Haworth & Lexon Law Newsletter
No.1 2012 (Total:No.119) Febuary.25, 2012
Edited by Haworth & Lexon
 

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Haworth & Lexon Law Newsletter is issued every month, mainly introducing the legal change in the fields of Corporate, Securities, Foreign investment, E-commerce, International trade etc. with necessary comment. All the comments do not mean the legal opinion of our firm and the firm does not have any legal liability for such comment. Should you have any interest in any topics or any questions please feel free to contact the firm. You will be expected to have satisfactory response from the professional attorney of our firm.

Guidelines:

Latest Laws and Regulations:

Catalogue of Industries for Guiding Foreign Investment (2011 Revision)

Interim Measures for the Investigation and Handling of the Failure to Declare Concentration of Business Operators in Accordance with the Law

Regulations of the Supreme People¡¯s Court on Placing State Compensation Cases on File

Decision on the Amendment to the Law of the People¡¯s Republic of China on Prevention and Treatment of Occupational Diseases

Notice on Issues concerning the Pilot Project for Domestic Securities Investment by RMB Qualified Foreign Institutional Investors of Fund Management Companies and Securities Companies

Detailed Rules for Implementation of the Regulations on the Administration of Lottery

Notice on Printing and Distributing the Interim Measures for Promoting the Development of Small and Medium-sized Enterprises through Government Procurement

Notice on the Value-added Tax and Business Tax Policies Supporting the Development of the Animation and Comic Industry

Circular on Further Strengthening the Administration of the Qualification for Online Map Services

Legal Practices:

Analysis on Guiding Direction of the New Catalogue of Industries for Guiding Foreign Investment

Legal Liabilities and Corresponding Solutions for Inability to Perform Housing Sale and Purchase Contract under the House Purchase Restriction Policy

Brief Analyses on Guiding Cases of the Supreme People¡¯s Court

Conflict Between Pre-existing Right and Trademark¡ªA Case Study

 

Legal Updates Express

Catalogue of Industries for Guiding Foreign Investment (2011 Revision)

On December 24, 2011, the National Development and Reform Commission and the Ministry of Commerce jointly promulgated the Catalogue of Industries for Guiding Foreign Investment (2011 Revision) (hereinafter referred to as the Catalogue), and put it into practice as of January 30, 2012
The new Catalogue has 473 items in total of which there are 354 items under the encouraged category, 80 items under the restricted category, 39 items under the prohibited category, with addition of 3 items, reduction of 7 items, reduction of 1 item respectively. In the meantime, restrictions on shareholdings proportion in some sectors have been cancelled, and items subject to shareholdings proportion requirements under the encouraged category and restricted category have been reduced by 11. Details about the new Catalogue are set forth in the article written by Attorney Bailey Xu in ¡°Legal Practices¡±.

 

Interim Measures for Investigation and Handling of the Failure to Declare Concentration of Business Operators in Accordance with the Law

On December 30, 2011, the Ministry of Commerce promulgated the Interim Measures for Investigation and Handling of the Failure to Declare Concentration of Business Operators in Accordance with the Law, and put them into practice as of February 1, 2012.

For the purpose of these Measures, the failure to declare concentration of business operators in accordance with the law shall refer to the case where the business operators concerned execute the concentration without declaring to the Ministry of Commerce (¡°MOFCOM¡±) in advance in accordance with the Anti-monopoly Law despite a concentration of business operators reaching the declaration thresholds prescribed by the Provisions of the State Council on the Declaration Thresholds for Concentration of Business Operators (hereinafter referred to as the Provisions).

MOFCOM shall be responsible for investigation and handling of the failure to declare concentration of business operators in accordance with the following procedures: (1) MOFCOM shall initiate a case and notify the business operators under investigation in writing once there are preliminary facts and evidence indicating the possible failure to declare concentration of business operators in accordance with the law; (2) Relevant business operators under investigation shall, within thirty (30) days upon being served the notice of case initiation, submit to MOFCOM the documents and materials on whether the transaction under investigation is a concentration of business operators, whether the transaction reaches the declaration threshold, and whether the concentration has been executed without prior declaration. (3) MOFCOM shall, within sixty (60) days upon receipt of the documents and materials submitted by the relevant business operators under investigation in accordance with Article 6 hereof, complete the preliminary investigation of whether the transaction is a concentration of business operators that is not declared in accordance with the law. The investigation is usually ended up with two results. Firstly, where the transaction is a concentration of business operators not declared in accordance with the law, MOFCOM shall conduct further investigation, and notify the business operators under investigation in writing. The business operators shall suspend the concentration progress. Secondly, where the transaction is not a concentration of business operators not declared in accordance with the law, MOFCOM shall render a decision on no further investigation will be made, and notify the business operators under investigation in writing.

Where MOFCOM decides to conduct further investigation, the relevant business operators under investigation shall, within thirty (30) days upon receipt of the written notice from MOFCOM, submit pertinent documents and materials to MOFCOM pursuant to the Measures for Declaration for Concentration of Business Operators. Within 180 days upon receipt of the said documents and materials, MOFCOM shall conduct assessment on whether such concentration as above will lead or may lead to elimination or restriction of competition in accordance with the relevant provisions of the Anti-Monopoly Law and Measures for the Review of Concentration of Business Operators. If the documents and materials submitted by the business operators under investigation are not compliant with the Measures for Declaration for Concentration of Business Operators, MOFCOM will demand such business operators to make good the materials within the prescribed time, under which circumstance the 180-day limit will be correspondingly extended.

Where the investigation finds that the business operators under investigation have executed concentration without making a declaration in accordance with the law, MOFCOM may impose a fine of not more than RMB 500,000 on the business operators under investigation, and may order the same to take relevant measures to restore to the pre-concentration status.

 

Regulations of the Supreme People¡¯s Court on Placing State Compensation Cases on File

 

On January 13, 2012, the Supreme People¡¯s Court promulgated the Regulations of the Supreme People¡¯s Court on Placing State Compensation Cases on File (hereinafter referred to as the Regulations), and put them into practice as of February 15, 2012. In case of any discrepancy between the judicial interpretations applicable prior to the implementation of these Regulations and these Regulations, these Regulations shall prevail.

For the purpose of these Regulations, State compensation cases shall mean the following cases as prescribed in Articles 17, 18, 21 and 38 of the State Compensation Law. Firstly, where a citizen was placed in detention in violation of the Criminal Procedure Law, or although the detention of the citizen complied with the conditions and procedures as prescribed in the Criminal Procedure Law, the duration of detention exceeded the time limit as prescribed in the Criminal Procedure Law, and a decision to withdraw the case or not to prosecute or a judgment of acquittal was made later to terminate the criminal procedure. Secondly, where after a citizen was placed under arrest, a decision to withdraw the case or not to prosecute or a judgment of acquittal was made to terminate the criminal procedure. Thirdly, where a judgment of acquittal was made by the court of second instance or the accused was found not guilty after the case was remanded by the court of second instance for retrial; etc.

Pursuant to the Regulations, where a compensation claimant files an application for compensation in person, the people¡¯s court receiving the application shall, in accordance with Article 12 of the State Compensation Law, issue to the claimant a written certificate of receipt stamped with the special seal of the court on the spot, with the date of receipt of the application indicated on the certificate. Where a compensation claimant files an application for compensation by mail or otherwise, the people¡¯s court receiving the application shall register and investigate the case in a timely manner. Where a compensation claimant refuses to accept the decision to dismiss the case made by a reconsideration authority or a people¡¯s court that acts as the authority liable for compensation, and files an application for compensation with the compensation committee of a people¡¯s court according to Article 24 and 25 of the State Compensation Law, the people¡¯s court receiving the application shall place the case on file pursuant to Articles 6 and 8 of the Regulations.

