Does Engaging Employee liable for Non-Competition Constitute Infringement in China?

(By Yue Mengyan) An employee violates non-competition clause in his previous labor contract with his former employer, and works for a new employer, which has a competitive relationship with his former one. Could the former employer claim the new employer to be liable for such infringement, in addition to the employee’s liability for breach of contract? Pursuant to relevant laws and regulations in China, we will introduce a case and make our analysis in the following.

Case Introduction:

Appellant (defendant of first instance): Liu Guoqing

Appellant (defendant of first instance): Beijing Qingke Houcheng Technology Ltd. Company (the “Qingke Company”)

Appellee (plaintiff of first instance): Beijing Ji’ao Juhe Technology Ltd. Company (the “Ji’ao Company”)

Court of first instance: Beijing Haidian District People’s Court

Court of second instance: Beijing Intellectual Property Court

Liu Guoqing entered a labor contract and the non-competition agreement with the Ji’ao Company, and then acted as the position of CTO. Upon the termination of their labor contract in 2013, Ji’ao Read More...

Laws and Regulations Update in November 2016

1.The Ministry of Commerce Publishes the Provisional Rules on the Establishment and Change of Registered Records of Foreign Invested Enterprises

Published on 8th October 2016, the Rules consists of clauses on the application scope, registration process, supervision and inspection procedures, legal responsibilities, etc. relating to the registration policy for the foreign invested businesses applying for establishment or a change of registered records not involving special access rules of PRC, set out in the revised versions of four foreign investment related laws including the Law of Foreign-funded Enterprises, issued by the National People’s Congress Standing Committee.   [Full Text]

2. The Ministry of Finance and the Ministry of Human Resources and Social Security issue the Interim Measures on the Provisional Rules on Occupational Annuities and Funds

Published on 28th September 2016, the Measures has made it clear that the forms of occupational annuities and funds are limited to domestic investments and that the total value of the investments of stocks, stock funds, mixed funds, stocks used as pension products cannot exceed 30% of the net assets of a particular investment portfolio.   [Full Text]

Read More...

Does the “GAP Underwear” Trademark Have Adverse Effect by Its Name?  

(By Luo Yanjie) Trademark Office (the “CTMO”) has been increasingly tightened its standards on trademark reviewing and claiming that the trademark itself may cause “adverse effect”. Competent authorities are more than inclined to use such grounds indiscriminately by treating it as an all-purpose shield to deal with distinct situations. Recently, the Supreme People’s Court remedied such phenomenon by making its decision on the GAP Underwear’s cases. The following is our detailed introduction:

Introduction to the Case:

Retrial Petitioner (Plaintiff at first instance, Appellant at second instance): GAP ITM INC. (盖璞(国际商标)公司, referred to as “GAP”);

Retrial Respondent (Defendant at first instance and Respondent at second instance): Trademark Review and Adjudication Board (the TRAB”);

Court of First Instance: Hefei Intermediate People’s Court No.(2012)合民三初字第00163号

Court of Second Instance: the Higher People’s Court of Anhui Province  No.(2013)皖民三终字第00072号

Retrial: Read More...

Laws and Regulations Update in October 2016

1. Decision of the Standing Committee of the National People’s Congress on Amending Four Laws including the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises

Published on 5th September 2016 and coming into effect on 1st October 2016, the Decision involves the amendment of Law of the PRC on Wholly Foreign-Owned Enterprises, Law of the PRC on Chinese-Foreign Equity Joint Ventures, Law of the PRC on Chinese-Foreign Contractual Joint Ventures and Law of the PRC on the Protection of Investments of Taiwan Compatriots. According to the amended laws, the registration system applies to foreign invested companies, joint ventures, Chinese-Foreign cooperative companies, which are not required by national laws to follow special market access administration rules promulgated by or with approval of the State Council, when they are being established or undergoing a change. The decrees issued by the State Council ordering a temporary change of laws and rules for the free trade zone as authorized by the Standing Committee of the National People’s Congress will no longer continue in effect.   [Full Text]

2. The State Council Makes the Opinions on Ensuring the Continuous Healthy Development of Business Startups Available to the Public

Published on 20th Read More...

