CCG Report | The CPTPP and China’s IPR

 Abstract 

Intellectual Property Rights (IPR) play an important role in encouraging and protecting innovation in today's economy and maintaining healthy competition. Since China joined the World Intellectual Property Organization (WIPO) in 1980, China has continued to establish and improve relevant intellectual property laws. A comprehensive IPR legal system has now been established covering the main IPR issues. In 2019, for the first time, the number of China's PCT international patent applications surpassed the US to rank first in the world. China has become a major player in intellectual property. However, with the development of the digital economy and the raising of international IPR standards, there are challenges for China's IPR system. These include how regional protectionism affects fairness in intellectual property law enforcement, the harmonization between various intellectual property rules, discrepancies with international IPR standards, and the quality of the intellectual property itself.

The state of China's IPR protection has certain impacts on China's participation in regional and globalized economic development. With the development of a regionalized economy, stringent IPR protection standards are entry barriers for advanced Free Trade Areas (FTAs). The focus of this report is whether China's IPR protection can align with high-standard FTAs, in particular the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that has higher standards than the World Trade Organization (WTO).

This report investigates and analyzes China's IPR protection across three major dimensions. Firstly, the evolution of China's IPR; Secondly, intellectual protection in the digital economy; Thirdly, comparisons between China's intellectual protection and international standards. Following the evaluation of these three dimensions, the feasibility of China's admissibility to the CPTPP will be explored from the IPR perspective.

The CPTPP, previously called the Trans-Pacific Partnership (TPP), is a regional free trade agreement initiated by the United States. Due to its high standards for intellectual property protection and trade, it was once regarded as a threshold set by the United States to exclude China from its trade circle. In 2017, after the United States' withdrawal from the TPP, Japan and other countries pushed for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was announced on Dec. 30, 2018. Following the withdrawal of the United States, China faces a limited window of time within which to join the CPTPP. By comparing the differences between China's IPR law and CPTPP rules, the gap between Chinese and established international regulations becomes clear. If China joins the CPTPP, it will become a member of the largest FTA in the Asia-Pacific region, gaining access to 11 countries' markets and a voice in current multilateral free trade area negotiations. At present, although there is controversy within China's academic circles on whether China should join the CPTPP, the Chinese government has expressed a positive attitude towards joining.

Analyzing the three dimensions above, this paper provides preliminary observations and analysis on the current situation of intellectual property protection in China through an investigation of IT companies and exchanges with relevant legal and academic professionals. According to our research, even though China is a growing power in terms of IP, the quality of intellectual property, companies' focus on intellectual property, and IPR education and laws can still be improved. At the same time, however, research shows that compared with international standards, China's IPR laws and regulations are not far behind. Especially within the digital economic domain, China is innovating in digital economic IPR issues which can be seen in business models, technology, and techniques for protecting intellectual property. These include the use of blockchain technology to strengthen IPR protection, the development of business models and related products in the digital economy, and related developments in the field of IPR which are relatively advanced.

In early 2020, under the pressure of COVID-19, construction of "New Infrastructure" as a method to restore economic development entered into the national economic policy list. New infrastructure not only focuses on maintaining the growth of the digital economy, but also on creating new digital economy applications and management models, at the same time stimulating the commercial use of new technologies. These changes create challenges for the innovation and protection of intellectual property. It is predominantly revealed in the blurring of responsibilities and new challenges for relevant anti-monopoly laws. At the Two Sessions in May 2020, the Anti-Monopoly Law and digital economic innovation attracted a lot of attention. Some proposals suggest that the local People's Procuratorates should be given the authority to file public interest cases against illegal anti-monopoly activities and take the burden of proof off small and medium-sized enterprises (SMEs), which typically are in a weaker position.

The findings of this paper suggest that issues related to local protectionism, which affect the fairness of IPR law enforcement, and difficulties for law enforcement are mainly related to factors such as regional economic disparities in China, the level of specialization of local law enforcement personnel, coordination between different agencies, and institutional factors such as the "Two-Track System" adopted by China on IPR, which lead to divergent local interests. In recent years, relevant departments have improved by setting up IPR courts and reorganizing the functions of the State IPR Office. At present, patent law and other relevant laws being revised to bring China's IPR standards up to international standards. Overall, China's IPR innovation has made great progress, and the level of IPR protection is improving steadily, but there is still room for improvement.

Based on the above comparison and analysis of the CPTPP's regulations on IPR, this report holds that although some of China's IPR protection standards fall behind CPTPP standards, the main problems are differences in the definition of certain terms; their implications need to be confirmed. There are also coordination problems between Chinese standards and laws, and some laws and regulations need to be further revised to align with the CPTPP. These problems will not create serious obstacles for China to join the CPTPP. At the same time, CPTPP member states reduced some IPR provisions as part of the negotiations following the withdrawal of the United States, making compatibility with China's IPR standards easier to achieve.

In conclusion, the report proposes the following suggestions:

1.Start negotiations between China and CPTPP members.

2.Pay attention to the combination of the protection of IPR in China's digital economy and the opening up of the economy. Examples of specific areas include the newly revised Copyright Law and clarity of the legal obligations of Internet service providers so as to strengthen copyright protection capabilities in the digital era. China should learn from the EU's General Data Protection Regulations (GDPR) to innovate and develop data rights in the digital age and protect enterprises' innovation and development.

3.Improve training of IP-related talent and achieve standardization. This includes the training of IPR workforce candidates in colleges and universities and the standardization of agency IPR qualifications and certifications. At the same time, we should strengthen the supervision of the national standard of "Enterprise IPR Management Regulation", to prevent enterprises from not fully complying with the regulations.

4.Promote the application of IPR protection blockchain technology, management, and R&D. Prevent improper blockchain practices that erode trust in blockchain technology.

5.As Chinese technology companies move abroad, China's foreign IPR protection needs improvement. Relevant ministries need to take measures to coordinate and strengthen the protection of China's IPR abroad.

