Intellectual Property Rights in China. Chinese Commercial Legal System: The Trademark Law - Essay Example

?Research Topics for Chinese Commercial Law Table of Contents Introduction 3 Brief Overview of the Cases 4 a. A&A Wuxi Import & Export Corp. (A&A) v Crocodile Garments Limited (2011) 4 b. Apple Inc. v. Proview Technology in 2012 5 Chinese Commercial Legal System: The Trademark Law 6 Protection of Foreign IPRs under the Trademark Law of China 10 Conclusion 13 References 15 Introduction According to the prevailing economic conditions of China, it can be recognized that the country has rapidly transformed its economic standing which incorporates increasing industrial revolution, technological advancements as well as improving export and import activities of the global organizations. In its recent performances, the country has achieved a significant growth on its economic development due to proper utilization of commercial guidelines for both domestic and international institutions operating within the People’s Republic of China (Yinghong, 2011). With this concern, it can be identified that the continuous development of the country’s legal system plays a vital role towards encouraging foreign marketers to expand their business operations across the country maintaining transparency and facilitating national trading by a large extent. However, when deciding upon their investments in the Chinese market, foreign companies often have to face significant challenges in relation to the policy measures enacted by the Chinese government concerning the protection of Intellectual Property Rights within the national market for both the domestic and international players. Based on this context, the discussion henceforth will focus on recognizing and understanding the commercial guidelines of China, particularly those related with foreign Intellectual Property Rights (IPRs), in terms of offering business opportunities to the foreign marketers to practice their business operations transparently within the economy. The evaluation of the foreign IP policies in China will be illustrated by taking into account two recent cases of trademark infringements, i.e. A&A Wuxi Import & Export Corp. v Crocodile Garments Limited (A&A v. Crocodile) Apple Inc. v. Proview Technology. Ultimately, the discussion will attempt to reveal the challenges faced by foreign investors when inventing in the Chinese market in relation to the IPRs Law being practiced within the nation. Brief Overview of the Cases a. A&A Wuxi Import & Export Corp. (A&A) v Crocodile Garments Limited (2011) This case complies with the Original Equipment Manufacturers (OEMs) sector of China. In its recent trade related operations, China can be observed to de-motivate foreign companies to enter its national market directly on the basis of the assumption that it might disrupt the growth prospects of national companies and thereby restrict self-reliance of the economy at large. However, to continue Foreign Direct Investments (FDIs), the economy has applied various norms including the development of OEMs wherein the national manufacturers operate in strategic alliances with foreign companies on the basis of contracts (Hogan Lovells, n.d.). However, such contracts have often been observed to cause infringements of trademark policies enacted in relation to the foreign trade policies of China. With respect to the case of A&A v. Crocodile, it has been observed that A&A, a mainland China based manufacturing organization was accused for producing 3,500 pairs of jeans trademarked with the Hong Kong Crocodile logo. According to the case scenario, A&A had received an order of producing women’s jeans and branded those products in alliance with the Crocodile International Pte. Ltd. of Singapore through contractual agreement. The products of the organization were produced to export in the foreign market, especially in South Korea. However, the products had been confiscated by the Shanghai Custom officers during the year 2010 with the accusation of trademark infringement of Hong Kong Crocodile Garments Co. Ltd. Correspondingly, A&A prosecuted to the court in January 2010 and appealed that the organization had not violated any foreign IPR during its OEM operations, owing to the fact that it was allied with the foreign company under legal agreement to product products with that particular trademark, not for “sale” in china, but only for the “export” purpose. In the context of the case, it has been further observed that A&A detained the claim affirming that the trademark is actually owned by Crocodile International Pte. Ltd. of Singapore, which is registered in South Korea and had been duly authorized by A&A complying with the laws specified by the South Korean Government. However, in this case, Hong Kong Crocodile Garments Co. Ltd. disagreed with the prosecution and argued that it is the only authorized company to use the Crocodile trade mark in China (Hogan Lovells, n.d.). b. Apple Inc. v. Proview Technology in 2012 Shenzhen Proview Technology is also known as Proview Technology which had registered IPad as their trademark during the year 2001. However, Apple