China: GossIP – May, 2021, HFG Law&Intellectual Property Newsletter

Dear readers,

Already May and rainy and hot here in China, but we're ready to refresh you with some new topics.

The first one deals with the so-called Severance compensation. Never heard of it before?

That might interest for you both as employer and employee working in China.

On the field of IP & Europe, the second article makes an analysis of the trend of Chinese trademarks in Europe in the past 10 years.

Try to guess... is it a positive trend? Read and discover.

E-commerce in China has been developing very fast, and the last booming phenomenon is livestreaming advertisements and sales.

But it needs regulation. How is the law dealing with this new trend?

We all are tech addicted, we can't do without our electronic devices, and we want a speed connection (of course!).

5G technologies patented by Huawei are for now available for free, but the China's biggest technical contributor to 5G standards could soon implement a way to impose a royalty fee on the use of its technology.

The last article highlights the difference between the old version of the Chinese Patent and Copyright Law and the new

Amendment, which came into action on March 1, 2021.

We summarize the major changes and make a comparison so it's very easy to understand what's new.

Enjoy the reading and stay dry!

LABOUR LAW

Severance Compensation: All You Need to Know!

By Claire Fu

If you work in China, probably you have heard one word called economic compensation or severance payment, as well as a bunch of confusing "N", "N+1" and "2N"... What on earth are they? Now we will introduce you thoroughly about them.

Definitions

"Economic Compensation" - a monetary payment paid by the employer to the employee in case of earlier termination of labor contract under specific conditions pursuant to PRC laws.

"N"- the number of years that one employee has worked for the employer.

If the working period is more than 6 months N is equal to 1; in case less than year N is equal to 0.5.

Working period ≥ six (6) months, N=1;

Working period < six (6) months, N=0.5.

"Rate" - the basis to calculate Economic Compensation, which is generally the monthly salary of the employee, with some exceptions to be explained in the Section Calculation of Economic Compensation.

Economic Compensation = 0

Under the following situations, the employer is NOT obliged to pay any Economic Compensation when the labor contract is terminated:

1. The employee notifies the employer three days in advance during the probation period to terminate the labor contract.
2. The employee notifies the employer in writing 30 days in advance to terminate of the labor contract.
3. The employee proposes to terminate the labor contract by consensus with the employer.
4. The employee is proved to have failed meeting the conditions for employment during the probation period, and consequently the employer terminates the labor contract.
5. The employee seriously violates the rules and regulations of the employer and consequently the employer terminates the labor contract.
6. The employee has seriously failed in his/her duty, committed fraud for personal gain, caused great damage to the employer, and the employer terminates the labor contract consequently.
7. The employee has established labor relations with other employers simultaneously which materially affects the completion of his task with the original employer, or he/she refuses to rectify the situation after being cautioned by the employer, and the employer terminates the labor contract accordingly.
8. The employee causes the labor contract to be invalid through fraud, coercion or exploitation of the other party's disadvantageous position, and the employer terminates the labor contract consequently.
9. The employee is subject to criminal liability in accordance with the law, and the employer terminates the labor contract accordingly.
10. When the labor contract expires, the employer maintains or raises the conditions stipulated in the labor contract and renews the labor contract with the employee, and the employee refuses to renew the labor contract.
11. The employee reaches the retirement age, is deceased or being declared dead or missing by the people's court.

Economic Compensation: N

The employer shall pay N times of the Rate as Economic Compensation at termination under the following situations:

1. The employer proposes to terminate the labor contract by consensus with the employee;
2. The employee resigns due to the employer's fault;
3. The employer applies for workforce layoff; or
4. The employer cancels the labor contract under any of the following circumstances by giving the employee 30 days' prior written notice:
5. 1. where the employee is unable to resume his/her original work nor engage in other work arranged for him/her by the employer after the expiration of the prescribed medical treatment period for an illness or non-work-related injury;
   2. where the employee is incompetent and remains incompetent after training or adjustment of his/her position; or
   3. a material change in the objective circumstances relied upon at the time of conclusion of the labor contract renders it impossible for the parties to perform and, after consultation, the employer and the employee are unable to reach an agreement on amending the labor contract.

