Author Archives: yytbest

Advantages and Disadvantages of Incentive Shares Held Directly and Indirectly

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(By Bai Lituan) Over recent years increasingly more businesses have used incentive shares to retain key employees. They may hold shares in the subject company directly (hereinafter referred to as “holding shares directly”) or indirectly through a limited partnership i.e., a platform for employees to hold shares (hereinafter referred to as “holding shares indirectly”). What are the advantages and disadvantages of holding shares directly or indirectly? This article deals with this issue in the areas of business control and tax burden.

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China Laws and Regulations Update in March 2023

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1. Amendments to Legislative Law of the People’s Republic of China

Promulgated by National People’s Congress

Promulgation date: 14 March 2023

Implementation date: 15 March 2023

Document number: NPC’s decision to amend the Legislative Law

According to the decision, the main content of the amendment is 1. improvement of legislative guidelines and principles, 2. administration of the Constitution and its supervision and clarification of Constitution compliance review requirements for the work on legislative and recordation review; 3. improvement of the mechanism for connecting and unifying legislative and reform decisions and the decision making rules for grant of powers; 4. implementation and demonstration of the whole-process people’s democracy philosophy; 5. scientific, democratic and legal legislation requirements; 6. the legal status of supervision laws and improvement of entities responsible for formulating rules of departments under the State Council; 7. improvement of legislative powers of a city divided into districts and clarification of rules and the work mechanism on coordination in local law making between districts; 8. improvement of recordation review rules; and 9. improvement of the work on legal advocacy. (Source: NPC website)

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Why Zheng Yuanjie Finds it Difficult to Seek Protection of Intellectual Property Rights?

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(By You Yunting) Zheng Yuanjie, a famous fairy tale writer announced on his personal social account that he would no longer seek trademark protection or publish any written work. By his own account, he had sought trademark protection for 673 infringed trademarks unsuccessfully. After reading part of the content of his Weibo, I feel he may have some misunderstanding of intellectual property protection principles. Actually, he was given a lot of legal protection, but intellectual property protection is different considering its privity. What he is angry about may be unnecessary.

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China Laws and Regulations Update in February 2023

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1. Instructions on Several Issues Connected with Enforcement Supervision Application Cases

Promulgated by Supreme People’s Court

Promulgation date: 31 January 2023

Document number: FF[2023]4

The Instructions regulates and gives guidance for common issues connected with enforcement supervision application cases. It regulates the filing and processing of these cases and gives guidance and includes requirements for appropriate ways in which parties involved can apply for enforcement supervision to the enforcement court and the court at the next level, eliminates ambiguities in existing enforcement rules by explicitly stating that in cases that should be resolved by arbitration or suing for substantive issues, parties involved and interested persons should follow the procedures of seeking remedies for substantive issues and work to enforce law and protect legal rights of parties involved more efficiently by regulating multiple and repeated enforcement supervision applications. It also sets out the period of application for enforcement supervision, explicitly stating that if the applicant refuses to accept the enforcement reexamination decision or applies to the court for enforcement supervision after expiration of the period for filing an opposition to or a request for reexamining the enforcement, the applicant should do so within the prescribed period of time. (Source: SPC website)

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Are AI Generated Works Copyrightable? I and ChatGPT Give Different Answers

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(By You Yunting) With much attention drawn to ChatGPT, people are interested in discussing whether AI generated works are copyrightable. When I am asked this kind of question, my answer is basically no. However, when I asked ChatGPT, the most well-known AI program, it answered yes. Open AI, ChatGPT developer claimed that it was entitled to benefits from these works. I would like to discuss this issue with you.

Ask Is AI generated content copyrightable?
ChatGPT Answer Yes, it is. In copyright law, original works created by individuals and organizations, including natural people and machines are copyrightable. All kinds of AI generated content that is protectable under copyright law, including words, pictures, audio recordings, videos and other forms of content are protected by copyright law.
Ask Can I get a share of profits from sale of AI (or chatgpt) generated works that are protected by copyright law?
ChatGPT Answer Sale or use of a copyright law protected AI generated work (such as a ChatGPT generated text) for other commercial purpose should be subject to license or authorization granted by the copyright owner, i.e. original author or licensor. Sale or use of the content of ChatGPT developed by a company or an individual with its copyright owned by the developer for other commercial purpose should be subject to license or authorization granted by the company or individual. In this case, ChatGPT developer or owner could get a share of the profits in an proportion agreed by the parties or explicitly set out in the authorization or license agreement.

First, my argument is that no person should be granted copyright in or paid a license fee for AI generated works because they are not copyrightable in nature. Users can claim their rights under the Anti-Unfair Competition Law in case of AI generated work infringement.

