Does MOC’s Prohibition on Item Sweepstakes Decrease the Profits for Game Companies in China?

(By You Yunting) Recently, the Ministry of Culture has issued the Notice of Ministry of Culture on Regulating Online Game Operation and Strengthening Interim and Ex Post Supervision (Referred to as “Notice”), which will be put into effect as of May, 2017. The Notice contains lots of specific policies, including the restrictive policy on providing virtual props and value-added services of an online game by sweepstakes (Referred to as “Item Sweepstakes”), which are the significant sources of profits for game companies. In this article, we’ll discuss whether this policy would affect the incomes of these game companies or not.

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How to Determine Joint Liabilities of shareholder for IPR Infringement in China?

(By Wang Ting and You Yunting)The limited liability of the shareholders means that the liability of the shareholder to the company are limited to its capital contribution, and the independent personality of corporation means that the Company shall fulfill its external liabilities by all of its properties. Therefore, the shareholders usually do not take personal responsibility in IPR infringement cases even when the long-term business of the company is infringement of the intellectual property rights (“IPR”) in most cases. However, today we will introduce a recent case, in which the shareholders were determined to take such joint liabilities for the IPR infringements.

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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.

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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.

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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.

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Litigation in China–A Long and Rocky Road

(By Dr. Wenbao Qiao) For foreign companies doing business in China, dispute and litigation may sometimes be inevitable. Once a dispute cannot be resolved out of court, there is a long and rocky road to the final success, with several important points to be considered for planning and handling of litigation in China:

Documents and Evidence

The first step of each procedure is to collect and prepare all necessary documents and evidence. According to Chinese law, documents and evidence from another country (such as excerpts from the commercial register or powers of attorney) have to be first notarized in their country of origin and then certified by the Chinese Embassy or Consulate in the respective country. Only notarized and certified documents and evidence will be accepted by Chinese courts. While preparing the documents and evidence, attention should be paid to the timeline required for the notarization and certification. There are several important statutory deadlines shown below. Failure to meet these deadlines can lead to the loss of a case. Notarization and certification in Germany usually takes two to three weeks, which in turn may play a critical role for the time schedule of trial preparation.

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Why Uber China Takes Legal Risks to Mega Millionaire Marketing Promotion?

uber

(By You Yunting) Recently, Uber Shanghai carries out a marketing activity called Call for one hundred million by one button of Uber cooperated with 1qiaobao, an App owned by PINGAN INSURANCE GRP. According to the Uber’s official Weibo, users can use the Uber App to call the securicar provided by both Uber and 1qianbao, and anyone who is the winner of the caller can obtain all the financing earnings of one hundred million yuan, which is about ten thousand yuan. I think this activity has huge legal risks, therefore hereunder are the risks and its reason.

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What Startups Need to Know to Protect Their IPR in China

 (By You Yunting) I was once asked by a journalist what the foundation of intellectual property  courts and the ratification of the Opinions on Quicker Development of the Globally Influential Scientific and Technological Innovation Center matter to small and medium-sized startups, and replied the outcome of those two events were the same, both of which ultimately aimed to enhance the awareness of intellectual property throughout our society and guide small and medium-sized enterprises to establish a competition barrier and a management philosopher on how to avoid infringing others’ intellectual property rights. As governmental authorities define and set official instructions and policies, each startup should take full use of its intellectual property during daily operation, trying to become positioned to succeed, just like a well-known Chinese aphorism says that even the pig can fly when the typhoon comes. Combined with my experiences, this article mainly deals with the issue of how small and medium-sized startups seek intellectual property protection both internally and externally.

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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”)

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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.

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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.

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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.

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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.

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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.

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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.

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