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Intellectual Property FAQ

Counterfeiting is a serious problem in China. Does Chinese law sufficiently protect the interest of intellectual property owners?

On paper, protection of intellectual property rights in China is almost at international standards. Knowledge and recognition about the importance of intellectual property rights, a relatively new idea in China, is growing. Chinese authorities and businesses have already realized that having a system of intellectual property protection in place not only benefits foreign investment but also domestic companies. This is witnessed both in the courtroom and in the classroom. Various intellectual property cases have already been settled in court, in favor of the right holder, for example "cybersquatting" -- or Internet domain name "stealing" - and copyright of digital materials. Additionally, the top law schools in China now offer courses on intellectual property law.

China is a signatory to the most important international intellectual property agreements and has implemented relevant legislation, most prominently on trademark, patent and copyright laws, and regulations on software protection. In recent months, amendments to the patent law, trademark law and software registration regulations have been made in anticipation of China's WTO accession, which requires compliance with TRIPs, the Agreement on Trade-Related Aspects of Intellectual Property.

Moreover, a draft of a new Copyright Law is under discussion and will probably be passed this summer. 

If China has so many laws regarding protection of intellectual property, is the general perception that China is one of the world's largest infringers of intellectual property false?

No, it is true that China, in reality, still faces serious problems in the realm of intellectual property protection. China maintains a very high rate of piracy for CDs, audiocassettes and computer software.

However, due to local protectionism and due to the lack of truly independent enforcement authorities, infringers of intellectual property are often not prosecuted or punished. Often, fines imposed on infringers are ridiculously low, far too low to deter further infringing activities.

China certainly needs to step up intellectual property protection, for instance by giving more power and independence to enforcement authorities. Counterfeiting does not only harm intellectual property owners, but also consumers. Furthermore, there are an increasing number of innovative Chinese companies that also suffer from the illegal copying of their products. Therefore, effective intellectual property protection is in the best interest of the Chinese economy as a whole. 

How does Chinese law deal with so-called Cybersquatters, people who register trademarks of others as a domain name?

Within the last year China has seen a number of cases of Cybersquatting. People have registered trademarks as Chinese domain names with the "dot com dot cn" suffixes with the intent to sell this domain name to the trademark owner. Trademarks as domain names are valuable because they are easy to remember.

One of the first prominent cases was the dispute over ikea.com.cn. Ikea alleged that the registrant registered this name in bad faith with the intent to sell this name to Ikea. The registrant was not very credible when he argued that he had chosen the name Ikea, because "I" stood for Internet, and "Kea" was the name of an Australian talking parrot that should symbolize communication. The registrant could also not explain why he at the same time registered a significant number of other prominent trademarks.

In the Ikea case, the decision was easy, because the registrant acted in bad faith. However, there are potentially a number of less clear-cut cases. It is possible that two trademarks for different goods greatly resemble each other or are even identical. In this case both trademark owners would have an interest in using the trademark ".com.cn" domain name. Such a dispute would be more difficult to resolve. 

How can I become the owner of a domain name on the Internet in China?

In China, an individual is not permitted to register a domain name. However, any representative office or branch of a foreign company, a nationally-registered company, or organization is free to register a domain name. The process, from application to registration, is relatively simple. In fact, one can even apply online at the China Internet Network Information Center's(CNNIC) website (http://web.archive.org/web/20041019040246/http://www.cnnic.net.cn/).

CNNIC is the governmental body in charge of the administration and approval of registration of domain names that end in the top-level name .cn. They require that the applicant be an organization that is legally registered. When applying for a domain name, the applicant must prove this by submitting copies of the business license or other registration certificates. It is required that the server of the domain names registered with CNNIC be hosted in China. The applicant must also provide the names of an administrative contact and a technical contact who will be responsible for the regular day-to-day operations of the server. A week after the application is submitted, the CNNIC should issue a domain name registration license.