Where a compensation claimant files an application for compensation to a people¡¯s court, the people¡¯s court receiving the application shall place the case on file if it finds after examination that the application meets the following conditions. Firstly, the compensation claimant has the subject status as prescribed by the law. Secondly, the court is the authority liable for compensation. Thirdly, there are specific claim items and reasons for claim. Fourthly, it falls under any of the circumstances specified in Article 1 of these Regulations.

The Regulations also have provisions on the specific time limit. A people¡¯s court shall decide whether or not to place a case on file within seven days of receipt of an application for State compensation. Where the people¡¯s court decides to place the case on file, it shall serve a notice of acceptance of case on the compensation claimant within five days following the date that it places the case on file. If the case involves State compensation and shall be heard by the compensation committee of the people¡¯s court, copies of the notice of acceptance of case, application for State compensation or Registration Form of Application for Compensation shall also be served on the authority liable for compensation and the reconsideration authority. Where after examination, the people¡¯s court determines that the case does not meet the conditions for being placed on file, it shall make a decision to dismiss the case within seven days and shall serve the decision on the compensation claimant within ten days following the date when the decision is made.

 

Regulations for Implementation of the Law of the People¡¯s Republic of China on Tendering and Bidding

On November 30, 2011, the State Council promulgated the Regulations for Implementation of the Law of the People¡¯s Republic of China on Tendering and Bidding (hereinafter referred to as the Regulations), and put them into practice as of January 1, 2012.
According to the Regulations, projects in which State-owned funds hold controlling interest or play a leading role and which require bid invitation according to law shall be subject to bid invitation, unless under any of the following circumstances: (1) where, due to sophisticated technology of the project, special requirements or constraints from the natural environment, only a few potential bidders are available for selection; (2) secondly, where the proportion of the expenses for adopting open-tender approach against the contract amount of the project is too large. The competent department in charge of construction project examination and approval as well as ratification shall examine and determine the scopes, methods and organizations of any prospective bid invitation and notify the competent bidding and tendering administrative supervision department of the foregoing matter.

The Regulations have detailed the provisions on prohibition against restricting or excluding bidders in accordance with unreasonable conditions and nonstandard review measures: not adopting different qualification review or bid assessment criteria for potential bidders or bidders; not determining the qualification, technology and commercial conditions that do not cater to the specific features and actual needs of the tender project or are unrelated to contract performance, not using the performance or award of a specific administrative region or a specific industry as the condition for getting additional scores or the condition for winning the bid, not restricting or designating a specific patent, trademark, brand name, country of origin or supplier, etc.

With regard to the members of the bid assessment committee, the Regulations provide: people¡¯s governments at the provincial level and the relevant departments of the State Council shall establish consolidated bid assessment expert tanks. Except for the special tender projects specified in the Tendering and Bidding Law, the expert members of the bid assessment committee shall be determined by random selection from the lists of experts in the relevant profession in the bid assessment expert tank. Any entity or individual shall not appoint or appoint in disguised form expert members to join the bid assessment committee. The bid inviter of a project shall not replace any member of the bid assessment committee that is determined in accordance with the law for reasons not prescribed in the Tendering and Bidding Law and these Regulations.

Local people¡¯s governments at or above the level of cities with districts may, based on their actual needs, establish uniform and regulated trading premises for tendering and bidding so as to provide services for tendering and bidding activities. The trading premises for tendering and bidding shall not have subordination relationship with administrative and supervision departments and shall not be operated for profit-making purpose. The State encourages the use of information network to conduct electronic tendering and bidding.

 

Decision of the Standing Committee of the National People¡¯s Congress on the Amendment to the Law of the People¡¯s Republic of China on Prevention and Treatment of Occupational Diseases

On December 31, 2011, the Standing Committee of the National People¡¯s Congress promulgated the Decision on the Amendment to the Law of the People¡¯s Republic of China on Prevention and Treatment of Occupational Diseases (hereinafter referred to as the Decision), and put it into practice on the same day.

Main amendments made by the Decision to the pre-amendment Law on Prevention and Treatment of Occupational Diseases include:

(1) To strengthen the role of trade union. Trade union organizations shall supervise over occupational disease prevention and treatment work to safeguard the legitimate rights and interests of workers. Employers shall listen to the opinions of trade union organizations in formulating or amending the rules and regulations on occupational disease prevention and treatment. Trade union organizations shall supervise, urge and assist employers in the publicity, education and training on occupational health, have the right to give advice and recommendations to employers on the prevention and treatment of occupational diseases, sign special collective agreements on work safety and health with employers on behalf of workers in accordance with the law, coordinate with employers and supervise and urge the settlement of problems related to the prevention and treatment of occupational diseases as reflected by the workers.

(2) Responsibilities of the persons-in-charge shall be specified. The key persons-in-charge of employers shall take full responsibilities for the work of their own entities concerning the prevention and treatment of occupational diseases.

(3) Employers shall guarantee the capital investment required for the prevention and treatment of occupational diseases will not be embezzled or misappropriated and shall assume liabilities for the consequences resulting from insufficient capital investment.

(4) Where a hazardous accident relating to an acute occupational disease occurs or may occur, the employer shall adopt the emergency rescue and control measures immediately, and report it to the supervisory and administrative department of work safety and the relevant departments of the place where the employer is located in a timely manner. After receiving the report, the supervisory and administrative department of work safety shall organize the investigation and handling of the case in conjunction with the relevant departments; and may adopt temporary control measures when necessary. The administrative department of health shall organize the proper handling of the medical treatment work. But the pre-amendment Law on Prevention and Treatment of Occupational Diseases provides that the employer shall report to the administrative department of health.

(5) If an employer does not provide information such as the testing result of the hazardous factor at the work premise that causes an occupational disease in the course of the diagnosis or appraisal of the occupational disease, the diagnosis or appraisal institution shall make the conclusion on the diagnosis or appraisal of the occupational disease based on the clinical manifestation and the result of the adjunct examination of the worker, the worker¡¯s occupational history and history of contacting the hazard causing the occupational disease and by reference to the description given by the worker and the information about the routine supervision and examination provided by the supervisory and administrative department of work safety, etc. If the worker has objection to the information such as the testing result of the hazardous factor at the work premise that causes the occupational disease that is provided by the employer, or if there is no employer to provide the above information due to the dissolution or bankruptcy of the employer of the worker, the diagnosis or appraisal institution shall request the supervisory and administrative department of work safety to conduct investigation. The supervisory and administrative department of work safety shall make a decision on the information against which the objection is raised or the status of the hazardous factor at the work premise that cause the occupational disease within 30 days from the date on which it receives the application. The relevant departments shall offer cooperation.

(6) If a dispute over the labour relationship, the type of work, the post or the on-the-job time arises between the parties concerned when the worker¡¯s occupational history and history of contacting the hazard causing the occupational disease is confirmed in the course of the diagnosis or appraisal of the occupational disease, an application may be made to the local labour and personnel dispute arbitration committee for arbitration. The labour and personnel dispute arbitration committee that receives the application shall accept the application and make an award within 30 days. If the worker is unable to provide the evidence that is related to the arbitration claims and held and managed by the employer, the arbitral tribunal shall require the employer to provide the evidence within a specified time limit. If the employer fails to provide the evidence within the specified time limit, it shall bear the adverse consequence.

(7) Labour dispatch entities shall perform the obligations of employers that are prescribed by this Law.

 

The People¡¯s Bank of China and the State Administration of Foreign Exchange respectively promulgated the Notice on Issues concerning the Pilot Project for Domestic Securities Investment by RMB Qualified Foreign Institutional Investors of Fund Management Companies and Securities Companies

On January 4, 2012, the People¡¯s Bank of China promulgated the Notice on Issues concerning the Pilot Project for Domestic Securities Investment by RMB Qualified Foreign Institutional Investors of Fund Management Companies and Securities Companies (hereinafter referred to as the Notice).

