There are several reasons for the present situation on the Chinese mainland with regard to patent offences, of which the historical, cultural and economic reasons are the chief ones. This chapter aims to identify weaknesses and deficiencies in the provisions of China’s criminal statutes with a view to improving and perfecting the legislation on patent-related crimes on the mainland.
The availability of a patent system on the mainland came rather late. It was not until 1984, 35 years after the founding of new China in 1949, that the first Patent Law was officially passed and promulgated. Earlier there had been only two sets of provisions concerning patent rights: ‘Interim Provisions on Safeguarding Invention Rights and Patent Rights’, adopted in 1950 and repealed in 1963; and ‘Provisions of Rewards for Inventions’, adopted in 1963.
But as the latter relied on a system of rewards for inventions instead of a patent rights protection system,11 it was unable to offer overall protection of various inventions, to safeguard inventors’ legitimate rights and interests, or to promote international technical exchanges. The patent rights protection system, reaffirmed by the adoption of the 1984 Patent Law, played an important role in encouraging inventions and creations and in advancing the development of science and technology. But as the protection of intellectual property has become a matter of international awareness and requirement, the 1984 Patent Law was felt to be inadequate to cope with the changing situation. In 1992 and later in 2000, the mainland twice revised the 1984 Patent Law. The revised Patent Law and the Rules for its Implementation improved the procedures for patent application and for protection of patent rights and intensified supervision over patent-related enforcement of administrative rules and judicial practices, thus meeting the needs for international protection of patent rights and bringing it more in conformity with the WTO Agreement on TRIPS (Trade-Related Aspects of Intellectual Property Rights).
11Provisions of Rewards for Inventions stipulates that all inventions belong to the state and any unit in the country is entitled to use them, without paying any fees, whenever it deems necessary.
The incorporation of provisions on patent offences into the mainland’s Criminal Law also appeared rather late. There was only one provision dealing with IPR offences in the Criminal Law adopted in 1979, that is, the provision making it a criminal act to counterfeit a registered trademark. In 1985, China became a signatory to the Paris Convention for the Protection of Industrial Property. In 16 February of the same year, the ‘Circulation on Several Issues Concerning Trials of Patent-related Cases’, issued by the Supreme People’s Court, stated that the criminal liability of persons involved in unauthorised use of another person’s patent, disclosing state secrets and neglecting official duties, abusing power, and engaging in self-seeking mis-conduct were to be investigated in accordance with the provisions in the Criminal Law of the People’s Republic of China. Article 63 of the Patent Law of the People’s Republic of China, which came into effect on 1 April 1985, also stipulated that in cases involving the misuse of another person’s patent serious enough to constitute criminal liability, the persons directly responsible were to be investigated with reference to the provisions dealing with the crime of unauthorised use of trademarks in the 1979 Criminal Law. It was not until 1997 that the act of unauthorised use of another person’s patent was criminalised in the mainland’s criminal code. The revised Criminal Law of the People’s Republic of China, adopted on 14 March 1997, defined the crimes of IPR infringement in a separate section of Chapter 3, Part Two (Specific Provisions), putting together in this criminal code all the specific criminal offences from former statutes and auxiliary laws with the newly added ones. What is more, it listed the criminal act of misuse of another person’s patent in a separate article and clearly defined its acts of offences and stipulated specific scales of penalties. This was a major new move to counter and reverse the worsening situation of patent-related crime. However, there are still many weaknesses in the existing laws and regulations, which have been inhibiting the crack-down on patent-related crimes. The main weaknesses and deficiencies are in the following areas:
Lack of clearly defined criteria for criminal prosecution and disconnection between protection of patent rights offered by the civil, administrative and criminal laws
The legal system has provided protection of varying degrees for patent rights. There are provisions in civil law, administrative law and criminal law to deal with patent offences based on the seriousness of the harm done. In order to build up an effective correctional system against such offences, it is important to make sure that the protections offered by these different tiers are closely connected, and coherent as a whole.
Unfortunately, since the Chinese statutes lack specific stipulations to determine if a patent infringer’s act is damaging enough to convict him, the ambiguity in filing a criminal case makes it difficult to follow the sequential procedures for the protection of patent between civil law, administrative law and criminal law.
According to the relevant provisions in the Patent Law, in the cases listed above, it is only when the circumstances are serious that the criminal liability of the persons directly responsible will be investigated.
But the law has not defined clearly how and when circumstances become serious, nor have academics agreed on it.12 This has led to confusion of jurisdiction between civil courts, administrative departments and criminal courts, hampering the transfer of cases between them. In China, the People’s Court hears a case involving patent infringement based on either complaint or petition filed by a party or on documents of prosecution prepared and sent by the People’s Procuratorate. Apart from this, the patent administration department also has the power to impose administrative penalties on patent infringement acts. When investigating a patent infringement case, some patent administration departments, driven by self-interest, finding that the circumstances were serious and would possibly constitute a crime that should be handled by a judicial department, would rather punish the offender by imposing a heavy fine than turn him in to the judicial department. Important as it is for a victim of infringement acts to get compensation for his loss, he is more concerned about whether his patent can be protected from being further infringed. The deterrent
effects that legal and administrative punishments are supposed to achieve have not been carried to the full because of lack of an efficient case hand-over and take-over system between the civil court, administrative department and criminal court. This has to a certain extent weakened the judicial protection of patent rights and connived somewhat at the patent-related crimes.
