Haworth & Lexon Law Newsletter (60)

Haworth & Lexon Law Newsletter

No.10, 2006 (Total:No.60) Oct.15th, 2006
Edited by Haworth & Lexon

"Haworth & Lexon Law Newsletter" is issued every month, mainly introducing the legal change in the fields of Corporate, Securities, Foreign investment, Intellectual property rights, International trade etc. with necessary comment. All the comments do not mean the legal opinion of our firm and the firm does not have any legal liability for such comment. Should you have any interest in any topics or any questions please feel free to contact the firm. You will be expected to have satisfactory response from the professional attorney of our firm.

Guidelines

Latest Laws and Regulations

  • “Enterprise Insolvency Law of People’s Republic of China”………………………………….2
  • “Circular of the Preferential Policies for Enterprise Income Taxes on Enterprise’s Technical Innovation” …………………………………………………………………………………….3
  • “Administrative Measures on Promotion Acts of Retailers” ………………………………......4
  • “Arrangements between the Mainland China and Hong Kong Special Administrative Region for Avoiding Double Taxation on Incomes and Preventing Taxation Evasion”……………......4
  • “Interpretations on the Relevant Issues on Application of “Arbitration Law of People’s Republic of China””…………………………………………………………………………....5
  • Explanations of the Foreign Investment Department of the State Administration of Industry??? and Commerce on the Essential Clauses of “Implementation Opinions on Some Issues concerning Application of the Administration of Examination and Approval and Registration of Foreign-funded Companies” ……………………………………………………………......6
  • “Circular on Relevant Issues on Improving Administration of Receipt and Settlement of Foreign Exchange”…………………………………………………………………………......7
  • IP Cases
  • The Client Name List Held by the Distributor will Lose its Value as Commercial Secret After the Distributorship is terminated …………………………………………………………………….7
  • It Constitutes Unfair Competition Using A Similar Domain Same for Publicity and Causing Confusion………………………………………………………………………………………8
  • It Constitutes Infringement Releasing Only A Notice on the Website on Payment of Remuneration but no Payment has been made in Reshipping Other’s Works ……………………………...9
  • Reasonable Use of Works Shall be on a Non-profit Basis and the Name of the Writers shall be Shown……………………………………………………………………………...10
  • Case Analysis
  • A Higher People’s Court Has the Jurisdiction on A Patent Dispute Case of the First Instance......................................................................................................................................1

 §Latest Laws and Regulations

  • "Enterprise Insolvency Law of People’s Republic of China”
The Standing Committee of the National People’s Congress promulgated “Enterprise Insolvency Law of People’s Republic of China” (hereinafter referred to as “Insolvency Law”) on August 27, 2006, which will come into force on June 1, 2007. The law applies to the enterprises with legal personality in China. The liquidation of entities except enterprises with legal personality provided by other laws may be referred to the procedure provided in this law. The Insolvency Law also has fundamental provisions on the insolvency of the financial institutions.

The “Insolvency Law” provides that the insolvency of the enterprise shall meet two conditions: it does not repay the due debt; its assets are not enough to discharge all of its debts or it obviously loses the ability of discharge.

One of the big changes of the “Insolvency Law” is that a court shall designate an administrator when it decides to accept the insolvency application. An administrator may be a liquidation group consisting of the relevant departments or organs, a lawfully established law firm or accounting firm or other social agencies such as insolvency & liquidation firm. The law has provisions on the determination of duties, remunerations and resignations of the administrators.

The“Insolvency Law” clearly defines “assets of a debtor”, and provides that the administrator may apply to the court to repeal it if there is any case to transfer the assets gratuitously or give up its rights as a creditor. The following acts involving the assets of the debtors are void: hiding or transferring the assets to avoid its debts or making up debts or admitting untrue debts.?

The “Insolvency Law” differentiates between insolvency expenses and communal debts. For example, litigation fees, fees for the administration, appraisal and distribution of the assets of the debtors, fees and remunerations to the administrators for its performance and fees for employing some workers are included in insolvency expenses. Six kinds of debts such as debts arising from voluntary service to the debtors’ assets, debts arising from unjust benefit of the debtors and debtors arising from damages caused by the assets of the debtors are included in the communal debts. Insolvency expenses and communal debts may be paid off momentarily. If it is insufficient to pay off the insolvency expenses and communal debts, the insolvency expenses shall prevail.

