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Further Utilize Foreign Investment

November 20, 2019

On 7th of Nov, 2019, the State Council released the Opinions on Further Improving the Utilization of Foreign Investment, which put forward 20 measures to utilize foreign investment further. The measures could be divided into four aspects namely, deepening market openness to foreign investors, promoting investment, deepening reform to facilitate investment and protecting the legitimate rights and interests of foreign investors.

Specific provision includes:

1. Move faster to further open up the financial industry.

China will eliminate all restrictions on the scope of business for foreign banks, securities companies and fund management companies, and remove requirements on total assets for the establishment of foreign-funded banks.

2. Deepen reform to facilitate investment.

China will lower the cost of cross-border capital use, and optimize the approval process for the use of land for foreign-funded projects.

3. Continue to reduce the negative list of foreign investment access in the national and free trade pilot zones, and comprehensively clean up and remove restrictions that are not included in the negative list

China will deepen market openness to foreign investors, promoting investment and protect the legitimate rights and interests of foreign investors

4. Optimize foreign investment policies in the automotive sector.

5. Make it easier for foreigners to work in China.

For innovative entrepreneurial talent and talent with professional skills that are urgently needed in China, restrictions over age, education and work experience etc. can be appropriately relaxed. Foreign students with an intention to innovate and start a business may apply for a 2-years residence permit in the private affairs category with the diploma of Chinese university. For foreigners who have applied for a work-type residence permit twice consecutively, a 5-years work-type residence permit can be issued in accordance with the provisions upon the third application. The government will optimize the process of applying for work permits for foreigners to work in China, improve the information sharing mechanism among governmental departments, and explore the possibility of integration of work permits and residence permits.

6. Guarantee equal participation in government procurement in accordance with the law.

7. Improve the protection mechanism of intellectual property rights of e-commerce, and improve the rules for notification of patent infringement determination and removal of the infringing list on e-commerce platforms.

8. Optimize the requirements of the form of evidence in intellectual property cases involving foreign-invested enterprises, apply the presumption of fact and reasonably reduce the litigation burden of such enterprises. Strengthen the protection of trade secrets, reasonably allocate the burden of proof, and strengthen civil and criminal protection of IPR.

Useful link:

MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA

E-commerce, foreign investment, IPR protection in China

Tax Credit Repair in China

November 17, 2019

On 13th of Nov, 2019, the State Taxation Administration released an Announcement on Matters Related to Tax Credit Repair, to be effective from January 1, 2020.

entity taxpayers may apply to the competent tax authorities for tax credit repair within the prescribed time limit if they correct their behavior

According to the announcement, entity taxpayers may apply to the competent tax authorities for tax credit repair within the prescribed time limit if they satisfy one of the following conditions:

(1) They have handled the tax declaration, tax payment and data filing, after failing to do so, in accordance with the statutory time limit, or

(2) For those who failed to pay tax in full, or pay overdue fine as demanded by the tax authorities however, whose behavior is not serious enough to constitute a crime, (hence they were directly considered as a D-level credit taxpayer), if they have paid or made up all tax payable within 60 days upon the final decision made by competent tax authorities.

(3) The taxpayer fulfills the corresponding legal obligations and the tax authorities lift the abnormal household status according to law.

According to the announcement, the prescribed deadline should be the end of next year when the taxpayer is put in the record by the tax authorities. The tax authority will adjust the status of the taxpayer’s credit evaluation index according to the correction of their behavior, and re-evaluate the tax credit level of the taxpayer, but may not evaluate it as A-grade.

Meanwhile, the announcement stipulates that the tax credit repair can only be applied once in a tax year.

Useful link:

State Taxation Administration

Tax credit, tax credit in China

MICHAEL JORDAN’s Trademark War in China

November 11, 2019

On October 16th 2019, the Supreme Court of PRC concluded the trademark dispute of Jordan Sports Company in Fujian province, holding that the trademark of the famous basketball player’s silhouette did not reflect Jordan’s personal characteristics, was not recognizable and did not constitute infringement of MICHAEL JORDAN’s right of portrait. Thus, they ruled in favor of Jordan Sports Company. That means the eight-year-old legal battle has finally come to an end with Jordan Sports Company retaining its “Jordan” trademark, it can put down its baggage for a second-round IPO preparation.

