ABSTRACT
The economic relationship between China and the EU has been considerably reinforced since China’s Reform and opening in 1980s, especially after the entrance of China into WTO in 2001. The two world-influencing entities have more and more incorporated as an economic interest community.
However, the conflicts from protection of Intellectual Property Rights between them play as an unharmonious tone, which has slowed down the pace to a higher degree of cooperation and common prosperity.
There are criticisms to China’s legal protection system of IPR from the EU and complains on exorbitantly high technical standards of the EU from China, which result in IPR problems more and more complex and difficult to resolved.
IPR protection is widely recognized to encourage invention and innovation and facilitate economic development. There are suits of legal rules to acclimate this international tendency both in China and the EU. The distinguish lies on different economic backgrounds and levels of legislation progress.
The solely objective of this article is to find out what are essential reasons for conflicts and try to propose some doable means to eliminate these conflicts.
Firstly, this article will emphasize on the difference of legal systems to protect IPR between China and the EU, especially their relations with TRIPS.
Secondly, the author pays attention to the potential crisis and threats of IPR, trying to find out the deeply hidden reasons of conflicts, by analyzing three disputable relations between IPR and technical barriers on trade, free competition, and State interest plus economic security.
Then, there will be a brief description and appraisal of present cooperation programs and dialog regime between China and the EU.
At last, the author will provide some most feasible measures to reconcile IPR related contradictions between China and the EU under the legal framework of TRIPS.
I. Economic relation and IPR conflicts
1. Context: China’s peaceful Rise
Since adopting the policy of Reform and Openness, China has developed more and more influentially important not just in economic but also political area in the world, which has enjoyed 9% annual average growth since 1980s and has seen its share of world GDP expand tenfold to reach 5% of global GDP. China’s growth has resulted in the steepest recorded drop in poverty in world history, and the emergence of a large middle class, better educated and with rising purchasing power and choices.
Beside economic growth China begins to pay more attention to address social inequality and ensure more sustainable economic and political development. Paradoxically, in a number of areas, the conditions for stability improve as the Party and State relax control. A more independent judiciary, a stronger civil society, a freer press will ultimately encourage stability, providing necessary checks and balances. Recognition of the need for more balanced development, building a “harmonious society”, is encouraging.
China’s regional and international policy also supports domestic imperatives: a secure and peaceful neighborhood is one conducive to economic growth; and China’s wider international engagement remains characterized by pursuit of very specific objectives, including securing the natural resources needed to power growth. At the same time China keeps desire to build international respect and recognition. The 2008 Olympic Games in Beijing and the 2010 World Expo in Shanghai will focus the world’s attention on China’s progress.
The foreign policy of China is set as one of strict non-interference, but as it takes on a more active and assertive international role, this may become increasingly untenable. However, the general principles China has set with other peace-loving countries are surely to be strictly applied. The only one thing that may be changed is that China will be able and glad to take more responsibility than before. The Chinese government is beginning to recognize this, and the international responsibilities commensurate to its economic importance and role as a permanent member of the UN Security Council as illustrated by its increasingly active diplomatic commitments.
The EU and China benefit from globalization and share common interests in its success. On the other side, it presents challenges to both and brings further responsibilities. The two important entities also share a desire to see an effective multilateral system. But there remain divergences in values, on which dialogue must continue.
2. Common benefits from Trade and new problems raised
The EU offers the largest market in the world. It is home to a global reserve currency. It enjoys world leadership in key technologies and skills. The EU plays a central role in finding sustainable solutions to today's challenges, on the environment, on energy, on globalization. It has proved capable of exerting a progressive influence well beyond its borders and is the world’s largest provider of development aid[1].
Both the EU and China stand to gain from trade and economic partnership. Europe and China can do more to promote their own interests together than they will ever achieve apart. The EU had always kept being friendly in trade with China several years following the establishment of full-scale partnership. However, in recent years, the attitude of the EU began to change into other side, which appeared more unfulfilled and raised much more criticism on economic and legal condition of China.
This turning results from the demand of economic development of itself. The enlargement to the east does not only mean the addition of member states, but also show the decline of average economic quality. The EU has changed from an entity of several developed countries to a mixture of rich countries in West Europe and poor countries in East Europe. The initial target to “speak in one word” becomes more and more difficult for the EU when integrating internal power. There is one core element which cannot be overlooked that even though the EU is the biggest economic entity in the world, 60% of international trade is accomplished within the EU between member states. To eliminate internal pressure originated from the unbalance of economic development, the EU tries to seek space in external market instead of exploring potential inside.
The prolongation of the EU to outside is restricted by the US, as market of which becomes so saturated that there is limited external demand left for the EU. Naturally, the EU turns attention to its biggest trade partner, China. Unfortunately, when the eyesight of European casts onto Chinese, the huge adverse balance of trade deficit shocks the EU. From the data provided by the European Policy Center, the adverse balance of trade deficit to China rise to 80 billion Euro in 2004 and 106 billion in 2005.
In the opinion of the EU, China is more a stable wall of obstacle than an widely openning gate of hope, such as high requirements of capital and complicated ratification procedures for telecoms and banks when entering into China and investment limits of cars, petrifaction and steel industries. The EU requires China to perform promisesset before its entering into the WTO, and treat European companies equally in trade equality and market openness.
3. More and more focus on IPR protection
In the “2004 European Business In China Position Paper” edited and published by European Union Chamber of Commerce in China, the Chamber states that 70% of EU enterprises investigated thought that in the past year there had not been any improvement of China’s performance of intellectual property law and protection of IPR in China was lack of factually binding force.
All though it is widely known that EU enterprises were not satisfied with China’s protection of IPR, this result of investigation still brought a big surprise. In the eyes of these enterprises, the level of protection in China was extremely too low beyond their imagination.
At the end of June of 2004, the EU wrote in the Accession Position Paper about market status of China that there existed leaks in the system of protection of IPR and related products, which means that the EU has linked IPR of China protection system with the market status.
The enlarged EU, as the biggest trade partner and most important source of direct investment, takes more or less effects to China in any action, especially in IPR area which is a so widely involved element of market related with almost all productive industries.
Piracy products are mainly provided to internal market, but IPR impringement in China gradually points to export, including west developed countries and Asian market, in which the EU is an important destination of such products. Besides lost caused by flood of piracy products, there are some other potential lost such as reduce of income credit of people owning IPR, which cost an uncalculated price to European enterprise. According to data from the EU, more than half of counterfeit and piracy products intercepted and captured on the EU border came from China, which is considered as a great threat to competitiveness of European products. EU trade Chief Peter Mandelson noted that even CCTV of China trenched IPR when using materials without paying anything[2].
Presently, it seems that the EU has got a big promise. On 7th October 2006, IPR Offices of Jiangsu and Guangdong signed “Understanding Memorandum on Enhancing IPR Cooperation” with the EU Chamber of Commerce In China. Accordingly, the EU would provide technical aid to and communicate with 50 “IPR Service Centers for Complaint and Tip-off”. Beyond this, the EU listed these two provinces as most questioned area to strike on focus.
Improvement of most market monitoring behaviors of IPR are related with adjust of internal laws and regulations of China, in which the EU also wants to say something. Mandelson required Chinese government to prolong protection period of medicine patent in allusion to the third modification of Patent Law of China. It is known that there is not any peremptory regulation to protect patent more than 20 years, so it is undoubtedly that the EU wanted China to provide super-level protection to patent rights of European enterprises, which seems unreasonable and unfeasible.
Comparing with other developed countries like the US and Japan, the EU always appeared much more kindly in economic relation with China, but as to IPR problem, the EU keeps amazing unanimous appeal with the US. It is most possible that the EU will unite the US to show weapons to China on IPR protection.
II. New development of IPR systems of China and the EU
1. The derive of TRIPS regime
The TRIPS is a rich set of IPR rules borne in a specific historic period.
Formation and development of protection regime of IPR had a more than 100 years history, which was mainly composed of Paris Convention for The Protection of Industrial Property, Berne Convention for the Protection of Literary and Artistic Works, Madrid Agreement Concerning the International Registration of Marks before 1980s. The WIPO was the only one international organization which played an important role in IPR international protection.
However, when developed countries represented by the US and European States began to rethink of their decreasing international competitiveness and remaining capital survived from petroleum crisis and economic stagnancy in 70s, they found to have overlooked a sum of unexploited and high-quality resource, IPR, exactly from which the “Four little Asia Dragons[3]” benefited a lot and developed so fast beyond anticipation. In mid of 1980s, these countries finally sought out an approach to this problem, which is to include IPR protection into the framework of GATT. Accordingly Uruguay Round negotiation began in September 1986 and lasted to April 1994, which transformed the General Agreement on Tariffs and Trade (GATT) into the World Trade Organization (WTO) and decided to draft a code to deal with copyright violation and other forms of intellectual property rights. In the negotiation, representatives from the US threated to quit if IPR was not listed as a new proposal to discuss. Under reluctance of developing countries and arguments between developed countries, the consensus of trade giants led a decisive importance for the final result.
The signature of TRIPS enriched traditionally international trade theories and brought a new structure of international trade[4], in which intellectualization of international trade and internationalization of intellectual property rights were embodied in concentrative. To discuss the rationale to bring IPR into the WTO framework, there are three important reasons as follows:
a) Importance of IPR in international trade
In the era of knowledge economy, science and technology become the first motivation to economic development of every state. Production, transportation and application of knowledge play the decisive role in the competition of global economic transaction. The average of added value in products has consisted of the most important factor of products value, at the same time, IPR itself has developed as a kind of separated products and objects of international trade.
The scope of IPR related trade has been enlarged since 1980s and the proportion of primary products (raw materials and half-products) declined year by year, which were replaced by high technology and products composed of knowledge and capital. What’s more, liberalization of global trade got enhanced, tariff and other non-tariff barriers influencing which became weaker and weaker under the endeavor of the GATT and the WTO. Therewith, IPR legal system was utilized by every State to protect their advantage of technology and brand and defense technical impulsion from outside. IPR rules were not just domestic law to protect internal intellectual fruits any more, but a kind of weapon to facilitate one State to be an economically strong country in the world. The increasing influence of IPR compelled the WTO to confront on it.
b) Development of international trade needs new IPR treaty
Firstly, there was not any disputes settlement mechanism in the former treaties. Negotiation was the only method to resolve disputes once there was tort dissension. If there was no result from negotiation, member states had to appeal to the ICJ. What’s more, member states had rights to reserve that, which made it more difficult to obtain reasonable resolution of disputes.
Secondly, effective scope was too limited in treaties before, such as, the number of member state, the jurisdiction of the treaties were limited, and there was not an authoritative regime to assort with legislations and policies of different countries to abstain conflicts with the treaties.
And protection levels were various in laws and practices in different countries, especially distinguish between developed and developing countries.
c) Pressure and compromise
The TRIPS agreement is a republication of national law of several developed countries like the US. If we compare TRIPS and IPR provisions of NAFTA[5] concluded just two years before the former in details, it is easy to find out that TRIPS contains plenty of American colors[6]. WTO and TRIPS required developing countries a higher standard to protect IPR, which would bring special pressure to enterprises and impact on national industries of such countries. It was so difficult for developing countries to agree with developed countries but they had no power to countermine the fact, so it is said that the greatest compromise of developing countries in the Uruguay Round Negotiation to developed countries was in respect of IPR.
2. TRIPS and modification of China IPR laws
IPR protection system has developed from nothing to perfection step by step in more than 50 years since foundation of new PRC. Especially, the pace to legislation had been enhanced since 1970s to 90s, during which time, three trunk laws: Trade Mark Law (1982), Patent Law (1984), Copyright Law (1990), and a set of related laws and regulations were established and published, which made clear that China had accomplished the fundamentally legal framework to protect IPR.
As a member state of WTO, to fulfill requirements of TRIPS in legislation, for practicing promises Chinese government made to follow the principle that national law should not conflict with TRIPS, China has completed a abundant of modification to above laws and created a series of new administrative regulations since 1990s, which contains modification of Patent Law in 1992 and 2000, Trade Mark Law in 1993 and 2001, Copyright Law in 2001 and new consolidation of regulations to protect new breeds of plant, integrate circuit and computer software[7]. The main amendments of contents are as follows.
Patent: to comply with TRIPS, the latest amendment extended the duration of patent protection to 20 years from the date of filing a patent application. Chemical and pharmaceutical products, as well as food, beverages, and flavorings are all now patentable[8]. China follows a first to file system for patents, which means patents are granted to those that file first even if the filers are not the original inventors. As a signatory to the Patent Cooperation Treaty in 1994, China will perform international patent searches and preliminary examinations of patent applications. Under China’s patent law, a foreign patent application files by a person or firm without a business office in China must apply through an authorized patent agent, while initial preparation may be done by anyone. Patents are filed with China’s State Intellectual Property Office (SIPO) in Beijing, while SIPO offices at the provincial and municipal level are responsible for administrative enforcement.
Trademark: the new trademark law extended registration to collective marks, certification marks and three-dimensional symbols, as required by TRIPS. China joined the Madrid Protocol in 1989, which requires reciprocal trademark registration for member countries. China has a ‘first-to register’ system that requires no evidence of prior use or ownership, leaving registration of popular foreign marks open to third party. Recent amendments to the Implementing Regulations of the Trademark Law allow local branches or subsidiaries of foreign companies to register trademarks directly without use of a Chinese agent.
Copyright: the Copyright Law confers rights to copyright owner rights to rent and communicate on networks[9]. The protection scope was enlarged to drawings of engineering designs, computer software, and acrobatic works[10]. Unlike the patent and trademark protection, copyrighted works do not require registration for protection. Protection is granted to individuals from countries belonging to the copyright international conventions or bilateral agreements of which China is a member.
