[co-author: Stefaan Meuwissen]

2019 was an eventful year in the Chinese IP landscape, with a large number of major developments shaking up existing practice, and with important overhauls of laws and regulations. So far, 2020 also promises to bring a lot of interesting developments. In this article we provide you with the highlights of 2019, and try to scan the horizon for some of the events to come in 2020.

The main developments for 2019 were:

• New IP Court of Appeal: on 1 January 2019, the new IP Court of Appeal was established at the national level, formally set up within the Supreme People’s Court (SPC). The new IP Court of Appeal is composed of highly experienced IP judges, and started hearing in January 2019: (1) all appeals against first instance civil judgments in technology-related IP cases (e.g. infringement cases) and (2) all appeals against administrative judgments issued by the Beijing IP Court pertaining to invention and utility model patent cases (i.e. appeals against the rulings of the Beijing IP Court regarding Patent Review Board decisions, e.g. patent validity cases). The establishment of the IP Court of Appeal will likely lead to greater consistency and efficiency in the adjudication of high-tech cases in China, and may lead, in some cases, to the joint hearing of validity and infringement arguments at the appellate level. See our article here for more information.
• New Regulations on Interim and Preliminary Injunctions for Intellectual Property Disputes: on 1 January 2019, the Supreme People's Court's newest regulations on interim and preliminary injunctions came into effect. The Regulations clarify the existing procedure and standards for IP trials, and provide typical cases illustrating them. The Regulations contain three major highlights: (1) interim injunctions can now be applied for before or during parallel arbitration procedures; (2) a new concept of wrongful application for preliminary application is adopted and clarified, including a range of circumstances illustrating when an application may be wrongful; and (3) the pre-existing practice of prior hearings is codified: i.e. in principle, courts must hold a hearing, to which both parties are summoned, before it grants an interim injunction. However, importantly, exceptions are made for very urgent cases, or cases where a prior hearing with both parties present could adversely impact on the implementation of the interim injunction, e.g. trade secret divulgation cases or patent infringement cases where the 'surprise element' is crucial. See our article here for more information.
• New Foreign Investment Law and repeal of key restrictions for IP transactions: on 15 March 2019, the new Foreign Investment Law (“FIL”) was adopted (entry into force on 1 January 2020). In the context of the US China trade dispute, the new FIL contains certain explicit assurances in relation to IP protection for foreign investors, including a general prohibition on trade secret theft and forced transfers of IP in order to gain market access. In the same context, on 18 March, some of the most controversial and restrictive IP-related provisions of the Technology Import and Export Administrative Regulations (“TIER”) and the Sino-Foreign Equity Joint Venture Law Implementing Regulations (the "EJV Implementing Regulations") were repealed with immediate effect. The articles that were repealed contained a number of controversial mandatory clauses and prohibitions on contractual provisions in technology import contracts (e.g. a foreign technology exporter is no longer required under the TIER to indemnify the Chinese technology importer for infringement of third party IP caused by the use of the imported technology in China; and improvements to the licensed technology no longer need to mandatorily belong to the party creating or inventing the improvement, amongst other significant changes). See our article here for more information.
• New Draft Patent Law: On 4 January 2019, China's National People's Congress (NPC) released draft amendments to the Chinese Patent Law for public comments, proposing, inter alia, higher damages for patent infringement, more options for rewarding inventors under an employee invention remuneration scheme, and patent term extensions for design patents and pharmaceutical patents. See our article here for more information.
• Amendments to Trademark Law and Anti-Unfair Competition Law: On 23 April 2019, both China’s Trademark Law ("TML") and its Anti-Unfair Competition Law ("AUCL") were amended. The amendments to the TML (effective 1 November 2019) are aimed at curbing bad faith trademarks by allowing rejections for bad faith at the trademark application stage, and at increasing damages for infringement, while the changes to the AUCL (effective 23 April 2019) are aimed at improving the protection for trade secrets, including burden of proof shifting provisions. In a connected development, on 11 October 2019, the Regulations on the Registration of Trademarks were published (effective 1 December 2019), which are implementing regulations under the latest version of the TML, and which clarify the elements indicating bad faith and trademark hoarding under the new article 4 of the TML, and also shed light on the correct application and scope of administrative sanctions for trademark agencies filing bad faith applications. See our articles here and here for more information.
• Reversal of OEM jurisprudence by Supreme People's Court: On 23 September 2019, the Chinese Supreme People's Court ("SPC") handed down its latest judgment on whether Original Equipment Manufacturing ("OEM") may constitute trademark infringement in China. In its judgment, the SPC refines and overhauls its earlier jurisprudence, now ruling that affixing trademarks on goods manufactured under an OEM license constitutes trademark use, and may therefore infringe on Chinese trademarks, even if such goods are all exported and not commercialised as such in China. This latest judgment has important repercussions for both purchasers, buying OEM products from China, and for trademark owners attempting to stop counterfeit goods being manufactured and exported from China.
• CNIPA's Amended Guidelines for Patent Examination: two sets of amendments were made to China's Guidelines for Patent Examination, in September and December 2019. The first one with effect on 1 November 2019 and the second one with effect on 1 February 2020. The Amended Guidelines reflected the shifting industry focus in China, by providing guidance on the exclusion of patentability of inventions relating to human embryos, patent application requirements for Graphical User Interfaces and algorithmic applications and business methods, which are closely related to the pharmaceutical industry, Artificial Intelligence, blockchain and the internet business. The Guidelines also contain amendments on examination procedures and standards with the purpose to improve the quality of the patents granted.

