Respondents’ Experiences of the IP System in 2005-6

A few examples of respondents’ experiences will now be detailed to evaluate how effective the post-TRIPS IP system was in practice. The first experience comes from a Chinese lawyer based in Guangzhou:

I acted in the case of a patent infringement dispute. I represented clients in Guangzhou to take quick and effective action. At my request, the court ordered the preservation of evidence and found evidence of violations and the illegal transfer of profits. However, we hadn’t yet gone to trial and the invention patent was quickly declared invalid by the patent re-examination board. I took the case to Beijing to appeal the administrative proceeding of the Patent Re-examination Commission. I met two experts in the field of technology patents, who were both very well prepared; I thought with these experts, we would definitely win the case. However, we lost. This is very common, but not normal. We later heard that we lost because our client is a foreign company. But of course we have no evidence of this.¹

The experiences of this lawyer highlight several points. Firstly, patent disputes were more often resolved through the courts as they were frequently too complicated for administrative personnel to adjudicate, compared to, for example, trademark infringements. Secondly, there was still a perception that foreign and local rights-holders received different treatment, although there was no evidence available of a systemic bias. Finally, there was also a perception that pursuing a case in a different city may result in a different outcome than if the case were pursued in the “home” city. This links to the supposed problem of local protectionism and also highlights the inconsistency that may have existed in enforcement.

The second example of the system in action is taken from a foreign lawyer working for a major law firm in Shanghai:

I can give you a specific example, (...) to give you an example of the problems we have. We raided a factory in Ningbo? They had counterfeits there, we looked into (searching) their records and found another invoice for the same model numbers, so we sued these people for the damages, when the (...) found (...) suing not just for the damages, but (the issue was) how much were the damages, it was actually quite (tragic), because the court gave us damages for the products that had been seized, which I can actually think theoretically, we shouldn’t get damages because they haven’t been sold, [...] but refused to give us damages for the goods which were shipped out, on the basis that the invoice did not say that the products had the trademark on it.²

This second account of the system in action also highlights several problems that may have remained in the 2005 IP system in China. First, it confirms the first respondent’s comments regarding different treatment of infringement claims in different cities, echoing the common complaint of local protectionism. Second and perhaps most important, these comments highlight the perception of judicial incompetence, that the judges did not have the training or knowledge to make competent and reasoned decisions. Finally, the problem that damages were awarded for goods not sold, but denied for goods already shipped suggests that the rules regarding evidence were far from satisfactory.

A final example of the system in action comes from a respondent in the services sector:

One customer who for the 1st time came to China to attend an exhibition had his company name and Chinese website hijacked by a Chinese competitor within 1 month of the exhibition. We already told him in advance this might happen. But as usual they didn’t heed our suggestion. For them the battle is already lost before they really could enter the Chinese market.³

This third account of the system in action also confirms previous observations as these comments reflect the feelings of frustration that were expressed by several of the respondents. Moreover, they highlight the continued prevalence of the problem of intellectual property infringements at that time and the need for extreme vigilance in seeking to protect IP rights. This would also suggest that the post-TRIPS IP system remained somewhat ineffective as intellectual property infringements were still pervasive and tackling such infringements was a key objective of the whole system.

On the other hand, despite these anecdotes concerning the ineffectiveness of the system in action, there were also several positive comments regarding the operation of the IP system, most notably praise for the system of administrative enforcement. For example, this Chinese lawyer working for a major international law firm stated:

The big advantages between administrative approaches to judicial proceedings are that administrative measures tend to be more expedited and more cost-effective, then they can take, the agencies themselves, can take initiative in investigating the infringing activities so that saves costs for the client also.⁴

Thus, both the speed of administrative action and the lower costs involved for the rights-holder were stressed as significant advantages of pursuing infringers through administrative enforcement.

Therefore, overall, despite continuing problems in certain aspects of the system, such as perceptions of local protectionism, poor quality of some judicial personnel and inadequate laws regarding evidence, it must be stressed that the 2005 post-TRIPS IP system was not completely ineffective. As the mix of comments from respondents shows, although there were some problematic areas particularly linked to the issues of local protectionism and assessment of damages, the system did also have some strong features, particularly the administrative enforcement system. Thus, the effectiveness of the system in 2005 appeared to be almost satisfactory, reflecting the overall judgement of the effectiveness of the system as reasonably effective, according to most questionnaire responses. Nevertheless, where problems did remain in the 2005 IP system in China, they appeared to lie between the black letter laws on paper which had largely been amended in line with the TRIPS Agreement, and the enforcement of these laws in practice. This “enforcement gap” between the laws on paper and enforcement on the ground will now be explored within the comprehensive model of compliance as outlined in Chap. 2.