As the plaintiff, Michael Jordan claimed that the basketball player’s silhouette is an infringement of his portrait right. To be honest, based on Jordan’s status in those days, most consumers are inclined to link this silhouette to the name of MICHAEL JORDAN. Nevertheless, this silhouette is hardly a “portrait” of anyone in the legal sense, as there is no face at all! The Supreme Court declared that the disputable trademark “doesn’t reflect Jordan’s personal characteristics and is not recognizable”, thus they don’t think this trademark infringes Jordan’s portrait right.

Honestly speaking, this result is to many people’s surprise. After all, it’s an obvious fact that, Jordan Sports Company did take advantage of the name “Jordan” – the basketball celebrity of The United States for many years. Many Chinese consumers were misled by the trademark and believed the product produced by Jordan Sports Company was more or less related to MICHAEL JORDAN. For example, they believed that MICHAEL JORDAN was probably the image spokesperson of the products, or the product originated in the US. The truth is, Jordan Sports Company is a 100% Chinese company incorporated in Jinjiang of Fujian province, a city famous for its’ shoe-making industry, they have nothing to do with the USA nor MICHAEL JORDAN. Back in China twenty years ago, the IPR protection legal system was not very well established, by playing edge ball, this Company took advantage of the great reputation of MICHAEL JORDAN to open the market of sport products.

In fact, this lawsuit is just one of the series of lawsuits Jordan filed about the trademark “Jordan” or it’s Chinese transliteration or pinyin since 2012. According to Trademark Law of PRC, the general principle for trademark registration is ‘first-to-file’, meaning that whoever applied for the trademark first will get it. The exception is “prior rights”: meaning that applying for trademark registration may not prejudice the existing or ‘prior’ rights of others.

MICHAEL JORDAN had asked for revocation of 78 registered trademarks owned by Jordan Sports Company, based on the “prior rights” of his name, or based on an accusation of infringement on the portrait right.

In 2016, the Supreme Court ruled revocation of three of the 78 registered trademarks. Three trademarks “乔丹” (the Chinese transliteration of Jordan) owned by Jordan Sport Company were revoked based on the argument that Michael Jordan had a prior right over these two Chinese characters. Michael Jordan’s victory however seems not so great at all, because the revoked “乔丹” trademarks were merely defensive trademarks by Jordan Sports Company, applying to category 25, 28 and 32. The products that these three revoked trademarks related to were baby clothing, wedding dresses, beer, etc. and not the more important items such as sports shoes, sportswear, etc. because the time limit for making an application for revocation on these more important products had already expired. The time limit for revocation of a registered trademark is five years, MICHAEL JORDAN did not file a lawsuit against the “乔丹” trademark until 2012. It was therefore too late to revoke all of the other trademarks which had been registered more than five years ago.

Michael Jordan’s team didn’t pay much attention to the China market and therefore missed their best chance to defend their rights

As a matter of fact, as the deadline of revoking the 乔丹 trademark on the category “sneaker” was missed, it won’t be easy for Michael Jordan to protect his rights any more. Initially, Michael Jordan’s team didn’t pay much attention to the China market and therefore missed their best chance to defend their rights, what’s done is done.

On the other hand, for Jordan Sports Company, they missed the 2012 time window for IPO because of this eight-year’s proceeds, they paid their price too.

We are going to discuss other lawsuits between Michael Jordan and Jordan Sports Company to help people to understand the reason behind the judgement.

Useful link:

TRADEMARK OFFICE OF NATIONAL INTELLECTUAL PROPERTY ADMINISTRATION, PRC

Jordan Sports Company, MICHAEL JORDAN, MICHAEL JORDAN’s trademark, Prior right in trademark law, trademark lawsuit in China

Highlights of The Amended Trademark Law of PRC

November 4, 2019

On 1^st of Nov 2019, the forth amended Trademark Law of PRC took effect officially. Some long-term “headaches” for overseas corporations are addressed in this updated law.

