A Look at China's New IP Court of Appeals

Just in October, the Standing Committee of China’s National People’s Congress issued a decision to establish a new Intellectual Property (IP) Court of Appeals within the Supreme People's Court, effective on January 1st 2019. Under the new framework, parties unsatisfied with the decisions of trials at lower level IP courts can appeal to have their case heard at the national level in front of judges that specialize in IP law and have expertise in technology-heavy cases. The decision also opens the possibility for unsatisfied parties to appeal for a retrial in the Supreme People’s Court.

According to a statement by the National People’s Congress, these changes are intended to “to unify the standards of IP cases, further strengthen the judicial protection of intellectual property rights, optimize the environment for scientific and technological innovation, and accelerate the implementation of the innovation-driven development strategy.”

While it is generally lauded as a positive move for China in respecting IP rights, the motives behind the decision are unclear. One natural assumption might be to see this advancement as a concession by China in light of its growing skirmishes with the United States. Indeed, President Trump has clearly expressed that the tariffs against Chinese imports were necessary because of China’s repeated abuses and theft of IP from the U.S., which the Commission on the Theft of American Intellectual Property estimates to $225 to $600 billion in damages each year. Perhaps, China is looking to repent and avoid an escalating trade war with the U.S. and can now point to their new IP court as a symbol for their commitment to respecting the US’ IP. Drawing a quick link between these two events is convenient, but it ignores the the larger picture of China’s development.

Indeed, the establishment of a national appellate IP Court is not a sudden deviation from China’s legal IP trajectory thus far. Indeed, understanding China’s developing timeline with regards to IP provides greater context for this development. In 2008, China announced its Outline of National IP Strategy, which sought to promote and protect IP creations with the goal of centralizing patent litigations. Then in 2014, specialized IP Courts were established in the key cities of Beijing, Shanghai and Guangzhou. Four more followed in 2017 in Nanjing, Suzhou, Chengdu, and Wuhan. These locations are not surprising, as Xiang Li, Chuanshu Xu, and Hui Zhang of ZY Partners, an intellectual property firm based in China point out that those “provinces are also among the top 10 largest provincial economies and most innovative parts of China.”

Through combination of intellectual property theft and investments in domestic technological innovation, China’s technological progress is now obvious. According to Market Watch, as of late May 2018, China has 9 of the world’s 20 largest technology companies measured in terms of their market evaluation. This path coincides with the growth in venture capital funding in China, and the uptick of government subsidies flowing into key sectors like information technology and railway equipment as a part of Made in China 2025. Yet, while IP theft by China is well established, the circumstances are changing insofar as China’s own technology is advancing. Now, it is in China’s interest to protect its own domestic industries and to ensure that this innovation is promoted through a more extensive and consistent legal framework.

While the decision to establish IP Court of Appeals isn’t effective yet, it will serve China doubly by not only protecting its blooming technological industry, but also to placate countries like the U.S., who have become increasingly frustrated with China’s IP infringements. The lens that we use to look at IP law developments across borders will become increasingly valuable and still leaves much to still be considered as international economies become more intertwined.