ETS and GMAC v. Beijing New Oriental Language School(2)

As early as the beginning of the 1990’s, New Oriental has been copying the TOEFL, GRE and GMAT test materials. ETS and GMAC brought the matter to the attention of the Beijing Administration of Commerce and Industry[1] in January of 1997. The agency took administrative measures and searched New Oriental’s warehouses and seized a great amount of test materials copied from ETS and GMAC publications. However, New Oriental did not learn its lesson from that case. It continued the infringing action which led to a second administrative search and seizure by the Beijing Administration of Commerce and Industry in 2000.

Generally, civil cases should be dealt with by courts, arbitrators or mediators, China has set up a special system, administrative system, for the protection of IP, through which IP infringements can also be dealt with by the designated IP administrations.[2] However, more and more people now prefer to taking legal actions to courts rather than relying on administrations.[5] In other words, an IP civil case may be handled via either administrative approach or judicial approach.[3] The first administrative organization, National Copyright Administration, regulating copyright protection was set up for copyright cases on July 25, 1985, the first Chinese Copyright Law came into force four years later.[4] Copyright disputes could be brought to courts or arbitral tribunals when parties involved cannot reach anagreement in consultation or via mediation.

Measures of the Imposition of Administrative penalties Relating to Copyright, promulgated by the National Copyright Administration on January 28, 1997, provides that the administrative department of copyright of the State Council (here refers to the National Copyright Administration) and administrative department of copyright of local people’s governments (here refers to the local administrative departments of copyright) are responsible for the imposition of administrative penalties according to Chinese Copyright Law and other laws and administrative regulations as well as the rules formulated by the national Copyright Administration within the limits of its power.[6] The National Copyright Administration is responsible for investigation and penalizing (1) illegal acts of serious influence throughout the country; and (2) illegal acts that it deems necessary to investigate and penalize by it.[7] Local administrative departments of copyright are responsible for investigating and penalizing illegal acts occurred within their respective administrative areas.[8]

Depending on the circumstances, an administrative department of copyright may impose the following types of administrative penalties: (1) a warning; (2) a fine; (3) ordering to stop the production and distribution of infringement reproductions; (4) confiscation of illegal gains, infringement reproductions and production equipment; and (5) other administrative penalties specified by laws and administrative regulations.[9] The amount of fine shall be determined according to the provision of article 51 of Implementing Regulations of the Copyright Law of the People’s Republic of China.[10] If an interested party is not satisfied with the decision on administrative penalty, he may institute legal proceeding in a People’s Court. The court will then review the validity and appropriateness of the administrative penalty.[11]

Administrations can interfere in copyright disputes to a much larger extent. This is mainly due to the administrative interfering tradition deeply in Chinese civil affairs. However, administrative interference has some negative effects due to the following reasons: (1) administrative approach may undermine the judicial authority and waste public resources. The copyright administration can only decide whether there is an infringement in existence and order to stop infringement rather than order to make compensation for losses,[12] the case can not be finally resolved in the administrative proceeding. If the case in nature is civil dispute which should be handled under civil procedure, the administrative procedure concerned in the case wastes the public resources; (2) an administrative punishment includes fine and confiscation,[13] administrative punishment can order an infringer to undertake civil liability or/and criminal liability.[14] In this circumstance, it is considerably easily confused with civil compensation and criminal penalty. In legal practice there is actually existing to use administrative punishment to take criminal punishments instead, that is so called “criminal taken by punishment instead” which seriously undermine the effect of criminal sanctions and connive at the crime upon intellectual property.[15]

 

As to the aforesaid reasons, the limitation of administrative measures has been shown in New Oriental case. The small amount of administrative fines did not sting new Oriental, especially when they expected big illegal profits could compensate its loss. The worst is the final judgement by Beijing High Court directly denied the first two administrative verdicts concerning trademark infringements. That means New Oriental in a certain circumstance could apply to quash the two administrative verdicts and for administrative compensations.[16]  Therefore, until brought to a legal action, the infringer will not be effectively deterred.

 

 

The final decision of New Oriental case made by Beijing High Court is a great progress in the protection of intellectual property. However, some problems deserver considering. Firstly, so huge amount of infringing materials used by the New Oriental and the infringement lasted so long time, the infringers have been ordered to take civil liability, whether the infringers should also take criminal punishment? Secondly, the rightholder of registered trademark enjoy exclusive right, how to define the problem like “descriptive use” is the task of judges and jurisprudents; thirdly, to dilute the administrative role further and enforce judicial capacity is an important in the way of judicial reform. There is a long way for the judicial construction to go, a further reform in legal system with regard to the protection of intellectual property needs to be enhanced in order to endorse the commitments made by Chinese government before China’s admission to World Trade Organization.

 

　

---