The highlights are as follow:

1. Malicious squatting will be cut down in multiple ways.

For quite a while now, trademark malicious squatting has been a nightmare for many overseas entities intending to do business in China. More often than not, when these companies started their adventures in China, they found not only their brands, but also some similar brands, or even the Chinese transliteration of their brands, had been registered by someone already. As a result, there were very few options left: either they “buy” their brands back at an astonishingly expensive price, or they file a series long-lasting lawsuits to win it back (check our previous post How to Get Back My Trademark in China? ). The only legal ground they could count on were the provisions in article 44 of the Trademark Law: apply to invalidate the registered trademark.

However, in practical court hearings, they found it was very difficult to get a positive outcome unless their brands had a strong name recognition, locally.

The new amendments have been put in place to address this and other issues.

the updated Trademark Law of PRC is intended to combat malicious squatting in initial review procedure, and malicious litigations

According to Article 4 of the updated Trademark Law: “Any application for trademark registration that is malicious and is not filed for the purpose of use shall be rejected.”

The reviewers of trademark registration are granted rights to reject any malicious application in the initial review stage. In article 19, it also stipulates that the trademark application agent has a duty to review to consider if a trademark application is malicious and shall not accept the entrustment to proceed if deemed a malicious trademark application. Furthermore, malicious squatting is one of the reasons to file an objection or invalidation before or after a trademark certificate is granted, based on the provisions in Article 33 and 44. In other words, the updated Trademark Law is intended to combat malicious squatting in initial review procedure, application agency procedure, application objection and trademark invalidation procedure.

Of course, how this provision of “trademark registration that is malicious and is not filed for the purpose of use” is applied in practice must be clarified by relevant implementing regulations or judicial interpretation. Generally speaking, malicious squatting should refer to any application of identical or similar trademark which:

1. Is owned by others;

2. Has some popularity;

3. In a category far beyond the applicant’s own scope of business.

2. Malicious registration and litigation will be punished.

 Article 68 of the updated Trademark Law provides punishment for people who violate the provisions in Article 4 and Article 19. It also provides that: “Whoever maliciously applies for trademark registration shall be subject to a warning, a fine, or any other administrative punishments, as the case may be; and whoever maliciously lodges a trademark lawsuit shall be penalized by the People’s Court according to law.”

3. More compensation for trademark infringement.

Another highlight of this amendment is the increase of monetary compensation for trademark infringement. According to Article 63 of the amended Trademark Law, “For malicious infringement of exclusive rights to use trademarks, in serious cases, the compensation amount shall be determined in accordance with the aforesaid method based on one to five times of the determined amount,” while the original provision provides “one to three times” of the determined amount.

Where it is difficult to determine the actual losses suffered by the trademark owner due to the infringement or the gains derived by the infringer from the infringement or the licensing fee of the registered trademark, the Court shall rule on a compensation amount of not more than RMB 5 million based on the extent of the infringement, while the original provision stipulate a compensation of “not more than RMB 3 million”.

Useful link:

TRADEMARK OFFICE OF NATIONAL INTELLECTUAL PROPERTY ADMINISTRATION, PRC

amended China trademark law, Amended trademark law of PRC, compensation for trademark infringement, malicious litigation, malicious squatting

Updated! Treatment for Non-Resident Taxpayers

October 25, 2019

On October 21st, 2019，the State Administration of Taxation (SAT) of the PRC released the updated Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treat under Tax Agreement. The new regulation will be implemented from January 1st, 2020, while the previous edition will be abolished at the same time.

Let’s see the highlights:

1. Identification

“Non-resident taxpayer” mentioned here refers to the taxpayer who shall be the tax resident of the contracting party in accordance with the residents’ provisions of the Tax Agreement.

“Agreement treatment” mentioned here refers to the entity income tax and individual income tax obligations that in accordance with the domestic tax law may be reduced or exempted in line with the Tax Agreement.

