The Legal System and Economic Law in China/ AF5512

Legal Challenges in China’s Belt and

Road Initiatives:
The Case of intellectual property law

Author: Xin Jie

ID : 18092733G
Date:2018/11/1
 Declaration

I confirm that this work is all the work of mine; all sources have been

identified by footnotes or other means of citation and that quotations are

clearly indicated. I understand that any plagiarism will result in a zero

mark being awarded and that any transgression may be reported to the

University authorities for further disciplinary action.

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Dated:
Abstract

China's intellectual property law needs to be strengthened under the initiative of

"B&R". In order to promote exchanges and cooperation with other countries, we need

to explore a reasonable way to protect intellectual property rights. This article analyzes

the current situation, difficulties and challenges faced by China's intellectual property

rights, and puts forward corresponding management strategies, which can make

Chinese enterprises more effective in avoiding intellectual property legal risks and

coping with related disputes, enhance international competitiveness based on the

intellectual property rights protection when going out and promote intellectual

property protection and cooperation between China and other countries along the

B&R.

Key words: the Belt and Road intellectual property law risk management

The philosophy, objectives, and development status of China’s B&R

Initiatives

In 2013, China proposed a initiative to jointly build the "Silk Road Economic

Belt" and the "21st Century Maritime Silk Road". China upholds “peace and

cooperation, openness and inclusiveness, mutual learning, mutual benefit and win-win

results” in the B&R and adhere to the principle of co - operation, co - construction and

sharing, and continuously expand cooperation consensus with the countries along the

B&R.
 As for the objectives of the Belt And Road in China, the first one is to

summarize the consensus of all parties, integrate the development strategies of all

countries, and define the general direction of complementary advantages and common

prosperity. Second, Chinese government will strengthen the cooperation in key areas

and identify a number of major cooperation projects as a key purpose, such as focusing

on infrastructure connectivity, trade and investment, financial support and human

interactions. Third, China devote itself to propose medium and long-term cooperation

measures, explore a long-term cooperation mechanism to jointly build the B&R and

build a closer and more pragmatic partnership network.

In the process of B&R initiative, China has proposed a top-level design

framework for the joint construction of "One Belt And One Road", which has drawn a

grand blueprint for the B&R. Besides, the total import and export volume between

China and One Belt And One Road countries grew rapidly, accounting for 36.2% of

China's total import and export volume in 2017. Meanwhile, the proportion of trade

volume between other countries and China kept increasing. In 2017, the trade volume

between Asia, Oceania and China reached $817.8 billions, accounting for 56% of

China's trade volume with other countries. What is more, jointly building economic

corridors is also the important achievement.

It is foreseeable that the in-depth implementation of the "One Belt and Road"

initiative will enhance the rapid growth of China's economic and trade cooperation

with other countries along B&R. And deepen the integration of investment, finance,

infrastructure, technological innovation, and cultural exchanges. Under the background

of great differences in the political and legal environment of the countries along the

way, the export of intellectual property system has become one of the breakthroughs

because of its uniqueness.

The introduction of intellectual property law in China

Enterprises are the important implementing subject of the B&R, and the

multinational operation of enterprises is the bridge and link of internationalization.

Thus, the establishment of intellectual property law in China is a key for enterprises to

go out. Experts on intellectual property rights have suggested that after China's entry

into the WTO, the role of intellectual property rights has emerged and the main

challenge for China may be the legal issues of the intellectual property rights. In the

future, the intellectual property disputes faced by Chinese enterprises will continue to

increase. Chinese enterprises will paying dearly for their indifference to intellectual

property rights. And the competition around intellectual property rights will become

the most advanced form of enterprise competition in the context of globalization.

Therefore, the current status of intellectual property law in China can be list as

follows.

Lack of necessary intellectual property legislation

The legislation of intellectual property rights in China started relatively late.

Although the government successively promulgated the implementation of the patent

law, trademark law, copyright law and other laws and regulations, it is far from

sufficient compared with United States, Britain, Japan and other developed countries.
Because there is a certain gap in content and system between these countries. So, the

legislation of intellectual property rights in China still needs to be further improved.

Weak awareness of intellectual property rights

Chinese enterprises lack the awareness of competition and rights protection with

intellectual property rights. The reason why Chinese enterprises have weak awareness

of intellectual property protection lies in their inadequate understanding of intellectual

property itself. Many enterprises still think money is the most important thing at the

beginning of operation. As long as they can earn profits, it doesn't matter whether they

need intellectual property rights or not. The weak awareness of intellectual property

has caused Chinese enterprises repeatedly faced patent restrictions overseas.

Weak technological innovation capability

The core technology is one of the sources of international competitiveness.

