Jacob Schindler

Back in December, Supreme People’s Court vice president Tao Kaiyuan told media that top authorities were considering the introduction of a national IP appeals court for China. Details are sparse at the moment, but the nation’s top court is likely to be consulting with stakeholders now in order to come up with a more detailed proposal. Madame Tao is a heavy hitter in the Chinese IP policy world, and has been an advocate of both specialised courts and a greater IP role for the judiciary (versus administrative bodies). Her comments are a good indication of what shape the next round of IP reform in China will take.

The three specialised IP courts in Beijing, Shanghai and Guangzhou are technically a pilot reform; that officials are already discussing introducing more specialised courts as a next step is a good indication that the initiative has been judged a successful one by authorities. Foreign patent owners too seem to have an overwhelmingly positive view of the new courts, praising them as knowledgeable and pro-IP; but for patent disputes they are only the court of first instance. The idea of an appeals court has been around for a very long time, with the first proposals calling for a Beijing-based body to review decision’s by China’s patent and trademark offices – a role that’s now filled by the Beijing IP Court.

If it happens, the court is likely to be based in Beijing. Should Chinese reformers follow the examples set by Japan’s IP High Court and South Korea’s Patent Court, the result may be a tribunal that hears both infringement cases from intermediate courts (including the specialised IP courts) across the country, as well as appeals against the Beijing IP Court’s judgments on SIPO and China Trade Mark Office (CTMO) validity decisions. IAM spoke with several members of the IP legal community in China and found considerable enthusiasm for the idea, tempered by a few reservations.

Pro - experienced, consistent judges

Practitioners and IP owners have praised the professionalism and expertise of judges in the new IP courts, saying they have seen greater consistency in decisions. In cases brought elsewhere in the country, decisions can be less predictable. Though many non-IP courts in China do have IP divisions, "in some provincial and intermediate courts, judges are very unfamiliar with patent cases”, says one lawyer. An appeals court with national jurisdiction would mean that even cases which start somewhere other than China’s three major commercial centres could be ruled on by a bona fide IP expert at least at the second-instance stage.

Pro – stronger IP environment

It is a common view that specialised IP courts can make the overall IP environment stronger under the right conditions. At the China Patents Blog, Erick Robinson writes that: “This is the next step in making China the innovation capital of the world. When the US established the Court of Appeals for the Federal Circuit in 1982, it led to stronger patent rights and greater innovation." Many credit (or fault) the CAFC with leading to an increase in patent damages awards – given China’s current very low damages, that would be a welcome development for a great many companies. Early indications are that the specialised IP benches in China may be more friendly for plaintiffs than unspecialised counterparts, and the same could be true in an appeals court.

Pro – ease fears of local protection

There is debate over how big a problem local protectionism is in courts around China, but there’s no doubt that it looms large in many foreign parties’ calculations. No matter what jurisdiction we’re talking about, most companies would prefer not to litigate against a company on its home turf, all other things being equal. Litigators say that having the option to have patent appeals heard by a central court in Beijing may give their clients greater confidence in using the litigation system.

Con – manpower

One of the challenges in setting up the specialised courts was finding enough judges of a very high standard. The Beijing court initially had a quota for 33 judges, but was only able to fill 25 of the positions within the first year. “The criteria are quite strict for choosing IP judges and there may not be enough in Beijing who have the necessary educational background and work experience,” one attorney told me at the time. Now it appears there are 43 IP judges in Beijing. How difficult will it then be to find judges with the experience to sit on a national appeals court? More than 100,000 IP cases were filed in China in 2015, with 13,000 involving patent infringement or technology agreements (a figure that’s growing 20% year-on-year). It is easy to imagine the docket of a cetralised national appeals court becoming unmanageable. A counterpoint to this is that Chinese courts are able to rely heavily on technical investigators who work for the court, unlike in the US system.

Con - insularity

It is a general objection to specialised IP courts that this blog has raised before, but it is worth mentioning here: the more you remove IP – and patents, in particular – from mainstream legal practice, the more of a tight, impenetrable world it becomes. In addition to possibly missing the opportunity to educate a broader swath of judges and legal professionals about IP, the move toward greater specialisation could also generate objections from industry. The CAFC is certainly a favourite target of patent reform advocates in the US, though similar courts in Korea and Japan don’t appear to have generated anti-patent sentiment. There doesn’t seem to be significant anti-patent sentiment in Chinese industry either. But that could change, especially if NPEs become more active or if foreign companies start to sue local Chinese companies more often. Imagine how easy it would be to make political hay of a statistic like this one.

Con – what’s the rush?

China’s specialised IP courts have only been around for a couple of years, and it’s impossible to assess them holistically at such an early stage. Many of the statistics we know about have come from judges making comments in the media – that’s hardly the level of information and transparency needed to measure the courts’ progress so far. Taking into account the manpower issues raised above, it doesn’t seem like there would be much harm in holding off for a couple of years as decisions made by the specialised courts make their ways through the appeals process and authorities are able to analyse a greater variety of cases and parties.