Intellectual Property Rights in China. Zhenqing Zhang
by the former critics of patent law. In December 1989, a former leader of the Ministry of Machinery met one of the original drafters of Chinese patent law. He finally admitted that adopting a patent law in China was “the right thing to do.”48
Despite these big steps forward, the 1984 Chinese patent law still bore the influence of socioeconomic conditions during the early reform period. The 1984 Chinese patent law was different from patent laws in developed countries, which had been in place for at least a century. These differences are mainly represented as follows.
First, the duration of invention patents in China was fifteen years,49 as opposed to twenty years in most developed countries. That is, technological innovation can be readily used by the public for free fifteen years after the granting of patent rights. A legal scholar interprets the shorter duration of patents as a move that encourages the dissemination of certain technology. Second, the scope of patentability under the 1984 Chinese patent law was narrower than the laws of the developed countries. Under Article 25 of the 1984 Patent Law, food, beverage, and flavorings, as well as pharmaceutical products and substances obtained through chemical processes, should not be granted patent rights.50
As will be discussed later, the articles came under serious attack by the U.S. pharmaceutical industry with an intention to invest in China in the U.S.-China bilateral IPR negotiations in the 1990s.
Chinese Patent Regime’s Deeper Integration with the Global IPR Norm, 1989–2001
During the reemergence of China’s patent regime in the 1980s, external influence began to be felt with both the increase of China’s foreign trade and the growing exchange between China and foreign countries. In the 1980s, the key driving force of China’s patent legislation mainly came from within. It was not until the 1990s that bilateral and multilateral pressure on Chinese IPR legislation was keenly felt. The China-U.S. bilateral IPR negotiations and China’s WTO entry were of particular importance. In this part of the chapter, I examine how the disputes over specific aspects of Chinese patent law were raised, debated, and resolved. I contend that external pressure played a key role in quickening the Chinese IPR regime’s deeper integration with the global IPR regime in the 1990s.
The Rise of China-U.S. IPR Disputes in the 1990s and Its Impact on Chinese Patent Regime
The issue of IPR was already raised shortly after China and the United States opened bilateral trade ties in 1979. On January 31, 1979, China and the United States signed the Implementation Accord on Cooperation in the Field of High Energy Physics. In Article 6, it stated that both sides “recognize the need to agree upon provisions concerning protection of copyrights and treatment of inventions or discoveries made or conceived in the course of or under this Accord.”51 On July 7, 1979, China and the United States signed the Agreement on Trade Relations.52 In Article 6 of the agreement, it was further stated that “both Contracting Parties in their trade relations recognize the importance of effective protection of patents, trademark, and copyrights.” Those were among the first China-U.S. bilateral agreements addressing the issue of intellectual property rights. According to the recollection of a Chinese IPR scholar, the U.S. side insisted that the agreements should include an article addressing IPR protection. However, China had just barely started drafting the patent law. The regulations as outlined in those bilateral agreements remained on paper and were rarely cited in real policy practice. The situation started to change as the U.S.-China bilateral trade ties deepened during the mid- and late 1980s.
Although the U.S. private sector and IPR lobbying groups had already raised complaints about China’s insufficient efforts to protect IPR in the mid-1980s,53 this issue was not brought to the government level until the late 1980s. In 1988, the United States revised its 1974 Trade Act and adopted the Omnibus Trade and Competitiveness Act. Under Section 301 of the 1988 Omnibus Trade Act, the U.S. Trade Representative (USTR) was empowered to identify and investigate countries deemed as doing “unfair trade practices” and impose sanctions where appropriate. Under the lobbying efforts by trade interest groups, the 1988 Omnibus Trade and Competitiveness Act further empowered the USTR to investigate and level trade sanctions against countries considered violators of the U.S. IPR. This part of the 1988 Omnibus Trade Act was later known as “Special 301.” China became an important target of Special 301.
In late April 1989, China was put on the “priority watch list” by the USTR for the first time. In May 1989, China sent a delegation to the United States, headed by Zhou Xiaochuan, then vice minister of foreign trade. That round of bilateral negotiation resulted in a draft memorandum of understanding (MOU). The draft MOU did not come into effect, but some scholars regarded it as setting the foundation for the formal MOU reached in the 1990s.54 In the draft MOU, China promised to finish the revision of the 1984 Patent Law by the end of 1989, expanding the scope of patent goods and extending the duration of patents. China also promised to finish reviewing the country’s first copyright law by the end of 1989.55 The U.S. side also agreed to remove China from the “priority watch list.”
After the Chinese delegation returned to Beijing, however, they were confronted with harsh domestic critiques. Some criticized the draft MOU as lacking a firm stance against U.S. pressure. Others even asked the delegation members whether they were “real patriots or selling out national interests.” At that critical juncture, then general secretary of the State Council, Luo Gan, stood on the side of the Chinese delegation team and praised them because they “did a lot of hard work under harsh conditions.” That intervention at least temporarily appeased the criticism.56
The 1989 U.S.-China negotiation was only the beginning of a series of IPR brawls between the two countries. In 1991, China was confronted with a more serious challenge: it was listed as one of the “priority foreign countries.” Under the U.S. Special 301 regulations, a country would not be subject to U.S. trade retaliation if put on the “priority watch list.” However, if a country is included as one of the “priority foreign countries,” the U.S. government would be authorized to launch trade retaliation if that country was unable to improve its IPR protection in six months. In April 1991, the USTR published a report, pointing at four glaring inadequacies in the Chinese IPR regime: first, the Chinese patent law is flawed in that it does not grant patent rights to pharmaceutical and chemical products; second, Chinese copyright law does not grant protection to American works published outside China; third, Chinese copyright law does not grant copyright protection for computer software; and fourth, China did not grant sufficient protection for trade secrets.57
After the publication of the U.S. Special 301 report in 1991, China and the United States went into several rounds of extremely tough negotiations. On several occasions, the two countries almost entered into a trade war with one other. On January 17, 1992, the two sides came to terms, signing the first MOU over the issue of IPR protection (known as the 1992 MOU).
The 1992 MOU was composed of seven parts that covered the revision of Chinese IPR laws (Articles 1–4), the establishment of U.S.-China bilateral dialogue on IPR issues in the future (Articles 5 and 6), and the termination of the U.S. Special 301 investigation against China (Article 7).58 The core part of the 1992 MOU was China’s promise to revise its IPR laws to address the concerns of the United States.
Under Articles 1 and 2 of the 1992 MOU, China agreed to grant patent rights to pharmaceutical and chemical products and extend the duration of invention patents from fifteen to twenty years; China also agreed to increase foreign patent holders’ rights by providing nondiscrimination of patent rights regarding compulsory licensing and providing national treatment as well as administrative protection for chemical and pharmaceutical inventions. The other parts of the 1992 MOU focus on the protection of copyright and trade secrets in China. I will discuss these in Chapters 2 and 3.
The 1992 MOU had a tangible impact on China’s already existing IPR regime. On June 23, 1992, the director of the Chinese Patent Office, Gao Lulin, reported to the Standing Committee of the Chinese National People’s Congress on the revision of the 1984 Chinese patent law.59 The revised patent law incorporated the spirit of the 1992 MOU by expanding