IP in the News: How Phase 1 of the New U.S.-China Trade Deal Will Impact IP Protections in China

Post Authored by Stephanie Nikitenko

Phase 1 of the “Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China” was signed into effect on Wednesday, January 15, 2020. [1] This first phase of the trade agreement includes a chapter on intellectual property that will strengthen the enforcement of U.S. intellectual property rights in China. [2]

Here is a broad overview of what to expect:

  • Increased criminalization of IP theft and infringement by requiring the transfer of cases from administrative authorities to criminal authorities when there is a “reasonable suspicion” of a criminal violation.
  • China’s promise to stop requiring U.S. companies to share their technology as a cost of doing business in China.
  • Providing specific protections for trade secrets, patents and pharmaceutical-related intellectual property, trademarks and geographical indications, and enforcement against pirated and counterfeit goods.
  • Implementation of these IP protections in China will begin with an Action Plan being submitted by China within 30 days of the agreement being signed. This action plan will include “measures that China will take to implement its obligations” and “the date by which each measure will go into effect.” [3]

Counterfeits and IP theft in China have long been a contentious topic. Many U.S. businesses and legal practitioners are curious about the idea of increased IP protection in China but wonder if it will be sufficient, and how China will enforce it. Most of the introductory language in the trade agreement is broad and vague. For example, when discussing bilateral cooperation on intellectual property protection, both China and the U.S. agree to work together to strengthen IP protection, but only to discuss biennial work plans. [4] No other specific commitments were included.

While chapter one addresses specific IP concerns, it narrows its focus to specific enforcement actions for each area of IP. For trade secrets, the intent is to “expand the scope of civil liability for trade secret misappropriation beyond entities directly involved in the manufacture or sale of goods and services, so that trade secret owners can bring suit against any natural or legal persons, including individual former employees or cyberhackers.” [5] Additionally, in the case of trademarks and geographical indications (GI’s), China is obligated to “address longstanding concerns regarding bad-faith trademark registrations, such as by invalidating or refusing bad faith trademark applications,” and “for GIs, use[ing] relevant factors when making determinations for genericness, including usage of a term in dictionaries, newspapers, and websites, how the good referred to by a term is marketed and used in trade, and whether the term is used in relevant standards.” [6]

There is also concern regarding how the U.S. will ensure China’s compliance with the commitments set forth in the trade agreement. One way is “the promise of further reduction in U.S. tariffs in the second phase of the trade agreement [which] would likely be an incentive for Beijing to ‘faithfully implement this agreement.’” [7] The U.S.  can also ask its allies to work with it in a multilateral system to keep Beijing from reneging on its promises. [8]

Ultimately, this trade agreement is a positive step forward for U.S. IP protection in China. How China will execute these promised actions will be determined.

[1] Scott Horsley, Trump Signs ‘Phase 1’ China Trade Deal, But Most Tariffs Remain In Place, NPR (Jan. 2020), https://www.npr.org/2020/01/15/796305300/trump-to-sign-phase-one-china-trade-deal-but-most-tariffs-remain-in-place.

[2] Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China Fact Sheet, China-U.S., Jan. 15, 2020, https://ustr.gov/sites/default/files/files/agreements/phase%20one%20agreement/Phase_One_Agreement-IP_Fact_Sheet.pdf.

[3] Saheli Roy Choudhury, Beijing cracking down on IP theft could boost investment in China, former US negotiator says, CNBC (Jan. 2020), https://www.cnbc.com/2020/01/16/us-china-trade-deal-intellectual-property-protection-benefits-beijing.html.

[4] Aaron Wininger, China Makes Significant Commitments to Improve Intellectual Property Protection in Phase 1 Trade Deal, Nat’l L. Rev. (Jan. 2020), https://www.natlawreview.com/article/china-makes-significant-commitments-to-improve-intellectual-property-protection.

[5] Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China Fact Sheet, supra note 2.

[6] Id.

[7] Choudhury, supra note 3.

[8] Id.

About the Author:

stephanieStephanie Nikitenko is currently a 3L at The John Marshall Law School in Chicago. At John Marshall, she’s the President of the Intellectual Property Law Society (IPLS) and primarily concentrates her studies on the subject of Intellectual Property. She recently spent a semester working in the JMLS Trademark Clinic where she assisted clients with the Trademark Registration process with the USPTO. Additionally, under the supervision of an attorney, she currently assists a law firm with both their trademark and patent matters.

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