# Presentation: 029185

## China: Criminal Judicial Interpretation And Other Developments

- Mark Cohen
- Intellectual Property Attaché
- U.S. Embassy, Beijing
- cohenma@state.gov
- Mark.cohen@uspto.gov
- February 2005

## Outline

- Introduction - Structure, Terminology and Statistics
- Enforcement Developments
- Laws, Rules, Rulemaking
- Policy
- Legislation
- Regulations
- Rules
- Judicial
- International
- Copyright Developments
- Judicial Interpretation

## Structure

- National People’s Congress - Legislative Branch
- Supreme People’s Court - Judicial
- No Constitutional Review
- No Authority to Invalidate Laws
- Two Criminal, No. 3 Civil, Administrative Courts
- Supreme People’s Procuratorate
- Prosecutor
- Supervisor (32 cases - ‘04)
- State Council
- Police - Two Criminal Divisions (Social Order and ECID), Cybercrime
- Substantive IP Agencies
- Local Governments
- All Except National Government - Locally Paid

## Terminology

- National People’s Congress or NPC Standing Committee --
- Laws
- Legislative Interpretations
- State Council - Regulations
- Drafted by SC or Its Agencies
- Executive - Ministerial Rules
- Drafted/Promulgated by Individual Agencies
- May Be Jointly Promulgated With Other Agencies
- Ministerial “Guidelines”  - May Not Be Promulgated
- Judicial Interpretations
- Court
- Procuratorate
- Local Laws and Regulations

## Enforcement Statistics

- SPP - March - December 2004
- SPP arrested 521 IP violators, prosecuted 378. 446: counterfeiting, 28: copyright, 55: trade secrets.
- January - June 2004
- Level of enforcement activity by local AICs was roughly the same as in the same period in 2003 (10,515 cases).
- Total fines imposed was also about the same (RMB990 million or US$12.3 million),
- Average fine per case (about RMB 7,100 or US$850).
- Case Transfers: 2001 - 86; 59 - 2002; 45 - 2003; 14 - first half of ‘04.
- Civil Cases - 12,213 - 2004 (overall 32% increase, with copyright increasing 71%)
- In major cities: 257 requests for PI, 183 granted.
- Impact of Symbolic Cases / Decisions
- Silk Alley, Operation Spring, Shanghai TM Effort

## Administrative Enforcement

- Police or Technology Supervisor?

## Statistics

- 580,000 TM Applications (3 years most active TM office in world).  Pending concerns.
- Most Design Patent Applications
- One of Most Actively Growing Patent Offices
- Largest Number of Internet Users
- Largest Number of Cell Phone Users
- Rapidly Increasing Broadband Penetration
- Largest Number of Seizures (US/EU)
- Largest Amount of FDI
- Most IPR Litigation?
- Among Highest Infringement Rates

## Developments - Policy

**August 2004 - IPR Action Plans **
**Under MORO - included all IP rights, Customs, Joint Cooperation on Cases, Coordinated Interagency Mechanism, Various Misc. Items - e.g., Development of Trade Associations, etc..  Phase 2 Ends in June, followed by Phase 3 to August, including local reports to MORO and Long Term Plans.**
**Individual Agency Action Plans**
**E.g., Mountain Eagle - MPS (includes int’l coop.)**
**Local Government Action Plans**
**Regional Action Plans**
**Not Equally Transparent**
**National IPR “Strategic Plan” Being Drafted**
**Legislative work, technology promotion, public awareness, etc.**
**Inter Agency Organizations**
**Formal - MORO and Ad Hoc **
**Different Perspectives from Different Agencies**

## Legislative

- Civil Code Drafting
- Scope of Protection
- Role of Government
- Antitrust Law
- Law to Counter Unfair Competition
- Patent Law
- Patent abuse/misuse

## Regulations (State Council)

- Internet Regulations - End of ‘05 (with NCA)
- Folklore (MoC)
- Just Released - Collective Management
- Thus far only music composers collective management society exists.
- Literary works CMO is currently being formed, others in preparation stage.
-  Foreign rights holders should be able to receive royalties by arrangements concluded between CMO's.
-  NCA will supervise CMO's and will announce royalty rates.  Collective management here does not mean collective ownership, as in Chinese civil law, but is intended to follow international practice regarding CMO's.
-  No Currently Planned SC-Level Enforcement Rules

