Hong Kong: Mutual Recognition Of Awards : Hong Kong And Mainland China For Intellectual Property Rights

Last Updated: 17 July 2019
Article by STA Law Firm

Mutual Recognition of award between Hong Kong and Mainland China with regards to Intellectual Property Rights

Introduction

For 22 years, Hong Kong and Mainland China have been described as "one country, two systems".  Since the handover of Hong Kong to the People's Republic of China in July 1997, both these parties have concluded agreements that create a metaphorical bridge between the two systems. One such bridge is the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial matters by the Courts of the Mainland and the Hong Kong Special Administrative Region.

Background

Hong Kong was transferred from the control of the United Kingdom and became a special administrative region of the People's Republic of China on 1 July 1997. Since the Handover, the judgments of the Hong Kong Courts were not enforceable in the People's Republic of China or Mainland China.

Hong Kong and People's Republic China have concluded arrangement relating to aspects of mutual legal assistance in civil and commercial matters. Arrangements providing for seamless cross-border recognition and enforcement of judgments between Hong Kong and the People's Republic of China (PRC) have been in effect since 1997. The two countries included the Arrangement on Reciprocal and Recognition Enforcement of Judgements in Civil and Commercial Matters by the Courts of the Mainland and the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned signed in 2006. This arrangement was modelled on the Hague Convention of 2005, and this Choice Court of Arrangement took effect on August 2008.

On the 18th of January 2019 Hong Kong and the People Republic of China signed yet another agreement. The arrangement follows a Consultation Paper that was issued by the Department of Justice in July 2018. The agreement was named the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region. The purpose of this arrangement is to establish bilateral mechanisms that foster clarity and legal certainty in commercial and civil matters between Hong Kong and Mainland China, thereby encouraging judicial cooperation between the two nations. This arrangement eliminates the need for re-litigation of the same disputes in Hong Kong and Mainland China. Additionally, this offers better protection to litigants interests. The agreement also establishes Hong Kong as a regional centre or an attractive forum for international legal and dispute resolution.

The agreement is not yet in force, but it is intended to replace the old arrangement which came into effect in 2008. The former arrangement applied if judgments were only mutually enforceable between Hong Kong and the People's Republic of China courts if the judgment concerned was for the payment of money in a civil or commercial case. The arrangement was also enforceable if the parties had agreed to a choice of court agreement in writing prior to the dispute.

The new arrangement applies to a wider range of cases. According to Article 1, not only will the new agreement apply to all commercial and civil cases but also cases related to civil damages in criminal cases. In addition, parties will no longer have to have concluded a choice of court clause in their contract for them to choose the most convenient forum between Hong Kong and the People's Republic of China. All agreements, whether including such a clause or not, will benefit from the New Arrangement. All monetary and non-monetary rulings for either court will be recognised and enforced as such. However, the new arrangement allows for the partial recognition and enforcement of awards. Furthermore, the new arrangement provides for decisions of the Hong Kong Labor Court, Lands Court and Small Claim Tribunals to be recognised by the People's Republic of China.

The new arrangement expressly excludes judicial review cases, and administrative law cases heard by the Hong Kong Courts. Judicial and non-judicial proceedings relating to regulatory matters are excluded. Orders for interim relief and rulings on anti-suit injunctions and preservation measures are also not within the realm of the arrangement. Article 3 states that the arrangement does not apply to a judgment which relate to family law in maintenance cases, cases on succession, administration and distribution of estate, bankruptcy insolvency cases, cases on marine pollution, cases on the recognition and enforcement of judgements, cases on the confirmation and setting aside of an arbitral award.   

The arrangement will be implemented in Hong Kong through the enactment of local legislation to this effect. The arrangement applies to judgments made on or after the commencement date.

