Patent Licences In this section, several recent significant phenomena concerning patent licences will be introduced and analyzed. Article 12 any unit or individual that intends to exploit the patent of another unit or individual shall conclude a contract with the patent right holder for permitted exploitation and pay the royalties. The permittee shall not have the right to allow any unit or individual not specified in the contract to exploit the said patent.78 Article 13 after the application for an invention patent is published, the applicant may require the unit or individual that exploits the said patent to pay an appropriate amount of royalties.79

The patent rights of the licensors are respected in the legislation and the enforcement of the patent licence contracts is more important. Meanwhile, domestic dramatic rise in law suit cases regarding the enforcement of the patent licence contracts increase rapidly in China.80 The stronger enforcement of the patent licence contact will benefit both overseas and domestic patent right holders.

5.7.3.1

The Royalties of DVD6C Group

In June 1999, Hitachi Ltd., Matsushita Electric Industrial Co., Ltd.(Panasonic), Mitsubishi Electric Corporation, Time Warner Inc., Toshiba Corporation and Victor Company of Japan, Ltd.(JVC), commenced a worldwide joint licensing program (DVD 6C Patent Licensing Group) for patents essential for DVD players charging royalties as 4% of net selling price (with the minimum rate of USD 4).81 Until April 2011, more than 60 Chinese DVD manufacture companies signed licence contracts with the Group.82 The royalties of the DVD 6C Group show the Chinese information technology (IT) industry that adopting the rules of IP seemed more valuable than providing competitive labor prices, affecting the performances and profits of the overall Chinese IT industry.83 A recent trend within the Chinese IT industry indicates that Chinese companies have started to learn and practice patent rules with a higher patent awareness

78 Article

12, Chinese Patent Law 2009. Article 13. 80 Yan Zhang and Jingqing Wang, ‘Foreign Related IPR Cases Draws More Attention’, China Daily, 24 December 2010. 81 DVD6C Group, ‘DVD Patent Licensing Program Announced by Six Companies’, Newsletter, DVD 6C Licensing Group official website, June 1999. https://www.dvd6cla.com/news/001.html. 82 DVD6C Licensing Group, ‘Licensee List of the DVD 6C Patent Licensing Group’, Licensee List, DVD 6C official website, March 2014. https://www.dvd6cla.com/licensee.html. 83 Shenge Ren, Ming Lu and Jianxin You, ‘An Empirical Analysis on the Relationship between Patent Pool and Innovation—The Case of DVD 6C and Hitachi Ltd.’, Research and Development Management, Issue 2, 2010, p. 48. 79 Ibid.,

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than before.84 On the one hand, more competitors will emerge from China in the global patent filing landscape. On the other hand, the Chinese courts and enforcement authorities perform more effectively and rationally in IP cases. Alongside this is an associated development in the regulatory environment for IP industries. In 2002, China founded AVS Industrial Alliance to standardize the audio-video coding standards in its domestic market.85 China ranked 14th on the Global Innovation Index 2019 released by the World IP Organization (WIPO).86

5.7.3.2

Netac—The Firstly Chinese Company Collecting Royalties in the US

One of the first Chinese companies to begin practicing IP rules outside China mainland was Netac Technology Co., Ltd. (Netac). It is a large solution supplier and manufacturer of mobile storage, portable hard disk and U-Chip controller products based in Shenzhen, China.87 In July 2002 CNIPA granted the company a Chinese patent (No. ZL991 17225.6) on “electronic flash memory external storage method device”. It received a US patent (US No.6829672) based on the same invention in December 2004.88 In February 2006, Netac sued PNY Technologies of Parsippany New Jersey (PNY) alleging PNY infringed Netac’s US patent rights on USB flash memory drives.89 Although the dispute was settled out of court, the episode was regarded as a positive signal that when Chinese companies begin protecting their own IP rights in other jurisdictions.90 After a two-year lawsuit, the out-of-court settlement included PNY signed a patent licensing contract with Netac paying patent royalties.91

5.7.3.3

Patent Licensing and the Future Development of Domestic Industry

From the examples above it can be observed that patent licensing rights and rules have been exercised. In this sense, IP operates as a useful catalyst for their sustainable 84 Ying Zhang and Xuezhong Zhu, ‘Analysis of patent Pool—Vanguard in the War of Patent and Standard’, Research and Development Management, Issue 1, 2007, p. 98. 85 Tianfu Li and Daxuan Qing, ‘The Model of Organization and Management of Domestic Technology Standard Alliance’, Journal of Beijing Institute of Economic Management, Issue 4, 2012, pp. 42–43. 86 ‘The Situation of China’s IP Protection in 2019’, https://www.sipo.gov.cn/docs/2020-04/202004 24140814696289.pdf. 87 ‘The Introduction of Netac’. https://www.netac.com/companyintroduction.php?id=1&mid= menu1. 88 Roger Parloff, ‘China Goes A-courting’, Fortune, Volume 153, Issue 5, March 2006. 89 Ibid. 90 Ibid. 91 Jingjing Jiang, ‘Netac Set up a Model in IPR Suit’, China Daily, 7 April 2008.

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development in global business strategies and R&D plans. Companies weak in patent applications and R&D had no other option but to pay royalties to the ones with bigger patent pools.92 In the example of DVD 6C Group considered earlier, the function of patent pools can be observed. John Temple Lang defines patent pools and their function in his 2011 article Patent Pools and Agreements on Standards, noting their role in promoting competition and reducing costs as follows. Technology pools are arrangements by which two or more parties put their patents and other technology together in a package for licensing to members of the pool and to third parties. Licences may be granted by each party, or by one entity on behalf of all the members. In some cases the technologies pooled support an industry standard. According to the guidelines on transfer of technology, pool agreements may reduce innovation by foreclosing alternative technologies. If the patents pooled are substitutes and not complements, price competition between them is prevented. Pools are usually pro-competitive, because they reduce transaction costs and limit aggregate royalties.93

One of China’s largest patent pools is the China Television Union Technology Ltd. (CTU) established by 10 television manufacturing companies in Shenzhen in 2007.94 The first action of this company was signing a cross-licensing contract with Thomson Electronics Company in 2010.95 By then, CTU pooled around 2000 television-related patents.96 The future development of patent pools in China is positive since China’s television industry is especially strong. China has established the Audio Video Standard (AVS) patent pool (Audio-Video Coding Standards), the Intelligent Grouping and Resource Sharing (IGRS) patent pool and CTU patent pool which focuses on IT.97 There is another feature worth observing and analyzing in the development of IP in China and its relationship with the change of economy. It can be seen that Chinese industry was facing outer “growing pain” and domestic challenges.98 In technology transfer, for example licensing, without sufficient bargaining power domestic companies and industries would not be in strong positions.99 In Yongpeng Song and Dajun Wang’s article, The Analysis on the Causes on the Cutthroat Competition in the China Colored TV, some reasons were identified. Firstly, the manufacturing of

92 Ying

Zhang and Xuezhong Zhu, op. cit., p. 98. Temple Lang, ‘Paten Pools and Agreements on Standards’, European Law Review, 36 (6), 2011, p. 887. 94 Tengyang Yang, ‘Ten TV Companies Set Up A Patent Pool—Absorbing 400 Patent in Several Months’, Daily Economy, 19 June 2007. 95 Xiaoliang Pan, ‘Major Chinese TV Companies Signed Agreements with French Thompson’, Xinhua News, 22 January 2010. 96 Ibid. 97 Shengli Wang, ‘Establishing Patent Pool and the Analysis on Its Competitiveness’, Commercial Times, Issue 4, 2009, p. 37. 98 Feng Ling, ‘CTU Took Three Years to Persuade Thompson—An Ice Breaking Action of CTU in the TV Patents’, IT Time Weekly, Issue Z1, 2010, p. 67. 99 Ibid. 93 John

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TV in China outnumbered domestic TV consumption.100 China had 69 TV manufacturing enterprises and the yearly manufacturing figure was around 86,000,000 sets while the domestic consumption was only between 25,000,000 and 30,000,000 sets.101 Secondly, the manufacturing methods of the many TV manufacturers were very similar to each other.102 Thirdly, the products were similar.103 Fourthly, the competitive methods were mainly focusing on the price wars.104 However, when the Chinese TV industry was facing outer challenges, as Feng Ling points out in his article, CTU Took Three Years to Persuade Thompson—An Ice Breaking Action of CTU in the Patents related to Colored TV, collective consciousness and collaboration would be the only path to benefit the development of the whole industry.105 This is a change derived from the method handling the outer pressure or challenges rather than evolving from the inner initiatives. Moreover, this changed the overall attitude towards IP. Thus, IP became a more important factor in the access to the core technologies within the colored TV industry.106 Feng Ling further points out that a key disadvantage in the Chinese colored TV industry is that most of the patents pooled are industrial design patents instead of the core technology.107 Thus, in future patent licensing negotiations, imbalanced bargaining will still exist.108 This actually brings a new question to the overall Chinese TV industry to collectively concentrate on the R&D of the core technology to become more robust and innovative.109 That is, innovation itself must become collective.

5.7.4 Injunctions The patent right holders can seek two types of legal instruments to prevent infringement. These are interlocutory injunctions110 and preservation of evidence.111 In this section, the establishment of these interim remedies in patent law will be discussed and compared. Interlocutory injunctions were introduced into the patent system with

100 Yongpeng

Song and Dajun Wang, ‘The Analysis on the Causes on the Cutthroat Competition in the China Coloured TV’, Journal of Shandong University of Science and Technology, Issue 2, 2005, p. 84. By 2003. 101 Ibid. 102 Ibid., p. 85. 103 Ibid. 104 Ibid. 105 Feng Ling, op. cit., p. 67. 106 Ibid., p. 68. 107 Ibid. 108 Ibid. 109 Yongpeng Song and Dajun Wang, op. cit., p. 86. 110 Article 66, Chinese Patent Law 2009. 111 Ibid., Article 67.

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the second amendment in 2001 and preservation of evidence was added with the third amendment in 2009. Article 66 if the patent right holder or interested party has evidence to prove that another person is committed or is about to commit a patent infringement, which, unless being checked in time, may cause irreparable harm to his lawful rights and interests, he may, before taking legal action, file an application to request that the people’s court order to have such act ceased. When filing such an application, the application, the applicant shall provide guarantee. In the event of failure to provide guarantee, the application shall be rejected. The people’s court shall make a ruling within 48 h upon its acceptance of the application. If an extension is needed under special circumstances, a 48-h extension may be allowed. If a ruling is made to order to have the relevant act ceased, it shall be enforced immediately. The party that is dissatisfied with the ruling may file once for review, and the enforcement shall not be suspended during the period of review. If the applicant does not take the legal action within 15 days from the date the people’s court take measures to have the relevant act ceased, the people’s court shall lift the measures. If the application is wrong, the applicant shall compensate the losses suffered by respondent due to ceasing of the relevant act.112

Article 66 was added to the 2001 amendment to adjust the patent law to comply with Article 41 (1) and Article 50 of TRIPS Agreement. There are four other supplementary regulations or measures regarding provisional injunctions. These are Article 87 of Implementing Regulations on Chinese Patent Law 2009, Chap. 9 of Chinese Civil Procedure Law 2007, No.79 Announcement of CNIPA 2001 and Chinese Supreme People’s Court’s Measures on the Issues regarding Preventing Patent Infringement Activities before Litigation 2001. In Article 66 above, several points need further explanation. Firstly, the meaning of “interested party” should be clarified. The definition can be found in a guiding document issued by the SPC, The Summary of Seminar on the Deciding the IP Cases from Some Courts in China 1998.113 This summary shows that the “interested party” in an IP case includes licensees in licence contracts and who inherit the IP rights when the original owners pass away.114 Secondly, there are some strict conditions for when patent right holders or interested parties may request the court to issue an injunction. The requestor should file a written application clarifying the specific reason, scope and content of the application as well as a detailed explanation of the potential damage on the requestor’s lawful rights if the interlocutory injunction is not issued on time.115 Additionally, significant evidence should be submitted with the application, such as the certificate of patent, instruction and the invoice of annual patent licence fees.116 112 Article

66, Chinese Patent Law 2009. II, (1), Summary of Seminar on the Deciding the IP Cases from Some Courts in China, the SPC, 20 July 1998. 114 Ibid. 115 Article 3, The SPC’s Measures on the Issues regarding Preventing Patent Infringement Activities before Litigation 2001. 116 Ibid., Article 4 (1). 113 Article

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Where a request relates to a utility model, the requestor should also submit a search report provided by CNIPA. Meanwhile, the requestor should submit evidence that the patent infringement is occurring, or is about to occur, including evidence of the infringing products and the comparison reports on the technical features between the lawful products and the infringing products.117 The court shall make a written judgment within 48 h after receiving the request of injunction from the patent right holders or the interested parties.118 The parties can request a review of the decision within 15 days of the receipt of the judgment.119 When reviewing, the court shall put the following factors into consideration: (1) Whether the respondents are infringing or will infringe the patent rights of the patent right holders or the interested parties; (2) Whether the legitimate right of the patent right holders or the interested parties will be harmed if the court does not issue an injunction; (3) The guarantee that the patent right holders or the interested parties provided; (4) Whether ordering the respondents to stop the relevant actions will harm the public interest.120 If the patent right holders or interested parties finally give up the accusation or the respondent’s loss was caused because of the wrong accusation, the respondents may sue in the court with jurisdiction for the remedies from the patent right holders or the interested parties, or choose to claim the remedies on the damages in the patent infringement of the lawsuit brought by the patent right holders or the interested parties.121 It can be observed that the courts must be very cautious in examining a request for an injunction.122 To uphold the lawful rights of the patent right holder is very important, but to prevent the abuse of the law is also valuable. Chinese patent law legislator Xintian Yin observes the implementation of junctions in his book An Introduction to the Patent Law of China and finds that in practice very few cases will seek injunctions.123 He also urges patent right holders to use injunctive relief only when they regard the possibility of patent infringement to exceed 90%.124

5.7.5 Preservation of Evidence Article 67 of Chinese Patent Law 2009 complies with the requirement of Article 50, Provision 1 of the TRIPS Agreement.

117 Ibid.,

Article 4 (3). Article 9. 119 Ibid., Article 10. 120 Ibid., Article 11. 121 Ibid., Article 13. 122 Xintian Yin, op. cit., p. 582. 123 Ibid. 124 Ibid. 118 Ibid.,

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Article 67 to check a patent infringement, when evidence might be lost or might be hard to acquire thereafter, the patent right holder or interested party may, before taking legal action, filed an application with the people’s court for evidence preservation. If the people’s court takes preservation measures, it may order the applicant to provide guarantee. If the applicant fails to provide guarantee, the application shall be rejected. The people’s court shall make a ruling within 48 h from the time of its acceptance of the application. If it rules to take preservation measures, such a ruling shall be enforced immediately. If the applicant does not take legal action within 15 days from the date the people’s court takes preservation measures, the people’s court shall lift such measures.125

This article was added by the 2009 amendment and complies with Article 74 of Chinese Civil Procedure Law 2007 as follows:. Under circumstances where it is likely that evidence may be destroyed or lost, or difficult to obtain later, the participants in the proceedings may apply to the people’s court for preservation of the evidence. The people’s court may also on its own initiative take measures to preserve such evidence.126

Chinese Civil Procedure 2007 was revised in 2017, and Article 74 was modified with new content and appeared as Article 81 in the new law. Article 81 designates that in the event that evidence may be lost or difficult to obtain in the future, the parties may apply to the people’s court for preservation of evidence in the course of litigation, and the people’s court may also take the initiative to take preservation measures. In case the evidence is likely to be lost or difficult to obtain in the future due to emergency, the interested parties may apply to the people’s court where the evidence is located, where the respondent has his domicile or where the people’s court has jurisdiction for preservation of the evidence before bringing a lawsuit or applying for arbitration. Xintian Yin stresses the significance of preservation of evidence. When the patent right holders claim that others’ actions infringe their patent rights, they shall bring forward the evidence of the features of the actions and whether the damaged object falls into the scope of patent protection.127 When the patent right holders claim remedies, they shall provide the evidence of the loss caused by the infringement or the income gained by the infringers.128 Whether the patent right holders are able to successfully provide the evidence will be highly related to whether they will receive the protection and the degree of this protection.129 The very nature of intangible assets, however, means that providing evidence for the infringement of IP rights will be far more difficult than showing interference with tangible assets.130 Furthermore, according to the requirement of Provision 3 of Article 26 of Chinese Patent Law 2009, 125 Article

67, Chinese Patent Law 2009. Article 74. 127 Xintian Yin, op. cit., p. 583. 128 Ibid. 129 Ibid., p. 584. 130 Ibid. 126 Ibid.,

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in the patent application the written description shall contain a clear and comprehensive description of the invention or utility model so that a technician in the field of the relevant technology can carry it out; when necessary, pictures shall be attached to it. The abstract shall contain a brief introduction to the main technical points of the invention or utility model.131 While defining the scope of the invention, at the same time it is arguable that this leads to a situation where the infringers only need to read the patent documents disclosed on-line and may be able to produce the infringing item without contacting the patent right holders or studying the actual patented products.132 In this particular situation the patent right holders cannot usually find the infringement in time. Thus, the preservation of evidence is very crucial to protect the patent right holders. Furthermore, regarding the “guarantee” requirements in the Article 67 of Chinese Patent Law 2009, this will vary according to the different types of evidence requested to be preserved. If the evidence requested includes advertisements, contracts, commercial invoices, account books or inexpensive sample products, the courts do not require a guarantee. However, if the evidence includes large facilities such as giant transportation aircraft, and the preservation of this evidence will cause the respondents damages since they cannot use the facility in a normal and proper manner, a guarantee will be required by the court.133

5.7.6 Patent Infringement Actions Article 11 has been revised three times in 1992, 2001 and 2009 amendments. The original Article 11 in Chinese Patent Law 1984 did not contain the prohibition against importing the patented products or selling or importing the product directly obtained by the patented process. In the 1992 amendment, these two types of new infringements were added into the article. Article 11 after the grant of the patent right for an invention or utility model, except where otherwise provided for in this Law, no entity or individual may, without the authorization of the patent right holder, exploit the patent, that is, manufacture, use, offer to sell, sell or import the patented product, or use the patented process, or use, offer to sell, sell or import the product directly obtained by the patented process, for production or business purposes. After a design patent right is granted, no unit or individual may exploit the patent without permission of the patent right holder, it or he may not, for production or business purposes, manufacture, offer to see, sell or import the design patent products.134

131 Provision 132 Xintian

3, Article 26, Chinese Patent Law 2009. Yin, op. cit., p. 584.

