May 08 2008
what’s good for the rule is law is good for chinese litigators
I have been hammering the fact that Chinese IPR enforcement–the protection of various sorts of intellectual property like patents and trademarks–has been getting better and better. Statistics are powerful, and I don’t think these are any different. The Economist recently did an article called “850,000 lawsuits in the Making” ( h/t Rich Brubaker at All Roads), which reads:
Since 2003 the number of trademark applications has grown by 60%; the number of patents has nearly doubled (850,000 are now active) and the number of lawsuits about intellectual property has more than doubled (see chart). The government is encouraging the trend in many ways, including signalling to the press to cheer it on.
This enthusiasm marks a dramatic change. During the Maoist era, private property of any kind was seen as theft from the masses, and so subject to just expropriation. Only in 1985 did China begin to enact laws to protect patents. It did not enforce them much until 2001, when the authorities promised to crack down in order to win admission to the World Trade Organisation.
China has since opened more than 50 courts that deal solely with intellectual-property cases, and Chinese firms are using them. Prominent litigants include a pram manufacturer protecting designs, a soya-milk producer defending an industrial process and a maker of Chinese medicines shielding a name that, roughly translated, means “mind and blood purge”.
Again, very encouraging numbers. 50 specialty courts that deal with IP? That’s fantastic. Sure, they are not all up to par with the Federal Circuit Court of Appeals, but I cannot complain. Chinese judiciary specializing in IP and learning how to deal with these sorts of cases is a good thing.
As companies in China establish brands and develop products, the incentive to sue will grow, particularly because the cost of bringing a case is minimal. “If you can afford a car, you can afford a lawsuit,” says Tony Chen, who works in the Shanghai office of Jones Day, an international law firm.
In America, firms often settle intellectual-property cases out of court for fear of enormous awards by juries. That is not true in China, Mr Chen says, where a judge rules in the majority of cases and damages tend to be small. They normally cover legal costs, however, turning lawsuits into a self-funding method to battle piracy.
Well, perhaps there is an argument to be made for the British system… that being a tangent, the British winner-takes-all approach will only allow the rule of law to grow in the early stages of IPR enforcement. Maybe later it can hurt, but for now, including damages into legal costs will encourage more and more companies to turn to the courts for IP remedies. That is a good thing. Few things encourage the rule of law such as the general citizenship of a country embracing lawsuits. And if Chinese companies can embrace them wholeheartedly, then perhaps the Chinese people will finally be able to as well.
Unsurprisingly, the main beneficiaries of the sudden interest in intellectual property are Chinese lawyers. Some reportedly earn more than $5m a year. Non-Chinese law firms sometimes provide advice on thorny cases. But they are not allowed to file patents or appear in court on behalf of a client—a proprietary process that Chinese lawyers are keen to defend.
Yes, there is a silver lining in the advancement of the rule of law: it’s that the lawyers profit most. I guess I can’t complain. But yes, someone will have to profit off of this sort of growth. For most people, that’s an unfortunate fact. But it’s a fact of life. The more that law becomes integral to Chinese society, the more lawyers will become more important. That’s an already established fact in America–much as lawyers are hated, they are also necessary to the functioning of everyday business. Expect the same in China.
So onward rule of law! Just make sure your coattails are long enough for the lawyers…