By the above measures, IPR legal system of China has been full-scope connected to the international tracks. As basis of prosperity of world economic, trade is one of chief means for China to improve productivity and accelerate increase of economic. Legislation of China on IPR extended range of protection, eliminated torts and obstacles in international business and was in favor of avoiding unnecessary attritions in international trade.
3. EU law and TRIPS
Before establishment of the EC, its member states have joined as contractual parties in WTO. In accordance with primary treaties establishing the EU, it has become a member de facto in place of its member states gradually in the regime[11]. In name of the EC, the President of the Council of Ministers formally signed final documents including protocols and multi-lateral agreements and ratified them according to legal procedures of the EC; at the same time, the EC at last acquired formal membership of this organization. The EU legal order is so a unique one that it has brought a new landscape to the IPR legal protection regime of international community.
a) A general introduction to EU IPR law
The EU IPR legal system is mostly concentrated in Treaties and Secondary laws, which has been developed to a so considerable level that it has obtained a feature of globalization. Laws released by the Council are classified into regulations and directives. The former are directly binding to all Member States and citizens in the whole of the EU. They are directly applicable, which means that the legal acts do not have to be transposed into national law but confer rights or impose duties on the Community citizen in the same way as national law. The latter is a type of EU decision that binds the member states to achieve certain targets. Normally they are transferred within a certain deadline (for instance 18 months) into national laws by the national parliaments. A directive is binding on the Member States as regards the objective to be achieved but leaves it to the national authorities to decide on how the agreed Community objective is to be incorporated into their domestic legal systems. The reasoning behind this form of legislation is that it allows Member States to take account of special domestic circumstances when implementing Community rules. In principle they are free to determine the form and methods used to transpose their Community obligations into domestic law[12]. Directives are used more in area of IPR, only few exceptions such as geographical mark.
In addition to the harmonization of intellectual property substantive law, the EU continues its efforts in creating unitary rights at Community level (Community trademarks, Community designs or models, future Community patents) with a view to simplifying and centralizing the protection system. The crucial advantage of these unitary protection rights is the ability to benefit, by means of a single registration procedure, from uniform protection that produces the same effects throughout the Community. For this reason, the Office for Harmonization in the Internal Market (OHIM), based in Alicante, Spain, was set up to perform the tasks of registering Community trade marks and Community designs. With regard to future Community patents, the European Patent Office in Munich will be responsible for issuing such patents.
b) The EU legal system and TRIPS
The EU is a developed regional organization, in which, member state relinquish part of their sovereignty to Community Institutions. This unique feature makes the legal system to protect IPR different from TRIPS. Let’s make a comparison in below.
Firstly, there are different scopes of protection. The EU legal regime is composed of vertical legislations including primary law and secondary law and horizontal legal system containing agreements concluded between member states in trade area, which makes it more advanced than TRIPS in depth and span.
Secondly, different binding forces regulate their own member state. The EU law has direct effect and supremacy to its member states, which can never be followed by effectiveness of TRIPS.
Thirdly, the EU provides higher level of protection and has established relevant organs for performance. On basis of common market and customs union, this regime possesses a higher jumping-off point and more forcefully coordination, which consists of institutions of legislation, executive and jurisdiction. Even though there is IPR Council in WTO, it is embarrassed when compared with the EU[13].
The EU provides a good sample of legal protection of IPR to international community, which is an important legal framework in correspondence with economic development indispensable for world IPR protection as enhancement of economic globalization.
III. Potential crisis and threats
There are conflicts between China and the EU in respect of IPR, originating from different level of protection, but they can not be resolved just by improvement of legal system of China, as it is not just a legislation problem. We should never overlook the essence of IPR and the potential crisis and threats it may bring and has actually been exerting to the balance of economic and political powers, common economic prosperity, and sustainable development between China and the EU.
1. IPR: new technical barriers to trade
Technical barriers has emerged as an extrusive problem to trade, which has drown attention of China and the EU; a new trend of combination with intellectual property rights is the main characteristic of technical barriers from the EU, which China is confronted presently.
a) Relation between technical barriers and IPR
Technical barriers to trade (TBT) refer to technical regulations and voluntary standards that set out specific characteristics of a product, such as its size, shape, design, functions and performance, or the way a product is labeled or packaged before it enters the marketplace. Included in this set of measures are also the technical procedures which confirm that products fulfill the requirements laid down in regulations and standards. A technical barrier to trade exists when a country applies technical regulations, standards (including packaging, marking and labeling standards) or procedures for assessing conformity with these standards, in such a way as to impose an unnecessary restriction on international trade.
TBT has intense connection with IPR no matter in essence or form. As we have entered a new era of knowledge economy, international trade has got more relation with IPR in subject and object. Origination and elusion of TBT show more and more content of origination and elusion of IPR. Under the background of economic integration, after elimination of physical barriers which means tariff and border control, TBT related IPR appears much more vitality for developed countries to obtain competitiveness in international economic relation.
For example, “to enact or advance the standard”, “to add items of the inspection and quarantine” and changing technical legal rules are frequently utilized by the EU to setup TBT. Technical standard is a common TBT confronted by productive industries of China, especially machinery and electronic industry. This standard wearing a cloth to protect environment and interest of consumer hides a Big Stick of paten in behind; alternative technologies fulfilling new standard have been applied as patent. If firms of China want to enter the EU market, purchasing alternative technologies protected by patent law is the first step what they should go. Expensive fees of permission to use eliminate the competitiveness of lower cost. This kind of TBT restricts entrance of lower price products of China into the EU market on one side, and facilitates the marketing of alternative technologies of the EU on the other side, which is a policy of “one stone, two birds”.
b) IPR related TBT between China and the EU
IPR related TBT has brought a great deal of restrictions to development of firms and national economy of China. For example, in 2003, plenty of TBT China was encountered were upheld by or directly composed of IPR, such as in industries of DVD, color TV-sets, cigarette lighters, batteries, mobile phones etc. This tendency could also be proved in the following cases: in 1999, the EU enacted Directive 1999/815/EC, which banned on phthalate derivates in children's toys and applied to toys and childcare articles made of soft PVC[14]. According to statistics from department of trade, the alternative ester of citric acid fulfilling requirements had already been applied as patent by the EU and US companies.
On 31 April 2002, A Child-Resistant Bill (CR Bill) was passed by the EU Parliament, which provided that cigarette lighters at price of less than 2 Euro should not be permitted to enter into the EU market without child resistant equipments[15]. The namely objective of this standard was to protect safety of children. However, as technologies satisfying this requirement had been applied as patents by companies of developed countries, to fulfill these standard, Chinese companies had to pay a great sum of fees to use the above patent. Ratification of this Bill means that Chinese companies which consisted of 70% of the EU lighter market, except for 10% who produced high-class lighter, would lose a considerable market share and even go bankrupt. There is a crisis for producers and sellers, who had kept competitiveness from lower price in the EU market for a long time, to be compelled outside of the market. This Bill established a TBT which seems impossible to be overstepped.
What’s more, on 13 February 2003, the Official Journal of the EU published the Waste Electrical and Electronic Equipment Directive (WEEE Directive)[16] and the Restriction of Hazardous Substances Directive (RoHS)[17]. The former imposes the responsibility for the disposal of waste electrical and electronic equipment (WEEE) on the manufacturers of such equipment. Those companies should establish an infrastructure for collecting WEEE, in such a way that "Users of electrical and electronic equipment from private households should have the possibility of returning WEEE at least free of charge". Also, companies are compelled to use the collected waste in an ecological-friendly manner, either by ecological disposal or by reuse/refurbishment of the collected WEEE. The latter restricts the use of six hazardous materials in the manufacture of various types of electronic and electrical equipment. According to statistic from Customs of China, the export of machine and electronic products to the EU was 27 billion US$, which took up 17% of general export. The implementation of the two directives brought an extremely negative influence to the exportation of such products of China.
The above cases show that the combination of technical standard and IPR has formed the new orientation to development of TBT recently. All the countries and companies who own relevant patents are trying to change their own patents into standard to obtain maximum economic interest, and standardization becomes the highest form patent technologies are seeking for.
Beyond this, in pursuit of the maximum interest of community and themselves, several companies owning core parents separately usually contribute out their patents and combine to an Essentialpatents pool (Combination of essential patents) of some specific product, by which they can get a monopoly status of market in fact which is difficult for a single company and establish special administrative institutions to actualize patent permission in pack, such as GSM standard of communication industry, DVD standard ,and standard of firewall port technology in IT vocation (IEEE1394) of the EU.
Abandoning traditional method for obtaining profits, the EU find a new approach to get maximum interest by transforming technology to patent, patent to standard, and standard to monopoly, within the contemporary legal framework.
In the specific process of exercise, the EU indicts IPR tort superficially, but extorts in fact. Deng Jun, the Director of Research Center of IPR Development of China IPR Office, noted that: “IPR battles Chinese companies were encountered these years always had a component of extort. Foreign giant industries and technical Union listed hundreds and thousands of patents and pointed that some enterprise must have impinged their patents or it could not produce relevant manufacture, without pointing out what item of patent and what rights we had impinged.” However, under the present transnational economic and technical structure, this kind of extort is too difficult for China to fight back.
2. IPR versus free competition
The basic public policy rationale for intellectual property laws is that they facilitate and encourage the pursuit of innovation and the disclosure of knowledge into the public domain for the common good, by granting authors and inventors the exclusive rights to exploit their works and invention for a limited period. From the perspective of economics, intellectual property is a temporary monopoly on the use or exploitation of that good, supported by legal enforcement mechanisms[18].
However, competition is a basic mechanism of the market economy and encourages companies to provide consumers products that consumers want. It encourages innovation, and pushes down prices. In order to be effective, competition needs suppliers to be independent of each other, each subject to the competitive pressure exerted by the others. In area of international trade, emphasizing IPR monopoly rights too much will restrict free competition.
a) Negative influence of IPR to free market
When confirming monopoly, the protection of IPR is inevitably sacrificing free competition.
Firstly, the monopoly will confine output and turnover of products and hold out a high market price. For example, if there is no patent system, an invention or technology can be used by everyone freely and output of products will increase and prices will go down; under patent regime, only who owning the patent has rights to produce with his invention, which makes products in higher price; if the inventor transfer patent rights or permit others to use his patent, that man should pay a sum of fees, which will be shifted into the cost of product and influence output and price similarly.
Secondly, the results of implementation of IPR maybe hobble the technical improvement, which betrays the original intention of this legal system. For example, if one invention is conferred exclusive rights on the inventor, other researcher in the relevant area maybe lose encourage, because they should avoid the granted patent. Furthermore, there may be some people just researching the technology which has got patent, without any material progress. In this condition, it is obviously that patent regime will do nothing to encourage technical innovation.
Thirdly, IPR systems maybe enhance the degree of centralization in some industries. One company may monopolize the product of some kind of manufacture in the effective period of a patent and continue to control this industry with new invention on basis of the former, which leaves no space to other new competitors. In other situation, several companies may exchange patent technology or permit each other, which leads to a condition where every company emphasize one kind of product and they divide the market within their common-interest community.
Once the monopoly is formed, it will be difficult to recover free competition, and then the benefits of consumers will be damaged, the development space of specific industry will be dwindled, and invention and innovation of the society will stagnate. What’s more serious, if the monopoly is controlled by foreign economic entities, the domestic economy will be encountered an irrecoverable strike. In this meaning, when establishing the regime to protect IPR, a system to antagonize monopoly is necessary and indispensable.
b) Lack of antitrust law in China
At present, there has not been an intact antitrust law yet, say nothing of specific IPR related antitrust law in China. However, there are some provisions in relation with this area in laws and regulations. Such as Art 46 of Regulations for the Implementation of the Law on Sino-Foreign Joint Venture Enterprise (enter into force in 1983, 2001 Amendment), Art 9 of Technology Import Contracts Regulations (enter into force in 1985, expired), Arts 14-15 of the Implementation of this Regulation, Arts 12, 15 of Anti-Unfair Competition Law (enter into force in 1993), Art 27 of Foreign Trade Law (enter into force in 1994), and Arts 329, 334 of Contract Law (enter into force in 1999), etc.
From the point of legal rules, they regulated directly or indirectly IPR related monopoly and behaviors limiting competition, but they are not from the angle of antitrust law and most of them applicable to foreign economic trade activities cannot be generally applied to IPR related monopolies or competition restrictions. As to the content of such rules, there is still a great gap with international custom.
It is not turgidly speaking that IPR related antitrust law which is suitable for requirements of development of Socialist Market Economy and future era of knowledge economy is at the bud stage, or is nearly blank. So, a hard work has already been put on the desk of China.
Antitrust Law of PRC (Draft for Review), which was made out on 25 July 2002, contains some related provisions, but this Draft is too simple and it judges market monopoly only according to market share, which does not tally with requirements of the era of knowledge economy.
c) Completed antitrust law in the EU
Comparatively, there has been a suit of effective and completed antitrust legal system in the EU. The antitrust area covers two prohibition rules set out in the EC Treaty.
First, agreements between two or more firms which restrict competition are prohibited by Article 81 of the Treaty, subject to some limited exceptions. This provision covers a wide variety of behaviors. The most obvious example of illegal conduct infringing Article 81 is a cartel between competitors (which may involve price-fixing or market sharing).
Second, firms in a dominant position may not abuse that position (Article 82 of the EC Treaty). This is for example the case for predatory pricing aiming at eliminating competitors from the market.
The EU Commission is empowered by the Treaty to apply these prohibition rules and enjoys a number of investigative powers to that end (e.g. inspection in business and non business premises, written requests for information, etc). It may also impose fines on undertakings that violate EU antitrust rules. Since 1 May 2004, all national competition authorities are also empowered to apply fully the provisions of the Treaty in order to ensure that competition is not distorted or restricted. National courts may also apply these prohibitions so as to protect the individual rights conferred to citizens by the Treaty.
