China Commits to Improve IP Protection in Phase 1 Trade Deal

China Commits to Improve IP Protection in Phase 1 Trade Deal

The everlasting trade war with China recently reached a phase one deal as President Donald Trump and Chinese Vice Premier Liu He finalized an 86-page agreement at the White House on January 15.^[1] China agreed to increase its purchase of American goods from the amount purchased in 2017 by $200 billion over the next two years in return for America’s lifting of a fraction of the tariffs previously imposed on the $360 billion of Chinese goods.^[2] Along with this major achievement, China concedes to take affirmative measures to improve intellectual property rights.^[3]

Since China joined WTO in 2001, China has generally accepted international norms with respect to intellectual property rights, and established a framework of legal system in protecting intellectual property rights according to the WTO requirements.^[4] However, problems remain pervasive in legislation, regulation, and enforcement.^[5] America has been urging reforms as the problems are considered disadvantageous to the interests of American intellectual property rightsholders in both the Chinese and international markets.^[6]

In the new agreement, Section B of Chapter 1 addresses trade secret misappropriation.^[7] In addition to defining the scope of trade secret misappropriation, Article 1.5 shifts the burden of proof to the accused party in civil litigation in China.^[8] Article 1.7 demands China to abolish its prerequisite of actual loss in criminal prosecution of trade secret misappropriation.^[9] Article 1.9 further adds that China shall prevent unauthorized disclosure of trade secret by third parties, including government authorities.^[10]

The following Section C specifically discusses pharmaceutical patents. It requires China to allow supplemental data in filing for pharmaceutical patents and related review processes, thereby loosening the application requirements.^[11] It also requires China to install a mechanism that notifies patent holders when another party seeks to market a patented product.^[12] Additionally, it calls for an administrative or judicial procedure for effective dispute resolution.^[13]

Section D covers patents. In response to the often prolonged review process when applying for a patent at China’s National Intellectual Property Administration, Article 1.12 urges China to extend patent terms in order to compensate for possible unreasonable delays during the application.^[14] America suggests that applications lasting more than four years be considered unreasonable delays.^[15] Article 1.12 similarly urges China to limit the unreasonable curtailment of effective patent terms by adjusting the terms at the request of the patent holder.^[16]

In Section E, the agreement requests the parties to reduce piracy and counterfeiting on online platforms. Regarding content platforms, China is required to install an effective notice system and expedite takedown after notification.^[17] Moreover, China shall penalize counterfeiting notices submitted in bad faith.^[18] Regarding e-commerce platforms in China, including Taobao, the world’s biggest e-commerce platform, and Pinduoduo, a rising platform known for its low price and counterfeits, the agreement presses China to combat the prevalence of counterfeit goods, even at the costs of revoking the platforms’ licenses after repetitive noncompliance.^[19] Admitting the lack of effective measures against e-commerce counterfeiting and China’s questionable willingness to shut down the platforms, America concedes that additional resources are needed.^[20]

The agreement further specifies other enforcement measures in protecting intellectual property rights in trades, customs, and judicial procedures. America generally vows to afford the same protections required for China. The agreement will take effect 30 days after it is signed.^[21]

In addition to the achievements, concerns arise over the enforcement of the agreement. The New York Times reports that it remains to be seen how the legal language will translate into action.^[22] Despite the agreement taking effect in 30 days, it does not impose a hard deadline for China to fulfill the commitments.^[23] However, some believe that China is motivated to fulfill the commitments in exchange for further tariff cuts in subsequent negotiation.^[24] The prospect for the coming negotiation remains uncertain.^[25]