Problems relating to Trade and Investment on China

17. Implementation of intellectual property rights ("IPRs")
Issue	Issue details	Requests	Reference

(1) IPRs Protection is Inadequate, and Its Enforcement is Insufficient	- Problems abound in implementation and execution of fines and penalties relative to criminal prosecution on IPR infringements, such as high barriers for criminal prosecution, and light fines and penalties. Infringements have become increasingly malicious, while criminal prosecution more difficult to file. Damages from infringements have snowballed not only domestically in PRC but also in the overseas' market.	- It is requested that GOC: -- beefs up administrative power, -- reviews the thresholds for criminal prosecution, -- enhances IPR administrative staff's professional skill, -- imposes severer fines and penalties, etc., and -- beefs up response to injuries experienced in the overseas' market.
	(Action) - "The Regulation of PRC on the Customs Protection of Intellectual Property Rights" was enforced on 1 March 2004. Under the new Regulation, the rightful claimant is no longer required to file the prior notification to the Customs the relevant intellectual property rights, contrary to the old regulation, which required such notification. The claimant can seek protection by filing with the Customs an application accompanied by the evidence of infringement concerning the export and/or import goods suspected of infringement. However, the notification system itself has survived the change. The degree of protection can vary depending upon absence or presence of the notification, since the Customs notifies the claimant if it discovers any cargo suspected of infringement. The validity of notification is extended from 7 to 10 years, which equals the protection period for trademark right, utility model right and copyright in the registered design. Whereas the old regulation required the Customs to suspend the investigation of the seized goods if the shipper or the consignee filed objection, the new Regulation authorises the Customs to continue its investigation despite the objection. The requirements remaining in the new Regulation heavily burden the claimant for posting, within 3 business days, the bond in the amount no higher than the cost of the cargo, upon filing application for seizure, and upon submitting the evidence of infringement. - "Measures of GAC of PRC for the Implementation of the Regulation of PRC on the Customs Protection of Intellectual Property Rights" enforced on 1 July 2004 defines clearly the "bond" that the rightful claimant must post in seizing the goods upon discovery of infringing goods at the Customs. These Measures define the implementing details of "Regulation of the PRC on the Customs Protection of Intellectual Property Rights" (revised) enforced on 1 March 2004. For example, as to the amount of bond stipulated "no higher than the cost of the goods" is defined in the Measures as follows: (1) If the value of the goods is less than RMB20,000, the bond equals to the value of the goods; (2) If the value of the goods is more than RMB20,000 and less than RMB200,000, the bond equals to 50% of the value of the goods but is not less than 20,000 RMB: (3) If the value of the goods is more than RMB200,000, the bond in the amount of RMB100,000 must be posted. In addition, the posting of bond can now be made in cash or by guarantee by bank or non-bank financial institution. The "general bond" system also introduced allows claimants of intellectual property rights to post bond in advance in the fixed amount not less than RMB200,000, obviating the need for posting bond each time goods suspected of infringement is discovered. - From September 2004 through August 2005, a special action for protection of intellectual property rights is being conducted in 15 provinces, autonomous bodies and demesne cities in 3 stages. Intellectual Property Rights Department of each district establishes the action plan, sets up an organization for execution of the plan, and periodically reports the status of progress to the central competent authority that in turn reports the summary of inspection to State Council. Some have posed question as to its effectiveness. However, this action reveals the PRC authority's efforts to tighten control on infringements of intellectual property rights. - Supreme People's Court (SPC) and Supreme People's Procuratorate (SPP) enforced on 22 December 2004 "Interpretation of the SPC and the SPP Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of Infringement upon Intellectual Property Rights" which provides for application of laws to prosecute criminal infringement activities of intellectual property rights. This Interpretation is directed at tightening protection of intellectual property rights by lowering the threshold for prosecution and clarifying the definition of terms. For example, -- "False Representation Charge On The Registered Trademark Of Goods" which is applied on "unauthorised use of the registered trademark on goods of the same class, type or kind" provides for 3 years imprisonment with hard Labour with fine for (1) illegal business of more than RMB50,000 or illegal income of more than RMB30,000 and for (2) illegal business of more than RMB30,000 or illegal income of more than RMB20,000 involving unauthorised use of more than two types of the registered trademarks. In addition, more than 3 years and less than 7 years imprisonment with hard Labour with fine are imposed on (1) illegal business of more than RMB250,000 or illegal income of more than RMB150,000 and on (2) illegal business of more than RMB150,000 or illegal income of more than RMB100,000 involving unauthorised use of more than two types of registered trademarks. -- Illegal business means the value of infringing products manufactured, stored, transported and sold by the infringer during the course of infringing intellectual property rights. -- "False representation charge on patents" for falsely representing patents owned by others is fined by imprisonment with hard Labour of less than 3 years with fines, namely, (I) illegal business of more than RMB200,000 or illegal income of more than RMB100,000 or (ii) illegal business of more than RMB100,000 or illegal income of more than RMB50,000 involving misrepresentation of more than two types of patents owned by others. -- "Copyright Infringement Charge": In the case the amount of infringing income is more than RMB30,000, "the infringing income is relatively large" under Article 217 of Criminal Law applies if (I) the illegal income is more than RMB50,000 or (ii) more than 1,000 unauthorised copies in total of literary work, music, movie, etc. are made, the infringer shall be fined by imprisonment with hard Labour of less than 3 years with fines. If the amount of infringing income is more than RMB150,000, "the infringing income is extremely large" under Article 217 of Criminal Law applies and if (I) the illegal income is more than RMB250,000 or (ii) more than 5,000 unauthorised copies in total of literary work, music, movie, etc. are made, the infringer shall be fined by imprisonment with hard Labour of more than 3 years and less than 7 Years with fines. -- Under "Commercial Secrets Infringement Charge", the infringer shall be fined by imprisonment with hard Labour of less than 3 years with fines if the damage inflicted upon the rightful owner is more than RMB500,000, and by imprisonment with hard Labour of more than 3 years but less than 7 years with fines, if the damage is more than RMB2.5 million. - On 22 December 2004, SPC and SPP enforced "Interpretation of the SPC and the SPP Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of Infringement upon Intellectual Property Rights" that serves as a guideline for application of laws, and on the same day, prosecuted offenders nationwide all at once. This guideline expressly provides that persons copying more than 5,000 copies of books, music, movie, TV and video products shall be imprisoned with hard labour for more than 3 years and less than 7 years with fine, on charge of copyright infringement. This guideline has clarified the basis of criminal penalty. - In October 2005, the U.S., Switzerland and Japan sought PRC that it provides information on its laws and regulations, final judicial and administrative decisions that are generally applied, possibility of acquiring intellectual property rights in PRC, its scope, execution and prevention for abuse of such rights, pursuant to Article 63.3 of TRIPs. - On 23 May 2007 China-the U.S. Strategic Economic Talk was convened and both governments agreed to intensify their execution of laws on intellectual property rights. - On 25 August 2008, draft amendment for Article 3 of Patent Law of PRC (as Amended 2008) was put on the agenda before the first session of the Standing Committee of the Ninth National People's Congress. - On 29 August 2008, GOC invited public comments on the third draft amendment of the Patent Law of PRC. - On 13 May 2012, Japan, China, South Korea Investment Treaty was signed. The Treaty in Article 9 provides for the Parties' obligation to protect intellectual property rights, and to establish and to maintain the intellectual property right system while ensuring its transparency. - On 17 May 2014 Agreement Among GOJ, GOK and GOC for the Promotion, Facilitation and Protection of Investment came into effect. Article 9 provides new provisions, namely, each contracting party shall, in accordance with its laws and regulations, protect intellectual property rights and establish and maintain transparent IPRs Regimes, etc. (The new provisions are not included in Japan/PRC and Japan/ROK Investment Treaties.)
	(Improvement) - Judgments in favor of FFEs have been handed down on alleged infringements by counterfeit motorcycles, trademark rights, and pirated CDs. Centering around urban areas, fair judgments can now be expected, being prompted by the PRC's accession to WTO. - With the view to eliminate duplication of work and unclear definition of job responsibility, to tighten Intellectual Property Right protection, to beef-up supervisory and managerial responsibility, and to provide one-stop-service, etc. the Shenzhen Municipal Authority established Administration of Market Supervision, by amalgamating IPR Bureau that protects intellectual property right, Administration of Industry and Commerce, and Quality and Technical Supervision Bureau that cracks down on product quality violation.

