Hong Kong: Latest Developments in Intellectual Property in China - 1995/6

Last Updated: 1 May 1996
Linklaters & Paines (NMSW)
23 August 1995

Overview

The last 12 months have witnessed the attempted implementation by China of various commitments made to the US for improving IPR protection within the PRC, pursuant to the Memorandum of Understanding for Improved Protection of Intellectual Property and its 22 page Action Plan signed in February 1995.

The pace of implementation has not been as fast as the US would like, notwithstanding regular meetings and negotiations of US and Chinese trade officials throughout the year.

New Customs Regulations

A major step forward was the issuing of regulations On The Customs Enforcment of IPRs, which came into effect on 1 October 1995. Under this scheme, Customs officers are empowered to seize goods intended for import or export, where those goods appear to infringe the IPRs of others. IPR proprietors may notify relevant IPRs (including copyrights and PRC registered trade marks or patents) to the Customs authorities; each notification lasts - subject to expiry of the IPRs - for up to 7 years (renewable).

Once notified, Chinese Customs may act of their own accord to seize infringing products. There is a further application procedure whereby IPR proprietors who post a bond may request an alert for Customs seizure of infringing goods thought to be entering or leaving the PRC.

Where infringement is established, Customs officials may destroy the offending goods, impose fines and/or refer the case to the criminal authorities for further action. There is a system of appeals by those disatisfied with the Customs action (whether importer/exporter or IPR proprietor), referable to the relevant administrative authorities or to the courts.

Clarification of Anti-Unfair Competition Law

Regulations were promulgated to supplement the Anti-Unfair Competition Law of 1993, to cover:

  • protection of business secrets
  • protection of unregistered trade marks and trade dress/get up which are well-known to the Chinese public or to the relevant market

Copyright Approval Systems

China's National Copyright Administration announced new procedures for:

  • manufacturers of audio-visual products and computer software to obtain approval from local NCA authorities before commencing production
  • accepting copyright verification/clearance for certain types of copyright works from designated international IPR organizations (including the International Federation of Phonographic Industries and the American Film Market Association)

Enforcement Activities

Following the signing of the 1995 MOU, the NCA posted inspectors to CD and laser disc plants around China. Several operations were closed down last year for illegally copying computer software, music and films. A further three factories were closed down in March 1996, with more expected to follow.

A general crack-down on street sales by enforcement authorities ended in September 1995, with the PRC Government claiming seizure of over 4 million illegal products. However, the level of counterfeiting remains at what the US considers an unacceptably high level.

The 1995 MOU also provided for the setting up of Task Forces to co-ordinate the enforcement activities of the police, customs and relevant administrative authorities, allowing rights holders to initiate action by a single complaint, and overseen by a China State Council co-ordinated network of "IP Working Conferences". In March 1996, a list of these Task Forces with contact names and numbers was made available, covering each of the major provinces and cities. The effectiveness of these Task Forces has yet to be tested.

To supplement these administrative initiatives, the Supreme People's Court announced that it would be opening a new division specializing in IPR issues, to complement the setting up of specialist IPR tribunals in Beijing, Shanghai and other key cities from 1993 onwards. This should assist the capacity of the People's Courts to interpret and implement China's growing body of IPR law.

Intellectual Property Training Centre

In April 1996, China announced the establishment of an inaugural government funded intellectual property training centre. Located in Beijing, it aims to provide training and research facilities on IPRs for officials, universities and business enterprises.

Particular problem areas

Aside from the still "higher than acceptable" level of infringment activity throughout China:

  • China's centralized copyright verification system for registering title and licensing arrangments re. audio-visual products, launched in 1994 and referred to in the 1995 MOU, is not yet working as smoothly as had been hoped.
  • Regulations promised by the 1995 MOU concerning registration and enhanced protection for famous trade marks have yet to be promulgated by the Trademark Office.

Conclusion

Whilst much remains to be done to implement the workings of the 1995 MOU, the last 12 months has seen a considerable degree of progress in terms of enhanced enforcement powers, increased enforcement activities and general official and public awareness within the PRC as to the importance of protecting IPRs.

This is well-evidenced by the story of Wang Hai, a young farm worker who learned that customers who named shops selling fake products could claim a reward. He travelled to Beijing, visited numerous stores, many of them state-owned, and reported those selling infringing items. He earned 8,000 Yuan (about US$1,000) - a small fortune for many Chinese. Wang Hai's actions, whilst allegedly disrupting the entire Beijing state-owned retail sector, have been praised by officials of the PRC National People's Congress and State Council who claim that with more customers like him - and fewer fakes - the higher the hopes for an orderly market in China.

FURTHER INFORMATION on the above may be obtained via Linklaters & Paines Hong Kong office or via any of the other nine Linklaters & Paines offices world-wide, located in Singapore, Tokyo, London, Brussels, Paris, Frankfurt, New York, Washington D.C. and Moscow. Contact details for the various L&P offices worldwide are available via the Linklaters & Paines corporate listing c/o Business Monitor Online - http://www.businessmonitor.co.uk

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