On December 28, 2009, the Supreme Court of the People's Republic of China issued an Interpretation of Issues in the Application of the Law in Patent Infringement Dispute Trials. In civil law jurisdictions like China, Supreme Court Interpretations are used to codify recent judicial precedent. This latest Interpretation brings China's patent laws, at least in the courtroom, closer than ever before to their western counterparts. Topics covered in the Interpretation include:

Given the continuing trend of Chinese Patent Law towards western standards, it is important for patentees and alleged infringers alike to maintain an international perspective. In order to better meet its clients' ever-changing legal needs, Lehman, Lee & Xu has staffed its industry-leading team of intellectual property professionals with not only registered Chinese patent attorneys, but licensed United States patent attorneys as well.

On December 26, 2009, the National People's Congress passed the Tort Liability Law of the People's Republic of China, in which Article 36 codifies the country's regulations involving internet infringements of intellectual property (IP) rights. Similar to the United States Digital Millenium Copyright Act (DMCA), Article 36 of the new Tort Liability Law extends infringement liability to web service providers as well as infringing users.

For example, Article 36 allows an IP holder to request that the web service provider delete, shield, cut the links to and/or take other necessary measures to combat infringement by a web user. If the web service provider does not take proper measures in response to the IP holder's request, the provider shall bear joint liability with the infringing web user. Moreover, if a web service provider discovers its users employing its web service to infringe others' IP, and fails to take preventative measures, the provider shall likewise bear joint liability with the users.

Lehman, Lee & Xu has successfully employed the regulations codified in Article 36 to assist numerous IP holders with removing infringing internet content from Chinese web servers. The firm's seasoned intellectual property enforcement team includes internet specialists who can identify infringing web users and web service providers, and achieve rapid takedown results.

The China Internet Network Information Center (CNNIC), the administrative agency responsible for operating and administering China's domain name registry (both the ".CN" country code top level domain and the Chinese Domain Name system), announced this month that it is drafting a new regulation that will allow individuals to register domain names.

Last month, China barred individuals from applying for ".CN" domain names as part of a national campaign against pornographic content spreading online. Applicants have been required to submit a business license as part of their application for domain name registration. However, this policy appears to be approaching an end. As CNNIC Deputy Director Qi Lin stated, "If we stop individuals from obtaining domain names, they will register abroad or fake themselves as company applicants anyway."

The primary implications of the new policy for Lehman, Lee & Xu clients relate to cyber squatting rather than content regulation. Although the intellectual property enforcement team at Lehman, Lee & Xu specializes in domain name disputes, the firm's foremost advice to clients is to register key domain names and variations thereof as early as possible to avoid disputes before they begin. The firm provides competetive registration services, as well as strategic registration counseling.

Lehman, Lee & Xu successfully represented Shanghai Newegg Co., Ltd., the Chinese branch of American online retailer Newegg.com Inc., in the company's domain name dispute with China's Edible Fungus Technology Development Co., Ltd.

In the year 2000, Newegg expanded its computer and electronics retail operations to China, registering and doing business through the domain name "www.newegg.com.cn". However, the company soon found that another company had registered the domain name "www.newegg.cn", and was directing visitors to a website selling sexually explicit adult products. Although Newegg had rapidly gained Chinese market share and brand recognition, the cyber squatter's nearly identical domain was sufficient to cause consumer confusion.

In 2008, Newegg retained Lehman, Lee & Xu to identify the cyber squatter and procure the "www.newegg.cn" domain name. The firm identified the squatter as China's Edible Fungus Technology Development Co., Ltd., and, once out-of-court negotiations failed, filed a lawsuit in the Beijing Second Intermediate People's Court in early 2009. After written and oral arguments, the Court found that (1) Newegg enjoys a legitimate right in the domain name "www.newegg.com.cn"; (2) the major part of the domain name "www.newegg.com.cn" is similar to that of "newegg.cn"; (3) the domain name registered by the defendant was directed to a website selling sex toys, which was not managed by the defendant; and (4) the defendant had provided no evidence to prove that it had ever practically used the domain name itself. The Court therefore concluded that the defendant's act of registering the domain name "www.newegg.cn" without practical use had caused confusion among consumers, damaged Newegg's goodwill, infringed Newegg's legitimate rights and constituted unfair competition. The Court then ordered the defendant to (1) transfer the domain name "www.newegg.cn" to Newegg; and (2) compensate Newegg with cash damages.

The defendant appealed to the Beijing High People's Court, where Lehman, Lee & Xu again represented Newegg and secured a settlement agreement in which the defendant agreed to transfer the domain name.

