Jacob Schindler

Few Chinese IP developments over the past year had the amount of mainstream media appeal than the short-lived injunction ordered by the Beijing IP Office against Apple’s iPhone 6. Though the sales ban was quickly stayed pending an appeal to the Beijing IP Court, and there’s no evidence that any actual sales in the city were impacted, it was a reminder that not only are patent injunctions available in China, but you don’t require a full-fledged civil lawsuit to obtain them.

Statistics from the last year show that a huge number of plaintiffs are turning to administrative authorities like the Beijing IP Office to assert their patent rights. Such cases reached 49,000 in 2016, a year-on-year increase of 36.5%. That outpaced the growth in patent filings and civil IP cases, but more surprising than that is that it represents a slowdown from the previous year, when administrative complaints nearly doubled. Interestingly, although administrative enforcement for trademarks has many of the same advantages (speed, low cost, injunctive relief), take-up of the enforcement tool increased just 3%.

One important caveat is that not all of these 49,000 cases are infringement complaints like the one filed by Baili against Apple. If past ratios held, about 40% – or less than 20,000 – dealt with infringement, the rest with patent counterfeiting (packaging falsely claiming a product is patented). Nevertheless, when held up against the 87,000 patent infringement cases handled by Chinese courts last year, it’s a significant number. Most of them, like the Apple case, will centre on a utility patent or design patent.

Andy Yang, the Beijing lawyer who secured the first-round win against Apple, told this blog shortly afterwards that speed, cost and expertise were the key factors that led his client to select the Beijing IP Office as a venue. Unfortunately for them, Apple won its appeal at the Beijing IP Court this past March, which ruled that “both phones are easily distinguishable in the eyes of consumers” in overturning the sales ban.

Perhaps the high-profile case contributed somewhat to the boost in administrative actions. It is almost certain that not much of the action has been initiated by foreign firms. Not only do they traditionally shun administrative enforcement, but they file for fewer utility patents and design patents than their Chinese counterparts. As Dan Harris wrote last year in reacting to the Apple injunction: “We cannot pin down this massive acceleration in design patent matters on any one thing and so we simply think that word has gotten out among Chinese companies regarding the effectiveness of engaging foreign companies in design patent disputes.”

So the real story here is about Chinese companies and their continuing embrace of a quick-and-dirty enforcement method. While this trend may be nuisance (or something more serious) for foreign companies, the fact that a patent can be enforced for an estimated $4,500 to $12,000 may be a positive thing on balance for the Chinese IP environment. There could well be thousands of small or medium-sized businesses in China using the system as their first experience with the patent enforcement. Compare that to the US, where sky-high litigation costs mean few startups and SMEs can fight any but the most critical cases - and even then they often find it too prohibitive, especially as the odds of prevailing are so stacked agaiunst them. I’d guess that thousands of smaller players in China using the administrative system now might result in a better appreciation of IP’s value further down the road.