The “Insolvency Law” has some provisions on the duties, votes of the creditors’ conference and the duties of the creditors’ committee.

The “Insolvency Law” stipulates that the debtor or its creditors may apply to the court for reconstruction and the court will examine and rule on it. The “Insolvency Law” has specific provisions on the procedures, drafted reconstruction plans and voting and the implementation of the plans.?
The “Insolvency Law” also provides that the debtors may apply to the court for settlement directly, or it may apply for settlement after the court accepts the insolvency application and before the insolvency is announced by the court. At the meantime, the debtors shall present the settlement agreements (draft). The court shall decide on whether to accept the application. The settlement agreements shall be voted by the creditors’ conference.

Once the enterprise is ruled to be insolvent, the enterprise comes into the stage called insolvency liquidation. The “Insolvency Law” provides on the sequences of the distribution of the assets after the insolvency expenses and communal debts are paid off: (1) the wages, subsidies for medical treatment and disability and comfort and compensatory funds as defaulted by the insolvent, the fundamental old-age insurance premiums, fundamental medical insurance premiums that shall have been transferred into the individual accounts of employers as well as the compensation for the employees as prescribed by the relevant laws and administrative regulations; (2) The social insurance premiums and tax fees as defaulted by the insolvent other than those as prescribed by the aforesaid provisions; and (3) The common credit of insolvent. If the assets of the insolvent are not enough to satisfy the requirements in the same sequence, it shall be distributed proportionately.

To protect the rights and interests of the employees, it shall be noted that Article 132 of the “Insolvency Law” provides the wages, subsidies for medical treatment and disability and comfort and compensatory funds as defaulted by the debtor, the fundamental old-age insurance premiums, fundamental medical insurance premiums that shall have been transferred into the individual accounts of employers as well as the compensation for the employees as prescribed by the relevant laws and administrative regulations which have been owed to the employees before the promulgation of the law and can not be paid off from the unsecured assets shall be paid from the secured assets, prior to the guarantors.

  • “Circular of the Preferential Policies for Enterprise Income Taxes on Enterprise’s Technical Innovation”
The Ministry of Finance and the State Administration of Taxation promulgated “Circular of the Preferential Policies for Enterprise Income Taxes on Enterprise’s Technical Innovation” on September 8, 2006.

In relation to some technology development fees, it is allowed to deduct 50% of the actual fees when calculating the enterprise income tax, even if the technology fees have been fully deducted. The part of the fees which are insufficient for deduction may be deducted within 5 years thereafter.

Employee education expenses, which are collected by the enterprise and actually used, within a limitation of 2.5% of such expenses, may be deducted from enterprise income tax.

From January 1, 2006, a new high-tech enterprise established within the national high-tech industrial park is exempted from enterprise income tax within two years from the profiting year, and after the exemption term, its enterprise income tax shall be reduced to 15%. If there is any loss during the start-up, it may be compensated year by year according to the taxation laws and its profiting year is calculated from year which is profiting after compensation.

  • “Administrative Measures on Promotion Acts of Retailers”

The Measures applies to the promotion acts of the retailers within the territory of China.

The Measures requires that the contents of advertisement and other publications of the promotion acts shall meat four standards: true, lawful, clear and pellucid. The promotion contents shall be indicated at an obvious position of the business place. The retailers shall not change the promotion activities within the express term after it starts the activities, except those changes caused by force majeure.

In relation to some false promotion acts, the “Measures” provides that when a retailer carries out the promotion acts, it shall not cheat or mislead the customers to buy its commodities by being discounted from a false previous price or misleading marked price.

The Measures provides on the promotion acts which limit on the time or amount. If it is a promotion limited by time, the retailer shall ensure the sufficient supply of the goods during that time. If it is limited by amount, the amount of the promoted commodities shall be denoted.

The Measures provides that the retailers shall not refuse to return or set up obstacles to return with the excuse of promotion.

  • “Arrangements between the Mainland China and Hong Kong Special Administrative Region for Avoiding Double Taxation on Incomes and Preventing Taxation Evasion”

The central government and Hong Kong Special Administrative Region signed the “Arrangements between the Mainland China and Hong Kong Special Administrative Region for Avoiding Double Taxation on Incomes and Preventing Taxation Evasion” (hereinafter referred to as “Arrangements”) on August 21, 2006, which will come into force after both parties complete the required legal procedures respectively.