What to consider for 2020:

• Phase 1 Trade Agreement between the USA and China, and potential Phase 2 deal: On 15 January 2020, representatives of the USA and China signed the 'Phase 1 Economic and Trade Agreement'. The Agreement contains a variety of IP-related undertakings, targeting primarily trade secrets, pharmaceutical patents and anti-counterfeiting actions. However, many of the undertakings in the Phase 1 Deal are not new, and do not require a drastic change of Chinese black-letter IP law. Some of the key novelties for China's IP system under the Agreement are the newly agreed lower bar to criminal enforcement of trade secret theft, patent term extensions, a patent linkage system and the permission to use supplemental data to support the patentability of pharmaceutical inventions. Nevertheless, much will depend on how these changes are put in practice, and we presume this will be clearer when China publishes its Action Plan, mandated under the Phase 1 Deal. Therefore, swift legislative and regulatory changes could also be expected for 2020, especially in the trade secret and patent sphere. Apart from the Phase 1 Deal, IP owners should also follow the negotiation results for a potential Phase 2 Deal, and scrutinize the compromises that can be reached in that context, to be able to leverage any specific developments when they take place (e.g. including further market liberalizations and sector-specific enforcement campaigns etc.). We will publish a comprehensive article guiding you on these changes as soon as the Action Plan is published.
• New SPC Provisions on Evidence in Civil Litigation: discovery with Chinese characteristics? On 25 December 2019, the Supreme People's Court ("SPC") issued its new Provisions on Evidence in Civil Litigation(最高人民法院关于民事诉讼证据的若干规定), effective on 1 May 2020. The amended Provisions firstly update and expand the rules on admissions in civil litigation, including a rule on presumed admissions (a failure to deny unfavorable facts may constitute an admission of those facts). Importantly, the Provisions also provide new rules for the disclosure by parties of documentary evidence under the Civil Procedure Law. If one party holds documentary evidence needed by the other party, such latter party may request the court in writing to order the other party to disclose such documentary evidence within a certain term. If such party fails to provide the documentary evidence it was ordered to provide, the court may decide the issue on the basis of the claimant's partial documentary evidence/claims. These rules are not IP-specific but will certainly help IP owners in litigation against IP infringers and in trade secret cases. For instance, it is often very difficult for IP owners to provide direct evidence of damages in infringement cases. Under the new Provisions, they could request the financial books and records of the infringer, and if these were not provided upon the court's order, the court could grant the plaintiff's claims. We have seen some Chines courts exercise similar rules in 2019 in IP cases and expect to see a broader implementation of this practice in the future.
• New Draft Patent and Copyright Laws Expected. It is likely that the China National Intellectual Property Administration ("CNIPA") and related government bodies will publish new draft versions for public comment of both the Patent Law (last draft published on 4 January 2019) and of the Copyright Law (last draft published in 2014). Especially a new draft of the Copyright Law is now long-awaited, with several legal lacunas remaining for instance in the digital copyright sphere, and has been on the legislative schedule for years, underlining the importance and the various interests at stake under this legislation.
• IP enforcement will continue to be a key area for legislative reform in 2020. Under guidelines from the General Office of the Chinese Communist Party and the State Council, released on 24 November 2019, the following areas will be areas of focus for legislative and regulatory reform in 2020 and beyond: increasing punitive damages for all types of IP infringements; lowering the threshold for criminal penalties; reducing the evidentiary burden on rights holders; linking IP infringements to the social credit system and improving IP protection in the pharmaceutical industry (including through patent linkage and patent term extensions).
• Results from new practice under the TML and Implementing Regulations. With the new Trademark Law and Implementing Regulations fully effective by the end of 2019, trademark owners should closely follow developments regarding the ex officio rejections for bad faith at the application stage. IP owners should particularly monitor whether the CNIPA will accept tip-offs or objection procedures from right owners regarding third party bad faith applications, and if so, how these will be organized in practice.

Next steps

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