The Commissioner Neelie Kroes noted in her speech of 23 September 2005 to the Fordham Corporate Law Institute that: Dominant companies should be allowed to compete effectively. The fundamental aim is to ensure that the EU's powers to intervene against monopoly abuses are applied consistently and effectively, not only by the Commission but also by national competition agencies and courts throughout the EU which also now apply EU competition law.
The EU antitrust provisions are applied in more and more ECJ cases and Commission decisions related with IPR in recent years. For example, on June 15, 2005, the European Commission ended its long-running investigation of AstraZeneca's behavior on the "proton pump inhibitor" market by imposing fines of €60 million ($72 million). This is a major step in the development of the way the antitrust rules are applied to intellectual property rights (IPR) in the European Union[19]. The EU is at pains to point out that its decision is not intended to have a chilling effect on innovation since the conduct complained of was related to the authorizations process and not the right to sell a medicine. However, IP rights holders will see this as a further case which constrains their commercial freedom and increases uncertainty.
The Commission plays an essential role in applying the EU antitrust law to IPR related monopoly by enacting regulations and providing Guidelines and Notices, such as Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements[20], Commission Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements[21], Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community[22], Commission notice: Guidelines on the application of article 81(3) of the Treaty[23], and Commission Guidelines on the applicability of Article 81 of the EC Treaty to horizontal cooperation agreements[24].
3. IPR versus State interest and economic security
The IPR system takes effect of almost every area for a State at different level as a kind of legal system, which is actually a special distribution regime of property rights, especially in relation with property rights of intellectual fruits. As a result, it is able to facilitate but can also conflict with State interest and economic security in great deal, especially for the more vulnerable developing countries.
a) TRIPS and State interest
A. The EU’s integral interest from China
China's integration into the global trading and investment system has been beneficial for both Europe and for China. The EU represents more than 19% of China’s external trade. European companies trading in China have brought capitals, goods, knowledge and technology, which have helped China develop its productive capacity. Reciprocally, trade with China helps to promote growth and jobs in Europe through increasing exports, continuing specialization in high-value products and services and strengthening the global competitiveness of EU companies.
China is a big country of technical imports, and the EU is a great entity of technical exports. EU exports to China increased by more than 100% between 2000 and 2005, much faster than its exports in the rest of the world. In the services sector EU exports to China expanded six fold in the period 1994-2004. The consummating IPR legal protection system in China makes it more charming for the EU to add trade and investment, which have allowed EU firms to remain competitive by gaining access to lower-cost inputs. A significant part of the value added of products "made in China" accrues to European companies. It has also helped European business maintain jobs and viable economic activities in the EU such as research, design, marketing, global management and complex manufacturing. Some investments in China have allowed EU firms to gain market share in the China market and supported our exports.
As this investment increases with Chinese commercial expansion beyond its domestic market, European companies will benefit from selling their experience and knowledge protected by IPR laws in distribution, sales and logistics networks.
Competitively priced imports from China have resulted in lower input prices for EU businesses and lower prices for manufactured products in Europe which have generally translated into lower prices for consumers. The total effect on inflation was estimated by the OECD to be -0.2% for the Euro zone for the period 2001-2005. This in turn has helped keep low global interest rates. Savings generated as a result of cheaper goods and inputs have been invested in other parts of the European economy.
B. TRIPS and State interest of China
The original intention of China to try its best to join the WTO, the same as many other developing countries, is out of the consideration of benefits from the overall package containing reduction of trade protection of developed countries[25]. TRIPS is reasonable as part of overall package, but in the rationale of itself, a restrict protection to IPR has brought a lumbersome burden to developing countries. Especially, the negative influence to public health from medicine patents is threatening social stability and State interest of developing countries. At the same time, the commitments made by developed countries to liberalize agriculture and textiles and reduce tariffs, have not been honored, while they have to live with the burdens of the TRIPS agreement.
Notwithstanding, as a great developing country, whether China has got only the burden and nothing benefit? How can China get more interest under the legal framework of TRIPS?
Before entering into WTO, a comparatively perfect IPR system had been established and worked very well. For example, during nearly 20 years since the Patent Law entered into force, 314,771 invent patents has been applied, which occupied 50% of all the invent applications. 70% of researchers in universities think that Patent Law is very helpful to encourage personnel of science and technology to invent. As more and more patent rights have been transformed to factually economic interest, the IPR system is in favor of reclaiming research outlay and stimulating re-devotion[26]. The protection of copyright has benefited all kinds of economic entity, especially private economic entities and new-developing computer and biological industries.
China is a developing country in science and technology[27], which means that even there is no TRIPS, China, is still a State of technical import. Even though this seedtime is insurmountable, the existence of IPR legal system brings a great deal of veracious and lower priced technical information and excites increase of domestic innovation.
All in all, national IPR system and obligations of TRIPS have negative and positive influence to China, so what is more important is to encourage benefits and get rid of harms.
b) IPR and State economic security
IPR system is an organic part of State legal and political regime, so only on basis of strategic objectives of the State, its importance and status can be correctly recognized and accurate IPR strategies can be established to guarantee State economic security.
A. Targets of the EU IPR policies
There are two main targets of the EU IPR policy: safeguarding European companies and defending the EU's interests.
The Commission takes action to assist EU companies on the ground, in particular small and medium-sized enterprises. Working through existing structures, such as the IPR helpdesk and the network of European Information Centers, the EU extends and strengthens the existing intellectual property rights helpdesk to provide training and advice on protecting and defending European intellectual property rights in China. The EU also works to develop private-public partnerships with EU industry federations and others to improve the protection of IPR in China[28].
Where trade irritants arise between China and the EU, the EU always seeks to resolve them through dialogue and negotiation. However, where this fails, the Commission will use the WTO dispute settlement system to resolve trade issues with China and to ensure compliance with multilaterally agreed rules and obligations.
Trade defense measures will remain an instrument to ensure fair protection of IPR between China and the EU, as with other countries. The EU will use these instruments carefully but rigorously where they are justified. At present, the conditions for granting Market Economy Status (MES) to China for IPR protections are not fulfilled in the EU’s point of view. The EU is actively working with China with a view to creating the conditions permitting an early granting of MES. Recent progress has been made on some of the conditions.
B. A potential concussion to economic security of China
Since 1980s, China has adopted the economic strategy of openness and introducing foreign investment to facilitate development, in which borrowing foreign technologies and capitals is a crucial part. In practice, there has appeared a good result. 400 Multinational Corporations out of 500 in total have invested in China, from Motorola of high technology to Coca-Cola producing soft drink, from Germany Siemens to Japanese Honda. One of the most important reasons for such corporations to invest in China is that there is a relatively flawless IPR legal system.
Even though in the UK IPR Commission’s point of view, IPR protection itself can not provide necessary and efficient motivation for foreign incorporations to invest in specific country[29], the reality and more important is that if there is no IPR protection regime, it will be more difficult to import investment from multinational corporations. As consideration of Nokia, everyone should do business in IPR protected industries and countries to safeguard valuable fruit of R&D and then take market benefits brought by innovation[30]. As to corporation like Nokia, IPR strategy is core part of its management strategy and it is beyond imagination that there is no IPR administration and IPR protection system. IPR system is not sufficient condition to introduce foreign investment, but under the upholding of other policies and conditions, IPR is essential requirement to attract direct investment from High-tech multinational corporations.
China became the biggest FDI afflux country in 2002, which brought China job opportunities, trade surplus and manufacture technologies, and what’s more important, the investment is on the basis of tangible substance, factories, so the financial risk maybe caused by speculation of foreign investment can be avoided, which in some degree protect the State economic security of China.
It is proved practically that multinational corporations have played a positive part in development of China, and made extrusive contribution for economic prosperity and cultivation of persons with ability[31]. In this angle, IPR system has protected the interest of foreign applicants and taken an irreplaceable effect on introduction of foreign investment and advanced technologies. So, even IPR system may influences State interest and Security of China in some area, as long as openness and market economy are adopted in China, that system will only be perfected step by step.
c) Rethink about the shortcoming of Weak Protectionism
There always emerged such phenomenon in developing countries that most people reject to define intellectual property as private property and protect producer of intellectual asset in legal level as the result of domestic economic development and ascending international trade. This is what is called Theory of Weak Protectionism of IPR[32], the four rationales of which are economizing State capitals, enhancing local industries, assisting to obtain technologies and cutting down dependency[33].
Hereinto, assisting to obtain technologies and cutting down dependency are two aspects related with State security especially technology security, which will be emphasized here.
Without IPR protection, a total transformation of technology is nearly impossible to be acquired, as the transformation especially for a whole set of technology is a complex and systematic project. Without acquirement of a whole set of technology and self-contained technical support, in the way of diving capital and researching by reverse project, the final result is that there is no competitiveness in imitators’ products in the angle of market economy. Accordingly, the so-called assisting to obtain technologies is just obtaining insufficient technological scenario, without economic interest, market competitiveness and more development space in international market.
One of premises to reduce dependency is that no devotion of R&D derives from inside of country and there will be not any technical innovation given birth. The other is that developing countries are absolutely dependent to developed countries and no dependency to developing countries from developed countries. However, if cancel or diminish protection of IPR, the final result will be that chances of innovation will be diminished too, capital introduced to research will be reduced and developing countries will be more dependent on technologies supports from developed countries.
It is obvious that the influence of the battle of IPR to the State security is unbearable to be ignored, but this importance deals with more all-win and common prosperity than counterwork. In particular for China, the greatest developing country with considerable capability of innovation, IPR protection should be considered as a means to boost up state economy and enrich technical strength.
Compared with the EU, China possesses less advantage in trade battle related IPR. However, this stage is insurmountable for every developing country. The urgent task for China to take is to try the best to find comparative competitiveness and improve capability of innovation availing itself of chances to cooperation with the private and public entities of the EU.
IV. Cooperation and dialog between China and the EU
There are conflicts between China and most developed countries in trade related IPR protection. Difference is that the EU has been holding a more relatively kindly attitude than others such as the US. Cooperation and dialogs have been launched from the end of 1990s and are working comparatively favorably nowadays.
1. Cooperation program
China-EU Cooperation program on IPR was signed by Chinese government and the EU Commission on 7 May 1996, in which the EU would invest 4.8 million Euro to provide necessary funds for IPR related institutions of China, for example, universities, academies, governmental offices and other relevant institutions.
The objective of this program is to cooperate with Chinese government closely on facilitating and protecting domestic IPR of China by a great deal of pointed activities, which mostly include training to judges and lawyers, upholding for legislation and implementation, enhancement of administrative management and public consciousness, transformation of technologies and supports for universities and research departments.
There are two parallel approaches to construct a favorable environment of IPR protection and establish a suit of protection and acceleration system. One is to support central institutions inside China involved IPR. The other is that it encourages relevant institutions to protect IPR in actively and positively in a much wider area, especially reanimating local governments to implement IPR policies effectively.
Specific methods are to organize training and professional consultation activities, open seminars and symposiums, organize relevant persons going to Europe to study and communicate with correlative persons of the EU for a short time. Till now there have been more than 2,500 Chinese experts containing judges, lawyers, administrative officials and custom officers obtaining chances to take part in training courses and seminars held by WIPO, WTO, EPO and other international and regional organizations.
Yi Xiaozhun, Vice Minister of Commerce of China, met Benita Ferrero-Waldner, European Commissioner for External Relations and European Neighborhood Policy, in Beijing on Jan. 17, 2007, and signed the agreement on finance for 3 cooperation projects: China-EU law school, Second Stage of China-EU IPR Protection, which will emphasize on improvement of effectiveness of IPR protection in China, and the China-EU Business Management Training[34]. Accordingly, the EU will provide a volunteer assistance of 37.2 million Euros to China. In addition to investment from Chinese government, the total value of the three programs is 62.655 million Euros.
2. Dialogue mechanism
In recent years, there have been a number of important economic dialogues, which have bilateral trade implications, established between the EU Commission and China. These dialogues cover issues such as intellectual property, market access, macroeconomic and financial sector issues, agriculture, competition, regulatory and industrial policy, and general product and food safety. The EU has also concluded sectoral agreements with China such as the Customs Cooperation Agreement which provides for reinforced EU China cooperation on IPR controls and supply chain security.
More important to be pointed that, on 30 October 2003, both sides reached an agreement on a structured dialogue related with IPR, of which objectives, contents, structure as well as frequency and participation are laid down herewith.
DG Trade and the Ministry of Commerce agree to set up a structured EU-China dialogue on intellectual property rights where all-encompassing issues, bilateral and multilateral, related to the protection and the enforcement of intellectual property can be discussed.
The dialogue is structured into horizontal and sectoral items, addressing respectively the following issues:
1. Horizontal discussions covering all IP sectors, between the Ministry of Commerce which is coordinator from the Chinese side and DG Trade which is the coordinator from the EU side, will cover inter alia the following issues:
a) Institutional issues: exchange of experiences in EU and China on IPR enforcement, co-ordination with sub-central levels, inter-agency coordination, institutional reform, human and financial resources, etc;
b) Horizontal legislative issues: exchange of experiences in EU and China on legislative progress;
c) Horizontal enforcement issues: exchange of experiences in EU and China on central and sub-central enforcement by customs, police, administrative and judiciary bodies, Co-ordination with other countries on exports of counterfeit goods.
d) Public awareness of consumers and right-holders.
2. Sectoral discussions on each individual IP sector.
The precise agenda of each session will be decided by joint agreement between the parties.
It is understood that the coordinator on each side will call upon all relevant IPR-related agencies to participate in the discussions, both horizontal and sectorial.
The dialogue will consist of one-day sessions at least once a year with the venue alternating between Brussels and Beijing. DG Trade and MOFCOM will co-ordinate the dialogue. The precise composition of each delegation will be decided by each party in consultation with the other one. The dialogue will report progress at the Economic and Trade Working Group (ETWG).