Chinese enterprises have weak ability in product development and lack of core

technology and competitiveness in high-end market. Independent innovation capability

and R & D capability have become the weak points of development and international

competition in Chinese enterprises. Two thirds of Chinese enterprises encounter

international technical barriers, which has become one of the main obstacles restricting

China's exports. The barriers of intellectual property rights supported by western

enterprises have become the mainstream. The gap between Chinese enterprises and

foreign transnational corporations is mainly reflected in the gap of intellectual property

rights.
Unfamiliar with international rules on intellectual property rights

Most Chinese enterprises lack experience, they do not understand other country’s

legal environment of intellectual property rights and lack the long-term consideration

of putting intellectual property rights into their development strategies. So, any

enterprises in China have been repeatedly suppressed by foreign countries. Even if the

enterprises already have the advantages of intellectual property rights, high-tech

enterprises like Huawei with a number of independent intellectual property rights

cannot be completely avoided. Experts believe that although Huawei has some

intellectual property rights, litigation is inevitable because it is not familiar with

international rules. In the face of such a lawsuit, Chinese enterprises often lack the

litigation and emergency mechanism to deal with.

Lack of perfect intellectual property management system

Intellectual property rights need to be managed. There must be a sense of advance,

some mechanisms, and some forward-looking arrangements for enterprises to avoid or

surpass foreign intellectual property rights in future trade. Many high-tech industries in

China have neither set up relevant departments nor specialized talents. The lack of

talent management mechanism and team construction is a huge obstacle in the

development of intellectual property in enterprises. Foreign enterprises usually have

intellectual property departments and carry out fruitful work. So it is very crucial for

us to learn some excellent methods from other countries.

Threats and challenges

Nowadays, more and more threats and challenges faced by Chinese enterprises

for the intellectual property issue when going out. The initiative of “One Belt and

Road” complies with the structural reform of opening-up in China, brings new impetus

to the development of domestic enterprises, and provides good opportunities for more

domestic enterprises going out. However, in the face of unfamiliar market and

environment overseas, domestic enterprises also face a variety of challenges, among

which the intellectual property rights closely related to technology will be an important

challenge. When Chinese enterprises going out, they should not only protect their own

intellectual property right, but also face the risk of intellectual property litigation by

foreign enterprises. If they do not respond properly, it may lead to a passive situation

of domestic enterprises and even the whole industry.

Risks of overseas intellectual property litigation

Overseas intellectual property litigation risks often occur in countries along the

"One Belt and One Road", because most of them are developing countries. The

intellectual property systems in these regions and countries are uneven, and some

countries have relatively backward intellectual property systems. So infringement

events often occur.

Risks of overseas intellectual property litigation can be divided into two parts:
a. International Trademark Infringement

International trademark infringement occurs when someone violates the rights of

a trademark holder in another country. In one infringement case, Beijing Daddy's

Choice Science and Technology Co., Ltd. has a registered trademark in the United

States. In 2008, Daddy's Choice sued Pinduoduo Inc. for infringing on their design for

the products and trademark rights. Therefore, Pinduoduo Inc. removed some

unauthorized products from the platform.

b. Patent infringement litigation

For a long time in the past, the trade in China mainly focused on exports of

manufacturing products with relatively low level of independent intellectual property

rights. Up to now, this problem is still exist, most of these products lack core patented

technology. Meanwhile, enterprises lack awareness of intellectual property rights,

which leads to frequent prosecution for patent infringement in export destinations,

including other companies' malicious intellectual property litigation. Foreign

companies often make use of the defects of domestic enterprises in foreign intellectual

property rights to make malicious applications and patent lawsuits. There are not only

judicial cases but also administrative proceedings.

For example, on December 11, 2014, millet was sued by Ericsson in India for

infringing eight patented technologies, such as ARM, EDGE and 3G. Another

typical example is that OPPO and vivo mobile phones were sued by Dolby AB

International in India for audio patent licensing and involved in patent litigation at the

end of November, 2016.

Overseas intellectual property barriers are hard to break through

With the growth of foreign trade along the "One Belt and Road" countries， more

and more countries realize the importance of intellectual property rights and improve

their own technology constantly. Foreign companies are increasingly taking

intellectual property as a substitute for direct investment to gain monopoly profits. And

domestic enterprises will inevitably face intellectual barriers from foreign companies

when they want to enter the foreign market.

a. Lagging technology risk

The technical barrier of intellectual property is the barrier formed by the

combination of intellectual property rights and technology. Chinese enterprises are

restricted to go out through technical barriers. In terms of the application of high-tech

patents, the number of applications in China is relatively small and foreign companies

will apply for patents in China and seize the Chinese market.

b. Brand risk

Most of these overseas trademark applications are concentrated in traditional

trading countries and regions, such as the United States, the European Union, Japan,

South Korea and Hong Kong. The layout of trademarks and brands in the countries

along the "One Belt And Road" is inadequate, accounting for only 12.4%, which is far

below the average level and even blank in some countries, such as Turkmenistan.

Because of the small number of international trademark applications in China in the

past, many enterprises have been registered with the corresponding trademark when
entering the foreign market For example, the trademark of "flying pigeon" bicycle was

preempted by Indonesia, and the "Changhong" TV was preempted with the trademark

in Thailand.

"Trademark protection is very important in the" One Belt and Road ". Therefore,

enterprises' participation in the B&R must pay attention to trademarks, brands and

reputation in intellectual property right."Dr. Francis Gao, a director general of the

World Intellectual Property Organization (WIPO) of the United Nations specialized

agency said.

