Revision of the Anti-unfair Competition Law Shall Strengthen Striking with Internet Underground Economy in China

(By You Yunting) National People’s Congress, the China’s legislature, has authorized the State Administration of Industry and Commerce (the “SAIC”) to propose the revision draft of the  Anti-unfair Competition Law which has been implemented for more than twenty years in China. Recently, Shanghai Administration for Industry and Commerce held a meeting in making suggestions upon business operators and administrative authorities for the revision. In the meeting, I delivered a speech with the following presentation.

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Liabilities of Contributed Capital Surreptitiously Withdrawn in New China Corporate Law

 (By You Yunting) In the end of 2013, China issued a revised Corporate Law updating the provisions about the contributed capital, as discussed in our previous post the Amendment to the Corporate Law. Today we will discuss the legal liabilities of promoters and shareholders with regards to the required contributed capital being surreptitiously withdrawn.

Assumption of liability

Pursuant to the updated Corporate Law, any shareholder who fails to make full payment of the capital contributions at the establishment of the company shall be jointly and severally liable for refunding the paid-in capital – in accordance with the amount of registered capital. As such, it is when the company is unable to pay its debts that the shareholders shall assume the liability of surreptitiously withdrawing the contributed capital.

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The Exposure Legal Defects of Chinese Crackdown on Online Rumors

(By You Yunting) Recently, Chinese governments have cracked down on the spreading of rumors online, and have arrested some web users for allegedly fabricating or disseminating online rumors. A lot of netizens have voiced their objections that this crackdown suppressed the “proper freedom of speech.” In our opinion, theoretically, online rumors shall better be handled through other means of self-remedy, such as the victims filing civil or criminal lawsuits against the alleged rumormongers. However, government intervention is in some cases a realistic necessity to more effectively crackdown online rumors, because in some cases the victims hurt by online rumors cannot file a lawsuit on their own initiative, often resulting from a failure to discern the rumormonger’s identity.

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Why China Should Revoke the Regulations Which May Put All the Piracy Selling Vendors into Jail?

(By You Yunting) You could find the vendors selling the pirated films, TV dramas, music or software in almost each single street in the cities of China. And according to the current regulation that the amount of the sales totaled 500 discs could be prosecuted for the criminal law violation, any vendors who has been selling the pirated discs for at least one month could constitute the crime of copyright infringement, and to be sent in to jail. Despite what the vendor has done may damage the IPR of the copyright holder, it is fair to combat them under the laws and regulations. But it seems that the existing judicial interpretation has a too wide governing scope, and could have damaged the purpose of the Criminal law. And in the practices, the vendors who have been prosecuted for their piracy selling could be less than 1% of all. Thus it has made the vendors do not care the punishment regulated in the criminal law, and that on the other hand has broken the principle “any violation against the criminal law shall be prosecuted and punished”, and thereafter it may promote the law enforcement upon the selection or the law enforcement in the political campaign or the rule of man. And the at the same time, it could harm the IPR protection.

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The Development of China Court’s Judgment over Criminal Offence of Online Game Cheating Programs, III

Today, our website will introduce the most recent crime adopted by courts in some regions of China to combat online game cheating programs: the crime of damaging computer information systems.

III. The crime of damaging computer information systems

Although there problems with all of the crimes previously discussed for combating cheating programs, with the strengthening of legislation, the online game industry finally found a suitable crime in 2011. According to Article 286 of the Criminal Law:

“Those who violate the law by deleting, modifying, adding, or interfering with the function of computer information systems so that information systems are unable to run normally, which leads to severe consequences, may be sentenced to imprisonment of no more than five years of detention; when the consequences are especially severe, the violator may be sentenced to imprisonment of more than five years. Those who violate the law by deleting, modifying, or adding data or applicable procedures to the storage, processing, or transmission programs in computer information systems, which leads to severe consequences, may be punished as per the preceding paragraph.”

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The Development of China Court’s Judgment over Criminal Offence of Online Game Cheating Programs, II

Today, we will introduce the second crime adopted in China to combat cheating programs in online games: criminal copyright infringement.

II. The state of criminal copyright infringement

After years of combating cheating programs using the crime of illegal operation, the judicial organs in some regions tried to use criminal copyright infringement from Article 217 of the Criminal Law to combat cheating programs. The subjective aspect of criminal copyright infringement requires the unlicensed copying and distribution of the copyrighted work of another for profit.