The Arrangements covers the direct income (such as business profit and individual labor income) and indirect income (such as dividend, interest and license fee) of the individuals and enterprises, which enlarges the contents of the “Arrangements between the Mainland China and Hong Kong Special Administrative Region for Avoiding Double Taxation on Incomes” signed in February, 1998 (only providing on direct income).

The Arrangements has a series of provisions on the taxation arrangements such as the real property income, business profit, income from shipping, land-carriage and air transportation, licensing fee, employment income and directors remuneration. For example, it provides that “If a resident of one party has income from the other party where the real property is, the taxation may be imposed by such other party.”

The Arrangements has special provisions on avoiding double taxation, mainly about when the taxation has been imposed on the income of a resident of one party by the other party, it is allowed to be deducted from the taxation imposed by such party.

The Arrangements provides on the information exchange. The State Administration of Taxation and the Inland Revenue Department of Hong Kong may exchange the information to implement the provisions of the Arrangements. The information to be exchanged is only limited to the data which is necessary and relevant to the tax category, especially on preventing tax evasion, in order to ensure that the data of the tax-payers should not be abused.

  • “Interpretations on the Relevant Issues on Application of “Arbitration Law of People’s Republic of China””

The Supreme People’s Court promulgated “Interpretations on the Relevant Issues on Application of “Arbitration Law of People’s Republic of China”” (hereinafter referred to as “Interpretations”) on August 23, 2006, which came into force on September 8, 2006.

The Interpretations confirms that the arbitration agreements which are in the forms of contract, letter or data message are arbitration agreements of “other written forms”.

The Interpretations provides if the name of the arbitration institution in the agreement is not correct, but the arbitration institution can be determined, the institution should be deemed as decided. However, if the agreement only says about the arbitration rule to be applied, the institution is not selected, unless the parties enter into a supplementary agreement or the institution can be determined from such arbitration rules.

If the parties select two or more arbitration institutions, they may choose one from them. If there is no such agreement, the arbitration agreement is void.

The case that the parties apply to the court for confirmation of the effect of the arbitration agreement shall be judged by the intermediate people’s court where the arbitration institution specified in the agreement is. If the chosen institution is not clear, the case shall be judged by the intermediate people’s court where the agreement is signed or where the opposite party is.

The laws applied in examining the effects of the foreign arbitration agreements shall be decided in the follow sequence: (1) the laws chosen by the parties; (2) the laws where the arbitration is situated; or (3) the laws where the court is situated.

  • Explanations of the Foreign Investment Department of the State Administration of Industry and Commerce on the Essential Clauses of “Implementation Opinions on Some Issues concerning Application of the Administration of Examination and Approval and Registration of Foreign-funded Companies”

The Foreign Investment Department of the State Administration of Industry and Commerce promulgated Explanations on the Essential Clauses of “Implementation Opinions on Some Issues concerning Application of the Administration of Examination and Approval and Registration of Foreign-funded Companies” (hereinafter referred to as “Explanations”) on September 22, 2006 for reference when implementing the “Implementation Opinions on Some Issues concerning Application of the Administration of Examination and Approval and Registration of Foreign-funded Companies” (hereinafter referred to as “Implementation Opinions”).

In relation to the article that the minimum registered capital for a one person company in the form of wholly foreign-owned company shall have the following meaning: first, the registered capital shall not less than RMB100, 000; secondly, a foreign individual may set up several one-person companies in China; thirdly, the form of one-person company shall not be used when such company makes investment; fourthly, the contribution of the registered capital to a one-person company may be by installments, such as other limited liability companies. Such provisions are applied to foreign invested companies whose registered capitals are changed or who makes investments after January 1, 2006.

In relation to the structures of the foreign invested companies, the Explanations provides that all kinds of foreign invested companies shall have director system, but such issues as the structures (director board or director), establishment measures, terms and duties shall be provided in the articles of association. In addition, the articles of association shall be effective after examination and approval, but the registration authority may examine the approved articles of association according to the law. If they violate the laws and regulations, the registration authority has the right to request the companies to make alterations. If the alterations are relevant to the items listed in the approval certificates, there should be re-examined and re-approved.