Laws and Regulations Update in September 2016

1. The Ministry of Transport and Seven Other Departments Co-Promulgate the Interim Measures on the Administration of Online Taxi Booking

The Ministry of Transport, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of Commerce, the State Administration for Industry and Commerce, the General Administration of Quality Supervision, Inspection and Quarantine and the Cyberspace Administration, of the People’s Republic of China co-promulgated the Interim Measures on the Administration of Online Taxi Booking (“Measures”) on 14th July, which will take effect on 1st November. Qualified private cars under the Measures can be used as vehicles bookable online and registered as “taxis for passengers to be booked online”. The Measures further expressly sets out that “the fare for the vehicles bookable online is subject to variable market prices, except the municipal government believes it necessary to implement the government’s guidance price”, “any vehicle bookable online that has been driven for up to 600 thousand kilometers must be reported as an abandoned vehicle”, and “any person driving a vehicle bookable online is required to have no criminal record”.   [Full Text]

2. China Banking Regulatory Commission and Four Other Read More...

Laws and Regulations Update in August 2016

1. The Ministry of Justice Issues the Notice on the Revocation of the Notice of the Ministry of Justice and the Ministry of Construction on Strengthening the Notarization Work for the Property Registration Administration

According to the Notice of the Ministry of Justice on the Revocation of the Notice of the Ministry of Justice and the Ministry of Construction on Strenthening the Notarization Work for the Property Registration Administration, notarization is not necessary to complete real estate registration formalities relating to inheritance, will, bequeathing, ownership transfer of property involving persons from abroad or Hong Kong, Macao or Taiwan.   [Full Text]

2. The State Administration for Industry and Commerce Promulgates the Interim Measures on Internet Advertising Administration

The State Administration for Industry and Commerce promulgated the Interim Measures on Internet Advertising Administration (“Interim Measures”), which will come into effect as of 1st September 2016.

The Interim Measures was made by taking account of the actualities of the internet advertising industry to give details about how to implement the new Advertising Law, set standards for Read More...

Laws and Regulations Update in July 2016

1. The State Council Publishes the Guiding Opinions on the Establishment and Strengthening of the Credit-Based Incentive and Punishment System in Order to Accelerate the Build-up of Social Credit and Moral Awareness

 

On 12th June 2016 the State Council published the Guiding Opinions on the Establishment and Strengthening of the Credit-Based Incentive and Punishment System in Order to Accelerate the Build-up of Social Credit and Moral Awareness (“Guiding Opinions”)

The Guiding Opinions indicates the necessity of the rapid development of the social credit system, making information about a person’s credit more widely available and shared, by using motivation and restraint in a legal way and creating a credit-based incentive and punishment mechanism involving government authorities and other communities in various regions, departments and areas, in order to make sure that people could do businesses in legal and honest ways without violating the good market order, in a society with good moral awareness. [Full Text]

2. The State Administration for Industry and Commerce Publishes the Opinions on the Administration of Expansion of the Opening-up to Hong Kong and Macao Residents’ Read More...

Laws and Regulations Update in June 2016

1. Notice of the State Council on Issuing the Transitional Plan on Adjusting the Distribution of the Value-Added Tax Revenue between the Central Government and the Local Governments after the Comprehensive Promotion of the Pilot Program of Replacing Business Tax with Value-Added Tax

This Notice was issued by the State Council on 30th April 2016, stating that the transitional plan described therein would come into effect on 1st May 2016 and the transitional period would be two to three years. According to this Notice, the repayment base for the central government and the payment base for the local governments should be assessed on the base of the year 2014, and the total income from payments for the value added tax would be shared by the central government and the local governments, of which 50% belongs to the central government and the rest 50% would be allocated to and shared by the local governments of the areas of the taxpayers.

(Official Website of the PRC Government:

http://www.gov.cn/zhengce/content/2016-04/30/content_5069490.htm

2. Announcement of the State Administration of Taxation on Publishing the Administrative Measures on Exempting Persons Involved in Cross-Border Read More...

Laws and Regulations Update in May 2016

1. The Supreme People’s Court Issues Official Reply Concerning the Disposition of Seized Property by the First Seizing Court and the Enforcement Court for a priority Claim

On 12th April 2016, the Supreme People’s Court issued an official reply to the request by the Higher People’s Court of Fujian Province for clarifying some issues concerning the disposition of seized property by the first seizing court and the enforcement court for a priority claim. This Judicial Interpretation came into effect on 14th April 2016.

As approved by the Supreme People’s Court, in the process of enforcement, the court first seizing, impounding, or freezing (hereinafter collectively referred to as “seizing”) any property of a debtor shall be responsible for the disposition of the seized property. However, where a claim which has entered the enforcement procedure of another court enjoys any security interest at a higher level in the order of payment or enjoys any priority in satisfaction out of the seized property (such a claim is hereinafter referred to as a “priority claim”), if it has been more than 60 days since the date of the first seizure and the first seizing court has not released any announcement of auction or entered any other sales procedure in respect of the seized property, the enforcement court for the priority claim may request that the seized property be transferred to it for enforcement.

Sourced from the official website of the Supreme Read More...

In What Ways Can Startups Obtain Competitive Advantages from Intellectual Property?

(By You Yunting) Large number of business opportunities have arisen from the rapid development of wireless and mobile technologies. As a result, new startups appear one after another, scrambling for these opportunities. However, the faster a market grows, the fiercer competition it involves. The process of Entrepreneurship is a race with other outstanding entrepreneurs, in which they use reasonable efforts to gain competitive advantages and win their rivals. If properly used, intellectual property rights can be very helpful in creating advantages. Here, let’s talk about what advantages can startups create by using intellectual property.

