Shanghai Municipality, Strengthening Protection of Intellectual Property Rights in Foreign Trade and Economic Cooperation Opinion

(Issued on May 20 2003.)

This Opinion is enacted to strengthen the protection of intellectual property rights (IPR) in foreign trade and economic cooperation, to promote a healthy development of foreign trade and economic cooperation, and to guide the enterprises and institutions of Shanghai Municipality to deal properly with the protection of IPR in their foreign trade and economic cooperation activities.

Article 1: Enterprises and institutions engaging in foreign trade and economic cooperation activities (hereafter, enterprises and institutions) shall strengthen their protection of IPR and related management work, set forth an IPR working system, establish or designate a department to take charge of IPR affairs according to the actual situation of the work unit, and equip corresponding IP management personnel.

Article 2: Enterprises and institutions shall strengthen the publicizing, training and education, for the personnel involved in foreign trade, of the IPR related laws and regulations of our country and other countries with which the foreign trade and economic cooperation activities are concerned. Enterprises and institutions shall sign non-disclosure agreements with the foreign trade personnel to define explicitly the specific information to be kept confidential, the term of performing the non-disclosure agreement and the consideration for abiding by the non-disclosure agreement.

Article 3: Enterprises and institutions shall make full use of contracts to protect their own IPR when engaging in foreign trade and economic cooperation activities. They can either sign an independent IPR contract or incorporate IPR clauses in contracts for technology or trade.

Article 4: A qualified valuation institution may be appointed to evaluate or retain relevant experts to discuss the IPR concerned in accordance with laws and regulations or whenever the parties deem necessary.

Article 5: Enterprises and institutions that import goods, services and technology involving IPR shall: require the exporter to present valid certificates proving that the exporter is the legal proprietor or licensee of the relevant IPR and to confirm the legal rights of such IPR in China; stipulate explicitly in the import contract that the exporter shall be responsible for the relevant economic losses and bear other legal liability in case of any infringement of IPR claimed by any third party or any other IPR disputes arising therefrom; and state clearly the rights and obligations of importer and exporter in pursuing liability for infringement in case of any third party infringement of the aforesaid IPR.

Article 6: Enterprises and institutions authorized to process imported materials or samples, or to OEM, shall require the authorizing party to present valid certificates proving that the authorizing party is the legal proprietor or licensee of the IPR that is associated with the processed products and/or their packaging and/or their promotional materials. It shall also be stipulated in the contract for such authorized processing that the authorizing party shall bear the legal liability arising and be responsible for the relevant economic losses incurred by the authorized party in case of any third party claims of infringement of the IPR associated with the processed products and/or their packaging and/or their promotional materials or detainment by customs on the borders due to suspected infringement of IPR.

Article 7: Enterprises and institutions importing technologies involving IPR shall enter into a technology import contract in accordance with the PRC Administration of Technology Import and Export Regulations and the contract shall contain no such clauses as restricting the assignee from improvements to or re-innovations to the imported technology.

Article 8: In a patented technology licensing contract, the parties shall:

(1) state explicitly the nature of the patent licence. Patent licences are usually classified as non-exclusive licences, sole licences and exclusive licences, namely: non-exclusive licences under which the patentee has the right to license the patented technology again to any third party other than the licensee; sole licences under which the patentee cannot license the patented technology again to any third party other than the licensee though the patentee itself still has the right to exploit the patented technology; and exclusive licences under which no party (including the patentee) other than the licensee can exploit the patented technology;

(2) state explicitly details of the patent licensing including details of the licensee's manufacture, use, offer to sell, sell or import of the patented product and whether the licensee has the right to authorize any other party to manufacture, use, offer to sell, sell or import the patented product;

(3) state explicitly the geographical scope covered by the patent licensing;

(4) pay attention to the period of validity of the patent and make it clear whether the licensee can continue to use the patent in case the licensing contract expires while the period of validity of the patent has not; and

(5) state explicitly the rights and obligations of both parties in pursuing the liability for infringement in case of infringement by any third party.

Article 9: Enterprises and institutions can register the copyright works involved in the export of goods, services and technologies with the municipal copyright administration. Enterprises and institutions importing computer software and entering into computer software licensing contracts with a foreign party shall apply to the municipal copyright administration for record filing of the contract.

Article 10: Before entering into a trademark licensing contract, enterprises and institutions shall conduct a search on the products (services) associated with the trademark to check whether the licensing contract is in conflict with relevant laws of the countries (regions) in which the products (services) are sold (used), or in conflict with the priority rights of third parties.

Article 11: Enterprises and institutions exporting goods, services and technologies shall check whether the aforesaid items constitute infringement of IPR in the importing countries (regions), and shall apply to the relevant authorities of the importing countries (regions) for patent or trademark registration for the qualified inventions-creations and trademarks so as to obtain local IPR protection.

Enterprises and institutions shall pay attention to fostering their own trademark on the overseas market while exporting products, and try their best to have the foreign traders market the products with manufacturers' trademarks.

If business secrets are involved in export, enterprises and institutions shall stipulate in the contract provisions prohibiting the importer from disclosing the business secrets to any third party as well as provisions on legal liability related to confidentiality obligation.

Article 12: Foreign trade export agents in the municipality engaging in export agency business that involves IPR shall enter into IPR agreements with the product provider and take joint measures to avoid infringing IPR of other parties.

Article 13: Foreign trade export enterprises in the municipality shall protect their foreign trademark rights. In case the foreign trade export enterprise owns foreign trademark rights while the product provider owns the same trademark rights in the domestic market, both parties shall settle the conflict in accordance with the principle of mutual benefit.