Definitions for charges of crime are too general and not specific enough
Of all the seven criminal charges against criminal acts involving IPR infringements prescribed in Section 7, Part Three of China’s Criminal Law, there is only one criminal charge for crimes involving patent rights, that is, the crime of counterfeiting the patent of another person as set forth in Article 216. Besides, according to Article 64 of the Patent Law, when a person, in violation of relevant provisions, applies for a patent in a foreign country and in the process discloses important state secrets, if the circumstances are serious, his criminal liabilities will be investigated. And Article 67 of the same law stipulates the same of patent administrative personnel and relevant state personnel who engage in neglect of official duties, abuse of powers and self-seeking conduct. It might be safe to point out that the available criminal charges against patent-related crimes could no longer meet the present requirements in China for crackdown and prevention, as the legal liabilities of many illegal acts in the patent field have not been accounted for and penalised. On the crime of counterfeiting a patent, Article 216 of the Criminal Law stipulates: ‘whoever counterfeits the patent of another shall, if the circumstances are serious’, be committing the crime of counterfeiting patent.
However, according to relevant interpretations, ‘counterfeiting the patent of another person’ has been defined very narrowly. It only refers to the passing off of unpatented products and unpatented methods such as those patented by patentees,13 but does not include other serious offences or the tort resulting from illegal practice of another’s patent. This restrictive definition has made judicial practices very difficult. There have been some widespread direct offences such as illegally practising the patents of other persons without their authorisation, and large numbers of other indirect offences such as making other people’s patent marks without authorisation. Although the damaging effects of these on the patentees as well as on society have been no less than those resulting from counterfeiting patents, the offenders could not, according to the present incrimination principle, be charged with the crime of counterfeiting patents and could not be penalised accordingly. We may conclude that the current upsurge in patent offences on the mainland has much to do with the unspecific and oversimplified definition for patent-related criminal charges.
Types of punishment are too stereotyped
The Criminal Law of the People’s Republic of China has only specified fixed-term imprisonment and criminal detention as two principal punishments, with a fine as an accessory penalty. With the diversification of subjects of patent-related crimes, the aforesaid types of criminal punishment could not meet the need for penalising offenders. For the rampant crimes perpetrated by units, the law has stipulated a dual-penalty system which imposes a fine on the unit and at the same time sentences the person in charge of the unit or personnel directly responsible for the crimes to fixed-term imprisonment or criminal detention.
However, in practice, with the cases involving unit offenders, especially those production-oriented units, since the person in charge or the personnel directly responsible for the crime more often than not play the key role in the unit’s production and operation, any court judgment that deprives them of their personal
12See Tian Hongjie, Studies on Some Difficult Issues Concerning Law Application in Criminal Trials with Units as Criminals, Jilin People’s Publishing House, 2001, pp. 345–7, and Liu Fang & Shan Min, Crimination and Sentencing of Crimes Involving IP Infringement, The People’s Court Press, 2001, p. 176.
13Liu Jiashen, Criminations and Punishments of Criminal Charges Commonly Cited in the New Criminal Law, The People’s Count Press, 1998, p. 520.
freedom would have very adverse effects. As judges often meet strong resistance during the court trials, cases of this kind would end up in imposing a fine on the unit but with the persons mainly responsible for the offence eluding due punishment. As a consequence, it is not uncommon to see the same unit commit the same crime of patent infringement.
Lack of specified and easy-to-operate sentencing criteria
A lack of operational and substantiated sentencing criteria has an adverse impact on crackdowns on patent offences and also on the prevention of repeat crimes. For instance, because of the huge economic benefits, the likelihood of a criminal repeating the same patent-related crime is very high. To deal with the situation, some countries and regions have prescribed specific response provisions in their criminal laws in this regard.
For example, the Criminal Law of Macau stipulates that anyone who commits the crime of patent infringement concerning an invention, utility model or industrial design will be sentenced to a fixed-term imprisonment of three years. If it is a repeat crime, the sentence of fixed-term imprisonment will be doubled, and an extra one-third of the imprisonment term will be added to crimes of extremely serious circumstances.
Under the same law, a fine of between $50 000 and $500 000 (patacas) will be imposed on crimes of trademark infringement. If it is a repeat crime, the fine will rise to between $50 000 and $1 million (patacas).
Specified sentencing criteria like these facilitate the operation of the judiciary and make clear the state’s differentiation between a first offence and a repeat offence; this has a considerable impact on the prosecution and prevention of repeat crimes. But in China’s Criminal Law, the provisions concerning patent-related crimes do not have these specific sentencing criteria. It is a matter of course that judges may hear and rule the cases of repeat crime at their own discretion in conformity with the principles set forth in General Provisions of the Criminal Law concerning the trial and sentencing of repeat crimes, yet it does leave some loopholes that criminals may exploit.