PROTECTING YOUR IP RIGHTS WITH THE CHINESE ANTI-UNFAIR COMPETITION LAW (AUCL)

The definition of an unfair competition is given by the article 2 of the PCR Anti-Unfair Competition Law (反不正当竞争法). According to this article, an act of unfair competition is constituted when during production or distribution activities, a business operator disrupts the market competition order or infringes the legal rights and interests of other business operators or consumers.

Some unfair competition acts can be related to intellectual property such as the Article 6 which concerns the copy and imitation of brands and the Article 9 relating to the trade secrets. These articles protect an intellectual property owner from infringing of its IP rights by a competitor. The Anti-Unfair Competition Law has the benefit of protecting unregistered trademark.

  1. Acts of confusion:

The article 6 of the PRC Anti Unfair Competition Law provides that acts of confusion “mislead the public to believe the product or service is another’s product” or “associate the product or service with another party”.

These acts of confusion include:

  • Unauthorized use of a product name, packaging or trade dress
  • Unauthorized use of entity’s name
  • Unauthorized use of entity’s website name
  • Other acts of confusion that mislead the public to believe the product or service is another’s product or associate the product or service with another party

Additionally, a name, packaging or the trade dress should have a “certain influence”. This means the owner of a brand must demonstrate the trademark’s fame in order to satisfy all requirements provided by the Article 6. Thus, new brands that are yet to have a certain degree of influence cannot be protected under the Article 6, nevertheless they may be enjoy the protection under the Article 2.

  1. Trade secrets:

The AUCL provides protections against the theft of the trade secrets by an employee or former employee, and any other entity or individual.

According to the Article 9 of the AUCL, if a third-party knows or should have known that an employee or former employee of the right holder of a trade secret or any other organization or individual has obtained the trade secret through illegal means, the third party shall be deemed to have infringed the trade secret.

In this sense, if an employee or a former employee discloses illegally the trade secret to a business operator, the business operator should be punished although it did not personally commit the theft of the trade secret.

  1. Penalties:

There are two different kind of penalties:

  • Damages to the victim of an act of unfair competition
  • Administrative sanctions imposed by the AIC

3.1 Damages:

The amount of damages should be calculated on the basis of the actual lose. If the actual lose cannot be determined, the profits earned by the infringer through the infringement will be take into account for the calculation of damages. If neither of these methods of calculation can’t be established, the AUCL provides statutory damages. The court can hold up to the statutory maximum amount of RMB 3 million.

3.2 Administrative penalties:

The local Administrations for Industry and Commerce (AICs) are empowered to impose administrative penalties.

With regards to the breach of the Article 6, the AICs can impose a fine up to five times the amount of the illegal turnover when it exceeds RMB 50,000. If the turnover is less than RMB 50,000, AICS can order a fine up to RMB 250,000.

Furthermore, if a company registered illegally the name of another party and it does not change its company’s name, the AIC will replace its original company’s name by an Unified Social Credit Code, according to the article 18.2 of the AUCL.

Concerning the theft of trade secrets, the AICs can impose a fine of between RMB 100,000 and RMB 500,000. The AICs can impose fines up to RMB 3 million for serious cases.

The definition of an unfair competition is given by the article 2 of the PCR Anti-Unfair Competition Law(反不正当竞争法). According to this article, an act of unfair competition is constituted when during production or distribution activities, a business operator disrupts the market competition order or infringes the legal rights and interests of other business operators or consumers.

Some unfair competition acts can be related to intellectual property such as the Article 6 which concerns the copy and imitation of brands and the Article 9 relating to the trade secrets. These articles protect an intellectual property owner from infringing of its IP rights by a competitor. The Anti-Unfair Competition Law has the benefit of protecting unregistered trademark.

  1. Acts of confusion:

The article 6 of the PRC Anti Unfair Competition Law provides that acts of confusion “mislead the public to believe the product or service is another’s product” or “associate the product or service with another party”.

These acts of confusion include:

  • Unauthorized use of a product name, packaging or trade dress
  • Unauthorized use of entity’s name
  • Unauthorized use of entity’s website name
  • Other acts of confusion that mislead the public to believe the product or service is another’s product or associate the product or service with another party

Additionally, a name, packaging or the trade dress should have a “certain influence”. This means the owner of a brand must demonstrate the trademark’s fame in order to satisfy all requirements provided by the Article 6. Thus, new brands that are yet to have a certain degree of influence cannot be protected under the Article 6, nevertheless they may be enjoy the protection under the Article 2.

  1. Trade secrets:

The AUCL provides protections against the theft of the trade secrets by an employee or former employee, and any other entity or individual.

According to the Article 9 of the AUCL, if a third-party knows or should have known that an employee or former employee of the right holder of a trade secret or any other organization or individual has obtained the trade secret through illegal means, the third party shall be deemed to have infringed the trade secret.

In this sense, if an employee or a former employee discloses illegally the trade secret to a business operator, the business operator should be punished although it did not personally commit the theft of the trade secret.

  1. Penalties:

There are two different kind of penalties:

  • Damages to the victim of an act of unfair competition
  • Administrative sanctions imposed by the AIC

3.1 Damages:

The amount of damages should be calculated on the basis of the actual lose. If the actual lose cannot be determined, the profits earned by the infringer through the infringement will be take into account for the calculation of damages. If neither of these methods of calculation can’t be established, the AUCL provides statutory damages. The court can hold up to the statutory maximum amount of RMB 3 million.

3.2 Administrative penalties:

The local Administrations for Industry and Commerce (AICs) are empowered to impose administrative penalties.

With regards to the breach of the Article 6, the AICs can impose a fine up to five times the amount of the illegal turnover when it exceeds RMB 50,000. If the turnover is less than RMB 50,000, AICS can order a fine up to RMB 250,000.

Furthermore, if a company registered illegally the name of another party and it does not change its company’s name, the AIC will replace its original company’s name by an Unified Social Credit Code, according to the article 18.2 of the AUCL.

Concerning the theft of trade secrets, the AICs can impose a fine of between RMB 100,000 and RMB 500,000. The AICs can impose fines up to RMB 3 million for serious cases.

Disclaimer: This article was first published on LinkedIn by Daniel Albrecht on https://www.linkedin.com/pulse/protecting-your-ip-rights-chinese-anti-unfair-law-aucl-albrecht/

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