China Laws and Regulations Update in April 2015

  1. The National Development and Reform Commission and the Ministry of Commerce Publish the Catalogue of Industries for Foreign Investment (2015 Revised Edition)                            

On the 10th March 2015, the National Development and Reform Commission and the Ministry of Commerce of the PRC published the Catalogue of Industries for Guiding Foreign Investment (2015 Revised Edition) (“Catalogue”) under the approval by the State Council of the PRC. The Catalogue will become effective on the 10th of April 2015.

The Catalogue totally contains 432 items, from which 48 items of the 471 items totally contained in the 2011 Edition, have been eliminated. Among those eliminated items, 41 ones are under the restricted class, 5 under the priority class and 2 under the prohibited class. In addition, the number of items “limited to joint investment and cooperation” in the Catalogue is 15, decreased from 43 in the 2011 Edition and the number of items applicable only to “Chinese controlled businesses” in the Catalogue is 35, decreased from 44 in the 2011 Edition.

Items under the priority class newly added to the Catalogue mainly include modern agriculture, high tech, advanced manufacturing, energy conservation, renewable energy and modern service industries.

Sourced from the official website of the National Development and Reform Commission of the PRC:   Read More...

Judgment Abstract on NDRC’s Administrative Decision of Qualcomm Incorporated (Part 2)

 (By You Yunting)  As we have already posted Judgment Abstract on NDRC’s Administrative Decision of Qualcomm Incorporated (Part 1) on April 17 2015, today we would like to introduce more.

III What’re the legitimate basis and the final decision?

Pursuant to Article 47 and Article 49 of the Anti-Monopoly Law, the NDRC made the following decisiosn against Qualcomm’s abuse of dominant market position in the SEPs markets and the baseband chip markets:

  1. Order Qualcomm a halt to illegal activities upon abuse of dominant market position as follows:

a   Qualcomm shall provide patent lists to its licensees in China and not charge licensees for expired patents.

b   Qualcomm shall not request its licensees in China to grant back their patents for reverse license to Qualcomm for free.

c   Qualcomm shouldn’t insist on charging a high rate of licensing fee to calculate based on the net wholesale prices.

d   Qualcomm shall offer licenses to its wireless communication related SEPs without bundling with other non-SEPs.

e   Regarding the sale of baseband chips, Qualcomm shall not be allowed to Read More...

Judgment Abstract on NDRC’s Administrative Decision of Qualcomm Incorporated (Part 1)

(By You Yunting) As from October 2013, the National Development and Reform Commission (the “NDRC”) starts the anti-monopoly probe into the world’s biggest cellphone chip maker, Qualcomm (NASDAQ: QCOM) , and makes in-depth investigations and discussion with tens of cellphone manufacturers and baseband chip manufacturers at home and abroad. Recently, the NDRC determined that Qualcomm holds a dominant position in the markets of standard essential patents (“SEPs”) licensing in relation to CDMA, WCDMA and LTE wireless communication and the baseband chip market, and that Qualcomm be fined 6.088 billion yuan in the violation of the Anti-Monopoly Law. Today we will introduce the punishment decision and make comments.

Introduction to the Case:

Respondent: Qualcomm Incorporated

Reference: 发改办价监处罚[2015] 1号

I.  Why does Qualcomm hold a dominant position?

1. Qualcomm holds a dominant position in the markets of SEPs licensing

The NDRC found that under the following facts and reasons, Qualcomm holds a dominant position:

a     Qualcomm occupies 100% shares in the market of SEPs licensing, without any competition. Pursuant to Item 1, Read More...

Could Co-Founder Rush-Register A Planning Trademark As His Own?

lehmanbrown (By Luo Yanjie) Article 15 of both the 2014 version and the 2001 version of the Trademark Law stipulated that an agent shall not rush-register trademarks of the principal or the represented. In practice, Article 15 is always used to prevent from rush-registration. The following judgment will introduce a typical rush-registration case with new ideas for reference.

 Introduction to the Case:

Re-appellant (plaintiff at first instance, appellant at second instance): LEHMANBROWN LIMITED (the “HK Company”)

Re-respondent (defendant at first instance, respondent at second instance): Tradeamrk Review and Adjudication Board (the “TRAB”)

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

Court of second instance: Beijing Higher People’s Court  No.: (2012)高行终字第686号

Court of Retrial: Supreme People’s Read More...

China Laws and Regulations Update in March 2015

1. The New Law Concerning the Administration of Tax Collection (Draft for Comments) Recently Published for Public Comments

The New Law Concerning the Administration of Tax Collection (Draft for Comments) (the “Draft”) was recently published for public comments (Closing date: 3rd of February 2015).

Contents of such Draft involve ideas about establishment of taxpayer identification number policy, based on which each Chinese citizen has a unique and permanently valid taxpayer identification number, new provisions on stopping collection of and not collecting tax interest surcharges, granting tax breaks to those who actively cure acts related to wrongful tax collection or cooperate with tax authorities to investigate wrongful tax collection cases, lowered standards for imposing punishments on taxpayers, narrowed scope for tax authorities to exercise prosecutorial discretion.

