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China has not recently enjoyed a sterling reputation with regards to the protection of intellectual property. Whether it's pirated software, bootlegged movies, or "pleather" designer handbags, China's got it all. There's even a term for it: Shanzai -- which roughly translates to "knock-off." Unnervingly, some journalists have reported that the term even has a certain cache about it.
In seeming response to this social and economic blight, the Chinese State Intellectual Property Office (SIPO -- the Chinese equivalent of the US Patent Office) recently released a fourth amendment to the country's patent laws -- the Amendments. An invitation for public comment is reminiscent of Mao's Hundred Flowers Campaign in which intellectual opinion was sought. Let's hope this one isn't as embarrassing for Chinese politicians.
The country's penchant for piracy has been an unfortunate stain that Communist officials have not been able to polish away. China has even copied whole cities -- really. Thus, cynics have also speculated that the SIPO release is a state-ordered desperate bid for legitimacy.
But if the Amendments are the genuine article (no pun intended), Article 61 of the Amendments would give courts the power to compel alleged patent violators to provide damages discovery. The requirement, however, is that the patentee must first show that it "tried its best" to obtain such proofs. If that doesn't just set the tone, nothing does.
SIPO's current statutory cap on patent violations stands now at $150,000 depending on the facts surrounding the violation. And if you're thinking that that $150,000 number stands for each violation: think again. Statutory caps of $150,000 often times is the maximum amount that patentees can rely on for violations that span years. And proposed Amendments provide for double or treble actual damages -- a massive expansion.
What This Means for American Companies
American companies have been pulling out of the Middle Kingdom, one after another in recent times. Company strategists and boards have had to weigh the "world's largest market opportunity" motive against the "world's largest IP infringing machine" cost. And this cost has proved too much for many companies.
If Chinese courts actually apply the Amendments consistently and in good faith, it will do much to re-establish China's legitimacy in the world as a socio-economic power that protects business interests, large and small. Even so, the Amendments give the courts broadened authority to punish rampant violations of intellectual property law, but it will be up to the courts to actually apply their new found powers.