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Should Shareholders Be Responsible for Illegal Registered Capital Decrease without Notice to Creditors?

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(By Bai Lituan) Registered capital is important part of a company’s assets and a guarantee on civil liabilities owed to people outside the company. Inappropriate registered capital reduction will directly affect a company’s ability to pay its debts and pose a threat to creditors’ interests. Therefore, the creditor notification process is a legal arrangement for maintaining a balance between legal person’s and personal interests and one of the prerequisites for exempting a shareholder reducing their capital contribution from liabilities to the extent of the registered capital decrease.

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How to Look at “Hideki Yukawa” (Physicist and Nobel Prize Winner) Trademarks on Toilet Covers from Chinese Law Perspective? Comments on Legality of “Hideki Yukawa” Trademarks

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(By Chen Danfeng)

On dang dang, JD and other platforms there are descriptions of the book “The Traveller” published by Shanghai Translation Publishing House and its author professor Hideki Yukawa, famous physicist and the first Japanese winner of the Nobel prize.

Translatation of the information of the Original Cover:

About the Author

Hideki Yukawa (1907-1981)

He is famous Japanese physicist who was born in 1907 and studied physics at the science school of Kyoto Imperial University (now named Kyoto University). He was awarded PHD of Science by Osaka Imperial University (now named Osaka University) in 1938, started to work as professor of Kyoto Imperial University in 1939 and was given the award of the Japan Academy in the following year. He served concurrently as professor of Tokyo Imperial University (now named Tokyo University) and was awarded the Order of Culture in the following year. He went to the US as guest professor of Princeton Institute for Advanced Study in 1948 and became guest professor and professor of Columbia University in July, 1949. He was awarded the Nobel Physics Prize for creation of the meson theory and became the first Japanese winner of the Nobel prize. He died of illness in Kyoto in 1981.

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China Laws and Regulations Update in January 2023

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1. Instructions on Improving Legal Protection of Intellectual Property Rights Relating to Traditional Chinese Medicines

Promulgated by Supreme People’s Court

Promulgation date: 22 December 2022

Document number: FF[2022]34

The Instructions consists of three parts and sixteen articles which are specific provisions relating to the role of judicial authorities in legal protection of intellectual property rights in traditional Chinese medicines and improvement of the ability to administer law to give legal protection of traditional Chinese medicine patents, business marks, trade and state secrets, copyrights and related rights, raw materials of traditional Chinese medicines, various products made from traditional Chinese medicines, etc. and more vigorously maintain the fair competition order on the traditional Chinese medicine market, protect legal interests of traditional Chinese medicine innovators and fight infringement of intellectual property rights in traditional Chinese medicines. The Instructions focuses on main areas and key issues relating to traditional Chinese medicines and is a guide for legal professionals to deal with cases arising from intellectual property rights in traditional Chinese medicines. To improve the protection of traditional Chinese medicine patents, the Instructions suggests following the development law of traditional Chinese medicines, understanding characteristics of traditional Chinese medicine innovation and improving rules on legal protection of patents in traditional Chinese medicine areas. (Source: SPC website)

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Legal Applications of “Clean Hands Rule” to Shareholder Brought Actions

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(By Bai Lituan)

What is “clean hands rule”?

The “clean hands rule” that came from the UK equity law deprives a person acting in an improper way of the right to seek remedies for their acts. A person acting in a way that violates the principles of “justice, conscientiousness, fairness, etc.” in equity law cannot seek remedies in a court under an equity law jurisdiction. The clean hands rule is generally accepted in international business arbitration and reflected by provisions of the Chinese Civil Code. For example, Article 591 provides that if a party violates the contract, the other party should take appropriate action to prevent loss increase or otherwise could not claim for the loss increase. Based on this provision, if a party does nothing to prevent the increase in damages caused by the other party breaching the contract, the non-breaching party will have no right to win the action for the loss increase with its hands not clean. In addition, articles 680 and 1125 of Civil Code implicitly follow the clean hands rule which for example is applied in Chinese cases of buying false products deliberately where the buyer will not be awarded a refund for and damages of three times the price of false products they bought because their hands are not clean and their acts are not protectable by law.

