Protection Against Intellectual Property Rights Infringement
November 2, 2009
China’s intellectual property legislation (including Patent Law, Trademark Law and Copyright Law) stipulates that infringement of intellectual property rights (IPRs) can be dealt with by administrative procedures or legal proceedings. In terms of civil liabilities, the infringer may be ordered to stop the infringing act, eradicate the damage done, make public apologies or compensate for damages. In terms of administrative measures and criminal liabilities, they include warnings, orders to stop the infringing act, confiscation of unlawful gains, fines, and compensation for damages.
1 Legal Proceedings
When an IPR infringement dispute arises, the infringed party may take actions against the infringer directly with the people’s court (generally an intermediate people’s court) at the place of the infringer’s domicile or where the infringing act takes place. An interested party may request the temperary order from the people’s court to stop the infringing act before legal action if he finds that due to emergency circumstances any delay to stop the infringing act may cause irreparable damages to his legitimate rights. In IPR infringement cases, if the infringer is convicted, he will be made to bear civil liabilities for the infringing act.
2 Administrative Procedures
When an IPR infringement dispute arises, the interested party may request the relevant administrative authorities at county-level and above at the place of the infringer’s domicile or where the infringing act takes place to handle the case. In making a request for the administrative authorities to handle an infringement dispute, the interested party should submit a written request, proof of his right, and evidence of the infringing act.
The administrative authorities responsible for handling copyright disputes will make a decision whether a complaint will be processed within 15 days upon receipt of the request and inform the applicant of its decision. A written explanation will be given to the applicant if the decision is negative. The administrative authorities responsible for handling patent disputes will, after examining a request, make a decision whether the complaint will be processed within seven days upon receipt of the request. If the decision is negative, the applicant will be given a written explanation within seven days.
Where an interested party is dissatisfied with the administrative punishment decision made by the administrative authorities, he may, within three months from receipt of the notification of the decision, institute administrative proceedings with the people’s court in the place where the administrative authorities are located. or he may, within 15 days from receipt of the notification of the decision, apply to the local people’s government or the administrative authorities at a higher level for reconsideration of the decision. The authorities concerned should decide within 10 days whether to handle the case. If positive, a decision on the reconsideration should be made within two months from receipt of the application for reconsideration. If the interested party is dissatisfied with the decision on the reconsideration, he may, within 15 days from receipt of the notification of the decision, institute administrative proceedings with the people’s court. If no proceedings are instituted and the decision is not performed at the expiration of the specified period, the administrative authorities may request the people’s court for compulsory execution thereof.
The competent administrative authorities may order the infringer to pay for damages based on the request of the applicant. The interested parties may resort to mediation. If mediation is not a preferred option, or mediation has failed, or one of the interested parties refuses to abide by the outcome of mediation, legal proceedings may be instituted with the people’s court.
3 Calculation of Compansation
The amount of compensation for infringing a copyright is calculated according to the direct damages caused by the infringement and reasonable fees incurred by the copyright holder in investigating and stopping the infringing act. The amount of compensation for infringing a trademark is calculated based on the proceeds derived by the infringer through the infringement during the infringement period or the damages suffered by the infringed party during the infringement period. The amount of compensation for infringing a patent is calculated according to the damages suffered by the patentee or the proceeds derived by the infringer through the infringement. Where it is difficult to determine the damages suffered by the patentee or the proceeds derived by the infringer, the amount of royalty for the patent may be used as the base for calculation.
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Establishment of Franchising Enterprises and Procedures for Opening Stores
August 26, 2009
The establishment procedures are the same as those for foreign-invested wholesale enterprises. Under existing policies, FIEs engaging in commercial franchising are treated in the same way as domestic enterprises with regard to establishment requirements, rights and obligations, information disclosure, advertising and publicity etc, but are different in terms of establishment procedures. Approval procedures carried out by the examination and approval authorities are merely a matter of formality.
FIEs that are qualified to engage in franchising should apply to their original examination and approval authorities for permission to add “engaging in commercial activities in the form of franchising” to their business scope and submit the necessary documents, including information disclosure document, sample of franchising contract and operation manual of franchising. The examination and approval authorities will make a decision in writing on whether or not to approve the application within 30 days after receiving the complete set of application materials. Upon obtaining approval and completing the necessary formalities in respect of change of registration details with the industry and commerce administration, the FIEs may start their franchising business.
