Intellectual Property Rights in HK and the PRC United but different On 19 December 1984 the governments of the PRC and the United Kingdom signed the Sino-British Joint Declaration on the Question of Hong Kong. The PRC and the United Kingdom declared together that under the principle of "One Country, Two Systems", Hong Kong would keep its capitalist system and retain its own laws and a high degree of autonomy for 50 years. These policies are codified in the Basic Law that came into effect on 1 July 1997. As of that moment Hong Kong would be called a Special Administrative Region of the PRC. The Basic Law is a kind of mini-constitution of Hong Kong, on which all legislation of Hong Kong is based. (In)dependent jurisdiction IPR has been dominated by the territoriality principle. This means that the territorial scope of any IP law of a jurisdiction shall be limited to the border of that jurisdiction. Therefore, if one has registered a trademark or design-patent, invention-patent or utility-patent in the PRC it does not mean that one has registered a trademark, industrial design, patent or utility model in Hong Kong. And if one has registered an IPR in Hong Kong one has not registered a IPR in the PRC, either. Copyright is an automatic right, which arises when it is created. Copyright registration is not needed in the PRC nor in Hong Kong, because of the 'no formalities provision' of the Berne Convention to which the PRC is a signatory and to which Hong Kong implicitly is a member. However, in the PRC you can register your copyright with the National Copyright Administration, which can be helpful to establish prima face evidence, for example ownership. According to the Hong Kong Intellectual Property Department (IPD) registration is not needed to get protection under the law. The territoriality also designates the law of the jurisdiction where the protection is sought as the applicable law to the infringement suit. However, parties can contractually put aside this conflict-of-law rule. An interesting dependence between the United Kingdom, Hong Kong and the PRC can still be observed in relation to the grant of a standard patent in Hong Kong, which can only be granted if it is based on the registration of a patent granted by one of the following three patent offices: PRC’s State Intellectual Property Office (SIPO), the European Patent Office (EPO), in respect of a patent designating the United Kingdom or the United Kingdom Patent Office. Civil Law versus Common Law tradition The PRC uses a Civil Law system that is heavily influenced by the German Civil Code, Japanese law, which itself was influenced by German law and by Socialist Law. The Basic Law of Hong Kong guarantees that Hong Kong courts continue to follow the Common Law tradition, which it inherited from the British. A difference between the Civil Law and Common Law tradition is that in the first the important principles are stated in the civil code, while the statutes complete them; while in the latter the law evolves via jurisprudence and in addition is amended by statute. However, in the area of IPRs, statute law is overwhelmingly important in all jurisdictions, including in the Common Law jurisdiction of Hong Kong. Another difference is that in Civil Law jurisdictions courts are held to the interpretations by higher courts, while the lower courts in Common Law jurisdictions are bound to follow the reasoning of the interpretation of the higher courts. However, in practice, the people’s courts follow the interpretations of the laws by the Supreme People’s Court, because of its authoritative status. Theoretically Hong Kong’s courts have to follow not only the precedents of Hong Kong’s highest court, the Court of Final Appeal, but also those of the English Court of Appeal. Since the Basic Law of Hong Kong guarantees that Hong Kong should continue its Common Law system, one can argue that post-1997 English court judgments, which might reflect the English pre-handover law more accurately than the post-1997 judgments by the Hong Kong courts, should be applied. However, in practice, post-1997 English court judgments have no binding effect in Hong Kong. Pre-trial evidence versus Discovery Although most jurisdictions that follow the Common Law tradition have no civil trial by jury anymore, the historical need to bring together a number of citizens to hear the testimony of witnesses, observe the evidence, find the facts, and to apply the facts to the law under instructions from a judge; explains why the civil proceedings in the Common Law tradition is shaped as a single concentrated event. According to Merryman, in Civil Law jurisdictions “[d]iscovery is less necessary because there is little, if any, tactical or strategic advantage to be gained from the element of surprise”, in which he is referring to the civil proceedings that are spread out “over a series of isolated meetings of and written communications between the counsel and judge, in which the evidence is introduced, testimony given, procedural motions and rulings are made.” Merryman noticed a trend