On November 27, 2016, China released a guideline outlining steps for the “better” protection of property rights (Guideline).  The Guideline is referred to as the “Opinion of the Central Committee of the Communist Party of China (CRC) and the State Council on improving the property rights protection (PRP) system and lawfully protecting property rights”.  Property rights in China include creditor’s rights, stock rights and intellectual property rights. 

The Guideline is the first state-level guideline on property rights protection and its purpose is to raise social confidence and promote justice in China.  While not rule of law, the Guideline is important as it is a centrally-issued policy.  Policy plays an enormously important and influential role in China and embodies and conveys certain values and often obtains broad results relatively quickly while final law is promulgated.

According to the Guideline, China will provide equal, comprehensive and law-based protection to all kinds of property rights, including intellectual property, and encourages the participation of the public in the process.  Although China has worked over the years to improve property rights, many problems still exist, including infringement on private property by public power (governments) and weak enforcement of intellectual property rights.  The Guideline states that securing property rights will help raise the public’s sense of wealth security, raise social confidence, foster positive expectations while raising the “impetus for entrepreneurship and innovation by various economic entities”.  Moreover, the Guideline further notes that improving such protection will facilitate social justice while maintaining healthy economic and social development.

According to the Guideline, the “essential strategy” that will be used to strengthen PRP is to “comprehensively” promote the “Rule of Law” (rather than the “Rule of Men”).  As a result, ten (10) tasks will be carried out.  One of these tasks involves reinforcing intellectual property (IP) rights (IPRs).  With respect to IPRs, the Guidelines lists several sub-tasks that need to be completed.  These include:

1. Increasing punishment for infringement of IPRs as well as the upper limits of damages available once liability for such infringement has been established.  The Guideline states that the concept of punitive damages should be explored and established.  Moreover, compensation for infringement should also cover the reasonable expenses paid by the patent holder to stop the infringement.

2. Establishing a mechanism to collect information on the source of counterfeit products.  Additionally, companies and individuals found to have infringed IPRs will have such information incorporated into their credit records.  Finally, improving the transparency of IP related administrative punishment procedures will be promoted.

3. Improving the procedures of IPR trials and actively increasing the role of the intellectual property courts.  Moreover, the Guideline suggests consolidating three judicial procedures (civil, criminal and administrative) into one system to enhance the cooperation between administrative and criminal enforcement.

4. Improving the enforcement mechanisms for foreign-originated intellectual property.  Specifically, the Guideline suggests strengthening the international cooperation of criminal enforcements and the intensity of investigations.  The Guideline suggests severely punishing those engaging in unfair competition in order to strengthen brand protection.  Finally, the Guideline suggests the combination of IP protection in IPR utilization in order to speed up IP transfer and transformation. 

It appears that courts in China are already beginning to implement some of the tasks outlined in the Guidance.  On December 8, 2016, the Beijing Intellectual Property Court (Court) issued a decision in favor of the patentee in a patent infringement action involving a patent claiming a USB key used by banks.  In its decision, the Court agreed with patentee’s claimed damages of 50 million RMB (about $7,241,969 U.S. dollars (USD)), including damages of 48,142,000 RMB (about $6,972,857 USD) calculated by multiplying the amount of each infringing product by a reasonable profit for each product, inferred damages of 858,000 RMB (about $124,272 USD) resulting from the defendant refusing to submit evidence of the volume of its sales as well as reasonable expenses of 1 million RMB (about $144,839 USD) incurred by the patentee in enforcing the patent.