Grant Thomas, 3L
Santa Clara Law
Energy of the Masses
“I have witnessed the tremendous energy of the masses. On this foundation it is possible to accomplish any task whatsoever.” – Mao Zedong
China thrust itself on to the modern stage after its economy increased in size consistently since the economic reform in 1979. Included in this reform was the recognition of intellectual property rights in trademarks, copyrights, and patents. In 1980, China joined the World Intellectual Property Organization. China modeled their intellectual property rights on the Berne Convention for the Protection of Literary and Artistic marks and the Agreement on Trade Related Inceptual Property Rights (“TRIPs”). China now tops the list of countries with the most patent application and is second only to the United States in patents granted per year.
Since the foundation of the Peoples’ Republic of China in 1949, the Government strove to create a homogenous mentality of state above all. What would later become known as Maoist principles identified that the country was one where the people would serve the government, and the government would serve the people. This ideology envisioned the divergent rays of the human spirit could convalesce to a focal point through the magnifying lens of a singularly purposed government. However, it is incongruous with the western liberal democratic view that governments and citizens have many viewpoints, creating a free market for the identification of the best ideas and their progression. Although Maoist principals are no longer the conviction of the country, these principals converged the will of the people and sparked the kindling of modernization. China’s rich history, spanning over five thousand years and influencing a significant portion of the Asiatic continent, fueled the fire that seared China’s position as an international powerhouse.
China’s prowess as an international power has caused some multinational corporations headaches. China currently does not recognize intellectual property protection for trade secrets. Trade secrets allow many international corporations to form and profit in the United States. In her February 20, 2018 talk, Jenifer Johnson, Associate General Counsel at DowDuPont, regaled students with stories of intellectual property theft of trade secret information on a scale that can only be described as corporate espionage. Johnson acknowledged platoons of individuals, rings of spies, enter the United States with the sole purpose of stealing trade secret information. Johnson told the story of one individual, sometimes posing as a professor, stealing seeds from corn fields in Iowa. Seeds that are so secret, even the farmer growing the crop did not know what was being grown. Other members of the crime ring had luggage containing stolen corn kernels seized at an airport in Chicago on their way to China. However, Johnson reported that need for regular meetings with local FBI agents to report suspicious activity and learn trends in the community.
Following Johnson, Mark Cohen of Berkley Law, chinaipr.com, and former general counsel to the United States Patent and Trademark Office spoke on the Chinese intellectual property regime. He discussed how administrators in China have a government mandated prerogative to raise the number of patents filed per capita. Bureaucrats in China are required to raise the number of patents filed to 3.3 patents per ten thousand citizens. These administrators have detailed plans for the promotion of science and arts throughout the country, targeting growing urban areas. Cohen identified how China’s growth, which was previously spurred by rampant intellectual property violations such as the sale of counterfeit goods and pirated movies, clashes with the modern need to have China’s intellectual property recognized abroad. The Berne Convention and TRIPs agreement require reciprocity in intellectual property protection that is as least as good as the protection provided to a country’s own citizens. China also recently agreed to participate in the Hatch Waxman Regime which requires patent reciprocity for pharmaceutical patents. Therefore, China officially has been increasing intellectual property protections for both nationals and foreigners. However, China’s government continues to maintain a protectionist stance in regards of Chinese business. Chinese law requires that upon a joint venture with a Chinese entity, that Chinese entity owns all improvements upon the patented technology, has access to foreign markets, and that the foreign entity must indemnify the Chinese entity against all claims of infringement. While this protectionism may be beneficial to Chinese companies, it may decrease the willingness of foreign entities to do business with Chinese companies. Cohen argued that while China has a history of intellectual property violations, the value of intellectual property holdings of Chinese companies such as Alibaba, Baidu, Tencent, would be put in jeopardy by a wanton disregard for foreign intellectual property rights. Furthermore, the government mandate to produce more patents would lose societal value if other governments were not willing to reciprocate intellectual property protection.