Concerning Article 7 of the Implementation Opinions, the Explanations clarifies that such provisions on fully contribution, profit, no record of violation of laws or no more than 50% of the net asset when the foreign invested companies make domestic investments, as provided in “Tentative Provisions on Domestic Investment Made by Foreign Investment Companies” will not implemented.

Article 25 of the Implementation Opinions provides that the changing or extension procedures will not be applied to the previously registered offices any more. The Explanations says that the laws do not forbid the existence of the offices, and the foreign invested companies may set up offices for business communications at the places except the registered address and the registration will not be requested. However, the registration authority shall continue to supervise such offices and the offices are forbidden to carrying on direct business. The offices may be held as conducting direct business if those of the production companies carry out selection, process, production and maintenance, or those of the non-production companies carry out direct processing service. The offices doing such business shall be replaced by the branches.

  • “Circular on Relevant Issues on Improving Administration of Receipt and Settlement of Foreign Exchange”

The State Administration of Foreign Exchange promulgated “Circular on Relevant Issues on Improving Administration of Receipt and Settlement of Foreign Exchange” (hereinafter referred to as “Circular”) on September 29, 2006, which came into force on November 1, 2006.

The Circular provides that if an entity who receives foreign exchange has any of the following cases, it shall be ranked in the “emphasized enterprises” list: (1) It is 10% or more of the balance between the amount of the received foreign exchange from transactions and the amount of the received foreign exchange which should be received during such period; (2) an enterprise which is punished for violation of regulations on foreign exchange administration in one year; (3) the administration of foreign exchange considers that it should be in the “emphasized enterprises” list. If the entities receiving foreign exchange are on the list, all of its income under the current account needs proving the nature of the income by providing documents according to the Circular and the entities can undertake the settlement only after the strict approval by the administration of foreign exchange.

The Circular provides if any foreign exchange is applied to be returned to China after it has been paid into account or settlement, it shall be subject to the strict examination and approval by the administration of foreign exchange.?

§ IP Cases


The Chongqing Higher People’s Court made the final judgment on September 14, 2006 in the case of infringement of commercial secret and unfair competition between the appellant Chongqing Xiaomifeng Financial Software Co., Ltd. (the plaintiff of the first instance, “Xiaomifeng Company”), the appellant Chongqing Xulang Technology & Development Co., Ltd. (the defendant of the first instance, “Xulang Company”) and Mr. Zongjin Zhou. The final judgment repealed the judgment of the first instance and rejected all the claims made by Xiaomifeng Company.

The court of the first instance held that, although there were names of four hundred and forty five (445) clients listed on the annex of the Civil Judgment No. 282, it was not accessible for the public. Even if the relevant parties may get the commercial secret because of involvement in the case, they are obligated to keep it confidential. Therefore, the name list of the twenty one (21) clients involved in this case was still commercial secret. Mr. Zongjin Zhou knew the contents of the name list due to its work. He provided the same service to the clients on the list for Xulang and he could not prove that he got the client in a lawful way, so the court affirmed that he disclosed the name list of the plaintiff and infringed the commercial secret of the plaintiff. But the claim of RMB 300,000 Yuan was too high. So the court judged RMB 10, 000 as the compensation according to the infringement scope and the fault of the defendants.

Xiaomifeng Company considered that the amount ruled in the judgment of the first instance was too low, and the conclusion was wrong that unfair competition was not constituted when the “Notice to Users of Xiaomifeng Software” was published on Chongqing Daily, Chongqing Commercial Newspaper and the website of the defendant.

Xulang Company defended that Xiaomifeng Company did not have the right to sell Xiaomifeng Financial Software after June, 2004, so it could not acquire any economic interest from the clients listed on the name list. The name list did not have any economic value for Xiaomifeng Company, so there should not be any losses for Xiaomifeng Company.