133 Ibid. 134 Article

11, Chinese Patent Law 2009.

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In the 2001 amendment, the new prohibition of “offering to sell the patent products or patent process” was added into the article. This is updated to be consistent with the patent owner’s rights in Article 28 of TRIPS Agreement and to prevent patent infringements in their early stages. It is therefore important to understand which activities constitute “offering to sell”. Article 24 of The SPC’s Measures on the Issues regarding Preventing Patent Infringement Activities before Litigation 2001 specifies that offering to sell means demonstrating the intentions of selling a product or process by advertising, window displays or exhibitions.135 Moreover, a former SPC judge Chidong Huang states:. Offering to sell can be targeting specific individuals or the general public; it can be done by oral agreement or formal agreement; it can be done by exhibitions, presentations, listing for auction, or through telephone, fax, newspaper or Internet.136

If offering for sale has taken place but no substantial damage has been caused, the infringer does not have civil liability for compensation, but still has the civil liability to stop the infringement and eliminate the negative effects.137 In the 2009 amendment, the prohibition on “offering to sell” the design patent right was added into this article although TRIPS Agreement does not contain the prohibition on “offering to sell” in the lesser protection of the design patent right (industrial designs). However, in practice, many design patent cases can be found in the fields of advertising, exhibition or display. Thus, in the 2009 amendment, infringements in invention, utility and design patent products were given the same prohibition. In addition, the new Article 27 in the 2009 amendment designates that the design patent applicant should submit a brief description of the design. This was a new requirement in the application package, along with a written request and drawings or pictures of the design.138 This means in future design patent infringement disputes, the brief description will be a key factor to decide the infringement.

5.7.7 Non-infringement Actions 5.7.7.1

Non-infringement Actions on the Patented Process

Article 61 of Chinese Patent Law 2009 complies with Article 34.1 of TRIPS Agreement regarding the burden of proof in the process patent as follows. 135 Article 24, The SPC’s Measures on the Issues regarding Preventing Patent Infringement Activities

before Litigation 2001. 136 Chidong Huang and Zhi Liu, The New Explanation on Patent Law 2001 and Related Regulations,

Publishing House of People’s Courts, 2002, p. 168. 118 and Article 134, General Principles of Chinese Civil Law 1986. 138 Article 27, Chinese Patent Law 2009. In this article, it requires that the brief description of the design should include the essential portion of the design, the colors for which protection is sought and the omission of the view of the product incorporating the design. The brief explanation shall not contain any commercial advertising and shall not be used to indicate the function of the product. 137 Article

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5 China’s Updates in Patent Law Article 61 if a dispute over patent infringement involves an invention patent for the process of manufacturing a new product, the unit or individual manufacturing the same product shall provide evidence to show that the manufacturing process of their own product is different from the patented process.139

Article 34.1 of TRIPS Agreement provides: “For the purposes of civil proceedings in respect of the infringement of the rights of the owner referred to in paragraph 1(b) of Article 28 of TRIPS Agreement,140 if the subject matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is different from the patented process.”141 Article 61 Provision 1 of Chinese Patent Law 2009 is an exception to the traditional principle by which the burden of proof shall be taken by the claimant.142 In addition, if the product or the technical solution to manufacture of the product has been disclosed to the domestic or overseas public before the date of patent application, the court shall decide that this product does not belong to the “new product” referred to in Article 61.143 Regarding which “evidence” shall be provided in Article 61, it is possible to consider two conditions in Article 34.1 of TRIPS Agreement as standard: 1. If the product obtained by the patented process is new; 2. If there is a substantial likelihood that the identical product was made by the process and the owner of the patent has been unable through reasonable efforts to determine the process actually used.144 5.7.7.2

Prior Art Defence

In the 2009 amendment of Chinese Patent Law, Article 62 was added as a “prior art defence”: Article 22 the prior art means the technology known to the public both domestically and abroad before the date of application.145

… 139 Article

61, Chinese Patent Law 2009. content of Article 28 (b) of the TRIPS Agreement is as follows: A patent shall confer on its owner the exclusive rights where the subject matter of a patent is a process, to prevent third parties not having the owner’s consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by the process. 141 Ibid., Article 34.1. 142 Article 64, Chinese Civil Procedure Law 2007. 143 Article 17, Judicial Explanation of Some Questions in Application of Laws in Hearing Patent Dispute Cases, the SPC, December 2009. 144 Article 34.1, TRIPS Agreement. 145 Article 22, Chinese Patent Law 2009. 140 The

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Article 62 in a patent infringement dispute, if the accused infringer has evidence to prove that the technology or design exploited is an existing technology or design, the exploitation shall not constitute a patent right infringement.146

If during the patent infringement dispute the alleged infringers have evidence proving that their technology or design is covered by prior art or prior design, no patent infringement shall be found.147 In 2009, the SPC issued a new Judicial Explanation on how to apply the laws in patent infringement cases.148 Article 14 of this Judicial Explanation provides that if all the elements of the accused device at issue are the same as or insubstantially different from the relevant elements in a single prior art reference (in the case of design patent, the accused design needs to be the same as or insubstantially different from a single prior art reference), the accused device or design would be deemed to be prior art by the courts.149 A patent attorney Qing Ge describes the “prior art defence” as a “non-infringement defence” and discusses the standard of “insubstantially different” as follows:. To make the prior art defence more practical, the interpretation specifies an approach for testing the defence: comparing technical features of the accused device involved in patent infringement with corresponding technical features of a prior art. If they are identical or have no substantial difference, the accused device should be considered as belonging to the prior art and the accused infringer shall be relieved from infringement liability. Before the issuance of the interpretation, the prior art defence had been adopted in practice, but there was a great deal of inconsistency among courts regarding approaches for testing the defence. Some court held that the prior art defence should be only applicable to the equivalent infringement and said the approach should be: Firstly finding out whether it constitute a literal infringement, if is not the case, the court can proceed with the testing; otherwise, the court must wait for the result of invalidation proceedings instead of directly adjudicating the prior art defence. However, from the approach specified in the interpretation, the courts are now allowed to directly compare the involved features of the accused device with the prior art, regardless of whether the accused device constitutes a literal infringement or not.150

Furthermore, patent law legislator Xintian Yin specifies the two conditions of the court’s comparison mentioned in Qing Ge’s article as follows. Firstly, the “prior art defence” should be carried out by the parties accused of patent infringement.151 Otherwise, even if the patent administration or the courts have obtained the materials of the prior art in the relevant case, they should not be taken into consideration.152 146 Ibid.,

Article 62.

147 Ibid. 148 Judicial Explanation of Some Questions in Application of Laws in Hearing Patent Dispute Cases,

the SPC, December 2009. Article 14. 150 Qing Ge, ‘New Judicial Interpretation—A Patent Owner’s Perspective’, Managing IP, 01 November 2010. https://www.managingip.com/Article/2710657/China-New-juridical-interpretati ona-patent-owners-perspective.html. 151 Xintian Yin, op. cit., p. 539. 152 Ibid. 149 Ibid.,

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Secondly, the evidence to prove “prior art defence” shall come from the parties accused of patent infringement instead of being determined by the investigation of the patent administration or the courts.153 The comparison of novelty can only be carried out in a “single comparison” way. This means one technical feature in the application shall be compared with one single technology rather than a combination of several technologies in the prior art. Similarly, the parties accused of patent infringement shall only use one technology in the prior art to defend themselves instead of using a combination of several technologies in the prior art.154 Qing Ge draws the conclusion that courts were given more power on ruling on the “prior art defence” than before.155 According to the Judicial Explanation, the prior art defence should cover situations where the allegedly infringing device is identical or has no substantial difference compared with the prior art.156 Qing Ge’s opinion on this issue is that the criteria for determining whether there are no substantial differences should be the same as those for determining novelty.157

5.7.7.3

The Doctrine of First Sale

The Doctrine of First Sale is introduced into Chinese Patent Law in the 2009 amendment. Article 69 the following shall not be deemed to be patent right infringement: 1. After a patented product or a product directly obtained by using the patented process is sold by the patent right holder or sold by any unit or individual with the permission of the patent right holder, any other person uses, offers to sell, sells or imports that product; 2. Before the date of patent application, any other person has already manufactured identical products, used identical process or has made necessary preparations for the manufacture or use and continues to manufacture the products or use the process within the original scope; 3. With respect to any foreign means of transportation that temporarily passes through the territory, territorial waters, or territorial airspace of China, the relevant patent is used in the devices and installations for its own needs in accordance with the agreement concluded between the country it belong to and China, or in accordance with any international treaty to which both countries have acceded, or on the principle of mutual benefits; 4. Any person uses the relevant patent especially for the purposes of scientific research and experimentation.158

153 Ibid.,

p. 540. Liu, ‘A study on the Principle of Substantial Equivalence in the Patent Infringement Lawsuit’, (Yongshun Cheng ed.) The Practical Book on Deciding Patent Infringement, Law Publishing House, 2002, p. 87. 155 Qing Ge, op. cit. 156 Ibid. 157 Ibid. 158 Article 69, Chinese Patent Law 2009. 154 Jixiang

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Provisions (2), (3) and (4) of Article 69 of Chinese Patent Law 2009 are commonly seen in the patent systems of most countries. For the first time, the doctrine of first sale was clarified in the Chinese patent system as one of the non-infringements in Article 69 (1) in the 2009 amendment. This was predicted to have huge impact on the business of international companies in China.159 Article 69 (1) was added as a new provision in the 2009 amendment so that the doctrine of first sale is clarified as a non-infringement action. Regarding exhaustion of patent right, Article 6 of TRIPS Agreement provides a clear principle as “for the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 (National Treatment) and 4 (Most-Favored-Nation Treatment) nothing in this Agreement shall be used to address the issue of the exhaustion of IP rights.”160 Also in the Doha Declaration,161 Article 5.d recognizes one of the flexibilities of TRIPS Agreement as follows. The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of IP rights is to leave each member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4.162

The Guideline of the Third Amendment of Chinese Patent Law analyses the legislative background of this new provision focusing on the “parallel import”. This is based on the situation that most advanced patents and technologies are owned by the patent right holders in developed countries and the technology development is partially relying on the imports of foreign products. Meanwhile, parallel importation aids public health, when the general publicis in need of the capability to manufacture patented drugs in the required quantities.163 If we look at the history of this doctrine, it has a long history in the US patent system. In Bonito Boats, Inc. v. Thunder Craft Boats, Inc., the balance between rights and limitations was described as follow. Granting patent rights to individual inventors promotes such a market-place by providing an incentive to create, leading individuals to produce a greater selection of goods and services for sale. However, the rights afforded to patent right holders must be limited to those necessary to provide the desired incentive. By their nature, patent rights restrict public access to the goods and services to which they attach. If the rights are not adequately limited, they may encumber, rather than enhance, a competitive market-place.164

159 Yusheng

Shi and Hongbin Jiao, ‘A Discussion on the IP Infringement Litigation of the Third Amendment of Chinese Patent Law’, IP Newsletter, King and Wood official website, July 2009. https://www.kingandwood.com/files/20091021/File/cn-2009-7-3-SYS%20JHB.pdf. 160 Article 6, TRIPS Agreement. 161 The Doha Declaration on the TRIPS Agreement and Public Health (Doha Declaration) was taken on by the WTO Ministerial Conference of 2001 on November 14 2001 in Doha, Qatar. It affirms that the WTO Member’s right to protect public health and to promote access to medicine. For the full text of Doha Declaration. https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_t rips_e.htm. 162 Article 5.d, Doha Declaration. 163 Division of Legislation of SIPO, op. cit., 2009, pp. 87–88. 164 Bonito Boats, Inc.v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989).

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The protections on patent rights and first sale of patent rights were confronted in some significant cases in the US. in Mallinckrodt, Inc. v. Medipart, Inc.,165 the US Court of Appeals for the Federal Circuit overruled the doctrine of patent exhaustion. The plaintiff Mallinckrodt owned a patented device for dispensing a radioactive mist to take diagnostic lung X-rays. The plaintiff sold the devices to hospitals for between USD 40 and USD 50. Mallinckrodt labeled the devices with the notice “Single Use Only” which were supposed to be discarded after they were loaded with a radioactive fluid to conduct a diagnostic procedure. The defendant went into the recycling business of this device (because of the price difference between its real manufacture cost USD 10 and the purchase price). The defendant cleaned the device and replaced some parts when necessary. It then returned them to the hospital to reuse at a recycling fee of USD 20. When the plaintiff sued before the district court, the district court ruled that the defendant did not infringe the patent because of the first sale of the rights. The plaintiff appealed and the Federal Circuit Court held “unless the condition violates some other law or policy (in the patent field, notably the misuse or antitrust law), patent right holder enjoyed freedom of contract to impose post-sale restrictions on customers under a rule of reason.”166 In his article, Professor Richard H. Stern addresses the rule against post-sale restrictions in Mallinckrodt, Inc. v. Medipart, Inc. as follows. The rule against post-sale restrictions on patent right holders’ customers should apply only to price-fixes and tie-ins. In cases not involving price-fixes or tie-ins, patent right holders were free to limit their customer’s use of products as long as the restrictions did not so greatly hinder competition as to amount to an anti-trust violation.167

Professor Stern goes on to analyze and summaries the possible impact of this case in five aspects: (1) the corporate patent counsels seemed concerned that it would be risky to restructure their company’s business arrangements on the basis of Mallinckrodt since courts might distinguish it and confine it narrowly to its facts; (2) the wealth transfer effect where the thrust of the new rule is to increase the economic power of patent right holders and their ability to devise ways to extract revenue from their products and the technology that the products embody; (3) the patent right holders can control supplies, repairs, and replacement parts; (4) the patent right holder can control modifications and enhancements of their patented products; and (5) charging different prices in different market niches may be possible since the same technology may have different values in different market niches.168 A 2008 US Supreme Court case, Quanta Computer, Inc. v. LG Electronics, Inc.,169 reaffirmed the doctrine of patent exhaustion and to some extent went against “the rule 165 Mallinckrodt,

Inc.v. Medipart, Inc. 976 F.2d 700 (Fed. Cir. 1992).

166 Ibid. 167 Richard.

H. Stern, ‘The Unobserved Demise of the Exhaustion Doctrine in US Patent Law’, European IP Review, Volume 15, Issue 12, 1993, p. 460. 168 Ibid., pp. 8–19. The five impacts are summarized from five different subtitles of Part II. The Possible Impact of the New Rule of this article. 169 Quanta Computer, Inc.v. LG Electronics, Inc., 553 U.S. 617 (2008).

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of reason” of post-sale restrictions established in Mallinckrodt.170 Justice Thomas in the US Supreme Court held that exhaustion is triggered by the sale of the component because their only reasonable and intended use was to practice the patent and because they embodied the essential features of the patent invention.171

5.7.7.4

The Bolar Exemption

Furthermore, Article 69 of Chinese Patent Law 2009 adds an additional circumstance in its Provision (5), which is similar to the doctrine of Bolar Exemption.172 Article 69 the following shall not be deemed to be patent right infringement: … 5. Any person produces, uses, or imports patented drugs or patented medical apparatus and instruments for the purpose of providing information required for administrative examination and approval, or produces or any other person imports patented drugs or patented medical apparatus and instruments especially for that person.

The origin of Bolar Exemption comes from Roche Products v. Bolar Pharmaceutica l733 F.2d 858 (Fed. Cir. 1984) involving conflicts between The US Food and Drug Act and The Patent Act. Bolar, a generic drug manufacturer, used Roche’s Valium (whose active ingredient was patented) in experiments to determine whether its generic product was bioequivalent to Valium, in order to obtain FDA approval. Bolar argued that its experiment was not an infringement of the patent pursuant to the experimental use exception.173 Further, the availability of generic drugs immediately after the patent expiry date justified the experimental use of the patented chemical. The Court of Appeals for the Federal Circuit held that Bolar’s experiment had a business purpose because it would sell the bioequivalent genetic product to compete with Roche’s Valium after its patent expiry date. The court rejected Bolar’s arguments and decided this conflict shall be decided by the US Congress.174 After this case, the US Congress passed a law permitting experiments using patented drugs for the purpose of FDA approval.