The dialog mechanism helps to promote regulatory cooperation and convergence and is important in managing an increasingly complex relationship.
V. Essential measures for reconciliation
Cooperation and dialogs have exerted a good importance to ease up conflicts in between; however, truly speaking, they are just superficial and temporary to a large extent. To solve IPR problems thoroughly and essentially, we should pay attention to reforms and constructions in the following areas.
1. Elimination of IPR technical barriers
Competitions rounded by IPR have been considered as the highest form of business competition under the background of globalization. IPR related technical barriers are being utilized by the EU as a favorable trade weapon to defend its economic interest, which consists of the first important issue confronted with Chinese enterprises in international business competition, especially after China’s entering into WTO and promising to take more responsibilities. A crucial measure to be adopted by China and the EU for harmonizing conflicts caused by IPR related TBT has been put on the desks of the two economies, as not only China will be suffered by such trade obstacles, the EU will be encountered the same question along with technical development of China and gradually deepened relation between China and the EU.
Some possible countermeasures are to be provided as follows:
Firstly, making a clear distinction between legitimate IPR protection and illegal IPR related TBT.
Lawful rights of IPR owners should be fully respected and protected, and actions should be put in practice to prohibit production and distribution impinge foreign IPR inside of the country, especially paying attention to stop exporting wrongful products to other countries.
However, in name of IPR protection but factually TBT established for trade protection should be opposed and retorted according to effective international approaches, such as, by constituting treaties of international economy and trade on a balance of interests from developing and developed countries, in which China should exert its influence and importance as the biggest developing countries, or by solving trade dissensions on basis of contractual clauses negotiated bilaterally or multilaterally. Extremely, vindictive countermeasures may be taken in condition that developed countries set embargos on developing countries and even trade revenge by all kinds of excuses supported by their IPR advantage.
Secondly, IPR conscientiousness should be enhanced and self-dependent IPR should be created and manifold.
At present, more than 85% of IPR in the world are possessed by developed countries, in particular, the US and Japan. For example, during 1989 and 1993, the EPO received 280, 000 patent applications, 28% from the US, 20% from Japan, 19% from German, 8% from France, and about 6% from the UK. 1,280,000 applications for patent in the US from 1982 to 1996 were composed of 54% by mainland of the US, 20% of Japan, 8% of German, 3% of the UK, and less than 3% of developing countries including China.
Lower price based on low-priced labor, which is the contemporary fact in China, will not be an advantage for competitiveness in a long run. A strong power of innovative capability and technology is the most important pillar in putting a food in international market and competition with foreign multinational corporations. Innovating and developing on basis of technical importation and establishing self-dependent IPR are urgent for China to keep up with the EU and other developed States and win a more strong status in international competition.
Thirdly, standards legislation should be strengthened with adopting international standards positively and establishing their own standards. New coming high-tech industries in China should be encouraged to constitute world class standard by themselves and join in the establishment of international standards. For example, the standards for Chinese traditional medicine should transcend that of Western medicine and become center of international standards.
At last, TBT agreements should be sufficiently used to inspect IPR related TBT by Chinese enterprises to prevent duble standards or standard discrimination. Facing obviously discriminated measures, China should promote bilateral negotiations or resort to WTO disputes settlement regime to maintain legal interest.
There is an obvious technical gap between China and the EU, but there is no reason for the EU to use this gap to make unfair profits in the bilateral economic relation. Efforts should be made by both China and the EU to low down the possibility for IPR related TBT to bring mutual collisions and obstacle free trade in between.
2. A consolidated antitrust law in China
At present, China is in a process of industrialization, during which a great deal of technologies are needed to be imported. In the mean time, some multinational corporations are taking up Chinese market in favor of absolute advantage of IPR. To prevent foreign firms from abusing IPR and monopolizing technical market, China has to strengthen legal restrictions and stick up legal interest of domestic consumers and firms on foundation of reasonable protection for IPR owners by referring international and regional experiences, especially the EU.
Antitrust law, which means a flawless antitrust code here, is crucial and indispensable for China. In such a code, all antitrust rules should be applicable to IPR area and there should be a suit of effective administrative structure for management and implementation.
In the era of knowledge economy, information and technology have become the decisive factors for economy and compelled a deep change of economic structure. Antitrust law, as closely related with economy, will be surely challenged by knowledge economy and be enriched by IPR, which means that antitrust law will be more tolerant but abuse of IPR will be restricted in a new progress. This situation pressurizes every developing country to establish and perfect domestic antitrust law to maintain the order of internal market.
3. Establishment of IPR security system under WTO
As discussed above, IPR facilitates economic development but also brings threats to State interest and security. An economic security system is needed in China, which is possible to come true in accordance with legal rules of TRIPS.
Article 73 of TRIPS Agreement regulates exceptional clauses of security, which provides:
Nothing in this Agreement shall be construed:
(a) to require a Member to furnish any information the disclosure of which it considers contrary to its essential security interests; or
(b) to prevent a Member from taking any action which it considers necessary for the protection of its essential security interests;
(i) relating to fissionable materials or the materials from which they are derived;
(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;
(iii) taken in time of war or other emergency in international relations; or
(c) to prevent a Member from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.
These clauses are initially established for developed countries to blockade technologies towards developing countries, even someone considered them as a new variation of economic aggression and colonialism and tools facilitating developed countries to intervene economy of developing countries[35]. However, on the other side, they can also assistant developing countries like China to establish security system of IPR under framework of WTO and resolve specific problems in the specific period. Presently, there have not been relevant regime and feasible legal regulations to carry out the exception clauses. Following the US, China can establish security institution to be responsible for appraising the influence of trade related IPR and technologies to China under the executive framework, protecting IPR related State interest by means of international business.
Article 7 of TRIPS agreement stipulates the objectives of the WTO, which provides: the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations. Accordingly, the status of users of IPR should be equal to creators protected by IPR law. Taking advantage of this clause, China can gradually establish and perfect legal regulations on coercive permission of IPR, making it as a deterrent force for IPR related TBT, which is a kind of security weapons allowed by the WTO legal rules.
A flawless security system is the premise of fair trade between China and the EU. The EU has run a long road ahead of China in virtue of executive regime and advanced rules of WTO. It has responsibility to assist China to establish relevant regime to protect IPR for both and maintain a stable bilateral relationship.
VI. Conclusion
It is easy to understand that IPR has become the central issue for economic and trade relations between China and the EU, which illuminates that there are essentially practical meanings to analyze and estimate conflicts between them objectively and rationally, and discuss further about cooperation in area of IPR.
Obviously, there are similarities and differences of interest aspirations related with IPR between China and the EU. As a community of developed countries, its economy is seriously dependent on technology exports in core of IPR, and monopolies of IPR will surely bring the EU a long-term practical interest, so it is an inevitable choice for the EU to emphasize importance of IPR protection. As the biggest developing countries, establishing an innovative country, respecting IPR of other countries and creating self-dependent IPR are its fundamental State policies. As Premier Wen Jiabao has said, protection of IPR in China will be as hard as steel, not as soft like bean curd. To enhance IPR protection is not compelled by external pressure, but self-requirements for strengthening state competitiveness, respecting international rules and maintain state security and economic interest.
At the same time, it should never be neglected that conflicts of IPR protection between China and the EU are nothing but disputes of different economic entities at different developing levels. On one hand, the EU proposes to carry out global protection of IPR and monopolize markets of other countries to obtain maximum economic interest, under the background of economic globalization and swift and violent development of information and technology; on the other hand, limited economic development degree and huge regional discrepancy result in considerable cost for China to protect IPR, so it is impossible and unpractical for China to reach protecting level as the EU in a short period, even though China never stop working hard to reinforcing this protection without a rest.
The reconciliation of conflicts between China and the EU requires us to obey fundamental principles of reciprocal respect, equality and mutual benefit, and common development of economy, social harmonization and health. Taking long views, on basis of continuing deepening full-scope strategic partnership, both China and the EU should, obeying the legal framework of TRIPS, by dialogs, negotiation, consultation and further understanding and trust, examine strictly behaviors of IPR tort and abuse, take material steps to eliminate IPR related TBT, put an end to monopolies on technical trade, and protect respective state interest and economic security, especially emphasizing on interest of China as a developing country to realize a balance between the two economies, accordingly, bringing along co-prosperity of China and the EU.
REFERENCES
l Scholarly Treatise
Zheng Chengsi, To Discuss IPR. Law Press, Beijing. 1988.
Liu Maolin. Economic analysis of IPR, Law Press, December 1996.
David I. Bainbridge. Intellectual property. Harlow : Longman, 2002.
Shao Jingchun, EU law and regime. Beijing. People’s Court Press. 1996.
Mark A. Lemley, "Property, Intellectual Property, and Free Riding" (Abstract).
Rationality, Crisis and Future Model of IPR. Edited by Li Yang. Beijing. Law Press. 2003.
TRIPS and fronter issues of IPR protection in China. Edited by Tang Anban. Beijing. Law Press. 2004.
David I Bainbridge. Cases and materials in intellectual property law. [London] : Financial Times Pitman Publishing, 1999.
Xue Hong and Zheng Chengsi. Chinese intellectual property law in the 21st century. Hong Kong : Sweet & Maxwell Asia, c2002.
Global intellectual property rights : knowledge, access, and development. Edited by Peter Drahos and Ruth Mayne. England. Oxford, 2002.
Chen Meizhang, Facilitation of Chinese patent system to technical improvement and economic development. Research on Patent Law. IPR Press, December,1999.
l Scholarly Essay
Bruce Canetti. Microsoft champions intellectual property rights and loses to European Union competition law: proceeding under Article 82 of the EC Treaty case comp/c-3/37.792 Microsoft, March24, 2004. Journal of Law, Technology & Policy. Vol. 2004. pp171-179.
Shahram Shoraka. World Trade Dispute Resolution and Developing Countries: Constructing a Framework for Fair Adjudication in the WTO. MJIEL. Vol. 3. Issue 2 . 2006.
Wesley A. Cann. Creating Standards and Accountability for the Use of WTO Security Exception: Reducing the Role of Power based Relations and Establishing a New Balance between Sovereignty and Multilateralism. Yale Journal of International Law. Vol. 26(2001). No.4. pp413-485.
Zhang Biwu. A comparison of TRIPS with ole and new legal system of IPR in China.China Science and Technology Information. Feb, 2006.
Tian Hongjun. Comparative survey of IPR legal system of the EU and TRIPS. Journal of Baicheng Teachers College. Vol.20. No.1. 2006. pp19-22.
Wang Hong. IPR protection and free competition. Mediation, Arbitration and Litigation. Vol.16. No.93. pp53-55.
Xu Xiangming. Antitrust control to abuses of IPR. Journal of Huaibei Coal Industry Teachers College, Vol.25 No.5, Oct.2004.
Xu XiuXia, Influence and countermeasure of IPR protection of China after entrance into WTO. Min Bai Study. 2001(5).
Fu Xu, Shi Fang, Three breakthroughs of Copyright Law, Jing Bao-Law weekly, 11 June 2001.
Tang Guangliang. Nine modifications of Copyright Law Facing to WTO. Legal Daily. 6 October 2002.
Wei Zhi. Comment on the directive of protection period of copyright in the EU. Chinese and Foreign law, 1996,(6).
Xiao Feng. An analysis of actuality and motivated power of technical development in China. Future and Development. 2001(4).
Zhang Zhicheng. Comments on IPR strategy of multinational corporations, IPR Review of Peking University. Col.3. Law Press. August, 2003.
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Integrating Intellectual Property Rights and Development Policy.Report of the Commission on Intellectual Property Rights of the UK. Published in London. November 2002 (2nd Edition). Available on http://www.iprcommission.org.
European Antitrust Review. Prepared by Gibson, Dunn & Crutcher’s European antitrust ractice Group april 2005 - april 2006. Published in October 2006.
Competition Law-Antitrust law and policy in a global marketinsight,An effects-based approach to technology transfer agreements.By David Wood and Isabel Davies.published in the May 2004 issue of Competition Law Insight.
Strengthening Protection of Intellectual Property in Developing Countries.World Bank Discussion Paper(sWDP-112). Edited by Wolfgang E. Siebeck. First printed in December 1990. Washington, D.C..
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Proposal for a regulation of the european parliament and of the council on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems (presented by the Commission). {SEC(2004) 1348}
Communication from the commission to the council and the European parliament. EU – China: Closer partners, growing responsibilities. {COM(2006) 632 final}
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[1] EU – China: Closer partners, growing responsibilities. COM (2006) 632 final.
[2] See http://www.europeanchamber.com.cn
[3] Which mean South Korea, Singapore, Hong Kong and Taiwan.
[4] Li Shunde. TRIPS in relation with IPR legal system of China, IPR Research, Col. 9
[5] This means North American Free Trade Agreement.
[6] Zheng Chengsi, To Discuss IPR, Law Press of China, 1988, pp656.
[7] Li Shunde. TRIPS in relation with IPR legal system of China. IPR Research. Vol. 9.
[8] Xu XiuXia, Influence and countermeasure of IPR protection of China after entrance into WTO. Min Bai Study. 2001(5).
[9] Fu Xu, Shi Fang, Three breakthroughs of Copyright Law, Jing Bao-Law weekly, 11 June 2001.
[10] Tang Guangliang. Nine modifications of Copyright Law Facing to WTO. Legal Daily. 6 October 2002.
[11] Shao Jingchun, EU law and regime. Beijing. People’s Court Press. 1996. pp494-507.
[12] Lb，pp498.
[13] Wei Zhi，Comment on the Directive of Protection period of Copyright in the EU, Chinese and Foreign law, 1996,(6).
[14] See Directive 1999/815/EC.