Article 14: Enterprises and institutions in the municipality that export technology and enter into patent technology licensing or assignment contracts with foreign parties shall complete the procedure for record filing of patent licensing contracts with the municipal intellectual property office and the procedure for contract registration with the municipal commission for foreign economic relations and trade.

Article 15: When establishing a Sino-foreign equity joint venture, if the foreign party is to contribute IPR such as patents, trademarks and copyrights as investments, the Chinese party shall ensure that the foreign party is the legal proprietor of the IPR in China and relevant countries (regions).

Article 16: When establishing a Sino-foreign cooperative joint venture if the foreign party is to contribute IPR such as patents, trademarks and copyrights as conditions for cooperation, the Chinese party shall ensure that the foreign party is the legal proprietor or licensee of the IPR in China and relevant countries (regions).

Article 17: To establish a Sino-foreign equity/cooperative joint venture in the municipality, enterprises and institutions shall stipulate explicitly the following in the equity/cooperative joint venture contract:

(1) the IPR such as patents, trademarks and copyrights created during the existence of the equity/cooperative joint venture shall belong to the equity/cooperative joint venture or jointly owned by both parties of the equity/cooperative joint venture;

(2) measures to deal with the jointly-owned IPR of the equity/cooperative joint venture upon expiration of the term of the equity/cooperative joint venture;

(3) in the course of performing the equity/cooperative joint venture contract, the foreign party shall bear the corresponding legal liability for infringement claimed by any third party against the IPR provided by the foreign party.

Article 18: In cooperating with the foreign party by way of equity/cooperative joint venture, the Chinese party, when trying to make use of the effect of the foreign party's trademark, shall at the same time protect its original trademark to avoid its being cancelled, played down and thus diluted in value; in registering new trademarks for the equity/cooperative joint venture, the Chinese party shall endeavour to incorporate its original trademark into the new trademark and avoid using simply a combination of "Shanghai" or other geographical names and the foreign party's trademark as the new trademark; upon expiration of the term of the equity/cooperative joint venture, the Chinese party shall make use of the market effect of the trademark of the equity/cooperative joint venture and foster relevant trademarks and register new trademarks at appropriate times.

Article 19: Enterprises and institutions investing in or contracting for projects overseas shall understand the relevant IPR laws of the target countries (regions) and avoid infringing the IPR of the target countries (regions). If the enterprises and institutions have their own inventions-creations and /or trademark, they shall apply promptly to the authorities of the targeted or relevant countries/regions for patents or registration of trademarks. The Chinese party shall obtain IPR such as patents and trademarks of the foreign cooperating party through contract. In case of any IPR disputes, the Chinese party shall take prompt action to collect evidence and pursue legal protection.

Article 20: Enterprises and institutions attending foreign exhibitions shall pay attention to the IPR such as patents, trademarks and copyrights in the products to be displayed and avoid the imitation and/or infringement of such displayed products.

Before attending the exhibition, enterprises and institutions shall find out, in the country (region) where the exhibition is held, the status of the intellectual property laws such as those for patents, trademarks and copyrights relating to the products to be displayed, to avoid infringement of any other party's IPR in the product to be displayed and/or their packaging and/or promotional materials. In case of any infringement against the IPR in the displayed product during the exhibition, enterprises and institutions shall take prompt action to collect evidence and contact the hosting authorities of the exhibition so as to pursue IPR protection.

Attending enterprises shall collect and preserve samples displayed, written materials and other evidential materials showing the name of the exhibition, the hosting authorities and the date of the exhibition, and use them as evidence of priority claims in application for trademark registration and of the grace period in application of patent and copyright claims.

Article 21: Enterprises and institutions shall apply promptly to the General Administration of Customs for record filing of customs protection of IPR in accordance with the requirements of the PRC Customs Protection of Intellectual Property Rights Regulations. If a rights holder who has filed its IPR for the record finds goods to be imported or exported are suspected of infringing its IPR, it shall apply promptly for customs protection of IPR to the Customs office where the goods are to be imported or exported.

Article 22: In case of IPR disputes, enterprises and institutions shall take active measures to protect their own lawful rights and interests in accordance with the law, regardless of whether their own IPR is infringed or is claimed to have infringed other parties' IPR.

The parties can settle their IPR disputes through the following ways:

(1) consultation between the parties themselves;

(2) submission of the dispute for arbitration as agreed;

(3) application to intellectual property administrative departments for mediation; or

(4) bringing suit to court directly.

Article 23: In case of IPR infringement by third parties or IPR infringement suits brought by third parties, both parties of a transaction shall, in advance, stipulate by means of contract such items as bringing suit, obligation of answering and allocation of fees. Any party aware of such cases shall inform the other party promptly and settle the dispute through joint endeavours.

Article 24: The foreign trade and economic cooperation association of the municipality shall be concerned with the status of the protection and management of IPR in the industry, establish notification and precaution systems for IPR application and ownership by enterprises within the industry, research and set forth industrial IPR strategies to improve the risk hedging capability of the whole industry, guide members to establish sound IPR working structures and systems, formulate industrial IPR self-discipline rules, carry out mediation for IPR disputes, participate in IPR litigation as entrusted by members, cooperate with law enforcement departments in investigating and handling of IPR violations, strengthen communication with the government, and promote cooperation and communication with relevant domestic and foreign industrial associations.

1. Translation provided by Rouse and Co. International.