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29 January 2021
On December 26, 2020, the Standing Committee of the National People’s Congress in China introduced punishment for IP infringement that could lead to up to 10 years in prison.
The amendments made by the Congress create more significant criminal penalties, making the maximum prison term seven to 10 years for trademark and copyright infringement.
The new Article 336(I) of the Criminal Law also creates penalties for illegally implanting gene-edited or cloned human embryos into humans or animals. These are some of the first – and by far most substantial – changes to China’s attempts to stop intellectual property theft.
“The increase of the imprisonment penalties against the trademark or copyright infringers for ‘more serious’ cases is welcomed by genuine IP owners. The latest cases in China demonstrate the trend that trademark and copyright infringement cases involving considerable volumes of counterfeit products and illegal gains have been proliferating in recent years. With the elevation of maximum sentences for ‘more serious’ trademark and copyright infringement cases, not only will a stronger deterrent effect be attained, criminal courts in China will also enjoy greater flexibility in their sentencing exercise that relatively stringent sentences may be ordered in cases where the courts think fit,” says Catherine Zheng, a partner in the intellectual property practice at Deacons in Hong Kong. “Our experience is that infringers who have been imprisoned for trademark or copyright infringement, they would not repeat the same offences.”
The amendments only make the maximum prison term seven to 10 years for trademark and copyright infringement. Why have patents been left out?
“There is no criminal offence for patent infringement in the world generally, including China,” Zheng says. “However, China imposes criminal liability for patent counterfeiting, i.e., if a party which does not own patents, but pretends and presents that it owns patents, it is counterfeiting patents. This might explain why Article 216 of the Patent Law specifies that the offence of patent counterfeiting, as opposed to trademark and copyright infringement, can only be punishable as a ‘serious case’ but not a ‘more serious case.’”
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Zheng notes that a patent counterfeiting case may be acknowledged as a ‘serious case’ if the amount of illegal proceeds arising from illegal business operations is relatively large (exceeding Rmb200,000 (US$31,000)), causing substantial direct economic losses to the patent owner (exceeding Rmb500,000 (US$77,000)). In line with ‘serious’ trademark and copyright infringement cases, the maximum sentence for ‘serious’ patent counterfeiting cases was not elevated in the recent amendment and remains to be a three-year imprisonment in addition to a fine, Zheng says. “From the patent owners’ perspective, it would create true deterrent effect if the lawmaker can introduce criminal liability for patent infringement in China in addition to patent counterfeiting.”
Based on the new law, implanting a genetically-edited or cloned human or animal embryo into the body of a human being or animal shall amount to a criminal offence. For serious cases, the defendant shall be sentenced to imprisonment of less than three years and/or a fine. For more serious cases, the defendant shall be sentenced to imprisonment of three to seven years and a fine.
“The criminalization of human genetic resource violations was considered to be the determination of the Chinese government to speed up the development of legislative framework in response to the advancement of biotechnology as a cutting-edge technology across the globe in recent years. In particular, the He Jiankui scandal involving gene-edited babies in 2018 triggered the legislation of a tailored crime in the area of illegal medical practice,” Zheng says. “In 2018, biophysicist He announced the birth of the world’s first two gene-edited babies by engineering mutations into human embryos, which were then used to produce babies. He’s announcement aroused heated public controversies pertaining to the associated ethical considerations of Clustered Regularly Interspaced Short Palindromic Repeats-babies. In December 2019, the Shenzhen Nanshan People’s Court convicted He of the offence of illegal medical practice on the basis of genetic manipulation of babies, and sentenced He to a three-year imprisonment, a fine of US$425,000, as well as a lifelong ban from further involvement in reproductive medicine.”
According to Article 27(2) of the Agreement on Trade-Related Aspects of Intellectual Property Rights, of which China is a member state, “members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.” In the United States, patents directed to or encompassing human organisms are not patentable under the current practice of the US Patent and Trademark Office, although the USTPO may issue patents to embryonic stem cell lines.
In China, Article 5(1) of the Patent Law similarly provides that the patent office may not grant a patent for an invention that is against the laws or social morality or is detrimental to public interest. According to the Guidelines on Patent Examination published by the China National Intellectual Property Administration, a process for cloning human beings or a cloned human being, use of human embryos for industrial and commercial purposes, and process for modifying the genetic identity of animals which is likely to cause them suffering without any substantial medical benefit to human-beings or animals, are contrary to social morality and shall not be granted patent rights, Zheng says. “Therefore, no one can obtain any patent for cloning human beings and thus there is no IP infringement – such cloning is just purely criminal offence.”
All of the penalties above will be effective March 1, 2021.
Johnny Chan