Compared with the growth rate of trade and investment along "One belt and

Road" countries, China is obviously lagging behind. The trademark brand layout has

the problems of late starting, high risk and high cost of safeguarding rights. The

government must attach great importance to it and take measures as soon as possible to

guide enterprises to raise their awareness of overseas registration and improve the

mechanism to facilitate enterprise registration. By expanding the influence of Chinese

brands in countries along “One Belt and Road”, we can effectively prevent and deal

with brand risks.

Risk prevention measures

In order to better solve the intellectual property law issues of Chinese enterprises

in B&R and prevent Chinese enterprises from being exposed to the above risks, I

propose the following measures.

Strengthen prevention

Under the initiative of the B&R, enterprises are faced with more complex

competitive environment in the process of "going out", The incidence rate of

intellectual property risks is also extremely high which requires enterprises to predict

and analyze the risks timely.

For example, in the design of a trademark, enterprises pay attention to whether

the trademark designed is significant, and whether it has the recognition function. The

level of intellectual property protection of the countries along B&R is different, which

will increase the risk that enterprises will be accused for intellectual property

infringement in these countries. Therefore, when Chinese enterprises want to enter

these countries, they should search the corresponding risks as much as possible to

check if there is any possibility of infringement of intellectual property rights.

Enterprises should be familiar with international rules in advance and be prepared.

Enterprises need to master different intellectual property rules, because different

countries have different judicial rules and different cultures.

Improve the ability to deal with intellectual property risks

It is inevitable to deal with disputes when Chinese enterprises going out. Chinese

enterprises have multiple options when faced with disputes. For example, Business

negotiation can be carried out before the litigation is settled by the enterprise, so as to

avoid the high cost and inefficiency of litigation. In the litigation, the enterprise should

formulate different litigation strategies according to the different litigation status,

entrust lawyers to collect evidence and conduct meticulous retrieval of intellectual

property rights. Also, the enterprise shall collect legal loopholes of other countries to

fight back when it proves that there is no infringement or the right is invalid.

Improve the legal system of abuse of intellectual property rights

Abuse of intellectual property is not only a vital manifestation, but also an

important cause of intellectual property trade barriers. China's current legislation on

intellectual property rights is more effective, but less effective in regulating abuse of

intellectual property rights, which result in some enterprises abusing intellectual

property rights in our country and can not be effectively regulated.

Therefore, it is an important task for our country to restrain the abuse of

intellectual property while strengthening the protection of intellectual property. More

Specific, the government could create a special system to regulate the abuse of

intellectual property. Meanwhile, the government should improve provisions of

standardization legislation and establish a system of intellectual property disclosure in

the process of standard setting, based on international experience.

Strengthen the supervision of intellectual property legal system

As the country cannot implement the relevant laws and regulations well, there

may be a big gap between the level of intellectual protection in reality and the laws.

Therefore, the supervision of intellectual property legal system is particularly

necessary. Especially in the key areas governance and trading along the V&R countries.

It is suggested that a regulatory system should be established to prevent infringement

of intellectual property rights and manufacturing inferior commodities. Besides, a

corresponding punishment system should be formulated. So that intellectual property

protection can be carried out systematically.

Strengthen international cooperation and exchanges

First，It is suggested to form a mutual aid system by signing cooperation

treaties or agreements with other countries. For example, South Korea establish

an "International mutual aid system for patent examination" with the United

States, Japan and Europe, aiming to provide support for domestic enterprises to

apply for patents quickly in foreign countries. On the other hand , Japan has

actively promoted the establishment of a world patent system and international

cooperation in patent examination.

Second, China should actively participate in the formulation of international

intellectual property rules. For example. The United States has been actively

participating and promoting the formulation and adjustment of international

rules on intellectual property rights, signing bilateral agreements with other

countries, requiring them to provide more stringent intellectual property

protection than the TRIPS Agreement and implementing double standards for

internal and external affairs.

Conclusion

In summary, in order to promote the development of Chinese enterprises,

avoid intellectual property legal risks and deal with relevant disputes more

effectively, we could learn from the specific measures taken abroad. To be

specific, we can learn from South Korea to improve the laws and regulations on
overseas intellectual property and establish overseas assistance fund and

insurance mechanism. Meanwhile, China can also learn from the United States,

Japan and South Korea to actively participate in the formulation of international

intellectual property laws. so that China's "intellectual property values" can

take a place in international intellectual property laws.

From the perspective of Chinese enterprises, they can apply for patent for

technical protection to do the adequate preparation for "going out". Wh at is

more, we should enhance the international competitiveness based on intellectual

property protection and promote the cooperation and protection of intellectual

property laws between China and the countries along the B&R. Only in this way

can we consolidate the position of Chinese enterprises in the B&R.

China and Central Asian countries have established the legal basis

and multi-level cooperation system for bilateral economic and trade

cooperation. In the initiative of the "B&R", we should speed up bilater al

negotiations on free trade agreements, promote the development of

bilateral intellectual propert y cooperation, and strive for more

development within the framework of the intellectual propert y law

s ystem. Onl y in this way, can we better ensure the industrialization of

intellectual propert y rights.

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