When choosing a domain name to register, the first thing one must do is check if it is already registered. This can be performed at the CNNIC website. There are 3 parts in a Chinese domain name. The first section is the last part of the domain name, otherwise referred to as the "top-level" name. In China, the top-level name under the control of CNNIC is .cn. The second section can be a "category domain name" or a "division domain name". The category names can include: .com for industry or commerce enterprises, .net for information centers, .edu for educational institutions, and .org for non-profit organizations. The division domain name refers directly to the geographical area the website is focused on(ie. .bj for Beijing, or .jx for Jiangxi province). The third part of the domain name is the owner's name. The owner's name can virtually be anything, as long as it does not transgress the laws of Article 11 of the Provisional Administrative Rules for Registration of Domain Names on China's Internet. This article forbids the use of: words such as China, Chinese, National(without official approval), well.-known names of other countries or regions, classifications of industries or generic names of foods, previously registered trademarks or names of enterprises plus any other names that are harmful to the interests of the state, society or the public. So, once you satisfy these requirements, you should rush out and register your domain name as the CNNIC accepts registrations on a first-come, first-serve basis. However, do not plan on registering many domain names with the hopes of selling them to interested third parties. Although this is a common practice worldwide, Article 24 states that "registered domain names may be changed or canceled, but are not permitted to be transferred, sold or purchased". This means that if the owner of a domain name no longer wishes to own a domain name, he must cancel it because the sale to a third party is prohibited. 

What are the differences between Patents, Trademarks and Copyrights?

There are three main areas in Intellectual Property Law. As you mentioned, they are patents, trademarks, and copyrights. These laws are meant to protect consumers, businesses, artists or inventors.

A patent is an official right that is used to protect the inventor of an original product or process. Once a person invents something, whether it be a machine, tool or process, that has a noticeable and original result, acquiring a patent can be very worthwhile. Once patented, an invention cannot be used by other parties , without explicit permission from the patent holder. If infringement occurs, and someone is illegally using a patented product or process, the patent holder has the right to seek compensation.

A trademark is designed to protect both businesses and consumers. A trademark is a distinctive mark, logo, or symbol that is used to identify a product. For example, the large M on McDonalds' signs is an example of a trademark. Because a customer associates a certain service or result with a symbol or marking, it would be unfair to let that mark be used in a different industry or manner. To protect a trademark is to protect the reputation of a business, while at the same time ensuring that a customer is able to relate that trademark with a certain type of product.

A copyright does not apply to concrete objects like inventions or businesses, but is used in the art industry. A copyright is the legal right of a composer, writer or exclusive owner of an artistic work to control how that work is used. Works that can be copyrighted include novels, music, video, computer software and fine arts. The work must be of a creative nature to be able to receive a copyright. Also a copyright cannot protect the ideas of an artist, only the expression of those ideas. 

Why are IPRs important?

The economy is shifting to a knowledge economy, and IPRs are gaining importance. Because IPRs directly affect the type of service or business that you provide, they can not be ignored anymore. Particularly in developing areas, such as China, it is indispensable to the health of a business to establish and protect Intellectual Property Rights. Now that China is formally accepted into the WTO, IPRs are certain to play a large role in transactions. 

What Intellectual Property Rights are recognized in China?

China has announced that the Trade Related Aspects of Intellectual Property Rights (TRIPS) will become effective immediately upon China's entry into the World Trade Organization (WTO). This means that all IPRs established in TRIPs will effectively be protected by the end of 2001, at the very latest.

Currently, although there have been many amendments to the major IP laws in China, such as the Patent Law and Trademark Law, China's protection system still lacks in some areas. However, as laws are quickly changing and litigation is also proving successful, China's outlook remains optimistic. 

What is the situation between IPRs and unfair competition in China?

As IPRs are fundamentally monopoly rights, there is a certain amount of conflict when market competition is encouraged. Because of the rapid development in China, many industry analysts are on the lookout for one party acquiring a patent for key technology and forcing all competitors to pay royalty payments or seek licenses. The Anti-Unfair Competition Law in China does not deal with matters pertaining to anti-trust issues, but as the market develops in China, it is likely to gain importance. 

When transferring an IPR, how can I value it?

Appraising IPR's before forming a Joint Venture, acquiring a company or entering into a contract is very important as it can help determine the amount of a transaction price or capital contribution.

Below are some questions that are useful in appraising:

• What is the market for the IPR?
• What is the IPR to be valued?(define boundaries)
• Do competitive products exist?
• Does an alternative exist?
• Is the protection for the IPR strong?
• Will the IPR gain or lose value in the future?
• Can a competitor design a similar product or offer a similar service without the IPR and at what cost?

What are the provisions of Chinese law regarding the enforcement of criminal law against infringement upon intellectual property rights?