(2) Difficulty in filing Divisional Patent Applications

- Unless parent application is pending, even if its divisional application is pending, it is disallowed to file further divisional application (sub-sub application).

- It is requested that the Patent Office of the State Intellectual Property Office permits filing of sub-sub application.

- Patent Examination Guidelines, Part 1, Chapter 1, 5.1.1

(3) Restricted Amendment in the Wording of the Patent Claim

- Upon correction of patent claims, GOC accepts only the wordings used in the specification of the patent claim. In addition, Patent Office refused to accept our member firm's correction that added a claim at the time of response to the Office Action.
- Unless correction of the claim is permissible under the Patent Prosecution Highway (PPH) Programme, it will defeat the objectives of the PPH Programme itself. For example, in a case where, based on the corrected claim, the First Office (in Japan or elsewhere) determines the invention is patentable, and then the applicant files its patent application under PPH Programme in PRC (Succeeding Office) based on the First Office examination, unless filing under PPH Programme is accepted with the corrected claim in PRC, examination will the based on the initial claim before the correction. If so, early patent registration cannot be hoped for.

- It is requested that GOC:
-- determines whether to accept the claim correction based on the details disclosed on the particulars of invention and the drawings, the same as other countries, and
-- approves additional clam at the time of response to the Office Action.
- It is requested that GOC affords opportunity for correction of patent claim upon filing application for PPH Programme.

- Patent Law Article 33, Examination Guidance Part II, Chapter 8, 5.2 Correction, 5.2.1 Request for Correction
- Detailed Rules for the Implementation of the Patent Law, Article 51(3)
- Detailed Rules for the Implementation of the Patent Law, Article 51

(4) Nebulous Legislative Definition of the Country of Origin Principle Obligations

- There are cases where effective acquisition of IPRs is difficult to secure in emerging countries, where the needs are rising in many of them for the local development of IPRs, the legislation provides the country of origin obligations. However, due to ambiguity of such legislation, effective acquisition of IPRs is difficult to secure in certain cases.
In addition, nowadays when R&D activity takes place across the border in plural countries, there are emerging risks for conflict in regard to the country of origin obligations of individual countries.

- It is requested that GOC:
-- deregulates or repeals the country of origin obligations, or
-- clearly defines the legislative provisions.
- It is requested that GOC:
-- pushes ahead by deregulation or repeal, the country of origin requirements.
-- advances deregulation of the country of origin requirements, etc. by multi-national arrangements, etc. on cross-border research & development.

