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ISSUE N° 7 November, 2002

The Intellectual Property Protection in China

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1. Law enforcement

1.1. Progress in IPR protection

During the last few years, essential improvement in the intellectual property right (IPR) protection have been made in China.

First of all, knowledge and consciousness about the IPR protection is growing in China. One of the main elements was the health risks to the Chinese population due to false drug production or prohibited use of agro-chemicals, not least due to infringements of Chinese firms. The Chinese authorities have realized that a sound system of intellectual property protection is important for a favorable business environment. It will not only benefit foreign investment but the final consumers of the goods. As a result, courses on intellectual property law are now being offered at every top law school in China; high priority has been given to IPR protection by the State Council, expressed in its continuous promulgation of legislation, administrative regulations, and enforcement guidelines; various intellectual property cases have been settled in the courts in favor of the holder of the right.

Furthermore, China entered the WTO in December 2001. Prior to the accession, China amended her Patent Law, Trademark Law and Copyright Law and formulated other IP laws and regulations including regulations on the protection of new plant varieties and the layout designs of integrated circuits to bring her laws and regulations in line with TRIPS agreement of the WTO. At the same time, China loosened the limitation for foreign patent applicators. The gap between total patents applied by and patents granted to foreign applicators is narrowing (see Appendix 2). Patents received from foreign applicators are growing steadily in China. The total accumulated number of patents applied reached 258,000 by the end of July, 2002. After Japan, USA, Germany, France and Korea, Swiss applications ranked 6th.

China' s courts and judges have begun to improve judicial protection with the guidance of WTO regulations. China set up the No. 3 Civil Court in 2000 and gave it the responsibility for hearing IP case trials in her 31 mainland provinces. China has also provided special training for judges to make them more familiar with TRIPS regulations and the newly amended IP laws. More and more judges have been given formal education in science and technology, given opportunities to communicate with their foreign counterparts and study in the US or Europe.

Statistics reveal that 5265 civil cases (5041 concluded) and 319 criminal IP cases (314 concluded) were initiated at all court levels in China in 2001. Among them was a case submitted by Rolex. The Swiss watch maker Rolex has successfully prevented a Chinese

Internet company from using the domain name in 2001. The People's Intermediate Court in Beijing decided that CINET, a local Internet service provider, did not have the right to the web address because Rolex is a famous brand in China. In addition, Rolex won RMB 10,000 from CINET in compensation for damages.

Progress in IPR protection is more obvious in big cities in China. In Beijing, for example, a copyright protection center was set up by the government in 1993 to monitor newspapers (some 2,000) and magazines (about 7,000). The center also protects the rights of artists in the music industry and in the performing arts. Shanghai carried out a series of activities to celebrate the first "World Intellectual Property Day" on April 26th, 2001. From October 23rd to 27th, the Shanghai government hold a symposium named "Preparing Tactics for Intellectual Property Issues after China's WTO Entry". Participants were many high ranking government officials.

1.2. International cooperation in the field of IPR protection

China is becoming more and more integrated into the global IPR protection networks. China is a signatory to the most important international intellectual property agreements. On June 3rd, 1980, China acceded to the Convention Establishing the World Intellectual Property Organization. It is now member state of the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty (PCT), the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure, the Berne Convention for the Protection of Literary and Artistic Works and the Locarno Agreement Establishing an International Classification of Industrial Designs (see Appendix 1).

Chinese officers and experts are becoming more and more internationally cooperative in IPR protection. They are playing an active role in multinational discussions at the United Nations, at the Hague and at the World Intellectual Property Organization. Bilateral exchanges are also increasing rapidly. These are shown in the following examples:

