IPR Toolkit
Disclaimer: Inclusion of material in this IPR Toolkit does not constitute legal advice and is not a substitute for advice of legal counsel. This information is subject to change according to the laws of the People's Republic of China. The U.S. government will strive to update and improve this IPR Toolkit as information becomes available and as United States government resources allow. Additionally, the United States Department of Commerce, its employees, and its contractors, assume no legal liability for the accuracy or, completeness, or usefulness of any information, resource, or process contained disclosed herein.
TRADE SECRETS and UNFAIR COMPETITION
Legislation
China provides for protection of trade secrets belonging to both Chinese citizens and citizens of WTO member countries including the United States. A trade secret is business information that is private and brings economic benefits to the owner, and for which the owner has adopted measures to maintain its confidentiality.
The Law of the PRC Against Unfair Competition (hereafter “Unfair Competition Law”) entered into effect on December 1, 1993. The Unfair Competition Law deals with such IPR concerns as the attempt to pass off a product as legitimate, the imitation of trade dress, the infringement of trade secrets, and the unauthorized use of an enterprise name.
The Unfair Competition Law has been modified by various regulations. These include the Several Regulations on the Prohibition of Acts of Unfair Competition Involving the Passing-off of a Name, Packaging or Trade Dress Peculiar to Well-known Merchandise, effective July 6, 1995, the Several Regulations on the Prohibition of Acts of Infringement of Trade Secrets, effective November 23, 1995 and the Interpretation of the Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition, effective February 1, 2007.
Under the PRC’s State Administration for Industry and Commerce (“SAIC”), the Antimonopoly and Anti-unfair Competition Enforcement Bureau is the entity that is responsible for the implementation of the Unfair Competition Law. Local Administration for Industry and Commerce offices (“AICs”) are entrusted with carrying out the administrative enforcement of the law.
What Constitutes Infringement?
Article 10 of the Unfair Competition Law prohibits:
Obtaining trade secrets by theft, inducement, duress, or other illegal means;
Disclosing, using or allowing others to use the trade secrets of any rightful party obtained by illegal means; or
Disclosing, using or allowing others to use trade secrets in breach of an agreement or the confidentiality requirements imposed by any rightful party.
Third parties who obtain, use, or disclose business secrets they knew or should have known to have been infringed by any of the means above-listed will also be deemed to have infringed the trade secrets of a rightful party.
The Unfair Competition Law also references the Trademark Law and the Product Quality Law in its provisions dealing with punishment for acts of passing off registered trademarks and falsifying the place of origin. Other acts of infringement include:
- passing off the registered trademark of another party;
- using, without authorization, the name, packaging or decoration peculiar to well-known goods or using a name, packaging or decoration similar to that of well-known goods, so that the copied goods are confused with the well-known goods of another party, causing buyers to mistake them for the well-known goods of the other person;
- using, without authorization, the business name or personal name of the other person on his own goods, leading people to mistake them for the goods of the other party; and
- forging or falsely using symbols of quality such as symbols of certification and symbols of famous and high-quality goods, falsifying the origin of the goods, and making false representations which are misleading as to the quality of the goods.
How to Address Infringement
Administrative enforcement
The Unfair Competition Law states that AICs have the power to investigate acts of unfair competition. Penalties include:
• confiscating the illegal income;
• ordering the business operator to cease the illegal act;
• paying a fine;
• revoking the business operator’s business license.
AICs also have additional authority under the Trade Secret regulations to:
• instruct the return of drawings, blueprints, and other materials containing trade secrets; and
• order the destruction of the goods manufactured using stolen trade secrets if such goods would disclose the secrets to the public if made available.
It should be noted that AICs do not have the ability to award compensation in unfair competition cases. If damages are sought, parties must turn to civil litigation proceedings in the People’s Courts. According to the Unfair Competition, damages are calculated according to the profit gained from the infringing goods.
Criminal penalties
In December 2004, the Supreme People’s Court and Supreme People’s Procuratorate issued a judicial interpretation on intellectual property crimes. Under the interpretation, prison sentences of up to three years can be imposed for the infringement of trade secrets if the damage caused is “serious”, defined as a loss of more than RMB 500,000 (approximately USD 73,000). If the defendant is an enterprise, a “serious” loss is defined as more than RMB 1,500,000 (approximately USD 220,000). In cases deemed “exceptionally serious,” (RMB 2,500,000 for individuals and RMB 7,500,000 for enterprises), a convicted defendant can be imprisoned for three to seven years in addition to being fined.
Policy & Issues
IPR Toolkit
Introductory Message from the U.S. Embassy
Trade-Fairs
Interview with Robert Stoll
