Intellectual Property Rights – China
Introduction
Intellectual property rights are the legal rights that a person acquires from the creations and
inventions of their own minds. The creator or the inventor is normally awarded all the exclusive
rights over their inventions or creations or over the use of their creation or inventions for a
specified period of time. These rights are usually divided in two major areas: 1) Copy rights and
also rights related to the copyrights. The rights of the authors of any literary or artistic
professional work, for instance books, music, sculptures, computer software’s or programs and
movies are all protected by the copyright act normally for a period not less than fifty years after
the passing of the author. Actors and musicians are protected by the copyright and other rights
that are related to the copy right act. These rights are normally enforced to protect the rights of
the creators and the inventors and also to reward them of their creations and to encourage
creativity and more inventions. 2) Industrial property is again divided into two: a) one part is
characterized by the exclusive protection of particular trademarks that are very distinctive to
particular goods or specific services. They are also generally related to particular geographical
regions which usually identifies the source of the product and the attributes of that specific
product. .The protection and the
implementation of the industrial property rights i.e. the protection of the trademarks or the
distinctive signs are meant to allow the consumers identify products positively and make
informed decisions and choices, promote open and fair competition and also to stimulate growth
of the particular sectors of the general economy. The protection can lasts as long as the product
continues to use that particular trademark or the distinctive sign. The other type of industrial
property is the patents: these promote innovations, technological advancement and creations and
other designs and trade secrets. The major purpose of the protection of patent is to encourage the
development and promotion of new technology and to provide the required incentives and the
eventual means to facilitate the financing of research and other related development activities.
Patents are normally protected for twenty years in which the government assumes the innovator
has acquired his profit and the development and research costs incurred during its development
1).China’s WTO membership has stimulated the formalization and the rationalization of Chinese
business laws. Discuss with one to two examples.
China has over the years conducted major legislative overhaul in its business laws and in its
regulations as it relates to WTO matters. China has scrutinized most of its business laws and
revised or repealed them in accordance with the demands and regulations of the WTO and its
members. (The China Quarterly, 2007) WTO policies such as the market economy,
organizational transparency and non discrimination have also been accepted generally by the
Chinese people and their companies have adopted some of the policies. These changes have
2 Business
brought tremendous success to the Chinese trade and investment climate or environment. (Quin,
2003)
The Peoples Republic of China (PRC) constitution is not categorical on the status of the signed
treaties and the Chinese law and if the international concessions and agreements can be
implemented in China without any domestic legislation enabling it. The WTO concessions are
implemented in China through the domestic legislation. (Clarke, 2003) The foreign trade law has
been amended to allow liberalization and change China’s foreign policy on trade to be WTO
compliant has been the foundation of the development of the Chinese foreign trade law. China
also removed most of its tariffs and non tariff obstacles and barriers in its economy and also
opened up all the service sectors and departments to competition from foreign companies. The
Peoples Republic of China has over time moved away from direct control of state corporations
and trade to supervisory and regulatory role. All the major laws governing local and foreign
trade, intellectual property, customs and administrative laws and procedures have been revised to
be in line with the WTO policies. (Aaditya, 2003)
2).The adoption of unified contract law is one necessary step China has taken in order to
establish a legal system compatible with its socialist market economy. Discuss.
The new unified contract law or the new contract law as it’s commonly referred to, was formally
adopted 15 th March the year 1999 on the second session of the ninth national congress of the
Peoples Republic of China. The basic principles of the new contract are equality, good faith and
fairness, public interest and party autonomy. The new contract law embraces the basic tenets of
socialism but is mostly confined to the legal contract systems around the world and by the
standards which are international and which are generally accepted as international contracts
requirements together with acceptable commercial contracts. The contract law establishes,
modifies and terminates all the civil basic rights and obligations between all natural or legal
persons or organizations. The new unified contract law is divided into three main parts i.e. the
General, Specific and the Supplementary provisions with a total of 23 chapters which are
featuring 428 articles. The first general provisions discusses the provisions of the conclusions of
contracts, their effectiveness and performance, termination, modification, obligations, liabilities
of breach, assignment and the miscellaneous provisions. The specific provisions deals with such
issues like contracts of sales, construction projects, transport, leases distribution and use of
power, water and gas use and its distribution networks, loans, donations, warehousing and many
other related activities. The supplementary provision has only one article that deals with the
effectiveness of the new unified contract law and the abrogation of the initial contract.