The following documents must be submitted when applying for permission to add “engaging in commercial activities in the form of franchising” to a company’s business scope:
- Application letter and resolution of the board of directors.
- Corporate business licence and Certificate of Approval of Foreign-Invested Enterprises (photocopy).
- Agreements on the modification of contracts and articles of association (for foreign enterprises, only the modified articles of association are required).
- Relevant documents showing compliance with Article 7 of the Measures.
- Basic information reflecting the provisions of Article 17 of the Measures.
- Sample of franchising contract.
- Operation manual of franchising.
FIEs are not allowed to engage in any business under the prohibited category as specified in the Catalogue for the Guidance of Foreign Investment Industries in the form of franchising.
Where patent licensing is involved in franchising, patent licensing contracts should be signed in accordance with the related provisions of the Patent Law of the PRC and its implementation rules, and record filing formalities should be completed in accordance with the provisions of the Measures for the Administration of Record Filing of Licensing Contracts for the Implementation of Patents. Before conducting franchising activities, the franchiser should handle matters relating to the trademark licensing contract in line with the provisions of the Trademark Law of the PRC and its implementation rules.
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Employment Procedures
August 23, 2009
Signing of Labour Contract
The new Labour Contract Law sets out stricter stipulations on the signing of labour contracts between employing units and employees. The new law specifies that an employing unit must sign a written labour contract with its employee within one month after the commencement of service by the employee. If an employing unit fails to sign a written labour contract with an employee who has worked for the employing unit for more than one month but less than one year, it should pay the employee double his wage each month. Any employing unit failing to sign a non-fixed term labour contract with an employee in violation of the Labour Contract Law should pay the employee double his wage each month starting from the date on which the non-fixed term labour contract should have been signed.
In hiring an employee, an employing unit should truthfully inform the employee of the job duties, conditions of work, place of work, occupational hazards, safe production conditions, remunerations and other matters that the employee wishes to know. Meanwhile, the employing unit has the right to know the basic information about the employee which directly relates to the labour contract, and the employee should truthfully provide the same.
On probation, the new Labour Contract Law sets out the following provisions:
For a labour contract with a term of more than three months but less than one year, the probation period may not exceed one month; for a labour contract with a term of more than one year but less than three years, the probation period may not exceed two months; and for a fixed-term labour contract of more than three years or a non-fixed-term labour contract, the probation period may not exceed six months. The same employing unit and the same employee may agree on only one probation period. For a labour contract with a term on project basis or a labour contract with a term of less than three months, no probation period is required. The probation period must fall within the term of the labour contract. If the term of a labour contract covers the probation period only, such probation period is deemed invalid and the term will be the term of the labour contract.
On termination of contract, the new Labour Contract Law provides that an employing unit may unilaterally terminate a labour contract if an employee:
(1) is proved to be not meeting the requirements for employment during the probation period;
(2) seriously violates the employing unit’s rules and regulations;
(3) commits serious dereliction of duty or practices graft, causing substantial damage to the employing unit;
(4) has simultaneously established a labour relationship with another employing unit which seriously affects the completion of his tasks with the original employing unit, or refuses to rectify the matter after the same is brought to his attention by the employing unit;
(5) causes the labour contract to be invalid due to the circumstances1 specified in item (1) in the first paragraph of Article 26 of the Labour Contract Law;
(6) has his criminal liability pursued in accordance with the law.
On staff layoff, it is provided that:
According to the Labour Law, staff layoff for economic reasons was only allowed if the employing unit was on the brink of bankruptcy or its production or operation had run into great difficulties. Under the new Labour Contract Law, the scope of staff layoff for economic reasons has been expanded:
If, under any of the following circumstances, an employing unit has to reduce its workforce by 20 persons or more or by less than 20 persons but the number accounts for more than 10 percent of its total workforce, the employing unit may only lay off its staff after it has explained the situation to the labour union or to all its employees 30 days in advance, has considered the opinions of the labour union or the employees, and has subsequently submitted the staff layoff plan to the labour department:
(1) restructuring pursuant to the Enterprise Bankruptcy Law;
(2) serious difficulties in production and operation;
(3) changes in production, major technological innovations or adjustments in the operation mode of the enterprise have made it necessary to reduce workforce even after changes have been made in the labour contract;
(4) the economic circumstances at the time of the signing of the labour contract have undergone major changes which have rendered it impossible to execute the contract.