 Full Report（Excerpts） 

The CPTPP and China’s IPR

1. The History of the CPTPP

The full name of CPTPP is the "Comprehensive and Progressive Trans-Pacific Partnership." Its predecessor, the Trans-Pacific Partnership (TPP), was first launched in 2002 by New Zealand, Singapore, Chile, and Brunei, with the United States joining the negotiations in 2009. By the time the negotiations were completed in 2015, 12 countries, including those in the Pan-Pacific region, had joined. The United States led the negotiations and proposed much stricter standards than those of the WTO in terms of labor rights, IPR, and the environment, and was considered a high standard Free Trade Agreement. But the TPP agreement was put on hold after some U.S. politicians, including the former U.S. secretary of state and 2016 Democratic presidential candidate Hillary Clinton, argued that the U.S. had too much responsibility and offered too much. On January 20, 2017, the first day of Donald Trump's swearing-in as president of the United States, had announced that the United States would withdraw from the TPP.

In November 2017, the 11 members of the TPP, with the exception of the United States, agreed to rename the TPP as the CPTPP and restart negotiations, mainly led by Japan. The negotiations were completed in March 2018, and the CPTPP came into effect on December 30, 2018.

The CPTPP's IPR provisions have changed somewhat compared to previous TPP provisions but still represent higher standards than those of the TRIP. The partnership covers a population of more than 500 million people and 13.4% of the world's GDP. In terms of GDP, the CPTPP is the world's third-largest free trade area after the USMCA (formerly NAFTA) and the European Common Market. Its standard of IPR protection is also in a leading position in the world.

2. How Will Joining the CPTPP Influence China?

Joining the CPTPP can result in multiple positive effects for China. Joining the CPTPP can promote China's trade liberalization and implementations in the future. At the same time, the CPTPP provides a good platform for China to promote the “Belt and Road” initiative and the construction of a community with a shared vision for the future of humankind, and it is also a new opportunity for China's future development. After China joined the WTO, GDP increased by more than eight times from 2001 to 2017. The CPTPP is also a multilateral trade cooperation agreement similar to the WTO, though has higher entry requirements for certain standards such as those relating to the promotion of trade in services and free trade. China’s trade in the services industry now accounts for approximately 60% of its total GDP. A large number of e-commerce and software service companies, including Alibaba, need to establish connections with the international market. The CPTPP can better protect the performance of Chinese companies under international rules. However, there are some reservations about China's accession to the CPTPP, and this report takes into account the challenges China has encountered in the process of joining the CPTPP. The second section of the fourth part of this research discusses related issues based on the opinions of experts from various fields concerning the impact of China's accession to the CPTPP and the challenges China faces in its accession to the CPTPP. The impact of joining CPTPP to China is mainly in the following two aspects:

(1) International Relations

From the perspective of international relations, joining the CPTPP will help China resolve trade frictions with some countries and enable China to better integrate into the world's multilateral trading system. This report categorizes the benefits of joining the CPTPP for international relations into several types:

A. Joining the CPTPP can resolve some of the China-US economic and trade issues. The CCG Chairman Dr. Wang Huiyao believes that since the CPTPP regulations involve trade liberalization, environmental protection, labor standards, state-owned enterprise reforms, intellectual property requirements, and other issues, there are many points of convergence with the American public's concerns with China. Joining the CPTPP will reduce trade frictions and increase consensus between China and the United States. The CPTPP trade framework can also hedge against the negative impact of the Sino-US trade war to a certain extent. Specifically, it can help improve China’s intellectual property standards. Intellectual property disputes between China and the United States are a core issue in bilateral trade relations. China's improvement of intellectual property standards will help alleviate this problem and reduce the U.S. accusations accusing China of the so-called "forced technology transfer." Some experts and scholars from the CCG exchanged views with members of the U.S. Congress on this issue in a series of activities during the “Track II Diplomacy” in the United States in September 2018. The lawmakers also believe that China can join the CPTPP to show a positive attitude towards opening up. Kent Calder, former special assistant to the U.S. ambassador to Japan, and director of the East Asian Studies Center at Johns Hopkins University, Craig Allen, President of the US-China Business Council, and Rick Larsen, chairman of the US-China Working Group and Democratic Representative, expressed the hope that China will consider the possibility of joining the TPP; if China joins or at least gestures towards joining the TPP, the image of a more open China will be strengthened. Because the TPP has higher standards in the trade of services, intellectual property protection, etc. and China has also reached this stage of development, China's measures for joining the TPP will signal that China hopes to improve its authenticity and credibility, and the United States will also perceive China as more open, which is conducive to advancing the Sino-US negotiations. Although the United States later withdrew from the TPP negotiations and Sino-US relations regressed, China's continued participation in the CPTPP with an open attitude can still be regarded as a gesture that China has made towards the United States to improve bilateral trade.

There is a broad and deep foundation of common interest between China and the United States. Under the spirit of the United States expressing its support for the Asia-Pacific Free Trade Area (FTAAP), taking the initiative to join the CPTPP is conducive to the establishment of FTAAP and a more comprehensive regional economic arrangement. Although the Trump administration withdrew from the TPP, he also stated that it needs what he believes is a "fairer" trade arrangement. If China joins the CPTPP and strengthens dialogues with CPTPP member states, it can connect the original TPP with the substance of the Regional Comprehensive Economic Partnership (RCEP) agreement, yet to be signed, which can then attract the United States to jointly promote the establishment of FTAAP and achieve new and broader trade and investment collaboration to achieve inclusive development and further integration into the world trading system.

B. From the perspective of the relationship between China and other TPP member states, according to CCG's past surveys, when the United States withdrew from the TPP, and the TPP had not yet been renamed CPTPP, many TPP member states had actively supported China's accession to the TPP. China's active participation in the TPP can fill a gap left in the pact after the United States’ withdrawal, increase the proportion of the TPP's total economy in the world, and increase the influence of the TPP. And China can also improve international relations through economic diplomacy. Australia, Japan, and other member countries have contributed a lot of experience in the TPP, and have always hoped to coordinate and promote economic and trade development between regions. In the face of the sudden withdrawal of the United States, the opinions of other member states have become more complicated. Some countries still hope to rebuild a TPP with U.S. participation, but more countries have begun to focus on the important role China plays in economic and trade activities in the Asia-Pacific region. Japanese Prime Minister Shinzo Abe and Australian Prime Minister Turnbull (2015-2018) have all publicly stated that they are open to China's accession to the TPP, believing that the participation of China and other Asian countries can help reassert the TPP.

