Minister Chen of China’s Health Ministry and Secretary Leavitt of the U.S. Health and Public Services announced plans to set up food and drug safety oversight offices in China and the U.S. to enhance the supervision and standardization of food and drug quality. 

In the interview, Secretary Chen stated that China is beginning preparations to set up offices in the U.S.  The main tasks of China’s oversight offices in the U.S. will be announced after their establishment. 

Secretary Leavitt of the U.S. Health and Public Services stated that the U.S. Food and Drug Administration had set up three offices in Beijing, Guangzhou, and Shanghai, and the offices had begun operations in November 2008.  The main tasks of the U.S.’s oversight offices in China are to improve China’s supervision of food and drug quality, and to inspect food and drugs that China is exporting to the U.S.

The Standing Committee of the National People’s Congress will begin the fourth examination of a draft Food Safety Law in late February 2009.  The draft Food Safety Law is based on the Food Hygiene Law, which was promulgated in October 1995.  The Food Hygiene Law will be repealed at the time the Food Safety Law is implemented. 

The Food Safety Law makes improvements on China’s food hygiene safety system in the following ways, many of which arose as a response to the “Sanlu baby formula” scandal:

1. Establishing a food safety risk monitoring and evaluating system, and utilizing the evaluation results as an important basis for formulating food safety standards and identifying countermeasures for controlling food-borne diseases;
   
   
2. Establishing quality safety-related systems for every food producing sector for precaution purposes, including food manufacturing, processing, packaging, transporting, storage, sales;
   
   
3. Establishing a food-manufacturing business license system, a records inspection system, a food labeling system, and a system for recalling dangerous foods;
   
   
4. Increasing food manufacturers’ responsibility as the primary entities for ensuring food safety.  Increasing the punishment for illegal acts committed by food manufacturers;
   
   
5. Enhancing imported and exported food quality management.  Foods, food additives and related products imported into China should meet China’s national standards for food safety.   Exported food should meet the compulsory requirements of importing into the country and/or region and should be inspected as on entry and exit.  Exported food will also be under the supervision of quarantine authority; 
   
   
6. Improving the food safety supervision system by defining the local government’s role in supervising food safety and empowering the administrative authority to enforce regulations;
   
   
7. Establishing an efficient and convenient channel for remedying violations of consumers’ rights.  Consumers may report acts of infringement of consumer rights and interests for prosecution and receive compensation; and
   
   
8. Establishing a food safety information publication system.

Normally, the Standing Committee will hold a formal vote after a legislative bill has been reviewed three times.  However, after the SCNPC’s third reading of the Draft Food Safety Law in October 2008, there were remaining concerns regarding the bill’s implementation of food- monitoring and quality supervising systems.  Thus, the Standing Committee’s Council of Chairmen announced further deliberation on the draft and proposed not putting the bill up for vote for the time being.

The Standing Committee of the National People’s Congress stated that the main goal of the Draft Food Safety Law is to “give priority to prevention” by creating stricter regulations over the production, processing, packaging, transportation and sale of food.

An Amendment to Taiwan’s “Operational Directions for Customs Authorities” revises original procedural guidelines to better carry out border control enforcement, and provides improved legal clarifications for rights holders, importers, and exporters in the case of a goods seizure.  The Amendment took effect on September 1, 2008.

Under the new amendment, rights holders may file a one-time extension request with the Directorate General of Customs (DGOC) if the rights holder has reasonable grounds for delay, but is unable to provide documentation proving infringement within three business days after receiving notice from the DOGC.  The rights holder may send a written request for an extension.  The longest possible extension is three days.  If the complainant fails to produce substantive evidence of infringement within three business days, the Customs authority would release the goods after taking representative samples.

Similarly, importers and exporters can file a one-time extension request with the DOGC if the importer or exporter has reasonable grounds for delay, but is unable to provide documentation proving authorization within three business days of receiving notice from the DOGC.  The importer may request an extension of three days at most, and the extension request must be sent via written letter.  If the rights holder cannot provide evidence to verify that the goods are infringements, the goods will be released even if the importer fails to prove that the goods were produced with authorization.  The old guidelines did not set a deadline for importers or exporters to provide documentation proving authorization.

The DOGC states the finalized amendment was made possible through consultation with government agencies, scholars, rights holders, and import and export associations.  The amendment will clarify enforcement procedures and border controls, while reducing delays in international trade caused by customs seizures.

The Internet Service Provider (ISP) Liabilities Bill, also known as the “Safe Harbor” Bill, seeks to define the liabilities of ISPs regarding infringers’ use of the Internet to distribute copyrighted material.  Specifically, the Amendment states ISPs will not be held civilly liable to rights holders or ISP users after the removal of suspected infringing material, as long as the ISP sends an initial takedown notice to the alleged infringer and the ISP in good faith removes infringing material.  Thus, ISPs are given a “safe harbor” from civil liability should they comply with the requirements of the Amendment.  The bill, if approved by the Taiwan Legislative Yuan, contains new Articles to be added to the existing Copyright Law.