The Beijing High People's Court recently reached a milestone verdict in a patent infringement case that has already lasted seven years. The case involves a disputed automobile logo claimed in the plaintiff's design patent, but used without his permission by the defendant in advertisement materials.

The plaintiff Lu Shunping filed a design patent application for the logo in 2002, and was granted a design patent in 2003. At around that time, he discovered that the defendant Hengtong Huatai Automobile Sales Co., Ltd. was using the patented design in various outdoor, television, internet, upholstery, newspaper and magazine advertisements. Mr. Lu promptly filed an infringement lawsuit against Hengtong Huatai. Hengtong Huatai maintains that it used the disputed logo before Mr. Lu, and filed a lawsuit to invalidate the design patent.

On April 28, 2008, the Patent Reexamination Board of the State Intellectual Property Office (SIPO) ruled Mr. Lu's design patent invalid, finding that Hengtong Huatai had used the logo in a promotional brochure prior to Mr. Lu's patent application. The Beijing No.2 Intermediate People's Court concurred with SIPO, and ruled accordingly. However, on December 18, 2009, the Beijing High People's Court ruled that Mr. Lu's patent is valid, because it was unreasonable to conclude that the promotional brochure was open to the public.

This case highlights the fact that the evidentiary standards used by the courts and those used by SIPO (e.g., Patent Reexamination Board) are not the same. Accordingly, while most clients retain only patent attorneys to pursue invalidation actions, they should consult or retain trial attorneys as well. The legal team at Lehman, Lee & Xu includes skilled patent attorneys and trial attorneys, with a long history of success in both SIPO and court proceedings.

Garnier, a division of cosmetics giant L'Oreal, has failed again in its attempt to register the trademark "Aqua Defense" in China. The company initially applied for the mark in relation to perfumes, toilet water and cosmetics in December 2005, but was unsuccessful during prosecution and before the Trademark Review and Adjudication Board (TRAB). TRAB held that "Aqua Defense" referred to a description of function, and was therefore not distinctive enough to qualify for registration. Garnier challenged TRAB's decision in an appeal to the Beijing No.1 Intermediate Court, but the Court rejected this appeal and upheld TRAB's rejection of the mark, finding that there was no exclusive relation between Garnier and "Aqua Defense."

This decision evidences the China Trademark Office's and Chinese courts' increasing sophistication with respect to trademark examination, both in English and Chinese. Nevertheless, attorney arguments during prosecution and before TRAB can have a substantial effect on registrability, and the award-winning trademark department at Lehman, Lee & Xu has on many occasions been successful in registering trademarks for clients where other firms were unable to do so.

Police this month raided a vendor's warehouse near Beijing's famed Silk Street market, seizing more than 8,000 knockoff designer bags. The knockoffs, valued at nearly RMB770,000 (US$113,000), bare such well-known brand names as Louis Vuitton and Chanel.

The Chinese vendor is now facing prosecution in Beijing Chaoyang District Court, where prosecutors are pushing for criminal liability based on the large quantity of bags involved. Silk Street market has been the subject of controversy in recent years because of similar trademark-infringing activities. Nevertheless, the market remains extremely popular, especially amongst foreigners.

The intellectual property enforcement team at Lehman, Lee & Xu has organized hundreds of successful raids, and maintains close working relationships with local police and Administration for Industry and Commerce (AIC) offices throughout China. The firm recognizes raids and customs recordal as important tools in combating infringement.

Statistics from the National Working Conference on Administration for Industry and Commerce show that the number of pending cases at the China Trademark Office dropped significantly in 2009. The period of pendency is now just 3 years, as compared with 13 years in early 2008.

At the same time, the State Administration of Industry and Commerce (SAIC) is now leading the world in trademark registrations, examinations and living applications. As of December 2009, the SAIC had examined 1.3 million trademark applications (up ~110%), resolved 22,700 disputed cases (up ~130%) and registered a cumulative 4.2 million trademarks.

While the SAIC has certainly expanded its capabilities, its ultimate ability to keep up with demand remains to be seen, especially as more businesses recognize the importance of trademark registration in China. Concrete examination trends likewise remain to be seen, for example, as of November 18, 2009 the SAIC's Trademark Review and Adjudication Board (TRAB) resolved 31,708 cases, of which 24,228 related to rejected applications. Lehman, Lee & Xu's trademark professionals excel not only at filing quality applications on short notice, but also successfully securing registrations from the SAIC.