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Property Laws in China

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Chinese Commercial Law: Assignment One Development of the Intellectual Property Laws and Protection of the Foreign Intellectual Property rights in China
  1. Introduction
According to the World Trade Organisation, Intellectual Property rights are defined as ‘the rights given to persons over the creations of their minds which give the creator an exclusive right over the use of the creation for a certain period of time.’ The period of time at which an individual own the Intellectual Property rights varied across the world and also depends on the creation itself. The Intellectual property rights are divided into two categories. The first category is the copyright and rights related to copyright which cover mostly literary and artistic works. The second category is the Industrial property which is further classified into protection of distinctive signs, in particular trademarks and those that are related to invention, innovation, design and the creation of technology with the aim of attracting investment in the development of new technology, thus giving the incentive and means to finance research and development activities. Infringement of the Intellectual property rights is said to have occurred when an individual or a firm used the protected Intellectual property rights without an authorisation or permission from the legally recognised owner of the creation within the protected period. Since the Intellectual Property right is a huge topic of study and it has been vastly covered in the existing literature, it is beyond the scope of this paper to cover every aspect of the Intellectual Property right. However, this assignment will explore the historical development of Chinese Intellectual Property laws, adoption of the intellectual property laws in China, studied two Cases involving the protection of foreign intellectual property rights in China and in conclusion, the essay will make some remarks on the current trends and how China is implementing its intellectual property laws as well as future scenarios and challenges facing foreign companies in their quest to do business and continue to protect their intellectual property rights in China.
  1. Historical development of the Intellectual Property Laws in China
The original concept of Intellectual property right in China can be dated back to A.D. 835. The first known pronouncement and protection of the intellectual property rights was in the form of an edict issued by Emperor Wenzong of the Tang dynasty. This edict had ‘prohibited unauthorised reproduction by persons of calendars, almanacs, and related items that might be used for prognostication.’ The role of the edict was later expanded to prohibit unauthorised copying and distribution of state legal pronouncements and official histories, and the reproduction, distribution, or possession of ‘‘devilish books and talks’’ (yaoshu yaoyan) and most works on Buddhism and Daoism (prognostication).’ The intellectual property laws in the modern China did not come without a concerted effort and push from the western countries which were worried of losing their trade and markets due to coping and violation of the intellectual property rights in China. The 20th Century American concerns and pressure on China to protect the intellectual property on Americans goods has been very prominent in this effort. In 1903, the USA induced China to sign a commercial treaty which granted copyright, patent, and trademark protection to Americans in return for reciprocal protection to the Chinese. Following this treaty, China embarked on the legislating various aspect of the intellectual property right. Among them was the introduction of the copyright law in 1910, patent law 1912, and trademark law in 1923 but all these laws were not put into practice and offered foreigners very limited intellectual property protection. The wait for the proper attention to intellectual property protection in China went on until the signing of the American and Chinese government’s intellectual property agreements of 1990s which consequently have a huge impact on the development Chinese intellectual property laws. After China reopen its shores for trade with the western nations, particularly the US, the European nations and Japan, the People’s Republic of China entered into an Agreement on Trade Relations with the United States of America which called for copyright, patent, and trademark protection to the nationals of the other party. In the late 1980s and early 1990s, it was approximated that the United States lost about $2 billion of revenues annually due to rampant piracy in China. The quantification of such losses made the US furious. In order to protect its businesses, the U.S. government adopted a coercive policy, which involved threatening China repeatedly with economic sanctions, trade wars, non-renewal of most-favo[u]red-nation status, and opposition to China’s entry into the World Trade Organization (WTO). As result, Chinese leaders began to show interest in implementing domestic legal reforms. Following this change of policy in 1990, China enacted various intellectual property right legislations and in 1996, China issued the Regulations on the Certification and Protection of Famous Trademarks and the Regulations on the Protection of New Plant Varieties as well as amending its criminal law to include a section on intellectual property crimes. In order to enforce these laws effectively, China upgraded the State Patent Bureau to the State Intellectual Property Office (SIPO).
