Outlook for IP and brand owners in the context of China's institutional reform

Introduction

On 13 March 2018 China's State Council proposed a seismic cabinet reshuffle plan to the National People's Congress (NPC) for deliberation. Also known as the Institutional Reform Plan of the State Council, the plan unveils a drastic government overhaul in an attempt to streamline governance. On 17 March the plan was adopted by the NPC and on 21 March the Central Committee of the Communist Party released the Plan on Deepening the Reform of Party and State Institutions, providing insight into how the Chinese government will be run in the medium-to-long term.

As part of the overhaul, the IP sector is undergoing radical changes that will change it for the better.

The restructuring will be top-down. On 10 April 2018 the State Administration for Market Regulation (SAMR) was inaugurated, which will integrate the following agencies or certain functions thereof:

• the State Administration for Industry and Commerce (SAIC) (to be dismantled);
• the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) (to be dismantled);
• the China Food and Drug Administration (CFDA) (to be dismantled);
• the pricing regulation probe and anti-monopoly enforcement function of the National Development and Reform Commission;
• the anti-monopoly enforcement function against concentration of business operators that was originally undertaken by the Ministry of Commerce; and
• the Office of the Anti-monopoly Committee under the State Council.

The State Intellectual Property Office (SIPO), a subordinate agency of the SAMR, will be restructured to integrate the registration and administrative adjudication responsibility for patents (its existing function), as well as trademarks and geographical indications.

The copyright sector has been removed from the governance of the State Council and put under the direct administration of the Communist Party. The State Administration of Press, Publication, Radio, Film and Television of China (SAPPRFT) will be dismantled and its responsibilities in censoring news and publications will come under the publicity department of the Communist Party. As part of the SAPPRFT, the General Administration of Press and Publication and the National Copyright Administration (which are one agency with two identities) will still be incorporated in the publicity department. The publicity department, which will govern copyright registration, the import of publications, supervision and administration of the contents and quality of publications, will no doubt have more control over content. As to the administrative enforcement of copyrights, this is likely to be left to the cultural market administrative enforcement teams nationwide.

This rearrangement has generally been received positively. Unification of the administration and enforcement of patents, trademarks and geographical indications under one single governmental agency will be beneficial to brand owners.

Streamlined governance of trademark and patent matters

The most prominent change in the restructuring of the SIPO is the integration of registration and administrative adjudication of patents and trademarks under one roof, which will align China with most other IP jurisdictions. The new SIPO will also oversee trademark and patent enforcement matters, which are to be undertaken by a market supervision comprehensive enforcement team under the SAMR.

The move will allow the administration to better allocate its resources and manpower to improve efficiency and create a consistent adjudication and enforcement mechanism. Brand owners will also benefit from the alleviation of the procedural burden.

The SIPO has already incorporated on its website:

• online portals for patent filing;
• the patent search and analysis database;
• the patent examination inquiry system;
• the trademark e-filing system;
• the trademark search database; and
• the geographical indication database.

Although visitors to these portals are still being directed to the same pages as before, it is expected that the databases will be integrated so that information is more easily accessible to the public in a more user-friendly way.

Since November 2017, the SAIC has vowed to facilitate trademark registration procedures and improve trademark registration efficiency. In its three-year plan for 2018 to 2020, the agency has shortened the deadlines for trademark prosecution procedures (see Table 1).

Table 1: deadlines for trademark prosecution procedures

Integrated registration procedure for geographical indications

Before the restructuring of the SIPO, China offered three independent systems of protection for geographical indications, which were managed by the following governmental agencies:

• geographical indication certification marks or collective marks under the SAIC;
• geographical indication products under the AQSIQ; and
• geographical indication agricultural products under the Ministry of Agriculture and Rural Affairs (previously known as the Ministry of Agriculture).

The three systems are governed by laws and regulations at different levels, which has led to certain overlaps and conflicts that have increased the cost of registering and enforcing geographical indications.

Although protection for geographical indications agricultural products remains under the scrutiny of the Ministry of Agriculture and Rural Affairs, in practice, brand owners often resort to the SAIC and AQSIQ to register their indications.

With the restructuring of the SIPO, the SAIC route and the AQSIQ route will be integrated under the framework of the new SIPO. It is likely that, for the sake of lowering administrative costs and streamlining administration, the two routes will eventually become one. This would simplify the registration and protection of geographical indications in China and effectively alleviate the procedural and financial burden for brand owners seeking to register geographical indications.

Integrated IP enforcement team

The market supervision comprehensive enforcement team, which answers directly to the SAMR, will take over the administrative enforcement responsibilities of the SAIC, AQSIQ and the CFDA.

For example, in an enforcement case against a counterfeit product that infringes both a trademark and a patent, under the previous system the complaint was filed separately with the SAIC and the SIPO. Such practice increased the administrative burden and costs for IP owners and often resulted in inconsistent administrative penalties.

With the restructured SIPO and its integrated enforcement team, IP owners will only need to resort to one governmental agency to enforce their trademark or patent rights. Under the SIPO's guidance, the market supervision comprehensive enforcement team will be well placed to unify the criteria for establishing infringement and the administrative penalty to be imposed on infringers.

Although it may take some time for the team to get up to speed, in the long run, this new approach will benefit brand owners in providing enhanced and consistent enforcement programmes.

Integrated resource for anti-monopoly enforcement

Before the institutional reform, the enforcement of anti-monopoly matters, placed under the guidance of the Anti-Monopoly Committee of the State Council, was handled by:

• the Ministry of Commerce (MOC) Anti-monopoly Bureau;
• the National Development and Reform Commission (NDRC) Price Supervision and Inspection and Anti-monopoly Bureau; and
• the SAIC Anti-monopoly and Anti-unfair Competition Enforcement Bureau.

In the future, even though the Anti-monopoly Committee of the State Council will not be dismantled, the above divided duties will be consolidated under the SAMR, including:

• the anti-monopoly law enforcement duties of the SAIC;
• the pricing regulation probe and anti-monopoly law enforcement duties of the NDRC; and
• the anti-monopoly law enforcement duties against concentration of business operators under the MOC.

The establishment of a unified anti-monopoly law enforcement team will solve the problems of multi-sectoral enforcement, form a joint force for anti-monopoly administrative enforcement and increase the consistency, professionalism, authority and stability of enforcement involving IP matters concerning anti-monopoly and unfair competition. Such measures will also be conducive to the protection of IP rights.

For further information on this topic please contact Bai Gang at Wanhuida Peksung? by telephone (+86 10 6892 1000) or email ([email protected]). The Wanhuida Peksung? website can be accessed at www.wanhuida.com and www.peksung.com.

Luna Lu, at Simmons & Simmons, co-authored this update. An earlier version of this article was first published in the International Trademark Association Bulletin Vol 73, No 8, 1 May 2018.

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