C. From the perspective of Asian integration, the Trump administration intends to establish FTAs in East Asia and other regions and exclude China, though China’s active participation in the CPTPP can improve the relationship between Northeast Asian and Southeast Asian countries and advance its “Belt and Road” Initiative. China’s role in the world has attracted much attention and expectation, and by actively joining the CPTPP, China can further demonstrate its determination to build a global open economy and promote common prosperity. In the interview, Professor Tu Xinquan, Dean of the China-WTO Research Institute at the University of International Business and Economics, said: “A very important feature of the U.S. government today is that it does not like multilateral or regional, or any supranational dispute settlement mechanism.” Therefore, the United States is somewhat unhappy to see a free trade agreement that is beneficial to regional integration. TPP member countries and neighboring countries such as South Korea are China's major economic partners, and they have a common interest in strengthening relations. In the event that the United States provokes conflicts in Asia, China should use economic-focused diplomacy to actively improve relations with various countries in Northeast Asia and Southeast Asia, and strengthen mutual trust and cooperation through the basis of common cultural and economic interests. By participating in the CPTPP, on the one hand, China can strengthen its relations with the Philippines, Indonesia, and other Southeast Asian countries and the surrounding countries of the South China Sea; on the other hand, it can also improve its relations with South Korea and Japan, strengthen cooperation with these countries, and strengthen the cohesion of Asian regional culture and promote greater Asian integration.

In 2017, the CCG released the report, "China's Diplomacy Enters a New Direction, and it may consider whether to join CPTPP." It was the first attempt to conduct systematic research on the TPP and subsequent CPTPP in China. The report says that: "China's economic development has built the foundation for the implementation of economic diplomacy, and joining TPP can be an important starting point for this strategy…it should seize the opportunity to join TPP as soon as possible." After three years, the international political, economic, and diplomatic landscape has undergone drastic changes, but the CCG report’s conclusion on China’s participation in the TPP and the positive significance of the CPTPP remains convincing.

(2) Economic Development and Opening-Up

The CPTPP currently includes 11 member states, with a total economic output accounting for 13.2% of the global sum, and a total trade volume accounting for 15% of the global sum. It is the largest trade agreement in the Asia-Pacific region. If China joins the CPTPP, it will increase its share of the global economy to more than 30%, making it one of the largest free trade agreements in the world. At present, it is noteworthy that China is still a developing country, while the development after 40 years of Reform and Opening-up has been surmountable, even becoming the world's second-largest economy more than ten years after China's accession to the WTO. When considering the CPTPP agreement, it is also necessary to break away from the dualistic thinking in terms of "developed countries vs. developing countries," but to consider the positive and negative impacts on China's actual economic development, productivity improvement, and optimal allocation of resources.

A. China needs new multilateral trade agreements to continue to increase openness and free trade.

President Xi Jinping mentioned on multiple occasions that China insists on opening up. For example, at the 2018 Bo’ao Forum for Asia Annual Conference, he said that “China’s door to opening up will not be closed, but will only open wider”; he made another speech at the celebration of the 40th anniversary of Reform and Opening-up, saying that "[we] must insist on increasing the level of opening up and consistently build a community with a shared future for mankind." It has been 19 years since China joined the WTO, and China has surpassed the traditional developing country market size and economic output expectations. However, according to the World Bank’s standard based on per capita GDP, China is still not a developed country. This special positioning requires China to participate and make some reservations and amendments to the original trade rules in China.

The WTO is currently facing some difficulties. In the past decade or so, as the divergence between developing countries and developed countries increased and the Doha Round negotiations was blocked, the WTO entered a period of stagnation. Especially after the Trump administration came to power, in the face of the impasse in WTO negotiations, the United States adopted a negative attitude, gradually abandoning multilateral negotiations and relying on bilateral negotiations to resolve economic and trade issues. Trump has also often threatened to withdraw from the WTO. In addition, the existing dispute settlement mechanism faces serious challenges. In the face of the new global economic situation in recent years, the WTO has failed to follow-up effectively. It ignores the rapidly developing digital economy in the world today. Because it only focuses on traditional trade issues, such as the trade of goods and tariffs, it has not been able to incorporate emerging topics such as information and digitization into the trade framework. Therefore, in addition to the WTO, China needs to participate in other multilateral trade agreements to adapt to the current economic situation and thus continue its opening up and development.

B. Joining the CPTPP is conducive to Chinese companies engaging in global competition and "going out" in the service industry. Since joining the WTO, China's total GDP steadily grew and now ranks second in the world, and the 2019 data shows a nearly tenfold growth since 2001 when it joined the WTO. If China maintains its original attitude and conditions of opening up, not only will it not be able to protect the development of its own economy and enterprises, but on the contrary, the principle of reciprocity will restrict the development of competitive Chinese enterprises overseas. Promoting competition and allowing Chinese companies to participate in more international competition provides the opportunity for Chinese companies to develop.

In the past 40 years since the launch of Reform and Opening-up, China's service industry has made considerable progress. After years of development, the added value of China's service industry accounted for 51.6% of GDP in 2017, and its contribution to economic growth was 58.8%. It is estimated that by 2025, China will, on the basis of optimizing structure, improving quality, and improving efficiency, increase the added value of its service industry up to 60% of its GDP. The CPTPP agreement, which focuses on the protection of IPR and trade of services, is consistent with China's continuously improving service industry, e-commerce, information technology, and other advantageous industries, and can effectively guarantee the development and rights of China's service industry. In the future, the service industry will account for a higher proportion of China's GDP, especially under the influence of the epidemic, requiring more technical services to implement remote working. A number of internationally competitive e-commerce and information technology companies have emerged in China, such as Huawei, ZTE, Xiaomi, Alibaba, Tencent, Lenovo, Meituan, and JD.com. Due to geopolitical changes in the external environment, countries including New Zealand, Australia, and Japan are considering "blocking" and "banning" sales of China's Huawei products and ByteDance's overseas product Tik Tok. Actively joining and participating in the CPTPP will support the acquisition or a larger foreign market share for China, thereby establishing a fair, free and broad global market for Chinese companies to operate in, and provide them with more opportunities to develop the service industry in these countries.