(5) Omitted Submission of Priority Documents relative to the Country of Origin

- The procedures of submitting priority documents relative to the country of origin already introduced by and among Japan patent office, U.S. patent and trademark office, European patent office, Korean intellectual property office are conditionally omitted. The procedures of submitting priority documents relative to the country of origin already introduced by among state intellectual property office of the PRC., U.S. patent and trademark office, European patent office, and Korean intellectual property office are conditionally omitted. However, between Japan patent office and state intellectual property office of the PRC, this kind of arrangement has not yet been introduced.

- It is requested that between Japan patent office and state intellectual property office of the PRC, they will introduce the scheme that conditionally omits the Procedures of the priority documents submission, relative to the country of origin.

(6) Excessive Clerical Workload for Notification and Registration of Patent License

- Member firm's subsidiary (MFS) must submit the same Licence Agreement to various administrative departments and agencies.
For example, filing of notification is cumbersome to Competent Authority of Foreign Trade Administration (for External Remittance), Patent Office of the State Intellectual Property Office, Office of the State Administration for Industry and Trademark (for acquisition of requirement to duly assert against third parties), furthermore, to Regional Bureau of Industry and Commerce (for Oversight).
In addition, there is no uniformity between the State and Local legislation, while the administrative scheme is complex. It is extremely difficult for an applicant of notification to follow the correct administrative procedures.

- It is requested that GOC:
-- streamlines administrative departments,
-- achieves compaction in administrative provisions, and
-- harmonises state and local administrative legislation.

- Regulations on Administration of Import and Export of Technologies
- Measures for the Administration of Registration for Patent Licence Agreement
- Measures for the Administration of Registration for Technical Licence Agreement

(7) Compulsory Warranty on Performance and Patent for Transferred Technology under Licensing Agreement

- The party exporting technology to PRC owes by law warranty liability to the importing party, while there is no express provision in the PRC law concerning the joint ownership of technology that takes place in PRC. A member firm is concerned with the growing disparity that might have arisen between the foreign and domestic nationals.

- It is requested that GOC causes the governing law to be amended to wipe out the disparity that might exist between the foreign and the domestic nationals.

- RAIET, Articles 24(2), (3) and 25
- RAIET, Articles 2, 24 & 25
- Regulations on Administration of Import and Export of Technologies

(8) Complex and Irrational Procedures for Patent Litigation	- FFEs are unable to activate the court system in PRC for instituting litigation, which requires complex procedures, being further aggravated by the time consuming public notary and validation requirements. Furthermore, due to the principle of protecting local industries and jurisdictional issues, judgements with extremely severe damages are sometimes handed down upon FFEs.	- It is requested that courts in PRC ensure that legal proceedings are carried out in all fairness and with high transparency for both PRC domestic enterprises and FFEs.	- Civil Procedure Law
	(Action) - On 31 August 2014, the 10th Standing Committee of the 12th National People's Congress decided on establishment of the Administration of Special IPRs Courts in Beijing, Shanghai, and Guangzhou Municipalities.
	(Improvement) - In October 2013, Shanghai City Pudong Xinqu People's Court was established in the China (Shanghai) Pilot Free Trade Zone (CS_PFTZ) to arbitrate civil/commercial disputes including IPRs cases within CS_PFTZ. - In November 2013, Shanghai City Pudong Xinqu People's Court (SCPX_PC) was established in CSPFTZ. It will examine all civil/commercial issues, including IPRs relative to CSP_FTZ. SCPX_PC will adjudicate, decide/render award, serving as the First Trial Court (the Court of First Instance).

(9) Invalidity Claim Made Difficult on Utility Model

- Utility Model Right is mushrooming in PRC for its facility in issuance because of its less rigorous requirement on novelty from the existing technology. Judgement on inventiveness is readily established due to the scarcity of literature, while voiding it is difficult in practice. The potential risk grows.

- It is requested that GOC harmonises employment of its judgement base on inventiveness on PRC utility model right in line with other countries (Japan, Germany.).

- Examination and Employment

(10) Inadequate Handling of Assessment Report on Utility Model

- In PRC it is possible to institute a civil proceeding without assessment report (AR) of the utility model right. AR can be obtained only by patent holder and interested parties (successor, exclusively licenced party, normally licenced party authorised by patent holder), not obtainable by any third parties (including defendant).

- It is requested that GOC:
-- compels the AR requirement in instituting a civil proceeding, and
-- authorises third parties (at least including defendant) request for AR.

- Patent Law Article 61(2)
- Detailed Rules for the Implementation of the Patent Law Article 56, and 57 of the same
- Examination Guidance Part V, Chapter 10, Section 2.2 Qualification of Demandant

(11) Disparity between Plaintiff and Defendant on Execution of Utility Model and Design Right

- In PRC, utility model and design right application may be registered without substantive examination, however, with lesser degree of certainty in the respective rights. However, the rightful claimant can readily exercise the respective uncertain rights, barely owing the onus of damage. The defendant on the other hand is denied with the right to request even "report of utility model technical opinion" to PRC Patent Office.

- It is requested that PRC Patent Office:
-- prohibits rightful claimant's assertion of right without report of utility model technical opinion in hand,
-- ensures rightful claimant bears the onus of damage in exercise of its right without report of utility model technical opinion, and
-- upon request by any person, grants access to report of utility model technical opinion.