2. Main procedure

Non-resident taxpayers shall determine by themselves whether they are eligible for tax privileges, and file an application for such privileges. They should keep relevant information to prepare for future examinations.

If a non-resident taxpayer finds that he should not enjoy the agreed treatment and had paid less or no taxes, he shall voluntarily file a tax supplement with the competent tax authority.

If a non-resident taxpayer paid more tax than agreed treatment, he may, within the time limit prescribed by the Tax Collection and Administration Law of PRC, request the refund of the overpaid tax to the competent tax authority, and submit the relevant information stipulated in the Measures.

3. The above-mentioned relevant information includes:

Updated Measures for the Administration of Non-Resident Taxpayers' Enjoyment of the Treat under Tax Agreement will be implemented from January 1st, 2020,

(1) The identification of tax residents of the current year or in the previous year, issued by the tax authorities of the contracting parties;

(2) Contracts, agreements, resolutions of the board of directors or shareholders’ meetings, payment certificates, etc. relating to the acquisition of relevant revenue;

(3) Where the non-resident taxpayer enjoys the agreed treatment relating to dividends, interest and royalties, relevant information certifying the status of “beneficiary”;

(4) Other information that non-resident taxpayers consider to be able to prove that they are eligible for the agreed treatment.

4. Simplification of Paperwork

The new regulation has reduced paperwork for non-resident taxpayers, who only have to file one statement.

However, if the original information required by the competent tax authority is in foreign languages, a Chinese translation shall be attached and the non-resident taxpayer shall be responsible for the accuracy and completeness of the translation.

Non-resident taxpayers and withholding agents may provide copies of information to the competent tax authorities, but they shall mark the original storage places on the copies and stamp the seal or seal of the person responsible for the report. If the competent tax authority requests the original to be examined, they shall produce the original.

5. Legal liability

If a non-resident taxpayer is not eligible for tax privileges but it pays less or no tax as a result, tax agency shall collect the unpaid tax and hold the taxpayer accountable for delaying tax payment, unless the withholding agent is responsible for the delay.

New IIT Law’s Impact on Foreigners

Useful Link:

State Taxation Administration

entity income tax, Individual income Tax, non-resident taxpayer, tax treatment

How to File a Lawsuit in China (P2-evidence)

October 22, 2019

After considering jurisdiction (which we can actually think about as early as when making a deal because one can agree to a more favorable jurisdiction in one’s contract), the next thing we need to consider is evidence.

According to PRC civil procedure law, evidence that can be accepted by the judge includes:

(1) statements of litigants;

(2) documentary evidence;

(3) physical evidence;

(4) audio-visual materials;

(5) electronic data;

(6) witness testimony;

(7) expert evaluations; and

(8) inquest records.

Litigants can make their statement via their pleadings or by oral argument during court hearings; litigants may apply for an expert evaluation or the judge may order an expert evaluation if the judge believes that it will help establish the facts of the case and uncover the truth of the matter.

However, besides the statements of litigants and the expert evaluations, other evidence may need to be submitted to the court. Litigants should be aware of the specific time limits relating to the submission of evidence as failing to adhere to these time limits could cause adverse consequences. If litigants cannot provide supportive evidence of their claim or cannot provide the evidence in a timeous manner then they may have to face an unfavourable result.

The following are other general rules regarding civil evidence:

1. Priority

Among all the evidence, notarized documents shall be taken as the basis for ascertaining facts by the court, unless there is evidence to the contrary sufficient to invalidate the notarization.

Generally, a pure statement of the litigants without other evidence is hard to be accepted by the judge. But, if the statement is against the very same person who made the statement, it will be used. So, litigants should be careful not to say things that will negatively affect their case.

Though witness testimony is listed as evidence, it is not easily accepted by the judge. Ideally, two or more witnesses had better testify to corroborative each other’s testimony. In other words, the testimony is more likely to be accepted by the judge if two or more witnesses make the same or similar statements. The problem with witness testimony as evidence is that the opposing party can simply say “the reason they said so and so, is because they are friends or is because the witness hates me.” This is why other forms of evidence are so important in proving the facts of the case.