  1. Patent advantages

As defined by the Patent Law of the People’s Republic of China (“PRC”), patents include invention, utility model and design patents. Invention and utility model patents are for protecting technologies and design patents for products’ appearance. Personally, software startups usually do not need to file or only need to file a limited number of patent applications, while intelligent hardware developers need to file patent applications much more often.

The performance of most software providers relies on user experience and corporate execution. The scarcity of time is the biggest problem Read More...

Laws and Regulations Update in March 2016

1 The Ministry of Land and Resources Issues the Detailed Implementation of the Interim Regulations on Real Estate Registration

On 1st January 2016, the Ministry of Land and Resources issued and made effective the Detailed Implementation of the Interim Regulations on Real Estate Registration.

(For more details, please consult with your lawyer.)

Sourced from the official website of the Ministry of Land Resources of the P.R.C.:

http://www.mlr.gov.cn/zwgk/flfg/tdglflfg/201601/t20160115_1395046.htm

2 The State Administration of Taxation to Simplify and Combine the Procedures Relating to the Filing of Tax Returns and the Payment of Taxes

On 1st February 2016, the State Administration of Taxation made the Announcement on Simplifying and Combining the Procedures Relating to the Filing of Tax Returns and the Payment of Taxes, to be effective since 1st April 2016.

(For more details, please consult with your lawyer.)

Sourced from the official website of the State Administration of Taxation of the P.R.C.:

Read More...

What Should Startup Entrepreneurs Know to Negotiate with Outside Investors and Handle Equity issues?

(By You Yunting) The other day I had a conversation with a lawyer of a foreign law firm. That lawyer, who specializes in handling legal affairs of VIE financing on behalf of the investment side, told me that many startups would sign investment agreements proposed by investors directly without any argument. To be honest, I can hardly understand nor agree with this kind of practice. I think investors may actually feel ambivalence in face of such situation, too. On one hand, they can get more control over the invested business as well as other extra benefits. With probably unfair terms being included in an investment agreement, investors may be happy to have a favorable position in the relationships with startups. On the other hand, the investors are expecting to gain lucrative profits, so they may doubt whether the startups will be able to win fierce competitions of the market as they behaved so obediently when making investment agreements. This article talks about common points of financing negotiation between startups and investors as well as startups’ internal equity allocation issues.

Keys for startups to know about how to deal with investors

Investments for startups can be classified into foreign and domestic ones. Startups had better appoint lawyers to review legal documents for them wherever possible. A VIE agreement in English covers at least a hundred pages so that even a person Read More...

Directors’ Liability in China

(By Yu ZhiyuanDirectors’ liability in China is an attractive matter to foreigners who act or intend to act as directors in China. Today, we would like to introduce directors’ liability in China to the below questions.

 

1. What are the key areas of liability that directors in China need to be aware of?

Directors shall abide by laws, administrative regulations and articles of association of the company and shall have the fiduciary and diligent duties to the company.

Directors may not abuse their authorities by accepting bribes or generating other illegal income, and may not convert company property.

The directors:

(1) may not misappropriate company funds;

(2) may not deposit company assets into an account in his own name or in any other individual’s name;

(3) may not loan company funds to other people or give company assets as security for the debt of any other individual without the approval of the shareholders meeting, general meeting of shareholders or the board of directors in violation of the articles of association;

(4) may not execute any contract or engage in any transaction with the company in violation of the articles of association or without the approval of the shareholders meeting or the general meeting of shareholders;

(5) may not use the favorable conditions and conveniences to seek the business opportunities that shall belong to the Read More...

China Laws and Regulations Update in December 2015

1 The State Council Issues Policy, Emphasizing Combating Fake Goods Sales and Copyright Infringements on Internet                 

On 7th November, 2015, the General Office of the State Council issued the Opinions on Intensifying the Regulation of intellectual property Infringement and Counterfeiting in the Internet Domain (the “Opinions”) with the aim to strengthen regulation of infringement and counterfeiting behaviors in the internet domain and promote sound growth of the e-commerce industry. The Opinions pointed out main activities the government authorities will fight against, including online sale of counterfeited and inferior products and internet copyright infringement.

(For more details, please consult with your lawyer.)

Sourced from the official website of the Government of the P.R.C.:  http://www.gov.cn/zhengce/content/2015-11/07/content_10276.htm

2 China Securities Regulatory Commission Issue Drafts of New Editions of Supervision Regulations for Public Comment     

On 6th November, 2015, China Securities Regulatory Commission (“CSRC”) issued notice requesting public comment on the Administrative Measures for Initial Public Offerings and Listing (Consultation Read More...