The court of the second instance held that the name list involved in this case was formed from the promotion, sales and after-sales service by Xiaomifeng Company in Chongqing, after it was entrusted by Shenzhen Shenruan Electronic Industrial Co., Ltd. on March 30, 2000. From the point of view of the part of the name list that forms commercial secret, the commercial secret should only mean the users of Xiaomifeng Software listed in the name list. Therefore, the rights of Xiaomifeng Company should be limited to promotion, sales and after-sales service. In this case, Xiaomifeng Company had stopped distributing Xiaomifeng software as of June, 2004, so Xiaomifeng Company had no rights or obligations any more in this regard. The name list had lost its basis and value to be commercial secret. Xiaomifeng Company had no right to prevent those authorized companies from selling Xiaomifeng Software for the clients on the name list. Therefore, it could not be established that Xulang Company and Zongjin Zhou infringed the commercial secret. The judgment by the court of the first instance should be changed because the bases to determine the name list as the commercial secret was improper and the court adopted the wrong laws.??


Beijing No.2 Intermediate People’s Court made, on September 2, 2006, the judgment of the first instance in the unfair competition case of Maidige Medical and Health Supplement (Jinan) Co., Ltd. (hereinafter referred to as “Maidige Company”) vs. Beijing Shangshangyi Myopic Eye Prevention Research Center (hereinafter referred to as “Shangshangyi Center”) and Beijing Yitong Yuanwang Technology Co., Ltd. (hereinafter referred to as “Yitong Yuanwang Company”).

The plaintiff stated that it had used “Maidige” as its name from the time of registration. It also registered and used “Maidige” as the trademark and “maidige.com” as the domain name. The defendant was the agent of the plaintiff in Beijing.? After the term of agency terminated, the defendant used the domain name “madige.com” and attracted investment by using “maidige” to link to “Beijing Maidige Myopic Eye Prevention Center”, then to transfer to “Shangshangyi Center”. In December 2005, the plaintiff found that most of the contents of the eyesight tables titled “Shangshangyi·Shixian Zoulang” used by the defendant were the same as that of the plaintiff.

Shangshangyi Center defended that Shangshangyi Center did not print such eyesight tables titled “Shangshangyi·Shixian Zoulang” and no infringement acts existed.

Yitong Yuanwang Company defended that the domain name “madige.com” and the trademark “maidige” was lawfully registered and it did not infringe the rights of Maidige Company.

The court held that the business scope of Yitong Yuanwang Company and its former existence “Beijing Maidige Technology Co., Ltd.” was basically the same as that of Maidige Company. Unfair competition was constituted when it registered and used “madige.com”, which led to confusion with the products provided by Maidige Company. At the same time, the court thought if searching through the key words “Maidige” by the search engine, it could link to the website of Yitong Yuanwang (the domain name was Madige.com) by such searching result as “Beijing Maidige Technology Co., Ltd.” and “Beijing Maidige Myopic Eye Prevention Center”, and the contents of the website were about myopic eye prevention, sales of glasses and attraction of investment of Shangshangyi Center. The above acts of Shangshangyi Center and Yitong Yuanwang Company led to confusion with the products of Maidige Company, misleading the relevant customers to visit the websites of Yitong Yuanwang Company, and publicizing the contents of Shangshangyi Center. So unfair competition was established. The claim to stop the above infringement should be supported.

  • It Constitutes Infringement Releasing Only A Notice on the Website on Payment of Remuneration but no Paymant has been Made in Reshipping Other’s Works

The Shanghai No.2 Intermediate People’s Court made the judgment of the first instance in the case of Beijing Sanmianxiang Copyright Agency Co., Ltd. vs. Shanghai Oriental Net Co., Ltd. regarding copyright dispute on May 15, 2006.

The plaintiff stated Mr. Zhang Shike wrote “Speed Acceleration of Yutong Bus on the way of Diversified Operation”. On April 18, 2005, the plaintiff and Mr. Zhang Shike entered into “Entrusted Compilation and Copyright Transfer Contract”, which said that except the right of authorship and the agreed price for the transfer, from the publication date to the expiry of the contract, the copyright belonged to the plaintiff. The term of such copyright transfer was ten (10) years. On the website (http://www.eastday.com ) of the defendant, the article of “Speed Acceleration of Yutong Bus on the way of Diversified Operation” was published, which was indicated to be from “China Car Newspaper”. Therefore, the plaintiff authorized a lawyer to send a letter to the defendant, requesting the defendant to pay the remuneration for the article and make compensations, but the defendant only paid a very low remuneration. The plaintiff thought that the defendant infringed the right of the plaintiff when the defendant did not pay the relevant remuneration to the right holder within a reasonable time.