[15] See Child-resistance for lighters. Safety requirements and test methods, EN 13869:2002
[16] See Directive 2002/96/EC.
[17] See Directive 2002/95/EC.
[18] Mark A. Lemley, "Property, Intellectual Property, and Free Riding" (Abstract); see Table 1: 4-5.
[19] See European Commission Raises Stakes in IP/Antitrust Battle, available on http://www.gibsondunn.com.
[20] See OJ 2004 L123/11.
[21] See OJ 2004 C101/2.
[22] See OJ 2001 C368/7.
[23] See OJ 2004 C101/97.
[24] See OJ 2001 C3/2.
[25] Integrating Intellectual Property Rights and Development Policy.Report of the Commission on Intellectual Property Rights of the UK. Published in London. November 2002 (2nd Edition). pp9.
[26] Chen Meizhang, Facilitation of Chinese patent system to technical improvement and economic development. Research on Patent Law. IPR Press, December,1999.
[27] Xiao Feng. An analysis of actuality and motivated power of technical development in China. Future and Development. 2001(4).
[28] See COM(2006) 631 final.
[29] Integrating Intellectual Property Rights and Development Policy.Report of the Commission on Intellectual Property Rights of the UK. Published in London. November 2002 (2nd Edition). pp2.
[30] Qi Xiaohuan, Innovation brings competitiveness and enterprise image, Speech on Second International Forum of Creativity and Invention of WIPO, 23-25 May 2002, Beijing.
[31] Zhang Zhicheng. Comments on IPR strategy of multinational corporations, IPR Review of Peking University. Col.3. Law Press. August, 2003.
[32] Liu Maolin. Economic analysis of IPR, Law Press, December 1996. pp82.
[33] Lb.
[34] See website of ministry of commerce of the PRC, http://www.mofcom.gov.cn.
[35] Wesley A. Cann. Creating Standards and Accountability for the Use of WTO Security Exception: Reducing the Role of Power based Relations and Establishing a New Balance between Sovereignty and Multilateralism, Yale Journal of International Law, Vol. 26(2001), No.4,pp413-485.
The economic relationship between China and the EU has been considerably reinforced since China’s Reform and opening in 1980s, especially after the entrance of China into WTO in 2001. The two world-influencing entities have more and more incorporated as an economic interest community.
However, the conflicts from protection of Intellectual Property Rights between them play as an unharmonious tone, which has slowed down the pace to a higher degree of cooperation and common prosperity.
There are criticisms to China’s legal protection system of IPR from the EU and complains on exorbitantly high technical standards of the EU from China, which result in IPR problems more and more complex and difficult to resolved.
IPR protection is widely recognized to encourage invention and innovation and facilitate economic development. There are suits of legal rules to acclimate this international tendency both in China and the EU. The distinguish lies on different economic backgrounds and levels of legislation progress.
The solely objective of this article is to find out what are essential reasons for conflicts and try to propose some doable means to eliminate these conflicts.
Firstly, this article will emphasize on the difference of legal systems to protect IPR between China and the EU, especially their relations with TRIPS.
Secondly, the author pays attention to the potential crisis and threats of IPR, trying to find out the deeply hidden reasons of conflicts, by analyzing three disputable relations between IPR and technical barriers on trade, free competition, and State interest plus economic security.
Then, there will be a brief description and appraisal of present cooperation programs and dialog regime between China and the EU.
At last, the author will provide some most feasible measures to reconcile IPR related contradictions between China and the EU under the legal framework of TRIPS.
I. Economic relation and IPR conflicts
1. Context: China’s peaceful Rise
Since adopting the policy of Reform and Openness, China has developed more and more influentially important not just in economic but also political area in the world, which has enjoyed 9% annual average growth since 1980s and has seen its share of world GDP expand tenfold to reach 5% of global GDP. China’s growth has resulted in the steepest recorded drop in poverty in world history, and the emergence of a large middle class, better educated and with rising purchasing power and choices.
Beside economic growth China begins to pay more attention to address social inequality and ensure more sustainable economic and political development. Paradoxically, in a number of areas, the conditions for stability improve as the Party and State relax control. A more independent judiciary, a stronger civil society, a freer press will ultimately encourage stability, providing necessary checks and balances. Recognition of the need for more balanced development, building a “harmonious society”, is encouraging.
China’s regional and international policy also supports domestic imperatives: a secure and peaceful neighborhood is one conducive to economic growth; and China’s wider international engagement remains characterized by pursuit of very specific objectives, including securing the natural resources needed to power growth. At the same time China keeps desire to build international respect and recognition. The 2008 Olympic Games in Beijing and the 2010 World Expo in Shanghai will focus the world’s attention on China’s progress.
The foreign policy of China is set as one of strict non-interference, but as it takes on a more active and assertive international role, this may become increasingly untenable. However, the general principles China has set with other peace-loving countries are surely to be strictly applied. The only one thing that may be changed is that China will be able and glad to take more responsibility than before. The Chinese government is beginning to recognize this, and the international responsibilities commensurate to its economic importance and role as a permanent member of the UN Security Council as illustrated by its increasingly active diplomatic commitments.
The EU and China benefit from globalization and share common interests in its success. On the other side, it presents challenges to both and brings further responsibilities. The two important entities also share a desire to see an effective multilateral system. But there remain divergences in values, on which dialogue must continue.
2. Common benefits from Trade and new problems raised
The EU offers the largest market in the world. It is home to a global reserve currency. It enjoys world leadership in key technologies and skills. The EU plays a central role in finding sustainable solutions to today's challenges, on the environment, on energy, on globalization. It has proved capable of exerting a progressive influence well beyond its borders and is the world’s largest provider of development aid[1].
Both the EU and China stand to gain from trade and economic partnership. Europe and China can do more to promote their own interests together than they will ever achieve apart. The EU had always kept being friendly in trade with China several years following the establishment of full-scale partnership. However, in recent years, the attitude of the EU began to change into other side, which appeared more unfulfilled and raised much more criticism on economic and legal condition of China.
This turning results from the demand of economic development of itself. The enlargement to the east does not only mean the addition of member states, but also show the decline of average economic quality. The EU has changed from an entity of several developed countries to a mixture of rich countries in West Europe and poor countries in East Europe. The initial target to “speak in one word” becomes more and more difficult for the EU when integrating internal power. There is one core element which cannot be overlooked that even though the EU is the biggest economic entity in the world, 60% of international trade is accomplished within the EU between member states. To eliminate internal pressure originated from the unbalance of economic development, the EU tries to seek space in external market instead of exploring potential inside.
The prolongation of the EU to outside is restricted by the US, as market of which becomes so saturated that there is limited external demand left for the EU. Naturally, the EU turns attention to its biggest trade partner, China. Unfortunately, when the eyesight of European casts onto Chinese, the huge adverse balance of trade deficit shocks the EU. From the data provided by the European Policy Center, the adverse balance of trade deficit to China rise to 80 billion Euro in 2004 and 106 billion in 2005.
In the opinion of the EU, China is more a stable wall of obstacle than an widely openning gate of hope, such as high requirements of capital and complicated ratification procedures for telecoms and banks when entering into China and investment limits of cars, petrifaction and steel industries. The EU requires China to perform promisesset before its entering into the WTO, and treat European companies equally in trade equality and market openness.
3. More and more focus on IPR protection
In the “2004 European Business In China Position Paper” edited and published by European Union Chamber of Commerce in China, the Chamber states that 70% of EU enterprises investigated thought that in the past year there had not been any improvement of China’s performance of intellectual property law and protection of IPR in China was lack of factually binding force.
All though it is widely known that EU enterprises were not satisfied with China’s protection of IPR, this result of investigation still brought a big surprise. In the eyes of these enterprises, the level of protection in China was extremely too low beyond their imagination.
At the end of June of 2004, the EU wrote in the Accession Position Paper about market status of China that there existed leaks in the system of protection of IPR and related products, which means that the EU has linked IPR of China protection system with the market status.
The enlarged EU, as the biggest trade partner and most important source of direct investment, takes more or less effects to China in any action, especially in IPR area which is a so widely involved element of market related with almost all productive industries.
Piracy products are mainly provided to internal market, but IPR impringement in China gradually points to export, including west developed countries and Asian market, in which the EU is an important destination of such products. Besides lost caused by flood of piracy products, there are some other potential lost such as reduce of income credit of people owning IPR, which cost an uncalculated price to European enterprise. According to data from the EU, more than half of counterfeit and piracy products intercepted and captured on the EU border came from China, which is considered as a great threat to competitiveness of European products. EU trade Chief Peter Mandelson noted that even CCTV of China trenched IPR when using materials without paying anything[2].
Presently, it seems that the EU has got a big promise. On 7th October 2006, IPR Offices of Jiangsu and Guangdong signed “Understanding Memorandum on Enhancing IPR Cooperation” with the EU Chamber of Commerce In China. Accordingly, the EU would provide technical aid to and communicate with 50 “IPR Service Centers for Complaint and Tip-off”. Beyond this, the EU listed these two provinces as most questioned area to strike on focus.
Improvement of most market monitoring behaviors of IPR are related with adjust of internal laws and regulations of China, in which the EU also wants to say something. Mandelson required Chinese government to prolong protection period of medicine patent in allusion to the third modification of Patent Law of China. It is known that there is not any peremptory regulation to protect patent more than 20 years, so it is undoubtedly that the EU wanted China to provide super-level protection to patent rights of European enterprises, which seems unreasonable and unfeasible.
Comparing with other developed countries like the US and Japan, the EU always appeared much more kindly in economic relation with China, but as to IPR problem, the EU keeps amazing unanimous appeal with the US. It is most possible that the EU will unite the US to show weapons to China on IPR protection.
II. New development of IPR systems of China and the EU
1. The derive of TRIPS regime
The TRIPS is a rich set of IPR rules borne in a specific historic period.
Formation and development of protection regime of IPR had a more than 100 years history, which was mainly composed of Paris Convention for The Protection of Industrial Property, Berne Convention for the Protection of Literary and Artistic Works, Madrid Agreement Concerning the International Registration of Marks before 1980s. The WIPO was the only one international organization which played an important role in IPR international protection.
However, when developed countries represented by the US and European States began to rethink of their decreasing international competitiveness and remaining capital survived from petroleum crisis and economic stagnancy in 70s, they found to have overlooked a sum of unexploited and high-quality resource, IPR, exactly from which the “Four little Asia Dragons[3]” benefited a lot and developed so fast beyond anticipation. In mid of 1980s, these countries finally sought out an approach to this problem, which is to include IPR protection into the framework of GATT. Accordingly Uruguay Round negotiation began in September 1986 and lasted to April 1994, which transformed the General Agreement on Tariffs and Trade (GATT) into the World Trade Organization (WTO) and decided to draft a code to deal with copyright violation and other forms of intellectual property rights. In the negotiation, representatives from the US threated to quit if IPR was not listed as a new proposal to discuss. Under reluctance of developing countries and arguments between developed countries, the consensus of trade giants led a decisive importance for the final result.
The signature of TRIPS enriched traditionally international trade theories and brought a new structure of international trade[4], in which intellectualization of international trade and internationalization of intellectual property rights were embodied in concentrative. To discuss the rationale to bring IPR into the WTO framework, there are three important reasons as follows:
a) Importance of IPR in international trade
In the era of knowledge economy, science and technology become the first motivation to economic development of every state. Production, transportation and application of knowledge play the decisive role in the competition of global economic transaction. The average of added value in products has consisted of the most important factor of products value, at the same time, IPR itself has developed as a kind of separated products and objects of international trade.
The scope of IPR related trade has been enlarged since 1980s and the proportion of primary products (raw materials and half-products) declined year by year, which were replaced by high technology and products composed of knowledge and capital. What’s more, liberalization of global trade got enhanced, tariff and other non-tariff barriers influencing which became weaker and weaker under the endeavor of the GATT and the WTO. Therewith, IPR legal system was utilized by every State to protect their advantage of technology and brand and defense technical impulsion from outside. IPR rules were not just domestic law to protect internal intellectual fruits any more, but a kind of weapon to facilitate one State to be an economically strong country in the world. The increasing influence of IPR compelled the WTO to confront on it.
b) Development of international trade needs new IPR treaty
Firstly, there was not any disputes settlement mechanism in the former treaties. Negotiation was the only method to resolve disputes once there was tort dissension. If there was no result from negotiation, member states had to appeal to the ICJ. What’s more, member states had rights to reserve that, which made it more difficult to obtain reasonable resolution of disputes.
Secondly, effective scope was too limited in treaties before, such as, the number of member state, the jurisdiction of the treaties were limited, and there was not an authoritative regime to assort with legislations and policies of different countries to abstain conflicts with the treaties.
And protection levels were various in laws and practices in different countries, especially distinguish between developed and developing countries.
c) Pressure and compromise
The TRIPS agreement is a republication of national law of several developed countries like the US. If we compare TRIPS and IPR provisions of NAFTA[5] concluded just two years before the former in details, it is easy to find out that TRIPS contains plenty of American colors[6]. WTO and TRIPS required developing countries a higher standard to protect IPR, which would bring special pressure to enterprises and impact on national industries of such countries. It was so difficult for developing countries to agree with developed countries but they had no power to countermine the fact, so it is said that the greatest compromise of developing countries in the Uruguay Round Negotiation to developed countries was in respect of IPR.
2. TRIPS and modification of China IPR laws
IPR protection system has developed from nothing to perfection step by step in more than 50 years since foundation of new PRC. Especially, the pace to legislation had been enhanced since 1970s to 90s, during which time, three trunk laws: Trade Mark Law (1982), Patent Law (1984), Copyright Law (1990), and a set of related laws and regulations were established and published, which made clear that China had accomplished the fundamentally legal framework to protect IPR.