## Ministerial Rules

- NCAC - MII Rules - Internet Copyright
- Draft rules now pending with MII for final approval.
- Rules are not intended to contradict or supersede SPC's JI.
- Email notification to  ISP's  will be adequate, it only needs to be "written.“
- Push back notification would likely be required to rights holder.
- Actual knowledge could be inferred by receipt of letter requesting takedown.
- NCA is still bound by statute, these rules are not intended to interpret legislative requirements such as “public interest”.
- Injunctive relief can be provided according to law and regulations.
- Jurisdictional issues will be complicated and are likely to occur
- AIC - New Administrative Enforcement Rules Under Consideration

## Internal Rules/Guidelines

- SIPO Patent Examination
- CTMO  Trademark Examination
- Other
- Police Arrest Guidelines
- Patent Term Extension
- Patent Linkage

## Judicial Interpretations

- Civil Division
- Currently In Effect: 41 + 2
- Just Released: Technology Transfer Contracts
- Being Drafted
- Patent Litigation
- Plant Variety
- Law to Counter Unfair Competition
- Increasing Transparency/Public Participation
- Many Criminal Interpretations/”Thresholds”

## International

- China Goes International
- China taking a more active role in international/regional organizations
- Regional IP relationships   - Asian Trilateral, China/Australia/Singapore, Other MOU’s.

## Criminal Judicial Interpretation

- December 2004
- History goes back to mid-90’s, WTO accession, JCCT.
- Transparency Concerns
- Prior Interpretation/Guidance:
- Criminal Copyright 1998
- MPS and Procuratorate on Criminal Case Referral
- SPP, MPS and MORO Notice (March 2004) on transfer of cases

## Chinese Criminal Procedure 101

- Criminal case reported to procuracy, court, or PSB (84).  Citizens have duty to report (84).
- Upon discovery of  facts, case is filed for investigation if within jurisdiction of PSB (83). PSB opens a case file or “li an” (86)
- Preliminary investigation is conducted (yu shen) and preliminary investigation report prepared by PSB.(90)
- Custodial investigation is exception, not norm.  Detention may be provided  if suspect is committing a crime, there is a likelihood of destroying or falsifying evidence.
- Can availability of PI provide a pathway to detention?
- Extension should not usually extend beyond 30 days.  Over-extended investigative detention is the norm, not exception.
- Recommendation for Prosecution filed with Procuracy by PSB (Ends police investigative phase)
- Procuracy examines the case / decides whether to Initiate a public prosecution if the evidence is reliable and sufficient. Bill of Prosecution filed with the courts.  Consideration whether an incidental civil case should take place occurs. (137, 141)
- Detention may be made pending trial according to the circumstances (68)
- If the evidence is “reliable and sufficient,” the suspect is convicted (168).
- Burden of Proof / Standards of Proof are unclear.  Sentencing standards unclear. Overly general legislative language.
- 				*Note: All numbers refer to Criminal Procedure law*.

## Criminal Code

**213. **  Using an identical trademark on the same merchandise without permission of its registered owner  ...
**214. **  Knowingly selling merchandise under a faked trademark with a relatively large sales volume  ....
**215. **  Forging or manufacturing or selling or manufacturing other's registered trademarks....
**216. **  Counterfeiting other people's patents...
**217. **  For the purpose of reaping profits and gains a fairly large amount of illicit income has committed one of the following acts of  copyright infringement, ...(1) copy and distribute written, musical, movie, televised, and video works; computer software; and other works without the permission of their copyrighters; (2) publish books whose copyrights are exclusively owned by others; (3) duplicate and distribute audiovisual works without the permission of their producers; ...
**218. **  Whoever, for the purpose of reaping profits, knowingly sells the duplicate works described in Article 217 of this Law, and gains a huge amount of illicit income ...,
**219. **  Infringers upon commercial secrets and brings significant losses ...
**220. **  When a unit commits the crimes stated above, it is to be sentenced to a fine;  directly responsible persons should be punished in accordance with these Articles....