In addition, the "E-commerce" chapter of the CPTPP provides extensive protection for data created through digital trade, which can provide tremendous help and support for China's service industry to "go global." By 2016, the productivity benefits of digital trade will create economic value for the Chinese economy at an estimated 3.2 trillion yuan ($466 billion U.S. dollars). By 2030, this number may increase more than 11 times, reaching 37 trillion yuan (5.5 trillion U.S. dollars). Digital exports are China's second-largest export commodity today, and is likely to continue to grow. The total value of exports of virtual goods and services facilitated by the digital economy (such as e-commerce) is 1.6 trillion yuan ($236 billion U.S. dollars), making it China's second-largest export industry. In fact, more than 80% of the value is driven by digitally supported products, mainly influenced by exports. By 2030, the value of digital support exports is expected to increase by 207% from current levels, reaching 5 trillion yuan (726 billion U.S. dollars). At the same time, the CPTPP also has provisions in the "Government Procurement" chapter that include open government procurement contracts for foreign bidders, etc., which is also highly compatible with China's hosting of the International Import Expo and promotes the development of an open world economy.

3. The Challenges China Faces in Joining the CPTPP

Under the current situation, most experts and scholars in political and academic circles believe that China's entry into the CPTPP will pose three major challenges: state-owned enterprises, labor rights, and IPR.

(1) State-Owned Enterprises

The main challenge for state-owned enterprises lies in the difference in the positioning between China and CPTPP member states. China’s general understanding of state-owned enterprises is based on the Chinese model, which has always emphasized that state-owned enterprises operate in accordance with market regulations. In the interview, Professor Tu Xinquan of the University of International Business and Economics said that China opposes the so-called “discrimination of ownership” and cannot discriminate against an enterprise in the formulation of market regulations on the basis of it being a state-owned enterprise. Therefore, China now proposes the concept of neutral ownership. However, most of the existing international regulations, including those set by the CPTPP, do not advocate ownership neutrality and still consider state-owned enterprises as special entities, which restricts their operation and affects how they are treated by the government. When China considers joining the CPTPP, it is difficult to anticipate the extent to which its member states will be receptive to the neutral ownership idea.

To be more specific, the CPTPP's regulations for state-owned enterprises are not excessively strict; in terms of the business consideration criteria and non-commercial assistance provisions, current Chinese laws generally align with the CPTPP regulations. Business consideration criteria already exist in WTO rules, and China clearly committed state-owned enterprises to conducting business in accordance with commercial considerations when joining the WTO. Decision-making and non-commercial assistance are also mentioned by the WTO. When China entered the WTO, it promised that subsidies for state-owned enterprises would be restricted but not prohibited. The more controversial aspect is whether state-owned enterprises should be treated as government entities or public institutions. In the past the WTO had not provided a clear definition of public institutions, but in the countervailing cases of various countries, state-owned enterprises were basically regarded as public institutions. Therefore, although the CPTPP does not completely prohibit the establishment of state-owned enterprises, it has formulated special rules for them. Whether China can accept these special rules, and whether it recognizes that state-owned enterprises can only exist in the case of market failure, is yet to consider. Of course, among the CPTPP member states, Vietnam and Malaysia also have many state-owned enterprises, and the list of exceptions allowed by the CPTPP is very long. Many state-owned enterprises are not restricted, which also leaves room for negotiation.

(2) Labor Rights

CPTPP's labor rights standards emphasize labor rights, including freedom of association and collective bargaining, the abolition of forced or compulsory labor, the prohibition of child labor, and the elimination of employment and occupational discrimination. At present, China has ratified four core international labor conventions that cover the latter two fundamental labor rights but has not yet ratified the four international labor conventions covering the first two fundamental rights. China's labor law has been gradually improved in recent years, the labor situation has been greatly improved, and there are related laws in the country to protect labor rights, but there are still some differences with the CPTPP standards.

In addition to this, the increase in trade frictions is also a concern for labor rights. Among the current trade frictions, lawsuits initiated by foreign countries (especially the United States) against China are mainly related to three topics: anti-dumping, anti-monopoly, and intellectual property. After joining CPTPP, labor rights have become a reason to initiate litigation against China. In the course of trade, China's products may face more trade disputes because they do not comply with the relevant labor rights clauses, which hinder free trade.

(3) Intellectual Property

CPTPP has lowered the requirements of intellectual property rules and has not adopted the excessively high standard requirements for intellectual property in the TPP. In total, 11 TPP intellectual property standards have been shelved. This makes it more feasible for China's intellectual property protection standards to align with CPTPP standards. Cui Fan, a professor at the School of International Trade of the University of International Business and Economics, said that many of the CPTPP provisions are not unattainable for China, and there is room for improvement. For example, smell and sound can be trademarked. Of course, developed countries will have more domestic law experience in this area than China, but China is not incapable of making improvements. For example, geographical indications can also be protected as trademarks. The management of geographical indications in China is carried out through the Department of Science and Technology of the Trademark Office, the former Quality Supervision Bureau, and the Ministry of Agriculture. The use of different procedural systems on the same matter means the relevant arbitration agencies and departments have some difficulties in adjudicating cases. By adopting high-standard international rules and accept unified standardization in this regard if possible, it will help to reform China's intellectual property system. On the whole, the TPP standards retained in the CPTPP are worth researching for China. This is the part that China's intellectual property protection laws and regulations need to be connected with. There are three main points: 1) Compared with TRIPs, the scope of intellectual property objects has expanded; 2) the protection standards for IPR have been clarified, and the content of IPR has been expanded; 3) Strict law enforcement procedures and legal responsibilities.

The comparison between China's intellectual property protection standards and CPTPP standards will be discussed in detail in Section 5 of this part.

4. Literature Review

Academic observers generally believe that China's protection of IPR has long been weaker than that of other developed trading countries, which poses some negative effects on China's internal innovation and development and China's image in international trade. In recent years, China's efforts on IPR are clear in terms of seeking to understand and resolve these problems. However, experts and scholars also believe that China's improvement still has a long way to go, and further improvement of relevant laws will have a positive impact on China's development in many respects. The current opportunity to join the CPTPP will help China improve its own economic and trade regulations and force itself to align with international standards, especially to enhance the protection of IPR. Many scholars also pointed out that joining the CPTPP itself will have a positive impact on China, including defending against US efforts to shut China out of global trade networks. However, some people have put forward different opinions, believing that CPTPP has a limited impact on China's economy and should not be a key concern.