Pursuant to the Notice, a pilot institution shall select a domestic commercial bank qualified both as a custodian for qualified foreign institutional investors and as a settlement agent on the inter-bank bond market (hereinafter referred to as the ¡°Custody and Settlement Agent Bank¡±) to open a basic RMB deposit account of foreign institutions and special RMB deposit accounts of foreign institutions. A pilot institution shall not open ordinary deposit accounts and temporary deposit accounts of non-temporary institutions. A pilot institution may open three types of Special Deposit Accounts with its Custody and Settlement Agent Bank to be used, respectively, for fund settlement for trading on the inter-bank bond market, trading on the exchange bond market and trading on the stock market.

A pilot institution shall make securities investment in the Mainland with the RMB funds raised in Hong Kong pursuant to the following requirements on asset allocation: subject to the approved investment quota, no more than 20% of the funds raised may be invested in stocks and equity-type funds, while no less than 80% of the funds raised shall be invested in fixed-income securities, including various types of bonds and fixed-income funds.

The Notice also has provisions on the materials required for opening special deposit accounts, the income and expenditure scopes of the special deposit account, materials required by the pilot institution for entering the inter-bank bond market, etc.

On December 20, 2011, the State Administration of Foreign Exchange promulgated the Notice on Issues Concerning the Pilot Project for Domestic Securities Investment by RMB Qualified Foreign Institutional Investors of Fund Management Companies and Securities Companies (hereinafter referred to as the Second Notice).

The State Administration of Foreign Exchange (¡°SAFE¡±) and its branches and foreign exchange administrative departments (hereinafter referred to as the ¡°Foreign Exchange Bureau¡±) shall lawfully monitor and manage the investment quotas, fund inflow and outflow, and other issues related to the domestic securities investment by RMB QFIIs. RMB QFIIs may not transfer or sell their own Investment Quotas to other institutions or individuals. Where an RMB QFII who has already obtained its Investment Quota fails to effectively use the same within one (1) year from the grant of such quota, the relevant Foreign Exchange Bureau shall reduce the RMB QFII¡¯s Investment Quota, and even cancel its Investment Quota depending on the relevant circumstances.

RMB QFIIs who have obtained the domestic securities investment business permit upon approval by the China Securities Regulatory Commission (¡°CSRC¡±) shall entrust their domestic custodians (hereinafter referred to as the ¡°Custodian¡±) to go through the procedures as required in this Notice on their behalf. An RMB QFII who has obtained the Investment Quota may reply on the quota approval issued by the SAFE to have its Custodian handle the formalities for fund inflow and outflow, and purchase of foreign exchanges.

The Custodians of RMB QFIIs other than open-end funds may remit RMB funds into the Mainland and remit funds abroad in RMB or in purchased foreign exchanges for them on a monthly basis. Where investment proceeds need to be remitted abroad in RMB or in purchased foreign exchanges, the said RMB QFIIs shall also submit to their Custodians the auditor¡¯s reports issued by domestic accounting firms and relevant tax certificates.

 

Detailed Rules for Implementation of the Regulations on the Administration of Lottery

On January 18, 2012, the Ministry of Civil Affairs and General Administration of Sport of China promulgated the Detailed Rules for Implementation of the Regulations on the Administration of Lottery (hereinafter referred to as the Detailed Rules), and put them into practice as of March 1, 2012.

The Detailed Rules have elaborated and explained some provisions of the Regulations on the Administration of Lottery, specified the administrative responsibilities of all government agencies, regulated the issuance and sale of lotteries, strengthened the administration of lottery draw and prize claim as well as lottery funds.

¡°Lottery varieties¡±, as referred to in Article 7 of the Regulations, shall mean the types of lotteries classified by the mechanism and features of lottery games, including lotto type, figures type, guessing type, traditional type, scratch-open type, video type, keno type, etc. Lottery issuing institutions shall, when the adding or alternation of lottery varieties involves major adjustments to technical schemes, entrust a professional testing institution with technical tests. Lottery issuing institutions shall apply for the examination and approval of a new lottery in accordance with following procedures: (1) Lottery issuing institutions shall submit the application materials with respect to new lottery varieties to be added to the Ministry of Civil Affairs or the General Administration of Sport of China for verification; (2) Lottery issuing institutions shall submit application materials to the Ministry of Finance upon approval of the Ministry of Civil Affairs or the General Administration of Sport of China; (3) The Ministry of Finance shall carry out preliminary review within 10 working days upon receipt of the application materials, and issue an acceptance or rejection notification; (4) The Ministry of Finance, after accepting the applications, shall solicit opinions from all circles of the society by organizing expert review or hearing or by other means; (5) The Ministry of Finance shall make a written decision within 90 working days after accepting the application in accordance with relevant regulations, lottery management systems and social opinions.

A lottery sales agent shall satisfy the following requirements: (1) A person reaching 18 years old and having full capacity for civil conduct, or an entity with the status of an independent legal entity; (2) Having necessary capital for engaging in lottery sales agent business; (3) Having necessary sites for lottery sales; (4) Having no criminal record or bad business credit record in the past five years; and (5) Other requirements set by lottery issuing institutions and lottery sales institutions.

The lottery public welfare funds shall be included into the budget in accordance with governmental fund management measures, with its revenue and expenditures being managed separately, and used specially for supporting social welfare, sports and other public undertakings. The surplus may be used in the next year and shall not be used for balancing the general financial budget. Prizes which fail to be claimed within a prescribed time limit shall be included into the lottery public welfare funds and turned over by lottery sales institutions to the provincial finance after settlement and summarization for the use of local governments.

 

Notice on Printing and Distributing the Interim Measures for Promoting the Development of Small and Medium-sized Enterprises through Government Procurement

On December 29, 2011, the Ministry of Finance and Ministry of Industry and Information Technology promulgated the Notice on Printing and Distributing the Interim Measures for Promoting the Development of Small and Medium-sized Enterprises through Government Procurement.

The small and medium-sized enterprises (including medium enterprises, small enterprises and mini enterprises) shall meet all the following conditions:

(1) Such enterprises shall be up to the standards for sizing small and medium-sized enterprises (see the Regulations on Standards for Sizing of Small and Medium-sized Enterprises promulgated by the Ministry of Industry and Information Technology, National Development and Reform Commission, Ministry of Finance and National Bureau of Statistics on June 18, 2011);

(2) Such enterprises shall provide goods manufactured by them, or projects or services undertaken by them, or provide goods manufactured by other small and medium-sized enterprises. The goods as mentioned in this subparagraph shall exclude the goods that use registered trademarks of large-sized enterprises. Mini and small-sized enterprises that provide goods manufactured by medium-sized enterprises shall be deemed medium-sized enterprises.

Specific supportive measures include: (1) All departments responsible for departmental budget (hereinafter referred to as ¡°all departments¡±) shall intensify the formulation of government procurement plans, formulate specific plans for procurement from small and medium-sized enterprises, and determine their procurement projects (including their subordinate entities, the same below) targeting small and medium-sized enterprises. On the premise of meeting departments¡¯ basic demands for self operations and providing public services, more than 30% of the total budget of annual government procurement projects shall be reserved for small and medium-sized enterprises, and among them, the proportion of reserves for mini and small-sized enterprises shall be not less than 60%. (2) For projects not specific for small and medium-sized enterprises, purchasers or purchase agencies shall stipulate a deduction of 6% to 10% of prices of products of mini and small-sized enterprises in bidding documents, negotiation documents or inquiry documents and the prices after deduction shall be considered in bid evaluation. Deduction proportions shall be determined by purchasers or purchase agencies. (3) Large and medium-sized enterprises shall be encouraged to form consortiums with other natural persons and legal persons, or other organizations shall be encouraged to form consortiums with mini and small-sized enterprises, to participate in government procurement not specific for small and medium-sized enterprises. Where the agreed contract value of mini and small-sized enterprises accounts for more than 30% of the agreed total contract value of a consortium in the consortium contract, 2% to 3% of prices of products of the consortium may be deducted. (4) Purchasers shall be encouraged to permit large-sized enterprises that acquire government procurement contracts to subcontract relevant projects to small and medium-sized enterprises in accordance with law. The value of relevant projects subcontracted by large-sized enterprises to small and medium-sized enterprises shall be included in the statistical amount of purchase from small and medium-sized enterprises.

