New Private Law? Intellectual Property “Common-Law Precedents” in China 1 NEW PRIVATE LAW? INTELLECTUAL PROPERTY “COMMON-LAW PRECEDENTS” IN CHINA Runhua Wang Chicago-Kent College of Law China has established a dynamic legal system by using guiding cases to improve adjudicative consistency. The guiding cases are de facto binding as “common-law precedents” and the only binding cases in China. In China’s dynamic legal system, the intellectual property (IP) legal mechanism and the legal rationales for adjudicating IP disputes are notably influenced by the U.S. On the one hand, some amendments to the IP statutes of China are coercive and in response to actions and criticisms by developed countries, especially the U.S. On the other hand, the IP judicial precedents that are selected, compiled, and published by the Supreme People’s Court (SPC) reflect the voluntary development of the IP regimes and the enforcement of the IP statutes in China. The IP regimes in China are on a path being inherently consistent with U.S. IP laws. In the U.S., IP laws are mainly considered as private law, but they do involve some public law characteristics, as shown by the intervention of legislators and the development of statutory interpretation by the courts. These public law characteristics do not transform IP laws into public law, but they evoke the concept of New Private Law in modern IP laws. This study reviews all the twenty-two IP guiding cases (i.e., patent, copyright, trademark, anti-unfair competition, anti-monopoly) in China and compares them with corresponding judicial precedents in the U.S. I urge that Chinese IP guiding cases are not conventional private or public law, rather are considered to be New Private Law. The IP guiding cases follow public policies to be part of governance and, as a result, show their own influence on policymakers and legislators. Consistent with the concerns of American IP holders, these guiding cases show that Chinese courts are instructed to be conservative in awarding both damages and injunctions. It shows that the courts function as a gatekeeper and consider IP quality to prevent over- rewarding IP holders either through the judicial system itself or the market when government agencies liberally or incautiously granted the IP rights. For trademark and unfair competition cases, public apologies are instructed to be expansively given by the courts to substitute economic damages for IP holders. Moreover, the IP guiding cases suggest that the SPC and Chinese judges are inclined towards a utilitarian and realistic/pragmatic judicial philosophy rather than a formalistic approach in their statutory interpretation. INTRODUCTION ............................................................................................ 3 I. STRENGTHENING IP PROTECTION IN CHINA ........................................... 7 A. Exogenous Effects ............................................................................ 7 1. Structuring an IP Regime under TRIPS ......................................... 8 2 New Private Law? Intellectual Property “Common-Law Precedents” in China 2. Trade Pressures from the U.S. ..................................................... 11 B. Internalize IPRs through the Guiding Cases ................................... 14 1. A Demand for Precedential Law in the IP Regime ...................... 14 2. The Guiding Case System ........................................................... 15 3. The Purpose of Guidance ............................................................ 17 4. The Compilation of the IP Guiding Cases ................................... 18 5. Enforcement of IP Guiding Cases through Appellate System Reforms ............................................................................................. 20 6. Enforcement through Government Agencies ............................... 22 II. IPRS AS PRIVATE PROPERTY UNDER “NEW PRIVATE LAW” .................. 24 A. Courts: IP Laws as New Private Law ............................................. 25 B. New Private Law for Increased Government Intervention .............. 28 III. ECONOMIC EFFICIENCY OF THE IP GUIDING CASES .............................. 30 A. Subject Matter and Scope of IP Protection ..................................... 30 1. Trademark and Unfair Competition ............................................ 31 2. Copyright ................................................................................... 35 3. Patent and Plant Variety.............................................................. 38 B. Property Rules and Liability Rules ................................................. 40 1. Balance of the Burden of Proof ................................................... 40 2. Remedies for IPRs ...................................................................... 