IP Protection for Technology Transfer in China

Prof. ZHANG NaigenDirector, the IP Center

Fudan Universityzhangng@fudan.edu.cn

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Outline Increased FDI and technology transfer The risks of technology transfer in

China Improved IP protection for technology

transfer The recent development of the

doctrine of equivalent (DOE) The critical issues in protecting trade

secrets

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Increased FDI in China

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2003 2004

New Fi rmsFDI

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Increased FDI in China

Source: www.mofcom.gov.cn (2005/04/20)

Firms %increase

FDI $ Billion

% increase

2003 41081 20.22 115.70 39.03

2004 43664 6.9 153.47 33.38

Total 508941 1096.6

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Technology Transfer in China, 2004

Source: www.kjs.mofcom.gov.cn (2005/04/20)

Tech transfer

No. $ million

% Total % increase

patent 361 1026.32 7.41 -22.57

Know-how 1385 4130.03 29.81 -6.84

Tech service

5256 3460.70 24.98 -2.35

Software 901 254.14 1.83 -34.85

Joint venture

95 114.95 0.83 -9.70

Key project 335 3784.30 27.31 27.59

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Risks of Technology Transfer More enterprises operated

exclusively with foreign capital Foreign investors worry about disputes with Chinese

partners or infringement of IPR.

More R & D Centers move to China More high technologies are introduced into and developed

in China. (Currently, more than 400 in China, 96 in shanghai)

Risks of insufficient protection of IPR More improvements of protection of IPR.

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Reduction of Risks to obtain IPR

Territory limitation for protection of IPR

Local conditions or business climate to transfer technology

Improvement of procedures to obtain IPR in China

New Patent Law abolishes the procedure of cancellation within 6 months after granting patent;

New judicial procedures to review the final administrative decisions.

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Reduction of Risks to Transfer IPR

Valuation of costs to transfer IPR More risks to transfer IPR, higher costs to be

valued Costs for licensee, costs for society Uncertainty and risks More guarantee of protection for IPR to reduce

risks Improvement of protection for IPR More IP legislations: patent/trademark/copyright

More IP enforcements: custom service/courts

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Reducing Risks of Infringement Costs for IPR holders against infringement Costs to prevent infringement, costs to get remedy More judicial enforcements In 2004, 8832 IPR cases handed by courts (increased

46.82%) New Judicial Interpretation on Several Issues of Application of Laws in Handing Criminal

Cases of Infringing IPR (Dec. 22, 2004) Lower the threshold of panel punishment for infringing IPR;

Expand the range of penal protection against infringing IPR.

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Recent Development of DOE One of the highest risks: patent infringement How to find patent infringement

Impact of finding patent infringement on patent application 90 % patent infringements are related to DOE DOE: critical issue of patent infringement Recent development of DOE in U.S.A. and its influence in

China Hilton case (1997) Festo case (2002) DOE and estoppel

China’s Supreme People’s Court interpretation on DOE (2001)

Its IP tribunal interpretation on estoppel (2001)

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Judicial Practice of DOE in China

Application of DOE and estoppel DOE can’t be used to enlarge scope of claims;

DOE shall be applied in element by element; Estoppel shall be applied for DOE cases; Existing technology can’t be interpreted as

claims.

General requirements of DOE Triple equivalents: means/functions/results

Obvious for ordinary experts

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Critical Issues of Protecting Trade Secrets

Protection of trade secrets Internal protection: define secrets, measures

confidential agreement External protection: anti-unfair competition

Anti-unfair competition law Art. 10.3 trade secrets/technology secrets

Art. 25 remedy against unfair competition

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More Protection for Trade Secrets

Criminal punishment against unfair competition

Art. 219 of criminal law

New judicial interpretation: material damages RMB 500,000

serious damages RMB 2.5 millions Need a new law of protection for trade

secrets Substantial protections: definitions

procedural protections: evidences Improvement beyond WTO commitments

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Q & A

Thanks