 

Notice on the Value-added Tax and Business Tax Policies Supporting the Development of the Animation and Comic Industry

On December 27, 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Notice on the Value-added Tax and Business Tax Policies Supporting the Development of the Animation and Comic Industry (hereinafter referred to as the Notice) the duration of which is from January 1, 2011 to December 31, 2012.

Pursuant to the Notice, after animation and comic enterprises who are VAT general taxpayers have paid VAT at the rate of 17% for sale of the animation and comic software products developed and produced on their own, the actual amount of VAT paid beyond 3% shall be refunded immediately after collection. Animation and comic enterprises shall be exempted from VAT for export of animation and comic software products. Business tax shall be levied at a reduced rate of 3% on the labour services provided by animation and comic enterprises for developing animation and comic products, including script writing, image design, background design, animation design, storyboarding, animation production, filming, profiling, colouring, image composition, dubbing, background scoring, sound synthesis, editing, subtitling, and compression and transcoding (to support online and mobile animation and comic file formats), as well as on the incomes obtained by animation and comic enterprises from copyright assignment transactions within the territory of China (including licensing and re-authorization of the brands, images or contents of animation and comic products).

 

Circular on Further Strengthening the Administration of the Qualification for Online Map Service

On December 23, 2011, the National Administration of Surveying, Mapping and Geoinformation promulgated the Circular on Further Strengthening the Administration of the Qualification for Online Map Services (hereinafter referred to as the Circular).

Pursuant to the Circular, entities qualified for online map service shall use maps examined and approved by the competent administrative departments of surveying, mapping and geoinformation at or above the provincial level for providing services, and indicate the map examination code, serial number of the surveying qualification certificate, serial number of the ICP certificate for value-added telecommunication service together in a prominent place on their websites. Entities qualified for online map service with foreign investment shall report to the competent administrative departments of surveying, mapping and geoinformation, and file a new application for qualification examination in accordance with the Interim Administrative Measures for the Surveying and Mapping Conducted by Foreign Organizations and Individuals in China.

No entities qualified for online map service shall provide links to foreign online map service. The real image maps published by entities qualified for online map service shall be submitted for examination in accordance with the relevant regulations on map examination; or otherwise such real image maps shall not be published on the internet.

From February 1, 2012, no entities qualified for online map services may be engaged in online map services; for those entities that have already filed an application or are in the process of examination and approval may not provide new online map services before obtaining a qualification for online map services.

Legal Practices

Analysis on Guiding Direction of the New Catalogue of Industries for Guiding Foreign Investment

 

On December 24, 2011, the National Development and Reform Commission (hereinafter ¡°NDRC¡±) and the Ministry of Commerce (hereinafter ¡°MOFCOM¡±) promulgated the Catalogue of Industries for Guiding Foreign Investment (2011 Revision), which shall officially become effective as of 30 January 2012 (hereinafter referred to as ¡°Catalogue 2012¡±). This article, through comparing the Catalogue 2012 with the Catalogue of Industries for Guiding Foreign Investment (2007 Revision) (hereinafter referred to as Catalogue 2007), intends to briefly analyze the guiding direction of Catalogue2012 to foreign investment in China.

Generally, the main revisions in Catalogue 2012 are as follows:

1. Further broadening sectors and industries open to foreign investment.

Generally speaking, since the issue of the first version of Catalogue of Industries for Guiding Foreign Investment in 1995, each revision has followed the principle of further opening to the outside. The Catalogue 2012 has increased three encouraged items, removed 7 items from the restricted categories and 1 item from the prohibited categories; meanwhile, it has also removed restrictions on foreign shareholdings in several sectors, and it also has reduced 11 items in the encouraged and restricted categories which required shareholdings proportion.

For instance, in the mining industry, unconventional natural gas resources is added to the scope of exploration and development in the Catalogue 2012, shale gas and seabed gas hydrate are listed for examples, and the way of Sino-foreign equity joint venture is also allowed. Catalogue 2012 has added manufacture of additional types of equipment into the encouraged category, including manufacture of equipment for recycling and disposal of waste and worn textile products, re-manufacture of waste and worn mechanical products, and comprehensive utilization of waste and worn tires.

2. Promoting foreign investment in high-end manufacturing industry, breeding energy-saving, environment-friendly and strategic emerging industries.

Catalogue 2012 has put the high-end manufacturing industry as a key field which encourages foreign investment promoting the foreign investors to use new technology, process, materials, and equipment, hence it has added textile, chemicals, and machinery manufacturing to the encouraged categories. For instance, in chemical industries, it has added auxiliary raw materials for synthetic materials, raw materials for synthetic fibers, synthetic rubber, engineering plastics and plastic alloys. In machinery manufacturing industry, it has added bearings of wind turbine generator set, manufacture of aircraft bearings, manufacture of high-density, high-precision, complex-shaped powder metallurgical parts and chains used for automobile, engineering machinery, manufacture of gear transmission used for wind power or high speed trains, gear transmission system with adjustable blades used for vessels, and large-sized, heavy-load gear box, etc.

In order to develop strategic emerging industries such as energy-saving and environment-friendly industry, new generation information technology, biology, new energy, new material, new energy automobiles, etc., and encourage foreign investment in these industries, Catalogue 2012 has added, in the encouraged categories, manufacture of key parts and components of new energy automobile, development and manufacture of next generation Internet system equipment, terminal equipment, testing equipment, software, and chips based on IPv6, etc.

3. Encouraging foreign investment in modern service industry.

The service industry is considered as next key attraction for foreign investment. In order to encourage foreign investment in modern service industry and support the utilization of foreign investment in livelihood service industry, Catalogue 2012 has made comparatively great amendments on policies of foreign investment. For instance, Catalogue 2012 has increased several encouraged categories, including construction and operation of vehicle charging stations and battery replacement stations, venture capital enterprises; intellectual property rights services, home service, cleaning service for oil pollution on the sea, occupational skills training, etc. Meanwhile, in line with the Opinions on Further Encouraging and Guiding the Establishment of Medical Institutions by Social Capital which was forwarded by the General Office of the State Council, Catalogue 2012 has removed the medical institutions from the restricted category, permitting whole foreign investment in medical institutions. In addition, the financial leasing company has also been removed from the restricted categories.

Besides, with respect to ¡°culture, sports and entertainment¡± which the state has the intention to develop, though there is no big change in the encouraged and restricted categories, Catalogue 2012 reduces the categories which prohibit foreign investment. For example, foreign investment will not be prohibited in general distribution and import of books, newspapers, and periodical, imports of audio video products and electrical publications, or video screening companies.

4. Adding a few restricted or prohibited industries, and reducing several encouraged industries.

Compared to the industries that have been broadened for foreign investors, Catalogue 2012 has added a few restricted categories in some areas. For example, Catalogue 2012 has removed, from the encouraged categories, manufacture of complete automobiles, multi-crystal silicon, coal chemical, etc.

In the mining industry, besides exploration and exploitation of diamonds, Catalogue 2012 has added high-alumina fireclay, wollastonite, and graphite as three nonmetal ores into restricted categories. Meanwhile, exploitation and ore dressing of lithium and iron sulfur mines and extraction of brine resources from salt lakes has also been added into the restricted category.

In mailing industry, domestic express delivery of letters has been added to the prohibited category, while in the real property area, construction of villa has been moved from the restricted to the prohibited category.

Besides the above-mentioned key changes in the new catalogue, the following issues are also worth noticing when foreign investors conduct business in China.