Legal Framework: Intellectual Property Rights

Regarding Intellectual Property Rights, Article 1(2) of the 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS) applies. Intellectual property rights are the rights that a legal entity holds and protects as his or her creations of the mind. Conceptions of the mind may be plans, ideas, inventions or other intangible assets. The definition contained in Article 1(2) includes therein includes copyright and related rights, trademarks, patents, geographical indications, industrial designs, integrated circuit designs and trade secrets. Copyright rights are those that protect and accord exclusive rights to the creator to print, publish, perform, film or record literary artistic or musical material. A trademark refers to the symbols and words that are legally registered or established by use as representing, referring and belonging to a company. Trademarks include stamps, logos, crests, seals, emblems, signs and other symbols that are recognisable as expressions which identify a product or service as belonging to a particular company. A patent is a right or title to make, use or sell an invention issued by a government authority or license for a specified period. Geographical indications are distinctive signs used on products that have a specific geographical origin as well as possess qualities or other characteristics, or reputation that rea due to that origin. A geographical indication may refer to not only a product or service but also to signs, emblems and symbols that can be understood as indicating the source of goods.  An industrial design is a process of creating and developing concepts and specifications that optimise the value, function and overall appearance of products and systems. This process of design is usually applied to products that are to be manufactured through techniques of mass production.  Industrial design is done for the benefit of both the use and manufacturer. An integrated circuit design is a form of electronics and engineering that refers to the logic and circuit design techniques to design integrated circuits. Trade secrets are the sales methods, distribution methods, consumer profiles, advertising strategies, practices, formulas, processes, design instruments about a company that are not generally known or reasonably ascertainable by others.

The New Arrangement lengthens the list contained in the Trade-Related Aspects of Intellectual Property Rights as it also includes plant variety rights. The New Arrangement includes plant variety rights as stipulated in the Hong Kong Plant Varieties Ordinance and Article 123(2)(7) of the General Provisions of the Civil Law of the People's Republic of China. A plant in terms of the Hong Kong ordinance is any multicellular vascular organism with a root system. A plant also refers to all kinds of algae or all types of fungi. Variety in terms of the Hong Kong Ordinance is a cultivar of a plant and also applies to any clone, hybrid, stock or line or a plant. The term variety does not however refer to a botanical array of such a plant. Plant variety rights are rights that are granted to the be cultivar or the breeder of a new variety of plant. These rights give the breeder or the cultivar exclusive control over certain material such as seeds, divisions, cuttings, and tissue culture. The breeder also holds exclusive rights to cut flowers, foliage, fruit and other harvested material. Plant variety rights were first included in Article 123(2)(7) of the General Provisions of the Civil law and were classified under Intellectual Property rights.

 The inclusion of plant variety rights in the New Arrangement is significant because it is the first time that plant variety rights have been recognised as intellectual property rights in the recognition and enforcement of judgments arrangement between in the People Republic of China and Hong Kong

The New Arrangement covers judgments ruling on contractual disputes involving intellectual property rights. The New arrangement introduces more requirements to cases involving infringement of intellectual property rights. In a judgement that concern intellectual property rights will only be enforceable in two instances according to Article 11. The first instance is when the judgment concerns the act of infringement was committed in the requesting place. The second instance is when the intellectual property rights or interest related is subject to protection under the law of the requesting place.

There are, however, some judgements that concern intellectual property rights that are excluded from the New Arrangement. If the People Republic of China Court has heard a case on the infringement of invention patents and utility model patents, then it is excluded from the New Arrangement. Judgments on the violation of standards patents including original grant patents are also outside the ambit of the New Arrangement. If the Hong Kong Court heard a case in the short-term patent cases, then it is not included in the New Arrangement. If either the People's Republic of China or Hong Kong issues a judgment on the confirmation of the license fee rate of a standard-essential patent, then that judgment is outside the scope of the New Arrangement. Intellectual Property Rights that are not covered by Article 5 of the New Arrangement are also not regulated by the New Arrangement. Lastly, a ruling on the validity, establishment or subsistence of intellectual property rights is also not within the ambit of the New Arrangement.  It is, however, essential to note that Article 15 states a ruling on liability based on a judgment on the validity, establishment or subsistence of intellectual property rights is within the ambit of the New Arrangement. These will be recognised and enforced, so longs as the judgement comply with the relevant requirement of the New Arrangement.

