The facts and China's position on China-US trade friction

Chinese Courts Heard Foreign-related IP Cases in Accordance with Law

Chinese courts have held open hearings on the "Qiaodan" trademark administrative dispute cases, the Dior trademark dispute cases, and other new types of major and problematic cases in accordance with law. The Supreme People's Court invited WIPO officers, foreign diplomats in China and relevant parties to observe the hearings. All this shows Chinese courts' commitment to offering equal protection to Chinese and foreign right holders' legitimate rights and interests in an open and transparent way, reinforcing judicial protection of IPR, and upholding a market environment that encourages innovation and fair competition. In 2013, the Shanghai Intermediate People's Court heard the trade secret misappropriation case lodged by Eli Lilly and Company and Lilly China against Huang Mengwei. The court issued an interlocutory injunction order requiring the defendant to stop infringement actions immediately. In its ruling, the court concluded that the defendant, whose behavior constituted trade secret misappropriation, should bear legal liabilities.

IP administrative authorities have taken protective measures and intensified enforcement in a proactive manner. China adopts a dual-track protection system where IP right holders can seek not only judicial but also administrative protection. The State Intellectual Property Office (SIPO) has established a coordinated system with rapid review, rapid rights verification, and rapid rights protection, and built a nationwide 12330 network that provides assistance in defending rights and accepting reports and complaints. The patent, trademark and copyright authorities have carried out strong and proactive enforcement that has effectively defended the legitimate interests of IP right holders. In November 2011, the State Council published Opinions on Further Cracking Down on IP Infringement and Manufacture and Sales of Counterfeit and Shoddy Products, setting up a national leading group and signaling a normalized mechanism involving 29 governmental departments. In 2018, China reorganized SIPO by retooling the trademark and patent enforcement teams into a comprehensive enforcement team for market regulation, thus integrating and strengthening the power of enforcement.

This intensified IP protection has served as an effective guarantee for foreign businesses to innovate in China. Received foreign invention patent applications grew from 117,464 in 2012 to 135,885 in 201725. Foreign trademark registration applications grew from 95,000 in 2013 to 142,000 in 2017, and trademark extension applications grew from 14,000 to 20,000 in the same period26. According to the Peterson Institute, China's protection of intellectual property is improving. China's payment of licensing fees and royalties for the use of foreign technology has recorded a four-fold increase over the last decade, reaching US$28.6 billion in 2017 and ranking fourth in the world. In fact, China ranks second globally in the scale of licensing fees paid for technology used within its national borders, second only to the US.27

US businesses have benefited hugely from effective IP protection in China. According to US Bureau of Economic Analysis of the DOC, China paid US$7.96 billion in licensing fees to the US in 2016. Statistics from China's National Copyright Administration, Ministry of Commerce, and State Administration for Market Regulation suggest that from 2012 to 2016, China imported 28,000 copyrights from the US. In terms of trademarks, from 2002 to 2016, the US applied for over 58,000 trademarks transfer in China, making up 4.54% of total transfers. In terms of culture, according to the State Administration of Press, Publication, Radio, Film, and TV, in 2017 China imported 31 American films at a cost of US$650 million.

China's progress in IP protection has been recognized by the international community. In 2011, China Customs won the National Public Body Award of the Global Anti-Counterfeiting Network. In 2012, the Economic Investigation Bureau of the Ministry of Public Security won the award for Distinguished Contributions to Anti-counterfeiting Enforcement. On 9 May 2011, former US president Obama stated that China had made good progress in IP protection. The US was willing to export more high-tech products to China and other countries in the interests of both sides28. In February 2018, GIPC released a report on the International Intellectual Property Index 2018, which maps the national IP environment for 50 surveyed economies with 40 indicators. China ranked 25th, up by 2 places from 2017.