Will China New Foreign Investment Law Wipe Out VIE Structure?

(By You Yunting) Abstract: The Foreign Investment Law (Draft for Comments) has shifted the standard of a company based upon the actual controller, instead of the shareholder of the company, and regulated that the domestic company must not engage in any industries where operation by foreign investors is prohibited. In case the Draft becomes law, it will cut off the survival basis of VIE structure, so that the VIE company controlled by foreign investors cannot be operated, that the overseas listed company controlled through the VIE structure by Chinese will lose its survival basis of oversea listing, and that the startup companies of VIE structure controlled by Chinese will be forced to abandon the VIE structure.

China Ministry of Commence issued the Foreign Investment Law (Drafts for Comments) (hereinafter the “Draft”) and began its revolution on the approval and management of foreign investment companies. However, the Draft regulated that a domestic company controlled by foreign investors must not engage in any industries where operation by foreign investors is prohibited, which will probably have some serious influence on industries such as internet companies that have already used variable interest entities (hereinafter the “VIE”) structure in gray zone, and might even wipe out the existence space for VIE structure. I am wondering Read More...

China Laws and Regulations Update in December 2014

  1. The State Council Releases the Catalogue of Investment Projects Subject to Government Verification and Approval (2014 Edition)

On 31st of October 2014, the State Council released the Notice of the State Council on Promulgating the Catalogue of Investment Projects Subject to Government Verification and Approval (2014 Edition), which became effective on the same date.

Enterprises that intend to invest in and construct the fixed-asset investment projects listed in the Catalogue shall apply to relevant project verification and approval authorities for verification and approval in accordance with pertinent provisions. Enterprises that intend to invest in and construct projects other than those listed in the Catalogue shall be subject to record-filing administration. Projects invested and constructed by public institutions, social organizations, etc. shall be governed by the Catalogue.

Sourced from http://www.gov.cn/zhengce/content/2014-11/18/content_9219.htm

 

  1. The Supreme People’s Court Promulgates Provisions on the Jurisdictions over Cases by Intellectual Property Courts in Beijing, Shanghai and Guangzhou      

On 27th of October 2014, the Supreme Read More...

China Supreme Court Approved Passive Use as the Use of Trademark

(By Luo Yanjie) Trademark is to distinguish the goods and services from different trademark owners. However, if the public voluntarily called it another name and made use of it, then does such use still constituted the use of trademark as regulated in the Trademark Law. If you want to know more, please read the next posts.

Introduction to the Case:

Re-appellant (third party at first instance and appellant at second instance): Gui Pufang

Re-respondent (plaintiff at first instance and respondent at second instance): Guangdong Tea Imp. & Exp. Co. Ltd (the “GDT”)

Defendant at first instance: Trademark Review and Adjudication Board (the “TRAB”)

Court of final appeal: Beijing Higher People’s Court  No.: (2013)高行终字第298号

Gui Pufang filed a trademark application of “广云贡饼” sign (the “disputed trademark”) under Class 30 for tea in 2005. The GDT, a company which Gui Pufang once worked, opposed that the disputed trademark was already in use and enjoyed substantial influence against Gui Pufang’s application. Through the trademark review, first instance and second instance, the GDT Read More...

What is the Procedure When It Comes to the Registration of Imported Software in China?

(By Wang Ting and You Yunting) Today we will discuss the legal restrictions and application procedures in regard to the introduction of foreign software into China.

  1. Copyright Protection of Imported Software

The Protection of Computer Software Regulations dividends the protection of imported foreign software into two types:

  • Software first distributed within the territory of China shall have copyright;
  • Software concluded with China by the countries to which the creators belong or in which the creators reside habitually or under the international conventions to which China is a member state shall enjoy its copyright.

China has concluded the Berne Convention for the Protection of Literary and Artistic Works with more than Read More...

Why Did Using a Literal Meaning of “智慧背囊” be Judged Trademark Infringement?

送给青少年的智慧背囊(By You Yunting) Introduction to the Case:

Appellant (1st defendant at first instance): Qingdao Publishing House

Respondent (plaintiff at first instance): Shandong Shiji Tianhong Education Technology Co., Ltd (the “Tianhong Education”)

2nd Defendant at first instance: Beijing Readbuy Tianxia Information and Technology Co., Ltd (the “Readbuy”)

Court of first instance: Beijing Fengtai District People’s Court No.: (2014)丰民初字第03829号

Court of second instance: Beijing No.2 Intermediate People’s Court No.: (2014)二中民(知)终字第10356号

On November 14, 2008, the Tianhong Education received the exclusive rights of the “智慧背囊” trademark numbered 4697993 (the “disputed trademark”, has a literal meaning Read More...

Youku Steals the Originality, How Can the Student Fight Against Plagiarism?

追气球的熊孩子(By You Yunting) A post named the Teenagers Cannot Be Bullied was made by a 19-year-old student to complain that Youku.com ripped off his idea, causing a big stir online. The 19-year-old student and his fellows succeeded in taking photos of the earth from flying a hot-air balloon and then published their experience named the Kids Who Chase the Balloon and photos online. Afterwards, staffs from Youku.com contacted him, saying that they would like to address a short video to write down their behaviors. Then they reached an agreement through emails that the 19-year-old student and his fellows would cooperate with Youku.com in making a creative short video from the post the Kids Who Chase the Balloon.