The concept of "counterfeit products" was strengthened in China around 2008, referring to the illegal infringement of original intellectual property products to counterfeit and compete with them in the market. Its scope not only involves all kinds of products but also includes software and film and television works. It had a negative impact on early Chinese companies (Huang Hui, 2015). In addition, China’s laws and regulations have also been questioned by some scholars in the treatment of illegal infringement. Although China's relevant laws are in place, people often take "shortcuts" in actual implementation, which makes domestic and foreign research and development institutions question the objectivity and independence of the legal system (Fairbairn, 2016). Nominally, China has formulated and amended laws and regulations to achieve a high level of intellectual property protection, but in fact, the protection of IPR has been weakened by incomplete law enforcement (Dai Zhongqiang, 2014). However, in recent years, China's intellectual property protection work has also been improving in reforming the management system and mechanism, improving laws and regulations, and reforming the intellectual property judicial system (Yi Jiming, 2017) The substantial increase in the number of intellectual property and patent disputes between enterprises in China also objectively illustrates the soundness of relevant laws and regulations and the increase in the importance of IPR (Brander et al., 2017). In fact, the improvement of intellectual property laws and regulations has a very positive impact on domestic companies. Chinese companies are also facing the problem of infringement of IPR overseas when going abroad (Zhang Changli et al., 2015). At the same time, corresponding laws and regulations have increased the expected income of R&D investment and increased the willingness of enterprises to innovate and develop (Wu Chaopeng and Tang Di, 2017).

Although Japan led the CPTPP negotiations after the United States withdrew, and finally revised some of the disputed clauses which have increase the feasibility of China's being able to join, its intellectual property rules still maintain high standards compared with existing multilateral FTAs. In terms of current Chinese rules, alignment is relatively difficult: if China joins CPTPP and accepts brand-new standards, there will be significant difficulties to overcome. Once China has made up its mind, it must prepare in advance to lay a solid foundation for the alignment of Chinese and international standards (Bai Jie, Su Qingyi, 2019). Some experts and scholars emphasize the difficulty of China's complying with the standards; there are also different opinions that joining a higher standard agreement will force itself to carry out further reforms and opening up, especially China's acceptance of high standards. The possibility has been significantly improved, and there is a demand for this (Su Qingyi, 2019). Moreover, the standards of the CPTPP agreement are so high that existing agreements (such as the Regional Comprehensive Economic Partnership Agreement, RECP) cannot reach (Liu Jingqing and Xia Fangjie, 2019). However, there are still foreign scholars questioning China's determination to reform. Whether it is at the legislative or law enforcement level, connecting China with international standards will face huge reform pressures and political challenges (Petri Plummer, 2020). Some scholars believe that even with the signing of the corresponding agreement, China still condones some infringement issues, and these intellectual property infringement issues will have a negative impact on global trade (Brander et al., 2017).

On the whole, many scholars also support China's accession to the CPTPP, believing that the agreement itself has more advantages for China than disadvantages. The predecessor of CPTPP, the Trans-Pacific Partnership Agreement (TPP), is a trade agreement led by the United States to combat China's trade influence and block China in the Asia-Pacific region. Although the United States has now withdrawn from this agreement, the CPTPP has reduced the tariff and non-tariff barriers of its member states and weakened the competitiveness of similar Chinese products, which will undoubtedly have a negative impact on China's exports (Shen Minghui and Li Haifeng, 2019). It is precisely because of the withdrawal of the United States that joining the CPTPP has become a possibility for China to further integrate into the global economy. Not only that, but China has also already participated in RECP, and could also join the CPTPP; it will definitely help China to participate in the construction of the global trade governance system and Asia-Pacific economic integration (Su Qingyi, 2019). Some scholars also pointed out that the Trump administration will eventually pay attention to the economic significance of CPTPP, so the United States has a high probability of returning to CPTPP (Whalley et al.; 2020). But now that China and the United States are at the same starting line, facing this hard-won opportunity, China needs to act first to compete for the initiative (Su Qingyi, 2019). After the U.S. withdraws, CPTPP has been suffered in terms of international influence and GDP volume. Therefore, even if its member states have different attitudes towards China, there is no absolute obstacle to joinging; on the whole, they are positive or even welcoming towards China's participation (Liu Xiangdong and Li Haodong, 2019). However, some experts do not approve of China's participation in the CPTPP. The main reason is that CPTPP has a relatively minor impact on China's economy, which can be offset by accelerating completion of the RECP; China is already promoting free trade negotiations such as RECP, so there is no need to waste resources on pursuing CPTPP too (Wang Xiaosong and Wu Sui, 2018).

5. CPTPP: A case study comparing China’s IPR and international standards

The United States led the TPP negotiations between 2009 and 2016 and proposed far more than WTO standards in terms of labor rights, IPR, and the environment. But the TPP agreement was put on hold after some U.S. politicians, including former U.S. secretary of state and 2016 Democratic presidential candidate Hillary Clinton, argued that the U.S. had given too much. On January 20, 2017, the day of Donald Trump's inauguration, he announced that the United States would withdraw from the TPP.  

In November 2017, 11 members of the TPP, with the exception of the United States, agreed to rename the TPP as CPTPP and restart negotiations, mainly motivated by Japan. The negotiations were completed in March 2018 and the CPTPP came into force on December 30, 2018.

The CPTPP's IPR provisions have changed somewhat compared to previous TPP provisions but are still higher than TRIPs. The CPTPP covers a population of more than 500 million and 13.4% of global GDP. In terms of GDP, CPTPP is the world's third-largest free trade area after the USMCA (formerly NAFTA) and the European Common Market. Its level of IPR protection is also the highest in the world.

As early as the TPP period, the government said China's attitude to it was "open." After the CPTPP came into effect, China said: "As long as it is in line with WTO principles, open, inclusive and transparent, and conducive to promoting global economic integration and regional economic integration, China would then has a positive attitude towards it." CCG has repeatedly called on China to join the TPP/CPTPP since 2019 to boost free trade and trade in the Asia-Pacific region while cushioning the impact of Sino-US trade frictions and achieving the role of "openness for reform." Major CPTPP member countries, including Japan, Australia, Canada, New Zealand, Singapore, and Malaysia, have all expressed a positive attitude to China's accession to the regional free trade body.