The defendant defended that the defendant reprinted the article lawfully, and had paid RMB 103.20 after the plaintiff sent the letter. Therefore, the defendant did not infringe the copyright of the plaintiff. In the meantime, in order to find the copyright holder to pay promptly the remuneration, the defendant released a notice on the first page of the website, providing the contact person, telephone number and address for the payment of the remuneration. In addition, the defendant entered into an agreement with China Copyright Protection Center, entrusting the Center to pay the remuneration as requested by the copyright holder. Therefore, the defendant had tried its best to perform its payment notification obligation.

The court held that since the defendant knew the source of the article, the defendant should contact the newspaper publishing house for the payment of the remuneration. But the defendant admitted that it failed to do so. It could not be deemed as performance of its obligation to the copyright holder while it only released a copyright notice to notify the holder of its intention for such payment. The defense that the defendant had fulfilled its notification obligation was in lack of factual or legal basis, so it could not be supported.

  • Reasonable Use of Works Shall be on a Non-profit Basis and the Name of the Writers shall be Shown

The plaintiff stated that he took the photo called “Taihu Yuge” (Fishermen’s Song on Lake Tai) in the evening of July 1986, which was released on the third page of Wuxi Daily on March 25, 1990. WLWO had revised and used the photo in the social insurance cards that it made and issued, but it had not asked for authorization, or printed the name of the photographer or made any payment. WEII was responsible for the production of the social insurance cards. The plaintiff considered that he was the copyright holder and his copyright should be protected by the laws. The defendant infringed the copyright of the plaintiff while it used the photo in making and issuing the social insurance cards without his consent.

WLWO, one of the defendants, defended that it was not the card issuance organization. According to the relevant regulations of the government, the card issuance organization was the Center. So the Center should be liable.

The Center, one of the defendants, had no objection to the fact that it had used the photo. But the use by the Center was reasonable use, so it is an act of the government. The Center should not be liable.

WEII defended that it had printed the social insurance cards upon the request and entrustment of WLWO and the picture had been decided by WLWO. WELL did not have the obligation to examine the source of the picture. WELL had completed the production of the cards in 1997 and had ceased the production a long time ago. No infringement existed. The complaint filed by the plaintiff had exceeded the limitation of actions, so the complaint should be rejected.

The court held that in this case, the Center defended that Wuxi Social Insurance Undertaking Office (the name of which had been changed to the Center) had issued the social insurance cards for performance of its administrative duties, not for profit. So it was reasonable use as specified by the Copyright Law. However, as ascertained in this case, there was a difference (RMB0.20 Yuan/card) between the issuance price of the cards issued by the Wuxi Social Insurance Undertaking Office and that for the production of the cards. Considering the issued number of 980,000 cards, the evidence provided by the Center was insufficient to prove that the issuer had not obtained actual interest during the issuance. In addition, Wuxi Social Insurance Undertaking Office and the Center had not shown the name of the author or the name of the works when using it, which was not in compliance with the form of reasonable use required by the Copyright Law. Therefore, the defense of the Center should not be affirmed. The use of photo was not reasonable use. WELL printed the cards upon the request and entrustment of the Wuxi Social Insurance Undertaking Office and the picture was also determined by the Wuxi Social Insurance Undertaking Office . WEII did not have the obligation to check the source of the picture. So the infringement of WEII could not be affirmed.

§ Analysis of Cases

  • A Higher People’s Court had Jurisdiction in the Patent Dispute Cases of the First Instance

{Introduction of the case}
This was a case about the jurisdiction of the patent disputes, tried by the Supreme People’s Court. The Appellants were Hebei Xinkai Automobile Manufacturing Co., Ltd. (hereinafter referred to as “Hebei Xinkai”) and Gaobeidian Xinkai Automobile Manufacturing Co., Ltd. (hereinafter referred to as Ggobeidian Xinkai), the appellees were (Japan) Honda Motor (hereinafter referred to as Honda), the plaintiff of the first instance was Dongfeng Honda Automobile (Wuhan) Co., Ltd. (hereinafter referred to as Dongfeng) and the defendant of the first instance was Beijing Xinsheng Baili Automobile Trading Co., Ltd. (hereinafter referred to as Xinsheng).