As a member state of WTO, to fulfill requirements of TRIPS in legislation, for practicing promises Chinese government made to follow the principle that national law should not conflict with TRIPS, China has completed a abundant of modification to above laws and created a series of new administrative regulations since 1990s, which contains modification of Patent Law in 1992 and 2000, Trade Mark Law in 1993 and 2001, Copyright Law in 2001 and new consolidation of regulations to protect new breeds of plant, integrate circuit and computer software[7]. The main amendments of contents are as follows.
Patent: to comply with TRIPS, the latest amendment extended the duration of patent protection to 20 years from the date of filing a patent application. Chemical and pharmaceutical products, as well as food, beverages, and flavorings are all now patentable[8]. China follows a first to file system for patents, which means patents are granted to those that file first even if the filers are not the original inventors. As a signatory to the Patent Cooperation Treaty in 1994, China will perform international patent searches and preliminary examinations of patent applications. Under China’s patent law, a foreign patent application files by a person or firm without a business office in China must apply through an authorized patent agent, while initial preparation may be done by anyone. Patents are filed with China’s State Intellectual Property Office (SIPO) in Beijing, while SIPO offices at the provincial and municipal level are responsible for administrative enforcement.
Trademark: the new trademark law extended registration to collective marks, certification marks and three-dimensional symbols, as required by TRIPS. China joined the Madrid Protocol in 1989, which requires reciprocal trademark registration for member countries. China has a ‘first-to register’ system that requires no evidence of prior use or ownership, leaving registration of popular foreign marks open to third party. Recent amendments to the Implementing Regulations of the Trademark Law allow local branches or subsidiaries of foreign companies to register trademarks directly without use of a Chinese agent.
Copyright: the Copyright Law confers rights to copyright owner rights to rent and communicate on networks[9]. The protection scope was enlarged to drawings of engineering designs, computer software, and acrobatic works[10]. Unlike the patent and trademark protection, copyrighted works do not require registration for protection. Protection is granted to individuals from countries belonging to the copyright international conventions or bilateral agreements of which China is a member.
By the above measures, IPR legal system of China has been full-scope connected to the international tracks. As basis of prosperity of world economic, trade is one of chief means for China to improve productivity and accelerate increase of economic. Legislation of China on IPR extended range of protection, eliminated torts and obstacles in international business and was in favor of avoiding unnecessary attritions in international trade.
3. EU law and TRIPS
Before establishment of the EC, its member states have joined as contractual parties in WTO. In accordance with primary treaties establishing the EU, it has become a member de facto in place of its member states gradually in the regime[11]. In name of the EC, the President of the Council of Ministers formally signed final documents including protocols and multi-lateral agreements and ratified them according to legal procedures of the EC; at the same time, the EC at last acquired formal membership of this organization. The EU legal order is so a unique one that it has brought a new landscape to the IPR legal protection regime of international community.
a) A general introduction to EU IPR law
The EU IPR legal system is mostly concentrated in Treaties and Secondary laws, which has been developed to a so considerable level that it has obtained a feature of globalization. Laws released by the Council are classified into regulations and directives. The former are directly binding to all Member States and citizens in the whole of the EU. They are directly applicable, which means that the legal acts do not have to be transposed into national law but confer rights or impose duties on the Community citizen in the same way as national law. The latter is a type of EU decision that binds the member states to achieve certain targets. Normally they are transferred within a certain deadline (for instance 18 months) into national laws by the national parliaments. A directive is binding on the Member States as regards the objective to be achieved but leaves it to the national authorities to decide on how the agreed Community objective is to be incorporated into their domestic legal systems. The reasoning behind this form of legislation is that it allows Member States to take account of special domestic circumstances when implementing Community rules. In principle they are free to determine the form and methods used to transpose their Community obligations into domestic law[12]. Directives are used more in area of IPR, only few exceptions such as geographical mark.
In addition to the harmonization of intellectual property substantive law, the EU continues its efforts in creating unitary rights at Community level (Community trademarks, Community designs or models, future Community patents) with a view to simplifying and centralizing the protection system. The crucial advantage of these unitary protection rights is the ability to benefit, by means of a single registration procedure, from uniform protection that produces the same effects throughout the Community. For this reason, the Office for Harmonization in the Internal Market (OHIM), based in Alicante, Spain, was set up to perform the tasks of registering Community trade marks and Community designs. With regard to future Community patents, the European Patent Office in Munich will be responsible for issuing such patents.
b) The EU legal system and TRIPS
The EU is a developed regional organization, in which, member state relinquish part of their sovereignty to Community Institutions. This unique feature makes the legal system to protect IPR different from TRIPS. Let’s make a comparison in below.
Firstly, there are different scopes of protection. The EU legal regime is composed of vertical legislations including primary law and secondary law and horizontal legal system containing agreements concluded between member states in trade area, which makes it more advanced than TRIPS in depth and span.
Secondly, different binding forces regulate their own member state. The EU law has direct effect and supremacy to its member states, which can never be followed by effectiveness of TRIPS.
Thirdly, the EU provides higher level of protection and has established relevant organs for performance. On basis of common market and customs union, this regime possesses a higher jumping-off point and more forcefully coordination, which consists of institutions of legislation, executive and jurisdiction. Even though there is IPR Council in WTO, it is embarrassed when compared with the EU[13].
The EU provides a good sample of legal protection of IPR to international community, which is an important legal framework in correspondence with economic development indispensable for world IPR protection as enhancement of economic globalization.
III. Potential crisis and threats
There are conflicts between China and the EU in respect of IPR, originating from different level of protection, but they can not be resolved just by improvement of legal system of China, as it is not just a legislation problem. We should never overlook the essence of IPR and the potential crisis and threats it may bring and has actually been exerting to the balance of economic and political powers, common economic prosperity, and sustainable development between China and the EU.
1. IPR: new technical barriers to trade
Technical barriers has emerged as an extrusive problem to trade, which has drown attention of China and the EU; a new trend of combination with intellectual property rights is the main characteristic of technical barriers from the EU, which China is confronted presently.
a) Relation between technical barriers and IPR
Technical barriers to trade (TBT) refer to technical regulations and voluntary standards that set out specific characteristics of a product, such as its size, shape, design, functions and performance, or the way a product is labeled or packaged before it enters the marketplace. Included in this set of measures are also the technical procedures which confirm that products fulfill the requirements laid down in regulations and standards. A technical barrier to trade exists when a country applies technical regulations, standards (including packaging, marking and labeling standards) or procedures for assessing conformity with these standards, in such a way as to impose an unnecessary restriction on international trade.
TBT has intense connection with IPR no matter in essence or form. As we have entered a new era of knowledge economy, international trade has got more relation with IPR in subject and object. Origination and elusion of TBT show more and more content of origination and elusion of IPR. Under the background of economic integration, after elimination of physical barriers which means tariff and border control, TBT related IPR appears much more vitality for developed countries to obtain competitiveness in international economic relation.
For example, “to enact or advance the standard”, “to add items of the inspection and quarantine” and changing technical legal rules are frequently utilized by the EU to setup TBT. Technical standard is a common TBT confronted by productive industries of China, especially machinery and electronic industry. This standard wearing a cloth to protect environment and interest of consumer hides a Big Stick of paten in behind; alternative technologies fulfilling new standard have been applied as patent. If firms of China want to enter the EU market, purchasing alternative technologies protected by patent law is the first step what they should go. Expensive fees of permission to use eliminate the competitiveness of lower cost. This kind of TBT restricts entrance of lower price products of China into the EU market on one side, and facilitates the marketing of alternative technologies of the EU on the other side, which is a policy of “one stone, two birds”.
b) IPR related TBT between China and the EU
IPR related TBT has brought a great deal of restrictions to development of firms and national economy of China. For example, in 2003, plenty of TBT China was encountered were upheld by or directly composed of IPR, such as in industries of DVD, color TV-sets, cigarette lighters, batteries, mobile phones etc. This tendency could also be proved in the following cases: in 1999, the EU enacted Directive 1999/815/EC, which banned on phthalate derivates in children's toys and applied to toys and childcare articles made of soft PVC[14]. According to statistics from department of trade, the alternative ester of citric acid fulfilling requirements had already been applied as patent by the EU and US companies.
On 31 April 2002, A Child-Resistant Bill (CR Bill) was passed by the EU Parliament, which provided that cigarette lighters at price of less than 2 Euro should not be permitted to enter into the EU market without child resistant equipments[15]. The namely objective of this standard was to protect safety of children. However, as technologies satisfying this requirement had been applied as patents by companies of developed countries, to fulfill these standard, Chinese companies had to pay a great sum of fees to use the above patent. Ratification of this Bill means that Chinese companies which consisted of 70% of the EU lighter market, except for 10% who produced high-class lighter, would lose a considerable market share and even go bankrupt. There is a crisis for producers and sellers, who had kept competitiveness from lower price in the EU market for a long time, to be compelled outside of the market. This Bill established a TBT which seems impossible to be overstepped.
What’s more, on 13 February 2003, the Official Journal of the EU published the Waste Electrical and Electronic Equipment Directive (WEEE Directive)[16] and the Restriction of Hazardous Substances Directive (RoHS)[17]. The former imposes the responsibility for the disposal of waste electrical and electronic equipment (WEEE) on the manufacturers of such equipment. Those companies should establish an infrastructure for collecting WEEE, in such a way that "Users of electrical and electronic equipment from private households should have the possibility of returning WEEE at least free of charge". Also, companies are compelled to use the collected waste in an ecological-friendly manner, either by ecological disposal or by reuse/refurbishment of the collected WEEE. The latter restricts the use of six hazardous materials in the manufacture of various types of electronic and electrical equipment. According to statistic from Customs of China, the export of machine and electronic products to the EU was 27 billion US$, which took up 17% of general export. The implementation of the two directives brought an extremely negative influence to the exportation of such products of China.
The above cases show that the combination of technical standard and IPR has formed the new orientation to development of TBT recently. All the countries and companies who own relevant patents are trying to change their own patents into standard to obtain maximum economic interest, and standardization becomes the highest form patent technologies are seeking for.
Beyond this, in pursuit of the maximum interest of community and themselves, several companies owning core parents separately usually contribute out their patents and combine to an Essentialpatents pool (Combination of essential patents) of some specific product, by which they can get a monopoly status of market in fact which is difficult for a single company and establish special administrative institutions to actualize patent permission in pack, such as GSM standard of communication industry, DVD standard ,and standard of firewall port technology in IT vocation (IEEE1394) of the EU.
Abandoning traditional method for obtaining profits, the EU find a new approach to get maximum interest by transforming technology to patent, patent to standard, and standard to monopoly, within the contemporary legal framework.
In the specific process of exercise, the EU indicts IPR tort superficially, but extorts in fact. Deng Jun, the Director of Research Center of IPR Development of China IPR Office, noted that: “IPR battles Chinese companies were encountered these years always had a component of extort. Foreign giant industries and technical Union listed hundreds and thousands of patents and pointed that some enterprise must have impinged their patents or it could not produce relevant manufacture, without pointing out what item of patent and what rights we had impinged.” However, under the present transnational economic and technical structure, this kind of extort is too difficult for China to fight back.
2. IPR versus free competition
The basic public policy rationale for intellectual property laws is that they facilitate and encourage the pursuit of innovation and the disclosure of knowledge into the public domain for the common good, by granting authors and inventors the exclusive rights to exploit their works and invention for a limited period. From the perspective of economics, intellectual property is a temporary monopoly on the use or exploitation of that good, supported by legal enforcement mechanisms[18].
However, competition is a basic mechanism of the market economy and encourages companies to provide consumers products that consumers want. It encourages innovation, and pushes down prices. In order to be effective, competition needs suppliers to be independent of each other, each subject to the competitive pressure exerted by the others. In area of international trade, emphasizing IPR monopoly rights too much will restrict free competition.
a) Negative influence of IPR to free market
When confirming monopoly, the protection of IPR is inevitably sacrificing free competition.
Firstly, the monopoly will confine output and turnover of products and hold out a high market price. For example, if there is no patent system, an invention or technology can be used by everyone freely and output of products will increase and prices will go down; under patent regime, only who owning the patent has rights to produce with his invention, which makes products in higher price; if the inventor transfer patent rights or permit others to use his patent, that man should pay a sum of fees, which will be shifted into the cost of product and influence output and price similarly.
Secondly, the results of implementation of IPR maybe hobble the technical improvement, which betrays the original intention of this legal system. For example, if one invention is conferred exclusive rights on the inventor, other researcher in the relevant area maybe lose encourage, because they should avoid the granted patent. Furthermore, there may be some people just researching the technology which has got patent, without any material progress. In this condition, it is obviously that patent regime will do nothing to encourage technical innovation.
Thirdly, IPR systems maybe enhance the degree of centralization in some industries. One company may monopolize the product of some kind of manufacture in the effective period of a patent and continue to control this industry with new invention on basis of the former, which leaves no space to other new competitors. In other situation, several companies may exchange patent technology or permit each other, which leads to a condition where every company emphasize one kind of product and they divide the market within their common-interest community.
Once the monopoly is formed, it will be difficult to recover free competition, and then the benefits of consumers will be damaged, the development space of specific industry will be dwindled, and invention and innovation of the society will stagnate. What’s more serious, if the monopoly is controlled by foreign economic entities, the domestic economy will be encountered an irrecoverable strike. In this meaning, when establishing the regime to protect IPR, a system to antagonize monopoly is necessary and indispensable.
b) Lack of antitrust law in China
At present, there has not been an intact antitrust law yet, say nothing of specific IPR related antitrust law in China. However, there are some provisions in relation with this area in laws and regulations. Such as Art 46 of Regulations for the Implementation of the Law on Sino-Foreign Joint Venture Enterprise (enter into force in 1983, 2001 Amendment), Art 9 of Technology Import Contracts Regulations (enter into force in 1985, expired), Arts 14-15 of the Implementation of this Regulation, Arts 12, 15 of Anti-Unfair Competition Law (enter into force in 1993), Art 27 of Foreign Trade Law (enter into force in 1994), and Arts 329, 334 of Contract Law (enter into force in 1999), etc.