After withdrawing from the TPP, the U.S. government said it would consider rejoining if the CPTPP provisions were in the U.S. interests and CPTPP members welcomed it. But even after the 2020 U.S. election, the bilateral negotiation process will not be smooth because of the different bilateral trade standards requirements for the CPTPP, and the U.S. has gone from being a standard-setter to a standard-bearer, resulting in a change of initiative in the negotiations. Given that the U.S. rules on IPR in the U.S.-Mexico-Canada Agreement (USMCA) are significantly higher than those standards of the TPP and CPTPP, while Canada and Mexico are both CPTPP members, if the U.S. does not adhere to the USMCA's IPR standards in the negotiations to join the CPTPP, it will essentially make the USMCA's rules a dead letter. It is entirely predictable that if the United States returns to CPTPP, it will insist on raising the IPR standards to the level of the USMCA. While some members of the CPTPP, such as Japan, Malaysia, and Vietnam, will oppose this because of their own level of IPR protection and regulatory guidelines, which would make the United States face greater obstacles to IPR rules.

China should take advantage of the current "window period" caused by U.S. absence to seek to join CPTPP. The United States is entering its election year with much more political change to come. Whether Trump or Biden is elected, both sides need time to build consensus within the government and Congress. So the window  for China to join the CPTPP is about two to six years. Chinese officials may be pushing for a regional economic partnership agreement (RCEP) to be reached this year (2020) and may suspend preparations for the CPTPP. The main current approach is to conduct a feasibility study on joining the CPTPP and communicate with member states, and it is expected that accession to the CPTPP will be possible as early as 2021. The main negotiators will be Japan, Australia, and Canada. Since Canada and Mexico are also members of the USMCA, we could not exclude the possibility that the U.S. using the "Poison Pill" in the USMCA to block Canada and Mexico from ratifying China's accession.

Judging from the various provisions of the CPTPP, it is relatively easy for China's laws and regulations to interface with it IPR rules. In total, CPTPP has shelved or deleted nine IPR provisions, namely 1) expanded national treatment, 2) A total reduction of patent objects, 3) Extending the path of the patent protection period has been removed, 4) Disclosure of the advantages of pharmaceutical patent data has been removed, 5) The protective terms for drug sales are put on hold, 6) The copyright protection period returns to the TRIPs standard, 7) The technical protection measures of copyright and information management terms are put on hold, 8) Decreased IPR relief for satellite and cable television signals, 9) The internet provider legal relief and safe harbor system requirements no longer exists.

The copyright of works, performances, and phonograms, as well as the extension of data confidentiality periods for pharmaceuticals and biological agents, are two key areas for the protection of IPR in the United States. The shelving of these two provisions has won a transition period for the improvement of relevant laws and regulations on IPR protection in China. If the U.S. tries to join CPTPP in the future, it will be difficult to repeat to the field of the IPR provisions. It will also be a problem whether other member states, especially developing countries, could accept the IPR provisions that convey the will of the United States. On March 8, 2018, CSIS announced a series of "critical questions" about the CPTPP, noting that "(C.P.) TPP agrees…Patent protection period of innovative drugs and copyright protection of some materials have been shortened, and the scope of protection of technology and information has been reduced".

However, although these provisions were being shelved, CSIS still considers the level of intellectual property protection of CPTPP to be the highest and most detailed in among current trade agreements. It will provide substantial assistance to companies operating abroad to prevent their innovations from being plagiarized. Thus, the CPTPP continues the broad-area, high-standard, strict-rule system features of the "next-generation trade rules" in the TPP agreement.

If China's relevant IPR laws and regulations need to be aligned with CPTPP, then the following different situations will arise bilaterally in specific areas:

CPTPP's IPR protection regulations are divided into four parts: trademark rights, patent rights, copyright, and enforcement.

The trademark rights section includes 1) Sound and odor could be included in the scope of trademark registration, 2) The protection of well-known trademarks is not conditional on registration, 3) The recognition and protection of geographical indications. The core content of the three sections is to expand the object of IPR. In this area, the related law in China has recognized the legal concept of objects other than odors. The sound and geographical indications are included in the application for trademark registration, but odors are not yet included, although they are already under discussion. Articles 13 and 14 of the newly amended trademark law provide for the protection of well-known trademarks, in which well-known trademarks registered and unregistered in China have different effects. But digital reproduction sprees of well-known trademarks are not included in the new Trademark Act, which is different from CPTPP.

The patent rights part includes 1) Enlarge the range of patentable objects, 2) Strengthening the protection of drug and biopharmaceutical data. In the field of patent rights, CPTPP provisions are aligned with Chinese laws and regulations and will not have a particularly large impact. In the area of drug data and biopharmaceutical data protection, China proposed in the 2018 Implementation Measures for Data Protection in Drug Experiments (Provisional) (Draft for Comments) that the 12-year data protection period for approved opportunities for innovative therapeutic biologics shows that China's data protection period is approaching the 12-year deadline for CPTPP.

In terms of copyright, CPTPP's approach includes 1) Expansion of the content of the copyright owner's right to copy, 2) The duration of protection of copyright and adjacent rights, 3) To specify the liability of network service providers for infringement. In China's third revision of the Copyright Law, the definition of "copying right" has not been extended to the standard of CPTPP, but in terms of copyright extension and protection of rights in line with CPTPP, there are differences in the network service provider's tort liability determination, which need to be clarified in terms of laws and regulations.

In terms of enforcement measures, it mainly includes 1) Maintaining the range of use of border measures, 2) Increase the compensation of civil damages, 3) Lowering the threshold for criminal penalties. China has a relatively big advantage in broader measures, and its overall terms are no less than the TPP/CPTPP. China is undertaking a broader reform on the remaining law enforcement issues, and the new measures include, but are not limited to, the following: 1) The establishment of the China International Intellectual Rights Property Arbitration Commission, 2) Strengthening the ability of IPR courts to hear and enforce IPR cases in Internet courts (70 percent of cases accepted by Internet courts are related to IPRs), 3) Increase the amount of tort compensation; it is possible to change the principle of "fill-in compensation" to "punitive compensation." 4) Make full use of China's existing systems, and, with the permitted conditions, refer to the relevant foreign rules, to conduct trials and adjudicates in some demonstration areas of China, such as Qianhai and Shenzhen.

