Shanghai Pudong Court White Paper on the Protection of Intellectual Property Rights of Foreign-Invested Enterprises
Last April, the intellectual property division of the Shanghai Pudong court published a White Paper dedicated to building an environment favorable to the protection of the intellectual property rights of foreign companies (companies owned by foreign capital, which includes joint ventures headquartered in China). Xi Jinping’s speech on the protection of intellectual property rights is one of the ideological foundations of this White Paper: equally protecting Chinese and foreign parties’ rights and legitimate interests, promoting fair competition between domestic and foreign parties. In this regard, the status of a free trade zone conferred on Shanghai places the judges who work within the jurisdiction of this zone in the position of privileged observers, which gives this White Paper tremendous importance.
The White Paper in question is rich in statistics. Let us take a look at some numbers. Since the establishment of the Shanghai free trade zone in 2013, the intellectual property division has accepted 589 cases involving intellectual property rights held by foreign companies, including 397 civil cases and 191 criminal cases. These figures are constantly increasing from year to year. The foreign parties are mainly American (24%), German (7.5%), South Korean (5%), and British (3.5%). According to the authors of the White Paper, the increase in the number of cases reveals the growing confidence of foreign companies in the Chinese judicial system in matters of intellectual property.
Judicial principles governing intellectual property lawsuits
The Shanghai court reiterates its devotion to a series of principles whose strict application is essential:
- to ensure respect for the principle of national treatment;
- to severely penalize criminal offenses relating to intellectual property;
- to reasonably balance the rights and interests of all parties and, to this end, to delineate precisely the scope of protection;
- to prohibit abuse of rights and actively protect the public interest.
The tribunal also pursues the following objectives:
- to increase financial compensation for counterfeiting;
- to strengthen cooperation between civil justice, criminal justice, and administrative justice;
- to promote mediation, which has recently been strengthened thanks to the Memorandum of Understanding between the Supreme Court and the World Intellectual Property Organization (wipo.int).
Case law illustrates most of these principles or objectives. Let us highlight a few examples.
The success of cooperation between civil justice, criminal justice, and administrative justice is highlighted by a case of counterfeit Bordeaux wines which resulted in prison sentences.
Regarding the severity of the penalties, the court took examples of trademark infringement cases concerning “L’Oréal” and “Dyson” in which the court handed down prison sentences of up to six years and fines of up to 10 million RMB. The court adds that intellectual property crimes relating to subsistence products, such as food and medicine, must be more severely punished.
As for the punitive damages, the court focuses on a trademark infringement case in which the award of punitive damages is based on:
- the failure to comply with a prior settlement agreement;
- the duration of the infringement of intellectual property rights (seven years);
- the obvious bad faith of the counterfeiter;
- the sale of counterfeit goods online ‘WeChat) and offline;
- the damage over product quality and brand reputation; and
- the profits made by the counterfeiter.
Finally, in a “Levi’s” trademark infringement case, the Shanghai court mentions the success of a mediation conducted under the aegis of the Arbitration and Mediation Center of the World Intellectual Property Organization.