USTR Releases Special 301 Report On Intellectual Property Protection With Special Section On New Chinese IP Laws

On April 27, the Office of the US Trade Representative ("USTR") released the 2022 Special 301 Report on Intellectual Property Protection and Enforcement. This year's report is notable in that it contains a separate section dedicated to new Chinese laws on intellectual property protection and USTR's view on their enforcement.

Introduction to the Special 301 Report

The Special 301 Report is an annual publication dedicated to the "global state of IP protection and enforcement."¹ The report labels countries of concern as Priority Watch List or Watch List countries; this year, 27 countries received a designation, including China, which remained a priority watch list country.² Designation as a priority watch list country does not come with additional penalties or enforcement, but USTR states that designated countries will be the "subject of particularly intense bilateral engagement during the coming year."³

Update on New Chinese IP Laws

The 2022 Special 301 Report was the first Special 301 Report issued after China amended its Patent Law, Copyright Law, and Criminal Law, along with other measures related to IP protection. USTR began with a practical analysis of how these laws impact rights holders in China in the following ways:

• Trade Secrets: USTR welcomed the Criminal Law amendments to trade secret protection, particularly the new procedural protections and a broad definition of misappropriation. USTR urged Chinese courts to issue new judicial interpretations on applying this law, and the Ministry of Justice to fully implement the Guiding Opinions on Strengthening the Protection of Trade Secrets and Confidential Business Information in Administrative Licensing.⁴

• Trademarks: USTR stated that, despite amendments to the Trademark Law, brand owners have had limited success in challenging bad faith trademark registrations in court, especially in comparison to the number of bad faith trademarks granted. It added that the China National Intellectual Property Administration ("CNIPA") has made "some improvements" in rejecting trademark applications from "hoarders" that file many applications at once, but criticized the agency for permitting bad faith applications from applicants that submit only a few applications at a time. It added that an appeals mechanism at CNIPA would help ease these concerns.⁵

• Counterfeiting: USTR welcomed national plans to "crack down" on counterfeit medicines and counterfeiting penalties in the Criminal Law, but still states that China and Hong Kong account for 83 percent of US IP seizures, mostly for counterfeits. USTR feared that deprioritization of counterfeiting cases in court, along with relaxed regulatory oversight of medical ingredients, would only lead to further counterfeiting. USTR notes that counterfeiting is particularly popular in e-commerce sites, but reforms to the E-Commerce Law have been slow in coming.⁶

Turning to the content of the laws themselves, USTR had the following comments:

• Judicial Reform: USTR's analysis focused on the March 3, 2021, judicial interpretation of punitive damages in civil IP cases. USTR saw this reform as a positive development, but noted that swapping the term "income" for "gains" could result in infringers who do not make a profit on illegal sales not being held liable under the law. USTR reported that criminal enforcement remains uneven, and it reported continued difficulties in securing injunctive relief.⁷

• Copyright Law: USTR welcomed the protection of new rights of public performance and broadcasting, but sought improved enforcement of these rights.⁸

• Patent Law: Looking at the patent application review process, USTR said that CNIPA's new efforts to improve patent application quality have not had much effect on the quality of patents filed. However, it welcomed reduced patent subsidies. USTR had higher praise for the new Patent Law, which protects "partial designs, patent term extensions for patent office and marketing approval delays, and the statutory basis for a mechanism for the early resolution of potential pharmaceutical patent disputes." However, USTR sought consistent enforcement from patent enforcement bodies. It also had concerns about expedited patent disputes, which USTR fears may favor Chinese companies over outsiders.⁹

• Cybersecurity Laws: USTR mentioned the Cyberspace Administration's new Review Measures related to data handling activities that impact national security. USTR feared that the agency could invoke cybersecurity as a pretext to infringe on IP rights.¹⁰

• Seed Law: USTR also mentioned recent amendments to the Seed Law from March 2022. USTR was concerned about gaps in plant protection outside of certain regulated categories.¹¹

Footnotes

¹ USTR Releases 2022 Special 301 Report on Intellectual Property Protection and Enforcement, Off of the US Trade Representative (April 27, 2022), https://ustr.gov/about-us/policy-offices/press-office/press-releases/2022/april/ustr-releases-2022-special-301-report-intellectual-property-protection-and-enforcement. 

² Id. 

3 Id.

4 Office of the US Trade Representative, 2022 Special 301 Report (2022), at 45-46, https://ustr.gov/sites/default/files/IssueAreas/IP/2022 Special 301 Report.pdf.

⁵ Id. at 46-47.

6 Id. at 47-49.

7 Id. at 49.

8 Id. at 50.

9 Id. at 49-50.

10 Id. at 52.

11 Id. at 53.

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