The new Criminal Law of the People's Republic of China comes into effect on October 1, 1997. In the new Criminal Law, there is a chapter regarding crimes of infringing intellectual property. Before the new law is effective, there has been provisions in intellectual property legislation where certain activities are charged with criminal liability. The amendment of the Criminal Law shows the strengthening of protection of intellectual property.

The relevant provisions in the new Criminal Law are as follows:
1. Using a trademark which is identical with the registered trademark on the same kind of goods without a license from the owner of the registered trademark, where the situation is serious, will be punished for no more than three years fix-term imprisonment or criminal detention, and may in addition or separately be imposed a fine. Where the situation is severe, a fix-term imprisonment of no less than three years, no more than seven years will be imposed with a fine.

2. Knowingly selling counterfeiting goods, where the money amount of sale is comparatively large, will be punished for no more than three years fix-term imprisonment or criminal detention, and may in addition or separately be imposed a fine. Where the money amount of sale is huge, a fix-term imprisonment of no less than three years, no more than seven years will be imposed with a fine.

3. Forging or making without authorization of a registered trademark label of another person or selling registered trademark labels which are forged or made without authorization, where the situation is serious, will be punished for no more than three years fix-term imprisonment or criminal detention, and may in addition or separately be imposed a fine. Where the situation is severe, a fix-term imprisonment of no less than three years, no more than seven years will be imposed with a fine.

4. Counterfeiting of other's patent, where the situation is serious, will be punished for no more than three years fix-term imprisonment.

5. Anyone who, for the purpose of making profit, commits any one of the following acts of copyright infringement, where the illegal income is large or other serious situation exists, will be punished for no more than three years fix-term imprisonment or criminal detention, and may in addition or separately be imposed a fine. Where the illegal income is huge or other severe situation exists, a fix-term imprisonment of no less than three years, no more than seven years will be imposed with a fine:
1). reproducing and distributing a literary, musical, motion picture, television, audio-visual works, computer software or other works without the permission of the copyright owner;
2). publishing a book of which the exclusive right of publication is enjoyed by another person;
3). reproducing and distributing a sound or video recording produced by another person without the permission of that person; or
4). producing or selling a work of fine art with forged signature of another person.

6. Anyone who knowingly sells the abovementioned infringing works for the purpose of making profit, where the illegal income is huge, will be punished for no more than three years fix-term imprisonment or criminal detention, and may in addition or separately be imposed a fine.

7. Anyone who commits one of the following acts of trade secret infringement, when material damages are caused to the right proprietor of the trade secret, will be punished for no more than three years fix-term imprisonment or criminal detention, and may in addition or separately be imposed a fine. Where extremely serious damages are caused, a fix-term imprisonment of no less than three years, no more than seven years will be imposed with a fine:
1). obtaining a right proprietor's trade secret by stealing, luring, intimidation or any other unfair means;
2). disclosing, using or allowing another person to use the trade secret obtained from the right proprietor by the means mentioned in the proceeding paragraph; or
3). in breaching the agreement or against the right proprietor's demand for keeping confidentiality, disclosing, using or allowing another person to use the trade secret he possessed.

Anyone, who knows or should have known the acts listed in the above paragraph, obtains, uses or discloses the trade secret of another person, shall be dealt with as infringing trade secret.

The trade secret mentioned in the above paragraphs means any technology, information, or business operation information, which is unknown to the public, can bring about economic benefits to the right proprietor, has practical utility and about which the proprietor has adopted secret-keeping measures.

The right proprietor mentioned above means the owner of trade secret and the user of trade secret who is permitted by the owner of the trade secret.

When an institute commits any of the crimes listed above, the institute will be imposed a fine and the managing personnel directly responsible for the infringement or any directly responsible person will be punished according to the above provisions. 

What acts of the business operator constitute unfair competition involving intellectual property rights?