- Patent Law
- Measures, Regulations, etc. relative to Patent Law

(12) Insufficient Penalty upon Infringement of IPRs	- As affairs stand, due to the lenient penalties imposed by the administrative agency, infringing activities on copyright is repeated. 1) The amount of damages and penalties are extremely low. While there is some sign of increase in the amount of penalties imposed depending upon the administrative agency in charge and upon cases, it is not infrequent that in many cases the court has handed down only minimal penalties. Frequently, damages comprise of confiscated infringing products. However, the damages are hardly sufficient, depending upon the efficiency of the attorney (research company). Also fines are extremely low for infringement of accompanying items, such as tags, operating manuals, outer box, etc. 2) Lack of consistency is obvious, regarding administration of fines imposed on trademark infringements: The amount of fines varies from case to case and administrations in various jurisdictions. 3) Where penalties are not paid up, no further execution is sought, with the result that infringers go Scot-free. Local authority sends out demand letter to infringers to show up for payment of penalty in the face of summon and if this does not work, confiscates the business licence of the infringers. However, infringers manage to resume their business by changing their business location, corporate names, and names of legal authorised representatives. - As affairs stand, the too lenient penalty imposed by the administrative agency fails to serve as deterrent so that many parties repeat the copyright infringing activities. There are repeated infringements by the same infringer.	- 1) It is requested that GOC: a. imposes severe penalties to stop recurrence of infringing conducts, and applies criminal penalties on infringers with past infringing record, even in the case where the amount of infringing business is less than 50,000 RMB, b. confiscates the business licence for the second time infringers, transfers the second time infringers automatically to PSB cases, c. determines the amount of fines commensurate with the market sales price of the original product, as to the tags, owner's manual, outer box and other accessories, and d. after administrative charge, the clampdown agency pushes forward the case for voluntary transfer to criminal prosecution. 2) It is requested that GOC eliminates variances in the amount of fines among the local administrations in each region, and clearly establishes the calculation basis of the amount of fines. 3) It is requested that the authority switches to a criminal case against those who fail to show up by heavier fines, etc. - It is requested that administrative agency: -- makes penalty more stringent, and -- structures the nation-wide data base, that enables sharing of the records for individual infringing conducts, penalties, etc.	- Trademark Law Article 63 - Regulation on the Implementation of the Trademark Law (2014 Revision) Article 60 - Anti-unfair Competition Law, Article 5
	(Action) - On 22 December 2004, the Supreme People's Court and the Supreme People's Procuratorate enforced "Interpretation of Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of Infringement upon Intellectual Property Rights" that deregulates the thresholds for applying the penalty on infringements of intellectual property rights. - In April 2007, "Interpretation II of the Supreme People's Court and the Supreme People's Procuratorate of the Issues concerning the Specific Application of Law in Handling Criminal Cases of Infringement of Intellectual Property Rights", reduced substantively to one-third of the previous level of the prosecution thresholds as to legal person, concerning Intellectual property rights inclusive of unlawful use of trademarks, and illegal copying of copyrighted products through removal of differences between Legal person and natural person. - The prosecution threshold point under Article 217 of Criminal Law of PRC for copying infringement has been reduced from 1000 to 500 as regards "penalty for copyright infringement". - In April 2007, the United States requested consultations under WTO Agreement with GOC, pursuant, among others, to Article 41 (that stipulates effective action against any act of infringement and remedies which constitute a deterrent to further infringements), and Article 61 (that provides for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright piracy on a commercial scale of the TRIPS Agreement with respect to certain measures pertaining to the protection and enforcement of intellectual property rights in China). In September 2007, DSB established a Panel. Japan has been participating in the Panel as third party. - On 26 January 2009, WTO Panel has handed down its Final Report, which is a dual decisions both pros and cons in DS362, in which the United States requested consultations with China concerning certain measures pertaining to the protection and enforcement of intellectual property rights in China. The U.S. alleged that certain copyright law, customs law and criminal law of PRC do not satisfy PRC's obligation under the WTO trade-related aspects of intellectual property rights (TRIPS). WTO Panel supported the U.S. allegation that the Copyright Law is inconsistent with TRIPS in that it does not recognise copyright depending upon the contents, and that it authorises entry into the market of the infringing product by removing the infringing trademark. However, the Panel set aside the other U.S. allegations, including the PRC's basis of prosecuting against counterfeiting conducts and piloting conducts.
	(Improvement) - On 27 December 2008, the Executive Meeting of the State Councilors released amended Patent Law of PRC (APL) for enforcement from 1 October 2009. APL raises the penalty on patent infringement from "3-times" to "4-times" of the unlawful income, and in the absence of unlawful income, from RMB50,000 to RMB.200,000.