in Civil Law jurisdictions toward concentration of the civil proceedings. This could a fortiori be true for IPR proceedings. Although the PRC Civil Law system does not have a formal discovery process, it provides for preliminary measures to preserve evidence before a party initiates legal proceedings, which could have the same function. Article 74 of the PRC’s Civil Procedure Law in general and article 50 of the PRC’s Copyright Law, article 58 of the PRC’s Trademark Law and article 61 of the PRC’s Patent Law for the respective IPRs. Article 65 of the PRC’s Civil Procedure Law states: “The people’s court has the right to acquire evidence from the relevant units and individuals, and they shall not refuse it.” However, article 65 of the PRC’s Civil Procedure law is seldom used. Hong Kong’s Civil Justice Reform includes legislation that gives the court the authority to order pre-action discovery between the parties and post-commencement discovery against non-parties in all types of civil claims, including IPR related ones. It is believed that, with greater transparency between the parties at an early stage, the prospects of an early settlement could be enhanced. Chinese versus Chinese and English In the PRC, Chinese is the only official language. English translations of law are for reference only. In Hong Kong English is an official language next to Chinese (Cantonese or Mandarin) and may also be used by the Hong Kong judiciary. Hong Kong can be praised that it not only offers all legislation bilingually, but that all legal proceedings be held in English at the party’s request. Transparency In order to determine whether a legal system is effective one should be able to know what is actually happening. One of the fundamentals is to be able to find the right law, regulation or judicial interpretation. In the PRC there is still room for improvements. In Hong Kong this is nearly perfect: all laws and regulations can be easily found online. Rule by Law versus Rule of Law The rule of law is arguably the single most important legal principle for any judicial system. It is intended to safeguard against arbitrary governance. Governmental authority can only be exercised legitimately in accordance with written and publicly disclosed laws and enforced in accordance with established procedure. If a state follows the rule of law and apply the law consistently, uniformly and in an impartial way, the societal benefits are legal security for the citizens and, according to the Political and Economic Risk Consultancy (PERC) “[b]etter judicial systems are associated with better IPR protection, lower corruption and wealthier economies.” The PRC’s leadership clearly wants to restrict lower government authorities to the rule of law. In a survey by PERC 1,537 corporate executives were asked to rate the judicial systems in the Asian countries where they work, using such variables as the protection of IPR, corruption, transparency, enforcement of laws, freedom from political interference and the experience and educational standards of lawyers and judges. PERC states that the less favourable perception of the PRC's judicial system is rooted in political interference, and that the Communist Party is above the law. According to the PERC survey Hong Kong has the best judicial system of Asia. The PRC can only be found on place 11. (In)dependent judiciary The PRC’s Constitution promulgates that the people’s courts exercise their judicial power independently, without any interference by any administrative organ, public organisation or individual. However, in contradiction to this principle, article 128 PRC’s Constitution states that courts report to the corresponding level of the people’s congresses that created them. At the highest level, the Standing Committee of the National People’s Congress is superior to the Supreme People’s Court: it has the final word when it comes to the interpretation or invalidating of laws by the Supreme People’s Court. Also, the People’s Procuratorate Bureau exercises supervision over the judiciary, leading to the situation where procurators are subject to the authority of the court when they appear before the court as a prosecutor and yet have the authority to challenge the “final” decisions of the court. Hong Kong enjoys a much higher degree of independent judicial power, including that of final adjudication. However, it should be noted that the power of interpretation of Hong Kong’s Basic Law is vested in the Standing Committee of the National People’s Congress, which authorises the courts of Hong Kong to interpret on their own, if it concern affairs that are outside the responsibility of the Central People’s Government or do not concern the relation between the PRC and Hong Kong. And then there was the incident in 1999 that the government of Hong Kong ignored an interpretation of the Basic Law by its highest judiciary, the Court of Final Appeal. Instead it sought assistance from the National People’s Congress to come up with an interpretation. Reciprocal agreement of judgments The PRC and Hong Kong