From the point of legal rules, they regulated directly or indirectly IPR related monopoly and behaviors limiting competition, but they are not from the angle of antitrust law and most of them applicable to foreign economic trade activities cannot be generally applied to IPR related monopolies or competition restrictions. As to the content of such rules, there is still a great gap with international custom.
It is not turgidly speaking that IPR related antitrust law which is suitable for requirements of development of Socialist Market Economy and future era of knowledge economy is at the bud stage, or is nearly blank. So, a hard work has already been put on the desk of China.
Antitrust Law of PRC (Draft for Review), which was made out on 25 July 2002, contains some related provisions, but this Draft is too simple and it judges market monopoly only according to market share, which does not tally with requirements of the era of knowledge economy.
c) Completed antitrust law in the EU
Comparatively, there has been a suit of effective and completed antitrust legal system in the EU. The antitrust area covers two prohibition rules set out in the EC Treaty.
First, agreements between two or more firms which restrict competition are prohibited by Article 81 of the Treaty, subject to some limited exceptions. This provision covers a wide variety of behaviors. The most obvious example of illegal conduct infringing Article 81 is a cartel between competitors (which may involve price-fixing or market sharing).
Second, firms in a dominant position may not abuse that position (Article 82 of the EC Treaty). This is for example the case for predatory pricing aiming at eliminating competitors from the market.
The EU Commission is empowered by the Treaty to apply these prohibition rules and enjoys a number of investigative powers to that end (e.g. inspection in business and non business premises, written requests for information, etc). It may also impose fines on undertakings that violate EU antitrust rules. Since 1 May 2004, all national competition authorities are also empowered to apply fully the provisions of the Treaty in order to ensure that competition is not distorted or restricted. National courts may also apply these prohibitions so as to protect the individual rights conferred to citizens by the Treaty.
The Commissioner Neelie Kroes noted in her speech of 23 September 2005 to the Fordham Corporate Law Institute that: Dominant companies should be allowed to compete effectively. The fundamental aim is to ensure that the EU's powers to intervene against monopoly abuses are applied consistently and effectively, not only by the Commission but also by national competition agencies and courts throughout the EU which also now apply EU competition law.
The EU antitrust provisions are applied in more and more ECJ cases and Commission decisions related with IPR in recent years. For example, on June 15, 2005, the European Commission ended its long-running investigation of AstraZeneca's behavior on the "proton pump inhibitor" market by imposing fines of €60 million ($72 million). This is a major step in the development of the way the antitrust rules are applied to intellectual property rights (IPR) in the European Union[19]. The EU is at pains to point out that its decision is not intended to have a chilling effect on innovation since the conduct complained of was related to the authorizations process and not the right to sell a medicine. However, IP rights holders will see this as a further case which constrains their commercial freedom and increases uncertainty.
The Commission plays an essential role in applying the EU antitrust law to IPR related monopoly by enacting regulations and providing Guidelines and Notices, such as Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements[20], Commission Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements[21], Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community[22], Commission notice: Guidelines on the application of article 81(3) of the Treaty[23], and Commission Guidelines on the applicability of Article 81 of the EC Treaty to horizontal cooperation agreements[24].
3. IPR versus State interest and economic security
The IPR system takes effect of almost every area for a State at different level as a kind of legal system, which is actually a special distribution regime of property rights, especially in relation with property rights of intellectual fruits. As a result, it is able to facilitate but can also conflict with State interest and economic security in great deal, especially for the more vulnerable developing countries.
a) TRIPS and State interest
A. The EU’s integral interest from China
China's integration into the global trading and investment system has been beneficial for both Europe and for China. The EU represents more than 19% of China’s external trade. European companies trading in China have brought capitals, goods, knowledge and technology, which have helped China develop its productive capacity. Reciprocally, trade with China helps to promote growth and jobs in Europe through increasing exports, continuing specialization in high-value products and services and strengthening the global competitiveness of EU companies.
China is a big country of technical imports, and the EU is a great entity of technical exports. EU exports to China increased by more than 100% between 2000 and 2005, much faster than its exports in the rest of the world. In the services sector EU exports to China expanded six fold in the period 1994-2004. The consummating IPR legal protection system in China makes it more charming for the EU to add trade and investment, which have allowed EU firms to remain competitive by gaining access to lower-cost inputs. A significant part of the value added of products "made in China" accrues to European companies. It has also helped European business maintain jobs and viable economic activities in the EU such as research, design, marketing, global management and complex manufacturing. Some investments in China have allowed EU firms to gain market share in the China market and supported our exports.
As this investment increases with Chinese commercial expansion beyond its domestic market, European companies will benefit from selling their experience and knowledge protected by IPR laws in distribution, sales and logistics networks.
Competitively priced imports from China have resulted in lower input prices for EU businesses and lower prices for manufactured products in Europe which have generally translated into lower prices for consumers. The total effect on inflation was estimated by the OECD to be -0.2% for the Euro zone for the period 2001-2005. This in turn has helped keep low global interest rates. Savings generated as a result of cheaper goods and inputs have been invested in other parts of the European economy.
B. TRIPS and State interest of China
The original intention of China to try its best to join the WTO, the same as many other developing countries, is out of the consideration of benefits from the overall package containing reduction of trade protection of developed countries[25]. TRIPS is reasonable as part of overall package, but in the rationale of itself, a restrict protection to IPR has brought a lumbersome burden to developing countries. Especially, the negative influence to public health from medicine patents is threatening social stability and State interest of developing countries. At the same time, the commitments made by developed countries to liberalize agriculture and textiles and reduce tariffs, have not been honored, while they have to live with the burdens of the TRIPS agreement.
Notwithstanding, as a great developing country, whether China has got only the burden and nothing benefit? How can China get more interest under the legal framework of TRIPS?
Before entering into WTO, a comparatively perfect IPR system had been established and worked very well. For example, during nearly 20 years since the Patent Law entered into force, 314,771 invent patents has been applied, which occupied 50% of all the invent applications. 70% of researchers in universities think that Patent Law is very helpful to encourage personnel of science and technology to invent. As more and more patent rights have been transformed to factually economic interest, the IPR system is in favor of reclaiming research outlay and stimulating re-devotion[26]. The protection of copyright has benefited all kinds of economic entity, especially private economic entities and new-developing computer and biological industries.
China is a developing country in science and technology[27], which means that even there is no TRIPS, China, is still a State of technical import. Even though this seedtime is insurmountable, the existence of IPR legal system brings a great deal of veracious and lower priced technical information and excites increase of domestic innovation.
All in all, national IPR system and obligations of TRIPS have negative and positive influence to China, so what is more important is to encourage benefits and get rid of harms.
b) IPR and State economic security
IPR system is an organic part of State legal and political regime, so only on basis of strategic objectives of the State, its importance and status can be correctly recognized and accurate IPR strategies can be established to guarantee State economic security.
A. Targets of the EU IPR policies
There are two main targets of the EU IPR policy: safeguarding European companies and defending the EU's interests.
The Commission takes action to assist EU companies on the ground, in particular small and medium-sized enterprises. Working through existing structures, such as the IPR helpdesk and the network of European Information Centers, the EU extends and strengthens the existing intellectual property rights helpdesk to provide training and advice on protecting and defending European intellectual property rights in China. The EU also works to develop private-public partnerships with EU industry federations and others to improve the protection of IPR in China[28].
Where trade irritants arise between China and the EU, the EU always seeks to resolve them through dialogue and negotiation. However, where this fails, the Commission will use the WTO dispute settlement system to resolve trade issues with China and to ensure compliance with multilaterally agreed rules and obligations.
Trade defense measures will remain an instrument to ensure fair protection of IPR between China and the EU, as with other countries. The EU will use these instruments carefully but rigorously where they are justified. At present, the conditions for granting Market Economy Status (MES) to China for IPR protections are not fulfilled in the EU’s point of view. The EU is actively working with China with a view to creating the conditions permitting an early granting of MES. Recent progress has been made on some of the conditions.
B. A potential concussion to economic security of China
Since 1980s, China has adopted the economic strategy of openness and introducing foreign investment to facilitate development, in which borrowing foreign technologies and capitals is a crucial part. In practice, there has appeared a good result. 400 Multinational Corporations out of 500 in total have invested in China, from Motorola of high technology to Coca-Cola producing soft drink, from Germany Siemens to Japanese Honda. One of the most important reasons for such corporations to invest in China is that there is a relatively flawless IPR legal system.
Even though in the UK IPR Commission’s point of view, IPR protection itself can not provide necessary and efficient motivation for foreign incorporations to invest in specific country[29], the reality and more important is that if there is no IPR protection regime, it will be more difficult to import investment from multinational corporations. As consideration of Nokia, everyone should do business in IPR protected industries and countries to safeguard valuable fruit of R&D and then take market benefits brought by innovation[30]. As to corporation like Nokia, IPR strategy is core part of its management strategy and it is beyond imagination that there is no IPR administration and IPR protection system. IPR system is not sufficient condition to introduce foreign investment, but under the upholding of other policies and conditions, IPR is essential requirement to attract direct investment from High-tech multinational corporations.
China became the biggest FDI afflux country in 2002, which brought China job opportunities, trade surplus and manufacture technologies, and what’s more important, the investment is on the basis of tangible substance, factories, so the financial risk maybe caused by speculation of foreign investment can be avoided, which in some degree protect the State economic security of China.
It is proved practically that multinational corporations have played a positive part in development of China, and made extrusive contribution for economic prosperity and cultivation of persons with ability[31]. In this angle, IPR system has protected the interest of foreign applicants and taken an irreplaceable effect on introduction of foreign investment and advanced technologies. So, even IPR system may influences State interest and Security of China in some area, as long as openness and market economy are adopted in China, that system will only be perfected step by step.
c) Rethink about the shortcoming of Weak Protectionism
There always emerged such phenomenon in developing countries that most people reject to define intellectual property as private property and protect producer of intellectual asset in legal level as the result of domestic economic development and ascending international trade. This is what is called Theory of Weak Protectionism of IPR[32], the four rationales of which are economizing State capitals, enhancing local industries, assisting to obtain technologies and cutting down dependency[33].
Hereinto, assisting to obtain technologies and cutting down dependency are two aspects related with State security especially technology security, which will be emphasized here.
Without IPR protection, a total transformation of technology is nearly impossible to be acquired, as the transformation especially for a whole set of technology is a complex and systematic project. Without acquirement of a whole set of technology and self-contained technical support, in the way of diving capital and researching by reverse project, the final result is that there is no competitiveness in imitators’ products in the angle of market economy. Accordingly, the so-called assisting to obtain technologies is just obtaining insufficient technological scenario, without economic interest, market competitiveness and more development space in international market.
One of premises to reduce dependency is that no devotion of R&D derives from inside of country and there will be not any technical innovation given birth. The other is that developing countries are absolutely dependent to developed countries and no dependency to developing countries from developed countries. However, if cancel or diminish protection of IPR, the final result will be that chances of innovation will be diminished too, capital introduced to research will be reduced and developing countries will be more dependent on technologies supports from developed countries.
It is obvious that the influence of the battle of IPR to the State security is unbearable to be ignored, but this importance deals with more all-win and common prosperity than counterwork. In particular for China, the greatest developing country with considerable capability of innovation, IPR protection should be considered as a means to boost up state economy and enrich technical strength.
Compared with the EU, China possesses less advantage in trade battle related IPR. However, this stage is insurmountable for every developing country. The urgent task for China to take is to try the best to find comparative competitiveness and improve capability of innovation availing itself of chances to cooperation with the private and public entities of the EU.
IV. Cooperation and dialog between China and the EU
There are conflicts between China and most developed countries in trade related IPR protection. Difference is that the EU has been holding a more relatively kindly attitude than others such as the US. Cooperation and dialogs have been launched from the end of 1990s and are working comparatively favorably nowadays.
1. Cooperation program
China-EU Cooperation program on IPR was signed by Chinese government and the EU Commission on 7 May 1996, in which the EU would invest 4.8 million Euro to provide necessary funds for IPR related institutions of China, for example, universities, academies, governmental offices and other relevant institutions.
The objective of this program is to cooperate with Chinese government closely on facilitating and protecting domestic IPR of China by a great deal of pointed activities, which mostly include training to judges and lawyers, upholding for legislation and implementation, enhancement of administrative management and public consciousness, transformation of technologies and supports for universities and research departments.
There are two parallel approaches to construct a favorable environment of IPR protection and establish a suit of protection and acceleration system. One is to support central institutions inside China involved IPR. The other is that it encourages relevant institutions to protect IPR in actively and positively in a much wider area, especially reanimating local governments to implement IPR policies effectively.
Specific methods are to organize training and professional consultation activities, open seminars and symposiums, organize relevant persons going to Europe to study and communicate with correlative persons of the EU for a short time. Till now there have been more than 2,500 Chinese experts containing judges, lawyers, administrative officials and custom officers obtaining chances to take part in training courses and seminars held by WIPO, WTO, EPO and other international and regional organizations.
Yi Xiaozhun, Vice Minister of Commerce of China, met Benita Ferrero-Waldner, European Commissioner for External Relations and European Neighborhood Policy, in Beijing on Jan. 17, 2007, and signed the agreement on finance for 3 cooperation projects: China-EU law school, Second Stage of China-EU IPR Protection, which will emphasize on improvement of effectiveness of IPR protection in China, and the China-EU Business Management Training[34]. Accordingly, the EU will provide a volunteer assistance of 37.2 million Euros to China. In addition to investment from Chinese government, the total value of the three programs is 62.655 million Euros.