Table 3: Comparison between CPTPP intellectual property clauses with China’s current IP clauses

	CPTPP	China
Trademark right	Sound and smell can be included into the registration of trademark	Sound has already been included, and smell is still under discussion
The protection of well-known trademarks is not conditional to registration	The digital reproduction form of well-known trademarks is incorporated into the new trademark law.
Recognition and protection of geographical symbols	Geographical symbols are incorporated into legal protection
Patent Right	Enlarges the scope of patentable objects	Basically similar to the standard of CPTPP
Increase the protection of drug data and Biopharmaceutical data	Close to the standard of CPTPP
Copyright	Expand the content of copyright owner's right of reproduction	The right of reproduction failed to reach CPTPP standard
Term of protection of copyright and neighboring right	Same with CPTPP
Stipulating the tort liability of Internet service providers	The tort liability is different from CPTPP
Enforcement	Maintaining the scope of use of border measures	Same and even higher than the CPTPP standard
Increase civil damage compensation (implement punitive compensation)	From filling compensation to punitive compensation
Lower the standard of criminal punishment	Strengthen the ability of Internet courts to hear and enforce intellectual property cases

Source: CCG compiled public data  

In general, comparing CPTPP's IPR provisions to China's laws, regulations, and enforcement, a considerable part of the two areas of trademarks and patents are the same, but there are differences in the definition and connotation of the concept as well. CPTPP's copyright law is no higher than the WTO TRIPs standard, so there are only a few details that exist for laws in China to align with. In terms of law enforcement, the geographical scope of customs clearance procedures applicable to the protection of IPR in China are not clear and are not in harmony with some domestic laws. In the CCG IPR-related seminar, some scholars said that in the protection of copyright law, the classification of copyright is relatively wide in categories, and China's law enforcement rules also need to be updated according to the actual situation.

People from academic circles believe that China's level of IPR protection has still got a certain gap compared with CPTPP. Some ambiguities in the legal provisions of both parties need to be clarified. In addition, the IPR protection of internet content providers (ICPs) has not been fully demonstrated in the CPTPP. China's ongoing patent law should be reflected in the joint legal liability of ICPs. China's legislation on the Internet and the digital economy is also inadequate; written guidelines should be further developed in the areas of Internet content delivery, and digital information with high standards should be established. As CPTPP's IPR standards have put pressure on existing laws and regulations in China, the government needs to prepare and to do a trial run in advance.

Part Five: 

Conclusion and Policy Recommendations

1. Conclusion

China’s economic development over the years and the continuous adjustment and change of its economic structure have resulted in the formation of a complete system of Chinese IPR from scratch in the past 40 years. In the fields of intellectual property innovation, application, authorization, and law enforcement, China has achieved certain volume and quality advantages.

Especially with the continuous innovation within China's digital economy, China has reached the forefront of the world in terms of intellectual property protection in the digital economy, and to a certain extent, is well positioned to participate in the formulation of intellectual property conventions. However, improvements are needed in terms of integrating law enforcement standards, personnel training, and the standardization of intellectual property management.

In terms of joining CPTPP, China’s standards in the field of intellectual property protection are already high and close to the benchmark set by the CPTPP’s intellectual property protection system. However, compared with CPTPP’s intellectual property protection rules, China’s related laws and regulations still include divergent terms, definitions, and applicable boundaries. China currently has a window of opportunity to join the CPTPP. In the absence of the United States and being unable to join the CPTPP in the short term, China will have 2-6 years to join this high-standard free trade agreement. China needs to conduct research in the field of intellectual property protection as soon as possible in order to reach a consensus on intellectual property rules with the CPTPP during negotiations.

In the digital economy, China needs to deal with new formats, models and scenarios created by rapidly developing digital technologies. It is necessary to consider not only the protection of innovation, but also the high degree of specialization in the digital economy, which has changed the means of obtaining power, collecting evidence, and adjudicating compared with traditional methods. The growth of the digital economy has led to changes in the applicability of some domestic laws. It is necessary to cautiously, yet assertively, introduce technology into the field of intellectual property protection to maximally prevent market and technology monopolies. In the course of building "new infrastructure" supporting the practical applications of a large number of digital technologies, policymakers should pay more attention to judicial interpretations to make relevant laws and regulations more enforceable.

2. Suggestions from Enterprises

In the research, some enterprises have put forward suggestions on the revision and changes of laws and regulations related to IPR. For example, some companies believe that the current digital patent rate of iteration is very fast, but the review will take from one to one and a half years. Hoping to speed up the review, JD.com put forward the following suggestions:

1. The number of complaints received by e-commerce platforms is very large, including standard IPR protection complaints, but also more rare and malicious complaints, for which there are at present few regulations. It is hoped that the amendments to the Patent Law and the Trademark Law can provide guidance and clarification on the judgment standards and penalties for malicious complaints.

2. The “squatting” of trademarks, as well as the problem of duplicate trademarks at home and abroad with inconsistent registrants, have caused e-commerce firms difficulties with the import of goods. It is hoped that relevant laws and regulations will be clarified.

3. During operation it is difficult for e-commerce companies to judge complex and difficult cases. It is hoped that an authoritative administrative agency or a professionally neutral third party will provide guidance.

4. Regarding the 15-day waiting period stipulated by the E-Commerce Law, on whether a counter-guarantee mechanism can be introduced.

3. Policy Recommendations from CCG

(1) Submit an application to join the CPTPP as soon as possible and start the negotiation process. Applying to join the CPTPP requires a lot of preparation, including diplomatic work with the member states of the CPTPP, and promoting the establishing  of a consensus, before the negotiations can begin. China itself also needs to do a good job in revising relevant laws and regulations, and actively seeking to align with CPTPP standards. At the start of the negotiations, China should consider a bilateral investment agreement (BIT) to promote negotiations with major CPTPP countries, such as Japan, as well as a bilateral consensus through negotiations, turning bilateral consensus into multilateral consensus.

(2) Strengthen the implementation of intellectual property law enforcement. It is possible to consider centralizing authorization/registration agencies, separating and strengthening administrative law enforcement agencies, granting some law enforcement agencies more enforcement authority (including the police), and expanding customs oversight of IPR. Improve law enforcement standards, achieve consistent case rulings, and unify administrative law enforcement standards with judicial protection standards.

(3) Pay attention to the relationship between the protection of IPR in China's digital economy and the opening up of the entire digital economy. To ensure that the market remains open, further assessment and auditing are needed on issues such as source code, algorithms, and keys, in line with national security needs, so as to achieve the goal of continuing to open markets and improving the business environment. This serves to avoid unreasonable restrictions on foreign companies and transnational corporations due to IPR legal restrictions on their business with China, which affects foreign investment and the sharing of technology.