Inc. had bought the name from a Taiwanese organization in the year 2009 which was found as allied with Proview Technology of Mainland China. The organization paid ?35,000 to Proview Technology (Shenzhen) in order to obtain the iPad trademark. Although Apple has bought the right of using IPad trademark across the global markets, the trademark was yet found to be owned by Proview Technology in Mainland China (Kurtenbach, 2012). Consequently, Apple launched its revolutionary iPad in the Chinese market in the year 2010; however, in the following year, the company was prosecuted by Proview Technology over the infringement of trademark rights under the foreign IPR practiced within China, in the Chinese court. In response, Apple also counter-sued Proview. However, after losing its prosecution, Proview appealed to the Xicheng district court and claimed a charge of USD 1.6 billion from Apple as a dispute of iPad trademark (Bonnington, 2012). Again, in the year 2012, a prosecution was held before the Santa Clara Superior Court by Proview Technology against Apple to infringe the trademark policy of the company (Tsukayama, 2012). Chinese Commercial Legal System: The Trademark Law The commercial legal guidelines of China involve a range of fairness decisions which attempt to ensure delivering lawful judgments for the commercial institutions if found to be conducting fraudulent and/or unfair business competition. The legal cases of the commercial institutions are resolute in a hierarchy of various courts including The Basic People’s Court to the Supreme Court in order to make fruitful decisions and thereby, ensure effective support to the foreign trade related business operations. In the context of commercial cases, the higher courts of the country provide major indicative regulations with the intention to ensure minimized conflicts concerning the IPRs performed by the business corporations. China International Economic and Trade Arbitration Commission (CIETAC) can be considered as one of the major international arbitration organizations, which principally emphasizes upon favorable arbitration processes among the foreign industries to extend their business operations to the markets of Mainland China. It is worth mentioning in this context that the Chinese commercial law has been amended in order to build a broader and constructive legal system which enables both the foreign as well as the domestic business organizations to perform business operations effectively (Christensen, 2011). The legal guidelines for commercial institutions, thereby considerably emphasizes upon transparent legal decisions, both for the domestic and foreign companies in relation to the infringement of trademarks, copyrights along with other IPRs (Berrell & Wrathall, n.d.). From the national perspective, the commercial law of the country can be identified to consist of four major categories in order to ensure commercial trademark rights of the business organizations. The regulations governing trademarks of the foreign commercial institutions in Mainland China can be termed as the Trademark Law of 2001. Moreover, the Anti-unfair Competition Law of 1993, the Copyright law of 2001 along with the Criminal Law of 2009 can be recognized as the major governing bodies of the Chinese commercial law in relation to foreign IPRs (World Intellectual Property Organization, n.d.). In addition, the Supreme Court has also approved certain major judicial interpretations that are further considered as significant insights for IPR protections in the national context, especially those concerning trademark infringements. The explanations of Supreme Court concerning trademark protection principally involve: “Application of Law in the Trial of Civil Disputes Concerning the Protection of Well-Known Trademarks (2009)” “Issues on the Application of Law in the Trial of Trademark Civil Disputes (2002)” “Issues on the Scope of Jurisdiction and the Application of Law for Trial of Trademark Cases (2002)” “Application of Law Concerning Preliminary Injunction of Trademark infringement as well as Evidence Preservation (2002)” Source: (Wu, n.d.) According to the general provisions, the Chinese trademark law was enacted in the year 1982, and later amended once in 1993 and recently in 2001, with the intention to improve the administration of the policies, to protect the special rights when using the trademark and to encourage manufacturers to assure the deliverance of quality products and/or services within the market. As it has been observed from the Chinese Commercial Law concerning trademark infringement, in case of the goods and/or services of a manufacturer which are protected by the registered trademark, the owner will enjoy the right to use the trademark when performing production activities within China, as in the case of A&A v. Crocodile (World Intellectual Property Organization, n.d.). For instance, in the Article 2 of the Trademark Law of the People's Republic of China, it has been observed that the Trademark Office of the organization and its administrative departments under the State Council needs to be in-charge during the trademark registration as well as administration all over the country. With this concern, the law significantly distinguishes that a collective trademark of a commercial organization can only be used by the organization or its registered partners, groups or associations. Moreover, the legal framework also assures to provide authoritative power to use their own trademarks which possesses significant capability of supervising over a particular type of product and/or service (World Intellectual Property Organization, n.d.). It is worth mentioning in this context that another major intention behind practicing the Trademark Law is to discourage unhealthy competition within the national market restricting the infringement of such IPRs. In the recent phenomenon, it has often been observed that foreign companies which intend to practice its business operations in the Chinese market have to face challenges in obtaining IPRs owing to the frequent recordings of trademark infringement acts. Hence, to provide a feel of security to the foreign investors, the Chinese Trademark Law has been enacted. Notably, the acts which confirm infringement of trademarks by the foreign or the national companies operating within China are registered under the Article 59, affirming criminal responsibilities in relation to such issues. According to the statement of Article 59, “anyone who counterfeits or makes without permission the representations of another person's registered trademark or sells such representations, who knowingly sells goods bearing counterfeit registered trademarks, where a crime is established, shall, in addition to compensating the losses suffered by the infringed, be investigated for criminal responsibility according to the law” (Shoukang & Hui, 2010). In correspondence with the principles mentioned under Article 59 of the Trademark Law of China, the Criminal Law of the state can also be termed as applicable in response to the acts of infringement of trademarks. Contextually, the Article 127, Article 213, Article 214 and Article 215, complying with the Chinese Criminal Law 1997 can be applied in response to the cases registered alleging infringement of trademarks (Shoukang & Hui, 2010). From an overall understanding, it can be observed that the Chinese government practices a transparent and highly responsible legal code of conducts to ensure justified counterfeiting activities in response to trademark infringements within the Chinese context. As far as the legal codes are concerned, the principles are deemed as applicable equally in the cases of national or foreign companies operating within the Chinese market. Protection of Foreign IPRs under the Trademark Law of China In relation to protect the IPRs in the Chinese trademark law, it can be identified that the legal framework involves basic principles which ensures to provide equal guidelines both for the domestic and foreign organizations while performing their business operations through involving registered trademarks. The basic principles of the trademark law of China denote that the trademark acquisition significantly depends upon the registration process which has been mentioned in the Chinese Trademark Law 2001. According to the country’s trademark law, it has been observed that the registrants are allowed to independently use the trademarks on their products or services until the trademark is registered by the Trademark Authority of People’s Republic of China. Hence, foreign companies are required to initially register their trademark in China complying with the guidelines mentioned by the authoritative body, i.e. the Trademark Authority of People’s Republic of China to obtain IPRs in correspondence to operate their business within the nation (Shoukang & Hui, 2010). The guidelines prescribed under the Chinese Trademark Law specify that any foreign company, applying for trademark registration should comply with authorized and qualified agencies of country. This requirement of acquiring trademark in China confirms to global operations, designed to facilitate effective communication between the Trademark Office and the foreign applicant, with the intention that the foreign applicants can perform all the necessary obligations for the obtainment of registered trademark within a shorter period (Shoukang & Hui, 2010). The legal specifications mentioned under the Chinese Trademark Law apparently depict the considerations rendered towards the security of IPRs held by foreign companies investing in China. However, the various concerns and the enactment of multiple principles, makes the entire process a complex phenomenon to be performed by the foreign companies when investing in China. Stating precisely, protection of IPRs can be considered as one of the major issues faced by the foreign investors while performing business operations in the Chinese market. For instance, when deciding upon the investments to be made in the Chinese market, foreign companies are required to perform numerous actions to initially register their trademark under the Trademark Law of China to obtain the complete benefits of IPRs which can at times prove to be a time-consuming process. Furthermore, in various cases, it can be identified that China enforces a few lackadaisical regulations which significantly affects both the foreign and domestic business organizations (Center for Advanced Defense Studies, 2006). For instance, it has often been observed that the foreign investors need to witness a range of risks while bringing in advanced technological innovations in the Chinese markets. The domestic competitors are likely to copy those technologies through which they reproduce similar commodities at cheaper costs. Furthermore, as these companies operate with trademarks which are slightly different from the registered trademark owned by the foreign companies, they attempt to take the virtues of getting exempt from Trademark Law owing to the principle under which only registered trademark are taken into consideration for the law enactments. With this concern, the risk of losing intellectual property can be affirmed as undoubtedly a major trouble for the foreign marketers (Center for Advanced Defense Studies, 2006). Furthermore, as observed in the cases of A&A v. Crocodile and Apple v. Proview, complexities in agreements involving two or more parties can also lead to disruptions related with the Trademark Law of China. Illustratively, even though A&A can be observed to operate in strategic alliance with the Singaporean unit of Crocodile Garments in compliance with legally signed agreement, as Hong Kong Crocodile Garments operated as a separate entity bearing the same trademark, it caused confusion within the Chinese market which further increased the cost of the foreign company within the national business environment. Again, in the case of Apple v. Proview, a similar instance can be observed where the existence of almost similar trademark, one owned by Proview and the other by Apple (which was further bought by the company from the Taiwan subsidiary of Proview) created disruptions for the foreign companies to operate within the Chinese business environment. Hence, it can be affirmed in this regard that the Chinese Trademark Law needs further amendment taking into account the roles played by the subsidiaries in agreements for transfer of trademark ownerships as well as the authoritative to use trademark . Conclusion The commercial legal system of China can be considered as one of the major contributory factors which tend to provide broader opportunities for the global organizations to operate successfully within the national market without disrupting the growth process of the national traders. Moreover, the legal system of the country also offers ample growth prospects for the international organizations to effectively operate their business operations by maintaining the commercial guidelines as well as other influential factors of the country (Berrell & Wrathall, n.d.). The business environment of China is rapidly developing which considerably has been continuously strengthening the country’s economic condition. The economic liberalization of China significantly provides an increasing opportunity for the foreign investors to conduct their business operations within the country. In relation to trade regulations of the country, it has been observed that it possesses a range of beneficial aspects for the foreign marketers to obtain trademark and operate their business operations across the country. Although the protection of IPRs policies under Chinese trademark law does not discourage investments from foreign companies in China, there are certain limitations to the legal amendments which might cause constraints for foreign investors when targeting the national market. For instance, as can be observed from the above discussion, the Chinese Trademark Law lacks in taking into account the inclusion of subsidiaries when enacting norms to confirm trademark using authority and ownership as well. Hence, these concerns can further be illustrated as major issues faced by foreign investors when entering the Chinese market. Additionally, the prevalence of multiple norms and conditions also makes the process of trademark registration for foreign companies in China, a complex and time as well as cost consuming obligations which further might discourage investors from the global forefront to penetrate the Chinese market. It is therefore suggestive that the Chinese trading law should be amended to comply with the requirements of foreign investors without affecting the interests of the national participants. References Berrell, M. & Wrathall, J., No Date. Changing Attitudes to Intellectual Property Rights in China: The Nexus between Chinese Culture and the Rule of Law. Introduction. [Online] Available at: http://mams.rmit.edu.au/gbmel0526xzrz.pdf [Accessed January 11, 2013]. Bonnington, C., 2012. Chinese Firm Demands $1.6 Billion from Apple in iPad Trademark Dispute. Conde Nast. [Online] Available at: http://www.wired.com/gadgetlab/2012/02/chinese-firm-ipad-trademark/ [Accessed January 11, 2013]. Center for Advanced Defense Studies, 2006. The Intellectual Property Challenge in China. Intellectual Property Rights. 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