The trade relationship between China and the United States has been top of mind for businesses over the past year. In spring 2018, Chinese President Xi Jinping denied the U.S. Government's request to end subsidies for key industries identified by the "Made in China 2025 Initiative.” (Read: Foreign Companies Pursuing Business in China: Proceed with Caution) The following year, starting in January 2019, intellectual property rights cases were allowed to be taken to China’s Supreme Court in a development aimed to provide uniformity in decisions and awards for intellectual property infringement in China. (Read: Pursuing Business in China? Continue to Proceed with Caution) Fast-forward to January 2020 and an agreement has just been signed by both the U.S. and China in an attempt to bolster IP protections in China for U.S. companies.

The latest step in a long journey to achieve greater protection for IP in China, especially as Chinese companies set out to increase their own intellectual property portfolios, this agreement is said to even the playing field for all companies acting on IP rights in China. While the agreement provides a good framework for improving IP protections in a number of important respects, it is only the initial phase. The agreement calls for an action plan to be issued by the Chinese government within the next month and then the provisions and processes for implementing the improvements will be determined according to the Chinese government’s “own system and practice.” The devil will be in the details and we will need to assess the action plan and the implementation to determine the ultimate impact and effect of the current agreement.

Importantly, stricter restrictions and stronger penalties for infringement and trade secret disclosures are called for, and the agreement is expected to make it easier for companies to litigate. The agreement also includes specific language to combat online piracy and the online sale of counterfeit goods, in addition to a number of other related provisions.

With regard to pharmaceuticals, the agreement requires an improved mechanism for the early resolution of disputes over pharmaceutical patents, and it requires China to take stronger action against counterfeit pharmaceuticals. It also requires China to offer patent term extensions to compensate for “unreasonable delays” in regulatory processes. Brand name pharmaceutical companies have generally welcomed this new agreement as a step in the right direction for protecting their intellectual property. On the other hand, Generic drug makers see it falling short of the U.S.-Mexico-Canada Agreement in terms of striking a balance between protection of innovation and access to affordable medicines.

If you have any questions regarding how these changes may impact your intellectual property strategy, please contact me at jpowell@verrill-law.com.