There are grounds for a requesting court to be denied the recognition and enforcement of a judgment. This denial will occur when a litigant was not summoned in accordance with the law of the requesting place as enumerated in Article 12. Another ground of refusal is that the litigant is not given a reasonable opportunity to make representations or defend the case. Lastly, the requesting court will be denied recognition and enforcement of the courts if the judgment referred to was obtained by fraud. It is important to note that the only People's Republic of China may refuse to enforce or recognise a judgment, but the inverse is not true.

If an applicant in a case that involves an infringement of a right that occurred in the requesting place or where an intellectual property right or interest is protected under the law of the requesting place, they have to follow the procedure set out in Article 8. The applicant has to apply, a copy of a legally effective judgement. A legally effective judgment on intellectual property rights in Article 4 is a judgment by a court of second instance or the judgment of a court of first instance of a court in Mainland China where no appeal is available or where no appeal has been filed within statutory limits. Article 4(2) states that a legally effective judgment in the case of Hong Kong is a judgment issued by the Court of Final Appeal, or Court of Appeal. A legally effective judgment also refers to the Court of First Instance of the High Court, the District Court, the Labour Tribunal, the Competition Tribunal or the Small Claims Tribunal.

The applicant must also submit a certificate issued by the court which gave the legally effective judgement. The purpose of this is to certify that the judgment is a legally effective judgment. The certificate must also show that the judgment has content that must be enforced. The certificate must also confirm that the judgment is enforceable in the requesting place. The applicant must also submit identification documents. The identification documents, if issued in a country that is not the requested place, then they must be certified in the manner prescribed by the law of the requested place. It is also important to note that Article 6 refers to a place of business, as the place incorporation or registration, place of the principal office and principal place of management. This definition is wider than that given in the General Principles of Civil law of the People's Republic of China. This expands standing for the victims of intellectual property rights infringement.

Article 9 states that a person applying terms of the New Arrangement must outline the details of the request and motivation and justification for the application. If the applicant is applying for enforcement, they must also submit details on the status and location of the property of the respondent. The applicant must also notify the court of the requested place if another application for the enforcement of the judgment in any other forum is pending. Article 10 states that the law of the requested place governs time limits, procedures and manner for making an application and enforcement of a judgement.

Finally, it is vital to mention that those wanting for judgments relating to intellectual property rights infringement to be recognised or enforced may apply for the appeal if the order was made by a Hong Kong court, or for a review for a request made by a court in Mainland China.

Remarks

The reforms ushered in by the New Arrangement are significant for a couple of reasons. Firstly, the remedies available for infringements committed in the two jurisdictions are very similar. For instance, Intellectual Property rights holders in China and Hong Kong may elect to enforce their rights through civil remedies. Civil remedies are available through the local courts in both jurisdictions. Within the People's Court, there are special Intellectual Property chambers that have expertise in dealing with Intellectual Property rights and disputes concerning such rights. These People's Courts are available in all major cities in China. Although Hong Kong still regards the decisions of the courts in the United Kingdom as precedent, the new arrangement is still useful in creating a bridge between the two jurisdictions.

China is the world's leading intellectual property rights infringer. It is estimated that China produces over 80% of the world's counterfeits. Although China's local Intellectual Property Laws comply with its commitments under the World Trade Organisation's Agreement on Trade-Related Measures on Intellectual Property rights (TRIPS), enforcement seems to be the major hurdle. It is therefore significant that judgments on the infringement of intellectual property rights will now be recognised and enforced in Hong Kong as well. This may help to improve the problem that the Chinese Courts have been having in enforcing such judgements.

Furthermore, the Arrangement on Reciprocal Recognition and Enforcement of Judgements in Civil and Commercial Matters by the Courts of Mainland China and the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned continues to apply. This means that parties can conclude a choice of court agreement in writing. Thus, the new Arrangement does not eliminate the choice of forums that are most favourable and convenient considering the different precedents followed in the two courts.

Conclusion

The New Arrangement has many favourable implications for parties in commercial and civil disputes. The New Arrangement regulates the enforcement of intellectual property rights issues and extends this protection to new plant varieties. The New Arrangement, undoubtedly, is much needed legal reform in the area of enforcing intellectual property rights.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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