170 Ibid. 171 Ibid.

See also United States v. Univis Lens Co., 316 U.S. 241 (1942). 69, Chinese Patent Law 2009. 173 This exemption came from the decision by Justice Joseph Story in Whittemore v. Cutter, 29 Fed. Cas. 1120 (C.C.D. Mass. 1813) stressing it is not an infringement if the alleged infringer “merely for scientific experiments, or for the purpose of ascertaining the sufficiency of the machine to produce its described effects”. 174 Roche Products v. Bolar Pharmaceutical, 733 F.2d 858 (Fed. Cir. 1984). 172 Article

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5 China’s Updates in Patent Law It shall not be an act of infringement to make, use, offer to sell, or sell within the US or import into the US a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of 4 March 1913) which is primarily manufactured using recombinant DNA, recombinant RNA, hybridoma technology, or other processes involving site specific genetic manipulation techniques) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.175

In a Chinese case Eli Lily Company v. Ganli Medicine Ltd.,176 the facts were very similar to Roche Products v. Bolar Pharmaceutical. In 2002, the defendant filed applications of two Insulin Lispro Injections to the National Medical Products Administration (NMPA) which contained the same components as the injections of the plaintiff patented in 2003. The defendant was granted a permit of clinical experimentation on one of the injections and a permit of manufacture on the other injection from NMPA. The plaintiff claimed that the defendant’s acts constituted patent infringement. The Second Intermediate Court of Beijing held that one of the defendant’s injections was still at the stage of medical application and did not fulfill the conditions of market availability. Although the defendant conducted the clinical experiments and applied for a manufacturing permit, the goal was to test the safety and efficacy of the new medicine and to fulfill the administrative examination for the registration of the medicine with the NMPA. The court also held that the plaintiff did not provide any evidence to prove that the defendant had manufactured and launched the other injection into the market although it was granted the registration of new medicine by the NMPA. Thus, the defendant’s act was not aiming for direct sale and the plaintiff’s claims were rejected.177 Finally, the court concluded “providing information needed for administration on medicines” was not included in the “goal of manufacture and business” listed in the previous Article 11 of Chinese Patent Law.178 Eli Lily Company v. Ganli Medicine Ltd. was decided in 2007. After the 2009 amendment of the Patent Law, providing such information for application on new drug or medical apparatus and instrument to the NMPA was clearly listed as a noninfringement in Article 69 (5) of the 2009 amendment. In the Guideline of the Third Amendment of Chinese Patent Law, the goal of adding this provision is to provide the general public with cheaper generic drugs and medical apparatus and instruments after the expiration of the patents and to resolve public health issues in a country with such a large population.179

175 § 27 (e) (1), Drug Price Competition and Patent Term Restoration Act (§ 27 (e) (1), Title 35, US.

Code. 176 Eli

Lily Company v. Ganli Medicine Ltd, Second Beijing Intermediate Court No. 6026 Civil Verdict, 2005. 177 Ibid. 178 Ibid. 179 Division of Legislation of CNIPA, op. cit., 2009, p. 89.

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The new Article 69 (5) of the 2009 amendment is very positive in improving public health. Reducing the price and cost of drugs and encouraging research and development in the domestic pharmaceutical industry has reached a common consciousness to increase the benefit in China.180 Access and manufacturing of foreign-patented drugs after the expiration dates by Chinese pharmaceutical industry is permitted by the new Provision (5) in Article 62 of Chinese Patent Law. This is a method of balancing interest among the drug consumers within the Chinese market, Chinese pharmaceutical industry and foreign pharmaceutical industry.181 The new Management Measures of Drug Registration revised by the NMPA in 2009 allows the applicants to apply for new registration within two years before the patent expiration date of patented drugs in China.182 If the application reaches the requirements of the registration, the permit will be issued after the expiry date of patent rights of the drugs.183

5.7.7.5

The Unintentional Infringement Action of Sellers

Article 70 where any person, for the purpose of production and business operation, uses, offers to sell or sells a patent infringing product without knowing that such product is produced and sold without permission of the patent right holder, he shall not be liable for compensation provided that the legitimate source of the product can be proved.184

This article has evolved with each amendment of the Chinese Patent Law. In the Chinese Patent Law 1984 and the 1992 amendment, it was not a patent infringement if someone used or sold a patented product or process without knowing that it was not legitimately permitted by the patent right holders.185 It was very difficult to prove that an infringer had knowledge of the restrictions placed on the patent. Therefore, this article has been changed and the circumstances of non-infringements have been narrowed. In the 2001 amendment, this article was changed as Provision 2 of Article 64 specifying the subject as “any person who, for production and business purposes, uses or sells a patented product or a product that was directly obtained by using a patented process”. It was later changed again in the 2009 amendment when the prohibition “offers to sell” was added into this article. The interpretation of several important terms is relevant here. Firstly, it is important to clarify the meaning of “without knowing”. The Guide of the Newly Amended Patent Law 2001 gives two conditions of this term and that “without knowing” 180 Xia

Lu, op. cit., p. 311. Yuan, Liyan Shang and Li Dong, ‘Comparison of “Bolar Exemption” Clause and Its Impact on the Pharmaceutical Industry between China and USA’, Chinese Journal of Pharmaceuticals, Issue 10, 2010, pp. 788–789. 182 Article 19, Management Measures of Drug Registration, China Food and Drug Administration, 10 July 2007. 183 Ibid. 184 Article 70, Chinese Patent Law 2009. 185 Article 62, Chinese Patent Law 1992. 181 Hongmei

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means “impossible to know” and “supposed to know but actually does not know”. For instance, if a patent is an internal part of a product, it may be impossible to expect the seller to open the product and check if any part is illegitimate. Secondly, it is necessary to understand what constitutes a “legitimate source”. Generally, if the seller provides a legitimate sale agreement or formal commercial invoice, it will prove the seller has the legitimate source.186 Finally, the seller shall not be liable to compensate for the damage, but still has the liability to stop the infringement action.

5.7.8 False Marking Actions Article 84 provision 1 of Implementing Regulations of Chinese Patent Law 2009 lists the actions of false marking a patent in Article 63 of Chinese Patent Law 2009: 1. Affixing patent indication on a product or on the package of a product which has not been granted a patent, continuing to affix patent indication on a product or on the package of a product, after the related patent right has been declared invalid or is terminated, or affixing the patent number of another person on a product or on the package of a product without authorization; 2. Sale of the product as prescribed in subparagraph (1); 3. Indicating a technology or design to which no patent right has been granted as patented technology or patented design, indicating a patent application as patent or using the patent number of another person without authorization, in such materials as specification of product, which could mislead the public to regard the related technology or design as patented technology or patented design; 4. Counterfeiting or transforming any patent certificate, patent document or patent application document; 5. Any other act which might cause confusion on the part of the public, misleading them to regard a technology or design to which no patent right has been granted as patented technology or patented design.187

The similarities of these actions above can been seen in Section 110 of UK Patent Act 1977, which specifies that if a person falsely represents anything disposed of by him for value as a patented product that person shall be liable on summary conviction to a fine.188 Also, these actions in Article 84 of the Implementing Regulations comply with Article 10bis of the Paris Convention which China joined in 1985. Article 10bis of the Paris Convention provides that member countries are bound to provide effective protection against unfair competition.189 Regarding the term “unfair competition”, any act of competition contrary to honest practices in industrial or commercial matters

186 Division

of Legislation of CNIPA, op. cit., 2001, pp. 371–372. 1, Article 84, Implementing Regulations of Chinese Patent Law 2009. 188 Section 110, Subsection (1), UK Patent Act 1977. 189 Article 10bis (1), Paris Convention. 187 Provision

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constitutes an act of unfair competition.190 The acts of the interested parties191 which shall be prohibited are: 1. All acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; 2. False allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; 3. Indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.192 In 2009, patent offices around China handled 30 cases in which the infringers were affixing the patent number of another person on their own products without authorization.193 In the same year, patent offices around China handled 548 cases in which the infringers were affixing patent indication on their own products without the patent being granted.194 13,240 enforcement officers participated the anti-false marking activities and 1,322,521 commercial goods were examined by patent offices.195 There were 533 cross-departmental enforcements and 204 cross-regional enforcements among the local councils.196 From this set of figures, it can be observed that administrative enforcement is one of he major methods to address the false marking activities in China. The false mark infringers will bear civil liabilities, administrative liabilities and criminal liabilities according to Article 63 of Chinese Patent Law 2009.197

190 Ibid. 191 According

to Article 10 (2) of Paris Convention, any producer, manufacturer, or merchant, whether a natural person or a legal entity, engaged in the production or manufacture of or trade in such goods and established either in the local falsely indicated as the source, or in the region where such locality is situated, or in the country falsely indicated, or in the country where the false indication of source is used, shall in any case be deemed an interested party. 192 Article 10 bis (3), Paris Convention. 193 The CNIPA, ‘The Protection of IP in China in 2009’, The White Paper of IP Protection, the CNIPA official website, April 2010. https://www.sipo.gov.cn/zwgs/zscqbps/201004/2009zhishich anquanbaohubaipishu.pdf. 194 Ibid. 195 Ibid. 196 Ibid. 197 Huixia Zhang, ‘The Comparison of False Marking Between US and China’, Journal of IP, Issue 6, 2011, p. 89.

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5.7.9 Non False Marking Defence Chinese Patent Law stressed on the condition of the suspected infringer’s mentalityon selling false marking activities.198 Article 84 provision 2 of Implementing Regulations of Chinese Patent Law 2009.

Affixing patent indication legally on a patented product, or on a product directly obtained by a patented process, or on the package of such products before the termination of the patent right, offering for sale or sale of such products after the termination of the patent right is not an action of false marking a patent.199 Article 84 provision 3 of the Implementing Regulations of Chinese Patent Law 2009. Where any person sells a product false marking a patent without knowing it, and can prove that it or he obtains the product from a legitimate channel, it or he shall be ordered to stop selling the product by the administrative authority for patent affairs, but be exempted from being imposed a fine.200

These two provisions provide two defence instruments of non-false marking actions. Provision 2 of Article 84 reflects again the doctrine of first sale. Once the patent right is exhausted, the seller or the person who offers to sell obtains the legitimate rights to affix patent indication on a patented product or a product directly obtained by a patented process. This can be regarded as a good example of justification between the patent right holder’s rights and the rights of others. In Provision 3 of Article 83, since the person who is selling false marking products does not necessarily demonstrate bad faith (or a bad intention), according to the Chinese three-factor scrutiny, this person’s action is not deemed as a false marking infringement. He or she shall be stopped from selling and exempted from a penalty of fine.201

5.7.10 The Civil Liabilities and Remedies In the Chinese patent system, perpetrators of both patent infringement and false patent marking have to bear civil liabilities. The difference in the extent of the liabilities is that patent infringement only leads to civil liabilities202 and false patent marking leads to civil liabilities, administrative liabilities and criminal liabilities.203 Also, the amount of compensation in the remedies from these three types of remedies is at 198 Heping

Zhou, ‘The Comparative Case Analysis on False Marking between US and China’, Division of Regulation and Laws, CNIPA (ed.), Patent Research 2010, IP Publishing House, 2011, p. 554. See also Provision 3, Article 84, Implementing Regulations of Chinese Patent Law 2009. 199 Ibid., Provision 2. 200 Ibid., Provision 3. 201 Ibid. 202 Article 65, Chinese Patent Law 2009. 203 Ibid., Article 63.

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different levels. Article 63 of Chinese Patent Law 2009 sets out civil, administrative and criminal liabilities thereof as follows. A person who false marking the patent of another person shall, in addition to bearing civil liabilities in accordance with law, be ordered by the administration department for patent related-work to put it right, and the department shall make the matter known to the public, confiscate his unlawful gains and, in addition, impose on him a fine of not more than four times the unlawful gain; if there are no unlawful gains, a fine of not more than RMB 200,000 Yuan may be imposed on him; and if a crime is constituted, criminal responsibility shall be pursued in accordance with law.204 In this article, we can see the emphasis on accounting for administrative burdens and rectifications, in addition to civil and criminal liabilities in accordance with the law. In this section, the analysis of the civil liabilities of patent infringement will be carried out.

5.7.10.1

The Articles in Different Laws and Rules Related to Civil Liabilities

Article 118 of General Principle of Chinese Civil law 2009. If the copyright, patent right, exclusive right of trademark, right of discovery, right of invention and other rights of scientific and technological achievements of a citizen or legal person are infringed by plagiarism, tampering or counterfeiting, he shall have the right to demand that the infringement be stopped, the influence be eliminated and the loss be compensated.205 Article 134. The main ways of bearing civil liability are: (1) stopping the infringement; (2) removing the obstruction; (3) eliminating the danger; (4) returning the property; (5) restoring to the original state; (6) repairing, redoing and replacing; (7) compensating for the loss; (8) paying liquidated damages; (9) eliminating the influence and restore the reputation; (10) apologizing. The above methods of bearing civil liability may be applied separately or jointly. In handling civil cases, in addition to the above provisions, the people’s court may also admonish, order to sign a statement of repentance, collect the property and illegal income from illegal activities, and may, in accordance with the provisions of law, impose a fine or detention.206 The General Principle of Chinese Civil Law was firstly implemented in 1986 and revised in 2009. Article 134 of The General Principle Law 2009 provides tentypes of civil liabilities. A new law—The General Rules of Chinese Civil Code was passed on the March 15 2017 and was implemented on October 1 2017. Article 179 of this new law added one more civil liability than The General Principle such as “continuing to perform”. Thus, there are eleven civil liabilitiesin total. Article 118 of General 204 Ibid. 205 Article 206 Ibid.,

118, General Principle of Chinese Civil Law 2009. Article 134.

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Principle describes three types (“infringement be stopped, its ill effects be eliminated and the damages be compensated for”) when patent rights are infringed. But, in legal practice, different courts have different approaches to deciding civil liabilities. The approaches of courts in Beijing and Shanghai are analyzed here as an example. Once the infringement is decided by the courts in Beijing, “the infringement shall be stopped” and the “damages shall be compensated for” will be decided according to plaintiff’s claims. If the plaintiff requires an apology, the court will rule that the defendant has to make a public apology in the newspapers.207 However, in Shanghai courts, no matter whether the plaintiff claims a public apology from defendant or not, the courts will only rule the civil liabilities as “the infringement shall be stopped” and the “damages shall be compensated for”.208 Some IP law practitioners hold the opinion that the adoption of “making a public apology” is unnecessary in the civil liabilities of patent infringement. The reasoning lies in the perspective that the importance of the patent right is its character as an economic right rather than a moral right, and that infringement of a patent right causes damage to the economic entitlements of a patent owner. On the other hand, “making a public apology to the plaintiff” is a compensation to the moral rights of the inventor which are unrelated to the economic nature of the right.209 Therefore, the two civil liabilities of “the infringement shall be stopped” and the “damages shall be compensated for” provided in Article 118 of the General Principle are enough in the civil liabilities in the patent infringement.

5.7.10.2

The Method to Calculate the Remedies of Civil Liabilities

This method can be found in Article 65 of Chinese Patent Law 2009. Article 65 the amount of compensation for patent right infringement shall be determined according to the patent right holder’s actual losses caused by the infringement. If it is hard to determine the actual losses, the amount of compensation may be determined according to the benefits acquired by the infringer through the infringement. If it is hard to determine the losses of the patent right holder or the benefits acquired by the infringer, the amount of compensation may be determined according to the reasonably multiplied amount of the royalties of that patent. The amount of compensation shall include the reasonable expenses paid by the patent right holder for putting an end to the infringement. If the losses of the patent right holder, benefits of the infringer, or royalties of the patent are all hard to determine, the people’s court may, on the basis of the factors such as the type of patent right, nature of the infringement, and seriousness of the

207 Jianjun

Cao, ‘The Forms of Civil Liabilities for Patent Infringements’, China Patents & Trade Marks, Issue 1, 2002, p.17. 208 Ibid. 209 Ibid., p. 18.

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case, determine the amount of compensation within the range from RMB 10,000 Yuan to 1,000,000 Yuan.210 In this article, several legal definitions used to determine the actual compensation are not clarified. Hence, in 2001 the SPC issued a Judicial Explanation called Some Regulations on Questions in Application of Laws in Hearing Patent Dispute Cases including the clarifications of these definitions.211 The determination of “the patent right holder’s actual losses” is calculated by the reduced quantities of products caused by the infringement multiplying the reasonable profit gained per patented product.212 If the reduced quantities of products caused by the infringement are hard to calculate, “the patent right holder’s actual losses” will be determined by the overall quantities of infringing products sold in the market multiplying the reasonable profit gained per patented product.213 “The benefits of the infringer” will be calculated by the overall quantities of the infringing products sold in the market multiplying the profit gained per infringing product. In general, the profit gained per infringing product is calculated by the operating profits of the infringer.214 Furthermore, Article 21 of this Judicial Explanation specified the method to calculate the remedies as follows. If the “patent right holder’s actual losses” and “the benefits of the infringer” are both hard to determine, the court can decide the compensation amount between one time and three times that of the patent licensing fee considering the types of patent right, the property or the seriousness of the infringement, the amount of the patent licensing fee, the property/scope/time of the patent license contract; If the patent license fee does not exist or the license fee is obviously unreasonable, the court can decide the compensation amount between RMB 5,000 Yuan and RMB 300,000 Yuan in general, the maximum should not exceed RMB 500,000 Yuan.215 Article 22 of this Judicial Explanation clarified that the amount of compensation also includes the reasonable fees of the patent right holder’s investigation or stopping the infringement.216

5.7.11 Administrative Liabilities and Remedies In China, the major patent administrative bodies are the national and provincial patent offices. Their main function is to manage the patent system and enforce patent law and 210 Article

65, Chinese Patent Law 2009. Regulations on Questions in Application of Laws in Hearing Patent Dispute Cases, the SPC, June 2001. 212 Ibid., Article 20. 213 Ibid. 214 Ibid. 215 Ibid., Article 21. 216 Ibid., Article 22. 211 Some

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regulations. In addition to the patent offices, China establishes other governmental administrative bodies to assist in the enforcement of patent law such as Customs and Administrations of Industry and Commerce (AICs). The enforcement carried out by all of these organizations is regarded as administrative enforcement (as distinct from the enforcement of the local courts, which is regarded as judicial enforcement). This administrative enforcement system might be different from the administrative systems in western countries, since in many western countries administrative enforcement refers to the enforcement of borders by Customs only. Article 60 of Chinese Patent Law 2009 provides. If a dispute arises as a result of exploitation of a patent without permission of the patent right holder, that is, the patent right of the patent right holder is infringed, the dispute shall be settled through consultation between the parties. If the parties are not willing to consult or if consultation fails, the patent right holder or interested party may take legal action before a people’s court, and may also request the administration department for patent-related work to handle the dispute. If, when handling the dispute, the said department believes the infringement is established, it may order the infringer to cease the infringement immediately; if the infringer is dissatisfied with the order, he may, within 15 days from the date of receipt of the notification of the order, take legal action before a people’s court in accordance with the Administrative Procedure Law of the PRC. If the infringer neither takes legal actions at the expiration of the time limit nor ceases the infringement, the said department may file an application with the people’s court for compulsory enforcement. The administration department for patent-related work that handles the call shall, upon requests of the parties, carry out mediation concerning the amount of compensation for the patent right infringement. If mediation fails, the parties may take legal action before the people’s court in accordance with the Civil Procedure Law of the PRC.217 In this article, it can be seen that the enforcement powers are balanced between the patent offices (as administrative enforcement) and the local courts (as judicial enforcement). CNIPA was established in the mid-1980s and opened its first patent training class of 250 students in Beijing in 1984.218 CNIPA focuses on patent management and the examination of patent applications. It also provides leadership and guidance to regional patent offices. In a 2006 report, the Head of Patent Office in Guizhou Province Mr. Tiancai Jiang describes Article 60, which provides that “When the administrative authority for patent affairs handling the matter considers that the infringement is established, it may order the infringer to stop the infringing act immediately”219 as a weak and inefficient enforcement. He asks whether stopping the infringement mainly depends on the will of the infringers. Therefore, when a patent right holder comes across “group infringements” or “repetitive infringements”, such a provision would increase the difficulties in collecting the evidence and the cost 217 Article

60, Chinese Patent Law 2009. Wang, ‘A Discussion on the Evolution and Restructure of Chinese Patent Agency System’, Chinese IP Newspaper, 12 August 2008. 219 Tiancai Jiang, ‘A Systematic Issue on Strengthening the Impact of Chinese Patent System’, A 2006 Research on Chinese Patent Law, IP Publishing House, 2007, p. 114. 218 Yunfang

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for the patent right holder to sue the infringers in a judicial procedure.220 In particular, he suggests that Article 60 of the current law should be amended such that the administration has not only the power to order the infringers to stop the infringing action, but also the authority to carry out the temporary containment, close-down, or expropriation on the infringing goods.221 Regarding the specific solutions to improve the administrative power of the patent offices, The Report of China IP Index provides several approaches. Firstly, the provincial patent offices shall be empowered with enough authority to deal with the infringement.222 Furthermore, the administrative procedure (especially the administrative hearing procedure) shall be strictly followed.223 Finally, “local protectionism” shall be tackled in the administrative enforcement.224 Similar to the civil liabilities, the administrative liabilities and remedies can be found in Article 63 of Chinese Patent Law 2009 as follows. Article 63 a person who false marking the patent of another person shall, in addition to bearing civil liabilities in accordance with law, be ordered by the administration department for patent related-work to put it right, and the department shall make the matter known to the public, confiscate his unlawful gains and, in addition, impose on him a fine of not more than four times the unlawful gain; if there are no unlawful gains, a fine of not more than RMB 200,000 Yuan may be imposed on him; and if a crime is constituted, criminal responsibility shall be pursued in accordance with law.225

In Article 63, it needs to be emphasized that only patent false marking will incur civil, administrative and criminal liabilities. This article was revised in the 2009 amendment so that administrative accountability was emphasized. The previous Article 63 (in 2001 amendment) provides that where any individual counterfeits patented products of another, that individual shall, in addition to bearing civil liability according to law, be ordered by the administrative authority for patent affairs to amend those actions, and the order shall be announced to the public.226 Further, the individual’s illegal earnings shall be confiscated and, in addition, he or she may have imposed a fine of not more than three times of any illegal earnings and, if there are no illegal earnings, a fine of not more than RMB 50,000 Yuan.227 Here it can be seen that the fine for infringement was increased from three to four times the illegal earnings, and the maximum fine for false marking increased from RMB 50,000 Yuan to 200,000 Yuan. Article 64 when the administration department for patent-related work investigates and handles the suspected false marking, it may, based on evidence obtained, inquire the parties concerned, and investigate the circumstances related to the suspected illegal act; it may 220 Ibid. 221 Ibid.,

pp. 114–115. Wang (ed.), The Report of China IP Index, IP Publishing House, 2009, p. 133.

222 Zhengzhi 223 Ibid. 224 Ibid. 225 Article 226 Article 227 Ibid.

63, Chinese Patent Law 2009. 63, Chinese Patent Law 2001. This article is revised in the 2009 amendment.

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5 China’s Updates in Patent Law conduct on-the-sport inspection of the places where the suspected illegal act is committed; consult and duplicate the relevant contracts, invoice, account books and other related materials; and check the products related to the suspected illegal act and seal or detain the products that are proved to be produced by the counterfeited patent. When the administration department for patent-related work performs its duties as prescribed in the preceding paragraph, the parties concerned shall provide assistance and cooperation, instead of refusing to do so or creating obstacles.228

Article 64 was a new addition in the 2009 amendment to grant the administration department of patent-related work the administrative obligation to handle false marking. The design of this article is very similar to Article 55 of Chinese Trade Mark Law 2001 (which grants different administrative instruments to the AICs). It also demonstrates the administrative enforcement in the patent field. From several articles above, we can see the administrative power of the patent offices has been increased, together with the administrative liabilities of illegal activities. It shall be noted that this administrative power provides an alternative by which to resolve and restrain the local illegal activities in a quick and effective method.

5.7.12 Criminal Liabilities and Remedies Article 63 of Chinese Patent Law 2009 states that, where any person falsely marks the patent of another person as his own and where the infringement constitutes a crime, that person shall be prosecuted for that criminal liability.229 Again, we can see here that only false marking can constitute a crime. Other patent infringements merely lead to civil liabilities. There are several issues to be discussed within this article. Firstly, Let us turn to a patent infringement related article in the Chinese Criminal Law 2011. Article 216 of Chinese Criminal Law 2015 states that whoever falsely marks the patent of another shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of not more than three years or be fined.230 In both Article 63 of Patent Law 2009 and Article 216 of Criminal Law 2015, the subject of the false marking crime shall be a natural person. So, if an enterprise false marks the patented product, can it become the subject of the crime in both articles?231 There are different opinions in the field of criminal law. One of the opinions states that the solution can be found in Article 3 of the Supplementary Provisions Concerning the Punishment of Crimes of Trade Mark False Marking.232 This article states that both a natural person and 228 Article

64, Chinese Patent Law 2009. Article 63. 230 Article 216, Chinese Criminal Law 2015. 231 Guoxuan Zhang, ‘Several Issues about the Criminal Liability in Patent Law’, Academic Journal of Jianghai, Issue 2, 1996. p. 70. 232 Supplementary Provisions Concerning the Punishment of Crimes of Trade Mark Passing-Off, Standing Committee, National People’s Congress, 22 February 1993. 229 Ibid.,

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an enterprise could be the subject of trade mark false marking. Chinese criminal law scholar Professor Huiyu Su supports the opinion that the enterprise shall be imposed a fine and the management team shall be liable for criminal liability and sentenced according to the imprisonment designated in Article 216 of Chinese Criminal Law 2015.233 Although the reference to the trade mark false marking supplementary provisions seems reasonable, after all, the patent false marking had supplementary legislations like this. Thus, whether an enterprise can bear responsibility for a patent false marking crime, remains uncertain. Some scholars have raised the question as to why in Article 63 of Patent Law 2009 and Article 216 of Criminal Law 2015, only the false marking infringement is punished under criminal liability. Regarding actions such as using other people’s patents without permission, intentional trafficking, sale and importation of counterfeiting products, if the actions are serious and the illegal incomes are huge, can these acts be regarded as crimes as well? Professor Guoxuan Zhang is of the view that the subject of the crime be enlarged to include other patent infringement actions listed above since they can also cause huge damage to society and disturb patent management seriously.234 In many countries patent infringement leads to civil liabilities instead of criminal liabilities. Philip W. Grubb has also observed the opinions from different countries on whether to adopt criminal liability on patent infringement. Infringement of a British patent is not a crime for which can be prosecuted but a tort. In January 2003, the EU Commission published a draft Directive on enforcement of IPRs, which among other measures would criminalize any “serious” infringement of IP rights, including Community patent. Later drafts retreated from this position and left criminal infringement to national law. Although criminal prosecutions for patent infringement are rare, the possibility may act as an additional deterrent (in Japan, an infringer could, in theory at least, be sentenced to up to five years’ hard labor) or may give procedural advantages to the patent right holder (for example, in Switzerland, a patent right holder alleging criminal infringement may be able to obtain a police search of the alleged infringer’s premises to obtain evidence of infringement.235 From the discussion above, we can see that the harm caused by patent infringement is measured differently in various countries. In some countries like the US and UK, it’s a civil tort so the patent right holder should sue in the Patents Court (or federal court in the US). In some other countries like China and Japan, patent infringement is regarded as a serious crime and can lead to lengthy imprisonment.

233 Huiyu

Su, The Criminal Law, Publishing House of Chinese University of Political Science and Law, 1994, p. 489. 234 Guoxuan Zhang, op. cit., p. 70. 235 Philip W. Grubb, op. cit., pp. 166–167.

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5.8 Chinese IP Tribunals The current Article 60 of Chinese Patent Law 2009 designates that thepatent right holders or any interested parties may institute legal proceedings in the people’s courts or request the administrative authority for patent affairs to handle the matter when their patent rights are infringed.236 With the rise of IP cases from late 1980s to early 1990s, China built IP tribunals in seven High Courts,237 in more than ten Intermediate Courts and in many District Courts.238 Chinese courts have four levels nationwide: The SPC, High Courts, Intermediate Courts and District Courts. In October 1996, the SPC opened its IP tribunal. Until 2006, there were 172 courts containing IP tribunals at all four levels of courts and 1667 IP judges nationwide.239 In 2006, 14,056 IP cases received judicial decisions in China.240 Until 2008, the figure of IP tribunals increased to 298 and the figure of IP judges increased to 2126.241 Regarding international cooperation, around 100 IP judges have been selected and trained in a Sino-France Joint Training program held by the SPC, the Chinese National Judge College and the French government since 2003.242 In terms of the figures of first instance IP cases accepted by the courts in 2012, there were 87,419 civil cases, 2928 administrative cases, and 13,104 criminal cases.243 Of these 9680 cases were patent related which was an increase of 23.8% over 2011.244 China has established one independent IP court called the IP Court of High and New Technology District of Zhuhai City in Guangdong Province, which was established in 2009.245 It has one tribunal and three judges. However, its judicial duties have been quite heavy— it ruled on 315 cases from January to October 2010.246 Furthermore, Chinese IP 236 Article

60, Chinese Patent Law 2009. are High Courts at Beijing, Shanghai, Tianjin, Chongqing, Guangdong Province, Fujian Province and Jiangsu Province. See The Writing Panel of IP Publishing House, The Training Textbook for IP Experts, IP Publishing House, 2008, pp. 240–242. 238 The Districts Courts are in areas where the economy develops faster than in other areas in China. For example, Haidian District Court in Beijing (where most universities are located), Chaoyang District Court in Beijing (the location of Central Business District) and Pudong New Area District Court in Shanghai (where many business and science parks locate). See The Writing Panel of IP Publishing House, The Training Textbook for IP Experts, IP Publishing House, 2008, pp. 240–242. 239 Ibid. 240 Ibid. 241 Yonghui Chen, ‘Achievement Can Be Observed through Figures’, People’s Courts Newspaper, 7 November 2008. 242 Chinese National Judge College, ‘The One Hundred Judge Program Started to Interview This Year’, Foreign Exchange Activities, Official Website of Chinese National Judge College, 18 October 2010. https://njc.chinacourt.org/public/detail.php?id=413. 243 The SPC, ‘The Report of Judicial IP Protection of Chinese People’s Courts 2012 (English Version)’. 244 Ibid. 245 Huijuan Ren, ‘The First Anniversary of China’s First IP Court’, People’s Courts Newspaper, 15 December 2010. 246 Ibid. 237 These

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tribunals are trying new methods in mediation. For examples, IP tribunals in Beijing local courts invited experts to be their mediators from The Mediation Centre of China Internet Association, The Chinese Writers Association and Beijing IP Office.247 The High Court of Zhejiang Province established the specified mediation system of civil patent cases.248 The Compendium of National IP Strategy 2008 issued by the Chinese State Council sets the expectation for the future development of IP tribunals as follows: a trial system of IP shall be improved; the allocation of judicial resources shall be optimized; and remedy procedures shall be simplified. Further study needs to be carried out establishing special tribunals to handle civil, administrative or criminal cases involving IP. Studies also need to be undertaken to reasonably centralize jurisdiction over cases involving patents or other cases of a highly technical nature.249 It can be seen from this objective that the ideal IP tribunal shall achieve a certain in professionalism deciding all the civil, administrative and criminal IP cases, otherwise called the “3 in 1” pattern by some legal scholars.250 The current situation is quite different from this goal. At present, all the civil IP cases are ruled by IP tribunals251 ; but all the administrative IP cases are ruled by the administrative tribunals and all the criminal IP cases are decided by criminal tribunals.252 A few courts have started to try the “3 in 1” pattern, such as the District Court of Shanghai High and New Technology Zone, the Intermediate Court of Xi’an City, and Tianhe District Court of Guangzhou City.253 By July 2009, there were 3 High Courts, 12 Intermediate Courts and 15 District Courts that adopted the “3 in 1”pattern.254 Until 2009, around 400 intermediate courts were capable of deciding IP cases.255 44 intermediate courts located at capital cities of provinces or the ones designated by the SPC, due to the difference in allocation of technical resources regionally, were able to rule on cases of patent rights, new plant variety rights and lay-out designs of integrated circuits.256 The SPC also assigned some District Courts in Beijing, Shanghai, Guangdong Province and Shandong Province to rule the cases of trial of first instance (all types of IP cases except patent cases). Many IP cases are decided by the Intermediate Court and High Court of Beijing.257 247 The

SPC, op. cit., Report 2012.

248 Ibid. 249 Article

54, Compendium of National IP Strategy 2008. Song and Guangming Yang, ‘A Research on the Allocation Pattern of Judicial Power in China—The Establish of Special Court’, The Legislation Division of CNIPA (ed.), Patent Law Research 2009, China IP Publishing House, 2009, p. 43. 251 Zhixiang Yang, Shuwen Mei and Long Long, ‘An Exploration on China’s Reform of Judicial IP Protection’, Dongyue Tribune, Issue 11, 2012, p. 188. 252 Ibid. 253 Yunxuan Song and Guangming Yang, op. cit., p. 44. 254 Ibid., p. 46. 255 Ibid. 256 Ibid. 257 Ibid. 250 Yunxuan

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In terms of the professionalism of IP tribunals and IP judges, an Intermediate Court Judge of Chongqing City Guangming Yang advocated that Chinese IP tribunals shall have both the legal type of judges and the technical type of judges.258 In particular, Chinese Judge Law and Chinese Patent Law shall be revised to grant technical judges the same position as legal judges.259 Furthermore, technical judges could be selected from CNIPA’s senior patent examiners with at least a B.Sc. degree in a special technical field and pass the judge licence certification examination.260 The latest development of Chinese IP courts will be discussed in the next chapter.

5.9 Compulsory Licensing Although China has not issued any compulsory licensingsince Chinese Patent Law 1984, the articles related to compulsory licensing have been amended three times: firstly, in 1993; then 2001; and most recently 2009.261 The latest amended articles on compulsory licensing include ten circumstances in which compulsory licensing may be available: (1) failure to exploit the patent three years since the date of the grant and four years since the date of filling; Article 48.1, Chinese Patent Law 2009. (2) failure to fully exploit the patent three years since the date of the grant and four years since the date of filling262 ; (3) anti-trust activities263 ; (4) national emergency or extraordinary state of affairs264 ; (5) public interests265 ; (6) the domestic manufacture and sale of the patented medicine because of the public health266 ; (7) the parallel import of patented medicine from WTO members because of the public health267 ; (8) export to the countries or regions that conform to the provisions of the relevant international treaties to which China has acceded268 ; (9) an invention representing a major technological advancements of remarkable economic significance relies on the exploitation of an earlier patent269 ; or (10) in the semi-conductor technology, the compulsory license is only limited to the purpose of public health and to Article 48.2.270 In this

258 Yunxuan

Song and Guangming Yang, op. cit., p. 54.

259 Ibid. 260 Ibid. 261 After the latest amendment, compulsory licensing occupies 11 articles from Article 48 to Article

58 in Chap. 6 “Compulsory Licensing” of Chinese Patent Law 2009. 262 Ibid. 263 Ibid., 264 Ibid.,

Article 48.2. Article 49.

265 Ibid. 266 Ibid. 267 Ibid. 268 Ibid.,

Article 50. Article 51. 270 Ibid., Article 52. 269 Ibid.,

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section, the most significant of these ten circumstances will be addressed and their relationship will be analyzed. Article 48 under any of the following circumstances, the patent administration department under the State council may, upon application made by any unit or individual that possesses the conditions for exploitation, grant a compulsory licensing for exploitation of an invention patent or utility model patent: 1. When it has been three years since the date the patent right is granted and four years since the date the patent application is submitted, the patent right holder, without legitimate reasons, fails to have the patent exploited or fully exploited; or 2. The patent right holder’s exercise of the patent right is in accordance with law, confirmed as monopoly and its negative impact on competition needs to be eliminated or reduced.271

The old Article 48 of Chinese Patent Law 2001 was deleted in the 2009 amendment.272 The primary purpose of the compulsory licensingis to reduce the possibility of patent right holders abusing patent rights. The definitions of “reasonable terms and conditions” and “a reasonable period of time” was unclear in the old Article 48. It has been commonly suggested that the requester for a compulsory licensing is supposed to provide the conditions of patent licensing fees, the method of payment and time limits, the manufacturing capacity, the sale areas of the products and the duration of the licensing contract. The reasonability depends on factors such as technical field, commercial potential, the price range of similar technological products and the investments into R&D of the inventions or utility models.273 The old article became controversial in measuring the flexibility of the compulsory licensing and so it was totally deleted. Under the new Article 48, the qualified applicants may be granted compulsory llicensing if: (1) the patent right holder 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 patent right holder’s use is determined to be a negative monopolistic activity.274 Article 49 where a national emergency or any extraordinary state of affairs occurs, or where the public interest so requires, the Patent Administration Department under the State Council may grant a compulsory licensing to exploit the patent for invention or utility model.275

The situation of “a national emergency or extraordinary state of affairs” was added into Chinese Patent Law in the 1992 amendment. Up to now, there was no case 271 Ibid.,

Article 48. content of the deleted Article 48 is listed as follows. Where any entity which is qualified to exploit the invention or utility model has made requests for authorization from the patent right holder of an invention or utility model to exploit its or his patent on reasonable terms and conditions and such efforts have not been successful within a reasonable period of time, the Patent Administration Department Under the State Council may, upon the request of that entity, grant a compulsory licensing to exploit the patent for invention or utility model. 273 Rule 72, The Implementing Regulations of the Patent Law of PRC 2009. 274 William L. Warren, Lei Fang and S. Alex Cao, ‘The Third Amendment of the Chinese Patent Law’, LegalAlert, 9 March 2009. 275 Article 49, Chinese Patent Law 2009. 272 The

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of issuing a compulsory licensing so far. There weresome cases relatedthe national emergency and the interests of patent right holders in China such as the patent licensingcontract between Roche and Shanghai Pharma.276 In 2006, the deadly H5N1 avian influenza virus (bird flu) had broken out in 45 countries including China.277 The only helpful and efficient medicine to combat H5N1 was Tamiflu manufactured by Roche. The patients had 48 h from the first sign of symptoms to treat the infection with this medicine.278 For a long time, Roche had not licensed Tamiflu to any other manufacturing company and remained the only Tamiflu provider in the world. However, when a threat to national health occurred and Tamiflu needed to be taken by the patients in two days from the first sign of symptoms, Roche had to consider if it was able to provide the demanding amount of Tamiflu to so many countries at the same time during the outbreaks of avian influenza. Former UN Secretary General Kofi Annan called for the medicine supply to be unaffected by the IP issues or commercial interests.279 CNIPA issued the Measures for Compulsory Licensingon Patent Implementation concerning Public Health Problems on 29 November 2005 which designated. In case a patent right is granted to any medicine for treating certain epidemic disease in China, and China has the capacity for the production of the medicine, the relevant competent department of the State Council may, according to the provisions of Article 49 of the Patent Law, request the CNIPA to grant compulsory licensing for implementing the patent (hereinafter called as compulsory licensing).280 On 12 December 2005 Roche declared it would grant a licence for Tamiflu to Shanghai Pharma.281 Compulsory licensing can be a legal relief to the public interest. The patent administration authorities shall use this policy very carefully since any over-issuance of compulsory licensing could interfere with the basic stability of a patent system. This provision complies with Article 31 (b) of the TRIPs Agreement. Meanwhile, regarding the implementation of Paragraph 6282 of the Doha Agreement, Paragraph 6 requires that WTO Members accessing the flexibility should be the ones “with insufficient or no manufacturing capacities in the pharmaceutical sector”.283 Statistics show that China had over 4000 pharmaceutical factories in 276 ‘The

Bird Flu Crisis and Compulsory Licensing’, Media Focus 2005. https://www.sipo.gov.cn/sipo2008/mtjj/2005/200804/t20080401_363149.html. 277 ‘Bird Flue Outbreaks Continue in Africa, Asia, Europe and Near East, FAO Says Battle against the Disease on Farms Showing Success, But More Efforts Needed’, FAO Newsroom, 6 April 2006. https://www.fao.org/newsroom/en/news/2006/1000266/index.html. 278 https://www.tamiflu.com/. 279 FAO Newsroom, op. cit. 280 Ibid. 281 Ibid. 282 ‘Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health’, Decision of 30 August 2003, WTO. https://www.who.int/medicines/areas/policy/WT_ L_540_e.pdf. 283 Paragraph 6, Doha Declaration on the TRIPS Agreement and Public Health was adopted on 14 November 2001. https://www.wto.org/english/thewto_e/min01_e/mindecl_trips_e.pdf.

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2003 and was a leader in producing active pharmaceutical ingredients for first line antiretroviral (ARV)284 as well as producing many second line ARVs.285 Meanwhile, neither Paragraph 6 of the Doha Agreement nor Implementation of Paragraph 6 of the Doha Declaration provides a specific standard of “insufficient” or “no manufacturing capacities”. Article 50 for the benefit of public health, the patent administration department under the State Council may grant a compulsory license for manufacture of the drug, for which a patent right has been obtained, and for its export to the countries or regions that conform to the provisions of the relevant international treaties to which the PRC has acceded.286

Article 50 is a newly added condition of compulsory licensing after the 2009 amendment. Under this new article, the law permits the granting of a compulsory licensing for drugs patented in China for the purpose of improving public health. This also applies to manufacturing of the drug in China as well as its exportation to countries under international treaties of which China is a member.287 This article provides “flexibility” in Paragraph 4 and 5 of the Doha Declaration. Also, it echoes Paragraph 6 of the Doha Declaration that: We recognize that WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem.288

A Chinese IP observer has commented on this new article that it was a reflection of the adjustment to address the balance between the patent right and public health.289 Meanwhile, this also reflects China’s obligation to help the least-developed countries in the field of public health. Article 51 where the invention or utility model for which the patent right has been granted involves important technical advance of considerable economic significance in relation to another invention or utility model for which a patent right has been granted earlier and the exploitation of the later invention or utility model depends on the exploitation of the earlier invention or utility model, the patent administration department under the State Council may, upon the request of the later patent right holder, grant a compulsory licensingto exploit the earlier invention or utility model.

Where, according to the preceding paragraph, a compulsory licensing is granted, the Patent Administration Department Under the State Council may, upon the request

284 ARV

is the acronym of antiretroviral.

285 Cheri Grace, ‘A Briefing Paper for DFID: Update on China and India and Access to Medicines’,

DFID Health Resource Centre, November 2005. https://www.dfidhealthrc.org/what_new/final%20i ndia%20china%20report.pdf. 286 Article 50, Chinese Patent Law 2009. 287 Cheri Grace, op. cit. 288 Paragraph 6, Doha Declaration. 289 Xinliang Tao, The Compulsory Licensing after the Third Amendment of Chinese Patent Law, Electronics IP, 2009, p. 28.

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of the earlier patent right holder, also grant a compulsory licensing to exploit the later invention or utility model.290 Actually the first provision of this Article has been amended in 2000. Originally, the first provision did not contain the requirement of “important technical advance of considerable economic significance”. For the preparation of China’s entry into the WTO in 2001, this provision was revised to comply with Article 31 (i) of the TRIPS Agreement that the invention claimed in the second patent should involve an important technical advance of considerable economic significance in relation to the invention claimed in the first patent.

5.10 Conclusion In this chapter, various amendments of Chinese patent law and the features of the patent enforcement in China have been discussed in order to demonstrate the development towards a balance between private rights and the public interest in IP that is emerging in modern Chinese patent law. The present analysis has shown the evolution of the patent system enforcement through the development of judicial and administrative enforcement. The balancing between these two methods adopted by the patent legislators will be further proved in the next chapter focusing on the new wave in the patent enforcement. Throughout it is clear the “Ren” and “Li” concepts in Confucianism have deeply influenced the society. For example, Article 1 of Chinese Patent Law 2009 echoes the “Ren” compassion of this statute to the patent right holders as “this law is enacted for the purpose of protecting the lawful rights and interests of patent right holders”.291 This influence is the basis enabling the Chinese society to accept and respect the legitimacy of modern patent system, to which the discussion now turns.

290 op.

cit., 196, Article 51. 1, Chinese Patent Law 2009.

291 Article

Chapter 6

New Waves in Chinese Patent Law System

6.1 Introduction In this chapter, major new waves happening in the Chinese patent Law system will be discussed in detail. Especially, the Draft of the Fourth Amendment of Chinese Patent Law and the Draft of the Regulation on Employment Inventions as well as the fresh establishment of new IP courts will be analyzed.

6.2 New Article 6 of the Draft of the Fourth Amendment and the Draft of the Regulation on Employment Inventions In the new article 6 of the draft of the Fourth Amendment, there is a new and important change. The work unit may deal with the patent right and right of applying for patent of employment invention and creation according to the law. The work unitcan use property right as an incentive, adopt stock rights, options and bonuses and other ways, make the inventors or designers reasonably share the innovation income, and promote the implementation and application of relevant invention and creation.1 In the previous chapter, the reward of intellectual work in the system of Imperial Examination was discussed. In this section, the new trend of rewarding inventors, especially the employment inventors will be analyzed. The current Article 6 of Chinese Patent Law 2009 designates that for an employment invention,2 the employer has the right to apply for a patent. After such application is granted, the employer

1 Article

6, the Draft of the Fourth Amendment of Chinese Patent Law. 6, Chinese Patent Law 2009. An invention accomplished in the course of performing the duties of an employee, or mainly by using the material and technical conditions of an employer shall be deemed as an employment invention.

2 Article

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shall be the patent right holder.3 For an invention accomplished by using the material and technical conditions of an employer, if the employer has concluded a contract with the inventor or designer providing the ownership of the right to apply for the patent or the ownership of the patent right, such provision shall prevail.4 Article 16 of Chinese Patent Law 2009 states that the work unit that is granted the patent right shall reward the inventor or designer of an employment invention. After such patent is exploited, the inventor or designer shall be given a reasonable amount of remuneration according to the scope of application and the economic results.5 The current Chinese Patent Law and the Implementing Regulation of Chinese Patent Law do not provide the specific methods of rewarding the inventors. Meanwhile, articles or provisions related to rewarding are barely seen in other laws and regulations.6 Clarifying the patent rights of the inventions and rewarding the inventors directly affects the enthusiasm of the inventors and the commercialization of the inventions.7 Thus, the State Council issued the Mid-Term and Long-Term National Talented Personnel Development Compendium 2010 including introducing a new regulation to increase the protection of inventors’ rights and benefits.8 Under this Compendium, CNIPA initiated the legislative work on drafting the Regulations on Employment Inventions in the same year.9 In this Draft Regulation, Article 21 represents the clarification on the rewards to the inventors in the employment inventions. Article 21 provides specific methods to calculate the monetary rewards to the inventions under the circumstances that the employers and employees do not agree on any calculating method and such agreement cannot be found in any regulations made by the employers.10 After the employers implement the employment inventions obtained IP rights, they shall reward all the inventors related to all the IP rights with one of the following methods. (1) Within the term of the IP rights, no less than 5% of the business profits obtained from exploiting the patent right or new plant variety right; or no less than 3% of the business profits obtained from exploiting other types of IP rights.11 (2) Within the term of the IP rights, no less than 0.5% of the sale incomes obtained from exploiting the patent right or new plant variety right; or no less than 0.3% of the sale incomes obtained from exploiting other types of IP rights.12 (3) Within the term of the IP rights, 3 Ibid.,

Provision 1. Provision 3. 5 Ibid., Article 16. 6 CNIPA, ‘An Explanation on the Draft Regulation on Employment Inventions’, The Draft Regulation on Employment Inventions and Relevant Opinions, the Official Website of CNIPA, 31 March 2014, pp. 1–2. http://www.sipo.gov.cn/ztzl/ywzt/zwfmtlzl/tlcayj/201403/t20140331_925616.html. 7 Ibid., p. 1. 8 Part 4.10, Mid-term and Long-term National Talented Personnel Development Compendium 2010. 9 CNIPA, ‘An Explanation on the Draft Regulation on Employment Inventions’, op. cit., p. 3. 10 Provision 1, Article 21, the Draft Regulation on Employment Inventions. There is no official English translation of the draft of this regulation, the English translation of the articles referred in this regulation is done by the author of this book. 11 Ibid. 12 Ibid. 4 Ibid.,

6.2 New Article 6 of the Draft of the Fourth Amendment and the Draft …

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referred the calculating results from the former two methods, determining the amount of the yearly rewards according to the reasonable multiples of the inventors’ own salaries.13 (4) According to the reasonable multiples of the calculating results from method (1) and (2), determining a lump sum amount of rewards to the inventors.14 The accumulative total rewards above shall not exceed 50% of the accumulating total business profits obtained from exploiting the IP right.15 If employer and employee do not agree on any reward and such agreement cannot be found in any regulations made by the employer, after they assign or license the IP rights to others, they shall reward the inventors with no less than 20% of the net revenues obtained from the assignment or licensing.16 CNIPA released a Focal Issues of the Draft Regulation on Employment Inventions on its official website in March 2014.17 It included both the supportive and opposing opinions on the Draft Regulation gathered by CNIPAwhen it was seeking for public opinions after the draft had been issued.18 The main opposing opinion focused on the provision 3 of Article 21 that the inventors shall receive no less than 20% of the net revenues obtained from assignment or licensing of the employment inventions.19 The first argument stated that the standard of “no less than 20%” was too high for the employers; the second argument pointed out that the expensive assignment or licensing fee may be caused by other factors such as business operation instead of the value of the employment inventions itself.20 Moreover, some enterprises expressed that their current methods rewarding the inventors such as promotions and allocation of stock shares were good enough to encourage the inventors.21 It can be observed that this article will still be under discussion in the near future.

6.3 New Article 43 of the Draft of the Fourth Amendment Article 43 revised its first provision that extends the term of design patent from 10 years to 15 years. This is a legislative preparation for China to join in the Hague Agreement Concerning the International Registration of Industrial Designs.22 13 Ibid. 14 Ibid. 15 Provision

2, Article 21, the Draft Regulation on Employment Inventions. 3, Article 21, the Draft Regulation on Employment Inventions. 17 CNIPA, ‘Focal Issues of the Draft Regulations on Employment Inventions’, Major Arguments and Focal Issues, the official website of CNIPA, 31 March 2014. http://www.sipo.gov.cn/ztzl/ywzt/ zwfmtlzl/zywtlz/201403/t20140331_925624.html. 18 Ibid. 19 Ibid., p. 9. 20 Ibid. 21 Yuru Zuo and Dan Luo, ‘The Help and Trouble from the Draft Regulation on Employment Inventions’, Electronics IP, Issue 1, 2013, pp. 44–45. 22 Provision 1, Article 43, the Draft of the Fourth Amendment of Chinese Patent Law. 16 Provision

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Article 43 also adds up a new provision. In order to compensate for the time for examination and approval of innovative drugs, the State Council may decide to extend the term of the patent right for innovative drugs that have been applied for launching into market simultaneously in China and abroad for a period of not more than five years, and the total effective patent right term for innovative drug shall not exceed 14 years.23 This revision is regarded to satisfy both the domestic and overseas patent right holders. In the pharmaceutical industry, the examination and approval of drugs often takes a long time. For instance, it took 3 years and a half for Jiangsu Hengrui Medicine Ltd. from patent application to clinical trials on the drug called Imrecoxib. When the drug was granted a patent, it only has 8 years and 10 months of protection period.24 Compared with the 20 years of innovation patent term, this period is obviously much shorter than what the pharmaceutical patent right holders would expect. Thus, appropriate extension on the patent right term is reasonable to reward the innovation and creativity.

6.4 New Article 50–52 of the Draft of the Fourth Amendment These three articles are the major new change in terms of licensing in the Draft of the Fourth amendment. Open licensing is introduced. Article 50 states that where the patent right holder declares in writing to the patent administration department under the State Council that he is willing to license any entity or individual to exploit his patent, and specifies the payment method and standard of the licensing fee, the patent administration department under the State Council shall make an announcement and implement an open license. Where an open license declaration is made for a utility model or design patent, an evaluation report on the patent right shall be provided. Where the patent right holder withdraws the declaration of the opening license, it shall put it forward in writing and the patent administration department under the State Council shall make an announcement. If the declaration of open license is withdrawn by announcement, the validity of the previously granted open license shall not be affected.25 Article 51 designates that where any entity or individual has the intention to exploit a patent under open license, it shall notify the patent right holder in writing and obtain a patent exploitation license after paying the royalties in accordance with the published payment method and standard of royalties. During the period of open license, the patent right holder shall not grant exclusive or exclusive license for the patent. 23 Provision

2, Article 43, the Draft of the Fourth Amendment of Chinese Patent Law.

24 Jianwu Zeng, Cuiling Wu and Jie Jiang, ‘A Review Analysis on the Domestic Chemistry 1.1 Class

New Drug Registration Acceptance and Patent from October 2007 to September 2014’, Chinese Pharmaceutical Affairs, Issue 6, 2016, pp. 575–578. 25 Article 50, the Draft of the Fourth Amendment of Chinese Patent Law.

