New Implementation Rules for Copyright Administrative Punishment

The State Copyright Administration promulgated the new Implementation Rules for Copyright Administrative Punishment ("Rules"), which took effect on September 1, 2003. The Rules replaced the old Implementation Rules for Copyright Administrative Punishment in place since January 28, 1997.

The Rules provide details on the types of enforcement actions that local offices of the Copyright Administration may take to enforce the Copyright Law and the Software Protection Act. The Rules provide detailed provisions regarding procedures for initiating and investigating a case, collecting evidence, holding a hearing, issuing a decision, and related matters. The Rules also list types of administrative punishments, and appeals procedures. The types of punishments include permanent injunctions, and the forfeiting of illegal gains, etc. According to the Rules, a copyright owner can initiate an administrative procedure by filing an administrative complaint with local Copyright Administrative authorities within the statute of limitations. The statute of limitations expires two years from the commencement of infringement, regardless of when the rights owner learned of the infringement, or, in the case of a continuing infringement, two years from the termination of infringement. For example, an author who discovers his book was printed without authorization three years earlier would be barred from bringing administrative action against the printer; however, if the book was offered for sale up until one ago, the author could still bring administrative action against the seller. Of course, these rules do not affect the statutes of limitations for legal action.

Certification and Accreditation Act

In order to comply with the WTO agreements and international standards for certification and accreditation, the State Council promulgated the Certification and Accreditation Act ("Act") on September 3, 2003. The Act will take effect on November 1, 2003, replacing The Product Quality Certification Act of 1991. The Act provides requirements for certification entities, including requirements regarding business premises, facilities, minimum registered capital, certified professionals, etc. The Act also stipulates rules governing certification and accreditation activities, supervision and administration of certification and accreditation entities and their activities, and legal liabilities for violation of the Act.

Administrative Permit Law

In order to regulate administrative permits and protect the legitimate interests of individuals and organizations, the Standing Committee of China's National Congress promulgated the Administrative Permit Law ("Law") on August 27, 2003, which will take effect on July 1, 2004. The Law specifies the categories of activities which require administrative permits, the authorities authorized to grant administrative permits, the procedures for obtaining administrative permits, the fees, the supervision and audit of such authorities, and the legal liabilities for such authorities and applicants.

China Further Lifted Restrictions on Foreign Trade Authorities

In order to comply with its commitments to the WTO, facilitate the development of the market economy and promote foreign trade in China, the Ministry of Commerce (MOFCOM) recently adjusted the requirements for imports & exports, qualification and related approval procedures. The capital requirement for Chinese companies was lowered to RMB 1 million (approximately US$ 121,000.) from RMB 5 million. For those located in Midwest China, the capital requirement is even lower, no less than RMB 500,000. These adjustments will qualify more domestic companies to engage in import & export businesses. The new requirements took effect on September 1, 2003.

New Financing Channel Available for Securities Companies

China's Securities Regulatory Commission (CSRC) issued the Provisional Rules for Bond Management by Securities Companies ("Rules") on August 29, 2003, to take effect on October 8, 2003. The Rules provide an alternative financing channel for securities companies, strengthen the financial abilities of securities companies and further develop securities companies in China. The Rules regulate bond issuance and assignment activities conducted by securities companies in China, covering issuance and undertaking, trust and assignment, disclosure, payment of bond, and legal liabilities. Under the Rules, securities companies may issue bonds to the general public or to qualified investors.

More Detailed Rules on Administration of QFII Foreign Exchange Issued

The State Administration of Foreign Exchange (SAFE) issued a notice on September 9, 2003 providing more detailed rules regarding administration of foreign exchange matters related to qualified foreign institutional investors (QFII) in China. According to the notice, the first installment of the investment amount wired by QFIIs may not fall below the minimum amount as required in the notice. For example, if the total investment is between US$50million and US$100million, then the first installment paid may not be less than 15% of the total investment amount.

Shanghai Government Issued Detailed Rules for Foreign Investment in State-Owned Enterprises in Shanghai

In order to facilitate foreign capital investment in reforming state-owned enterprises in Shanghai, the Shanghai Municipal Government issued detailed rules to implement relevant regulations promulgated by MOFCOM. The state-owned enterprises covered by the rules include only wholly state-owned enterprises/companies or companies of which the state has controlling shares or equity interests, excluding financial companies and listed companies. There are also detailed rules regarding documentation and major procedures involved in this type of foreign investment, such as assets evaluation, title transactions, registration of title change, and so on. The rules aim to simplify procedures, shorten the application period and simplify the transaction process for foreign investments in Shanghai.

Multinational Corporations' Regional Headquarters in Shanghai Encouraged

On August 21, 2003, the Shanghai Foreign Economic and Trade Committee issued detailed opinions on implementing the Provisional Regulations Encouraging Foreign Multinational Corporations to Set Up Regional Headquarters in Shanghai. The opinions provide detailed documents required for setting up regional headquarters. The opinions require that the authorities issue approval decisions within 30 days after receiving all completed application documents. According to the opinions, foreign multinational companies, which set up regional headquarters in Shanghai, will enjoy favorable policies in respect to employee training, personal income tax, import & export authorities, visa, etc. For example, Regional Headquarters may obtain financial support from the local government for providing essential training to their employees. The education fee, relocation fee, expense for meals and other subsidies given to foreign employees of the regional headquarters may be exempt from personal income tax or entitled to tax deduction by the employer. Local commercial banks may provide more active financial services to satisfy the needs of regional headquarters. In addition, under the regulations, foreign managerial personnel may obtain foreign residence permits with a valid period of two to five years.

Foreign Invested R&D Centers in Shanghai

The Shanghai Foreign Investment Committee recently issued the Opinions on Encouraging Foreign Investment in Setting up R&D Centers. According to the Opinions, the R&D Center may be in the form of a joint venture, a cooperative enterprise, a wholly foreign-owned enterprise, or a department or branch of a foreign invested enterprise. The R&D centers will be entitled to various tax benefits and favorable treatments in foreign exchange, customs, visas, human resources, patent application, etc. The Opinions took effect on September 15, 2003.

Cybersquatting Cases Hinge on Infringed Marks’ Chinese Fame

The China International Economic and Trade Arbitration Committee (CIETAC) ruled earlier this year that Cinet, a company in Beijing which has registered thousands of domain names, including hundreds of foreign brand names, assign the domain names,,, to Burberry, GM and Caesars respectively. The rulings are primarily based on the ground that the domain names registered by Cinet are identical or similar to the registered marks owned by these companies and Cinet registered those domain names in bad faith and with malicious intent to prohibit the rights holder from using its mark as a domain name and thereby earn a profit. Thus the reasoning in the Beijing High Court's Ikea decision and other world courts has been adopted by the arbitration body. However, other famous mark holders have lost similar cases where they were unable to prove their mark's fame in China. For example, Google lost its action against Cinet for recovery of the domain name from Cinet. CIETAC's ruling is primarily based on the ground that Google did not have any legal rights, such as trademark ownership, or rights under the Anti-Unfair Competition Law to a famous, but unregistered trade name, prior to Cinet's domain registration.