Economic Compensation: N+1

Under and only under the preceding situation marked in blue (n. 4, a, b, c) the employer can also choose to pay additional one month's salary together with the "N" Economic Compensation to avoid the 30 days' prior notice. Yes, the "1" is actually a payment in lieu of the notice.

Economic Compensation: 2N

If the employer terminates or cancels the labor contract without any legitimate basis, the employee can demand continued performance of such contract or request the employer to pay double of the "N" Economic Compensation for the illegal termination or cancellation, which is the commonly called "2N".

Where the employee does not demand continued performance of the labor contract which is illegally terminated by the employer, or if continued performance of the labor contract has become impossible, the employer shall pay 2N times of the Rate to the employee.

Calculation of Economic Compensation

Firstly, we need to know how to define the Rate. Normally, the Rate equals the monthly salary which refers to the employee's average salary for the twelve (12) months prior to cancellation or termination of his/her labor contract.

However, if the monthly salary of an employee is three times higher than the average monthly wage (the "Average Wage") in the previous year as announced by the government at the municipal level where the employer is located, the Rate for Economic Compensations paid to him/her shall be three times of such announced Average Wage and it shall be for no more than 12 years of work.

IP&EU

Trend of Chinese trademarks at EUIPO

By Laura Batzella

On February 24th, 2021, the European Intellectual Property Office (EUIPO) published the report entitled "China EUTM and RCD Focus" which focused the attention on 10 years of China trademark (TM) and registered community design (RCD) filings in the European Union.

The report also makes few considerations on the impact that the 2020 Covid-19 pandemic had in the intellectual property community.

Briefly, the European Union Trade Mark (EUTM) application filings from China, experienced a remarkable growth from 2010 to 2019, with an average rate of 33.2% and an overall growth rate of 1,027.9%. While, when comparing the 2019 and 2010 filing volumes, more than 63,000 EUTM filings, including over 116,500 goods and services classes, were filed by more than 47,000 individual applicants.

Despite the Covid-19 pandemic, 2020 was a powerful year for Chinese trademark filings. In fact, the Chinese filing increased sharply of the 88% in 2020 compared to the past year 2019. A significant but less important rate is found in RCD filing with only 19%.

It is reported that the Top 10 EUTM applicants from China during the period in question are all large enterprises operating in various industrial and commercial sectors, such as: consumer electronics; telecommunications equipment, systems and services; automotive design and manufacturing; Internet-related services and products.

Huawei is the company commands the chart being responsible for more than 50% of the collective Top 10 filing volume. ZTE (telecommunications equipment, networks and mobile devices) occupies the second position in the ranking, followed in third by Oppo Mobile (consumer electronics and mobile communications).

However, the Top 10 applicants collectively represent only 4% of overall EUTM filings from China, which are overwhelmingly filed by small and medium enterprises (SMEs).

Eventually, these data may be indicators that China's efforts to expand its ownership of IP, beyond a few leading companies, is showing success.

However, despite the overall TM filings growth, filings using the Madrid system dropped from 38% to 14%; but it showed familiarity with the European system from the Chinese applicants.

Apart from trademark or design filings, 2019 indicated the absolute grounds objection rate for EUTMs with Chinese applicants, which was around 3% compared to the overall rate of 7%. Also, the Chinese classification deficiency rate was 2% compared to a 14% rate overall.

The only area where the rejection rate was higher for Chinese applicants, compared to the EU average, was in filing the so called "formality deficiencies" (3.7% vs. 2.2%).

The pandemic did not produce major changes regarding the basic composition and share distribution of the Top 10 overall EUTM and Direct RCD filing classes in 2020, although certain variations were most likely driven by the health crisis.

As the report declares, China's preponderance on the EUTM and Direct RCD filings during 2020 is quite evident and was clearly decisive in sustaining the overall growth dynamic for the EUIPO's main products even under extremely difficult circumstances.

The Office will closely monitor the evolution of filing volumes from China and other countries in order to properly adjust strategies and capabilities aimed on continuing to meet the needs of its users with excellent quality and timeliness.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.