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The Development of China Court’s Judgment over Criminal Offence of Online Game Cheating Programs, I

(By You Yunting) Since Shanda imported the massively popular online game, MIR, from South Korea in 2001, the online game industry has gradually become one of the most profitable businesses in China, and has made a fortune for tycoons such as Chen Tianqiao and Ding Lei. On the other hand, all kinds of illicit activities have arisen with the development of the online game business, among which cheating programs to assist players is the most troublesome for the game companies.

According to information acquired by the writer while working in a game company, cheating programs are software that run with the game software, thus giving them their name as game cheating programs. Cheating programs have several harms. First, they incur Gresham’s Law (bad money chases out good money), which makes rules-obeying players easily defeated and thereby damages the fairness of the game. Second they put more burden on the server and force the operator to purchase more servers and the bandwidth, which undoubtedly increases costs and decreases the stability of the server. Third, they enable players to fulfill game objective more quickly, which abnormally speeds up the progress of the game and could force the game company invest more human resources into developing new game content or elements. Although it is possible that some cheating programs are used to make up for the defects in the game, most have harmed the gaming experience, added costs of the company’s development and operation, and could jeopardize stable running of the game.

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Analysis on Legal Risk of Out-of-Account Kickback by Foreign Invested Companies in China

By Luo Yanjie

As the mid-autumn festival is drawing on, the producers and sellers of moon cakes in cities throughout China (note: the link is in Chinese) are keen in the promotion of the snack. And by the investigation of some reporters, some merchants even try to get a big order for the moon cake by risking the kickback, and by one case, the reporter pretended to order 200 boxes of moon cakes in the name of a company, the kickback offered to him is 6% of each 10 thousand purchase, that means a total feedback of RMB 2, 400 will be paid to the reporter for the 200 boxes purchase. And in addition to the official kickback, another part of rebate from the salesman is also available.

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Legal Risk of Unlicensed User Data Disclosure by Internet Companies

By Albert Chen

It has been a chronic social problem that personal information could be released with no license, and that has brought widely seen information harassment, also a threat to the security of personal asset. The Economic Investigation Squad of Shanghai Police Department published a case in recent, in which the crime of illegally selling personal information has been investigated, and there involved more than 200 million pieces of information and thousands of corporate information. In an era of information, the Internet companies have a wide command of personal data compared with normal companies. Therefore, through today’s post, we would like to express our opinions on the risk and risk prevention of the information leakage.

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How to Understand “Not Known to the Public” in Trade Secret Cases by China Law?

By Luo Yanjie

Trade secret must be “secret”, a message must be “non-public” for being trade secret. Generally speaking, Information or technique is not generally known for the public and cannot be directly obtained from the open channel. Today we would like to share the topic in China law with readers as follows:

I. The definition of “non-public” in the judicial interpretation

<Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Civil Cases Involving Unfair Competition> defines the “non-public” as follows:

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How to Define Confidential Measures in Trade Secret Cases?

By Luo Yanjie

Article 10 of China <Law Against Unfair Competition> and Article 219 of <Criminal Law> defines “Trade Secret” as “Trade secret means technical information and operational information which is not known to the public, which is capable of bringing economic benefits to the owner of rights, which has practical applicability and which the owner of rights has taken measures to keep secret.” According to the definition, information must have “confidentiality measures” before it becomes trade secret. While in practice, what measures can be identified as legally effective “confidentiality measures ” has no clear standard. Today we would like to share the topic with readers.

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Microsoft ‘s New Anti-piracy Development in China: An Ever-long Criminal Sentence for IPR Infringement

The screen print of POTATO windows’ desk, a pirated windows system in China

By You Yunting

The maximum imprisonment in China Criminal Law concerning the crime of intellectual property is 7 years, but a recent judgment in Beijing against the criminal is 7 years and 6 months.

According to the report of Sina Tech, the Chinese merchant Shang Yajun was penalized the imprisonment of 7 years and 6 months for copyright infringement and the sale of illegally manufactured registered trademarks. The 1st Intermediate People’s Court of Beijing upheld the Haidian District Court’s decision, representing the longest-ever criminal sentence in China for such crimes in China.

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The First Criminal Case on Internet Video Copyright Infringement in China

Highlights: to introduce the first criminal case on the internet infringement, and also the analysis on the relevant laws and regulations in China. 

As one of the biggest video websites in China, the openV.com, which claims being able to provide multi-platform VOD services through mobile phone, computer and television, has been prosecuted for criminal offenses, with the website itself and six staffs are brought to the court. OpenV has been the first video website put subject to criminal liability for unauthorized film and television works on demand services. This unprecedented case shocks the industry currently with widespread infringements, and also shows the determination to combat internet infringement of China government.

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