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CNIPA’s plan highlights China’s innovation ambitions


Managing IP’s Karry Lai talks to China IP specialists who say that trademark squatting, patent quality and IP securitisation are priorities to focus on

In-house counsel, academics and lawyers have praised CNIPA's yearly plan and are especially encouraged to see more focus on improving patent quality and targeting bad-faith trademarks.

CNIPA's plan for the next 12 months, which was announced on May 13, is a lengthy one, with 100 goals encompassing everything from making IP education a priority in school systems to improving coordination on IP enforcement.

Knowledge is power

Niklas Fu, senior enforcement manager at multinational luxury goods company Richemont in Shanghai, says that as the list of goals is so long, his first doubt is whether all the goals can really be implemented.

But, he says that based on the current international climate, including China's advancement in the 5G sphere and the increasingly tense relationship with the US, having good systems to manage all areas of IP matters is becoming more important than ever for China.

He adds that what is different from previous years is that the plan emphasises the importance of IP education not only at the university level, but also in primary and secondary schools.

"This idea is new and rare, and I think the new younger generation actually already has a much better understanding of why it's important to respect IP compared to older generations," he says.

Evicting the squatters

Fu says that he is glad to see the focus on trademark squatters, especially as the new trademark law has defined genuine intention of use as a key criterion of registration. He thinks there has been good progress made, and there have already been examples of punishment of infringers violating this clause.

Aaron Wininger, director of China IP at Schwegman, Lundberg & Woessner in San Jose, says that the most important part of the plan is the continuing focus on stopping malicious registration and hoarding of trademarks.

I think the new younger generation actually already has a much better understanding of why it’s important to respect IP compared to older generations

Niklas Fu, senior enforcement manager at Richemont (Shanghai)

"Foreign companies have faced trademark squatting for many years, and the Chinese government – through the newly amended trademark law, administrative enforcement mechanisms and court decisions – have really cracked down on squatting, and both trademark agencies and trademark applicants have been fined for malicious registration," he says.

Karen Wang, associate general counsel of trademark and brand protection at Western Digital in Shanghai, says she is encouraged to see the discussions on trademark agency management between representatives from law firms, trademark agencies and brand owners, as a priority in fighting against malicious trademarks

"I think this is also a good sign to show that there will be actual actions to regulate the operation of trademark agencies which will help combat malicious trademark filings," she says. "We have seen improvements on actions against these filings during the past few years already, and with the actions by different government agencies as indicated in CNIPA's plan, I believe we will see further improvement."

Customs and e-commerce

On IP protection by customs, she hopes that actions to seize counterfeits will not differentiate between local and foreign brands and will protect all brand owners.

"Customs seizure is a critical part of enforcement as it stops counterfeits at the border, which will have a chain effect in the industry," Wang says. "We have seen very good seizure actions in the past and look forward to continuous efforts in this area."

In terms of online enforcement, Wang says that IP protection on the internet is a priority but hopes to see more stakeholder involvement.

"This is critical as e-commerce is becoming more and more important to our everyday lives, especially with the COVID-19 situation," she says.

However, only CNIPA has been put in charge of this priority area in the plan. As it involves many stakeholders, such as internet service providers, e-commerce platforms, wholesalers, retailers, manufacturers and consumers, Wang does not think that it is sufficient for only CNIPA to take this on, and argues that it will need more support to build a better environment for protecting IP online.

Time up for subsidies

One of the priorities in CNIPA's plan is to improve patent quality with a key goal being the phasing out of subsidies for utility model and design patents.

Wininger thinks that this will decrease the filing of 'abnormal' patent applications – which are mainly utility model and design patent applications that do not get examined substantively and therefore get granted quickly.

"I think the subsidised filings of abnormal applications diverts resources at CNIPA that could be better used for substantive examination of invention patent applications," he says.

However, the subsidies will not stop for invention patent applications, so that may increase filings on innovative inventions as local governments increase existing incentives for these applications.

Jili Chung, researcher at the East China University of Political Science and Law in Shanghai, says the move to improve patent quality by phasing out subsidies is a good one. "Major cities such as Shenzhen and Shanghai have already phased out subsidies, but small counties still need to encourage enterprises to demonstrate their innovation abilities."

Securing your assets

A notable aspect of CNIPA's plan is the push for IP securitisation, the idea of which is for IP owners to issue market-traded securities from their assets. It's a concept that is still new in China, with just 12 deals since 2018, but it is an area that is garnering interest from IP owners and investors.

Chung says that IP securitisation can help organisations better monetise their IP.

However, he believes that patent pledging, where patents are used as collateral for loans, will need to be better developed before IP securitisation becomes more popular. This is because, Chung says, IP securitisation is complicated and involves banks, accounting firms and legal advisers.

Chung says that having high patent quality is fundamental for businesses to be able to build a good patent portfolio that they can monetise; otherwise, it would be difficult to find investors to want to securitise the portfolio.

Ding Jian, director at IP financial service company Beijing Intellectual Wealth Group, which has been involved with IP securitisation deals in China, says that the key challenge with IP securitisation is finding the right opportunities and high-value patents.

"CNIPA's plan to improve patent quality and push for IP securitisation will help enterprises find value in IP," he says. "The connection of small and medium entreprises with the capital markets will open up a new door of opportunity."

He adds that government organisations such as CNIPA can help drive this development by identifying enterprises with high-value portfolios and connecting them with financial institutions interested in securitisation opportunities.

However, the challenge is to shorten the time it takes to securitise products and to keep pace with the fast developments in patents, especially in the areas of 5G and artificial intelligence.

CNIPA's latest plan shows China's determination to improve IP awareness and protection at all levels of society. IP practitioners are watching how these high-level goals will be implemented through more detailed action plans in the next 12 months and beyond.

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