Chinese President Xi Jinping says infringers should be punished and pay a heavy price

“Xi Jinping March 2017” by the U.S. Department of State. Public domain.

In the middle of July, China’s state-run news outlet Xinhua reported on comments made recently by Chinese President Xi Jinping during the National Financial Work Conference, a meeting on policy guidance which occurs once every five years. Various financial regulations and reforms were discussed during the conference, but as Intellectual Asset Management noted in a recent report, President Xi made some unusual comments regarding intellectual property, especially where IP infringement was concerned. “Wrongdoing should be punished more severely so that IP infringers will pay a heavy price,” Xi said, according to the report.

According to IAM, the comments from President Xi are the most extensive he’s made in public on the subject of intellectual property protection. He called on national authorities to advance IP regulations, improve the quality and efficiency of examinations and to accelerate the building of IP institutions. The remarks are a major acknowledgement of the importance of strong IP protections to a nation’s economy directly from the head of state of one of the world’s strongest economies.

Political leaders in Washington, DC should take notice of Xi’s comments. In China where there is single party rule change can happen dramatically, as we have already seen start to take place on the patent and innovation landscape. With the support of President Xi, China could very quickly move to become the preferred jurisdiction for innovators, given the market size afforded by a country with 1.4 billion people. If acted upon in a serious way, this new Chinese approach to dealing with infringers could send a shockwave through the entire intellectual property community, if not the entire world economy.

“President Xi’s statement on the importance of IP enforcement indicates China’s growing status as a leader in innovation,” said Erick Robinson, a U.S. patent attorney based in Beijing. He is Director of Patent Litigation at Beijing East IP. “China knows that only by protecting patent rights will individuals and companies have incentive to create new technical solutions.”

In the most recent IP index released this year by the U.S. Chamber of Commerce, China increased its overall ranking on the strength of its IP system to 27th overall out of 45 nations. Two of the key areas of weakness listed holding back China’s score included historic and growing levels of IP infringement, as well as challenges in the ability of IP owners to secure adequate remedies for infringement. China’s patent system ranked 20th in the most recent IP index from the Chamber of Commerce and, if President Xi enacts policy which backs up his recent comments, it wouldn’t be surprising to see China’s ranking rise in next year’s index, perhaps rather significantly.

At a time when President Xi is actively moving China’s IP policy to a place where infringers are met with harsher penalties, U.S. leadership in Congress, especially in the House of Representatives, seems to be opening their arms yet again to the efficient infringer lobby. Congressman Bob Goodlatte (R-VA), chairman of the House Judiciary Committee, and Congressman Darrell Issa (R-CA), chairman of the House IP subcommittee, support legislation and poor narratives that continue attempts to further gut the U.S. patent system, allowing infringers a free holiday and the ability to infringe without consequence or penalty. The legislative agenda released this year by Goodlatte included calls for additional patent litigation reform to address “truly frivolous lawsuits.” Issa, an inventor listed on 37 patents used in various patent enforcement regimes, takes an incredibly dim view of all patent owners. Technically, Issa’s reasoning means he is himself a patent troll. In recent days, the House IP subcommittee has piled on, looking for ways to further reduce venue for plaintiffs in infringement suits and turning into a forum for attacking judges on patent cases and the critics of patent reform. The witness panels put together for the House IP hearings border on atrocious and recent hearings have included at least one witness who had no business being on the panel.

It is indeed ironic to read President Xi’s comments in juxtaposition with Congressman Issa’s comments from an April 2016 hearing. In April 2016, Congressman Issa rather imperiously stated: “for purposes of my opening statement ‘plaintiff’ and ‘troll’ will be interchangeable.” In other words, Congressman Issa views all patent owners as patent trolls. While President Xi says in a simple declarative way that infringers must pay a heavy price. If you were not told in advance who made which comment would you have guessed that the leader of the most populist communist country in the world made the comment defending property rights holders while a senior member of the Republican Party in the U.S. House of Representatives made the comment defending those who take what others have created?

While factions within the U.S. seriously discuss further dismantling the U.S. patent system in favor of infringers, China continues to take the lead in increasing the enforceability of patents, eating the lunch that the United States of America is serving to them on a silver platter. As patentability for software and business methods has declined in America, China issued revised guidelines on patent policy last fall which increased patentability for both software and business method inventions. China has set up courts which are dedicated to hearing IP cases and foreign plaintiffs have been using those courts to enforce upon their intellectual property; foreign plaintiffs won 100 percent of the infringement cases they brought to China through last November. The number of inventors filing patent applications in China is swelling and that country saw one million patent applications filed in 2015; that was one-third of all global patent application filed that year and 96 percent of the Chinese patents were filed in the domestic office only.

Although it may tickle Darrell Issa’s sense of humor to hear it, China is very obviously becoming a better jurisdiction for both patent right enforcement and the protection of venture capital investment into burgeoning fields of technology. Maybe if China’s patent system outpaces the U.S. in next year’s Chamber of Commerce IP index, Issa will realize that the joke was on him the entire time.