In retaining staff in the course of carrying out layoffs, priority should be given to the following staff:
(1) those who have signed a fixed-term labour contract with a relatively long term with the employing unit;
(2) those who have signed a non-fixed-term labour contract with the employing unit;
(3) those who are the sole wage earner in their families and have to support elders or minors at home.
If an employing unit that has laid off its staff in accordance with the rules recruits staff again within six months, the laid off staff should be notified and should be given priority in employment under the same conditions.
The new Labour Contract Law and the relevant regulations clearly state the mandatory terms and conditions to be included in a labour contract, such as the term of the contract, changes in the contract, dissolving or terminating the contract, as well as compensations in the event of dissolving the contract. The Labour Handbook provided by the local labour department should be used as reference by enterprises in formulating their labour contracts.
7.2.2 Contract Authentication
Contract authentication is a legal process whereby the labour administrative department conducts full-scale examination, verification and validation of all labour contracts signed between an enterprise and its employees. Hence, the process confirms the legality of a labour contract. At present, it is compulsory for all labour contracts signed between enterprises and their staff to be authenticated.
The enterprise should submit the labour contract to the local labour administrative department for authentication within 30 days after the commencement of service by an employee upon signing a labour contract. In the case of collective labour contracts, they should be filed with the local labour administrative department for the record. Collective contracts automatically enter into force 15 days after the date of receipt by the labour department if no objection is raised during that period.
The following documents are required for contract authentication (the list may vary in different localities, so enquiry at relevant local departments is advised):
(a) Labour contract and its copy;
(b) Business licence or its copy;
(c) Proof of identity of legal representative or authorised person;
(d) Identity card or proof of domicile registration of the employee;
(e) Proof of education attainment, medical report, Labour Handbook, and other relevant information of the employee.
7.2.3 Personal Files Management
An enterprise or its resident representative office may entrust a service agency specialised in human resources employment to manage the personal files of its mainland staff. Such agencies should be located at the place of domicile registration or current work place of the staff concerned. The services they offer include verification of the staff’s identity, salary track record and political reports (for overseas travel). Other services such as assessment of technical qualifications, contract authentication and social insurance are also provided.
7.2.4 Foreigners Working in China
According to stipulations, foreigners (including Hong Kong residents) are allowed to work in China. Any organisations or individuals employing foreigners (including Hong Kong residents) in the mainland are required to complete the necessary formalities with the labour bureau which is responsible for granting approval and handling registration. Otherwise, the employees and employers concerned would become “illegal workers” and “illegal employers” and may be fined or even prohibited from working in the mainland.
(a) Departments Responsible for Administration of Employment of Foreigners in China
The labour administration departments at provincial, autonomous region and municipal levels and their authorised labour administration departments at prefecture and city levels are responsible for the administration of employment of foreigners in China.
(b) Criteria for Foreigners Taking up Employment in China
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At least 18 years of age and in good health;
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Possessing the professional skills and working experience required for the work of intended employment;
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No criminal records;
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Having a confirmed employer;
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Having a valid passport or other international travel documents;
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Being able to obtain employment and residence permits for foreigners upon entry into China.