(13) Insufficient border injunction on counterfeit goods	- While the number of suspended export of counterfeit goods continues to increase, the Custom's enforcement is not enough, since a great number of counterfeit goods made in PRC are discovered in the overseas' market. - There have been cases where the result of disposal of the seized counterfeit goods is not notified to the IPR owner. - 1) Disclosure of information is insufficient to the rightful claimant as to the disposal of infringing goods. 2) The sales volume has dropped down for counterfeit watches sold in the watch market at the West Gate of Guangzhou Station. However, there has been no substantial change in the absolute sales volume. Presumably, they have shifted the sales method from person-to-person selling at the shop counter to catalogue/internet sales. Numerous counterfeits are on placed on the web sales (at the common internet market place, or at independent individual sites). 3) On actual crackdown, as matters now stand, excepting public security, administrative agencies such as AIC/TSB, etc. are precluded from joining the raid, since counterfeiters locate their stockroom/assembly factory in the residential area. 4) Counterfeiters once charged with infringement are found repeating their infringing businesses. However, it is not clear how the regulatory agencies keep track of the "repeat offenders".	- It is requested that GOC tightens its border injunction on the counterfeit goods, by raising the inspection rates, etc. - It is requested that GOC develops a mechanism to notify all IPR owners, in concern, the result of disposal of the customs seizures. - 1) It is requested that the authority send to the rightful claimant the following documents at all times: a. Details of infringement (list of the seized goods), b. Written decision/certificate of penalty upon Infringing party(ies), c. Confirmation on disposal of infringing products (disposal certificate). 2) It is requested that GOC: -- clamps down on sales of counterfeit products via the internet and by catalogue, and -- tightens its clampdown on the internet service providers for the common market place, causing them to delete the web pages that list counterfeit products. 3) It is requested that GOC allows AIC/TSB's agencies to crack down also in the residential zones. 4) It is requested that GOC establishes the ID Card based system that allows all investigating agencies to access the past record of infringers (if such system is unavailable) to keep repeat offenders under severe surveillance.	- Regulation on the Customs Protection of Intellectual Property Rights (IPRs Regulation) & Measures for Implementation of the IPRs Regulation (IPRs Measures) - TRIPS Agreement - Patent Law - Trademark Law, etc.
	(Action) - On 10 March 2010, GOC decided to extend by another 6-month, "The Special Project Activities to crack down on Manufacture/Sales of IPR Infringing Products, Counterfeit Goods, and Low Quality Products", which began from October 2010 until March 2011.

(14) Counterfeit goods are ubiquitous, dispersing internationally	- Counterfeit pharmaceutical drugs and medicines (Counterfeits) manufactured in PRC, etc. are distributed not only in their own countries but are exported widely to other countries. Counterfeits not only constitute infringement of IPRs (patent and trademark rights), but in many cases, they can be a cause for material health problems to patients. It is imperative, therefore, to keep the Counterfeits beyond the reach of the patients by clamping down. - Counterfeit products of a Member Firm are distributed on internet and unofficial distribution channels. Counterfeits bearing the Trade mark of a Member Firm are distributed in the market as counterfeit products. - Counterfeits of Member Firm's products manufactured in massive volume have been distributed both in the domestic and export markets, materially hurting the sales of the Member Firm's products. - Rampant counterfeits have grown into a factor suppressing sales, and shortage of crack down has grown it into a rat race. - Increasing volume of counterfeits manufactured in PRC are distributed internationally over the internet platform. - Especially in the alloy steel (ferrosilicon, etc.) industry, due to the rampant smuggled products (exported from PRC), goods destined for export to Japan are, from time to time, unable to meet the price competition.	- It is requested that GOC makes redoubled efforts in clamping down on manufacture and sales, distribution and export of Counterfeits. - It is requested that administration authority: -- tightens clamp down on counterfeit products, and -- beefs up control and crack down upon internet service platform providers, for the sake of protecting the rights and the benefits of the trademark holders and the consumers. - Fines upon counterfeit factories exposed are too lenient. It is requested that GOC takes step to impose much heavier fines upon them to strengthen its deterrent force. - It is requested that GOC takes step to raise the fines by a large margin. - It is requested that GOC administers adequately, measures for the administration of internet transactions, enforced since 15 March 2014. - It is requested that GOC/GOJ tighten the clampdown on smuggled goods.	- Trademark Law (10-27-2001), Article 52(1) & (5) - Patent Law - Trademark Law, etc. - Customs Law - Measures for the Administration of Internet Transactions
	(Action) - The need for tightening control in PRC against infringing products by counterfeits and pirate editions has been pointed out at the forums of the TRIPS Council/China Transitional Review Mechanism (TRM) by Japan, the U.S. and EU, and the request for improvement has been made by GOJ to GOC at bilateral negotiation tables, such as Japan-China Economic Partnership Consultation. - On 23 May 2007, at the U.S.-China Strategic Economic Dialogue, it was mutually agreed to exchange information on clampdown of counterfeits and pirate editions between the U.S. and PRC. - On 25 April 2008, the U.S. released" 2008 Special 301 Report" that continues to designate PRC in the categories of "Priority Watch List" as counterfeit manufacturing country. - On 19 and 20 November 2009, the First Meeting on Japan-PRC IPR Conference was convened. Japan side requested the PRC side to eliminate web sales of counterfeits, to prevent re-entry into the market of the confiscated goods, and to execute rigorous monitoring and disposition of counterfeit goods. - The OECD 2009 study concluded that international trade in counterfeit and pirated goods could have accounted for USD 250 billion (about 25 trillion yen), excluding the damage caused by the domestically distributed products, or from the internet distribution. (The Economic Impact of Counterfeiting and Piracy (2nd Period)). - In 2014, the damages caused to Japanese enterprises by counterfeits originating from PRC climbed to 53.1% in North America, 52.8% in Western Europe, 55.0% in Russian Federation, 55.4% in Middle East, 49.8% in Mid-South America, more or less 50% in all. ("FY 2014 survey report on injury from counterfeiting" by the Japan patent office). - In 2014, the number of cases for import suspension at Japanese customs by IPR infringing products climbed to 32,060 cases, of which 92.2% is represented by Imports from PRC (excluding Hong Kong). Export bases are mainly international harbours in Hong Kong/Guang Dong, Shanghai, etc. However, recently, overland transport of infringing products via Russia, and Middle Asia has been rising, in order to avoid the border enforcement. ("FY 2014 Survey Report on Injury from Counterfeiting" by the Japan patent office).

