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IT Legal Environment
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Overview Year 2001 has seen continued progress in making protection of intellectual property rights (IPR) a priority of the Chinese government. Strong statements by State Council leaders have demonstrated that the government understands the widespread economic losses of 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 IPR protection by the State Council has been expressed in continuing progress in promulgating legislation, administrative regulations, and enforcement guidelines. Notwithstanding this progress, enforcement remains weak and ineffective in most parts of China, and many factors weigh against successful litigation for those who attempt to protect their intellectual property rights (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 deterrent, 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 frequently difficult for the 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 strengthening their ability to work together efficiently. Privacy 34 Top 25 Countries by Piracy Rate 1999 2000 Vietnam 98% 97% China 91% 94% Indonesia 85% 89% ……
* Retail Software Revenue Lost to Piracy ('1000) China is among the top 3 countries by privacy rate, and the government is aware that establishing a legitimate system of software copyright protection is vital for 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. Copyright for Books & Music 35 The new copyright law clarifies the nature of copyright protection, confirming its assignability and prescribing the terms for a contract of 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. Patents 36 Prosecuting patent infringements is now easier, as pre-litigation injunctions and requests for evidence preservation will be accepted by the court, provided there is sufficient evidence and that the plaintiff provides a guarantee. The newly revised laws try to ensure that the patent owner will receive some form of compensation by giving the judges alternative methods of calculating compensation, such as an amount equivalent to royalties. Where this is impracticable, sums of RMB5,000 to 300,000 (US$600 to $36,000), or in serious circumstances even RMB500,000 (US$60,000), may be awarded. However, these sums are arguably still too low to provide an effective deterrent. Trademarks 37 The new 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, and in some cases order property preservation. Counterfeiting & Enforcement 38 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 RMB50,000 (US$6,000). If the quality of the contraband cannot be shown to be inferior, the illegal gains must be even higher: RMB100,000 (US$12,000) if the infringing party is an individual; RMB500,000 (US$60,000) for crimes committed by an entity. Therefore, small-scale counterfeiters often escape with low fines that offer minimal deterrent, and the rights holder receives minimal compensation for the loss. Layout Designs for Integrated Circuits 39 New regulations on the protection of layout designs established a system for the registration of integrated circuits, 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. Domain Name Disputes 40 Courts are showing consistently sound principles in their treatment of domain name disputes, with frequent references 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. ICANN-based Dispute Resolution 41 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. Censorship 42 China has the most extensive Internet censorship in the world, regularly denying local users access to 19,000 Web sites that the government deems threatening, a study by Harvard Law School researchers finds. Only the most determined and technologically savvy users can evade the filtering, and they do so at some personal risk, the study says. Change of role for the CNNIC 43 The China Internet Network Information Center (CNNIC) has switched to an administrative role with respect to Chinese character domain names, but retains its former role with respect to Roman-letter names. The CNNIC retains its role under the auspices of the Ministry of Information Industry (MII) 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. Remittance of Royalties 44 Some companies concerned about 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. Legislative Profile 45 Patents:
Trade Marks:
Copyright and Related Rights -Copyright:
-Other Country-Specific Legislation or Activities
• Regulations on Computer Software Protection, June 1991.
• Regulation on the Protection of Layout Designs of Integrated Circuits, entered into force October 2001. Miscellaneous:
Digital signature 46
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