1. Linkup with Catalogue 2007

Pursuant to the interpretation of NDRC, Catalogue 2007 shall apply to foreign investment projects approved before the implementation of Catalogue 2012. However, regarding projects on which restrictions (including prohibition) have been imposed by Catalogue 2012, such as a foreign invested enterprise existing and operating before January 31, 2012, the policy which was effective upon its approval shall apply, but Catalogue 2012 shall apply to its capital increase, share transfer or public offering.

2. Shift of industry policy

Pursuant to the interpretation of NDRC, several encouraged items removed from Catalogue 2012 will be taken into account during the amendment of the Catalogue of Priority Industries for Foreign Investment in the Central-Western Region, considering the principles of promoting the acceptance of shifted industries in central-western region, and developing distinguishing priority industries in western and central regions.. Therefore, when foreign investors invest in western and central regions, they shall review whether there are special policies under the Catalogue of Priority Industries for Foreign Investment in the Central-Western Region (2008 Version, as amended from time to time) besides Catalogue 2012.

3. Foreign investment issues out of Catalogue 2012

Furthermore, when making investment in some special industries, foreign investors shall consider other laws and regulations besides the Catalogue 2012. For example, setting up offices of foreign law firms in China shall be subject to the Regulations on the Administration of Foreign Law Firms¡¯ Representative Offices in China. While establishment of foundation shall be examined and approved in the light of the Regulations on Registration and Administration of Social Organizations and Regulations on Foundation Administration, rather than regulated by NDRC and MOFCOM.

(The author¡¯s contact information: baileyxu@hllawyers.com)

 

Legal Liabilities and Corresponding Solutions for Inability to Perform Housing Sale and Purchase Contract under the House Purchase Restriction Policy

[Background]

According to the Opinions of Shanghai Municipality on Implementing the Notice of the State Council on Issues Related to Further Enhancing the Regulation and Control of Real Estate Market (No. 6 [2011] Hu Fu Ban Fa) promulgated by the General Office of Shanghai Municipal People¡¯s Government, the house purchase restriction policy was officially carried out in Shanghai on February 1, 2011.

Pursuant to the Circular on Issues Concerning Strengthening Regulation on Commodity House Sales in Shanghai Municipality and Strictly Implementing Restrictions on Residential House Sales promulgated by Shanghai Municipal Housing Support and Building Administration Bureau on July 20, 2011, where a family without the registered permanent residence of Shanghai purchases a house upon strength of the personal income tax payment receipt, the declaration date of the personal income tax must meet the regulations of ¡°a 12-month contribution of the personal income tax is completed in the past 2 years up to the house purchase date¡±, and supplementary payment of personal income tax will not be acknowledged.

[Case Profile]

In May 2011, Zhang, a resident in Shanghai yet without the registered permanent residence of Shanghai, was introduced to Tang by a house intermediary agent and signed a brokerage agreement with Tang for house purchase. In light of the house purchase restriction policy, Zhang proposed to purchase the house through the remedial payment of personal income tax and together with Wang concluded an official Shanghai Municipality Housing Sale and Purchase Contract with Tang and at the same time made the down payment. Thereafter, Zhang could not handle formalities for bank loans and property title transfer since the new policy explicitly prohibits against detouring the purchase restriction policy through the remedial payment of personnel income tax. To this end, Zhang requested to change contractual parties to Wang and Tang, for the conditions of Wang complied with the house purchase restriction policy, but Tang insisted Zhang bearing the liability for breach instead of accepting the said arrangement. Under the circumstance where the buyer and seller could not reach any consensus and it was impossible for the Contract to be performed, Zhang and Wang filed a lawsuit to the court in September 2011, requesting to rescind the Contract and requesting Tang to refund the down payment, but on the other hand Tang filed a counterclaim that Zhang should pay a penalty of RMB 300,000 Yuan which was equal to 20% of the total house price.

In the process of court trial, Zhang claimed that he never fabricated or concealed any real condition and the witness from the house intermediary side evidenced the fact that Tang knew about the migrant worker status of Zhang and Zhang¡¯s need of making remedial payment of personal income tax for the house purchase. It is the relevant policy change, rather than Zhang¡¯s unilateral going back on his words with regard to the house purchase, that has caused the contract to be unable to be performed. On the other hand, Zhang once claimed for change of the contractual parties in order to continue to perform the Contract but Tang maliciously claimed liquidated damages and refused to follow Zhang¡¯s proposed change. However, Tang defended himself that since he knew nothing about the actual status of Zhang, Zhang should be liable for his own incompliance with the relevant regulations on the house purchase.

The court of first trial asserted that the Special Notice (II) of the House Sale and Purchase Contract has already informed the house purchaser of all the preconditions he should have and the relevant consequences. Zhang was clearly aware of his not having the said preconditions but still attempted to obtain the house purchase qualification through inappropriate means, therefore, the consequence of Zhang¡¯s failure to perform the Contract due to his not having the house purchase qualification should be borne by Zhang himself. The court of first trial finally judged that the Contract should be rescinded, Mr. Tang should refund to Mr. Zhang the down payment and Mr. Zhang should pay to Mr. Tang liquidated damages of RMB 140,000 Yuan. Furthermore, the court of second trial dismissed in January 2012 the appeal filed by Tang that the amount of the liquidated damages determined by the court of first trial was too small to cover Tang¡¯s losses caused by the fall of housing price in the latter half of 2011.

[Lawyer Analysis]

Under the circumstance where the State real property control policies remain unchanged and Shanghai housing prices fluctuated from time to time, the present case will provide some reference and warning significance for execution and performance of house sale and purchase contract, contract dissolution and dispute settlement.

1. In accordance with the continuity of the real estate control policies and the relevant judicial precedent, a sweeping approach is mostly adopted to ascertain that the party lacking in house purchase qualification should be solely liable for the breach of failure to perform the sale and purchase contract; furthermore, the plea made by the purchaser with regard to the change of circumstances or force majeure as well as other particulars not attributable to both parties concerned was more often than not rejected. Therefore, a prospective house purchaser should be fully aware of such alternatives as ¡°packaging¡± or other special approaches taken by the relevant house intermediary agent to close a house property transaction and avoid any fluke mind in such transaction. The purchaser should reach consensus with the seller on relevant circumstances and make explicit and reasonable covenants in the house sale and purchase contract on such matters with possible adverse effect on the performance of the house sale and purchase contract and house property transfer registration as well as on the apportionment of liabilities, and otherwise the purchaser will probably suffer from claims for reasonable intermediary commissions due to the house intermediary agent and huge liquidated damages or economic losses due to the seller.

2. Pursuant to the house purchase restriction policy in Shanghai, any purchaser in breach of the relevant regulations is not entitled to handle the house property registration. Therefore, the seller shall have appropriate knowledge and confirmation of the prospective house purchaser¡¯s qualification and status before executing any letter of intent or house sale and purchase contract in order to avoid any failure to handle the house property transfer registration or postponement of transaction due to any breach of the house purchase restriction policy or inaccurate declaration of other matters (such as debts or taxes). In addition, pursuant to the house property transaction registration process in Shanghai, once the purchaser and the seller execute an official house sale and purchase contract (i.e. subject to online record in the house property transaction center, known as ¡°Online Execution¡±), the online record cannot be unlocked under the circumstance where the two parties fail to reach consensus on contract rescission and the seller therefore cannot sell the house by himself or herself. In the present case, it is the seller¡¯s refusal to change the contractual parties and tough and obstinate claim for the liquidated damages of 20% of the total house price that have caused the dispute to be subject to court proceedings and the house unable to be sold after the first and second trials. Therefore, the seller, under the circumstance where the transaction is stalemated due to some special conditions, should make reasonable and rational analysis of such costs as time and opportunities that might be caused by the contract rescission and claim for compensation and negotiate a reasonable rescission solution with the other party, for the purpose that the dispute is able to be settled in a timely and effective manner.

