2013 China IP Review

Authored by Cheng Bing (chengbing@anjielaw.com)

2013 was a milestone year for the development of China Intellectual Property Rights.  During 2013, copyright, patent and trademark legislation were all revised.  The judicial practice picked up speed as well, with cutting-edge precedents that established protections in trade secrets and other IPR fields. In summary, the Chinese IPR regime enjoyed a rapid growth in 2013. 

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MOFCOM Published Interim Provisions on Standards Applied for Simple Merger Cases

Authored by Michael Gu (michaelgu@anjielaw.com)

During the first week after the Chinese New Year Holiday, the Ministry of Commerce (“MOFCOM”) published long-awaited rules on merger control cases subject to summary procedure, i.e. Interim Provisions on Standards Applied for Simple Cases of Concentration of Undertakings (“Interim Provisions”). The Interim Provisions came into effect on 12 February 2014. It has taken more than 10 months for MOFCOM to finally promulgate the Interim Provisions since the consultation draft was published for seeking public comments on 3 April 2013. However, compared with last year’s consultation draft, which contained only 7 articles, the Interim Provisions is even simpler with 6 articles in total. Except where the Interim Provisions dropped one article and made a few clarifications, no significant improvement or changes have been made to the consultation draft. The Interim Provisions mainly set out the criteria for concentrations that are suitable for treatment under the simplified review procedure. Though the Interim Provisions do not address some key procedural issues in relation to simple cases, it is expected that MOFCOM will soon release relevant supporting procedural rules and further optimize the merger control review mechanism.

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Proposed SAFE Reform Will Substantially Eliminate Restrictions On Cross-border Security

Authored by REN Gulong (rengulong@anjielaw.com)

On 13 February 2014, State Administration of Foreign Exchange (SAFE) released a consultation paper on Foreign Exchange Rules On Administration Of Cross-border Security (the “Consultation Paper”).  It is proposed in the Consultation Paper that restrictions on Cross-border Security will be dramatically relaxed so that FX/RMB will be fully convertible in respect of Cross-border Security.  This is a significant reform in pace with Chinese Government’s streamlining administration and institute decentralization and opening up of capital account transactions.

Cross-border Security refers to (a) provision of security by a PRC entity in favor of an offshore entity in an offshore financing transaction (“Outbound Security”); or (b) provision of security by an offshore entity in favor of a PRC entity in PRC financing transactions (“Offshore Security”).  The Consultation Paper penciled the following reforms:

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Significant Changes Proposed in Beijing Arbitration Commission's ('BAC') New Rules

Authored by Author Xiao Dong (dongxiao@anjielaw.com)

Beijing Arbitration Commission (‘BAC’) was founded in 1995 by Beijing Municipal government and later became a financially independent institution. Since its founding, BAC has received great reputation among the business and legal community and growing very fast in recently years. [1] Many foreign companies choose CIETAC and BAC as the top two choices for their arbitration forum in Mainland China.

The last amendment of the Beijing Arbitration Commission’s (‘BAC’) Arbitration Rules (‘Rules’) was made in 2007 and went into effect in 2008. On October 31, 2013, BAC announced its latest amended Rules seeking for public comments. BAC claims that the new revision of the Rules reflects the valuable experience BAC has gained in application and enforcement of its 2008 Rules in the last 5 years. The discussion below will address numerous amendments to the 2008 Rules and the reasoning behind those revisions. 

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Supreme People's Court Attempting to Reinvigorate China IP Enforcement

Authored by He Jing (hejing@anjielaw.com)

On October 22, 2013, the Supreme People’s Court (SPC) held a press conference in Beijing to announce 8 leading intellectual property (IP) court decisions.  The cases are all made by local courts in different cities and involved the granting of preliminary injunctive orders, reduction of the burden of proof on IP owners and an increase in the amount of compensation in civil cases, and intensified criminal penalties.  Almost all the claimed progress in the announcements relates to what has been asked for by foreign business communities. 

While it is worthwhile to remind that China is not a case law country, it is encouraging to see the new progress made in IP enforcement, which could be used as good precedents for IPR owners to push for more courts to follow.

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China Supreme People's Court Holds That a Dispute Must Meet "Foreign-Related" Requirement for Arbitration at Foreign Arbitration Forums

Authored by Arthur Xiao Dong ( dongxiao@anjielaw.com)

While foreign invested companies in China, either operating as a joint venture or wholly-owned entity, may have a strong desire to apply the rules and administration of an international arbitration commission due to their unfamiliarity with the Chinese arbitration system, there is a common misunderstanding that they can just draft an arbitration clause in their commercial contract to designate a foreign arbitration forum to arbitrate the case. The most recent decision rendered by the Supreme People’s Court illustrates that corporate users need to be very cautious in reviewing the “foreign-related” requirement before choosing a foreign arbitration forum.