(15) The system concerning acquisition of design right is inadequate and insufficient	- Problems concerning design right acquisition in PRC: 1) Introduction of Substantive Examination in Design Right Application: In the examination process for design right application, no substantive examination is made. Instead, GOC performs its examination in form only. In so far as the documents are complete in form, design applications void of novelty are accepted and registered. "Revision of Patent Law has made it possible to lump together to a single application up to 10 similar applications, provided, however, that due to the absence of substantive examination, instability in patent right remains. It forecloses the utility of this system." 2) The Term of Design Right: The term of design right in PRC is 10-years from the filing date, while in Japan it has been changed from 15-years to 20-years by amendment of the Design Law. Compared to 25-years of EU, 14-years of the U.S., and 15-years of ROK, the validity of the design right in PRC is the shortest of all. The 10-year period is insufficient for protection of regular products. 3) Introduction of Partial Design System: There is no effective means for protection against partial copying of the creative portion of the design for the whole product, as the design right is granted to a whole product. 4) Introduction of Special Exemption provision on Loss of Novelty: While Patent Law contains special exemption, as it stands, the scope of its application is limited to the case, where the disclosure is made at government-sponsored or accredited trade show. In practice the possibility for application is extremely restricted.	- It is requested that GOC ensures: 1) Stability of the design right by shifting the system as soon as possible to the substantive examination, and enhancement of the stability of patent right on similar design, 2) Synchronisation of the law in line with the international standards by introducing substantive examination and a longer period of the design right protection. 3) Introduction of a system that allows protection of a part of the design right in line with the international trend, 4) Expansion of the scope of application to include the case, where the disclosure is made at individual exhibition, sales activity, etc. other than a government-sponsored or accredited trade show, where "the design has become the public domain, arising from the applicant's action".	- Patent Law - Patent Law Article 23 - Patent Law Article 24 - Patent Law Article 42
	(Action) - Shanghai Industry and Commerce Administration Bureau has tightened its control on infringing activities of copyright through renewal of related legislation in a joint effort with People's Court, Municipal Procuratorate, Public Security Bureau, and Judicial Bureau, while issuing "Notice to focus control on counterfeiting of trademarks" that strictly controls the fake trademark activities. - Patent Law promulgated in December 2008 the requirements for the design right has been made more stringent compared to the original law by adding non-ease of creation.

(16) Legal protection is wanting in the Patent Law for counterfeits in form

- Anti-Unfair Competition Law (AUCL) is the only available legal means with which to combat counterfeits in form, provided, however, that, the AUCL, which continues to require if the product is well-known, is not an effective means to stop the counterfeiting activities.
On the other hand, promulgation of Legal Interpretation [2007] No. 2 "Interpretation of the Supreme People's Court and the Supreme People's Procuratorate Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of Infringement upon Intellectual Property Rights (2)" is a welcome positive step forward. It has clarified the basic interpretation of the Law.

- It is requested that GOC adds more applicable conditions to AUCL, specifically, the terms similar to Article 2. 1(3) (Dead copy provisions) of Japanese AUCL.

- Anti-Unfair Competition Law, Article 5(2)

(17) Nebulous Basis of Infringement Determination

- Wide gaps exist on the judgement among customs and other administrative agencies over the judgement, if the trademark infringement exists, concerning the OEM products ordered by overseas purchasers, manufactured in PRC, and exported abroad.

- It is requested that GOC:
-- reinforces its administrative competency, reviews the basis of criminal prosecution, enhances the professional skill of IPRs staff, tightens the penalty, etc.
-- enhances its ability to meet the injury in the overseas market, and
-- promulgates interpretative notes and guidelines based on the laws now in force.

(18) Irrational Application Procedures for Seizure Guarantee by IPRs Holders	- Security Deposit: 1) The existing security deposit rule applies where the patentee does not elect the TSD. The method to establish the amount of the security deposit remains nebulous. It seems it is left to the discretion of each Customs, rather than the amount described on the invoice. 2) TSD is valid for one-year maximum (from the date the application is accepted to 31 December of the same year). The applicant, choosing to obtain the full one-year coverage of TSD must file application and deposit the amount of TSD 2-3 months before 1st January. The amount of deposit will be refunded within 180 days from 30 June of the following year so that the patentee must, deposit TSD for two-years from the 2nd year and thereafter, in order to benefit from the continued coverage.	- It is requested that GOC: -- promulgates expressly in writing the amount of the security deposit -- allows carryover of TSD once deposited to the following year, where the applicant chooses to continue with TSD and -- structures the system that obviates the needs for TSD to begin with (as it is done in Japan and EU/USA).	- IPRs Regulation, Article 14 - IPRs Measures, Article 22 - Announcement of GAC (No. 31 [2006]) on GAC's Receipt of General Guaranties of the IPR Holders
	(Action) - On 3 March 2009, "Measures of GAC of PRC for the Implementation of the Regulation of PRC on the Customs Protection of Intellectual Property Rights" was promulgated and the provision under Article 24 authorises a guarantee issued by financial institutions in lieu of posting of the security bond deposit.