(The author¡¯s contact information:terryxie@hllawyers.com)

 

Brief Analyses on Guiding Cases of the Supreme People¡¯s Court

[Key Words]

Civil, Brokerage Contract, Sale and Purchase of Second-hand Houses, Breach

[Case Profile]

In the case of brokerage contract dispute between Shanghai Centaline Property Consultant Limited (hereinafter referred to as ¡°Centaline¡±) and Tao Dehua, Centaline alleged that Tao took advantage of the house sale information provided by the Centaline but entered into a house purchase contract directly with the seller by bypassing Centaline, under which circumstance a breach should be deemed to have been constituted by Tao who should therefore pay a penalty of RMB 16,500 Yuan. However, Tao defended himself that the original owner of the house in dispute authorized many house intermediary agents to sell the house, therefore Centaline was neither the exclusive owner of the house information nor the exclusive agent for sale of the house. Tao did not take advantage of the information provided by Centaline, let alone bypassed Centaline to enter into a contract with the seller.

After trial, the Court ascertained that the original property owner Li of the house in dispute actually went to several house intermediaries to have its house listed for sale. The defendant Tao and his wife were led to visit the house in dispute by several intermediaries and singed a Confirmation Letter for House Property Wanted with Tao. The Confirmation Letter provided that within six months after Tao checked the house in dispute, where Tao or its authorized person, agent, representative, undertaker and any other person related with Tao who utilized the information, opportunities, etc. provided by Centaline failed to establish a transaction with the third party via Centaline, Tao should pay to Centaline a penalty of 1% of the actual transaction price of the house in dispute. The quotation made by Centaline was RMB 1,650,000 Yuan and that made by another intermediary was RMB 1,450,000 Yuan. Thereafter, with the brokerage of the latter intermediary, Tao signed a house sale and purchase contract with Li at the final transaction price of RMB 1,380,000 Yuan and Mr. Tao paid to the intermediary a commission of RMB 13,800 Yuan.

[Court Ruling]

The People¡¯s Court of Shanghai Hongkou District made a civil judgement (No. 912 [2009] Hong Min San (Min) Chu Zi) that Tao should pay to Centaline a penalty of RMB 13,800 Yuan. After the judgement was pronounced, Tao lodged an appeal to Shanghai No. 2 Intermediary People¡¯s Court. After the second trial, Shanghai No. 2 Intermediary People¡¯s Court made a civil judgement (No. 1508 [2009] Hu Er Zhong Min Er (Min) Zhong Zi) that the civil judgement pronounced by the People¡¯s Court of Shanghai Hongkou District should be revoked and Centaline¡¯s claim against Tao Dehua for payment of liquidated damages of RMB 16,500 Yuan should not be supported.

[Main Point of Verdict]

The case of Shanghai Centaline Property Consultant Limited (hereinafter referred to as ¡°Centaline¡±) versus Tao Dehua on brokerage contract disputes was actually a kind of dispute arising out of the ¡°bypassing¡± act of the buyer in the sale and purchase of second-hand house. This precedent confirms that the agreements of the brokerage contract which prohibit the buyer from utilizing the house resource information provided by the broker and from bypassing the broker to enter into a property purchase and sale contract with the seller have binding force, i.e. the buyer shall not breach the contract through ¡°bypassing¡± the broker who has provided important house information to him or her; however, if the same property sale information has been published by multiple brokers and the buyer obtains such information through the above legitimate means, the buyer shall have the right to choose a broker offering the lowest quotation and best services among various brokers to facilitate the transaction, which shall not be deemed a breach of contract.

[Lawyer¡¯s Opinion]

In second-hand house transactions, house resources as well as transaction opportunities are very importance to both the seller and buyer, so the house intermediaries usually manage to cause the transactions to be fulfilled through collecting and summarizing house information. Therefore, such clause as ¡°any private transaction not via the intermediary¡± shall not be determined as null and void on the ground that the intermediary tries to take advantage of standard clauses to impair the customers¡¯ right to make independent choice, or otherwise the loss of social contractual spirit will be worsened.

In the present case, the ruling of the court acknowledged the validity and effectiveness of the provision of the Brokerage Contract that it is prohibited that the purchaser who utilizes the house resources information provided by the intermediary should sign a house purchase and sale contract directly with the seller. However, the key of weighing whether the purchase has ¡°made a detour¡± lies in that whether the purchaser had utilized the house resources information, opportunities, etc. provided by such intermediary. If the seller engaged several intermediaries to release its house resource information and the purchaser was able to obtain such information by other appropriate means, the purchaser should be entitled to choose the intermediary that offered lower price and better services to cause the house purchase and sale contract to be executed, under which circumstance the purchaser should not be deemed to have constituted a breach.

At the same time, I believe the Contract Law expressly stipulates that the intermediary failing to cause the Brokerage to be executed shall not request the principal to pay any remuneration pursuant to the Brokerage Contract; but Centaline indeed provided such services as advertising, introducing house resources and guiding to visit house resources during the brokerage period, so Centaline may claim necessary fees against the purchaser and seller, the specific amount of which may be determined by the court in accordance with the contents of services and industry practices.

The present case is one of the first guiding cases announced after the Provisions on Case Guidance Work were printed and issued by the Supreme People¡¯s Court on November 26, 2010. Announcement of the guiding cases is good for all levels of courts to accurately grasp the guiding spirit of various cases in court trials and for realizing the organic unification of the legal effect and the social effect of the case judgment. The announcement have also established the case guidance work mode for the Supreme People¡¯s Court to announce guiding cases and for the supreme people¡¯s court of all levels to issue reference cases.

(The author¡¯s contact information:bruceluan@hllawyers.com)

 

Conflict Between Pre-existing Rights and Trademark¡ªCase Study

 

¡°Trademark Registration Forestalling¡± has been one of the hottest issues in recent years. From the forestalling registration of ¡°Hisense¡± in Germany by Siemens to the trademark dispute over ¡°Liu Lao Gen¡± in China to a rage of registration of the names of many domestic and overseas entertainers as trademarks, ¡°Trademark Registration Forestalling¡± has been one of our people¡¯s concerns. Recently, the dispute between Michael Jordan, American famous basketball star, and Qiaodan Sports Co. over the alleged infringement by ¡°Qiaodan¡± of Qiaodan Sports Co. upon Michael Jordan¡¯s right of name again shifted the public focus to the ¡°Trademark Registration Forestalling¡± and the conflict between the pre-existing right and trademark.

An explanation needs to be made for the ¡°Trademark Registration Forestalling¡±. ¡°Trademark Registration Forestalling¡± is not a legal concept, and at the same time it is not necessarily a breach of the laws and regulations of China in light of the principle of prior application applicable to trademark registration in China. Article 3 of the Trademark Law of the People¡¯s Republic of China provides that trademarks that are registered upon verification and approval of the Trademark Office are registered trademarks, and a trademark registrant shall be entitled to the exclusive right to use the registered trademark and such right shall be protected by law. In other words, obtainment of a trademark in China is based on the application for registration of it, under which circumstance, who applies first for registration of a trademark is entitled to the exclusive right to use the registered trademark. This will definitely make the act of ¡°Trademark Registration Forestalling¡± legally feasible and practically necessary. However, not all acts of ¡°Trademark Registration Forestalling¡± will be determined lawful, and according to Article 30 of the Trademark Law of the People¡¯s Republic of China, ¡°any one may file an opposition to a preliminarily approved trademark within three months of the publication date.¡± Furthermore, Article 41 hereof further stipulates that any trademark owner claiming a malicious forestalling registration of its own trademark by any other person may apply to the State Administration for Industry & Commerce Trademark Appeal Board for revocation of the said trademark. Causes for the attack against the unjustifiable ¡°Trademark Registration Forestalling¡± mainly include that the applicant for registration of the trademark infringes the pre-existing right of another person, infringes the well-known trademark and is an unjustifiable forestalling application for registration of a trademark that has already been used by another person and has a certain influence, etc. In the following text, the author will specially elaborate on the infringement by a trademark application upon another person¡¯s pre-existing right through citing the relevant cases.