The bill calls for the creation of a “notice and takedown” mechanism to protect copyright holders’ rights and to curb online copyright theft.  This mechanism would allow rights holders to inform ISPs about illegal use and to direct the ISP to remove the infringing material.  ISPs can apply for exemption from liability after removing the material, provided that all laws were obeyed and infringing material was removed in a timely manner.

A counter-notification mechanism would also be added to protect Internet users’ rights.  If an alleged infringing party’s material is subject to unwarranted removal, the alleged infringing party may send a written request to the ISP to restore the material.  The alleged infringing party may also hold rights holders liable for damages incurred by the removal of the non-infringing material.

The amendment is still pending with the Taiwan Legislative Yuan, which completed its first reading of the bill on October 14, 2008. Generally, the Legislative Yuan upon a third reading will pass a bill.

On October 25, 2008, the National Copyright Administration of the People’s Republic of China, the U.S. Patent and Trademark Office, and the U.S. Copyright Office signed the Strategic Cooperation Memo in Beijing.  The memo established a cooperative framework between China and the U.S. regarding copyright protection. 

According to the signed memorandum, China and the U.S. will exchange legislative information and documents and conduct discussions of copyright issues of common concern.  The two countries will discuss plans on conducting annual surveys of the copyright field to improve the effectiveness of each other’s copyright system as much as possible.  In addition, the memo covers examination operations, auxiliary automation systems to enhance examiners’ efficiency in examining patent applications, joint seminars, exchanges to each other’s offices, and other cooperative projects. 

In March this year, Jeboo.com sued the Motion Picture Association of America (MPAA) in the Beijing Intermediate Court for defamation, apology to rehabilitate Jeboo’s reputation, and damages of RMB1 million. 

This is a surprising and aggressive action by the Chinese website, which was sued by five members of the MPAA for transmitting copyrighted movies through its website.  The parties settled out of court and Jeboo paid damages to the movie companies, but the parties did not mention infringement or compensation in the settlement agreement.

After the settlement, the MPAA released a statement on their website stating that Jeboo stopped their copyright infringement and paid legal damages, and had gained illicit profits through piracy, which had hurt the healthy development of various legal Internet services.  Jeboo.com believed that such a statement had severely injured its reputation and seriously harmed its business.  It took legal action against MPAA this spring and the case was accepted by the Beijing Court.

With the rapid development of online services in China, and rampant piracy on Chinese websites, the result of this new defamation lawsuit and the response of MPAA will be a focus for all Chinese Internet enterprises and foreign companies.

In 2003, Energizer Holdings, Inc. claimed that fourteen Chinese manufacturers of zero-mercury-added alkaline batteries, which were sold in the U.S. market, infringed its U.S. Patent No. 5,464,709 patent (the “709 patent”).  Energizer then filed a complaint with the International Trade Commission (ITC) in the U.S. to conduct a Section 337 investigation on their claims, and requested that the ITC forbid certain Chinese batteries and related products from entering the U.S. market.  Under Section 337 of the Tariff Act of 1930, the ITC is authorized to conduct investigations into claims of infringement on U.S. intellectual property rights and other unfair trade practices regarding imports into the U.S., and to issue resolutions such as general or specific exclusion orders or cease and desist orders.

The Chinese parties, including the China Battery Industry Association, collectively responded and argued that the claims of the ‘709 patent were too extensive and violated Article 112 of the U.S. Patent Law, which requires that descriptions of inventions be clear and concrete. 

In 2004, the ITC ruled that the ‘709 patent lacked definitiveness and invalidated the patent.  The ITC required that Energizer give up claims 8-12 of their ‘709 patent, and ruled the same for its European patent for zero-mercury-added alkaline batteries.  Energizer subsequently filed an appeal.

After two rounds of appeals, Energizer finally lost their case.  On April 22, 2008, the U.S. Court of Appeals for the Federal Circuit ruled to maintain the ITC’s decision.  This is the first time any Chinese enterprise has won in court against a foreign non-tariff barrier.  The result will have significant impact on the development of battery manufacturing in China, and will open markets for Chinese manufacturers in the U.S. 　

After losing its administrative litigation at the Taipei High Administrative Court in March this year, the Taiwan Intellectual Property Office has decided not to file an appeal.  Though it respectfully disagrees with the High Court’s opinions, the TIPO will now officially bow out of the licensing conflict between Philips and Gigastorage, as the two parties have now reached a preliminary agreement. 

