Chinese Officials Propose to Improve Intellectual Property Protections

For US intellectual property owners, the Far East has often been like the Wild West. Even as China has grown into an economic superpower, intellectual property protections in that market have fallen far short of American and European standards.

However, there recently have been encouraging signs that China is serious about strengthening protections for IP property holders. The most noteworthy sign came in April, when Lyu Guoqiang, commissioner of Shanghai's Intellectual Property Office, said the country is considering stiffening penalties for IP infringement.

Currently, Chinese law caps awards for patent violations at 1 million yuan (approximately $161,000). Trademark violation awards are capped at three million yuan ($483,000), and awards for copyright violations top off at 500,000 yuan ($80,500). These penalties are far lower than what infringers face in US courts, and many foreign IP holders complain that they are too low to adequately discourage infringement.

Lyu tells the Associated Press that Chinese officials are listening to those concerns. “China is not America. Our economies are different, but we still need to consider adjusting the damages standards,” he said.

In addition, Chinese officials also are considering allowing plaintiffs to pursue punitive damages in IP infringement cases. They also are looking at adding teeth to injunctions granted against allegations of trade secret theft.

These proposed steps come just months after China set up its first dedicated intellectual property courts.

The push to increase IP protections come as China looks to its next stage of economic growth. The nation has become a manufacturing powerhouse, and now looks to spur innovation to drive growth and increase wealth.

Feng Xiaoqing, an IP law professor at the China University of Political Science and Law in Beijing, tells Bloomberg Business that the nation’s leaders also want to improve the country’s international image. The Office of the United States Trade Representative has placed China on a watch list for shoddy intellectual property protection in each of the past 25 years. The 2014 report noted that China remains a “major source country” for counterfeit pharmaceuticals, for example.

The situation in China demand further monitoring, at least until the nation enacts and enforces these proposed IP protections. However, the prospects of greater IP protections should be encouraging for Middle Market companies, many of whom may have growth opportunities in the Chinese market.

Did You Know? Womble Bond Dickinson helps US Middle Market companies protect their intellectual property in China and other Asian markets.