04 February 2020
On 15 January 2020, Phase One of the Economic and Trade Agreement Between the United States of America and the People’s Republic of China (Phase One) was concluded and signed, following a lengthy and ongoing trade war between the two countries.
Sparked to some extent by the Findings of the Investigation into China’s Acts, Policies, and Practices related to Technology Transfer, Intellectual Property, and Innovation, dated 22 March 2018, Phase One specifically addresses some of the US’ longstanding concerns regarding China’s protection of intellectual property and technology. Other fields covered by Phase One include agriculture, financial services, currency expanding trade and dispute resolution, with overarching commitments by China to increase purchases of US goods and services and by the US to ease tariffs on Chinese products.
Although President Trump has foreshadowed that Phase Two negotiations (which are set to deal with issues including cybersecurity) will commence promptly, analysts suggest an agreement is unlikely before the US Presidential Election, due to take place on 3 November of this year.
Chapters 1 and 2 of Phase One contain lengthy commitments in respect of intellectual property and technology transfers that essentially operate to strengthen intellectual property protection in China and eliminate the prevalence of forced technology transfers.
The form and structure of these commitments, however, will only be seen once China submits its Action Plan, which is due within 30 working days of signing. This Action Plan should expand on China’s proposed implementation of the following key commitments addressed in Phase One.
Other noteworthy commitments relating to intellectual property include measures to avoid overprotecting geographical indications and generic terms, the introduction of provisions concerning bad faith trade mark registrations, unlicensed software and deterrent-level penalties for intellectual property theft or infringements.
Although these commitments are between the US and China, given their nature, it appears that their implementation will at least to some extent require structural reforms and substantial revisions of China’s intellectual property laws that should presumably extend more broadly.
If China remains faithful to the spirit of these commitments in its Action Plan and implementation, the result should be a stronger, more robust intellectual property framework that offers greater protections and more sanctions and which is better aligned with western standards. If this is indeed the outcome, then as Chinese vice Premier Liu He said, “[The] conclusion of the Phase One trade agreement between China and the US is good for China, for the US and for the whole world.”
For Australian businesses with intellectual property that are considering investing in China, reforms of this nature should – contingent on their enforcement – provide more confidence and certainty that they can obtain enforceable intellectual property protection and avoid ceding their technology, thereby making China a more transparent and open market and a safer and easier jurisdiction to do business in, import into and export from.
However, since China has previously shown an intention to make some commitments of Phase One’s nature without any follow-through, the real impact of this deal is still unknown. The release of China’s Action Plan should further clarify whether this deal will yield transformative results, as well as any other potential takeaways for Australia.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.