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Article 52 designate that where a dispute arises over the implementation of an open license, the party concerned may request the administrative department for patent under the State Council to mediate. The system originates from British patent law. One of the benefits of implementing open licensing is to help establishing a technology development alliance in the science and technology community in order to jointly overcome the technical difficulties. In the ordinary patent licensing, there is a natural alliance relationship between the licensor and the licensee due to the license contract. Licensor can provide technological guidance, quality control or marketing assistance to the licensee. The licensee can feed back the effect of using the patented technology to the licensor in time, which objectively promotes the joint implementation and even further development of a patented technology. However, as a licensor, the patent right holder is often difficult to find a suitable licensee by his or her own strength. In this process, the problems such as information asymmetry and the difficulty of reaching agreement on licensing fees in licensing negotiations are the difficulties faced by the patent right holder. Therefore, the establishment of an open licensing system will further expand the technology development alliance in terms of licensing fees and advertising to the community, which will help to find more social forces to focus on tackling technical problems. Open licensing allows patent right holders to declare in writing that they are willing to license to any work unit or individual, which will be announced by the patent administration department under the State Council, and the payment method and standard of the licensing fee have been clarified, which creates the possibility for potential licensees to actively contact the licensors and be willing to implement the patented technology after obtaining relevant information through the announcement and to avoid the patent right holder wasting time and energy in the process of finding the licensee. In addition, open licensing meets the needs of scientists who have been devoted their life and time into science. This saves their time in finding the licensees and helps them carry on focusing on scientific activities.26

6.5 New Article 69 of the Draft of the Fourth Amendment The current Article 64 only grants patent offices enforcement power to handle false marking cases.27 The new amendment expands this administrative power into “actions suspected of patent infringement and false marking” and became a new Article 69.28 The Departments in charge of patent work and patent law enforcement may, based on evidence obtained, make inquiries of the parties concerned, and investigate the circumstances related to the suspected illegal action. They may conduct on-the-spot inspections of the places where the suspected illegal action is committed; 26 Nan Zhang, ‘The Evolution of British Patent Law during the Industrial Revolution and Its Enlightenment to China’, Contemporary Law Review, Issue 6, 2019, P. 119. 27 Article 64, Chinese Patent Law 2009. 28 Provision 1, Article 64, the Draft of the Fourth Amendment of Chinese Patent Law.

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consult and duplicate the relevant contracts, invoices, account books and other related materials; and check the products related to the suspected illegal actions and seal or detain the products proved to be produced by the patent infringers.29 This new Article 69 echoes with the new Article 70 of the Draft of the Fourth Amendment. There are two advantages: firstly, the time of the administrative procedure is shortened; secondly, this can prevent the suspect from hiding or transferring the relevant evidence and increase the efficiency of the enforcement.30

6.6 New Article 70 of the Draft of the Fourth Amendment In the current Article 60, patent offices are only granted the authority to order the infringers to stop the infringement. If the infringers are not willing to stop, patent offices have to request compulsory enforcement from the courts.31 Previously the cases handled by the Patent Office of Zhejiang Province ranged from 20 to 30 per year per person; now the figures have dropped to a maximum of around 10 cases per year per person.32 The Draft of the Fourth Amendment of Chinese Patent Law adds a new article as Article 70 as follows: The administrative department for patent under the State Council may, at the request of the patent right holder or interested parties, handle patent infringement disputes that have a significant impact in the whole country. With the request of the patent right holder or interested parties, the administrative department for patent of the local people’s government shall handle patent infringement disputes jointly regarding the cases of infringing the same patent right in its own administrative region; the cases of infringing the same patent right across regions may be handled by the administrative department for patent of the people’s government at a higher level.33 This revision complies with the Article 1 of the TRIPS Agreement that members may, but shall not be obliged to, implement in their law more extensive protection than is required by this agreement, provided that such protection does not contravene the provisions of this agreement. Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.34

29 Ibid. 30 Ibid. 31 Article

60, Chinese Patent Law 2009.

32 Xiaojun Xu, Jianmin Li and Jian Wu, ‘Suggestions on the Amendment of Patent Law and A Study

on the Administrative Enforcement’, Today’s Technology, Issue 5, 2012, p. 21. 33 Article 70, the Draft of the Fourth Amendment of Chinese Patent Law. 34 Article 2, TRIPS Agreement.

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6.7 New Article 71 in the Draft of the Fourth Amendment This article is a newly added one in the Draft of the Fourth Amendment. The patent right holder or interested party may, in accordance with the effective judgments, rulings, mediation documents of the people’s courts, or the decisions made by the administrative department for patent affairs to order the suspension of infringement, notify the network service provider to take necessary measures such as deleting, shielding, and disconnecting the links of infringing products. If the network service provider fails to take necessary measures in time after receiving the notice, it shall be jointly and severally liable for the extended part of the damage with the infringing network users. After the patent law enforcement department makes a decision to order to correct the patent false marking, it may notify the network service provider to take necessary measures such as deleting, shielding and disconnecting the links of counterfeiting patent products. After receiving the notice, the network service provider shall take necessary measures in a timely manner.35 The wording of this new article is very similar to Provision 2 and Provision 3 of Article 36 of Tort Law of PRC2009 that established the “noticing-deleting” principle in Chinese tort law. This new article also requests a threshold to initiate the procedure that the patent right holder or interested party shall have effective documents such as judgments, rulings, mediation of the courts or decisions made by the administrative authority. It creates a balance from between the rightholders and the Internet service providers and prevents the abuse of the procedure.

6.8 Chinese Patent Enforcement Measures 2011 and Its 2015 Revision China has adopted new measures to better enforce patent rights. China started to strengthen the administrative enforcement power by issuing a revised Chinese Patent Enforcement Measures which was implemented on 1 February 2011 and revised in 2015. Firstly, the three new principles of this measure, “lawfulness”, “fairness” and “appropriation”, in the enforcement procedure are reaffirmed.36 Secondly, it adds articles regarding the trusted parties in confiscating counterfeited goods and mediating patent disputes as well as the duties of the trusted parties.37 It also strengthens the mediating function of the local patent offices.38 Thirdly, it clarifies the duties of investigation and evidence collection of the local patent offices. When the interested parties are not able to collect the evidence due to reasons out of their control, the patent office will decide whether to assist in collecting the evidence based on a 35 Article

71, the Draft of the Fourth Amendment of Chinese Patent Law. 3, Chinese Patent Enforcement Measures 2011. 37 Ibid., Article 6. 38 Ibid. 36 Article

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written request from the interested parties. Further, the new measure provides that the patent dispute shall be settled within 4 months since the open date.39 And this article was revised in 2015 with the time shortened to 3 months since the open date.40 False marking cases shall be settled within 1 month since the open date.41 These dates can be extended in exceptional circumstances if a case is very complicated.42 Moreover, Where the administrative department for patent affairs discovers or accepts the report or complaint and discovers the suspected action of patent false marking, it shall set up a case within 5 working days from the date of discovery or 10 working days from the date of receiving the report or complaint, and designate two or more law enforcement officers to investigate.43 As we discussed throughout this chapter, patent enforcement contains both judicial enforcement and administrative enforcement. This is a system comprised of multiple enforcement bodies bearing different costs of human resources, time, expenses, and demanding more cooperation and communication between different organizations.44 In ancient China, the judicature was not independent of the administration; the judges were the same people as the administrative officials. Thus, when the general public were seeking for help, they often turned to the local governments.45 In the modern time, both judicial enforcement and administrative enforcement are helpful to the general public. For example, when Shanghai residents found their patent rights were infringed, 41.5% of them would choose administrative protection, 40.1% would seek for judicial protection, 18.4% of them would ask for mediation.46

6.9 New Article 72 of the Draft of the Fourth Amendment 6.9.1 Increase of Statutory Compensation The current rule of deciding compensation lies in Article 65 of Chinese Patent Law 2009. The primary rule in deciding compensation for patent infringement is based on the patent right holders’ actual losses caused by the infringement. If this is hard to determine, the compensation shall be determined on the benefits acquired by the infringers. If neither of these can be determined, the compensation shall be determined on the reasonable multiplied amount of the royalties of the patent. If none of these can be determined, the court shall determine the amount of compensation 39 Ibid.,

Article 19. 21, Chinese Patent Enforcement Measures 2015. 41 Article 34, Chinese Patent Enforcement Measures 2011. 42 Ibid., Article 19 and Article 34. 43 Article 28, Chinese Patent Enforcement Measures 2015. 44 Jianzhi Deng, ‘A Fundamental Study of Administrative Protection System in China’, Social Science Journal of Hu Nan Normal University, Issue 3, 2012, p. 36. 45 Ibid. 46 Ibid. 40 Article

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within the range from 10,000 to 1,000,000 Yuan considering the type of patent right, nature of the infringement and seriousness of the case.47 This range of compensation is commonly called “statutory compensations” in Chinese patent law theory.48 Three Chinese judges Chunjian Xu, Sibin Liu and Xuejun Zhang note in a recent article that the determination of damages of patent infringement should mainly rely on the actual losses instead of the statutory compensation range. Statutory compensation is regarded as a supplementary tool according to the difficulties in the calculation of the actual losses and the realistic obstacles in the patent protection.49 However, because in reality the actual losses are difficult to prove, statutory compensation is commonly adopted: for example, in some local courts in Guangdong Province, more than 95% of the decisions are made according to the statutory compensation.50 A CNIPAofficial Meng Zuo had analyzed patent decisions from January 2010 to January 2012 and found 40% of invention patent infringement cases nationwide were decided according to the statutory compensation.51 Judicial comment notes that “although this adoption saves time in the judicial procedure, it actually restricts the level of the compensation against the patent infringement and barely reflects the value of the patented products and the policy of patent law protection” and “it will discourage the confidence of the patent right holders”.52 The National People’s Congress of the PRC published a “Seeking for Public Opinions Notice” on its official website in January 2019 with the Draft of the Fourth Amendment of the Chinese Patent Law.53 In the new Article 72 of the Fourth Amendment, the range of the statutory compensation increased to “100,000–5,000,000 Yuan”.54 In order to determine the amount of compensation, the people’s court may order the infringer to provide the account books and materials related to the infringement when the right holder has tried his best to provide evidence and the account books and materials related to the infringement are in the possession of the infringer. If the infringer fails to provide or provides false books and materials, the people’s court may determine the amount of compensation according to the claims and evidence provided by the right holder.55

47 Article

65, Chinese Patent Law 2009. Xu, Sibin Liu and Xuejun Zhang, ‘The Rule of Evidence in the Compensation of Damages in IPR Cases’, People’s Judicature, Issue 17, 2012, p. 38. 49 Ibid. 50 Ibid. 51 Meng Zuo,‘The Punitive Compensation in the New Patent Law Amendment’, Electronics IP, Issue 10, 2012, p. 26. 52 Chunjian Xu, Sibin Liu and Xuejun Zhang, op. cit., p. 38. 53 ‘Legislative Drafts Seek for Public Opinion’, Official Website of the National People’s Congress of the PRC, 4 May 2020, http://www.npc.gov.cn/flcaw/more.html. 54 Article 72, the Draft of the Fourth Amendment of Chinese Patent Law. 55 Ibid. 48 Chunjian

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6.9.2 The New Adoption of Punitive Compensation Its key changes should be discussed to see that the efforts at resolving the enforcement problem in patent infringement are progressing. In the new Article 72 of the amendment, the significant change is that the punitive compensation is written into this draft for the first time. It states that where the intentional infringement of the patent right is serious, the amount of compensation may be determined between one and five times the amount determined in accordance with the above methods.56 A survey has found that approximately 30% of the patent right holders in China have been infringed.57 Judge Chen notes the advantages of the introduction of punitive compensation into Chinese patent law system in his recent article. He analyzes that the original goal of introducing this new form of compensation was to increase the future cost of the infringers and to frighten potential infringers.58 If the infringers realize that the cost of patent infringement is higher than the gains of infringement, the possibility of infringement will be reduced.59 Judge Chen also points out that the calculation of compensation in patent infringement cases is very difficult due to the specialty of patent information storage, the use of the patent and the features of patent infringement.60 In other words, the probative effect of evidence provided by the patent right holders to prove their changes of recent incomes, commercial orders, production figures, the market occupancy or the changes of interests could be easily denied by the infringers due to weakness in probity, relevance or legitimacy of these evidences.61 In her 2012 article, CNIPAofficial Meng Zuo regards this new provision as a necessity to compensate the actual losses of the patent right holders and to break the restriction of the maximum amount of 1,000,000 Yuan in statutory compensation.62 Meng Zuo also identifies some points needed to be further clarified in the amendment. Firstly, the determination of infringement action is a difficult task. Secondly, the wording of the revised article means not all the intentional infringement actions would be published under the punitive compensation, when the infringement occurs, and so the conditions that shall be fulfilled for the punitive compensation should be further clarified.63 Thirdly, the maximum amount of punitive compensation should target the patent infringement in the worst faith due to the difference on the levels of intention.64 56 Ibid. 57 Zeyong Chen, ‘A Study on the Necessity of Punitive Compensation in the Patent Law Enforcement’, Electronics IP, Issue 10, 2012, p. 30. 58 Ibid., p. 31. 59 Ibid. 60 Ibid., p. 33. 61 Ibid., p. 31. 62 Meng Zuo, op. cit., p. 27. 63 Ibid. 64 Ibid.

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6.9.3 Increase of the Judicial Power in Collecting Evidence Article 61 of the Chinese Patent Law obtained a new third provision in the Draft of the Fourth Amendment. It grants courts and the suspected patent infringers new duties as follows. During the patent infringement suit, regarding the evidence such as suspected infringing products, account books and other materials controlled by the suspected infringers, people’s courts shall investigate and collect them according to the requests of the plaintiffs or their attorneys.If the suspected infringers do not provide or transfer, forge or destroy the evidences, people’s courts shall impose compulsory measures65 to prevent them from obstructing the suit. If a crime is committed, the suspected infringers shall bear the criminal liability.66 The legislative purpose of this new provision has been described as “a method to resolve the difficulties in evidence collection” and “an increase in the judicial enforcement power”.67 As discussed in the previous sections of this chapter, the losses of the patent right holders or the incomes of the suspected infringers are difficult to calculate. Further, many useful pieces of evidence are controlled by the suspect infringers, while the plaintiffs do not have the possibility to obtain access to the infringers’ companies or factories to collect evidence. Thus, shifting this obligation to the courts is necessary. However, this provision is also regarded as potentially strict on the suspected infringers.68 If the suspected infringers are burdened with compulsory measures due only to their refusal to provide evidence, when the case is related to trade secrets or state secrets, the courts’ actions will remain unpredictable.69 Professor Xiaoqing Feng has put forth a solution. He has suggested that the compulsory measures shall be imposed upon the suspected infringers “if they do not provide with proper reasons or transfer, forge or destroy the evidences”.70

6.10 The Establishment of New IP Courts The origin of the establishment of new IP courts came from the Decision on Some Important Issues of Completely Furthering the Reform adopted in the Third Plenary Session of the 18th CPC Central Committee in 2013. On 31 August 2014, the National 65 Compulsory measure is defined as “the enforcement officers of a court impose the infringers to complete certain designated actions according to the request of the applicants and the official judicial documents”. 66 Provision 3, Article 61, Draft of Fourth Amendment of Chinese Patent Law. This new provision has not received the official English translation so far, this translation is done by the author of the book. 67 Kaixuan Yu, ‘The Fourth Amendment of Chinese Patent Law—A Stage of Administrative Enforcement and Judicial Protection’, Electronics IP, Issue 10, 2012, p. 43. 68 Ibid. 69 Ibid. 70 Xiaoqing Feng, ‘The Legislative Purpose of Fourth Amendment of Chinese Patent Law Is to Increase the Creativity in China’, Journal of Chinese Social Science, 17 October 2012, p. 2.

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People’s Congress passed the decision of establishing IP Courts in Beijng, Shanghai and Guangzhou. For instance, the Beijing IP Court started to receive IP cases since early November 2014, and within one month, it received more than 200 cases.71 The jurisdiction of IP Court covers first instance civil and administrative cases related to patent, new plant variety, layout designs of integrated circuits, technical secrets and other IP cases. The appeal court of the Beijing IP Court is the High Court of Beijing.72 The SPC set up its IP Court in January 2019. This Court hears cases on appeal over patent and other IP related technologies throughout the country.73 The IP Court of the SPC often holds trainings on its judges since establishment. For example, in April 2019, this Court invited the SPC International Commercial Expert Committee member to train IP judges on “Writing in English on Chinese Law”.74

6.11 Conclusion In this chapter, the increase of both administrative enforcement and the judicial enforcement has been discussed as the new waves of the Chinese patent system. These new changes in the patent system will bring a better legitimate environment to develop innovation and creativity in China. It can be foreseen that the Chinese patent system will evolve quickly in the next decade.

71 ‘Beijing IP Court Has Received More than 200 Cases in the First Month’. http://www.chinaipma gazine.com/news-show.asp?id=12658. 72 ‘Beijing IP Court Will Be Opened Next Month’. http://www.chinaipmagazine.com/news-show. asp?id=12415. 73 ‘Introduction to the IP Court of the SPC’, Introduction, Official Website of the IP Court of the SPC, 26 December 2018. http://ipc.court.gov.cn/en-us/news/view-136.html. 74 ‘Susan Finder, SPC International Commercial Expert Committee Member Spoke at the IP Court of the Supreme People’s Court ’, News, Official Website of the IP Court of the SPC, 2 April 2019. http://ipc.court.gov.cn/en-us/news/view-180.html.