On August 31, 2012, the Supreme People’s Court, in its certiorari, affirmed Jiangsu Higher People’s Court’s decision in Jiangsu Aerospace Wanyuan Wind Power Co., Ltd. vs. LM Wind Power (Tianjin) Co., Ltd. ("Wanyuan vs. LM”).  The Supreme People’s Court held that the parties cannot choose ICC arbitration because there is no basis in Chinese law that permits parties to choose arbitration at a foreign arbitration institution or ad hoc arbitration outside the PRC’s territory if the dispute fails to present any “foreign-related” element. 

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Chinese Court's Roadmap on Vertical Monopoly Analysis: Some Comments on the Final Judgment on Rainbow vs. Johnson & Johnson Case

Authored by Zhan Hao (zhanhao@anjielaw.com)      

On August 1 2013, Shanghai People’s High Court (the Court) handed down judgment on the first private antitrust action involving vertical agreements under the minimum resale price maintenance (RPM) clause of China’s Anti-monopoly Law (AML). The Court rescinded the judgment of the first instance court and ordered the US-headquartered health care giant Johnson & Johnson Medical (China) Ltd. and its Shanghai branch (collectively J&J) to pay their Beijing-based former distributor Rainbow Medical Equipment & Supply Co. (Rainbow) RMB 530,000.

This judicial decision was made against the backdrop that the recent high-profile luxury liquors case and baby formula case handled by antitrust implementing agencies of China have demonstrated a new trend of striking both horizontal and vertical monopolies, but the agencies used to invest much more efforts in investigating horizontal monopolies. The Court’s judgment marks the first official deliberation of the Chinese judicial bodies over vertical monopoly agreements. Meanwhile, the judgment has also helped to mitigate the lack of transparency of how to deal with vertical monopoly agreements by the government bodies, as the ruling has clarified the Court’s attitudes towards vertical monopolies, in particular vertical price agreements, and the analytical approach. In this sense, the judgment is of great importance.

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To Go to Arbitration or Litigation in Subrogation Cases?

Authored by Zhan Hao (zhanhao@anjielaw.com)

One of the questions in China is whether an insurer should go to arbitration or litigation in subrogation cases.

1. The contradiction between bulks of insurance disputes and less efficient resolution channels

China is facing an increasing number of insurance disputes in respect of all business lines such as construction insurance, credit insurance, marine insurance, product liability insurance, car insurance, D&O liability insurance, environment protection insurance, investment-linked insurance, and life insurance. According to a speech of the Assistant Chief Justice of the PRC Supreme People's Court, 14,465 insurance litigations were formally accepted by courts in 2005, and in 2010, the number of cases accepted reached 59,747 cases. Some legal experts have estimated that the number of insurance litigations in 2012 is around 1.5 times of that in 2010. Insurance disputes frequently arise from disagreements on the scope of clauses limiting or excluding coverage (“excluding clauses”), the obligation of the insurer to clearly explain the excluding clauses to the applicant, and the disclosure obligation of the applicant and insured.

The biggest proportion of insurance disputes belongs to automobile insurance disputes. 

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Chinese Antitrust Agency Imposed Record Fines on Baby Formula Brands - An Analysis on the Application of the Leniency Program under the PRC Anti-Monopoly Law

Authored by Michael Gu (michaelgu@anjielaw.com)

Late June of this year, it was reported that the National Development and Reform Commission (“NDRC”) had been conducting antitrust probes against several major baby formula brands, including both foreign and domestic brands such as Mead Johnson, Dumex, Wyeth, Abbotts, Friesland Campina, Biostime, and Beingmate, for suspected price monopoly behavior. Shortly after that, NDRC confirmed that the investigations were underway, which immediately attracted extensive attention. In response to the NDRC’s investigation, the baby formula manufacturers have, one after another, taken rectification steps, such as cutting formula prices directly or indirectly. At the beginning of August, NDRC closed their investigations into the manufacturers. According to the NDRC news release, six of the nine investigated brands were fined various amounts while the other three did not receive administrative penalties.

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Dealing with Post-investment Disputes in China

 Authored by Jeremy Dai (jeremydai@anjielaw.com), George Zhang (zhangjianzhou@anjielaw.com)

QWhat are the typical post-investment disputes in China?

AIn our experience, post-investment disputes in China could be classified as the following categories:

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