Sourced from the official website of the Ministry of Finance of the PRC:

http://www.mof.gov.cn/zhengwuxinxi/caizhengxinwen/201501/t20150105_1176083.html

2. The Supreme People’s Court of the PRC Amends Provisions on Issues concerning Applicable Laws to the Trial of Patent Controversies

As of 29th of January 2015, the Supreme People’s Court of the PRC Read More...

DeBund Succeeds in Pushing Copycat Game App from AppStore

Recently, DeBund takes a big step forward in providing mobile internet legal services that You Yunting Team, on behalf of clients, succeeds in pulling a popular game from the AppStore by more than 10 lawyer’s letters.

The Developer of the complained game copied large amounts of background elements of a well-known game, including graphic design, plots, role names and geographic names, and also used the brand of the original game. The Developer also made a cartoon modeling on the game characters, and did a slight change to the game name, not exactly the same as the original game. The infringed benefits greatly from the complained game to millions of yuan every month.

Not exactly the same to the original game is a bit more complicated because in most cases, application market operators are unwilling to push them from the market but would like to ask the two parties solving the matter through lawsuits. However, lawsuits take time. As the infringed still can gain a lot during the lawsuits, it is pushing them out from application market that becomes critical against infringement.

Fierce fights come because of involving numerous benefits. In our Lawyer’s Letters, You Yunting analyzes the infringing contents in detail and explains the reasoning pursuant to the Copyright law, the Anti-Unfair Competition Law, and the Regulations on Protection of the Right to Network Dissemination of Information. At the other side, the Developer contends and Read More...

Does Unauthorized Use of Screenshots in Game Guide Constitute Infringement?

(By You Yunting) A game guide, also known as game strategy guide, is an essential reference for players. Generally, a game guide may quote pictures and screens from the game itself. But if without authorization, it triggers questions whether this quotation causes copyright infringement. In the following, a similar case will be introduced.

Introduction to the Case:

Plaintiff: Shanghai Aurogon Information and Technology Co., Ltd (the “Aurogon”)

1st Defendant: China Zhongdian Media Co., Ltd (the “ZD Media”)

2nd Defendant: Beijing Sheng Bi Er Digital Technology Co., Ltd (the “SBE”)

3rd Defendant:  Beijing Books Building Co., Ltd (the “BBB”)

Court of first instance: Xicheng District People’s Court No.:(2010)西民初字第18215号

Plaintiff, the developer and copyright holder of the game Gujian Qitan, a 3D role-playing video game, filed a lawsuit against three defendants hereof, with the claim that, the book Gujian Qitan Prima Guide (the “disputed book”) published by the ZD media and sold by both SBE and BBB, is unauthorized Read More...

Qvod Vs China Government: RMB 260 million Punitive Fine for Copyright Infringement?

qvod(By You Yunting) Introduction to the Case:

Plaintiff: Shenzhen Qvod Technology Co., Ltd (the “Qvod”)

Defendant: Market Supervision Administration of Shenzhen Municipality (the “MSA”)

Court of first instance: Shenzhen Intermediate People’s Court

The MSA filed a case with the Shenzhen Intermediate People’s Court, and claimed to cancel the punitive fine of RMB 260 million from the MSA. On 30th of December 2014, the Shenzhen Intermediate People’s Court held the trial as the case is still on that trial.

On 26th of June 2014, the MSA issued a punitive fine of RMB 260 million to Qvod. After the receipt of the punitive fine, the Qvod put forward an administrative review but was rejected by the Copyright Bureau of Guangdong Province. The Qvod filed a lawsuit asking the court to cancel the most expensive online copyright administrative punishment. On the 30th December 2014, the court held a trial.

The Qvod claimed, it only provided Read More...

Does Proposed Anti-Monopoly Investigation against the Merger of Didi and Kuaidi Affect Innovation?

(By You Yunting) China’s two largest Taxi apps Didi Dache (“Didi”) and Kuaidi Dache (“Kuaidi”) confirmed merger on the Western Valentine’s Day, triggering the whole industry, which also lead to the suspicion of a monopoly. Afterwards, the Taxi apps Didi and Kuaidi responded this with much larger travel markets, and told that their merger does not lead to a monopoly, because mobile taxis only count a small proportion with lots of participators. As for whether their merger is accused of monopoly, there are hot discussions among legal professions. At present, third parties were tending to make anti-monopoly investigation from the Ministry of Commerce, and I am no exception. But after full consideration, I fell into confusion.

At the first interview by reporters, my opinion was that the Ministry of Commerce should initiate an investigation. According to the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, where a concentration of undertakings does not reach any of the thresholds specified in Article 3 herein, but facts and evidence collected in accordance with the prescribed procedures establish that such concentration effects, or is likely to effect, the elimination or restriction of competition, the competent commerce department of the State Council shall initiate an investigation in accordance with law.