Unexpectedly, staffs from Youku.com later began to find various excuses for denying making the video and finally used lack of funds to terminate the video-making. However, Youku.com published their own commercial video named the Kids Who Chase the Balloon with embedded ads such as Momo and Lexus. The student accused Youku.com of ripping off his ideas and Read More...

China Laws and Regulations Update in November 2014

  1. The State Intellectual Property Bureau of the P.R.China Publishes the Opinions on Investment Administration Regulations Concerning Intellectual Property to Foster Growth of Small and Micro Enterprises.      

On 11th of October 2014, the State Intellectual Property Bureau of P.R.China published the Opinions on Investment Administration Regulations Concerning Intellectual Property to Foster Growth of Small and Micro Enterprises. The Opinions involve fifteen specific measures to help small and micro enterprises obtain rights to their innovative achievements, improve patent sponsorship policies for small and micro enterprises and support small and micro enterprises by properly tackling intellectual property related issues, in order to foster innovation and growth of small and micro enterprises, perfect intellectual property services for small and micro enterprises, improve the ability of small and micro enterprises to use intellectual property and optimize the intellectual property development environment for small and micro enterprises.

Sourced from the official website of the State Intellectual Property Office of the PRC:

http://www.sipo.gov.cn/tz/gz/201410/t20141011_1020001.html

  1. Twenty-one Provinces and Cities across P.R.China Witness Publication of the 2014 Salary Rise Read More...

Bruce Lee’s Daughter Won Trademark Opposition for the Chinese Name of the late Bruce Lee

(By Luo Yanjie) The most common trademark squatting is to register celebrity names as trademarks in China. In following post, we will introduce a case regarding where the court rejected the rush-registered trademark via the use of late celebrity names. Bruce Lee, with his Chinese name 李小龍, was a late Hong Kong American martial artist, Hong Kong action film actor, martial instructor, filmmaker and the founder of Jeet Kune Do. The descendants of the late Bruce Lee set up a Bruce Lee Enterprise, LLC in the operation of related matters to the late Bruce Lee.

Introduction to the Case:

Plaintiff: Zhang Chaoqin

Defendant: Trademark Review and Adjudication Board (the “TRAB”)

Third Party: Shannon Emery Lee, Bruce Lee Enterprise, LLC (the “Bruce Lee Enterprise”)

Court of first Instance: Beijing No.1 Intermediate People’s Court

Court of second Instance: Beijing Higher People’s Court

On October 14th, Zhang Chaoqin filed an application of the “李小龍”(the “disputed trademark”) trademark numbered 4309490 under the Class 12 for Read More...

Are Enterprises Entitled to the Rights for Its Prior Enterprise Name?

(By Wang Ting and You Yunting) In enterprise name registration, if an enterprise changed its enterprise name at once, generally the new enterprise name is under protection. This means, the enterprise is no longer entitled to the rights and interests of its prior enterprise name. Such being the case, does another’s registration on the prior enterprise name cause its prior rights, or violate the Article 32 of the Trademark Law on the stipulation that the trademark application shall not infringe upon another party’s prior existing rights? Is the enterprise with a new enterprise name entitled to the prior right for its prior rights? In today’s post, with regard to those questions, the Trademark Office, the Trademark Review and Adjudication Board, Beijing No.1 Intermediate People’s Court and Beijing Higher Peoples Court were divided in their attitude.

Introduction to the Case:

Appellant (defendant at first instance): Trademark Review and Adjunction Board (the “TRAB”)

Appellant (the third party at first instance): Luxin Venture Capital Group Co., Ltd (the “LUXIN”)

Respondent (plaintiff at first instance): Qingdao SISA (GROUP) Abrasives Co., Ltd (THE Read More...

Could JD.com Make the Alibaba’s Registered “双十一” Trademark Invalid?

京东(By You Yunting) According to the news, Alibaba Group, an Chinese e-commerce that provides consumer-to-consumer business-to-consumer and business-to-business sales services via web portals, has already obtained the registration of the trademark “双十一” (meaning “double 11”, actually the date of November 11th) (the “disputed trademark”) and authorized its affiliated Tmall.com to the  exclusive use of the disputed trademark. Moreover, Alibaba delivered letters to various news media arguing that the JD.com’s use of “双十一” infringed the rights of its trademark. However, JD.com, one of the largest B2C online retailers in China by transaction volume, replied that the date of “November 11th” has already became a shopping day for all retailers and Alibaba’s registration on the “双十一” is accused of having the monopoly. Actually, Sunning Appliance, Gome and Amazon have suffered such impacts as well as JD.com.

Alibaba attempted using trademarks to protect its brands, which convinced me for its intellectual property consciousness from the bottom of my heart. Furthermore, Alibaba used its trademark as an effective weapon at the height of its campaign against JD.com before November 11th, Read More...