The IPR dispute between China and the United States is currently primarily focused on mandatory transparency requirements of Chinese laws, such as source code, algorithms, and keys, as well as ISPs’ liabilities with respect to copyright. Such areas involve national security and other issues, which will be part of a long-term negotiation between the two sides. The EU is following the U.S. on similar topics as well. China's newly revised Copyright Law on the liability of ISPs should be more explicit in its legal obligations to strengthen copyright protection capabilities in the digital era.

Meanwhile, China should protect its increasingly strong innovation capabilities in digital technology and avoid these innovation capabilities being limited by IPR barriers when relevant laws and regulations are enacted. For example, the law on standard-essential patents requires clarification as soon as possible. The EU implemented the GDPR in 2019, which has introduced data rights in the digital era. China should learn from the EU's approach with GDPR, and maintain the innovation capabilities of enterprises, and define the boundaries of relevant rights in the digital era.

(4) Improve talent development and standardization. This should include standardizing the training of IPR talent in colleges and universities, the certification of IPR agencies, and intensifying supervision following the implementation of the national standards for the Administration of IPR of Enterprises, so as to mitigate potential laxity following the achievement of the enterprise's target.

(5) Promote the application, management, and research of IPR technologies. Blockchain is one of the major emerging IPR protection technologies, which is supported and developed by many digital technology companies. However, there are a number of problems in the development and application of blockchain technology in China. One problem is that blockchain is largely associated with virtual currencies such as Bitcoin, which has been the subject of much hype and improper activities. Another problem is that blockchain has been tainted by numerous scams when applied to IPR authentication, and many blockchain companies do not have the technology to develop genuine blockchain mechanisms. In the investigation, the CCG learned that many copyright confirmation processes nominally relied on the blockchain; in fact, the use of network crawling technology, so that the ability to confirm and trace the work became extremely unreliable, and the information obtained is difficult to use as legal evidence. Therefore, the legal status of blockchain should be studied in-depth on the basis of existing laws so as to promote the judicial and administrative entities of IPR to obtain evidence, certainty, and adjudication.

(6) As Chinese technology companies are gradually becoming known internationally, overseas protection measures for Chinese IPR need to be enhanced. In 2016, the Ministry of Commerce established the Overseas Protection Assistance Center for enterprise IPR, and in July 2019, the State Intellectual Property Rights Office established the National Overseas Intellectual Property Dispute Resolution Guidance Center. Although it strengthens the protection of IPR overseas by many parties, the overall standard has yet to be jointly enforced. Consideration could be given to promoting cross-departmental cooperation between agencies such as the Ministry of Commerce and the State Intellectual Property Office, and the establishment of an overseas IPR information service system and a platform for the protection of rights.

Scan QE for E-Report

CCG Books

● Published by Springer 

● Edited by Wang Huiyao, President and Miao Lu, Vice President, Center for China and Globalization(CCG), Beijing, China 

More Information

The internationalization of Chinese enterprises is one of the most notable aspects of economic globalization in the 21st century. Despite the 2008 financial crisis and weak global outbound investment, under the “go global“ initiative, Chinese outbound investment has gone from strength to strength, while also diversifying in terms of investment modalities, destinations, and industries. However, growing anti-globalization sentiment in some countries has also created new challenges for Chinese firms expanding internationally.

Drawing on nearly 3000 data samples, using both quantitative and qualitative research methods, this book presents unique insights into the features and patterns of Chinese enterprises’ globalization. The analysis provides a useful reference for enterprises that have already gone global and those that plan to. In particular, this book investigates challenges confronted by Chinese companies when doing business in foreign countries. It summarizes research covering three angles, namely: the current situation, causation analysis and corresponding solutions, and recommendations for firms, government agencies and other institutions.

This book provides a comprehensive overview to help readers to grasp the broad picture of the international expansion of Chinese enterprises. It has important reference value for enterprises to help devise foreign investment strategy, seize opportunities, and navigate challenges in the course of globalization.

● Links：

https://www.springer.com/cn/book/9789811546457

● Published by Edward Elgar 

● Edited by Wang Huiyao, President and Miao Lu, Vice President, Center for China and Globalization(CCG), Beijing, China 

More Information

An excellent guide for understanding the trends, challenges and opportunities facing China through globalization, this Handbook answers the pertinent questions regarding the globalization process and China’s influence on the world.

With contributions from leading experts and international researchers, each chapter covers key topics regarding China’s participation in globalization, including: China’s new role in global economic governance; outward direct investment; China’s soft power and the implications for foreign relations; global migration, diaspora and talent. An enriching range of case studies and extensive empirical research are used to explore the successes and failures of globalization in China, and to discuss the dilemmas facing decision makers in today’s globalized world. A major contribution to the field, this Handbook offers valuable insights to China’s often misunderstood globalization process.

An essential reference for academics and researchers looking for a go-to empirical resource, this Handbook provides scholars of economics, politics and East Asian studies with an exemplary selection of contemporary research on China and globalization.

● Links：

https://www.e-elgar.com/shop/handbook-on-china-and-globalization

● Published by Springer

● Authors: Wang Huiyao, President and Miao Lu, Vice President, Center for China and Globalization(CCG), Beijing, China 

The first effort to address the gap regarding higher-end talent within the scholarly work on internal labor migration in China

Provides an essential overview of the major milestones in China’s talents attraction policies, as well as several recommendations to help further improve those policies

Investigates corresponding policies in Germany, Japan, and Singapore to serve as a basis for comparison

Provides a snapshot of first-hand reference material for relevant stakeholders involved in cooperation with China

More Information

This book offers the most comprehensive, up-to-date assessment of China’s domestic and international migration. Restructuring economic development requires large numbers of educated and skilled talents, but this effort comes at a time when the size of China’s domestic workforce is shrinking. In response, both national and regional governments in China have been keen to encourage overseas Chinese talents and professionals to return to the country. Meanwhile, the Chinese government has initiated a number of policies to attract international highly-skilled talents and enhance the country’s competitiveness, and some Chinese policies have started attracting foreign talents, who are coming to the country to work, and even to stay. Since Chinese policies, mechanisms, and administration efforts to attract and retain skilled domestic or overseas talents are helping to reshape China’s economy and are significantly affecting the cooperation on migration and talent mobility, these aspects, in addition to being of scholarly and research interest, hold considerable commercial potential.

● Links：

https://www.springer.com/gp/book/9789811362552#aboutBook

Other CCG News: