China strengthen protections for trademark rights and trade secrets

In April, China’s legislature, the Standing Committee of the National People’s Congress (NPC), approved amendments to three laws – the Trademark Law, the Law Against Unfair Competition and the Administrative Licensing Law – that will strengthen protections for intellectual property (IP) rights.

These amendments are integral to the successful implementation of the new Foreign Investment Law that was passed at the end of the Two Sessions meeting in March. The law will come into effect on 1 January 2020.

The amendments to the Trademark Law, which will come into effect on 1 November, are designed to combat ‘trademark squatters’ and those found guilty of trademark infringements. The Trademark Office will be able to deny bad-faith applications and invalidate any trademarks that have been registered in bad faith. Trademark agencies that accept such clients will also receive a warning or fine.

Revisions to the Anti-Unfair Competition Law and the Administrative Licensing Law, which are already in force, focus on strengthening protections for trade secrets.

The definition of trade secrets under the Law Against Unfair Competition is amended to include all ‘trade information’, not just technical information and “business information”, and two new types of misappropriation have been added – acquiring trade secrets through ‘hacking’ and “instigating, inducing, or assisting in” the breach of confidentiality to “acquire, disclose, use, or allow others to use” trade secrets.

All entities and individuals, not just “business operators”, are now subject to the Law’s prohibitions on the misappropriation of trade secrets and introduces provision for quintuple damages for malicious trade secret infringement with the maximum statutory damages increased to RMB 5 million (US$741,180). The amendment also reverses the burden of proof in civil trade secret litigation when the plaintiff makes certain prima facie showings.

The amendments to the Administrative Licensing Law prohibits all those involved in licensing proceedings from disclosing an applicant’s “trade secrets, undisclosed information, or confidential business information” without the applicant’s consent or unless otherwise authorised by law.

If an administrative agency is so authorised, it must allow the applicant to make an objection and no agency can directly or indirectly demand technology transfer as part of the conditions for issuing a licence.

The amendments to strengthen protections for IP rights and prevent forced technology transfers follow the government’s efforts to clean up China’s image as an open market and an attractive investment destination. These are also at the centre of the on-going trade negotiations between China and the US.

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