But could Read More...

China Laws and Regulations Update in February 2015

  1. The New Foreign Investment Law(Draft) Published for Public Comments

On 19th of January 2015, the Ministry of Commerce of PRC published the Foreign Investment Law of PRC (Draft for Comments) (referred to as ‘draft FIL’ below). Opportunities to offer comments on the draft FIL will remain open to the public until 17th of February 2015.

Significantly, the draft FIL transforms the current foreign investment administration system by introducing the administration model combining pre-establishment national treatment policies and the Negative List and stipulating that foreigners intending to invest in one of the areas as specified in the Negative List shall apply for and obtain a foreign investment entry permit beforehand. Also, foreign investors throughout PRC shall perform the reporting obligation regardless of the Negative List. Under this new administrative system, foreign investment in most areas can be admitted to PRC without prior approval by relevant departments. In addition, the draft FIL includes provisions on China’s national security review system, the foreign investment promotion and protection system, supervision and inspection of investment and operational actions taken by foreign investors and foreign invested enterprises, strengthened in-process and after-the-fact administration.

Sourced from the official website of the Ministry of Commerce of PRC:

Read More...

Is Integrated Circuit Layout Design Protected by China Judicial Judgment?

(By You Yunting) Introduction to the case:

Appellant (plaintiff at first instance): Hi-Trend Technology (Shanghai) Co., Ltd (the “HTT”)

Appellant (defendant at first instance): Shenzhen Rui Micro-Technology Inc. (the “RMT”)

Respondent (defendant at first instance): Shanghai Yachuang Electronic Component Co., Ltd. (the “YEC”)

Court of first instance: Shanghai No.1 Intermediate People’s Court  No.: (2010)沪一中民五(知)初字第51号

Court of second instance: Shanghai Higher People’s Court  No.: (2014)沪高民三(知)终字第12号

In May 2006, the HTT signed a Technology Transfer Contract and supplementary agreement with Zhuhai Actions Semiconductor Co., Ltd. (the “Action Semi”) that the Action Semi transferred its proprietary technology of a chip to the HTT at the price of RMB 12 million. After then, the HTT made a subsequent research and gained an exclusive right in 2008 at the registration of layout design numbered ATT7021AU (the “disputed design”) with the State Intellectual Property Office. However, the HTT found that, the RMT who developed a chip Read More...

Is It Illegal for WeChat to Block Sharing Link of Alipay?

WeChat vs Alipay_副本(By You Yunting) Recently, China Internet giant enterprises generated an intense competition during their hand-to-hand combat, but this time the main character is the Tencent which successively block sharing link with Alipay, Xiami Music App and NetEase Cloud Music App on its WeChat platform. It means that WeChat users could not use the mobile applications to link the contents of Alipay Red Envelope Gifting, Xiami App and NetEase Cloud Music App on its WeChat platform.

Afterwards, Tencent implied externally that the act of sharing link with Alipay Red Envelope Gifting is a malicious marketing and promotion on its WeChat platform, even a shattering experience, and its blocking should have something done with the uninstallation of WeChat Payment on Alipay platform (Chinese Link: http://tech.techweb.com.cn/thread-642700-1-1.html) For cutting off link with Xiami App and NetEase Cloud Music App, Tencent implied to have relationship with its content piracy (Chinese Link: http://tech.sina.com.cn/i/2015-02-05/doc-ichmifpx7018268.shtml).

Therefore, in a legal WeChat group’s discussion, I thought that Tencent’s block had little Read More...

Does Story Plot Plagiarism Constitute Copyright Infringement in China?

(By You Yunting) Introduction to the Case:

In the first half of 2014, Palace 3: the Lost Daughter is a 2014 Chinese historical television series written and produced by Yu Zheng. In April 2014, a Taiwanese writer Chiung Yao made a letter claimed that Palace 3: the Lost Daughter (the “disputed show) was based on her novel Plum Blossom Scar (the “reference novel”), but Yu Zheng delayed. On May 28, 2014, Chiung Yao filed a lawsuit, claiming that Yu Zheng was unauthorized to copy her original core plot, recompose the disputed drama and produce and broadcast the disputed show with another 4 defendants. Chiung Yao thought that Yu Zheng had seriously violated her right of adaptation and cinematization, causing great mental damage, and requested Yu Zheng to immediate stop infringement, eliminate influences, make an apology and compensation of RMB 20 million for economic loss.

Upon the trial, the court held the following:

1   In terms of literary works, it is hard to draw a direct conclusion over some plots and source material that are not similar to each other or belongs to public areas if compared with each other independently. But if making a comparison integrally, it will be conducive to find out the similarity on the structures of two works. Character design, plot structure, and internal logic rearrangement that is specific enough are protected by Read More...

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...