The country's strong push for innovation has meant more work for lawyers: the Chinese Patent Office issued more than 580,000 patents in 2009, up 41% from 2008. New patent applications grew to 947,000 in 2009 up from 252,000 in 2003. Over the last year, the Chinese Patent Office has become the third-busiest patent authority in the world, following closely behind Japan and the US.
To handle the growing demand, leading IP firms like Lifang & Partners have expanded their legal teams. Last year, Lifang recruited over 30 IP lawyers, some of whom joined from DeHeng's IP division. The firm later also merged with Guangzhou-based IP specialist firm Liu & Partners.
Fair IP litigation
Last year The Supreme People's Court announced that 30,626 civil IP litigation cases were filed, up over 25% on the 2008 figure. Meanwhile, with over 24,206 IP suits filed in 2008, China surpassed the US to become the most litigious country in the world for IP disputes.
But who are initiating these cases - large-scale foreigners given China's reputation for counterfeits? Out of those 580,000 patent applications, only about 10% were filed by foreign companies. A foreign company was one of the parties in less than 5% of those 24,206 IP suits in 2008.
The trend that becomes prominent is how foreign companies have abstained themselves from the IP litigation process. "Preventive litigation", lawyers say, is where foreign-related work is mostly derived. "Foreign companies care more about the new laws promulgated; they want to know how it affects them and what they should do to avoid damages. They just want to be compliant," says Long Chuanhong, a partner at CCPIT.
Understandably so, patent litigations making the headlines seem to indicate that the legal system favours local companies which are litigating against foreign competitors. The landmark case of Schneider Electric and Chint Group closed with Schneider paying damages of around US$48.5m in 2007. In 2008, Samsung was also hit with a US$7.4m fine for infringing a mobile phone patent held by Holley Communications.
Seemingly frightened foreign companies have been taking the backseat, trying to lay low by diligently taking proactive measures to make sure they are compliant. But while the locals are feeling more empowered in light of the Schneider case, many international enterprises have been forced to take the hot seat. "We are acting for and defending a lot more international companies against Chinese companies. Chinese companies have taken heart from recent favourable awards and are flexing their muscles," says Rouse & Co's Shanghai-based partner Elliot Papageorgiou. "Since a lot of incentives have been created for companies who protect their IP rights, that has given the locals a lot of confidence to enforce their rights on their own turf," he adds.
While many of those foreign companies are still wary of rumours that the legal system is somewhat biased, and are therefore hesitant about trying to enforce their rights in China, recent IP litigation cases, however, seem to suggest that the local authorities are attempting to move away from the stigma. Many local lawyers have also listed fairness as one of the most significant traits seen by courts trying IP cases.
In January last year, Neoplan, a German bus company, was awarded US$3m in its litigation against two Chinese infringers. The compensation represents the largest infringement damages ever obtained by a foreign company in China. Earlier this year, the Beijing No 1 Intermediate People's Court ordered two Chinese companies to pay a combined total of US$1.3m in damages to Strix, a British manufacturer of electric kettle components.
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