3).Intellectual property protection is necessary to China’s economic development. Discuss.
The conventional wisdom and theories holds that very strong intellectual property rights
protection is required to attract or draw foreign direct investment in less developed nations.
Companies are normally reluctant to make huge investment in foreign countries that have no
assurance on the protection of their intellectual property rights, assets or financial investment.
When a country or company are not able to copy or imitate foreign items, products or services or
technologies then the natural business interest of those foreign firms are most unlikely to be
threatened in any way hence the intellectual property rights protection would not be necessary.
China has a very strong capacity to copy and imitate most products and services from foreign
countries. This makes it mandatory for china to have very strong intellectual property rights
3 Business
protection to attract more investment. A country that has a large market like China must have a
strong intellectual property protection act to control the large influx of foreign companies that
may want to take advantage of the economies of scale available in the country. In order to foster
faster economic growth, china needs to identify which form of protection in terms of intellectual
properties needs to be promoted and strengthened to promote the much needed economic growth.
Firms that have targeted the establishment of manufacturing units together with the research and
development activities needs the act protecting the non disclosure of trade secrets and
technologies introduced by foreign companies. Other companies that are ready to establish
markets for their finished products also require copyright, trademark or patent protection.
Besides the strong and developed intellectual property protection other measures like the location
advantages, transport costs, availability of markets, and cost of labor also play a big role in the
economic development process. Other factors like the status of its financial and legal system and
also the overall transparency of the government systems and operations affect its economic
development. The increasing number of the patent applications and also the patent disputes cases
in China shows the positive development of the property intellectual system in china. China has
taken the right procedures in creating a strong infrastructure that includes patent data bases and
the general hierarchy of courts in handling and determining intellectual property disputes.
4).The development of company law in china was mainly designed to facilitate the State Owned
Enterprises (SOEs) reform in China. Discuss.
For many years the Chinese government has worked very hard to build a strong corporate
governance framework and structure as a way of accelerating the enterprise reform and the
capital market promotion and development. Since the year 1990 when the Chinese stock market
was established, the general corporate governance structure and the capital markets have been
transformed tremendously. Many institutions have been developed and new laws and regulations
have been enacted. The Chinese Securities Regulatory Commission (CSRC) oversees and
implements the Chinese laws and the general regulations as adopted by the OECD i.e. the
Organization for Economic Cooperation and Development. The OECD launched the OECD
Asian Roundtable discussion on the cooperate governance in the city of Shanghai where the
Shanghai and the Shenzhen national stock exchanges were hosted. (OECD, 2011) The company
law and also the securities law were introduced in the 2006 to provide the basic foundation for
developing and improving the corporate governance structure in China. And also to protect the
rightful and legal shareholders rights and to promote public interest. The company law brought a
lot of reforms in the legal control, obligation and responsibilities of all those who actually control
the companies i.e. the senior managers and the directors. State owned enterprises financial and
accounting systems were overhauled, and the systems of liquidation and mergers streamlined.
While the reforms protected the rights and interest of all the creditors, it also facilitated the
reorganization of the enterprises. The reforms generally improved the supervision and
management of all state owned enterprises and also the listed companies, improved transparency,
created more legal responsibilities and integrity obligations for the top management of these
companies. A government body known as the Asset Supervision and Administration
Commission of the State Council was made responsible for implementing the reforms in large
State Owned Enterprises (SOE) which also provided for the legal establishment of board of
directors as per the Company law. (OECD, 2011)
4 Business
The basic standard that was enacted in the year 2008 covers all the principal objectives that all
the SOE must establish and implement fully all the requirements regarding the internal controls,
the general risk undertakings, internal supervisions and also in information and communication
methods.(Hung, 2004)
5).To what extent the laws on foreign invested enterprises in China have transformed in line
with China WTO membership?