{Applications of the appeal}
(1) the judgment of the first instance held that Xinsheng sold the products involved in the case, which had not been proved or examined by the appellees;
(2) the case of the first instance should be ruled by the Intermediate People’s Court, not the Higher People’s Court;
(3) the appellant had filed an invalidation application to the Patent Re-examination Office for four patents involved in this case, which were accepted by the Patent Re-examination Office, so please suspend the trial of this case.

{Defences}
(1) Xinsheng had sold the products involved in the case and the defendant had provided the notarized proof;
(2) the Beijing Higher People’s had jurisdiction according to the provisions of jurisdiction by levels on copyright provided by Beijing;
(3) the appellant had no right to request the court of the second trial to suspend the litigation.

{Ascertained Facts}
The facts ascertained by the court were: At the time of the service of the bill of complaint to the appellees on November 30, 2004, as well as the sixteen proof. The No. 7 proof ([2004] Jingjingzi No.05752 “Notary Letter” of Beijing Notary Office) was used to prove that Xinsheng had sold the products involved in this case. In the case of the second trial, the appellants admitted that he had received the aforesaid proof, but it refused to give further opinions on the examination of the proof with a reason that the notary was not present. The appellants presented the objection of jurisdiction during the time to present bill of defense, which said that (1) the products involved in the case, namely the Type HXK6491E cars, were manufactured by Hebei Xinkai, which was seated in Hebei Province. According to the relevant judicial interpretations, this case should be ruled by Hebei Shijiazhuang Intermediate People’s Court. (2) According to the relevant provisions, the patent dispute of the first instance should be ruled by the Intermediate People’s Court. It was not proper for acceptance by the Beijing Higher People’s Court. It was not referred to in the jurisdiction objection whether Xinsheng was the seller of the products involved in infringement.

{Affirmation of the Court}
(1)Xinsheng was the seller of the products alleged to infringement. According to “if a litigation is brought both by the manufacturers and sellers, the court of the place of sales has a jurisdiction”, provided in Article 6 of the “Relevant Provisions of the Supreme People’s Court on the Application of Laws in Trial of patent Dispute”, the relevant courts in Beijing had the territorial jurisdiction, since Beijing was the place where the sellers were.
(2) Beijing Higher People’s Court had a jurisdiction by level. Article 2 of the “Relevant Provisions of the Supreme People’s Court on the Application of Laws in Trial of patent Dispute” provided that “the patent disputes of the first instance should be governed by the intermediate people’s court where the government of the provincial level is and the intermediate people’s court designated by the Supreme People’s Court”. This article intended to provide that the lowest level for the patent cases should be the intermediate people’s court, which did not exclude the Higher People’s Court for the patent cases of the first instance. In the “Provisions on the Jurisdiction by Level of the copyright Civil Disputes of the first Instance Accepted by the Courts of Various Levels” promulgated by Beijing Higher People’s Court on December 17, 2002, the Higher People’s Court has a jurisdiction in the copyright civil litigation cases whose disputed amounts were RMB100,000,000 or more. The provisions were in accordance with the civil litigation law and the interpretations by our court, so it could be used as a basis of jurisdiction by level. The disputed amount in this case was RMB100, 000,000 and Beijing Higher People’s Court had the jurisdiction.
(3) Suspension was not among the trial scope of this case. The determination of jurisdiction was a premise to other procedural problems or all of the substantial problems. The court did not examine such problems as suspension until the solution of the jurisdiction objection. As an appeal in jurisdiction, suspension should not be within the trial scope of this case, so this court did not examine it.

{Ruling of the final instance}
The Supreme People’s Court made the final ruling on June 28, 2005, which affirmed the ruling of the first instance.

{Focus}
The focus in this case was that whether a Higher People’ Court had a jurisdiction in the patent dispute of the first instance.

Article 2 of the “Relevant Provisions of the Supreme People’s Court on the Application of Laws in Trial of patent Dispute” provides that “the patent disputes of the first instance should be governed by the intermediate people’s court where the government of the provincial level is and the intermediate people’s court designated by the Supreme People’s Court.” The article was purported to provide that the lowest level for the patent cases should be the intermediate people’s court, which did not exclude the Higher People’s Court for the patent cases of the first instance.
(This case was published in the bulletin of Supreme People’s Court and has a guiding effect.)