IP Protection for Technology

Transfer in China

Prof. ZHANG Naigen

Director, the IP Center
Fudan University
zhangng@fudan.edu.cn
 Outline
 Increased FDI and technology transfer
 The risks of technology transfer in China
 Improved IP protection for technology
transfer
 The recent development of the doctrine
of equivalent (DOE)
 The critical issues in protecting trade
secrets

2
Increased FDI in China
45000
40000
35000
30000
25000
New Firms
20000
FDI
15000
10000
5000
0
2003 2004

3
 Increased FDI in China
Firms % FDI %
increase $ Billion increase
2003 41081 20.22 115.70 39.03

2004 43664 6.9 153.47 33.38

Total 508941 1096.6

 Source: www.mofcom.gov.cn (2005/04/20)

4
 Technology Transfer
in China, 2004
Tech transfer No. $ million % Total % increase

patent 361 1026.32 7.41 -22.57

Know-how 1385 4130.03 29.81 -6.84

Tech service 5256 3460.70 24.98 -2.35

Software 901 254.14 1.83 -34.85

Joint venture 95 114.95 0.83 -9.70

Key project 335 3784.30 27.31 27.59


Source: www.kjs.mofcom.gov.cn (2005/04/20)

5
Risks of Technology Transfer
 More enterprises operated exclusively
with foreign capital
Foreign investors worry about disputes with Chinese
partners or infringement of IPR.
 More R & D Centers move to China
More high technologies are introduced into and developed in
China. (Currently, more than 400 in China, 96 in shanghai)
 Risks of insufficient protection of IPR
More improvements of protection of IPR.

6
Reduction of Risks to obtain IPR
 Territory limitation for protection of IPR
Local conditions or business climate to transfer
technology
 Improvement of procedures to obtain
IPR in China
New Patent Law abolishes the procedure of
cancellation within 6 months after granting patent;
New judicial procedures to review the final
administrative decisions.

7
Reduction of Risks to Transfer IPR
 Valuation of costs to transfer IPR
More risks to transfer IPR, higher costs to be valued
Costs for licensee, costs for society
Uncertainty and risks
More guarantee of protection for IPR to reduce risks
 Improvement of protection for IPR
More IP legislations: patent/trademark/copyright
More IP enforcements: custom service/courts

8
Reducing Risks of Infringement
 Costs for IPR holders against infringement
Costs to prevent infringement, costs to get remedy
 More judicial enforcements
In 2004, 8832 IPR cases handed by courts (increased 46.82%)
 New Judicial Interpretation on Several Issues
of Application of Laws in Handing Criminal
Cases of Infringing IPR (Dec. 22, 2004)
Lower the threshold of panel punishment for infringing IPR;
Expand the range of penal protection against infringing IPR.

9
Recent Development of DOE
 One of the highest risks: patent infringement
How to find patent infringement
Impact of finding patent infringement on patent application
90 % patent infringements are related to DOE
 DOE: critical issue of patent infringement
Recent development of DOE in U.S.A. and its influence in China
Hilton case (1997) Festo case (2002)
DOE and estoppel
China’s Supreme People’s Court interpretation on DOE (2001)

Its IP tribunal interpretation on estoppel (2001)

10
Judicial Practice of DOE in China
 Application of DOE and estoppel
DOE can’t be used to enlarge scope of claims;
DOE shall be applied in element by element;
Estoppel shall be applied for DOE cases;
Existing technology can’t be interpreted as claims.
 General requirements of DOE
Triple equivalents: means/functions/results
Obvious for ordinary experts

11
Critical Issues of Protecting Trade Secrets

 Protection of trade secrets

Internal protection: define secrets, measures
confidential agreement
External protection: anti-unfair competition
 Anti-unfair competition law
Art. 10.3 trade secrets/technology secrets
Art. 25 remedy against unfair competition

12
More Protection for Trade Secrets
 Criminal punishment against unfair
competition
Art. 219 of criminal law
New judicial interpretation: material damages RMB 500,000
serious damages RMB 2.5 millions
 Need a new law of protection for trade secrets
Substantial protections: definitions
procedural protections: evidences
Improvement beyond WTO commitments

13
Q&A

Thanks

14