(19) Disposal of the Products after Seizure is both Nebulous and Delayed	- Customs is to notify the patent holders about information on the 5-items including the consignee and the sender of the goods under Article 28 of DRCP. However, this notification requirement is not necessarily observed. - Disclosure of information is insufficient as regards disposal of infringing goods. - Patent holders are responsible to pay warehousing, disposal fees, etc. of the seized goods incurred during the seizure period. - It takes too long for deciding the disposal of the seized goods, delaying the invoicing for the cost incurred on them, causing complications in bookkeeping. (There was a case in which it took 2-years from the date of Seizure to the date of invoicing.) - PRC customs currently discloses only the destination of the seized goods. - Substantial disparity exists on the storage cost of seized goods between the regional Customs. Detailed account of storage fee is neither nebulous nor supplied at all. In many cases, fees are calculated on the basis of the maximum legal period. - While Customs Rules are expressly spelt out in writing, the rule for disposal of AIC/TSB/PSB is not clearly defined.	- It is requested that GOC ensures a thorough implementation of all issues set forth in the left column. - It is requested that GOC discloses the details of disposal for the infringing goods. - It is requested that GAC holds infringing parties liable to assume cost of warehousing and disposal fees incurred during the seizure period. - It is requested that the customs expedites dispatch of invoice. - It is requested that customs discloses the name of consignee not just the destination country. - It is requested that GOC makes it a mandatory requirement for each local customs to provide the particulars for storage on seized goods. - It is requested that the Administrative Agency clearly establishes the disposal rules for the confiscated goods.	- IPRs Measures, Article No. 35 - IPRs Regulation, Article No.20-27 - IPRs Measures, Article No. 28 - IPRs Measures, Article No. 31 - IPRs Regulation, Article No. 25
	(Action) - On 3 March 2009, Measures of GAC of PRC for the Implementation of the Regulation of PRC on the Customs Protection of Intellectual Property Rights (Amended) was promulgated. Amended Measures due for enforcement from 1 July 2009 sets forth in Article (3): "Upon Customs seizure of infringing products, IPR owner, shipper and consignee of the cargo can hold consultations".

(20) Requested Extension of the Seizure Application Period

- Applications for seizure within 3-business days:
The patentee must file application for seizure of the infringing goods and pay security bond deposit within 3-business days of the receipt of notice from the Customs about the discovery of goods suspected of infringement. However, if the patentee resides in a distant, remote area from the Customs, it is extremely difficult for the patentee to complete the requisite procedure within 3-business days.

- It is requested that GOC grants extension of the application deadline as necessary.
- Certain Customs provide digital pictures of goods suspected of infringement. It is much appreciated if all Customs including regional Customs will follow suit, by providing dual enlarged pictures per product of the front area where letters are visible plus the rear lid area as well.

- IPRs Measures Article No. 21
- IPRs Regulation, Article No. 16

(21) Fraudulent Use or Registration of Trade Names such as Famous Trademarks

- Internationally famous trademarks are used as trademarks, etc. of third parties without authorisation, while numerous company names identical or similar to such famous trademarks are registered in PRC. A case has arisen in violation of the Anti-Unfair Competition Law, whereby products bearing these famous trademarks are manufactured and/or sold without authorisation in mainland China.

- It is requested that PRC Patent Office tightens its examination of Registration Application based on Unauthorized Use of Famous Trademarks, etc.

(22) Nebulous and Delayed Trademark Registration Procedures

- While trademark protection on prior use has been explicitly written into law, its interpretation differs from case to case.
Furthermore, it takes a long time for registration from the filing date of application.

- It is requested that GOC promptly updates the website for searching the trademarks.

- Amended Trademark Law (2013), Article 59(3)

(23) Issues concerning Proposed Amendment of Copyright Law

- On 6 June 2014, Legislative Affairs Office of State Council (LAOSC) solicited Public Opinions on PRC Copyright Law (Draft Revision) and its revision work continues even now. Should the draft revision be promulgated as is, the following issues are matters of concern:
- Article 13.1.3: "Right to maintain Integrity" Exemption Clause is not included.
- Articles 3, 31 and 32: Amply protect author's copyright, obviating the need for the grant of neighbouring right to publisher. Multiple right holders to a single book might likely damage the secondary use of the book.
- Article 15: Juridical person, administering or investing, creating things on behalf of corporation and bearing responsibility, will satisfy the conditions to be regarded as author. Assuming arguendo "Announcement" here mentioned is interpreted as meaning only the matters "announced", exclusive of the matters, such as "those that are assumed to be made in the name of Juridical person in the announcement", then, despite the satisfaction of the requirements, such as investment made, the creative will, assumption of responsibility, etc., all unannounced materials would be incapable of recognition, resulting illogically in denial of copyright to the Juridical person. It is irrational.
- Article 17: The requirements for litigating on work of joint authorship are irrational, as regards: "either of the joint authors may litigate in his/her own name". If it is provided that the litigation may be instituted in the name of either author on the issue that is agreed for joint execution, then it is no problem. However, if the litigation is initiated singly without completing the process of mutual consultation as an exception to the joint institution in principle, such provision is improper.
- Article 20: Treatment of work-for-hire is ambiguous..
- Article 20, and Article 36: Clause that requires proper fosterage in regard to Work-for-Hire, and Live-Performance-for-Hire.
- Article 43.1.1: The scope private free copying without approval and without remuneration should not be narrowed down.
- Article 43.1.2: The scope of the "Permissible Quotation" is inadequate.
- Article 65: Where more than 2-organizations of group copyright administration collect royalty for usage from the same users, it is inadequate that the group administration must establish "the uniform utility collection base".
- Article 68, Article 69, Article 71: Extensive definition and restrictive exemption clause.
- Article 73: The responsibility of Network Service Providers (NSPs).
- Article 76: In regard to the amount of damage, statutory damage compensation system is introduced: "It allows section of either by reasonable multiplication index or the amount not exceeding RMB 1 million".
In addition, punitive damage compensation system is introduced: "where intentional infringements of copyrights or neighbouring rights arise twice or more, the damage may be determined in the amount double or treble of the damage calculated in the preceding paragraph."
- Article 78: Copyright Administrative Authorities (CAA) measures for law enforcement: The draft revision is inadequate to the extent it endows CAA with excessively stringent power for law enforcement, concerning manufacture, import, supply of "Tools for Circumventing Technical Protective Means (TCTPM)", and provision of "TCTPM circumventing service".

