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The Effects of China’s Institutional Reform on the Intellectual Property Rights Industry
date: 2018-03-29 Read by:

The newly established State Market Supervision Administration (March 21, 2018) will be headed by Zhang Mao, former director of the State Administration for Industry and Commerce.

As part of the “Deepening Reform of the Party and State Institutions“, the State Council has decided to consolidate the State Administration for Industry and Commerce (SAIC), General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and State Food and Drug Administration (SFDA) into the newly established State Market Supervision Administration.

The plan set out to reform the market supervision system as it is the key link for establishment of a unified, open and modern market system. In order to improve the market supervision system, promote the implementation of the strategy of building a strong country with quality, creating a market environment of honesty, trustworthiness, and fair competition, promoting comprehensive market supervision and strengthening supervision of product quality and safety, so that the people can purchase and consume with confidence and a peace of mind. The duties of SAIC, AQSIQ, and SFDA, the responsibilities of price supervision and inspection and the enforcement of the Anti-Monopoly Law of the National Development and Reform Commission (NDRC); the responsibilities of anti-monopoly law enforcement responsibilities of the Ministry of Commerce will be combined with those of the State Council's Anti-Monopoly Committee. These duties will now be taken up by the newly established State Market Supervision Administration, which will be under direct supervision of the State Council.

The main responsibility of State Market Supervision Administration is to

    - comprehensively manage and supervise the market;

    - register new entities, establish information disclosure and sharing mechanisms;

    - undertake unified Anti-Monopoly Law enforcement;

    - standardize and maintain market order;

    - organize and implement the strategy of building a strong country;

    - be responsible for the quality and safety of industrial products, food safety and supervision of special equipment safety;

    - unify management of measurement standards, inspection and testing, certification and accreditation.

The reform plan also sets out to reform the State Intellectual Property Office. Strengthening intellectual property creativity, protection and use is an important measure to quicken the pace of innovation in China. To correct for the overlapping law enforcement responsibilities of the trademark and patent offices and to perfect the intellectual property system management, the responsibilities of the State Intellectual Property Organization (SIPO), trademark management responsibilities of SAIC, the geographical indicator mark responsibilities of the AQSIQ, SIPO will be reformed, to be supervised by the newly established State Market Supervision Administration.

SIPO’s main responsibilities include protecting IP, promoting the establishment of IP rights protection system, registration of trademarks, patents, geographical indicators and administrative decisions, and guiding patent and trademark enforcement. The trademark and patent enforcement duties are borne by the market supervision and comprehensive law enforcement team.

The above plans and ideas for institutional reform will have a significant and far-reaching impact on intellectual property protection in China in the future. We can predict that the intellectual property industry will adjust and adapt accordingly. The impact of this adjustment on the intellectual property industry includes the following aspects.

 

Strengthening market norms and creating a fair market environment

The paramount goal and responsibility of the State Market Supervision Administration is to strengthen market supervision management, to regulate and protect the market order. Therefore, a certain level of the administrative management will be dedicated to intellectual property rights. Thus, in the future, the management of intellectual property rights will focus more on regulating and maintaining the market order. Researching and regulating how market entities are using intellectual property rights to protect their rights and interests should be a major topic. In other words, supporting and protecting market players' rational use of intellectual property rights to protect their rights is an important undertaking. At the same time, market regulators should also be aware that market players must not abuse intellectual property rights to engage in unfair competition. In addition, the relationship between intellectual property rights and antitrust should also be valued. From the point of view of market competition, intellectual property rights should be given reasonable position and management, market order should be standardized and maintained, a market environment of honesty, trustworthiness and fair competition should be created, and a correct and reasonable boundary for the use of intellectual property rights should be established.

 

Unifying and integrating administrative management of intellectual property and improving administrative efficiency

The main focus of the institutional reform is unification and efficiency. In terms of intellectual property, administration of patents, trademarks, geographical indicators and others are consolidated into the duties of the newly reformed SIPO, which will promote the establishment of an intellectual property protection system. In terms of administrative institutions, intellectual property rights are moving to form into a more comprehensive system. This change will also facilitate the administrative department in considering the issue of intellectual property rights as a whole rather than partially.

At the same time, it is entirely possible to improve administrative efficiency by unifying administration of patents, trademarks, and geographic indicators, such as unifying the system for registration and application to include similar standards across IP services. For applicants and agents, it is necessary to anticipate this change in advance and make timely adjustments to obtain a more efficient application process.

 

Unifying administrative enforcement of intellectual property rights

Responsibilities of enforcing of trademark and patent rights will hereto forth be borne by the market supervision and comprehensive law enforcement team, making this team truly “almighty”, as it will cover industry and commerce, quality inspection, food, medicine, price, trademarks, patents and other law enforcement aspects. To deal with such a large volume of responsibilities, integration and unification are integral components of this structure. To ensure a high level of law enforcement and especially of local market supervision, the team also needs further program support.

The changes which may be brought on by this administrative unification are as follows:

    1. The law enforcement standards and processes will be unified. Therefore, based on evaluations of the effects of the process or complaint, the complainant will be further facilitated in resolving their case.

    2. The unification of different enforcement rights, like those of trademark and patents and trademarks and quality assurance, will facilitate the joint enforcement of laws and processing, in turns improving law enforcement efforts. At the same time, in sharing common information, it is beneficial for all parties to establish an integrity mechanism for market players and crack down on infringers and regulate the market.

    3. Due to streamlining administration and delegating responsibilities, strengthening institutional management constraints, the number of personnel in the local market supervision and law enforcement team will be subject to certain restrictions. Therefore, administrative enforcement of patents may focus on design cases or relatively simple utility model cases to solve the problems caused by the restricted number of law enforcement officers at the grassroots level.

 

Adjustments to relevant intellectual property laws and regulations

This national institutional reform will inevitably require revisions of various rules and regulations, as the enforcement responsibilities laid out by law for different agencies will differ from the proposed changes. Enforcement methods and requirements are also different, such as enforcement of the Anti-Monopoly Law. In addition, the revision of the Patent Law has also been included in this year’s State Council's legislative plan. In the submission draft before the Patent Law, the patent administrative enforcement provision has always been controversial. This time, with the adjustment of the organization, the relevant issues have been solved. The revision of the Patent Law is expected to be introduced within the year.

After establishing the new State Market Supervision Administration, the relevant rules and regulations must be amended; at the same time, as the country strengthens its market supervision institutions in the future, the original regulatory procedures must be rebuilt and reintegrated to reflect the changes. 

In conclusion, this institutional reform is quite influential and will bring about many changes. The integration and uniform enforcement of administrative agencies may be an opportunity for the IP industry and may also cause problems. No matter what happens, it is impossible to reverse the reform, so the intellectual property industry will continue to develop into the future.  

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