2. Dialogue mechanism
In recent years, there have been a number of important economic dialogues, which have bilateral trade implications, established between the EU Commission and China. These dialogues cover issues such as intellectual property, market access, macroeconomic and financial sector issues, agriculture, competition, regulatory and industrial policy, and general product and food safety. The EU has also concluded sectoral agreements with China such as the Customs Cooperation Agreement which provides for reinforced EU China cooperation on IPR controls and supply chain security.
More important to be pointed that, on 30 October 2003, both sides reached an agreement on a structured dialogue related with IPR, of which objectives, contents, structure as well as frequency and participation are laid down herewith.
DG Trade and the Ministry of Commerce agree to set up a structured EU-China dialogue on intellectual property rights where all-encompassing issues, bilateral and multilateral, related to the protection and the enforcement of intellectual property can be discussed.
The dialogue is structured into horizontal and sectoral items, addressing respectively the following issues:
1. Horizontal discussions covering all IP sectors, between the Ministry of Commerce which is coordinator from the Chinese side and DG Trade which is the coordinator from the EU side, will cover inter alia the following issues:
a) Institutional issues: exchange of experiences in EU and China on IPR enforcement, co-ordination with sub-central levels, inter-agency coordination, institutional reform, human and financial resources, etc;
b) Horizontal legislative issues: exchange of experiences in EU and China on legislative progress;
c) Horizontal enforcement issues: exchange of experiences in EU and China on central and sub-central enforcement by customs, police, administrative and judiciary bodies, Co-ordination with other countries on exports of counterfeit goods.
d) Public awareness of consumers and right-holders.
2. Sectoral discussions on each individual IP sector.
The precise agenda of each session will be decided by joint agreement between the parties.
It is understood that the coordinator on each side will call upon all relevant IPR-related agencies to participate in the discussions, both horizontal and sectorial.
The dialogue will consist of one-day sessions at least once a year with the venue alternating between Brussels and Beijing. DG Trade and MOFCOM will co-ordinate the dialogue. The precise composition of each delegation will be decided by each party in consultation with the other one. The dialogue will report progress at the Economic and Trade Working Group (ETWG).
The dialog mechanism helps to promote regulatory cooperation and convergence and is important in managing an increasingly complex relationship.
V. Essential measures for reconciliation
Cooperation and dialogs have exerted a good importance to ease up conflicts in between; however, truly speaking, they are just superficial and temporary to a large extent. To solve IPR problems thoroughly and essentially, we should pay attention to reforms and constructions in the following areas.
1. Elimination of IPR technical barriers
Competitions rounded by IPR have been considered as the highest form of business competition under the background of globalization. IPR related technical barriers are being utilized by the EU as a favorable trade weapon to defend its economic interest, which consists of the first important issue confronted with Chinese enterprises in international business competition, especially after China’s entering into WTO and promising to take more responsibilities. A crucial measure to be adopted by China and the EU for harmonizing conflicts caused by IPR related TBT has been put on the desks of the two economies, as not only China will be suffered by such trade obstacles, the EU will be encountered the same question along with technical development of China and gradually deepened relation between China and the EU.
Some possible countermeasures are to be provided as follows:
Firstly, making a clear distinction between legitimate IPR protection and illegal IPR related TBT.
Lawful rights of IPR owners should be fully respected and protected, and actions should be put in practice to prohibit production and distribution impinge foreign IPR inside of the country, especially paying attention to stop exporting wrongful products to other countries.
However, in name of IPR protection but factually TBT established for trade protection should be opposed and retorted according to effective international approaches, such as, by constituting treaties of international economy and trade on a balance of interests from developing and developed countries, in which China should exert its influence and importance as the biggest developing countries, or by solving trade dissensions on basis of contractual clauses negotiated bilaterally or multilaterally. Extremely, vindictive countermeasures may be taken in condition that developed countries set embargos on developing countries and even trade revenge by all kinds of excuses supported by their IPR advantage.
Secondly, IPR conscientiousness should be enhanced and self-dependent IPR should be created and manifold.
At present, more than 85% of IPR in the world are possessed by developed countries, in particular, the US and Japan. For example, during 1989 and 1993, the EPO received 280, 000 patent applications, 28% from the US, 20% from Japan, 19% from German, 8% from France, and about 6% from the UK. 1,280,000 applications for patent in the US from 1982 to 1996 were composed of 54% by mainland of the US, 20% of Japan, 8% of German, 3% of the UK, and less than 3% of developing countries including China.
Lower price based on low-priced labor, which is the contemporary fact in China, will not be an advantage for competitiveness in a long run. A strong power of innovative capability and technology is the most important pillar in putting a food in international market and competition with foreign multinational corporations. Innovating and developing on basis of technical importation and establishing self-dependent IPR are urgent for China to keep up with the EU and other developed States and win a more strong status in international competition.
Thirdly, standards legislation should be strengthened with adopting international standards positively and establishing their own standards. New coming high-tech industries in China should be encouraged to constitute world class standard by themselves and join in the establishment of international standards. For example, the standards for Chinese traditional medicine should transcend that of Western medicine and become center of international standards.
At last, TBT agreements should be sufficiently used to inspect IPR related TBT by Chinese enterprises to prevent duble standards or standard discrimination. Facing obviously discriminated measures, China should promote bilateral negotiations or resort to WTO disputes settlement regime to maintain legal interest.
There is an obvious technical gap between China and the EU, but there is no reason for the EU to use this gap to make unfair profits in the bilateral economic relation. Efforts should be made by both China and the EU to low down the possibility for IPR related TBT to bring mutual collisions and obstacle free trade in between.
2. A consolidated antitrust law in China
At present, China is in a process of industrialization, during which a great deal of technologies are needed to be imported. In the mean time, some multinational corporations are taking up Chinese market in favor of absolute advantage of IPR. To prevent foreign firms from abusing IPR and monopolizing technical market, China has to strengthen legal restrictions and stick up legal interest of domestic consumers and firms on foundation of reasonable protection for IPR owners by referring international and regional experiences, especially the EU.
Antitrust law, which means a flawless antitrust code here, is crucial and indispensable for China. In such a code, all antitrust rules should be applicable to IPR area and there should be a suit of effective administrative structure for management and implementation.
In the era of knowledge economy, information and technology have become the decisive factors for economy and compelled a deep change of economic structure. Antitrust law, as closely related with economy, will be surely challenged by knowledge economy and be enriched by IPR, which means that antitrust law will be more tolerant but abuse of IPR will be restricted in a new progress. This situation pressurizes every developing country to establish and perfect domestic antitrust law to maintain the order of internal market.
3. Establishment of IPR security system under WTO
As discussed above, IPR facilitates economic development but also brings threats to State interest and security. An economic security system is needed in China, which is possible to come true in accordance with legal rules of TRIPS.
Article 73 of TRIPS Agreement regulates exceptional clauses of security, which provides:
Nothing in this Agreement shall be construed:
(a) to require a Member to furnish any information the disclosure of which it considers contrary to its essential security interests; or
(b) to prevent a Member from taking any action which it considers necessary for the protection of its essential security interests;
(i) relating to fissionable materials or the materials from which they are derived;
(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;
(iii) taken in time of war or other emergency in international relations; or
(c) to prevent a Member from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.
These clauses are initially established for developed countries to blockade technologies towards developing countries, even someone considered them as a new variation of economic aggression and colonialism and tools facilitating developed countries to intervene economy of developing countries[35]. However, on the other side, they can also assistant developing countries like China to establish security system of IPR under framework of WTO and resolve specific problems in the specific period. Presently, there have not been relevant regime and feasible legal regulations to carry out the exception clauses. Following the US, China can establish security institution to be responsible for appraising the influence of trade related IPR and technologies to China under the executive framework, protecting IPR related State interest by means of international business.
Article 7 of TRIPS agreement stipulates the objectives of the WTO, which provides: the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations. Accordingly, the status of users of IPR should be equal to creators protected by IPR law. Taking advantage of this clause, China can gradually establish and perfect legal regulations on coercive permission of IPR, making it as a deterrent force for IPR related TBT, which is a kind of security weapons allowed by the WTO legal rules.
A flawless security system is the premise of fair trade between China and the EU. The EU has run a long road ahead of China in virtue of executive regime and advanced rules of WTO. It has responsibility to assist China to establish relevant regime to protect IPR for both and maintain a stable bilateral relationship.
VI. Conclusion
It is easy to understand that IPR has become the central issue for economic and trade relations between China and the EU, which illuminates that there are essentially practical meanings to analyze and estimate conflicts between them objectively and rationally, and discuss further about cooperation in area of IPR.
Obviously, there are similarities and differences of interest aspirations related with IPR between China and the EU. As a community of developed countries, its economy is seriously dependent on technology exports in core of IPR, and monopolies of IPR will surely bring the EU a long-term practical interest, so it is an inevitable choice for the EU to emphasize importance of IPR protection. As the biggest developing countries, establishing an innovative country, respecting IPR of other countries and creating self-dependent IPR are its fundamental State policies. As Premier Wen Jiabao has said, protection of IPR in China will be as hard as steel, not as soft like bean curd. To enhance IPR protection is not compelled by external pressure, but self-requirements for strengthening state competitiveness, respecting international rules and maintain state security and economic interest.
At the same time, it should never be neglected that conflicts of IPR protection between China and the EU are nothing but disputes of different economic entities at different developing levels. On one hand, the EU proposes to carry out global protection of IPR and monopolize markets of other countries to obtain maximum economic interest, under the background of economic globalization and swift and violent development of information and technology; on the other hand, limited economic development degree and huge regional discrepancy result in considerable cost for China to protect IPR, so it is impossible and unpractical for China to reach protecting level as the EU in a short period, even though China never stop working hard to reinforcing this protection without a rest.
The reconciliation of conflicts between China and the EU requires us to obey fundamental principles of reciprocal respect, equality and mutual benefit, and common development of economy, social harmonization and health. Taking long views, on basis of continuing deepening full-scope strategic partnership, both China and the EU should, obeying the legal framework of TRIPS, by dialogs, negotiation, consultation and further understanding and trust, examine strictly behaviors of IPR tort and abuse, take material steps to eliminate IPR related TBT, put an end to monopolies on technical trade, and protect respective state interest and economic security, especially emphasizing on interest of China as a developing country to realize a balance between the two economies, accordingly, bringing along co-prosperity of China and the EU.
REFERENCES
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David I. Bainbridge. Intellectual property. Harlow : Longman, 2002.
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l Scholarly Essay
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[1] EU – China: Closer partners, growing responsibilities. COM (2006) 632 final.
[2] See http://www.europeanchamber.com.cn
[3] Which mean South Korea, Singapore, Hong Kong and Taiwan.
[4] Li Shunde. TRIPS in relation with IPR legal system of China, IPR Research, Col. 9
[5] This means North American Free Trade Agreement.
[6] Zheng Chengsi, To Discuss IPR, Law Press of China, 1988, pp656.
[7] Li Shunde. TRIPS in relation with IPR legal system of China. IPR Research. Vol. 9.
[8] Xu XiuXia, Influence and countermeasure of IPR protection of China after entrance into WTO. Min Bai Study. 2001(5).
[9] Fu Xu, Shi Fang, Three breakthroughs of Copyright Law, Jing Bao-Law weekly, 11 June 2001.
[10] Tang Guangliang. Nine modifications of Copyright Law Facing to WTO. Legal Daily. 6 October 2002.
[11] Shao Jingchun, EU law and regime. Beijing. People’s Court Press. 1996. pp494-507.
[12] Lb，pp498.
[13] Wei Zhi，Comment on the Directive of Protection period of Copyright in the EU, Chinese and Foreign law, 1996,(6).
[14] See Directive 1999/815/EC.
[15] See Child-resistance for lighters. Safety requirements and test methods, EN 13869:2002
[16] See Directive 2002/96/EC.
[17] See Directive 2002/95/EC.
[18] Mark A. Lemley, "Property, Intellectual Property, and Free Riding" (Abstract); see Table 1: 4-5.
[19] See European Commission Raises Stakes in IP/Antitrust Battle, available on http://www.gibsondunn.com.
[20] See OJ 2004 L123/11.
[21] See OJ 2004 C101/2.
[22] See OJ 2001 C368/7.
[23] See OJ 2004 C101/97.
[24] See OJ 2001 C3/2.
[25] Integrating Intellectual Property Rights and Development Policy.Report of the Commission on Intellectual Property Rights of the UK. Published in London. November 2002 (2nd Edition). pp9.
[26] Chen Meizhang, Facilitation of Chinese patent system to technical improvement and economic development. Research on Patent Law. IPR Press, December,1999.
[27] Xiao Feng. An analysis of actuality and motivated power of technical development in China. Future and Development. 2001(4).
[28] See COM(2006) 631 final.
[29] Integrating Intellectual Property Rights and Development Policy.Report of the Commission on Intellectual Property Rights of the UK. Published in London. November 2002 (2nd Edition). pp2.
[30] Qi Xiaohuan, Innovation brings competitiveness and enterprise image, Speech on Second International Forum of Creativity and Invention of WIPO, 23-25 May 2002, Beijing.
[31] Zhang Zhicheng. Comments on IPR strategy of multinational corporations, IPR Review of Peking University. Col.3. Law Press. August, 2003.
[32] Liu Maolin. Economic analysis of IPR, Law Press, December 1996. pp82.
[33] Lb.
[34] See website of ministry of commerce of the PRC, http://www.mofcom.gov.cn.
[35] Wesley A. Cann. Creating Standards and Accountability for the Use of WTO Security Exception: Reducing the Role of Power based Relations and Establishing a New Balance between Sovereignty and Multilateralism, Yale Journal of International Law, Vol. 26(2001), No.4,pp413-485.