## Philosophy of the JI

- Pursue manufacturers and organized criminal groups.
- Limits imposing liability on retailers.
- Stretch legislative language to accommodate new challenges.
- Have procuratorate co-promulgate -- to insure that prosecutions are brought.
- Focus only on criminal IP laws, not “illegal business operations”, “fake/shoddy goods”, relationship with civil / admin. litigation, etc.
- Declines to address relationship with market access.

## Good News

- Overall reduction in thresholds, with shrinking of thresholds for individuals vs. units to 3/1 from 4/1 or 5/1.
- Use of copy thresholds (1,000/3,000) in Art. 217 (surrogate for large gains)
- Charging directly or indirectly constitutes “profit making” (e.g. advertising on a website)
- Incorporated “distributing a work over an information network” into Art. 217.
- Lowered thresholds if two marks involved (e.g., certification mark plus product mark).
- Clarifying what is an “identical” mark; what constitutes “use”  (including product guides, advertising, publicity) (Art. 213).
- Incorporating products produced, stored, transported and not sold in illegal business amounts.
- Providing accomplice liability for those who knowingly provide funding, production and operation places, assistance in producing, storing, import-export.

## Bad News

- Thresholds!!!!
- Continuing the Distinctions Between Individual and Work Units
- Statutory Problems of Profit/Identical Marks/Criminalization of Exports Could Not Be Fully Avoided.
-  Fine or Imprisonment If Below Three Years
- Accomplice Liability Not Mandatory
- No coverage of rental rights, import/exports, public performance, exhibition, presentation, broadcast of works or sound recordings, etc.
- Well known mark, health safety zero thresholds lost.
- No recidivist provisions
- Did they really work? / Being Dropped Elsewhere
- Lots of Uncertainties...

## Uncertain News

- Sentencing for less serious circumstances, accomplices, corporate shells.
- Relationship to prior JI, SPP/MPS referral standards, especially “3 Strikes”, illegal business operations, fake & shoddy goods
- Relationship to illegal business operations in former JI.
- Music Recordings
- End User Piracy
- Possibilities of presumption of commercial reproduction to meet thresholds (217)??? (stampers/molds)
- What constitutes “knowing”, esp. “other circumstances” for purposes of Art. 214 (Art. 9)
- Case Establishment/Detention, willingness of administrative agencies to use three strikes.
- “Insulating” effect of administrative cases.
- What is a “copy” in Internet environment? With compressed format DVD’s? One movie? One song? How to apply to P2P environment?
- Calculating illegal prices/business amounts (compare TS provisions)
- Application to export environment “stage of export”
- Three Cases   - one TM, one Copyright, one Trade Secrets
- Civil disposition may result in dismissal of copyright case.

## Key Factor

**POLITICAL WILL, **
**Esp. Local Political Will**

## Next Steps on JI

- Request Explanatory Guidance/Corrections from the Court
- Encourage SC/LAO or MPS Guidance on Referrals for Prosecution, Arrest, Investigation Standards
- Improve Administrative Transparency /  Administrative And Civil Deterrence
- Legislative Reform
- File Cases
- Criminal Complaints
- International Cases
- Supervision Cases
- Private Prosecutions
- Seek Criminal Referrals from Civil Process
- Use Civil process to meet evidence for criminal cases (?)
- Request cooperation on international cases
- Focus on key cities? / regions?
- WTO Consultations/Dispute Proceedings

## Other Efforts

- Educate Businesses
- Mutual Legal Assistance/Customs Assistance/JLG
- US Remedies
- Plurilateral/Multilateral Efforts
- Technical Assistance
- IPR WG/JCCT
- Chinese Rights Holders’ Increasing Involvement

## How To Contact Me

- cohenma@state.gov
- 86-10-65323831 x 6033
- Fax: 86-10-65326645
- PSC 461, Box 50, FPO AP 96521