There is a legal adage that only Chinese companies can win litigation in China. Cohen argued that the growing need to receive international IP reciprocity no longer makes that the case. Johnson stated that her company is unwilling to bring certain forms of intellectual property, namely trade secret information, to China for fear of theft. According to Johnson, someone can replicate certain trade secreted bio-engineered products as simply as wearing a tape on their shoe and taking a tour of the DowDuPont labs. Furthermore, Johnson highlighted the difficulty of filing a trade secret theft case in China. China does not allow for discovery during litigation. Therefore, companies wishing to file a case must have their entire case built upon the date of filing. China also requires evidence to be notarized. Therefore, if a company believes that an off the shelf product includes trade secreted materials, that company must purchase that product in front of notary before tests of the product proving trade secret theft to be admitted into evidence in Chinese litigation. Finally, in many cases in China, there is a statutory maximum amount of recoverable damages. This statutory maximum is often far less than the cost of litigating the case. According to Cohen, damages in an intellectual property case between Chinese nationals can be a maximum of ten to twenty thousand dollars. For foreign entities, damages maximums are around forty thousand dollars.
Cohen identified China’s growing scope of intellectual property protection and increased transparency in judicial proceedings. Cohen acknowledged that, as of two years ago, China published court data, placing nearly four million court documents online. The publishing of this data signifies a move towards a more precedential judicial system. From the data published by China, patent infringement cases have around an eighty percent success rate, which is higher than the US success rate. Further, Cohen acknowledged that while it may still be difficult to recover damages under a patent infringement lawsuit in China it is easier to receive an injunction because of the lack of eBay Inc. v. MercExchange, LLC requirements. However, Cohen also acknowledge that trade secret theft cases only have around a thirty to forty percent success rate, the lowest success rate for any intellectual property cases in China. In response to the Supreme Court decision Alice Corp v. CLS Bank, China has made it easier to apply for and receive business method and software patents. Cohen believes that this is to attract new talent and patent applications to China, that would no longer be valid in the United States. Cohen’s final point was the Chinese government is making the intellectual property environment more protectionary. Whether this will be beneficial to just Chinese citizens, or beneficial to all entities that do business with China, has yet to be seen.
The dichotomy of China’s need for Intellectual Property Protection reciprocity and the systematic theft of intellectual property by Chinese nationals depicts a split in national focus. On one hand, China needs recognition by other world powers for their contributions to science and the arts. On the other, Chinese nationals will violate international intellectual property protections to gather IP to make strong companies that can produce products that are competitive on a world stage. One could argue that China’s philosophical rooted nationalist policies instilled the desires to put Chinese interests above the interests of other governments. Cohen believes that China’s need to have national recognition for intellectual property will eventually decrease the theft of intellectual property by Chinese nationals though government crack downs. Johnson relayed that it was her belief, as well as some FBI officials, that the theft of trade secrets was state sponsored.
Michael D. Swaine, of the Carnegie Endowment for International peace, believes “most Chinese value a strong, unified, and proudly nationalistic central government led by ‘virtuous’ individuals who keep the people’s interests in mind. They are not inclined, either historically or culturally, to endorse a Western, liberal democratic, divided-power political system. This belief is changing among some elements of the more educated urban class in China, but only gradually. For most Chinese, the West still offers only tools for advancements in power and prosperity, not political and social models.”[1] Chinese intellectual property theft can be viewed in two ways. First, the theft is run by a singularly focused government that wants to elevate Chinese interests by absorbing as much technology, by any means, as well as to receive international IP protection. Second, the theft could be recognized as a splintering of Chinese national mentality and a movement towards a more liberal democratic, divided power political system. One in which the Chinese citizens and government do not see eye to eye on how to make China a great nation. In either case, China is going to play a major role in the world’s economy for time to come.
To watch the talk, see the link below:
To view Jennifer Johnson’s slides, see the link below:
https://docs.google.com/presentation/d/10FqQ6ZOOyjMhxXUM17V5gKTd3tGU-o_g_F1loGLtNYE/edit#slide=id.p3
To view Mark Cohen’s slides, see the link below:
https://docs.google.com/presentation/d/1T-vtqD-OW-sr5RI5sb4syRD9q5ZSVcOVxFWc-Oej1dk/edit#slide=id.p6
[1] https://thediplomat.com/2015/01/china-the-influence-of-history/