  • From January 29th to February 2nd, 2001 China' s State Intellectual Property Office (SIPO) dispatched experts to attend the Forum on the International Private Law and Intellectual Property in Geneva and the Expert Meeting on IP Issues of the Jurisdiction of Civil and Economic Affairs and Foreign Adjudication Convention on the International Private Law Conference in Hague organized by WIPO.
  • A roundtable discussion concerning judicial protection for IPR was held by Chinese Supreme People' s Court and European Union from May 30th to June 1st, 2001 in Beijing. This was a part of a judge-training program to help Chinese judges gain advanced experience of law enforcement on intellectual property rights. So far, more than 200 judges from intermediate people' s or higher people' s courts have received such training.
  • In 2001, the SIPO delegations visited the Intellectual Property Office of Switzerland, the German Patent and Trademark Office, the Swedish Patent and Registration Office, the European Patent Office, the United Kingdom Patent Office, the Intellectual Property Institute of France, the Japanese Patent Office, the Korean Intellectual Property Office and so on. Besides, SIPO also received delegations of the European Patent Office, the Spanish Patent and Trademark Office, the German Patent and Trademark Office, the Austrian Patent Office and the Japanese Patent Office.

2. Problems of IPR protection in China

However, IPR protection in China is still at an early stage for a market economy. The situation of the IPR protection in China is similar to the situation of environment protection: there is a big gap between government policy and day to day reality. Enforcement of IPR remains weak and ineffective in most parts of China. Due to local protectionism and due to the lack of truly independent enforcement authorities, infringers of intellectual property are often not prosecuted or punished. Fines imposed on infringers are still ridiculously low, far too low to deter further infringing activities.

Small-scale counterfeiters often escape with low fines that can not easily be collected and offer minimal deterrence, and the rights' holder receives minimal compensation. The court system still has a shortage of adequately trained judges and the resources of the police, prosecutors, and relevant administrative agencies are insufficient. It is often difficult for these various bodies to cooperate smoothly, particularly in transferring cases from civil to criminal proceedings.

The general perception of the international community remains that China is one of the world's largest infringers in the field of intellectual property. China maintains a very high rate of piracy for CDs, audiocassettes and computer software. Through State media, China has always shown that she is serious about stopping the booming piracy industry. However, what was openly destroyed is only a small part of the vast false and piracy industry in China.
The counterfeiters and pirates still seem to sail safely on, while foreign producers of music, film and software, who claim Chinese piracy steals a large portion of their business, are obviously unsatisfied.

3. Some important aspects of IPR in China

3.1. In the field of patents

The Patent Law of the People's Republic of China was adopted on March 12th, 1984, amended twice on September 4th, 1992 and on August 25th, 2000. The Implementing Regulations of the Patent Law of the People's Republic of China were promulgated by Decree No. 306 of the State Council of the People's Republic of China on June 15th, 2001, and became effective as of July 1st, 2001. Following are the most important aspects specially for foreigners:

The Patent Law was substantially revised. Previously, design patents lacked substantive examination prior to approval, meaning that such rights were often granted in contravention of earlier existing rights. The remedies of original rights owners have now been strengthened: design patents may not conflict with another' s prior legal rights; the rights of an original patent holder shall prevail over those of the later in a patent dispute. Prior legal rights include trademarks, copyrights, enterprise names and unique packaging or branding associated with well-known products.

According to Article 29 of the Chinese Patent Law, anyone, who files an application for a patent in China within twelve months from the date on which he first filed an application for a patent for an invention or for an utility model in a foreign country, or within six months from the date on which he first filed an application for a patent of a design in a foreign country, may enjoy a right of priority for a patent for the same subject matter in accordance with any agreement concluded between the said foreign country and China, or in accordance with any international treaty to which both countries are party, or on the basis of the principle of mutual recognition of the right of priority.

According to Article 19, any foreigner, foreign enterprise or other foreign organization having no habitual residence or business office in China applying for a patent, or has other patent matters to attend to, shall appoint a patent agency designated by the Patent Administration Department Under the State Council to act as his agent.

Offering or selling infringing goods is now accepted as an infringing activity itself, meaning that preemptive action can be taken against those offering to sell infringing goods but who have not participated in their manufacturing, distribution or wholesale.

Prosecuting patent infringements is now easier as pre-litigation injunctions and requests for evidence preservation will now be accepted by the court, provided there is sufficient evidence and that the plaintiff provides a guarantee. The patentee may bring a law suit against an infringing agent within two years from the date when he knew or he was proved to be known of the happening of infringement.

