1. IP Protection for Technology Transfer in China Prof. ZHANG Naigen Director, the IP Center Fudan University zhangng@fudan.edu.cn

2. 2 Outline Increased FDI and technology transfer The risks of technology transfer in China Improved IP protection for technology transfer The recent development of the doctrine of equivalent (DOE) The critical issues in protecting trade secrets

3. 3 Increased FDI in China

4. 4 Source: www.mofcom.gov.cn (2005/04/20)www.mofcom.gov.cn Firms % increase FDI $ Billion % increase 20034108120.22115.7039.03 2004436646.9153.4733.38 Total5089411096.6

5. 5 Technology Transfer in China, 2004 Source: www.kjs.mofcom.gov.cn (2005/04/20 )www.kjs.mofcom.gov.cn Tech transferNo. $ million % Total% increase patent 361 1026.32 7.41 -22.57 Know-how 1385 4130.03 29.81 -6.84 Tech service 5256 3460.70 24.98 -2.35 Software 901 254.14 1.83 -34.85 Joint venture 95 114.95 0.83 -9.70 Key project 335 3784.30 27.31 27.59

6. 6 Risks of Technology Transfer More enterprises operated exclusively with foreign capital Foreign investors worry about disputes with Chinese partners or infringement of IPR. More R & D Centers move to China More high technologies are introduced into and developed in China. (Currently, more than 400 in China, 96 in shanghai) Risks of insufficient protection of IPR More improvements of protection of IPR.

7. 7 Reduction of Risks to obtain IPR Territory limitation for protection of IPR Local conditions or business climate to transfer technology Improvement of procedures to obtain IPR in China New Patent Law abolishes the procedure of cancellation within 6 months after granting patent; New judicial procedures to review the final administrative decisions.

8. 8 Reduction of Risks to Transfer IPR Valuation of costs to transfer IPR More risks to transfer IPR, higher costs to be valued Costs for licensee, costs for society Uncertainty and risks More guarantee of protection for IPR to reduce risks Improvement of protection for IPR More IP legislations: patent/trademark/copyright More IP enforcements: custom service/courts

9. 9 Reducing Risks of Infringement Costs for IPR holders against infringement Costs to prevent infringement, costs to get remedy More judicial enforcements In 2004, 8832 IPR cases handed by courts (increased 46.82%) New Judicial Interpretation on Several Issues of Application of Laws in Handing Criminal Cases of Infringing IPR (Dec. 22, 2004) Lower the threshold of panel punishment for infringing IPR; Expand the range of penal protection against infringing IPR.

10. 10 Recent Development of DOE One of the highest risks: patent infringement How to find patent infringement Impact of finding patent infringement on patent application 90 % patent infringements are related to DOE DOE: critical issue of patent infringement Recent development of DOE in U.S.A. and its influence in China Hilton case (1997) Festo case (2002) DOE and estoppel China ’ s Supreme People ’ s Court interpretation on DOE (2001) Its IP tribunal interpretation on estoppel (2001)

11. 11 Judicial Practice of DOE in China Application of DOE and estoppel DOE can ’ t be used to enlarge scope of claims; DOE shall be applied in element by element; Estoppel shall be applied for DOE cases; Existing technology can ’ t be interpreted as claims. General requirements of DOE Triple equivalents: means/functions/results Obvious for ordinary experts

12. 12 Critical Issues of Protecting Trade Secrets Protection of trade secrets Internal protection: define secrets, measures confidential agreement External protection: anti-unfair competition Anti-unfair competition law Art. 10.3 trade secrets/technology secrets Art. 25 remedy against unfair competition

13. 13 More Protection for Trade Secrets Criminal punishment against unfair competition Art. 219 of criminal law New judicial interpretation: material damages RMB 500,000 serious damages RMB 2.5 millions Need a new law of protection for trade secrets Substantial protections: definitions procedural protections: evidences Improvement beyond WTO commitments

14. 14 Q & A Thanks