Chapter 7

Conclusion: Cultural Strategies for IP Enforcement

7.1 Key Principles in Each Chapter of This Book In Chap. 1, it clarifies the contribution of this book in the research field and provides a thorough literature review. In Chap. 2, the discussion examines the way in which the society changed because of the forces of industrialization. The industrialists emerged and motivated the three golden times of patents in recent Chinese history. China has been opening up to the world since 1978 and has become a large manufacturing power. China is also facing the challenge of turning from a manufacturing economy into a creative economy. Furthermore, Confucianism, which has influenced the Chinese society for over two thousand years, continues to influence the newly established Chinese patent system. In Chap. 3, the effect of traditional Chinese culture on the notion of IP with a particular focus on Confucianism and how Chinese society has valued knowledge throughout history is analyzed. The status of knowledge during Confucius’ time show that Confucian principle has played a key role in promoting science and increasing power of nations. From the analysis of “Four Books and Five Classics”,1 in my view, it can be observed that even the contemporary legislation of Chinese patent system has echoed the main principles of Confucianism recorded in these nine classic works. Confucian social, educational and moral influence has been instrumental in shaping Chinese society. In Chap. 4, the first part of the chapter focuses on China’s long ancient history of innovation. Ancient China was advanced in agriculture, meteorology, navigation, paper-making and printing which remained as a world-leading technology for a long time. This chapter also discusses Confucianism’s influence on innovation and creativity. Further, this chapter continues to analyze the early Chinese patent law. Different patent regulations were issued and different initiatives were tried to reward inventors.

1 See

Jinglun Wang, op. cit., p. 194.

© Intellectual Property Publishing House and Springer Nature Singapore Pte Ltd. 2020 N. Zhang, A Confucian Analysis on the Evolution of Chinese Patent Law System, https://doi.org/10.1007/978-981-13-9027-2_7

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Chapter 5 begins by concentrating on China’s updates in patent law. China amended patent law in 1992 with the intention of joining the WTO. China subsequently joined the WTO in 2001 and the 2001 amendment of the Patent Law can be regarded as further legal preparation for Chinese entry into the WTO. The 2009 amendment was based on the needs of the developing domestic economy which was more open and transparent. The second part of this chapter focuses on different aspects of the Chinese patent system such as the types of patent rights, examination on invention, utility model and design patents, patent licences, injunctions, preservation of evidence, patent infringement and non-infringement actions, false marking actions, non-false marking defence, compulsory licensing, the civil, administrative and criminal liabilities and remedies combined with the analysis of the patent offices and courts in China. In Chap. 6, new waves in patent system and new enforcement measures adopted by China are discussed. The Draft of the Fourth Amendment of Chinese Patent Law is analyzed as a new wave in the field. In particular, the adoption of new provisions related to punitive compensation, the increase of both administrative and judicial enforcement power are the key issues in this section. Furthermore, the change in the Draft of the Regulation of Employment Inventionsand the establishment of the newIPcourts are also introduced and discussed. In this final chapter, for improving legal and enforcement environment, in the context of the historical and social legacy of Confucianism, five key themes in better the enforcement methods have emerged: education (including IP awareness), culture (creating an IP culture in China), benefits of both local and overseas patent right holders (industry and forces of industrialization), social group (in particular, the development of a creative group) and commercial strategy (including patent portfolios and branding). These will now be considered in detail towards developing a comprehensive recommendation for patent law and enforcement in China.

7.2 Enforcement is the Agenda: Five Strategies 7.2.1 Education The Chinese State Council issued Outline of National IP Strategy in June 2008. This policy set up the major direction of IP development in China. In 2012, the State Council issued Promotion Plan of National IP Strategy 2012. Article 85 of this Plan required that text books of elementary schools, middle schools and high schools shall be revised with IP education content.2 It also requested that higher education

2 Article

85, Promotion Plan of National IP Strategy 2012.

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institutions launch IP related courses.3 This aims to increase the IP awareness of children and youth in China.4 Article 60 of Part 7 of The Outline of National IPStrategy established the goal of developing IP human resources as follows: Set up national education bases to train IP professionals. The training of senior IP tutors needs to be accelerated. A sub-discipline program on IP should be set up and the higher education institutions that meet the requirements are supported to establish programs for conferring IP Master’s and Doctor’s degrees. Large-scale training programs need to be organized to train all types of IP professionals, focusing on training of urgently needed management personnel and personnel to provide intermediary service involving IP.5

Article 61 of Part 7 of The Outline of National IP Strategy stressed that more comprehensive training on IP should be provided to different professionals including teachers.6 IP education is expanding from elementary schools to universities in China. This educational expansion of IP knowledge is carried out experimentally by trial schools in trial cities. For instance, the Shaodong City in Hunan Province, Zhangdian District in Shandong Province and Luohu District in Shenzhen, Guangdong Province are trialing IP education in elementary and middle schools.7 Many methods have been tried to encourage the passion of inventing among children and teenagers. For example, the selection of “Tomorrow’s Star Scientists for Youth in Shanghai”, award has been founded by the Shanghai IP Office with special funds to support patenting related activities.8 Award winners can apply for sponsorship of patent application fee from this office.9 Meanwhile, Shanghai City has founded IP educational courses in 40 middle schools and 10 IP education demonstration schools.10 Currently Chinese universities have three types of IP courses. The first type is basic or foundation IP courses.11 The second type includes more detailed and specific courses, such as Patent Law, Trade Mark Law, Copyright Law, Trade Secret Law or International IP Law.12 The third type is practical and includes programs such as Patent Information Analysis, Search on Patent and Trade Mark Information or professional IP Clinics.13 So far, most Chinese universities have set up the first two types 3 Ibid. 4 Ibid. 5 Article

60, Part 7, Outline of National IP Strategy, State Council, 5 June 2008. Article 61. 7 Haiwang Hao and Gang Han, ‘A Discussion on the Characteristics of IP Education in the Elementary Schools and Middle Schools’, Journal of Jing Dezhen College, Issue 1, 2007, p. 96. 8 Shanghai Education Centre of Science and Art, ‘The Notice of Tomorrow’s Star Scientists at Shanghai Education Centre of Art and Science’, Activity Information, Shanghai Education Centre of Science and Art official website, 17 November 2013. https://www.sycste.org.cn/article/MRZ Xhdxx/5645.html. 9 Provision 2, Article 4, Measures of Sponsoring Patent Related Activities of Shanghai City. 10 Haiwang Hao and Gang Han, op. cit., p. 96. 11 Zhenyu Wang and Xiaoguang Shan, ‘A Study on the Development of IP Education in Chinese Universities’, Law Review, Issue 4, 2009, p. 121. 12 Ibid. 13 Ibid. 6 Ibid.,

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of courses, but very few practical courses have been taught. This cannot fulfill the goal of cultivating specialized IP professionals.14 In particular, Professor Xiaoguang Shan, the Dean of Shanghai International College of IP in Tongji University, has promoted the method of IP Law Clinics teaching in Chinese law schools. He regards this type of course as a useful channel for law students to absorb real techniques such as confidentiality, dealing with clients, preparing litigation, collecting evidence or drafting legal documents in IP disputes.15 The China University of Political Science and Law was the first Chinese law university to establish IP Law Clinic courses in September 2005. Such courses include classes teaching academic theories and collaboration with training centers such as local district courts and law firms. The students are required to attend an IP Moot Court decided by local district court IP judges.16 Meanwhile IP training targeted at working professionals has become more commonly seen in China. In 2008, Article 62 of The Outline of the National IP Strategy has already clarified the goal of training working IP professionals as follows: Improve relevant systems of attracting, exploiting and managing IP professionals, improve the human resources structure and encourage reasonable mobility of personnel. In view of the implementation of the Civil Servant Law, we need to improve the civil servant administration system in IP administration departments. A professional and technical assessment system for IP professionals needs to be established in accordance with the overall requirements of the reform to the professional titles system of the State.17

According to the Global Innovation Index 2019, China has the world’s largest group of knowledge workers receiving property training in different sectors of the industry.18 For instance, the organization holding frequent training classes for IP professionals is China IP Training Center which is under the leadership of CNIPA. It provides training to IP judges, managers, teachers, brokers and enforcement officers.19 Besides organizing examination preparation classes for the patent attorney examinations,20 it also awards two Master of Law degrees in collaboration with the

14 Ibid.,

p. 124. Liu, ‘The Exploration of New IP Service Forum’, Department News, official website of China University of Political Science and Law, 7 January 2012. https://www.cupl.edu.cn/sites/msj jfxy_xsw/info_content.jsp?ColumnID=583&TID=20120107153,823,137,156,917. 16 Maolin Yang and Xinyu Zhang, ‘The Clinic Class Successfully Held the 13th IP Moot Court’, University News website of China University of Political Science and Law, 3 December 2012. https://www.fadaren.com/Fadaren/20121204113230.shtml. 17 Article 62, Part 7, Outline of National IP Strategy, State Council of China, 5 June 2008. 18 Cornell University, INSEAD, WIPO, ‘Global Innovation Index 2019’, https://www.wipo.int/pub lications/en/details.jsp?id=4434. 19 The China IP Training Centre, https://www.ciptc.org.cn/index.do. 20 The Long Distance Learning of Chinese IP Training Center. https://elearning.ciptc.org.cn/public/ index. 15 Ying

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John Marshall Law School21 and Cardozo School of Law.22 It also provides long distance on-line education on basic IP courses.23 Most attendees of the classes of IP training centers are civil servants, patent examiners and patent attorneys. Furthermore, IP trainings targeted at enterprises are not popular. In China, patent right holders can be enterprises; patent infringers can be enterprises as well. Research carried out among the enterprises in Jilin Province has demonstrated that some entrepreneurs, managers and R&D staff had relatively weakerIP awareness.24 Lack of IP business strategies, expertise, rules and regulations existed within the enterprises in this province.25 Some very useful measures to resolve this problem are brought forward by the authors and can be illustrated in the following chart: Providing different types of IP training according to different levels of staff means that it is possible to offer specific skills relevant to the particular needs and role of the staff undertaking the training. Regarding training patent engineers in an enterprise, the focus shall be put on the patent management strategies and drafting patent documents.26 Regarding training technicians, the focus shall be put on the extraction of patentable technology and drafting of common technical documents (Chart 7.1).27

7.2.2 Creating an IP Culture in China Chapter 3, it has been shown that Chinese society has been deeply influenced by Confucius’ “Ren”, “Lun” and “Li” principles. Inevitably, Confucianism has influenced the Chinese legal tradition. This relationship between culture and legal tradition is set out clearly in John Henry Merryman and Rogelio Perez-Perdomo’s book The Civil Law Tradition: A legal tradition … is a set of deeply rooted, historically conditioned attitudes about the nature of law, about the role of law in the society and the polity, about the proper organization and operation of a legal system and about the way law is or should be made, applied, studied,

21 Jing Xiao, ‘China-US IP Law Seminar Was Successfully Held in the China IP Training Centre’, News, China IP Training Centre official website, June 2013. https://www.ciptc.org.cn/news.do?met hod=contentindex&id=8a8181be3f229fce013f8479ac1700cb. 22 Yinan Zhou, ‘CNIPA-Cardozo Law School Graduation Ceremony 2012 Was Held in the China IP Training Center’, Newsletter, China IP Training Centre official website, July 2012. https://www. ciptc.org.cn/news.do?method=contentindex&id=8a8181be3fe555a8013ff5c5b2b70021. 23 The Long Distance Learning of Chinese IP Training Center. https://elearning.ciptc.org.cn/public/ index. 24 Caiping Qin, Chunhui Su, Juan Wang and Shuhong Liu, ‘Strategic Consideration on the Comprehensive Development of Vocational Training of IP in the Enterprises in Jilin Province’, Vocational and Technical Education, Issue 32, 2006, p. 5. 25 Ibid. 26 Linfeng Zhang and Wu Yang, ‘The Important Support of IP Strategies of Enterprises—The Establishment of IP Training System’, China Invention and Patent, Issue 5, 2010, p. 86. 27 Ibid.

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Chart 7.1 Possible methods of training in the enterprises (This chart is literately described in the Caiping Qin, Chunhui Su, Juan Wang and Shuhong Liu, op. cit., p. 6. The visualization of this chart is designed by the author of this book.) perfected, and taught. The legal tradition relates the legal system to the culture of which it is a partial expression. It puts the legal system into cultural perspective.28

However, it is incorrect to view legal tradition as merely a frozen past. Rather, it is a vital, dynamic, on-going system.29 In terms of international policy and standards development, WIPO’s Mid-Term Plan for WIPO Program Activities—Vision and Strategic Direction of WIPO, notes that every country should be encouraged to develop an IP culture appropriate to its needs, including a focused national IP strategy, the most suitable national IP system, and the fostering of a nation-wide perception of IP as a powerful tool for economic, social and cultural development.30 Regarding one of the strategic goals, this Plan clarifies that promotion of an IP culture includes 28 John Henry Merryman and Rogelio Perez-Perdomo, The Civil Law Tradition, Stanford University

Press, 2007, p. 2. 29 Mary Ann Glendon, Michael W. Gordon and Paolo G. Carozza, Comparative Legal Tradition, West Academic, 1999, p. 13. 30 Article 10 (b), Medium-Term Plan for WIPO Program Activities—Vision and Strategic Direction of WIPO, Thirty-Ninth Series of Meetings, WIPO, Geneva, 22 September, 1 October 2003.

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making resources and expertise available to assist Member States in their own efforts to develop an IP culture through cooperation with governments, intergovernmental organizations and partners in private sectors.31 With regard to the promotion of an IP culture, as set out in WIPO’s Mid-Term Plan, two articles of Part 8 of The Outline of China’s National IP Strategy 2008 point out similar goals in the cultivation of an IP culture: (63) Set up a working mechanism for publicizing information about IP that is led by the government and supported by the media, in which the public widely participates. The coordination mechanism needs to be improved and relevant policies and working plans need to be formulated to promote public awareness of IP and the development of an IP culture.32 (64) Offer IP courses in higher education institutions and to introduce education on IP into the quality-based education to students of such institutions. A general education plan on IP needs to be formulated and implemented, and IP education needs to be listed into teaching plans in primary and high schools in whole China.33 Moreover, Article 15 of Promotion Plan of National IP Strategy 2012 emphasizes the promotion of an IP culture and explains the purpose of this promotion as follows: “Strengthen the knowledge propagation on IP and increase the awareness of IP in the whole society … Increase the IP content in the national promotion of the public moral culture and the national ordinary education in law. By advocating the moral concepts of being proud of innovation and honesty and ashamed of plagiarism and counterfeiting or cheating, the IP culture could be established throughout China, characterized by respect for knowledge, enthusiasm for innovation and creation, being honest and following the laws.”34

In The Reading of an IP Culture, a book edited by the late Deputy Commissioner of CNIPA, Binhe Lin, one section focuses on the challenges that China has been facing. One of the challenges has been identified as the lack of an IP protection mentality.35 As the main bodies of innovation, Chinese enterprises were lacking a particular sense of innovation and IP protection awareness.36 A set of figures in 2005 showed that there was only one patent right holder in every 1 million Chinese population; by contrast, there were 994 patents in every 1 million Japanese population.37 15 years has passed, there has been a massive development of IP culture in China. In 2019, the social satisfaction rate on IP protection increased to 78.98%, and patent right holder satisfaction rate on IP protection increased to 79.89%.38 There are many new methods of creating an IP culture recently. For example, the China IP Publishing 31 Ibid.,

Article 11 (a). 63, Part 8, Outline of National IP Strategy, State Council of China, 5 June 2008. 33 Ibid., Article 64. 34 Article 15, Promotion Plan of National IP Strategy 2012. 35 Binhe Lin (ed.), The Reading of an IP Culture, IP Publishing House, 2008, p. 55. 36 Ibid. 37 Ibid. 38 CNIPA, ‘The Situation on IPR Protection of China 2019’, 24 April 2020. https://www.sipo.gov. cn/docs/2020-04/20200424140814696289.pdf. 32 Article

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House Co. Ltd. created a series of children’s novel called I Am Also an Inventor.39 Each book contains 8 stories about innovative solutions to solve problems in different aspects in life. The stories are relatively easy to read for teenagers with each of them having over 30 colorful illustrations. An animation based on this series of novels will be launched in 2021 on Children’s channel of Chinese national TV station. Thus, introducing IP awareness into the “inner consciousness” of the public to influence their actions is of great importance in China.40 To achieve these, a culturally relevant and acceptable translation of IP is essential.

7.2.3 Benefits of Both Local and Overseas Patent Right Holders Professor Yahong Li observes the development of IP protection in the Chinese software industry and concludes that the enforcement will be bettered when the industrial and commercial sectors in China start to seek stronger protection; in other words, a more internationally integrated legal and administrative framework would be more important.41 Furthermore, taking the software industry as an example, a strategy to improve its incentives to enforce IP laws in China is to provide assistance to local software suppliers to protect their IP rights and develop alliances with the other software suppliers.42 In the view of Confucianism, this strategy provides the condition of creating the environment for “Ren”—“Not to do to others as you would not wish done to yourself”43 and “For the man of perfect virtue, wishing to be established himself, he also seeks to establish others; wishing to be enlarged himself, he also seek to enlarge others”.44 The Chinese State Council issued Decision of Accelerating Fostering and Developing Strategic New Industries on 10 October 2010.45 The strategic new industries are based on the breakthrough of the prominent technology and important development

39 Danzhi Li, ‘The Engine of Creativity Is Generated, 5000 Copies of I Am Also an Inventor Published by China IP Publishing House Co. Ltd. Sold Out’, 25 May 2018, Economic Daily. https://www.ce.cn/cysc/newmain/yc/jsxw/201805/25/t20180525_29242431.shtml. 40 Ibid. 41 Yahong Li, ‘Pushing for Greater Protection’, University of Pennsylvania Journal of International Economic Law, Issue 23, 2002, p. 658. 42 Horacio Teran, ‘IP Protection and Offshore Software Development: An Analysis of the US. Software Industry’, Minnesota IP Review, Volume 2, Number 1, 2001, p. 33. 43 The original Chinese Pinyin is “Ji Suo Bu Yu, Wu Shi Yu Ren”. James Legge (trans.), The Analects, op. cit., Verse 2, Chapter 12. 44 The original Chinese Pinyin is “Fu Ren Zhe, Ji Yu Li Er Li Ren, Ji Yu Da Er Da Ren”. Ibid., Verse 28, Chapter 6. 45 Decision of Accelerating Fostering and Developing Strategic New Industries, Chinese State Council, 2010, No. 32.