The newly revised laws endeavor to ensure that the patent owner will receive a financial compensation from RMB 5,000 to 300,000 (US $600 to $36,000), in serious cases even RMB 500,000 (US $60,000). These sums are arguably still too low to provide an effective deterrent.

3.2. In the field of trademarks

The Trademark Law of the People's Republic of China was adopted on August 23rd, 1982, revised for the first time on February 22nd, 1993, and revised for the second time on 27 October 2001. Following are the most important aspects for foreigners in particular:

The revised trademark law extends protection to more marks, including , geographical indications, collective and certification marks, three-dimensional symbols and colour combinations. Judicial review of administrative decisions is now possible. Courts are now authorized to order an infringing party to cease its use and in some cases order property preservation.

Previously, where an infringing trademark could be separated from the goods on which it was displayed, the infringing trademark could be removed and destroyed, and the goods returned to the infringing party. Now, the practice of reverse passing off, which occurs when a trademark is removed from goods and another trademark, is put in its place for the purposes of further sale, is recognized as an infringing deal.

According to the old Trademark Law, only foreign individuals could apply to register trademarks in China. The new Trademark Law now allows any individuals, legal persons and other organizations to apply for registration of a trademark and obtain the exclusive right of use for a product they manufacture, produce, process, select or sell, or a kind of service they render to their clients.

Article 5 stipulates that two or more individuals or legal persons or other organizations may jointly apply for registering the same trademark and enjoy the exclusive right of use of such trademark. This new stipulation meets the requirement of a group of companies in a partnership to jointly own the rights to a trademark. This is an important amendment, as many foreign applicants jointly owned a trademark in other countries but were not able to enjoy joint-ownership in China.

Another important change is the specific recognition of the international principle that whether a mark is "well-known" is determined according to market factors such as the extent of public knowledge, the duration of use, and the publication of the mark. This ends the need for registration in the official registry of well-known trademarks.

The fine for infringements is increased from RMB 10,000 or less to RMB 100' 000 or less, if the counterfeited business volume is impossible to determine.

3.3. In the field of copyrights

The Copyright Law of the People's Republic of China was adopted on September 7th, 1990, and revised on October 27th, 2001. The implementing Rules for the Copyright Law also came to effect on September 15th, 2002. Following are the most important aspects specially for foreigners:

Copyright protection under the new law was expanded to compilation works in order to protect databases and the right to transmit via the Internet as well.

The "fair-use doctrine", which under the previous law allowed for certain uses of copyrighted material without permission from the owner, has been restricted. Radio and television stations must pay for the use of published music.

Stronger enforcement measures have been introduced to combat copyright infringement. The defendant, rather than the plaintiff, must testify the legal source of its production at a lawsuit.
The burden of proof is now placed on the party suspected of infringement. Any producer, manufacturer, or distributor who can not prove that their copying is authorized will now be held liable.

Foreign copyright owners will receive legal protection equal to that of their Chinese counterparts, according to the new regulation for the implementation of the Copyright Law.
The previous regulation stipulated that only the State copyright authority was eligible to handle complaints of infringement on foreigners' copyrights. The new regulation eliminates this restriction and allows foreign copyright owners to seek redress from local administrations. Protection of the copyrights held by foreigners or stateless persons whose works were first published in China starts from the day their works are published.

The fine for infringement is also increased from RMB 10,000 or less to RMB 100, 000 or less, if the infringer' s business volume is not to be determined.

4. What are the chances for foreign small- or medium-sized enterprises in case of IP infringements?

Up to now, most of the foreign winners of IPR law suits were the big international companies, such as Adobe Systems (against Nianhua Tuwen Computer Co. Ltd.) and Microsoft Corporation (against Shanghai Huahai Computer Electronic Facilities Co. Ltd.). The foreign small- or medium-sized enterprises also meet infringement problems, but in most cases they are reluctant to take legal steps, due to limited means. Do they have any chance to win disputes? Here is some advice to small- or medium-sized enterprises by legal specialists concerning their IP rights:

First of all, they should register their trademarks or patents, as soon as they enter the Chinese market, in order to hold a sound legal position. This is especially true for products and trademarks that are easy to copy and which are quite well-known.

