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CHINA'S PATENT LAW.
Term Paper ID:28098
Essay Subject:
Focus on international policy; Qualcom's CDMA patents, impact of 1992 revisions to law, intellectual property rights.... More...
10 Pages / 2250 Words
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Paper Abstract:
Focus on international policy; Qualcom's CDMA patents, impact of 1992 revisions to law, intellectual property rights.
Paper Introduction:
China’s International Policy - Patents
Until 1984, when the first Patent Law of the People’s Republic of China was passed, the government of China afforded no patent protection to foreigners (Moser and Ho 453). Along with legislation involving trademark, copyright, and intellectual property rights, China’s patent laws have signaled the Republic’s desire to open its doors to new technology transfer (Shan 1). Though, in its original form, China’s Patent Law fell short of international standards, amendments passed in 1992 have brought the law in line with the international community (Global Sources).
Cultural hurdles faced by the government in enforcing the patent protection it affords have been aggressively pursued. The characteristically Chinese concept of technology as a
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Qualcom then is in a tough position. (3 May 2 ).8. The Chinese government isapparently unhappy with the fees Qualcom will receive from its agreementwith China Unicom. First, because Qualcom held patents on CDMA in both the United Statesand other foreign countries before obtaining its patent in China, it issafe to assume the Chinese government saw CDMA as a technology worthy ofbeing afforded exception to its no previous use rules. "China's Basic Position Regarding the Protection of Intellectual Property Rights." About.com Chinese Culture. This, in additionto the priority rules for foreign patent holders, likely played a key rolein Qualcom's patent applications. To reach definite conclusions on the questions above is beyond thescope of this discussion. According to the China Trademark Service, the current patent lawaffords protection to patent holders in three categories: inventions,utility models and design. On the other side of the China-WTO debate are several specialinterest groups more concerned about the economic and social environment inChina than the benefits of opening roads to that market. There is no consensus on this issue among market observers, and eventhose closely involved in the negotiations over CDMA in China do not appearto be confident in a resolution to the current situation. "China to revise patent law." 2 Jan. Since the stated intention ofthe 1992 revisions was to more closely comply with the variousinternational agreements China has joined (Shan 1-4), it is doubtful thatunder the 1992 law, the government would continue to allow a licensee tofreely export patented technology. ./yhoo&dist-yho3. Such bundling however, is prohibited by China'spatent regulations (Ehrbar 131). http://www.chinalaw.cc/library/law/ip/patent.ip (3 May 2 ).7. Either way, the license holder in China has beenprohibited from pursuing the use of its license, and Qualcom has beenblocked from entering the lucrative China market. Enforcement may include fines foruse of a patented invention, utility or design without proper license fromthe patent holder, or for use by a licensee beyond the terms of thelicense. 1993.5. If the patentee fails to do so, thegovernment will issue a compulsory license to an individual or entity ableand willing to exploit the patent. In this case, the patentee will receivea compulsory licensing fee from the appointed license holder for theduration of the patent. Global Sources. 2 ).The real question is how many more hurdles Qualcom will have to jump overbefore it is finally allowed to reap the benefits of its patent rightsthere, and how long it will have to wait while the politics of thesituation play themselves out. "US pushes China on CDMA mobile technology." 6 April 2 . The patent law itself gives the patent holder the right to stopanyone from importing the patented technology, however in their originalform the patent regulations prohibited patent holders from limiting alicensee's right to export the technology (Ehrbar 131). http://www.chinalaw.cc/library/law/ip/patent.htm (3 May 2 ).11. "Notice to Prospective Patent Applicants in China." http://www.cntradmark.com/shangbiao/trademk.htm (3 May 2 ).4. 2 June 1999. http://www.aol.com/metropol3 (14 April 2 ).12. http://cbs.marketwatch.com/archive/2 225/news/current/press_briefin.. 24 Feb. References1. These novelty anduse provisions are subject to liberal exceptions when the governmentdetermines that the requested patent will further the economic and culturalwelfare of the people (Patent Law of PRC 1992 chpt. That does not seem to be the case, however, since theQualcom's offer was apparently rejected (Bartash 24 Feb. Thehigh-tech software lobby in the US, The Software Alliance, had already beenputting pressure on Congress to approve China's admittance into the WTO(Leopold 9 Feb. 1992. Currently, it appears that the main domestic holder of a CDMA licensein China will be China Unicom, the second largest wireless carrier in thatcountry (Bartash 24 Feb. "Chinese carrier plans huge CDMA network." EE Times. 9 Feb. China isclearly intent on joining the world economy, as evidenced by its vigorouspursuit of membership in international trade alliances. (3 May 2 ).6. "The Registration and Protection of Patents in China." Foreign Trade, Investment and the Law. China's latest move will likely bring pressure fromCDMA suppliers like Motorola and Lucent Technologies as well. Leopold, George. 2 ). 