The Third Session of the 13th National People’s Congress (NPC) voted and passed the “Civil Code of the People’s Republic of China” on May 28, 2020. This law came into force on January 1, 2021.
The fundamental objective of this Civil Code is to facilitate the protection of people’s extensive civil rights and provide sufficient remedies for right holders whenever their IP rights are infringed upon especially when it comes to counterfeiting.
Apart from serving as a policy instrument for stimulating innovation, intellectual property (IP) rights have always been considered a significant category of private rights. The intellectual property regime, thus, is deeply rooted in and closely related to the civil law system.
While referred to by the Chinese press as the Encyclopedia of Social Life, the new Civil Law includes many provisions related to intellectual property (IP). At first read, the most striking IP provision is for punitive damages for intentional infringement, which will be potentially most valuable in patent infringement cases and especially in cases related to counterfeiting.
Article 1185 (out of 1260 articles) states, with reference to IP, “if the circumstances are serious, the infringed person shall have the right to request corresponding punitive damages”. This actually aligns with the newly amended trademark law that provides for increased punitive damages.
Article 63 of the trademark law, as amended in November 2019, increased punitive damages from three times to five times the amount of assessed damages when infringement is “committed in bad faith and the circumstance is serious.”
The United States has called China the “world’s principal IP infringer”. In a 2017 report, the US bipartisan Commission on the Theft of American Intellectual Property estimated that counterfeit goods, pirated software and the theft of trade secrets cost the US economy between US$225 billion and US$600 billion annually, not including the full cost of patent infringement.
China, meanwhile, has signaled that IP protection is a priority in its 14th five-year plan for 2021 to 2025, as part of its strategy to move towards self-reliance in critical technology.
Government economic planners detailed how they intended to strengthen the protection of IP and raise high-value patent ownership over the next five years, and Beijing is this year set to reveal its strategic plan to make China a global IP power by 2035.
In both the Chinese Patent Law and the Copyright Law, which will come into effect on June 1 2021, the applicable elements of punitive damages are “intentional infringement” and “aggravated circumstances“ according to the China Civil Code.
Therefore, punitive damages will be more actively applied by the Chinese courts when handling IP cases in the future.
The introduction of punitive damages into IP infringement disputes will help improve the protection of intellectual property rights, promote technology progress and innovation, and build a healthier market for investment.
The implementation of the Civil Law in China is not just a declaration to strengthen the protection of civil rights. It opens a new era by protecting IP rights.
The new Civil Code is demonstrating China’s resolute attitude toward malicious IP infringement, concrete articles and complementary civil principles could enhance the protection of IP rights in China.
In order to provide our clients with a unique expertise, necessary for the exploitation of intangible assets, we keep you informed about intellectual property and digital economy issues with our articles written by the Dreyfus legal team.