The foreign trade law has been amended to allow liberalization and change China’s foreign
policy on trade to be WTO compliant and also to be the foundation of the development of the
Chinese foreign trade law. China also removed most of its tariffs and non tariff obstacles and
barriers in its economy and also opened up all its services sectors and departments to competition
from foreign companies. (Lardy, 2002) The liberal trading system as represented by the WTO
aims at increasing the general welfare of all nations involved by reducing considerably all the
trade restrictions between the member nations. The development and the subsequent
implementation of the intellectual properties has been one of the laws that have brought about
changes in its foreign policy to be in line with the WTO policy. (Roessler, 2000) WTO normally
prescribes two different types of obligations to its members i.e. market access responsibilities
and obligations where there is commitment by each member country to open up its domestic
market to all other members goods and services produced by the member countries. The other is
the obligations which are the normal rules of conduct and behavior of the international market.
These rules and regulations also cover internal measures which affect trade, domestic taxes,
health and technical standards, government subsidies and intellectual properties.WTO
obligations are universally enforceable through the overall WTO dispute resolution and
settlement mechanism which has compulsory jurisdiction and its decisions are binding to all the
member countries. China agreed to reduce all its tariffs at the lowest statutory rates besides other
special rule obligations applicable to WTO. (Xin Zhang, 2006) To implement the WTO
commitment, China amended its foreign trade law that was in force since the year 1994 in July
2004 and replaced the operations of the import-export trade in china. Any company or individual
engaging in the import and export business was required to proceed only after following the
registration procedure with the Chinese ministry of commerce. (MOFCOM) Dumping i.e. selling
below the normal value and the use of certain government subsidies to influence sales and the
selling prices are basically classified as unfair trade practices and any WTO member is allowed
to levy antidumping duties. The initial antidumping and anti-subsidy regulation was adopted in
the year 2001 in China to protect its industries. (Kennedy, 2006)
The WTO accession brought a spur and ultimate growth in the foreign direct investment flow
in China. This foreign investment also increased the volume of foreign trade. (Bown and
McCullon, 2005) China made a critical move and allowed foreign banks to operate in its
territory freely, these allowed competition that targeted improvement in the general performance
of its banking sector. (China quarterly, 2001) The WTOs agreement and concessions on trade
related nature of the Intellectual Property rights i.e. TRIPS provided an overall structure of the
protection of the foreign companies intellectual property rights.
5 Business
References
Protocol on the Accession of the Peoples Republic of China 2001 Nov 10 th WT/L/432
The China Quarterly, 2007
Quin, J. (2003) WTO Plus obligations and implications for the WTO legal systems an appraisal
of the Chinese accession Protocol, Journal of world Trade, Vol.37, No. 3
Aaditya, M. (2003) China’s accession to the WTO: the service dimension, Journal of
international Economic Law, Vol. 6, No. 2.
Clarke, D. (2003) China’s legal system and the WTO: the prospects for compliance, Washington
University Global Studies Law review, Vol. 2
OECD (2011) Corporate Governance of Listed Companies in China: Self Assessment by the
China Securities regulatory Commission, OECD Publishing.
Lardy, R. (2002) Integrating China into the Global Economy, Washington, DC: Brookings
Institution Press.
Roessler, F. (2000) The constitutional function of the multilateral trade order, Essay on the legal
Structure, functions and limitations of the world trade order. London: Cameron
6 Business
Xin Zhang (2006) International trade Regulation in china. Hart publishing
Kennedy, S. (2006) The political economy of standards coalitions: Explaining China’s
involvement in high tech standards wars, Asia policy. No. 2
Bown, C. and McCullon, R (2005) US trade policy towards China: Discriminations and it
implication.
China quarterly (2001) issue No. 167
Hung, M. (2004) China’s WTO commitment on independent judicial review impact on legal and
political reform. American journal of comparative law, Vol. 52, No.1