43 IV. GOVERNMENT’S ROLE IN ADJUDICATION ............................................ 50 A. Deference to Administrative Agencies on IP Eligibility................... 51 B. Provide Evidence and Testimony Standards ................................... 52 V. GUIDING AS “COMMON-LAW PRECEDENTS” ........................................ 54 A. The Presumption of “Common-Law Precedents” ........................... 55 B. Guide the Judicial System .............................................................. 56 C. Guide the CNIPA in Issuing IPRs ................................................... 58 D. Guide the Local Governments in IPR Enforcement ......................... 59 CONCLUSION ............................................................................................. 60 APPENDIX ................................................................................................. 62 New Private Law? Intellectual Property “Common-Law Precedents” in China 3 INTRODUCTION The US-China trade war has been a topic undergoing intense public attention since June 2018.1 A large proportion of the negotiations between the two countries focus on intellectual property (IP) protection.2 President Trump complains about the “alleged IP theft” in China 3 and “enjoyed bipartisan support.” 4 Responding to his concerns over IP protection, Standing Committee of the National People’s Congress proposed amendments to the Trademark Law and the Anti-Unfair Competition Law in April 2019 and quickly approved these amendments in three days.5 This is not the first time that China reforms its IP statutes under the trade pressures from the U.S. 6 However, neither the earlier reforms nor the recent two amendments conclusively wipe off Trump’s allegations of IP theft, including but not limited to the issues of counterfeiting, trade secret misappropriations, and IP infringement.7 It is a misunderstanding that a reform of the IP statutes can entirely solve these issues of IP protection in China. The problem that makes the owners of intellectual property rights (IPRs) in the U.S. anxious is whether they can secure and enforce their IPRs in China. Even though China’s IP laws have been reformed several times to broaden the scope of protection and 1 See generally Greg Ip, The Trade Wars of 2018: An Alternate History, WALL ST. J., June 10, 2018, https://www.wsj.com/articles/the-trade-wars-of-2018-an-alternate-history- 1528672886; Ana Swanson, Trump’s Trade War With China Is Officially Underway, N.Y. TIMES, July 5, 2018, https://www.nytimes.com/2018/07/05/business/china-us-trade-war- trump-tariffs.html. 2 Lingling Wei & Bob Davis, U.S., China Close In on Trade Deal, WALL ST. J., Mar. 3, 2019, https://www.wsj.com/articles/u-s-china-close-in-on-trade-deal-11551641540 (“U.S. Trade Representative Robert Lighthizer said the provisions involving protecting intellectual property total nearly 30 pages out of a working document of more than 100 pages.”). 3 Grant Clark, What Is Intellectual Property, and Does China Steal It? WASHINGTON POST, Jan. 21, 2019, https://www.washingtonpost.com/business/what- isintellectual-property-anddoes-china-steal-it/2019/01/21/180c3a9e-1d64-11e9-a759- 2b8541bbbe20_story.html?utm_term=.e18875d581d5; But see Interview by Stuart Varney with Max Baucus, the 11th U.S. Ambassador to China (June 18, 2019) (arguing that “IP theft” has been in past tense and the situation of IP protection in China is in a situation much better than the old days). 4 Vivian Salama, Trump Sees China Trade Deal “When the Time Is Right,” WALL ST. J., May 14, 2019, https://www.wsj.com/articles/trump-sees-china-trade-deal-when-the- time-is-right-11557839937. 5 Statement on the Drafted Amendments to Eight Laws (Construction of the P.R.C. and Other Laws, etc.) (promulgated by the Nat’l People’s Congress Constitution & Laws Comm., April 20, 2019) (China); Anti-Unfair Competition Law (promulgated by the Standing Comm. Nat’l People’s Cong., Sep. 2, 1993, effective Dec. 1, 1993) Apr. 23, 2019 (China); Trademark Law (promulgated by the Standing Comm. Nat’l People’s Cong., Aug. 23, 1982, effective Mar. 1, 1983) Apr. 23, 2019 (China). 6 See infra Part I. Section A.2. 7 See Dennis C. Blair & Keith Alexander, China’s Intellectual Property Theft Must Stop, N.Y. TIMES, Aug. 15, 2017, https://www.nytimes.com/2017/08/15/opinion/china-us- intellectual-property-trump.html (“Intellectual-property theft covers a wide spectrum: counterfeiting American fashion designs, pirating movies and video games, patent infringement and stealing proprietary technology and software.”). 4 New Private Law? Intellectual Property “Common-Law Precedents” in China confirm that the IPR holders are entitled to property rights in China, excessive government intervention and