2. Electronic data

In recent years, more and more people communicate or even make deals via e-communication，electronic data is also accepted. In a collateral explanation given by Supreme People’s Court, Supreme People’s Procurator, Ministry of Public Security stipulates that e-evidence shall include the following:

published information in web pages, blogs, micro-blogs, friends circle, paste bar, Internet disk and other network platforms;
mobile phone text messages, e-mails, instant messaging, communication groups and other communication information in network applications;
user registration information, authentication information, electronic transactions, communication records, login logs etc.;
documents, pictures, audio and video, digital certificates, computer programs and other electronic files.

Although this explanation is given particularly about criminal evidence, the principal rules herein have been extensively applied to other procedures.

notarized documents shall be taken as the basis for ascertaining facts by the court, unless there is evidence to the contrary sufficient to invalidate the notarization.

3. Original or copy

When the plaintiff files a lawsuit, he can only submit copies of the evidence. However, all originals should be shown in court room during the court hearing. A cross-examination will be conducted before court debate. A litigant can refuse to conduct cross-examination on the evidence, if the other party failed to provide the original. However, if the judge believes that the other party is withholding the original because the evidence is against him, the judge can, at his discretion, accept the copy.

4. Application for investigation

Usually it’s the litigants’ duty to provide evidence. However, under some objective circumstances, if it’s impossible for the litigant to do so, the litigant can apply for an investigation by the court.

Evidence must be verified to be true before it can be used as the basis for ascertainment of facts.

Useful link:

The Supreme People’s Court of The People’s Republic of China

evidence in China court, file lawsuit in China, how to win, how to win case in China, lawsuit

China-More Opening-up in Financial Sector

October 18, 2019

On October 15, 2019, the State Council of PRC announced the revision of the Regulation of the People’s Republic of China on Administration of Foreign-funded Insurance Companies and the Regulation of the People’s Republic of China on the Administration of Foreign-funded Banks.

There are four primary amendments to the Regulation on the Administration of Foreign-funded Banks, including:

1. Liberalizing requirements on shareholders that plan to set up foreign-invested banks in China and requirements on foreign banks that plan branches in China;

2. Allowing foreign banks to simultaneously set up branches as well as wholly foreign-owned banks — or branches and Sino-foreign joint venture banks — in China;

The State Council of PRC announced the revision of two financial administration regulations and opening-up more to overseas investors in financial sector

3. Easing restrictions on foreign banking business ;

4. Lowering their branches’ threshold of fixed-term renminbi deposits to 500,000 yuan from 1 million (to $70,610 from $141,220) per deposit.

The government has relaxed market access for foreign insurance firms, such as removing requirements that companies that apply to establish foreign-invested insurers in China “must operate insurance business for at least 30 years” and “establish representative office in the territory of China for at least two years”, in order to be approved to set up foreign-funded insurance companies in China.

These new regulations are believed to provide more development room for smaller foreign banks in China, which have their own expertise in specialized areas and detailed implementation measures for these two regulations will be published soon.

According to official statistics, the assets of foreign banks and foreign insurers in China accounted for 1.64 percent and 6.36 percent, respectively, of the total assets of the Chinese banking and insurance sectors.

By the end of the second quarter, foreign banks had set up 41 locally incorporated foreign-invested banks, 116 branches and 151 representative offices in China. Foreign insurers had established 59 locally incorporated foreign insurers and 131 representative offices in the country.

Negative List for Foreign Investment –2019 Edition

Useful Link:

MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA

financial sector, foreign banks in China, opening-up

How to File a Lawsuit in China? (P1-jurisdiction)

October 16, 2019

For expats doing business in China, if they have any civil or commercial disputes with their business partner, what can they do?

The most cost-effective or best way of course, is negotiation. If negotiation doesn’t work, the next option people can consider is filing a lawsuit.

So, how does someone file a lawsuit in a Chinese court? What is going on behind the mysterious dark red door of the court room? Is there a chance for a foreigner to win a case against local people?