have a mutual recognition of arbitration findings and since July 14, 2006, also the mutual enforcement of court rulings on IP infringements, which is called: Reciprocal Enforcement of Judgments in Civil and Commercial Matters by the Supreme Court of the PRC and the Secretary of Justice of Hong Kong. The arrangement initially only applies to money judgments of commercial cases. Since the parties need to agree on an exclusive jurisdiction clause, the reciprocal agreement of judgments seems to be of limited value in its current form for IPR cases. Most infringements of IPRs are done by unknown parties with whom the IPR right holder has not made any agreements. IPR enforcement in PRC and Hong Kong Although great gains have been made to date, most people would agree that there is still plenty of improvement in regard to the PRC’s national IPR strategy. Although it is not fair to compare the effectiveness between the PRC and Hong Kong, because Hong Kong is much more synoptic, the government of Hong Kong has shown an unstinting commitment to innovative ways to protect and enforce IPRs. The general perception is that the Hong Kong government is effective in protecting and enforcing IPRs. However, this has not always been the case. Only in 1997, the year that the sovereignty of Hong Kong was returned to the PRC, Hong Kong was put on the 301 Watch List created by the United States Trade Representative (USTR). According to this trade policy adviser to the US President, Hong Kong had problems with IPR protection and enforcement. In 1998 the then Trade and Industry Bureau, the IPD and Customs & Excise Department C&ED worked together to enact and implement a series of amendments to the copyright related legislation. In 1998 the C&ED also set up a Special Task Force to target pirate optical disc outlets. Statistics show the decrease in copyright infringements. In 1999 Hong Kong was removed from the 301 Watch List. Innovative ways of IPR protection and enforcement in HKong Kong include the “No Fakes” label scheme, to be displayed at shops. In March, 2004, more than 380 retail merchants covering 2,300 outlets have joined the Scheme. The alliance will help monitor and report any counterfeiting and piracy activities. In 2008 the concept was followed by Shanghai. Sometimes the Hong Kong government gets criticism because of perceived excessive anti-counterfeit and piracy measures. This includes recruiting children for IPR surveillance and Mr Chan Nai-ming was the first person in the world that was convicted and sentenced because of uploading movies via BitTorrent. After two appeals Mr Chan was convicted by the Court of Final Appeal to serve a three-month prison term for uploading the movies Daredevil, Miss Congeniality and Red Planet without permission . Hong Kong Tolerates Shadow Companies to the Disadvantage of the PRC Despite Hong Kong’s successes in the field of IPR protection and enforcement, there are still some problems left that need attention. PRC entities are setting up companies in Hong Kong with company names that are “inherently distinctive”, according to the current legislation, but very similar to well-known trademarks, and accepted by the Hong Kong Trade Marks Registry. These so called shadow companies usually engage in counterfeiting activities in the PRC. In the PRC they show official copies of their Hong Kong certificates of incorporation to Chinese manufacturers, who will churn out infringed and pirated goods in good faith. One can argue that the Hong Kong Companies Registry is interpreting the Companies Ordinance Chapter 32, Section 22 (2) and Section 22A and Section 291 too restrictive. Conclusion Although Hong Kong is part of the PRC it has a separate jurisdiction. Therefore, IPRs need to be registered in each jurisdiction separately, with the exception of copyright. Hong Kong misses a lot of the extra-judicial factors that make enforcement of IPRs difficult. It is the perception of executives in Asia that Hong Kong has the best judicial system, which seems to correlate with good IP enforcement, lower corruption and a wealthier economy. Hong Kong’s judiciary is nearly completely independent from government interference. Legal proceedings in the PRC can only be done in Chinese, in Hong Kong this can be done in both Chinese or English. The transparency in Hong Kong is much bigger than in the PRC. The Reciprocal Agreement of Judgments between the PRC and Hong Kong has not yet great value in relation to IPR cases. The Hong Kong government has developed itself into an effective IPR protector and enforcer using innovative strategies, with the exception of shadow companies. Danny Friedmann <!--[if !supportFootnotes]-->
<!--[endif]--> The Basic Law was drafted by a committee composed of members from Hong Kong and the Mainland. It was adopted on 4 April 1990 by the Seventh National People's Congress of the PRC and it came into effect on midnight 1 July 1997.Basic Law of the Hong Kong SAR available at: http://www.basiclaw.gov.hk/en/basiclawtext/index.html.
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