  1. Adoption of the Intellectual Property Laws in China
According to a report published by Wang Jing & Co, in 2009 alone, the Supreme People’s court heard 15,302 copyright cases, 6,906 cases for trademarks, 4,422 cases regarded patents and the Court the total disputed amount for first instance cases was RMB 3billion .Out of all the cases heard in 2009, , foreign parties were involved in 1,361, an increase of about 19% from 2008. The arbitration of these cases have shown the commitment of the People Republic of China in prosecuting those who infringed on the intellectual property rights of others and protecting the intellectual property rights for both domestic and foreign companies and individual. This was a move by the government of the People Republic of China in implementing it policy agenda and encouraging innovation and invention. China amended it Criminal Law in 1997 in order to give the People’s supreme Court powers to ‘severe punishment against serious violations of intellectual property rights, such as counterfeit and piracy.’ The criminal law is implemented together with the three main intellectual property laws in China which are applied together with accompanying regulations by the Supreme People's Court. These intellectual property laws are the
  • Trademark Law of the People's Republic of China (Revised in 2002).
  • Copyright Law of the People's Republic of China (Revised in 2001).
  • Patent Law of the People's Republic of China (Revised in 2008).
In order to reverse the infringement trend, the People’s Courts has been imposing ‘severe penalties for infringements as provided by law’. This is purposely designed to cut the cost of intellectual property law enforcement and increases the financial cost of the infringement. The People’s Courts apply the ‘principle of “give priority to mediation; combine mediation and adjudication” (tiaojie youxian, tiaopan jiehe) to ensure full and final resolution.’ Therefore, only serious infringement cases and those whose mediation has failed proceed to court.
  1. Two Cases Involving the Protection of Foreign Intellectual Property Rights in China
  1. Case One: BMW v Shenzhen Century Baoma Apparel Co. Ltd
Using the Trademark Law of the People's Republic of China and the Regulations for Recognition and Protection of Well-Known Marks, BMW sued Shenzhen Century Baoma Apparel Co. Ltd for unfair competition practices and trade mark infringement. BMW argued that its trademark was a well know brand and it would be damaged by the respondent for mimicking it logo as well as it letters which may easily confuse consumers. The legal issue presented before the Supreme People’s Court for decision was whether Shenzhen Century Baoma Apparel Co. Ltd has involved in unfair competition practices and has infringed the BMW trade mark? This question was addressed by the People’s Court by applying the existing laws and regulations. The law which was applied is the Trademark Law of the People's Republic of China (Revised in 2002) and the Regulations for Recognition and Protection of Well-Known Marks. The regulations were passed to prevent registration of famous trademarks by non-owners in other countries. In this case, during the application of the law in protecting intellectual property rights, the People’s Court consideration of elements such as the distinctiveness of the trade mark and market awareness where are the forefront in the analysis of the case. During the proceeding, the People’s Court recognised that the BMW trademark and logo was a popular brand and Baoma should have foreseen the damage it would cause by violating it. The People’s Court held that Shenzhen Century Baoma Apparel Co. Ltd has intentionally misled the public and violated generally accepted business ethics, which constituted trade mark infringement and further damaged the BMW’s reputation. Since Shenzhen Century Baoma Apparel Co. Ltd was dealing with mixed product with some carrying similar logo to BMW, it was very difficult to estimate the amount of profit made by Baoma due to this infringement. Therefore, ‘the court awarded RMB 500,000 to BMW, the maximum permitted by statute in cases in which the infringer’s profits are unknown.’ Under the Regulations for Recognition and Protection of Well-Known Marks, BMW trademark receives protection. Therefore, this case has set an authority which may feature in similar future cases of trademark infringement in China.