Secondly, When transferring an IPR for establishing a Joint Venture, they should carefully value it, and determine the amount of a transaction price or capital contribution. They should clearly know, if the protection for the IPR strong enough in China and what are the provisions of Chinese law against infringement upon intellectual property rights. A joint venture contract should actually include an article on this question.

Should there be any infringements, they may protect their right through the following channels:

a) Administrative Action:
when the foreign small- or medium-sized enterprises are confronted with an IPR infringement, they can address the relevant local authorities above county level (pls. see Appendix 3.) and ask them for help and consultation. The authorities are committed to take proper measures to protect IP right holders.

The Chinese administrative system is very complicated. It is quite difficult for foreigners to find the right places and right persons for their business. Today, it is the local Intellectual Property Administration, which is in charge of the administration and protection of patents; the local Administration for Industry and Commerce (AIC) is in charge of the administration and protection of trademarks; the local Copyright Bureau deals with the administration and protection of the copyrights; and the local Administration of Culture, Radio, Film and Television should crack down on piracy activities in the audio and video market; finally, the local Customs are in charge of cracking down the smuggling trade.

These authorities can order a public apology by infringing party and a stop of manufacturing and selling of infringing products, destroy infringing trademark representations, remove all the trademarks from existing goods in stock, seize tools and molds for making the trademark representations, destroy the infringing goods in case the trademarks are not easy to be removed from the goods. Concurrently, penalty fine may be imposed, which can amount to 50% of the illegal turnover, or five times the illegal profit. Upon request of the infringed party, the AIC may order the infringing party to pay damages for economic losses arising from the infringement.

Advantages of the administrative action are the quick effectiveness and a lower cost. Only a minimum registration fee of about 300 RMB is necessary. Shortcomings are the longer duration and the lower compensation by the infringer.

b) Civil Proceedings:
The plaintiff may initiate civil proceedings with the People's Court, which will usually decides that the infringement be stopped, ill effects be removed and damages paid. Article 45 and 46 of the Copyright Law provide the following civil liabilities: anyone who commits any of the following acts of infringement shall bear civil liability for such remedies as ceasing the infringing act, eliminating the effects of the act, making a public apology or paying compensation for damages, depending on the circumstances, and may, in addition, be subjected by a copyright administration department to such administrative penalties as confiscation of unlawful income from the act or imposition of a fine.

c) Criminal Proceedings:
Article 213, 214 and 215 of the Criminal Code stipulate that serious infringement of trademark rights may face an imprisonment of up to three years, concurrently or separately with penalty fine. Where the cases are extremely serious, the sentence will be imprisonment of 3 to 7 years, together with a fine. Article 217 reads that whoever, for the purpose of reaping profits, has committed one of the following acts of copyright infringement and gains a fairly large amount of illicit income, is to be sentenced to not more than three years of fixed-term imprisonment, criminal detention, and may in addition or exclusively be sentenced to a fine; when the amount of the illicit income is huge or when there are other particularly serious circumstances, he is to be sentenced to not less than three years and not more than seven years of fixed-term imprisonment and a fine.

The advantage of the judicial proceedings is that the amount of the damage compensation is usually larger than that by taking administrative action, whereas the shortcoming of the judicial proceedings is that the process will be rather long (about 1.5 years in average) and the cost relatively high.


In accordance with its achievements in the field of economic reform, essential improvements in the IPR protection have been made in China. However, many problems still exist, because China today, as a whole, remains a developing country. A further improvement of the legal framework depends on a progressive reform of the political system, which can only be a gradual and steady process.

China certainly needs to step up intellectual property protection in practice. The country learns to protect IPR from criticism by the outside world, but also by painful lessons hurting Chinese producers or the public at large.