- It is requested that LAOSC expressly provides: "Right to maintain Integrity Exemptions" does not apply "in the case where in light of nature, purpose and mode of use, it is recognised that the changes made are inevitable."
- It is requested that SIPO refrains from granting neighbouring right to publishers.
- The authorship requirements are inadequate.
- It is requested that State Intellectual Property Office of PRC (SIPO) takes step to clarify the relations between the provision, "As regards Indivisible work of joint authorship, each joint author jointly owns copyright to the work of joint authorship, and jointly exercises it by consultation" and the draft act.
- The relationship is ambiguous between Article 15 (Juridical Person's Work-for-Hire), and Article 20 (Employee's Authorship of Work).
In principle, business unit should enjoy the benefit of work created by its employee in discharging his/her work assignment, inclusive of the case, where explicit agreement is absent between the parties, unless otherwise stipulated in the agreement. Departure from this principle fails to come to grip with the thought behind Article 15 (Juridical Person's Work for Hire).
- In addition, in regard to the copyrighted articles that business unit enjoys, it should not grant the right to display the name to its employee.
- Furthermore, it should be expressly provided that business unit is entitled to display for free of charge the name not only by itself but to the right to licensing the name to Third Party(ies) for free. Article 20 (3) "The Employee is entitled for free of charge the work of authorship created by the editing method" should be deleted, as it is likely to void the proviso 2. on "Vesting in the Business Unit".
- While the meaning of "incentive" is unclear, in regard to creation and performance of copyrighted materials in business, payment for the consideration is completed by salary. Thus, grant of further incentive is internationally unprecedented, hence unnecessary.
- In light of balancing between protection and usage, and reflection of the actual usage status in various countries abroad, GOC should reflect the reality of the permissible usage of work in various foreign countries. Free copying should be permitted for the entire work, not in part only, by adding "Objective Appreciation" the same as the existing law on top of: (1) "Private study and research", and (2) Copying of the entire literary work, instead of "partial" copying.
- It is considered difficult to produce "introductory note", "reviewal" or "explanation" on "literary work", when quotation is permissible only to the extent, exclusive of "the main" or "the substantive portion". On the premise that quotation is permissible on published literary work, in approaching the issue, further deliberation should be given, in principle, to the scope, purpose, inevitability, master servant relationship, etc. between the quoted portion and the rest of the work of "the Permissible Quotation"
- Establishment of the utility collection base for royalty is better left for free competition among organisation for group copyright administration.
- Defining the technology relative to "access for inspection", "appreciation", "operation" as "protected technical protection means" is considered too broad, even in light of Article 65, "for the purpose of protecting copyright and neighbouring right."
The provision prohibiting circumvention should remain within the boundary of prohibiting positive conducts for circumvention, modification, etc.
The defined cases for permissible circumvention of "technological protection measures" are extremely narrow. It makes it impossible to secure protection under the legitimate circumvention provision.
- The Proposed draft makes the Network Service Provider (NSP) in concern jointly responsible with the user for the portion of the expanded damage, by the NSP's failure to take the requisite measures promptly. This provision is in order, as it comes to grips with the internationally accepted understanding on the question of the NSP's responsibility over its failure to take prompt measures. It is also the same with the provision, in which an NSP fails to take the requisite measures on a network user's copyright infringing conduct, using its network service, while NSP knows or ought to have known the network user's copyright infringing conduct, in which event, NSP owes a joint and several liability. Should this proposed draft be written into law, as is, the term "Requisite Measures" is ambiguous, lacking in legal stability. It can become a factor injurious to business. Moreover, the proposed draft leaves a room for interpretation that the measures the claimant demands equals requisite measures. On top of its failure to secure the opportunity for rebuttals, it denies the opportunity for rebuttals, leaving problems from the standpoint of fairness. In the least, it should be expressly made clear that onus upon NSP to take "Requisite Measures" is restricted within the "Scope of Reasonableness."
- In light of compensating damage to the author, compensation for the actual damage should suffice.
As to malicious infringement, criminal penalty and administrative penalty should suffice.
- There is no denying of the possibility for CAA's expanding the scope of its interpretation of the term, "TCTPM" subject to control, henceforth, giving a grave negative impact on the enterprises' sound business activity.

- Proposed Amendment of Copyright Law

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