According to the Law of the People's Republic of China Against Unfair Competition which was effective from December 1, 1993, a business operator means a legal person, or any other economic organization or individual engaged in marketing of goods or services. A business operator shall, in his business transactions, follow the principles of voluntariness, equality, fairness, honesty and faithfulness and observe the generally recognized business ethics. The following acts of a business operator, who infringes the lawful rights and interests of another operator and disturbing the social-economic order, are prohibited by the Law Against Unfair Competition as unfair competition involving intellectual property rights:
1. Counterfeiting a registered trademark (including service mark) of another person;
2. Using on goods without authorization of a unique name, package, or decoration of other's famous goods, or using a name, package, or decoration similar to that famous goods, thereby confusing the goods with that famous goods and leading the purchasers to mistake the former for the latter; or
3. Using without authorization the name of another enterprise or person, thereby leading people to mistake their goods or service for those of the said enterprise or person;
4. Forging or counterfeiting authentication marks, famous-and-excellent-product marks or other product quality marks on their goods or services, forging the origin of the products or make false and misleading representations as to the quality of the goods or services; or
5. Infringing trade secret. 

How to obtain the Customs protection towards intellectual property?

In order to maintain international trade order, to strengthen protection of intellectual property rights, to promote the healthy growth of economy, the State Council enacted the Regulations of the People's Republic of China on Protection of Intellectual Property Rights by Customs (hereinafter referred to as the Regulations) on July 5, 1995, which was effective as of October 1, 1995. The State Customs published the Implementation Methods of the Customs of the People's Republic of China on Intellectual Property Rights Protection (hereinafter referred to as the Implementation Methods) on September 28, 1995, which was also effective as of October 1, 1995.

The Customs protection of intellectual property rights follows the system of voluntary protection. Those intellectual property right holders who want their rights be protected by the Customs shall first apply to the State Customs for recordation with the Customs protection of intellectual property. The recordation is the precondition for customs protection.

Those right holders who have applied for recordation with the Customs protection of intellectual property and obtained the qualification of recordation may, when they find that the suspected infringing goods is going to enter or exit the boarder, apply to the customs at the place of entry or exit for protective measures. The Customs concerned will review the application of the right holder to determine whether protective measures are to be taken. 

Which right holders may apply for recordation with the Customs protection of intellectual property and protective measures?

According to Article 2 of the Implementation Methods, the right holders who are qualified to apply for recordation with the Customs protection of intellectual property and protective measures are the copyright owners and licensees of exclusive copyright license referred to in Article 9 of the Copyright Law, the trademark registrants referred to in Article 3 of the Trademark Law and the patentees referred to in Article 6 of the Patent Law. 

Are there any anti-counterfeiting regulations in China?

There are currently a several rules dealing with the area of anti-counterfeiting. The Explanation of Several Problems Relating to the Specific Application of Law in Criminal Cases Involving the Production and Sale of Fake and Inferior Products (the Joint Explanation, The Rules Relating to Prosecution Standards of Economic Crimes (the Criminal Prosecution Standards), and The Criminal Law all set out rules that govern the production and sale of counterfeit products. 

How is the production and sale of counterfeit products defined?

In the Criminal Law, a crime can be established "when producers/sellers mix impurities into or adulterate the products, pass fake products off as genuine, defective products as high-quality ones, or substandard products as standard ones, and earn more than RMB 50,000 from the sales of such products." The Joint Explanation provides a four point guide when describing what constitutes a crime. It clarifies the factors involved, clarifies what is meant by sales amount, makes it a crime to attempt the production and sale of fake and inferior products and makes it a crime to assist sellers and manufacturers of fake and inferior products.

How will the WTO accession affect China's intellectual property protection?

It is estimated that it will be another five years before WTO accession will lead to a decrease in the infringement of IP rights. On the contrary, many believe that there may be an increase in the number of infringements since the accession will likely boost growth in the Chinese economy. However, the area of intellectual property will change, including dispute resolution mechanisms.

What is ambush marketing?

Ambush marketing is attempting to capitalize on the Olympic Games without paying for the privilege.

Is ambush marketing illegal?

Ambush marketing will be illegal only if China passes special legislation similar to special Australian legislation: the Olympic Arrangements Act 2000 and the Sydney 2000 Games (Indicia and Images) Protection Act 1996 (Commonwealth).

What's wrong with ambush marketing?

The Games depend on sponsorship. If sponsors cannot be guaranteed exclusive rights to benefit in certain ways from association with the Games, they will not put up the millions of dollars required to finance the Games.

What are examples of ambush marketing?

Notorious examples of ambush marketing at past Games include advertising campaigns which suggest without explicitly stating an association with the Games, one-off publicity stunts, unauthorized clothing or even tattoos on athletes or reporters or newscasters, and Olympic event ticket giveaways by non-sponsors.