I. Relevant Legal Provisions on the Settlement of the Conflict between Pre-existing Right and Trademark

Before analyzing relevant cases, the author has summarized the relevant laws and regulations on the conflict between pre-existing right and trademark.

First of all, Article 9 and Article 31 of the Trademark Law enforced by our nation as of 2001 have explicit provisions on the application of pre-existing right. Article 9 provides that a trademark for which a registration application is made shall have distinctive features and be easily distinguishable, and shall not conflict with the pre-existing lawful rights of others. Article 31 provides that an application for trademark registration shall not prejudice any pre-existing right of others. It is prohibited to forestall the registration, through any improper means, of a trademark that is already used by another party and has produced a certain influence. Notwithstanding the foregoing fundamental provisions, the Trademark Law makes no explanation on the specific content of the pre-existing right.

The Supreme People¡¯s Court promulgated in February 2008 the Provisions on Certain Issues Concerning the Trial of Civil Dispute Cases Involving Conflict of a Registered Trademark or Enterprise Name with Any Pre-existing Right, Article 1 of which provides that if a plaintiff files a lawsuit alleging that the words or devices contained in another¡¯s registered trademark infringe the plaintiff's copyright, exterior design patent, enterprise name right, or other pre-existing rights so that the provisions of Article 108 of the Civil Procedure Law have been violated , the relevant people¡¯s court shall accept the lawsuit. In April 2010, the Supreme People¡¯s Court promulgated the Opinions on Certain Issues concerning the Trial of Administrative Cases of Trademark Authorization Confirmation, pointing out the fundamental principles that shall be followed by the people¡¯s court in hearing cases of trademark disputes. With regard to trademarks under dispute that have not been widely used, a people¡¯s court, while trying administrative cases of trademark authorization confirmation, can impose strict trademark authorization confirmation criteria in accordance with the law in the examination and judgment of authorization confirmation conditions, such as trademark similarity and goods similarity, and in handling of conflicts with the earlier trademark, and shall take into full consideration the interests of consumers and peer business operators. Where the Trademark Law is silent, the legitimate rights to be protected pursuant to the General Civil Law (of the People¡¯s Republic of China) and other laws and regulations shall be protected pursuant to the summarized provision.

In addition to the above laws and regulations as well as judicial interpretations, the State Administration for Industry and Commerce promulgated in 1999 the Opinions on Resolving Certain Issues Involved in Trademarks and Enterprise Names with provisions on solutions to the conflict between trademarks and enterprise names.

From the judicial experiences of recent years, the pre-existing rights subject to infringement by the ¡°Trademark Registration Forestalling¡± include the name right of a natural person, the right of portraiture and other personal rights in addition to the copyright, design patent and the right of enterprise name already specified by the foregoing judicial interpretations. The author will cite relevant cases in the following text to make analyses respectively on the conflicts between all kinds of pre-existing rights and trademarks.

II. Conflict between Trademark and Copyright

[Case Profile] In the case of the trademark dispute filed by NEWPEARL CERAMICS GROUP against the State Administration for Industry & Commerce Trademark Appeal Board (No. 2818 [2010] Yi Zhong Zhi Xing Chu Zi), the alleged third person Su Yihe registered the trademark of ¡°SUMMIT and Pictures¡± (hereinafter referred to as the ¡°Objected Trademark¡±), but GUANGDONG NEWPEARL CERAMICS GROUP (hereinafter referred to as ¡°NEWPERAL GROUP¡±) raised an objection to the Trademark Office, alleging that the pre-existing right of business name as well as the copyright of Foshan Summit Ceramics Co., Ltd., the licensed user of the cited trademark, has been infringed by the Objected Trademark.

Beijing No. 1 Intermediate People¡¯s Court deemed during the trial of the said case that NEWPEARL COMPANY had submitted to the Trademark Appeal Board the cited trademark registration certificate, authorized design proof and design drafts with the company chop affixed thereupon; under the circumstance where there was not any evidence to the contrary, the said materials submitted by NEWPEARL COMPANY were sufficient to prove that before the registration of the Objected Trademark NEWPEARL COMPANY had already acquired the copyright of the registered cited trademark and publicized such copyright in the form of trademark registration and made the cited trademark available to the social public. At present the Objected Trademark was identical with the cited trademark and thus was deemed an infringement upon the pre-existing copyright of NEWPEARL COMPANY. The Trademark Appeal Board failed to review the design drafts included in the evidence and insufficiently determined that the controversial trademark did not impair the pre-existing copyright of NEWPEARL COMPANY, which was not supported by facts and legal grounds. Therefore, Beijing No. 1 Intermediate People¡¯s Court supported NEWPEARL COMPANY¡¯s claim.

From the above case, the key point of a claim for a demurral (revocation) application on the basis that the trademark infringes the pre-existing copyright lies in how to bear the burden of proof to that the opponent applicant (or the applicant for revocation) has already acquired the copyright in relation to the pictures or characters of the controversial trademark. In accordance with the principle of ¡°the burden of proof lies upon him who affirms¡±, the opponent applicant (or the applicant for revocation) in judicial practices must affirm that it has the pre-existing copyright, usually and mainly upon the strength of the authorized design contract, design drafts, communication materials to-and-fro between the designer and the principal in the process of design, etc. Therefore, the author believes that the registration of copyright of a design (work of art) can be handled in the meantime when an original logo is subject to trademark registration, under which circumstance, even if the trademark is not all-around registered, a forestalling registration of the said design by another person in different categories of commodities.

III. Conflict between Trademark and Design Patent

In the case of the administrative trademark dispute between GUANGXI YUANANTANG PHARMACEUTICAL CO., LTD. and the State Administration for Industry and Commerce Trademark Appeal Board (No. 488 [2010] Yi Zhong Zhi Xing Chu Zi), Yangjiang Jin Hui Huang Daily-Use Chemicals Co., Ltd. (hereinafter referred to as ¡°Jin Hui Huang¡±) applied for the trademark ¡°FUYINJIE¡±, and GUANGXI YUANANTANG PHARMACEUTICAL CO., LTD. (hereinafter referred to as ¡°YUANANTANG¡±) filed a dispute settlement application to the Trademark Appeal Board with one of the causes that the trademark in dispute has constituted an infringement upon the pre-existing design patent of YUANANTANG.

Beijing No. 1 Intermediate People¡¯s Court held, the precondition for judging whether a registered trademark becomes an impairment to the design patent of any other person should be whether the category of goods or services covered by such trademark is the same as or identical with the category of goods or services covered by the other person¡¯s design patent. In the present case, such design patent, pursuant to the picture attached to the relevant design patent registration certificate provided by YUANANTANG, is mainly used on the outer package of drugs which are not identical or similar with the air freshener approved to be covered by the trademark in dispute. In addition, the above design patent was nullified on November 19, 2011. Therefore, the claim of YUANANTANG could not get any support.

With regard to the case of a trademark¡¯s infringement upon a design patent, the burden of proof is easier to bear because a design patent must be announced and registered in order to be effective. Where the interested party produces the design patent registration certificate and relevant announcement paper, it will be very easy for the court to judge whether the applicant who has filed the demurral (revocation) hold a pre-existing right to the design patent. However, according to the author¡¯s professional experience, the following two aspects are indispensable for judging whether a trademark application infringes a design patent.

1) The design patent must be legal and valid upon the trademark registration, i.e. the patent must have a validity term of ten years and the patent fees have been paid in due course. Where the design patent becomes null and void, it will not be entitled to any pre-existing right.

2) For a pre-existing right to be constituted, the article used by the design patent must be identical or similar with the goods approved to be designated to be covered by the trademark, and otherwise even if the design patent is legal and valid and is exactly identical with the logo, the patent holder cannot impede any other person from registering the trademark on the grounds that it owns the patent.