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demands.46 They are playing the leading roles in the economic and social development.47 They occupy intensive knowledge and technology, consume less in terms of material resources, maintain growing potential and obtain overall efficiency.48 The strategic new industries are promoted by the State Council as the leading and pole industries in China. The current emphasis is focused on energy saving and environmental protection, IT, biology, high-end equipment manufacturing, new energy, new material and new energy automobiles.49 According, in these seven strategic new industries promoted, the numbers of the granted patents have kept booming between 2008 and 2012.50 The new patent boom came from the promotion of the seven new strategic industries, showing that better enforcement of patent law would lie in the push made from these local patent rightholders. And the improved patent law protection will benefit both local and overseas patent right holders.

7.2.4 Creative Group and IP The foundations of creative group can be found in the previous chapters. In ancient China, creative thinking was promulgated by Confucius and his disciples and demonstrated through the innovations and creative output of the ancient Chinese scientists and scholars. A journal article published in 2006 recognized that the modern Chinese creative group emerged during the first decade of the twenty-first century.51 The creative industry was proved to change the future of China from the status of “the world factory” after the establishment of the fundamental industries such as steel, chemistry, mechanism and electronic engineering. “Improving the creative capability and establish a creative country” became the national goal for the next decade, thus, the rise of the creative group became a must.52 The Chinese creative group was chasing after challenges, responsibilities and flexibilities in work.53 Being creative gradually became a life habit nationwide—for the web bloggers, ring tone singers, graffitists

46 Ibid.,

definition of Strategic New Industries.

47 Ibid. 48 Ibid. 49 Ibid. 50 The Division of Planning and Development of CNIPA, ‘The Statistic Report of the Patents Granted

in the Strategic New Industries’, Patent Statistic Bulletin, the CNIPA official website, 8 August 2013, p. 3. https://www.sipo.gov.cn/ghfzs/zltjjb/201310/P020131025653717743541.pdf. 51 Xiaoyi Hu, Junjie Huang, Wen Hu, Yuchi Huang, Jiujiu Hu and Mo Chen, ‘The Ten Streams of Creative Life in 2006’, Journal of Shu Zhai, Issue 12, 2006, p. 17. 52 Ibid. 53 Ibid.

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and directors of on-line mini movies, the power of the Internet and new media facilitates the establishment of this new creative group as both the representatives of the new pop idols of the general public.54 There are several universal features of the creative group. The creative industry is often developed in the urban and very populated areas due to the function and convenience of these areas. The urban areas provide comprehensive public facilities, good cultural environment, convenient transportation and readily available human resources for the working opportunities and residential environment dominated by the creative group.55 Furthermore, the creative group also rises along with the boom of Chinese patent right holders. The development of the creative group is at different stages in different geographical regions; that is, it varies from province to province.56 It can be clearly seen that East China held the most patents in China. East China includes Beijing, Tianjin, Shandong Province, Jiangsu Province, Shanghai, Zhejiang Province, Fujian Province and Hainan Province.57 The region that occupied the fewest patents is Northeast China including Liaoning Province, Heilongjiang Province and Jilin Province.58 A CNIPA report shows that the rankings of the top five cities and provinces occupying the most granted patents are Guangdong Province, Beijing, Jiangsu Province, Shanghai and Zhejiang Province.59 This ranking reflects the imbalance of economic development in different provinces due to the different resources in technology, capital and human resources.60 The creative group can possibly be regarded as the important drive advocating for improving patent law protection and enforcement in China.

7.2.5 Patent Portfolio and Branding Patents play an important role in the branding of patent right holders themselves or the company itself. For the Standard & Poor (S&P) 500 companies, in 2000, for every USD 6 of market value less than USD 1 was comprised of physical and financial assets of which the remaining USD 5 was comprised of intangible assets.61 In the case of acquisition and joint ventures, intangible asset valuation is important 54 Ibid. 55 Jianjun Chen and Baoqin Ge, ‘The Impact of Urbanism on the Development of the Creative Industry’, Academic Journal of Zhejiang, Issue 6, 2008, p. 164. 56 The Division of Planning and Development of CNIPA, ‘The Annual Report of the Valid Patents Granted in the 2012 Part I’, Patent Statistic Bulletin, the CNIPA official website, 31 July 2013. https://www.sipo.gov.cn/ghfzs/zltjjb/201310/P020131025653689932785.pdf. 57 Ibid. 58 Ibid. 59 Ibid. 60 Ibid. 61 Ted Hagelin, ‘A New Method to Value IP’, American IP Law Association Quarterly Journal, Volume 30, 2002, p. 353.

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to determine the value of a firm for both the buyers and sellers and the value of a partner’s contributions to collaborative undertakings.62 If a person or a start-up owns patents, this situation will enable the investors to estimate the future income of the patent attributable to the use of it.63 Investors frequently look for early-stage companies or new ideas that have commercial potential, provided that adequate IP rights have been or can be secured to protect the underlying business.64 The technology can be evaluated in several ways such as determining the excess earning generated through the use of technology or estimating the royalty income earned by licensing the technology.65 Furthermore, the patent portfolio shall be examined. This raises several questions: Are the patents fundamental or improvements? Have patents been applied for or issued in all important markets? Is it possible to engine around the patents? Have the patents been litigated? Will future patents be included in the licence?66

Therefore, a start-up company should carefully consider its patent portfolio to protect its business including licensing, establishing the patent right ownership and avoiding infringement of the patent rights of others.67 In particular, a patent portfolio development strategy integrating with a company’s business plan is particularly attractive to investors.68 For biotechnology or small molecule therapeutic companies, because it often takes many years for them to develop a patentable product to market, the value of this type of company seriously relies on the patent portfolios. Compared to companies without patent portfolios, the ones owning patent portfolios would be regarded more innovative and technically robust in China. For example, the Chinese automobile manufacturer Foton considers itself as a leading innovative technical automobile manufacturer in China and includes its awards in trade mark protection and energy saving technology on its introduction for the official website.69 As reported by the largest Chinese IP news agency, Foton currently owns over 160 patents and is advocating its promotion in R&D.70 Owning patents is regarded as a positive sign of the strong innovation of a company. In China the banks always play an important role in providing small loans to technical start-ups. For example, the Patent Office of Tianjin City signed a Framework Treaty of Loans on Patent Rights 62 Ibid. 63 Kenneth L. Port, Jay Dratler, Jr. Faye M. Hammersley, Terence P. McElwee, Charles R. Mcmanis and Barbara A. Wrigley, Licensing IP in the Information Age, Carolina Academic Press, 2005, p. 203. 64 Richard S. Gruner, Shubha Ghosh and Jay P. Kesan, Transactional IP: from Start-ups to Public Companies, LexisNexis, 2012, p. 106. 65 Kenneth L. Port, Jay Dratler, Jr. Faye M. Hammersley, Terence P. McElwee, Charles R. Mcmanis and Barbara A. Wrigley, op. cit., p. 204. 66 Ibid., p. 205. 67 Richard S. Gruner, Shubha Ghosh and Jay P. Kesan, op. cit., p. 106. 68 Ibid., p. 107. 69 ‘The Introduction of Foton’. https://www.foton.com.cn/intro/. 70 Yan Wu,‘Patent and Branding Are Supporting Foton as Both Hands’, China IP Newspaper, 26 September 2007.

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between Government and Bank with the Tianjin Branch of the Agricultural Bank of China in 2003.71 So far, 47 Tianjin local enterprises have received loans from this bank because they are patent rightholders.72 Thus, owning patent rights in China is a must for the bank investors to provide their loans to technical start-ups. Furthermore, the marking of a patent number or patent application number would increase the value of the products in the mind of the consumers as a promotional method as well as a warning sign to potential in fringers.73 Provision 2 of Article 17 of the Chinese Patent Law 2009 states that the patent right holder shall have the right to have his or her patent mark displayed on the patented products or on the package of such products.74 Rule 83 of Implementing Regulations of the Chinese Patent Law 2009 designates that where any patent right holder affixes a patent marking on the patented product or on the package of that product in accordance with Article 17 of the Chinese Patent Law 2009, they shall make the affixation in the manner as prescribed by CNIPA.75 Regarding whether the application numbers of patents shall be marked or not, two Chinese patent scholars, Liying Fu and Xiaodong Zhang, brought forward that application numbers should be marked on the products as well to protect them from potential infringement.76 These developments in the social, economic and legal aspects of patent enforcement in China, as well as the integration of IP within the firm itself, indicate that IP law and policy in China are maturing. There is much work to be done to further make the basic principles of innovation policy, management and development mainstream in the cultural life of the Chinese population. It is towards the practical implementation of this approach that a plan of action is now offered.

7.3 A More Detailed Plan for Action As discussed in the previous sections in this book, Confucianism played a key role in promoting science and technology in ancient China. From the analysis of modern Chinese patent law, the legislative and policy making process reflects Confucian principles. It is the proposal of this book that further integrating Confucianism into future patent law enforcement is crucial to facilitating an environment of legitimacy and relevance for patent protection for the next one or several generations. The actual plan of action is put forward in this book is as follows:

71 Shan

Liu, ‘IP Loans Are Growing in Exploration’, China IP Newspaper, 15 September 2011.

72 Ibid. 73 Liying Fu and Xiaodong Zhang, ‘The Analysis on Patent Marking and the Rights to Mark on Patents’, Academic Journal of East China University of Science and Technology, Issue 1, 2011, pp. 85–86. 74 Article 17, Chinese Patent Law 2009. 75 Rule 83, Implementing Regulations of Chinese Patent Law 2009. 76 Liying Fu and Xiaodong Zhang, op. cit., p. 87.

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Commencement of compulsory IP education at an early stage, for instance, at middle school level under the supervision of the Chinese Ministry of Education; mainstream IP education in the classroom as one of the generalized early learning programs in China.

This policy is inspired by a famous verse in Confucius’s The Analects. Confucius said: “At fifteen, I had my mind bent on learning. At thirty, I stood firm. At forty, I had no doubts in life. At fifty, I know the decrees of Heaven. At sixty, my ear was an obedient organ for the reception of truth. At seventy, I could follow what my heart desired, without transgressing what was right.”77 As it can be seen, Confucius considers that the human’s understanding towards the world grows with the growth of age and maturity. Confucius regards fifteen to be a suitable age to concentrate on learning new knowledge. Presently, few cities in China have started to experiment with IP education in elementary and middle schools, such as the Shaodong City in Hunan Province, Zhangdian District in Shandong Province and Luohu District in Shenzhen, Guangdong Province.78 However, the number of these experimental schools in those cities, compared with total 655 cities in China until the end of 2007,79 was very few. As discussed in the section on education earlier in this Chapter, Chinese universities have started a massive expansion of IP education. However, the more suitable age to receive IP education shall be earlier, ideally around fifteen years old; in another word, around the age of middle school level students. Thus, it is recommended that the Ministry of Education lists IP education as one of the compulsory courses in middle schools so that the students have to work at a higher level in order to pass the examinations. In this way, the students will have a better and more thorough understanding on the basic concepts of IP. More budgets shall be spent on public education of IP protection, such as free public exhibitions or interactive workshops in community service stations, property management offices of residential complexes and free advertisements promoting IP protection through social media all year around (not just during the week around World IP Day in late April). This policy is inspired by two well-known verses in Confucius’s The Analects. Confucius said: “Isn’t it pleasant to learn with a constant perseverance and application?”80 He also said: “The learning virtue without proper cultivation; the not thoroughly discussing what is learnt; not being able to move towards righteousness of which knowledge is gained; and not being able to change what is not good—these are things that have caused me worry.”81 The first verse stresses that the good technique of learning is perseverance, application and repetition. The second verse encourages 77 The

original Chinese Pinyin is “Wu Shi You Wu Er Zhi Yu Xue, San Shi Er Li, Si Shi Er Bu Huo, Wu Shi Er Zhi Tian Ming, Liu Shi Er Er Shun, Qi Shi Er Cong Xin Suo Yu, Bu Yu Ju”. James Legge (trans.), The Analects, op. cit., Verse 4, Chapter 2. 78 See Foot note 6. 79 Jingxin Hou and Cuicui Zhu, ‘A Research on the Threshold, Quantities and Scale Control of Chinese Cities’, Study and Practice, Issue 6, 2009, p. 22. 80 The original Chinese Pinyin is “Xue Er Shi Xi Zhi, Bu Yi Yue Hu?” James Legge (trans.), The Analects, op. cit., Verse 1, Chapter 1. 81 The original Chinese Pinyin is “De Zhi Bu Xiu, Xue Zhi Bu Jiang, Wen Yi Bu Neng Xi, Bu Shan Bu Neng Gai, Shi Wu You Ye.” Ibid., Verse 3, Chapter 7.

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people to discuss what they have learnt and to correct their wrong doings. In October 2000, China and Algeria introduced of the idea of establishing a World IP Day and it was passed by the WIPO Convention.82 Since then, World IP Day was celebrated in order to promote the discussion of the role of IP in encouraging innovation and creativity.83 However, just promoting IP during World IP Day is not enough to meet the demand of the educational purpose of protecting innovation and creativity. The promotion of this protection should be carried out on a much larger geographical scale, for a much longer time and with more repetition, following the concerns and principles identified by Confucius in The Analects. Furthermore, the concept of IP shall not only be understood by the educated group, but also by the widerpublic.84 A survey carried out in 2006 about China’s Public IP Awareness shows that most of the general public excludes themselves from the activities of creativity and innovation. Meanwhile, the survey shows that the public considers IP protection to be a social responsibility only for the educated group.85 Thus, a more comprehensive and more expansive promotion of IP should be undertaken, including most of the populations in China. Enterprises shall be helped to grow an internal corporate culture of being proud of creativity and the production of IP products. Confucius said: “Riches and Honors are what men desire. If it cannot be obtained in the proper way, they should not be held. Poverty and meanness are what men dislike. If it cannot be avoided in the proper way, they should not be avoided.”86 This verse explains the attitude of Confucian towards the relationship between virtue and fortune. Confucius believes that fortune and honors desired by men shall be obtained in the right way. By adopting this into modern policies, guiding enterprises to grow a corporate culture praising innovation and creativity is the proper method. Regarding patent management, Professor Ping Jin summarizes three issues in SMEs in Yiwu, Zhejiang Province. Firstly, some small entities did not consider patent protection as an indispensable factor in cooperate management; moreover, some of them regarded patent infringement as an inevitable fate of a patent so that the yearly fee paid to CNIPA should be invested into the manufacturing.87 Secondly, some SMEs focused more on R&D and innovation rather than patent protection. They did not necessarily appreciate the concept of the patent and the process of application in their new development in technology, resulting in oversights both in terms of innovation 82 The Civil Affair Service Centre of Guang Dong Provincial News and Publication Bureau, ‘Implementing IP Strategies and Supporting Innovation and Development—26 April The World IP Day’, Guangdong Printing, Issue 2, 2013, p. 57. 83 WIPO, ‘World IP Day—April 26’, About IP, the WIPO official website. https://www.wipo.int/ ip-outreach/en/ipday/. 84 Hua Liu and Ying Zhou, op. cit., p. 106. 85 Ibid. 86 The original Chinese Pinyin is “Fu Yu Gui, Shi Ren Zhi Suo Yu Ye.Bu Yi Qi Dao De Zhi, Bu Chu Ye. Pin Yu Jian, Shi Ren Zhi Suo Wu Ye.Bu Yi Qi Dao De Zhi, Bu Qu Ye.” James Legge (trans.), The Analects, op. cit., Verse 5.1, Chapter 4. 87 Ping Jin, ‘A Discussion on the Issues of Patent Protection of SMEs in Yiwu with Some Recommendations’, Outstanding Figures of China, Issue 8, 2013, p. 195.

7.3 A More Detailed Plan for Action

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strategy and in IP management (such as forgetting to pay the yearly fee after the patent right was granted).88 Thirdly, some of the SMEs were patent infringers. They had a complacent and high-risk attitude that the patent infringement activities were difficult to discover by the enforcement authorities. Thus, more policies shall be issued to encourage Chinese enterprises (especially SMEs) to have a more positive attitude to creativity89 and patent protection and to aim towards long-term IP interest and development as part of innovation strategy. This could include a suite of activities and programs. A more comprehensive and up-to-date help system shall be provided to guide the enterprise on portfolios, strategies, applications, use and the protection of their patents. SMEs should receive more help on this aspect. This is inspired by the most famous verse in Confucius’s The Analects: “The superior man seeks to perfect the admirable qualities of men, and does not seek to perfect their bad qualities. The mean man does the opposite of this.”90 This Confucian principle seems to be setting up a high moral standard for the virtuous man. In reality, when the councils are assisting enterprises with their patent strategies, they may actually create more possibilities and opportunities for innovation, job opportunities and tax revenues. This situation can be regarded as a win–win result. Currently, CNIPA has built up a relatively complete assistance system to the enterprises adopting different method of instruments, such as an electronic advisory forum91 and an online public service center of patent information.92 Furthermore, a more detailed supporting system may be established by the municipal and provincial patent offices. Finally, a positive mind shall be kept open to see the future evolution of patent system in China.

88 Ibid. 89 Ibid. 90 The

original Chinese Pinyin is “Jun Zi Cheng Ren Zhi Mei, Bu Cheng Ren Zhi E. Xiao Ren Fan Shi.” James Legge (trans.), The Analects, op. cit., Verse 16, Chapter 2. 91 Electronic Advisory Forum of CNIPA. https://www.sipo.gov.cn/zxt/. 92 Online Public Service Centre of CNIPA. https://www.sipo.gov.cn/wxfw/.

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