China Laws and Regulations Update in Octorber 2014

  1. Intellectual Property Tribunals to Be Established in Beijing, Shanghai and Guangzhou

On 1 September 2014, the Standing Committee of the National People’s Congress approved the Decision to Establish Intellectual Property Tribunals in Beijing, Shanghai and Guangzhou. The Decision stipulates that the Supreme People’s Court should be entitled to set up intellectual property tribunals in Beijing, Shanghai and Guangzhou by taking into account types and numbers of intellectual property cases. Such tribunals govern first-instance civil and administrative intellectual property litigation cases relating to such technically demanding issues as patents, new species of plants, layout designs of integrated circuits, confidential know-hows, etc. and have the right to decide on any appeal against first-instance judgment or verdict by a local lower-level people’s court on civil and administrative intellectual property cases relating to copyrights, trademarks, etc.

Sourced from the NPC News Website:

http://npc.people.com.cn/n/2014/0901/c14576-25574846.html

  1. The Shanghai Municipal Government Publishes the Priority Work Arrangements in 2014 through 2015 for Establishment of the International Trade Center

On 27 August 2014, the Shanghai Read More...

An Analysis on Chinese and Foreign Entrepreneurs’ Equity Disposal Options

(By Wang Qiurui) Selfishness is nature of human beings and difficult to get rid of, out of which a problem arises that employees and even high-level managerial staff of a company care much more about their own interest than the company’s rise and fall when dealing with managerial issues. Adam Smith raised a question related to such problem in his masterpiece the Wealth of Nations, known as ‘Smith’s Difficult Question’.

Many past and living Chinese and foreign entrepreneurs have turned to equity to find a way of thinking a solution to overcome such weakness of human beings. However, being governed by the current Company Law of P.R.China, settlement of a case in such a way would give rise to many legal issues. It should be more advisable for Chinese entrepreneurs to create and apply to their businesses a phantom equity system.

  1. Equity Incentive Programs Applied by Fortune 500 Companies

Some fortune 500 companies, especially those listed companies, usually have equity incentive systems and programs for eligible staff above certain position levels, especially high-level managerial staff, who are given an amount of equity (mostly in the form of stocks) and then become shareholders of the companies.

A company taking such action obviously aims to mobilize high-level managerial staff to work as the Read More...

Does Tudou.com Require Permission for the Use of YYeTs’ Unauthorized Subtitle Translation in China?

tudou(By You Yunting) YYeTs is one of fansub groups in China, which translated foreign films and television program and subtitled into a language other than that of the original by fans (not officially licensed translator). YYeTs have translated many foreign films and television programs and developed very fast in China.

Recently,  YYeTs claimed that, as Tudou.com used, without permission, YYeTs’ subtitle translation for the video of the Voice and deleted the names of translator, YYeTs tried to negotiate with Tudou.com but was blamed for illegal translation. That raised a question: without the permission of the right holder for the Voice, could YYeTs’ translation receive protection from the Copyright Law?

The video of the Voice, an American reality television singing competition broadcast on NBC, shall be legally regarded as an audio -visual recording. If Internet users used them to practice English, YYeTs’ translation certainly is a type of legitimate action. Nonetheless, if the translation were uploaded to the Read More...

Will Alibaba’s App Information Leakage Trigger Strict Supervision and Regulation on Mobile Games?

alibaba(By You Yunting) “疯狂来往” App, an in-game of China’s leading e-commerce Alibaba(NYSE: BABA)’s Messaging App Laiwang, was blamed for user’s private data leakage, according to the news. “疯狂来往” App (pronounced as “Feng Kuang Lai Wang”) was made to record players as one persons holds up a mobile device displaying words and others use gestures to provide clues to an answer, a little like guessing game. Considering that “疯狂来往”App is an interactive game among friends and acquaintances, many of the players were dressed rather casually when caught on the videos and some videos shows users in their underwear or naked while playing the game at home with family or friends. Worsen the videos also involved private information of teenagers under eighteen. Regardless of its sharing features into social networking websites such as Wechat and Qzone, some sharing videos were also automatically stored on Youku.com, a video website, which anyone can read online.

After exposure, the videos have since been deleted by Youku.com. However, the videos may be up to 35959 sharing in Youku.com without permission, which included a tremendous amount of private data Read More...

China Laws and Regulations Update in September 2014

1.The PRC State Administration of Foreign Exchange releases the Notice on the Pilot Reform of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-Invested Enterprises in Certain Areas

On 4 August 2014, the PRC State Administration of Foreign Exchange released the Notice on the Pilot Reform of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-Invested Enterprises in Certain Areas to launch the pilot reform of the settlement of the foreign exchange capitals of foreign invested enterprises on a discretionary basis in 16 areas throughout the P.R.China, including the Suzhou Industrial Park, on 4 August 2014, after such reform was first launched in the Shanghai Free Trade Zone.

In addition, according to the Notice, the uses of the foreign exchange capitals of foreign invested enterprises and the RMB capitals acquired through the settlement of such foreign exchange capitals are restricted, and the payment management, the management of settlement and use of the capitals in foreign accounts for direct investment and the post-supervision of the PRC State Administration of Foreign Exchange are standardized.

Website of the State Administration of Foreign Exchange:

Read More...