2 . 2 . Cultural hurdles faced by the government in enforcing the patentprotection it affords have been aggressively pursued. 2 ). 2 ). the date of its first patent approval in the US), muchof the duration for that patent would have run before Qualcom receivedofficial approval in China. The answer to that question underlies the restricted market economyof China. Nonetheless, it is clear that the Chinese government wants CDMAtechnology in China, and some observers feel that its ban on China Unicom'ssupply contracts is more an attempt to bring Qualcom back to thenegotiating table over its licensing agreement with China Unicom than anattempt to force admittance into the WTO. Qualcom reportedly agreed to reduce those fees, butonly if the company's specialized computer chips are bundled into the deal(Bartash 24 Feb. Patents are awarded for a term of 2 years fromthe date of filing for inventions, and for 1 years from the date of filingfor utility models and designs. McGraw Hill, New York. Ehrbar, Thomas, J. There is little doubt that CDMA technology will eventually make it toChina. An invention is a new technical solutionrelating to a product, a product or a process or improvement of a process.A utility model is a new technical solution relating to the shape,structure or both of a product having some practical use. Negotiationswith the European Union for its vote to admit China to the WTO have brokendown, and in February the Chinese government prohibited China Unicom fromcontinuing to take bids for supplies that would be necessary to put CDMAtechnology to use (Bartash 24 Feb. At the heart of these complications is China's desire to be admittedto the World Trade Organization (WTO). It should be noted, however, that thepriority rules treat a foreign applicant as having applied for the patentin China as of the date a foreign patent was granted. 2 ). 2 . In accordance with the Patent Law of the PRC 1992, once a patent hasbeen granted the patent holder is obligated to either use the patent inChina or license another to use it. II). CBS.MW. Thus,even if an application for patent on an identical invention, utility ordesign is submitted before the foreign applicant files, if the foreignapplicant holds a patent which became effective in another country prior tothe date of the identical application, the foreign applicant/patent holderwill be afforded the patent rights in China (L&A Law Firm 6). The applicationprocess in China takes approximately 2 to 3 years and one approved patentprotection runs from the date of application (Ehrbar 146). Still, industryobservers show little doubt that Qualcom will be the one to bring CDMAtechnology to the country on a wide-spread basis (Bartash 24 Feb. Foreign applicants are required to apply through a governmentsanctioned patent agent or agency, and rights of priority will be affordedto foreign applicants in accordance with international and reciprocalagreements to which China and the foreign applicant's home country aresignatories (China Trademark Service). China's International Policy - Patents Until 1984, when the first Patent Law of the People's Republic ofChina was passed, the government of China afforded no patent protection toforeigners (Moser and Ho 453). However, if China is usingQualcom as a bargaining chip in its bid for admittance to the WTO, theentire issue may already be out of Qualcom's hands. Thecharacteristically Chinese concept of technology as a product to be boughtand sold freely is somewhat in conflict with patent rights. L&A Law Firm. This right of priority is important, because the Patent Law of thePRC recognizes patentable rights according to the first to file rule. Thus, ifQualcom was deemed to have applied for the patent in China as of a muchearlier date (i.e. The revisions of 1992significantly extended the duration of a patent, but Qualcom would nottechnically be afforded the extended protection if it was deemed to haveapplied for the patent under the previous regulations. Though the exact details of Qualcom's patent and licensingagreement are not known, several assumptions can be made. China Trademark Service. 24 Feb. Qualcom's experience in China is a telling example of thedifficulties involved in entering newly opened foreign markets. ../qcom_cmna.as2. Bartash, Jeffrey. Ho. China is currently seeking admittance to the WTO, and some speculatethat it is using Qualcom as a bargaining chip in that effort. Since the 198 's China has beenactively pursuing international trade agreements, and thus far has become amember of the Paris Convention for the Protection of Industrial Property,the Treaty on Intellectual Property in Respect of Integrated Circuits, theMadrid Agreement for the International Registration of Trademarks, theBerne Convention for the Protection of Literary and Artistic Works, theUniversal Copyright Convention, the Convention for the Protection ofProducers of Phonograms Against Unauthorized Duplication of TheirPhonograms and the Patent Cooperation Treaty of the World IntellectualProperty Organization (Shan 2-4). They are presented only to point out thecomplexity Qualcom's negotiations with the Chinese government necessarilywould have involved, and the continuing uncertainties Qualcom faces as itnegotiates the details of licensing agreements for use of its CDMAtechnology in China. No patent will be awarded for inventions, utilities or designs thathave been published or put to commercial use in China or other countriesprior to the application date for the patent, and the subject of the patentmust be put to use in China within three years of the official grant ofpatent protection (Patent Law of the PRC chpt's I-II). These groupsoppose the admittance of China to the WTO until what they see as humanrights violations are corrected (Bartash 24 Feb. "China postpones network project." CBSMarket Watch. 