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China Laws and Regulations Update in December 2022

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1. Instructions on Formulating Fundamental Data Policies to Take Good Advantage of Data Elements

Promulgated by the Central Committee of the Communist Party and the State Council

Promulgation date: 19 December 2022

The Instructions includes 20 policies relating to data property, trade, profit distribution and security governance in order to establish underlying data policies and systems in China, fully activate data elements, energize real economic development, vitalize market entities, help develop new growth perspective and promote sound development. The Instructions explicitly mentions exploration of data property structuring system and establishment of confirmation and authorization systems for classification and grading of public, corporate and individual data. It also puts forward establishment and improvement of personal information confirmation and authorization mechanisms in order to cause data processors to legally collect, possess, use and entrust others to manage data containing personal information within the individual’s authorized scope, regulate activities of processing personal information, prevent excessive collection of personal information by “package licensing”, forced approval, etc. and promote fair use of personal information. (Source: Chinese Government website)

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Six Key Points in Amendments to Company Law for Second Deliberation

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(By Huangfu Yuxuan) On 30 December 2022 the Company Law (Amendments for Second Deliberation) (“Amendments”) was published on the website of Chinese National Congress. The Amendments is to further modify and regulate shareholders’ responsibility to contribute capital, the company’s organizational structure, shareholders’ right to know, directors’ responsibilities, corporate governance of listed companies, company cancellation, etc. to address the problems of existing company laws that do not fit or match the market development. It is the third major amendment of the Company Law since its promulgation in 1993. Key points in the Amendments are as follows.

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China Laws and Regulations Update in November 2022

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1. Law on Protection of Women’s Interests

Promulgated by Standing Committee of National People’s Congress

Promulgation date: 30 October 2022

Implementation date: 1 January 2023

Document number: Chinese President Order No.122

The Law on Protection of Women’s Rights and Interests aims to fully implement fundamental state policies, including ones relating to the equality between men and women and continue improving rules on protection of women’s rights and interests. In terms of women’s personal and moral rights for which there is widespread concern in our society, based on bans on women trafficking and abduction, it sets out job duties of the government and departments concerned, villagers’ committee and residents’ committee to ascertain, report, rescue, settle, support and take care of women trafficked or abducted, improves women’s employment and social interests, eliminates and sets out circumstances of job and sex discrimination, includes job and sex discrimination in the scope of employment supervision, sets out employer’s responsibilities for protecting women’s interests and explicitly provides that employment (or appointment) contract or service agreement should include provisions relating to protection of women’s interests. (Source: NPC website)

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Legal Protection of Digital Derivatives of Drama (Part II)

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(By Lv Xuanxuan)

I. Civil right protection

As stated above, digital derivatives are virtual property because of its form and value. In Section 5 Civil Rights of Chapter I General Provisions of Civil Code include general provisions about digital and internet based virtual property, stating that digital and internet based virtual property should be protected according to relevant legal provisions, if any. Pursuant to Articles 240 and 241 of Civil Code, real property or property owner is legally entitled to possess, use, receive profits from, assign or create a right to use or security interest in the property, but the person with a right to use or security interest in the property cannot exercise their rights by harming the property owner’s rights. In Article 323 of Civil Code which sets out five rights relating to use of property, the person with a right to use other person’s real property or property can legally possess, use or receive profits from the property. In addition, Civil Code also includes security, pledge, lien and occupation related rules. Because of the legality of rights in property, ownership and the right to assign internet based virtual property is based on creditor’s right to ask for payment of debts owed to them, not directly coming from the property related provisions of Civil Code.

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Legal Protection of Digital Derivatives of Drama (Part I)

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(By Lv Xuanxuan)

Issues

Digital collectibles (artworks) that emerged over the past year or so are a hot topic in culture and art. As one example, an artist uploads a digital file of painting, audio, video or creative works in other forms onto a third party platform, creates a file copy on the digital book of a block chain as “NFT” and backs it up with encrypted currency. As another example, a performance organizer sells tickets with characters in a play (art images) on a third party platform.[1] Digital collectibles (artworks) come from “NFT” applications. “NFT” technology is used to record ownership of artworks or collectibles and other assets. “NFT” is the abbreviation of “Non-Fungible Tokens” which according to Collins English Dictionary[2] means a digital certificate registered in a block chain and is usually translated into Chinese as “non-homogenous tokens”.

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China Laws and Regulations Update in October 2022

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1. Regulations on Several Issues Connected with People Freed on Bail Pending Trial

Promulgated by Supreme People’s Court, Supreme People’s Procuratorate, Ministry of Public Security and Ministry of National Security

Promulgation date: 21 September 2022

Implementation date: 21 September 2022

Document number: GTZ[2022]25

To better regulate people freed on bail pending trial and prevent failure to or negligence in the regulation, the Regulations mainly puts forward the following measures.

First, the scope of activities of people freed on bail is clarified. To meet the practical regulatory requirements, the Regulations further specifies the “specific places”, “specific people” and “specific activities” in Article 71 of the Criminal Procedural Law so that enforcement authorities can understand and put these provisions into practice and people freed on bail can clearly know the scope of their activities.

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