How will China’s government reform affect IP in the country?

China announced a huge government reshuffle programme. The sweeping government restructuring programme was said to be the largest reform since the end of the Mao Zedong era in the 1970s. The number of ministerial-level bodies was reduced significantly. The entire structure reflects the aim of streamlining governance, in key areas such as environmental protection, taxation, financial regulations and the legislature system on the administrative side.   

In the intellectual property world, the most relevant change is the establishment of a super State Market Regulatory Administration (SMRA). This combines the State Administration for Industry and Commerce (SAIC), the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and the China Food and Drug Administration (CFDA).

The antitrust divisions of the National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) will also be merged into this super ministry. The patent and trade mark offices will be combined and housed under one roof - the SMRA. The responsibilities of the State Intellectual Property Office (SIPO), the State Administration for Industry and Commerce (SAIC) and the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) – for patents, trade marks and geographical indications respectively – will all be governed under the SMRA.    

Placing the patent and trade mark offices under the new mega ministry SMRA is something that has been discussed before, but the extent of this new authority’s powers comes as a surprise. With regard to how it will affect the capabilities of the patent and trade mark functions, it seems the change might be more administrative in nature and cause no major disruptions. It is not necessary that the reorganisation will impact either office negatively, as it will still be the same group of people working at both offices. Each office should function in the same way as they have done previously.  

The restructuring also raises bigger picture questions such as who will now guide the overall direction of IP policy in China and whether there will be a redistribution of resources. Traditionally, the SIPO has been deeply involved in nurturing IP innovation policy and shaping the law, and it reports directly to the State Council, the highest level of authority in the country. 

SIPO plays an instrumental role in the new patent law amendments and inventor remuneration regulations. Now, any policies to be initiated by SIPO will be checked first by the new SMRA and, if approved, forwarded to the new Ministry of Justice, which is reinvigorated by including the former State Council Legislative Affairs Office. It is believed that before long the SMRA will dictate patent-related policies.    

Regarding the SMRA, what is mostly notable is its new leader. Bi Jingquan, former head of the CFDA was just appointed to lead the new regulatory body as party secretary general, together with Mr Zhang Mao, former head of the SAIC, as minister of the SMRA. Bi Jingquan is widely regarded as a hands-on pro-reform and pro-innovation leader who has, for example, been playing a critical role in introducing the pharmaceutical patent linkage system in China.

The reform he led in the pharmaceutical area is unprecedented and is clearly part of the foundation for his promotion. He might continue instigating reforms at this new ministry. The progress he will  initiate in the area of patent linkage, regulatory data protection and patent term extension will be signals of future reforms in the IP field.    

The impact of the consolidation at the central government level remains to be seen at the local level. In fact, in recent years local SMRAs have been established in many cities, starting from Shenzhen. Patent administrative enforcement has already been tried out at some of the local SMRAs. The consolidation of the enforcement powers in both the trade mark and patent area might arguably increase effectiveness and deterrence.   

What is also notable is the consolidation of the antitrust departments in the SMRA, as it may have some impact on IP-related antitrust regulations. The NDRC and SAIC arguably both have jurisdiction over IP-related antitrust issues. The consolidation, which aims to achieve uniform antitrust law enforcement will probably put an end to this dual jurisdiction.