(c) Application Procedures for Foreigners Taking up Employment in China
China has a more liberal and pessimssive foreign labour policy than Hong Kong or other western countries. Hong Kong residents or foreigners wishing to work in the mainland are only required to register with the “foreign labour employment service centre” under the local city-level labour bureau by presenting the following documents:
|
Category |
Hong Kong, Macau and Taiwan Residents |
Foreign Nationals |
|
Formalities |
Employment Permit for Personnel from Taiwan, Hong Kong and Macau |
Employment Permit for Foreigners |
| Documents Required |
|
|
| Note |
|
|
The term of the employment permit for foreigners (including Hong Kong residents) issued by various mainland cities depends on the duration of the current labour contract and is usually one or two years. It is advisable to apply for extension of the employment permit within one month before its expiration as overdue applications are not only more costly and time-consuming but also involve more complicated procedures. Formalities for extending the employment permit are as follows:
|
Category |
Hong Kong, Macau and Taiwan Residents |
Foreign Nationals |
|
Formalities |
Extension of Employment Permit for Personnel from Taiwan, Hong Kong and Macau |
Extension of Employment Permit for Foreigners |
| Documents Required | The extension formalities are generally the same for foreigners and personnel from Hong Kong, Macau and Taiwan:
|
|
| Note |
|
|
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Procedures for Establishment of Resident Representative Offices by Foreign Companies
August 23, 2009
Step 2:
Agent submits on applicant’s behalf all the required documents to the provincial foreign trade and economic cooperation department for handling application procedures.
Step 3:
Upon approval granted, applicant should proceed promptly to the provincial or municipal administration for industry and commerce for registration.
Step 4:
Other formalities to be handled by the resident representative:
- Complete residence application procedures with local public security bureau by presenting registration certificate, representative certificate and approval certificate;
- Apply for opening bank account by presenting registration certificate and approval certificate to local foreign exchange administration;
- Apply to Customs for permission to import office equipment, daily necessities and transport vehicles for use by the representative office and its personnel;
- Complete tax payment registration procedure at local tax office;
- Appoint local foreign service company to recruit local staff.
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Application Procedures for the Establishment of Wholly Foreign-Owned Enterprises
August 23, 2009
The time limit for the approval of applications for the establishment of wholly foreign-owned enterprises is as follows: The approval organ must give a written reply within 30 days after receiving preliminary application from the foreign investor and decide whether or not to grant approval within 90 days (for Guangzhou and Shenzhen, 15 working days) as from the day all documents required for the formal application are received.
For wholly foreign-owned enterprises, the date of the issuance of business licence is the date of their incorporation. The foreign investor may appoint an FIE service company or other economic organisations to handle the application procedures, but a power of attorney must be signed.
Application Procedures for Establishment of Wholly Foreign-owned Enterprises
Step 1: Submission of Preliminary Application
The foreign investor of a foreign enterprise should submit a report to the foreign trade and economic cooperation department at county level or above at the place where the proposed enterprise is located.
Content of report: Objectives of the wholly foreign-owned enterprise, business scope, scale of operation, products to be produced, technology and equipment to be used, land area required, conditions and quantities of water, electricity, gas and other forms of energy resources required, and requirements for public facilities.
Step 2: Submission of Formal Application
After the foreign investor receives a written reply from the relevant government authorities, a formal application supported by all the required documents should be filed with the local foreign trade and economic cooperation department at county, municipal or provincial level.
Documents required: Application letter for establishing the wholly foreign-owned enterprise; feasibility study report; articles of association; list of legal representatives (or board of directors); foreign investor’s legal papers and credit report; list of materials to be imported; written replies from the local approval authorities at county level or above; application for registration of the name of the enterprise approved by the provincial or municipal administration for industry and commerce; comments on the project by various government departments such as environmental protection, fire services, health and land administration. In case where two or more foreign investors are involved, copies of the contracts signed by them should be submitted to the approval authority for the record.
Step 3: Application for Approval Certificate
After the formal application is approved, the foreign investor should apply to the foreign trade and economic cooperation department at county, municipal or provincial level for an approval certificate by presenting all the necessary documents.
Documents required: Application letter for establishing the wholly foreign-owned enterprise, feasibility study report, articles of association and list of board of directors.
Step 4: Registration
Upon collection of the approval certificate, an application for business licence should be filed with the provincial or municipal administration for industry and commerce within 30 days. Subsequently, the enterprise should complete such procedures as applying for official seal and enterprise code, opening bank account, and registering for tax payment and customs declaration with the local public security, technical supervision, taxation, Customs, finance, foreign exchange administration, banking, insurance and commodity inspection departments.
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