These trends reflect rising urgency among Chinese courts and law enforcers to cement the country’s new-found reputation for protecting intellectual property rights, a thorny issue in China’s trade rows with the US and Europe. The efforts are likely to encourage more foreign firms to defend their rights in the country.

“Compared to last year when American companies were having trouble filing cases, even, in China, now it’s the other way around,” said Douglas Clark, global head of disputes at IP law firm Rouse, who has practised in Hong Kong and China for more than two decades. “Foreign companies are starting to win big cases.”

“Right now the environment [is] for the courts to say ‘yes, go ahead’ and, if there’s good cases, find in favour of foreign parties,” added Clark, who was involved in the New Balance and Spin Master cases.

Thanks to trade agreements struck with the US in January and ongoing talks with the European Union, the international pressure on Chinese courts to better protect IP rights has also increased with the number of filings, Clark said.

Court cases involving foreign entities have been on the rise since 2014, when China’s legislature approved plans to set up separate courts for IP cases in major cities including Beijing, Shanghai and Guangzhou. Last year, the Supreme People’s Court also launched an IP tribunal.

US companies accounted for a third of the cases, with German and Japanese firms trailing behind at 10 per cent and 9 per cent respectively. They had a 68 per cent winning rate in civil cases between Chinese and foreign entities.

In Zhejiang province, a major manufacturing hub in eastern China, new cases involving offshore companies – including those in Hong Kong, Macau and Taiwan – jumped 32 per cent to 1,367 last year from 2018, a top provincial court reported last month. In the neighbouring Jiangsu province, they surged 142 per cent to 452 in 2019.

Cases involving foreign entities have increased year by year, said Guangzhou Intellectual Property Court in southern China in a report last month. “Renowned companies have increasingly chosen to file their cases in Guangzhou, such as Qualcomm and Apple,” it said, adding that half of the cases were disputes over patent rights.

Better handling of these cases is of huge significance to China. A stronger IP protection regime is among the eight main improvements China promised to make in the partial trade deal with the US, which took two years of painful tariff hikes on both sides and more than a dozen rounds of negotiation to reach.

Prevalent technology theft as well as counterfeit and pirated goods in China was a central focus of the US Trade Representative Section 301 investigation launched in August 2017, which eventually formed the basis for the US to slap additional tariffs on Chinese goods.

As China started to switch its focus towards talks with the EU on a major investment deal recently, intellectual property protection remains a thorny issue the country has to tackle to push negotiations forward.

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In a report by the European Commission released in January, investigators found weak protection for intellectual property and trade secrets was causing “irreparable harm to European businesses”.

Besides trade relations, China has plenty of reasons to work on IP protection for its own good, as copycats will be squeezed out of the market while real innovators survive.

Domestic technology developers and home-grown consumer brands are now seen as a lynchpin to China’s efforts to climb the global value chain, as policymakers seek to reduce its reliance on old-economy industries, after the economy expanded just 6.1 per cent last year – its slowest pace in nearly three decades, before the slump last quarter.

“The biggest impetus for better IP protection in China is coming from the Chinese companies themselves,” said Clark. “As they develop and get new technology and ideas and trademarks themselves, they can suddenly see a value in having a proper system to protect IP.”

A slew of recent court rulings indicate positive signs.

In a landmark ruling made in late April, the Shanghai Pudong People’s Court ordered Chinese company New Barlun to pay damages of 10.8 million yuan (US$1.5 million) to the US sports footwear and apparel company New Balance, for unfairly using “N” symbol that closely resembles New Balance’s signature logo.

The case represented the largest damage granted to foreign businesses over trademark infringement.

“The New Balance case is an example showing that Chinese courts have gradually become more willing to grant higher damages and substantial legal fees in trademark cases,” said Andrew Cobden, counsel at law firm Hogan Lovells based in Hong Kong.

“Foreign IP owners are increasingly successful in court cases in China,” he added.

This follows a ruling handed down in March by a court in Suzhou that awarded Canadian toymaker Spin Master 15.5 million yuan (US$2.2 million) in damages from Chinese firm Guangzhou Lingdong Creative Culture Technology, whose products were found to have infringed the former’s patent.

That was the largest amount ever granted to a foreign plaintiff over patent infringement disputes in China, according to Lusheng Law Firm, who advised Spin Master on the case.

A number of other global companies have been awarded large damages in recent cases. British chocolate maker Cadbury in December won 2.43 million yuan (US$344,000) in damages from Yikoulian (Xiamen) Food, who was ruled by a Beijing court to have infringed its trademark.

French wine conglomerate DBR Lafite, which owns the iconic Chateau Lafite Rothschild, was also granted 2.1 million yuan in November when a separate court in Beijing decided a Chinese firm violated its trademark.

“The amount of damages granted by our court in cases involving foreign entities has risen significantly over the past five years,” the report by Guangzhou Intellectual Property Court says. The average damages claimed were 830,000 yuan (US$117,000) and the average awarded was 660,000 yuan, according to the report.

In addition to greater damages, Chinese lawmakers have also made so-called trademark-squatting harder to tackle the scourge.

“China’s ‘first to file’ trademark registration system has, over the years, enabled trademark squatters to proliferate,” said Amita Haylock, partner at law firm Mayer Brown based in Hong Kong. “The good news is we have seen important revisions to the law to combat this.”

Amendments to the Trade Mark Law that took effect in November empowered authorities to refuse bad-faith applications filed without the intent to use the mark, she said. In China, the first to file for registration gets the trademark, in contrast to a “first to use” system in the US and Canada.

Whether the shift in court attitude will sustain remains to be seen in future cases. Some of the major cases pending that involve European companies include French cosmetics giant L'Oréal SA, which sued Beijing Xinwang Digital Technology last month for using its trademark “3CE” in its domain name.

The French electrical equipment maker Schneider Electric SE is also pending a ruling by the court of second instance, after a court in Shandong province decided local firm Shandong Shinaide used “Schneider” in its advertisement and sales without authorisation.

In addition, Bruce Lee Enterprises, a California-based company run by the Hong Kong movie star’s daughter, in December sued Chinese fast-food chain Guangzhou Real Kungfu Catering Management for violating his image and claimed 210 million yuan for compensation.

“Trade secret matters are very difficult to handle in China’s administrative processes due to concerns about local economic influences, uncertain procedures to maintain confidential information, fears of retaliation, etc,” Mark Allen Cohen, visiting professor at Fordham Law School wrote in a recent article.

“In general, foreign companies have been reluctant to sue national and local Chinese government agencies, with the significant exception of patent and trademark validity challenges.”

But the government’s resolve to enhance its intellectual property environment is unmistakable, according to Ivy Liang, specialist IP counsel at law firm Gowling WLG based in Guangzhou, who was formerly a deputy director of the intellectual property division of a court in the city.

The recent rulings and upcoming law amendments are a “positive sign of China’s aspiration of creating a pro-innovation and business-friendly environment where foreign and domestic companies receive equal IP protection,” she said.