The State Administration of Industry and Commerce (SAIC) promulgated new Regulations on Famous Mark Verification and Protection, which took effect on June 1, 2003. These Regulations replace the 1996 regulations which contained the provision authorizing the infamous Chinese Famous marks lists. The Regulations are additional to the 2002 Implementing Regulations for the amended Trademark Law.

The new Regulations protect any mark determined by the TMO to be famous. Fame must be established by documents showing trademark use and registration history, proof of the mark being protected as a famous mark in China or other countries and territories, advertising and promotion materials and other documents. However, a mark owner need no longer show that the mark is registered as a trademark in China. This is a significant improvement, especially as it takes around 18 months to obtain a trademark registration.. Under the new Regulations, a famous mark owner may raise a cancellation or opposition action, or apply for an injunction against a third party based on evidence of use of a confusingly similar mark to identify identical or similar goods or services.

In addition, the Regulations specifically provide that the owner of a famous mark may apply to cancel the corporate name of another when the name is likely to cause confusion or mislead consumers.

Rules on Registration and Administration of Certification Marks and Collective Marks
The State Administration of Industry and Commerce (SAIC) issued new Rules on Registration and Administration of Certification Marks and Collective Marks, which took effect on June 1, 2003. These Rules replace the 1994 Rules.

The new Rules set forth the qualifications for a collective mark or a certification mark. An applicant must be an organization of professionals in a certain field and have professional testing equipment or facilities.

The new Rules also provide detailed requirements to apply for protection of a Geographical Indication (GI) by means of the collective or certification mark method. One of the requirements is that the applicant must submit approval of the government with authority to administer the GI. A foreign applicant must submit proof showing its use of the GI is protected under the laws of its home country. The GI to be protected as a collective or certification mark in China may be the name of the geographical area or other discernible character derived from the specific geographic location. Implementation Rules for Madrid International Trademark Registrations The State Administration of Industry and Commerce (SAIC) issued new Implementation Rules for Madrid International Trademark Registrations, which took effect on June 1, 2003. They replace the 1996 Rules.

The new Implementation Rules apply to international applications for which China is the country of origin, extended applications designating China, or other related applications. An application may designate multiple classes of goods or services, and may designate multiple nations belonging to either the Madrid Convention or the Madrid Protocol

Such applications must be filed with the China Trademark Office, and must satisfy the Chinese TMO’s requirements in order to retain their filing dates. Within three months from the first day of the month after publication in the International Trademark Gazette of the extended application designating China, anyone may file an opposition against the extended application. The applicant for a collective mark or certification mark designating China must submit the qualification documents and trademark use rules within three months after the mark is registered in the WIPO International Registrar.

Foreign Investors Can Establish Venture Capital Companies In China To Engage In Venture Investment>

China has finally issued detailed rules regulating foreign invested venture capital companies. The Rules allow foreign investors to establish venture capital companies to invest in local entities. The Rules set several fairly strict requirements on establishment of such a corporation. The minimum capital requirement of a corporate investor is US$5million. A foreign-invested venture capital company must have at least one “necessary investor” who has enough funds to engage in venture capital investment activities and has experience in the business in the past several years. The Rules also provide many special regulations on initial investment ventures in many fields of its operation, including management structure, investment measures, business scope, profit allocation and so on.

The Rules further create another type of corporation, called a management corporation for venture capital companies, to promote the operation and management of an investment venture. This form of business is intended to provide professional management service to ventures, and can manage one or more ventures.

MOFCOM Issued Specific Rules Regarding Foreign Invested Enterprises With Less Than 25% Foreign Ownership Interests

According to a Notice Regarding Approval, Registration, Foreign Exchange and Tax of Foreign Invested Enterprises, jointly announced by MOFTEC, State Administration of Taxation of China, State Administration of Foreign Exchange and State Administration of Industry and Commerce on January 6, 2003, if a foreign investor’s contribution to a foreign invested enterprise is less than 25% of the registered capital of the enterprise, it will be treated as a normal local company not entitled to the beneficial treatment of a foreign invested company. The statement, “The proportion of foreign capital is less than 25%” will be noted on the company’s Certificate of Foreign Invested Enterprises and its business license. This type of foreign invested company is not entitled to any tax benefits offered to a foreign invested company holding more than 25% equity interests.

China Loosened Strict Restraints On Chinese-Foreign Trading Joint Ventures

The Ministry of Commerce (MOFCOM) issued “The Provisional Rules on Establishment of Chinese-Foreign Trading Joint Ventures ”. With the issuance in 1996 of “The Tested Temporary Rules on Establishing Chinese-foreign Trading Joint Ventures” such ventures could exist and engage in import and export business, but the old rules still applied many strict requirements.

The new Rules allow more competition in the field. The registered capital of a Trading Joint Venture is lowered from RMB 100 million to RMB 50 million, and even lower, only RMB30 million for those established in Western China. The former requirements of an annual revenue abroad of over US$500 million in the year prior to the application and existence of a representative office in China for more than 3 years have been eliminated.

Regulation of Foreign Purchases of Chinese Enterprises

MOFCOM, State Administration of Industry and Commerce, State Taxation Administration and State Administration of Foreign Exchange issued “The Temporary Rules for Foreign Investors to purchase Enterprises in China”, which took effect on April 12, 2003.
The Rules govern the following types of purchases:

  1. directly buying property The Rules govern the following types of purchasesof a local company and use the property to set up a foreign invested enterprise,
  2. purchasing and managing the assets of a local company through a foreign invested enterprise,
  3. buying the equity interests of a local company.

Legislators obviously hope to guarantee foreign capital contribution by specifying a definite and fixed payment period for each type of purchase.

In order to avoid a potential monopoly, if the purchase may affect the public interests of Chinese consumers or may constitute a monopoly in an industry, the foreign purchaser is required to report the details of its market share in the relevant industry to the authorities for approval.

Ministry of Culture Issues “Provisional Regulations on Internet Culture”

The new Regulations regulate the type of cultural content, including audio, visual, games, cartoons, and software programs that are broadcast and transmitted via the Internet. According to the Provisional Regulations, all Internet cultural content must be pre-approved by the Ministry of Culture, which is required to respond to each application within 30 days. Entities violating the Regulations face a fine up to RMB 30,000 (US$ 3,600). A lesser fine will apply to non-profit entities. Approval will not be granted to content which runs counter to Chinese laws or principles, including the Chinese Constitution, the concepts of national sovereignty and Taiwan unification, and the protection of ethnic minorities, and morality. Immoral products would include anything related to gambling, pornography, and religious cults. The regulation will come into effect July 1, 2003.

As China has passed the first anniversary of admission to the World Trade Organization, it looks back on a year full of new legislation. The legislative activity slowed down somewhat at the end of the year, with more details provided by new rules, notices, and regulations issued in specific areas. We list those here that relate to foreign investment and intellectual property.