IV. Conflict between Trademark and Enterprise Name Right

[Case Profile] In the case of administrative dispute over the trademark ¡°Andeli ADL¡± between Huang Cheng and the State Administration for Industry and Commerce Trademark Appeal Board and Zhongshan Andeli Locks Co., Ltd. (No. 592 [2007] Gao Xing Zhong Zi), Zhongshan City Lee locks Co., Ltd. (hereinafter referred to as ¡°Lee¡±) applied for the trademark ¡°Andeli ADL¡±, but Zhongshan Andeli Locks Co., Ltd. (hereinafter referred to as ¡°Andeli¡±) claimed that the Lee¡¯s application for the trademark ¡°Andeli ADL¡± infringed its pre-existing rights and thus filed an application for trial of the trademark dispute.

The court held, Andeli Locks Factory and Andeli Hardware Factory, as associated enterprises of Andeli, had already gone through the industrial and commercial registration in 1994. The trade name ¡°Andeli¡± of such enterprises have already constituted a pre-existing right of Andeli and its associated enterprises before the application date of the trademark in dispute. The trade name ¡°Andeli¡± is known to the public in the local area, under which circumstance the registration of ¡°Andeli ADL¡± by Lee will probably impair the rights and interest of Andeli and its associated enterprises.

The author supposes that the following aspects are worth paying attention to in the conflict between the trademark and the enterprise name right.

1) A pre-existing right should be constituted on the ground that the trademark is with a certain degree of popularity. Therefore, in the case of this kind, the applicant who has filed the demurral (revocation) must be able to prove that the trademark in dispute has been widely used and is widely known to the public in the locality. For instance, it is evidenced that the relevant public have known much about the trademark; the trademark has been used for a long time; and the trademark has been massively publicized, etc.

2) Only when the place of use of the trademark and the domicile of the trademark registration forestaller are in the same region, and the trademark and enterprise name right belong to the same or similar industry operator, can the act of the trademark registration forestaller be deemed inappropriate and the trademark holder be entitled to stop the trademark registration forestaller from the prospective forestalling registration of the trademark. The law does not specify the specific scope of the said region, but the judge will make judgement on that in trial of the case according to such factors as the nature and the business mode of the commodities.

V. Conflict between Trademark and Name Right

[Case Profile] In the appeal filed by BRITNEY SPEARS against the State Administration for Industry & Commerce Trademark Appeal Board (No. 3257 [2010] Yi Zhong Zhi Xing Chu Zi), Guangzhou Baiyun Jun Ming Leather Products and Handbags Factory (hereinafter referred to as ¡°Jun Ming Factory¡±) applied for registration of the trademark ¡°BRITNEY¡±, where led to an allegation filed by BRITNEY SPEARS that this act was an infringement upon her name right.

Beijing No. 1 Intermediate People¡¯s Court concluded after trial that the name of right, as a statutory right, should be a kind of pre-existing right. Generally speaking, where the relevant public would automatically think of the name of someone at the sight of a trademark and believe that such trademark or the provider of commodities with such trademark is associated with the ¡°someone¡±, the right of name of such ¡°someone¡± could be impaired thereby. Thus, the reputation of the name owner should be taken into consideration for the judgement upon whether a trademark has impaired the current pre-existing right of another person. Therefore, in the present case, the focus of the dispute was placed on whether or not the plaintiff was known to the public in Mainland China before the trademark registration date. However, the evidence produced by the plaintiff in the review phase was not sufficient to prove that the plaintiff¡¯s full name ¡°BRITNEY SPEARS¡± or first name ¡°BRITNEY¡± was known to the public in Mainland China before the trademark registration date, a sole and congruent relationship had already been built by the public between ¡°BRITNEY¡± and the plaintiff, the trademark in dispute used on the designated commodities were prone to make the public believe that the said commodities came from the plaintiff or bore certain relations with the plaintiff, which led to impairment of the plaintiff¡¯s related interests that might be obtained by virtue of her right of name. Therefore, the claim by BRITNEY SPEARS was revoked.

In the action filed by Yi Jian Lian Sports Goods (China) Co., Ltd. against the State Administration for Industry & Commerce Trademark Appeal Board (Case No.: No. 707 [2010] Yi Zhong Zhi Xing Chu Zi), Beijing No.1 Intermediate People¡¯s Court held that Yi Jianlian, as the third person, was engaged in basketball practices since the year of 1999 and played in numerous international basketball games and was known to the relevant public before the date of application for registration of the controversial trademark. Mingle (China) Co., Ltd. (the original applicant for the trademark ¡°Yi Jian Lian¡±), a sports goods company, registered without license a controversial trademark identical with the name of the third person for sports shoes so as to cause a congruent relationship to be built by the relevant public between the controversial trademark and the third person, under which circumstance the relevant public was prone to believe that the said commodities came from the third person or bore certain relations with the third person, in which case, the related interests that might be obtained by the third person by virtue of his reputation might be impaired. Whereas the registration of the controversial trademark infringed the right of name of the third person and breached the provisions of Article 31 of the Trademark Law, the trademark ¡°Yi Jian Lian¡± held by Yi Jian Lian Sports Goods (China) Co., Ltd. should be revoked.

Personally speaking, the intention of the trademark ¡°Yi Jian Lian¡± registration forestaller is inextricably to improve the recognition of its own commodities by taking advantage of the reputation and social influence of public figures. But the said trademark registration forestalling will definitely cause adverse effects to the reputation of public figures, impede the name owner from obtaining benefits for himself / herself in virtue of his/her own reputation and probably create confusions and misunderstanding about commodities or services to consumers. Therefore, generally speaking, the court will support the claim by a natural person against infringement upon the right of name by a trademark registration forestaller where the natural person is demonstrated to be well-known to the public and have great influence and such trademark forestalled for registration is prone to make the public believe that the commodities come from such natural person or bears certain relations therewith. Furthermore, the following aspects should be taken into consideration to determine whether a trademark constitutes an infringement upon the right of name of a natural person.

1) The right of name refers to not only the right of name of Chinese citizens, but also the right of name of foreign natural persons which should also be protected;

2) Since the right of name is not exclusive, different natural persons may use different characters as names. Generally speaking, only when a name is well-known can it constitute a pre-existing right. But judgement on whether or not such name is well-known or not should be made mainly within the territory of China, with foreign territories as references.

3) From the trademark dispute in relation to ¡°KATE MOSS¡±, we may conclude that a thorough consideration should be made before any judgement on whether a name constitutes a pre-existing right. Even if the name owner cannot prove that his or her name is very famous, where such name is not a word with regular collocation and the trademark registration forestaller cannot make any explanation on the origin of such trademark (such name), the court will probably determine that the trademark registration forestaller is prone to illicitly use the trademark and hence reject the trademark application.

4) Under the circumstance where the owner of a name is a prestigious figure, even if the trademark forestalled for registration is homophonic with the name, confusion and misunderstanding might be caused to consumers about the commodities or services under such circumstance and the trademark forestalled for registration might also be revoked.

5) With regard to the protection of foreigners¡¯ Chinese names, the fact whether the foreigners¡¯ Chinese names are directly and solely related with the foreigners themselves should be taken into account, i.e. whether the trademark registration forestaller will create confusions about the sources of commodities or services by registering such Chinese name or whether such foreigners as natural persons will be automatically called to mind at the sight of commodities with the brand of such Chinese name.

The author will not give unnecessary details about the conflict between portraiture right and trademark right since it seems relatively simple. Regardless of the category of a pre-existing right, such fundamental principles as good faith and credit as well prohibition of confusion should be followed for the relevant judgement, and in the meantime the interests of consumers and operators in the same profession should be taken into account, in order to make an accurate judgement on whether the forestalling registration act constitutes unfair competition or infringes the pre-existing right of other people.

(The author¡¯s contact information: kevincheng@hllawyers.com)