4 Sept. "Patent law of the People's Republic of China." Virtual Library. Qualcom has successfully obtained patentprotection on its CDMA technology, and has found an anxious licensee forthe use of that technology in China Unicom. So why isn't CDMA technologybeing exploited in China? Though, in its original form, China's Patent Law fell short ofinternational standards, amendments passed in 1992 have brought the law inline with the international community (Global Sources). If China's recent move was an attempt to re-opennegotiations on the licensing agreement with China Unicom, Qualcom may dowell to consider renegotiating the contract. 2 ). To assure thatall people of the Republic know of and understand these relatively newlaws, the government of China has implemented extensive informationdistribution and training courses on intellectual property rights. 2 ). Several regional offices of the China Trademark Service areauthorized to enforce the patent law. The right of priority meansessentially that a foreign applicant that holds a patent for the subjectinvention, utility or design in another country will be considered to haveapplied for the patent in China as of the effective date of the foreignpatent. 2 ). The government itself has stepped in, either to gain better termsin licensing deal for China Unicom or to force a favorable US vote on itsadmission to the WTO. Despite this regulatory prohibition, thegovernment may very well allow an exception to this rule, as it has toother aspects of the patent laws, if it felt the resulting licensing feewas low enough. Along with legislation involving trademark,copyright, and intellectual property rights, China's patent laws havesignaled the Republic's desire to open its doors to new technology transfer(Shan 1). "High-tech Industry to Support China Trade Bid." EE Times. http://aolpf.marketwatch.com/source/biq/aolpf/archive/2 224/news/cur. "Qualcom down on China concerns." CBSMarket Watch. Add to that apresidential election year, and the whole issue becomes so bogged down inulterior motives and politics, that Qualcom is in great part taken out ofthe equation. This also brings into question under which setof regulations Qualcom received its China patent. Revisions to thepatent regulations in 1988 specifically allowed for exceptions to this banon export provision (Ehrbar 138), and it is unclear whether the ban onexports has survived the revisions of 1992. 27th Session of the Standing Committee of the Seventh National People's Congress. Qualcom CEO,Irwin Jacobs, may have summed up the situation best when he told investors,"You can never tell in China." (Bartash 24 Feb. http://www.techweb.com/wire/story/TWB2 2 9S 3. Thismeans that regardless of who invented the subject invention, utility ordesign first, a patent will be granted to the first to apply for it. The move could have a significantnegative impact on several US companies that had been hoping to receive alarge share of the over $87 million in supply contracts China Unicom hadplanned to spend to build a CDMA network in China (Liu 2 June 1999). http://www.southafricansources.com/TNTLIST/APULSE/ 21 /NTO12 5.HTM. Negotiations for the licensingagreement have reportedly been finalized. Though a patent holder is free to negotiate the terms of a license,including the form of payment, the government encourages agreements thatwill limit foreign exchange payments made to foreign patent holders.Rather, the authorities encourage licensing agreements in which payment isbased on trade, or joint ventures in which domestic firms enjoy the use ofa patent as the domestic partner to the foreign patent holder (Ehrbar 132).Both of these arrangements are often beneficial to the foreign patentholder, especially when the patent was obtained in order to have an inroadto doing business in China.Qualcom's CDMA Patents in China Qualcom holds several patents on CDMA technology in China, and hasconcluded licensing agreements for the use of that technology (Reuters 6April 2 ). However, much more sweepingcomplications surround Qualcom's deal with the Chinese. Afterthe 1992 revision to the patent laws, for instance, literally millions ofcitizens attended government sponsored classes on the new law (Shan 4-3). and David Y.W. 1986.1 . A patentabledesign includes any new design of the shape, pattern or color of a productthat improves the aesthetic of a product and has industrial applications(Moser and Ho 453). 2 . http://www.eet.com/story/industry/systems_and_software_news/OEG1999 526 S 17 (3 May 2 ).9. Shan, Jun. Domestic firms there claim to be making advances on the technologyusing their own intellectual property (Liu 2 June 1999). Liu, Sunray. Patent Law of the People's Republic of China. Reuters. http://chineseculture.about.com/culture/chineseculture/lib.../blsintell 2.htm (3 May 2 ). It too, faces tremendouspressure from the industry and its shareholders to do what it can to getthings moving in China. Moser, Michael, J. Business International's Guide to International Licensing: Building a licensing strategy for 14 key markets around the world. The regional authorities may also enjoin the continued use of thepatented invention, utility or design and award compensatory damages to thepatent holder (China Trademark Service). As previously stated, negotiations on thatlicense appear to have been concluded. It has adoptedlaws to protect intellectual property rights of foreign and domesticenterprises alike, and has revised those laws in order to better fitinternational standards.
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