The administrative litigation was the final result of years of conflict over pricing of CD-R and CD-RW royalties between Gigastorage Corp, a Taiwan compact disc producer, and Royal Philips Electronics NV.  Gigastorage, believing that Philips’ CD-R and CD-RW royalty fees were unreasonable, had refused to pay royalties for over four years to Philips. 

Gigastorage later applied to the TIPO to issue compulsory licenses, and in 2005, the TIPO issued the licenses.  The ruling was surprising, as compulsory licenses are generally granted only for patented medicines, or music broadcasting, but not for industrial patents.  The TIPO imposed compulsory licensing on five CD-R and CD-RW patents owned by Philips, raising eyebrows throughout the European Union.

In its decision, the TIPO agreed with Gigastorage regarding Philips’ royalty pricing.  The sales price for CD-R and CD-RWs has nose-dived from US$5 to US$0.19 per disc, but Philips still maintained a fixed royalty per disc, instead of a percentage per disc as Gigastorage had wanted.  The U.S. International Trade Commission and Taiwan’s Fair Trade Commission both agreed that the royalties should be lower. 

Because Gigastorage and Philips could not reach a licensing agreement for a long period of time, the TIPO ruled to apply Articles 76 and 78 of the Patent Law, which allow a patentee to apply for compulsory licensing if a licensing agreement with reasonable commercial terms cannot be reached between the patent owner and patentee.  However, the practice must be restricted to the domestic market.  The Taiwan manufacturers were producing for export to world markets.  The MOEA later affirmed the ruling when Philips appealed.

Under pressure from the EU, the Taiwan High Administrative Court overturned the TIPO’s decision.  The Court argued that the specific price of royalties could not be used to invoke Articles 76 and 78 of the Patent Act, and that the entire licensing agreement must be considered in order to determine whether reasonable commercial terms and conditions existed. 

Louis Vuitton Malletier, maker of iconic leather handbags toted by celebrities and socialites around the world, recently won a trademark infringement claim against a high-end Chinese hotel, which had allowed sales of counterfeit LV products in one of its hotel shops.  In March 2008, the Dongguan Intermediate Court ruled that the hotel, Gladden Hotel of Dongguan City in Guangdong Province, and the shop owner were jointly liable for trademark infringement.  Gladden Hotel and the shop owner were required to destroy the remaining counterfeit products and pay RMB100,000 (approximately US$ 14,500) in damages to LV.

This is a surprising judgment considering that the hotel only seemed to be leasing rental space to the infringer and did not directly participate in sales.  However, the Court found specific circumstances that made the hotel particularly culpable for contributory infringement.  While Gladden rented the space to an individual for an independently operated sole proprietorship, hotel staff members were often involved in the daily operations of the store, and employees that worked in the store wore Gladden Hotel uniforms.  The hotel’s seal was even affixed on the shop’s invoices and receipts, thus identifying the store with the hotel.  Moreover, the Court found that Gladden should have enforced the specific provisions in its rental contract with the store owner that prohibited sales of counterfeit products and should have demanded the store owner to cease selling the counterfeit products when hotel management became aware of the activity. 

LV’s award is quite high for IP lawsuits in China, and suggests that the Court wanted to warn other luxury hotels that they would be held liable for infringement if they leased their shops to infringers.  The Court noted that some infringing vendors take advantage of consumers’ trust in luxury hotels to sell fake products in hotel lobbies.  As a high-end hotel, the Court concluded, Gladden Hotel should have had better judgment and its actions have degraded the public’s confidence in other similar luxury hotels, which will result in negative social effects. 

It is unclear, however, whether the Court’s opinions will apply to non-hotel properties and future cases that are similar in nature.  One question that should be of particular interest to foreign companies wishing to protect their marks in China is whether companies will be able to successfully prosecute general property managers for renting spaces to infringing vendors or manufacturers. 

It seems that so far landlord liability cases have not changed the atmosphere.  The management of Beijing’s famous Silk Street market are not deterred.  Their website’s home page still describes the market as, “notorious among international tourists for their wide selection of counterfeit designer brand apparels” (http://www.silkstreet.com/).

On April 25, 2008, the Office of the United States Trade Representative (USTR) published its annual “Special 301” Report on intellectual property rights protection by U.S. trading partners.  This year, it placed 46 countries on its Priority Watch List, Watch List, or Section 306 Monitoring List.  Appearance on one of these lists is considered a trade sanction, and flags certain countries as investment risks. 

This year, China appears on the Priority Watch List, and Taiwan appears on the Watch List.  The USTR will proceed with an out-of-Cycle review this summer for Taiwan to affirm the development of IP protection and related enforcement procedures in Taiwan.  Taiwan and China have generally been on one of the lists every year for the past 20 years.