(Main information sources of this report:
other web sites and various newspapers)

Shanghai, November 2002 Li Rongzhang


Appendix 1. International Conventions, Treaties or Agreements to which China acceded

International Convention, Treaty or Agreement Date of establishment Date on which China became a member or party to the Convention or Treaty
Convention Establishing the World Intellectual Property Organization 1967 Stockholm
1970 Effective
1974 UN
Paris Convention for the Protection of Industrial Property 1883 March 19, 1985
Stockholm Act
Madrid Agreement Concerning the International Registration of Marks 1989 October 4, 1989
Stockholm Act
Berne Convention for the Protection of Literary and Artistic Works 1886 October 15,1992
Paris Act
Universal Copyright Convention 1957 October 30, 1992
Geneva Phonograms Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonogram 1971 April 30, 1993
Patent Co-operation Treaty 1970 January 1, 1994
Geneva Act
Nice Agreement for the Protection of Appellations of Origin and their International Registration 1957 August 4, 1994
Budapest Treaty on the International Recognition of the Deposit of Micro-organisms for the Purposes of Patent Procedure 1977 July 1, 1995
Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks 1989 December 1,1995
Locarno Agreement Establishing an International Classification of Industrial Designs 1968 September 19, 1996
Strasbourg Agreement Concerning the International Patent Classification 1971 June 19, 1997

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Appendix 2.
Comparison of Patents Applied and Granted for Chinese and Foreign Applicators, 1985-2001

Patents Accumulated Number 85-97 1998 1999 2000 2001
a. Granted for Domestic Applicators
b. Received from Domestic Applicators
    a / b
c. Granted for Foreign Applicators
d. Received from Foreign Applicators
    c / d

Patents Granted for Foreign Applications, 1985-2001
Countries and Region Accumulated Number 85-97 1998 1999 2000 2001
Total 70387 30753 6508 8044 10109 14973
JP 25299 10517 2599 3012 3594 5577
US 16692 7921 1418 1905 2332 3116
DE 6058 2549 470 674 871 1494
FR 3466 1545 279 323 537 782
KR 3183 794 330 427 608 1024
CH 2992 1447 287 288 408 562
NL 2480 1409 183 217 311 360
GB 2214 1012 243 285 304 370
IT 1341 578 138 186 181 258
SE 1128 414 91 163 183 277
AU 767 408 58 82 82 137
FI 611 203 53 59 100 196
CA 603 314 38 57 100 94
DK 464 235 37 41 59 92
BE 378 201 35 31 42 69
ES 213 99 13 23 37 41

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Appendix 3: Useful Addresses

The State Intellectual Property Office (SIPO)

Shanghai Intellectual Property Administration
9 F, South Building, China Merchants Plaza
333 Chengdu Beilu
Shanghai 200041
Tel. 021-5298 0379
Fax. 021-6272 9341
Contact person: Ms. Liu
Director General: Mr. QIAN Yongming

Trademark Office, State Administration for Industrial and Commerce, PRC (TMO)

Shanghai Administration for Industry and Commerce
301 Zhaojiabang Lu
Shanghai 200032
Tel. 021-6422 0000

The National Copyright Administration (NCA)

China Copyright Protection Centre

Shanghai Copyright Bureau
5 Shaoxing Lu
Shanghai 200020
Contact person: Mr. WU Youzhang
Tel. 021-64670303
Fax. 021-64332452

The State Administration of Radio, Film and Television

Shanghai Administration of Culture, Radio, Film and Television
2 Beijing Donglu
Shanghai 200002

General Administration of Customs

Shanghai Customs
13 Zhongshan Dongyilu
Shanghai 200002
Tel. 021-6323 2410
Fax: 021-6387 8690
Department of Law (in charge of IP)

The Supreme Peoples' Court (SPC)
Judge JIANG Zhipei
Chief Judge of the Intellectual Property Right Trial Chamber of
The Supreme People's Court of P. R. China
Tel/Fax: 010-6529 9598

Shanghai Higher People's Court
209 Fuzhou Lu
Shanghai 200002
Tel. 021-6321 2570

Swiss Lawyer in Beijing:
Wenger Vieli Belser, Beijing Liaison Office
Room 722, Golden Land Building
32 Liangmaqiao Lu, Chaoyang District
Beijing 100600, China
Tel. 010-6468 7331/2
Fax. 010-6460 3132
Web site:

Swiss Lawyer in Beijing Shanghai:
Christoph J. Vaucher, LL.M.
CMS Bureau Francis Lefebvre
Roon 905, Kerry Centre
1515 Nanjing Road West
Shanghai 200040
Tel 021-6289 6363
Fax 021-6289 9696


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