Monday, September 7, 2009
Posted by Paul Jones
One of the major areas of tension between China and the other countries has been, and will likely continue to be, intellectual property rights in standards. For example when China wants to develop its own national standards, there are concerns form foreign businesses that they will be disadvantaged in the Chinese market, such as in mobile telephones. On the other hand Chinese manufacturers feel that all of their profit margin disappears in the license fees for patented standards in products such as DVD players. Often China played no role in the development of these standards.
So where is China headed on this issue?
On Friday in Beijing there was a Forum on the Interface Between Standardization and Intellectual Property Rights:
Agenda (in English): http://www.chinaiprlaw.cn/file/2009090115639.html
Dr. Jiang Zhipei, the former head of the IP Section of the Supreme People’s Court, prepared a paper for the Forum which he has now posted online (in Chinese): http://www.chinaiprlaw.cn/file/2009090615659.html
His paper is a good overview of the development of standard setting policies in China, with reference to earlier cases decided by the Chinese courts and the current development of policies. I recommend it to those wishing to better understand the Chinese approach to standard setting.
First he points out that there are different types of standards; national standards, industry standards, local standards, and enterprise standards. These were set out in the Standardization Law adopted in 1988 (in Chinese:
http://www.chinawater.net.cn/guifan/bzhf.htm ) While in China national and industrial standards have tended to be considered as public property, he recognizes that in the U.S. sometimes industrial standards can be proprietary , and can capture the market for the owner.
In 2007 the Supreme People’s Court decided a case (http://www.chinacourt.org/html/article/200811/17/330980.shtml ) in which Jiang was one of the Judges. Article 6 of the Standardization Law requires that enterprise product standards must be submitted to local government agencies for the record. Did such a submission constitute a disclosure under the Patent Law so that the invention lost its novelty? The court said that enterprise standards are generally corporate trade secrets and the recording did not mean that they had been publicly disclosed. However the other three categories, namely the national, industry and local standards are to be considered differently.
When asked for advice in a patent case in 2008 the Supreme People’s Court wrote that as standards had not yet been established by standard setting bodies with respect to the disclosure of proprietary rights in standards, that if proprietary information is included in a standard with the consent of the owner, the use of the standard without a specific license from the owner does not constitute infringement. The owner may demand the payment of fees for such use, but at a significantly lower rate.
With the adoption of the amendments to the Patent Law in December of 2008 a draft Interpretation was issued by the SPC in June 2009 (最高人民法院关于审理侵犯专利权纠纷案件 – Several Provisions of the Supreme People’s Court on Issues Concerning Rules Applicable to the Trial of Patent Rights Infringement Disputes. Available online in Chinese at: http://www.chinacourt.org/wsdc/) . Article 20 of the draft Interpretation deals with standard setting and patent infringement.
It provides that where the proprietary information in a patent has been incorporated into a national, industry or local standard the royalty owing to the patent holder should be set by the court based on the degree of innovation in the patent, among other things. Where the patent owner has not disclosed its rights or where the obligation to disclose is unclear, the parties can request the court to determine the fee and the license terms. Otherwise the laws on standardization shall prevail.
The consultation period for the draft Interpretation ended in July, and the final form of Article 20 is not yet known. But in China it is clear that standard setting is something in which the public and the state have an interest, except with respect to enterprise standards.