Does the Chinese Government understand the importance of protecting Intellectual Property Rights? Does the Chinese Government make Intellectual Property Rights protection a priority in China?

The last year has seen continued progress in the protection of intellectual property rights (IPR) and the making of IPR a priority by the Chinese government. Strong statements by State Council leaders have demonstrated the governments understanding of the widespread economic losses suffered by Chinese and foreign firms alike due to IPR violations. Moreover, the State Council clearly understands that the lack of IPR protection is a severe constraint on the development of creative products. Investments in R&D cannot be made without a reasonable assurance that the resulting intellectual property will be protected long enough to earn an economic return. Software designers, authors, filmmakers, musicians, and others cannot earn a living if their products are immediately pirated. Additionally, the export of counterfeit and pirated products is expected to increase as trade is stimulated by China's accession to the World Trade Organization (WTO), increasing the risk of friction with trading partners and damage to China's international reputation. The high priority given to IPR protection by the State Council has been expressed in its continual promulgation of legislation, administrative regulations, and enforcement guidelines.

Are the measures for the protection of Intellectual Property Rights taken by the Chinese Government effective? What areas need to be improved?

Notwithstanding this progress, enforcement of IPR remains weak and ineffective in most parts of China, and many factors weigh against successful litigation for those who attempt to protect their IPR via the courts. Compensation is invariably low, while the burden of proof for the plaintiff is high. Small-scale counterfeiters often escape with low fines that are not easily collected and offer minimal deterrence, and the rights holder receives minimal compensation. The court system has a shortage of adequately trained judges and the resources of the police, prosecutors, and relevant administrative agencies are insufficient. It is often difficult for these various bodies to cooperate smoothly, particularly in transferring cases from civil to criminal proceedings. Finally, local protectionism continues to favor IPR violators. Thus the problem now facing China is to translate the improved legal framework into a significantly changed environment at the local level. This can only be done by improving the professional capabilities of the police, prosecutors, courts, and administrative agencies and by strengthening their ability to work together efficiently.

Is the Chinese Government aware that establishing a system for software copyright protection is vital in encouraging foreign firms to offer their latest proprietary technologies in China? What measures has the Chinese Government taken in software protection?

The government is aware that establishing a system for software copyright protection is vital in encouraging foreign firms to offer their latest proprietary technologies in China. The government has issued occasional circulars on the subject, including one distributed within the ministries forbidding their use of counterfeit software. The move demonstrates the government's resolve to address the issue at the highest levels.

Pirated software is cheaper and still more readily available than genuine software. Piracy of business application software remains a significant problem and stronger countermeasures are required.

New software regulations have recently been issued, and finally include measures that increase the chance of successful prosecution, such as provisions for the preservation of evidence. Consumers are encouraged to purchase genuine software as the new regulations confer liability for pirated software on the end user. Since these regulations have only recently been introduced, it will be some time before their full effect will be felt and it is still unknown how strictly the authorities will interpret them.

What are the major changes in the new copyright law? Have stronger enforcement measures been introduced to combat copyright infringement? What are those measures?

The new copyright law clarifies the nature of copyright protection, confirms its ability to be assigned and prescribes the contract terms for copyright assignment.

The fair-use doctrine, which under the previous law allowed for certain uses of copyrighted material without permission from the owner, has been restricted. Radio and television stations must now pay for the use of published music but are not required to notify the copyright owner in advance.

Stronger enforcement measures have been introduced to combat copyright infringement. The burden of proof is now placed on the party suspected of infringement. Any publisher, manufacturer, or distributor who cannot prove that their copying is authorized will now be held liable. Preliminary injunctions and orders for the preservation of evidence may now be granted prior to litigation, whereas previously these would only be granted if a party had filed an action.

Damages have been increased and a higher level of statutory compensation is now available for the economic loss suffered by the copyright owner or where the illegal income derived by the infringing party is difficult to determine. Compensation up to RMB 500,000 (US $60,000) may be awarded.

Article 23 of the new copyright law permits a form of statutory licensing whereby extracts of published works are allowed to be included as part of a compilation in school text-books, unless the author has expressly forbidden such use. Emphasis is placed on the public benefit derived thereon, and that the author must be compensated.

What are the major changes in the newly revised patent law?