1. How to decide the jurisdiction?

Jurisdiction means which court has the authority to hear your case. There are two kinds of jurisdictions which will be discussed below, namely, 1) grade jurisdiction and 2) territorial jurisdiction.

1 Grade jurisdiction

Courts in China are divided into three levels, the Primary Court, the Intermediate Court and the Supreme Court. For example, in Guangdong province, Guangdong provincial court is the Supreme Court, Guangzhou municipal court is the Intermediate Court and the courts in each area of Guangzhou are the Primary Courts.

Generally speaking, the Primary Courts have jurisdiction for a trial of first instance for civil (including commercial) cases, unless the case is major and foreign-related or the case has a significant impact. The significance of a case usually depends on the amount in dispute (the quantum), among other factors.

2 Territorial Jurisdiction

A principal for territorial jurisdiction is that: The Court at the location of the Defendant’s domicile shall have jurisdiction. Domicile means the location where the defendant’s identity certificate is granted, for an individual this refers to his Identity card; for an entity this refers the company’s business license. However, for an individual that has moved away from his domicile, the plaintiff can file the lawsuit in the court where the defendant has habitually been living.

However, there are some exceptions. For example, in the case of a contract dispute, the court at the location of the defendant’s domicile or the place of performance of contract shall have jurisdiction.

Furthermore, the litigants of a contract dispute or other property rights dispute may agree in writing on the selection of the court at the location of the Defendant’s domicile, place of performance of contract, place of execution of contract, address of the plaintiff, location of the subject matter, etc or a venue which has actual connection with the dispute to be the People’s Court which has jurisdiction, but shall not violate the provisions of this Law regarding to grade jurisdiction and exclusive jurisdiction.

If you want to file a lawsuit in China, the first thing you have to do is to choose the jurisdiction, namely, decide which court you are going to choose?

In the case of a lawsuit regarding a dispute over the incorporation of a company, confirmation of shareholder qualification, profit distribution, dissolution, etc, the court at the company’s domicile shall have jurisdiction.

In the case of a real estate dispute lawsuit, the court at the location of the real estate shall have jurisdiction.

In the case of a tort lawsuit, the court at the place of occurrence of the tortious act or the Defendant’s domicile shall have jurisdiction. So, in an IPR infringement case, where the infringing company is incorporated in an inland or underdeveloped city and sells the infringing product nationwide, we would suggest that you file a lawsuit against the infringer in a more developed city because we believe that the judges in developed cities have a stronger sense of IPR protection and have more experience. In order to do this, the infringing product must be located in the developed city in order to found jurisdiction. We feel that having the law suit in a more developed city will give you a better chance of getting a favorable result for our client as the judges in the infringer’s city may be influenced by “regional protectionism”

Tip:

It’s important to know the identity of the people who you are making a deal with. If dispute happens and a lawsuit needs to be filed, the first thing you have to do is to decide which court you are going to file a lawsuit with. Furthermore, you have to prove to the court where jurisdiction is, meaning you have to provide the defendant’s identity information and prove one of the above mentioned grounds to found jurisdiction.

Useful link:

The Supreme People’s Court of The People’s Republic of China

choose the jurisdiction, civil procedure law in China, file lawsuit in China, litigation in China, selection of court

Further Utilize Foreign Investment

1. Move faster to further open up the financial industry.

2. Deepen reform to facilitate investment.

Tax Credit Repair in China

MICHAEL JORDAN’s Trademark War in China

Highlights of The Amended Trademark Law of PRC

1. Malicious squatting will be cut down in multiple ways.

2. Malicious registration and litigation will be punished.

3. More compensation for trademark infringement.

Updated! Treatment for Non-Resident Taxpayers

1. Identification

2. Main procedure

3. The above-mentioned relevant information includes:

4. Simplification of Paperwork

5. Legal liability

How to File a Lawsuit in China (P2-evidence)

1. Priority

2. Electronic data

3. Original or copy

4. Application for investigation

China-More Opening-up in Financial Sector

How to File a Lawsuit in China? (P1-jurisdiction)

1. How to decide the jurisdiction?

1 Grade jurisdiction

2 Territorial Jurisdiction

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