  1. Case Two: Criminal Liabilities in Copyright Infringement: Chengdu Share-Software, Sun Xianzhong (Individual), Zhang Tianping (Individual), Hong Lei (Individual), Liang Chaoyong (Individual)
In 2009, the People’s Courts found Chengdu Share-Software Net Science and Technology Co. Ltd and group of the individuals listed in the case above as criminally liable for coping a Windows XP operating system without Microsoft’s authorization, and made a software know as Tomato Garden software’ that allowed users unrestricted access to certain Microsoft softwares, as well as provided technical support and access through free downloads online.’ From the onset of this case, the legal issue presented before the Supreme People’s Court for decision was whether Chengdu Share-Software Net Science and Technology Co. Ltd and the assisting groud of individual defendants have copied a Microsoft Windows XP operating system by developing the Tomato Garden software that allowed users unrestricted access to certain Microsoft softwares. Like many other cases in China, the People’s Court followed a strict application of the laws. The law being applied in this case was the Copyright Law of the People's Republic of China (Revised 2001) and Patent Law of the People's Republic of China (Revised in 2008). During the application of these laws in protecting the intellectual property rights of the Microsoft, the court developed three main doctrines which guide the decision and sentencing of the accused. Firstly, the court took a position that profiting from copied software is unacceptable and the offenders are culpable of a criminal offence. Secondly, developing and producing plagiarised software is punishable with imprisonment and finally, using foreign intellectual property without authorisation and profit from it has been criminalised as this case has set a precedent. This was the first case in China where the copyright infringement has been given a criminal liability. From this case, China has demonstrated its clear intention to implement its international obligations regarding the equal protection of foreign copyright holders under the Paris Convention. This is a sign that piracy and copying of foreign softwares is illegally and it is no longer accepted in China. The People’s Court found that all the accused were culpable for copying the Microsoft Windows XP operating system. Therefore, Chengdu Share-Software was order to pay a fine of RMB 9 million and ordered to forfeit all RMB 2.9 million of illegal earnings. The president of Chengdu Share-Software and all the defendants were jailed for three and half years and the company website and Tomato software were shut down. This case has a huge significant when it comes to the turn of events in China regarding the protection of the IP rights because it is the first case in China where a criminal liability has been imposed for infringement of the IP rights. It is also acting as a stern warning to individuals and companies which may be tempted to violate intellectual property rights with a view of profiting from it. The case has also demonstrated that China has the willingness to protect foreign intellectual property rights thus, the Microsoft intellectual property right was protected in this particular case.
  1. Conclusion
The current trends and how China is implementing its intellectual property laws indicated that China is on the right trajectory regarding the protection of the intellectual property rights. China’s reform and opening-up (gaige kaifang) has spurred the development of intellectual property since the late 1970s and early 1980s. A study conducted by Nathan W. Snyder, suggested that domestic Chinese firms and individuals support the concept of trademarks and trademark litigation with over 76% of disputes being filed by Mainland plaintiffs. It also found that case outcomes are not affected by litigants’ nationalities or locations. In his view, foreign companies were more likely to both win and receive compensation through either adjudication or mediation. In china, businesses can combat the intellectual property right infringement through either the State Administration for Industry, the State Press and Publication Administration and Commerce or through the People’s Courts. To better protect intellectual property rights, China has enacted comprehensive compulsory licensing schedules which require the individual or the owner of the intellectual property to register their creation. From the two cases of BMW and Microsoft which have been studied in this assignment, it is evidence that the People’s Republic of China has shown the intention to implement it international obligation in protecting intellectual property right for domestic and foreign companies. As indicated in the literature and by the two cases, any violation of the intellectual property right is not accepted and it has been criminal in some serious cases. Even though China civilisation has been dated back to over 4000 years, the country has been lagging behind in it development of the intellectual property laws. Majority of the current intellectual property laws were legislated in 1990s and the associated implementation regulations were passed just from 2000 to 2014. This means that China has still got some room to improve it laws as well as strengthening it judicial processes when dealing with intellectual property rigt violation. On the positive note, the People’s Republic of China has set some precedents in protection of the foreign intellectual property right has demonstrated in the case of BMW and Microsoft and it would be fair to conclude that China is indeed protecting the intellectual property right of those companies which are doing business in China.
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