Substantial revisions have been made to the patent law. Previously, design patents lacked substantive examination prior to approval, meaning that such rights were often granted in contravention of earlier existing rights - this is still an ongoing issue. The remedies of original right owners have now been strengthened: design patents may not conflict with another's prior legal rights; the rights of an original patent holder shall prevail over those of the later in a patent dispute. Prior legal rights include trademarks, copyrights, enterprise names and unique packaging or branding associated with well-known products.

Offering for sale infringing goods is now accepted as an infringing activity, meaning that preemptive action can be taken against those offering to sell infringing goods but who have not participated in their manufacture, distribution, or wholesale.

Prosecuting patent infringements is now easier as pre-litigation injunctions and requests for evidence preservation will now be accepted by the court, provided there is sufficient evidence and that the plaintiff provides a guarantee.

However, administrative remedies are still problematic. The revised law specifies that patent administrative authorities have the power to handle infringement cases and to order the infringing party to stop all such acts immediately. However, due to the current lack of resources, the prospect of this method being an effective administrative remedy remains unlikely.

The newly revised laws endeavor to ensure that the patent owner will receive some form of compensation by giving presiding judges alternative methods for calculating the compensation, such as, an amount equivalent to the royalties the patent owner should have received for such use. Where this is impracticable, the sum of RMB 5,000 to 300,000 (US $600 to $36,000), or in serious circumstances even RMB 500,000 (US $60,000) may be awarded in compensation. However, these sums are arguably still too low to provide an effective deterrent.

What are the major changes in the newly revised trademark law? Is there any conflict between the newly revised trademark law and the international treaties China has joined?

The newly revised trademark law extends protection to three-dimensional signs, geographical indications, collective trademarks and certification trademarks. Courts are now authorized to order an infringing party to cease its use and in some cases order property preservation.

The practice of reverse passing off, which occurs when a trademark is removed from goods and another trademark is put on in its place for the purposes of further sale, is now recognized as an infringing activity. Previously where an infringing trademark could be separated from the goods on which it was displayed, the infringing trademark could be removed and destroyed, and the goods returned to the infringing party. Under the new law, the Administration for Industry and Commerce (AIC) must destroy all infringing goods, regardless of whether or not the trademark can be removed. Fines may now also be issued. The protection extends slightly beyond the strict requirements of the WTO's TRIPS (Trade Related Aspects of Intellectual Property Rights) agreement, providing greater certainty and a clear deterrent effect.

Areas of conflict still exist between the revised law, TRIPS, and the Paris Convention for the Protection of Industrial Property. The new law fails to accommodate Article 6bis(1) of the Paris Convention, which extends protection of well-known trademarks to cases in which only "an essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith".

What are the anti-counterfeiting measures taken by the Chinese Government? How is the enforcement situation? What are the challenges to enforcement? How to deal with the challenges?

The State continues to deter counterfeiters with the threat of criminal liability and imprisonment, as opposed to civil penalties. Before a criminal prosecution can be brought, however, a counterfeiter's illegal gains must exceed RMB 50,000 (US $6,000). If the quality of the contraband cannot be shown to be inferior, the illegal gains must be even higher: RMB 100,000 (US $12,000) if the infringing party is an individual; RMB 500,000 (US $60,000) for crimes committed by a company. Therefore, small-scale counterfeiters often escape with low fines that offer minimal deterrent, and the IPR holder receives minimal compensation for the loss.

Moreover, the court system has a shortage of adequately trained judges. The few cases that are brought before the court can take up to a year before being resolved. A real effort is being made to train more judges, with training programs like the EU-China IP Program and through better funding of university law departments. Improvements to the existing alternatives to litigation would further help to relieve the pressures faced by the legal system.

New regulations on the transfer of cases from the administrative level to the criminal level reflect government concerns in the present weakness of the deterrence for counterfeiters and producers of poor quality goods. In addition, the main government ministries concerned with product quality and counterfeiting have issued a "notice" on the transfer of such cases that emphasizes the serious danger poor quality goods pose to the public and calls for increased cooperation in the fight against them. Those goods that are not only of poor quality but also infringe third party IPRs, will be dealt with even more severely.

The new regulations define in detail how the Public Security Bureau (PSB) and the administrative authorities are to coordinate the transfer of cases. While the decision as to whether a case of production and sale of poor quality goods constitutes a crime remains with the authorities, the decision is subject to review by the People's Procuratorate or higher administrative authorities. Those who abuse or neglect the system may be criminally liable.

The legal threshold for criminal liability has been lowered by the Supreme People's Court and Supreme People's Procuratorate's "Explanation of Certain Questions on the Specific Application of Laws in Criminal Cases of Production and Sale of Poor Quality Goods", which came into effect on March 30, 2001.

The joint explanation states that if poor quality goods with a total value of more than RMB 150,000 (US $18,000) are found prior to sale, the owner will be held criminally liable for the attempted production and sale of poor quality goods. The penalties are not outlined specifically, but are likely to be similar to those for the actual production and sale of such goods, as outlined in Article 140 of the Criminal Law: a two-year prison sentence and a fine of between 50 and 200 percent of the estimated profits of the illegal sales.

Parties investing in, who have registered a company producing poor quality products or are providing transportation, storage facilities or in any other way facilitate the production of poor quality goods will be held responsible as accomplices.

Liability hinges on the illegal sales amount of the infringing party. The joint explanation has further defined "sales amount" to include profits from all infringing goods sold but not delivered. Furthermore, the sales amount is not to have the infringing party's own costs deducted from it. However, the issue whether infringing goods contracted to be produced but are not yet made are also to be counted towards the sales amount remains unclear.

The expected overall result of the joint explanation will be an increase in the level of criminal prosecutions. Yet despite a considerably tougher stance on poor quality goods and counterfeiting, doubts remain whether local protectionism can be eradicated.

Illegally manufactured drugs and drugs that are earmarked for domestic consumption are strictly regulated. However, no equivalent regulations currently exist for drugs planned for export.

What are the main areas covered by the new regulations on the protection of the layout designs? What is the significance of the new regulations?

The new regulations on the protection of layout designs establishes' a system for the registration of integrated circuits that is to be overseen by the State Intellectual Property Office (SIPO). A layout design of an integrated circuit must be deemed original to receive such protection.

Layout designs will be registered without a substantive examination procedure. The registered owners of layout-designs (topographies) of integrated circuits shall enjoy, for a maximum of ten years, the exclusive right to reproduce the protected original layout design and to import, sell, and distribute the protected original layout design for commercial purposes.

Layout designs of foreign nationals shall be protected provided the design is first put into commercial use in China, or the foreign national is from a member state of any international treaty dealing with such rights to which China is also a member. The introduction of the regulations will bring China's intellectual property legislation on layout designs of integrated circuits into line with TRIPS. However, the new legislation confers the minimum level of protection required. Protection of layout designs is limited to semiconductor integrated circuits, formal registration is required for protection, protection is allowed to lapse 15 years after the creation of the layout design and certain actions do not require the registrant's authorization.

New implementation rules for the regulations have recently been promulgated.

How do courts resolve domain name disputes? Is there any significant precedent?

The Courts are showing consistently sound principles in their treatment of domain name disputes, with frequent references being made to the Paris Convention. In last year's landmark case over the Safeguard.com.cn domain name, the plaintiff's trademark was found to be sufficient grounds for defeating the defendant's registered domain name. This case will have significant precedent value.

What is the procedure for Chinese character domain names disputes resolution?

For Chinese character domain names, there now exists a dispute resolution procedure based upon ICANN (Internet Corporation for Assigned Names and Numbers) procedures, and administered by the China International Economic and Trade Arbitration Center (CIETAC). The procedures may be used only where there is a conflict between registered trademark rights and a domain name.

What is the role of the China Internet Network Information Center (CINIC)?

The China Internet Network Information Center (CINIC) has switched to an administrative role with respect to Chinese character domain names, but retains its former role with respect to Roman-letter names. CINIC retains its role under the auspices of the Ministry of Information Industry and is an impartial, non-profit administrator of domain names. Registration services will be devolved to other authorized registrars, of which there are currently nine.

Registration in respect of Roman-letter domain names has not yet been simplified. Neither is there an equivalent of the ICANN-based international dispute resolution procedures for Roman-letter domain names, as there are for Chinese characters.

Are there any difficulties in the remittance of royalties for licensed IPRs?

AmCham-China members are concerned with recent difficulties in arranging the remittance of royalties for licensed IPR. The difficulties stem from notices issued by the State Administration for Foreign Exchange that require banks to inspect specific documents related to the recording or approval of IPR licenses and tax-paid certification or tax-exempt certification. Unfortunately, processing the required documentation in a timely manner is very difficult, and often impossible.

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