Haworth & Lexon Law Newsletter
No.5 2008 (Total:No.79) June. 20th, 2008
Edited by Haworth & Lexon 

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¡°Haworth & Lexon Law Newsletter ¡± is issued every month, mainly introducing the legal change in the fields of Corporate, Securities, Foreign investment, E-commerce, 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:

Guiding Opinions of the General Office of the Ministry of Commerce on Doing Well in the Dissolution and Liquidation of Foreign-invested Enterprises

Provisions of the Supreme People¡¯s Court on Some Issues about the Trial of the Cases of Ship Collision Disputes

Notice on Printing and Distributing the ¡°Trial Measures on Administration of Housing Registration Book¡±

Notice of the State Administration of Taxation on Relevant Deed Tax Policies Concerning Assignment of Assets from the Parent Company by A Wholly-Owned Subsidiary

Measures on Administration of Export Licenses for Goods (Revised)

Detailed Rules for Directional Asset Management Business of Securities Companies (for Trial)

Provisions on Administration of Business Qualification for Domestic Waterborne Transport

Motor Vehicle Registration (revised)

Reply of the Supreme People¡¯s Court on Whether Accessory Punishments Could be Added when the Criminal Trial of Second Instance Has Changed the Accusation in the Judgment of the First Instance

Notice on Relevant Issues of Adjustment of the Criterion for Pre-income-tax Deduction of Individual Business Household, Sole Individual Proprietorship Enterprises and Partnership Enterprises

Notice of the General Office of China Banking Regulatory Commission on Relevant Issues Concerning Foreign Exchange Margin Trading Launched by Banking Financial Institutions

IP Cases:

Only Witness's Testimony is not Enough to Prove the Legal Resource of Infringing Products, and the Suspected Infringer is Held Liable for Infringement

If a Registered Trademark was Revoked by the Trademark Review and Hearing Board upon Effective Judgment, the Parties has no Right to Initiate a Separate Action

If Not Specifically Stipulated, the Rights on Special Decoration and Packing of Famous Commodities are Jointly Owned by the Manufacturer and the Seller

The Profit Earned from the Infringement shall be Returned to the Right Holder There is no Fault on the Part of the Infringer

Network Culture Business License of a Website shall not be the Unique Evidence to Confirm the Website Operator

Latest Laws and Regulations

Guiding Opinions of the General Office of the Ministry of Commerce on Doing Well in the Dissolution and Liquidation of Foreign-invested Enterprises

The ¡°Guiding Opinions on Doing Well in the Dissolution and Liquidation of Foreign-invested Enterprises¡± (hereinafter ¡°the Guiding Opinions¡±) were promulgated by the Ministry of Commerce on May 5, 2008, which have provisions in respect of the dissolution and liquidation of foreign-invested enterprises after the abolition of the Measures for Liquidation of Foreign-invested Enterprises.

The Guiding Opinions provide that the dissolution and liquidation of foreign-invested enterprises shall be carried out according to the Company Law and the laws and administrative regulations on foreign investment. Where there are special provisions in the laws and administrative regulations but there are no relevant detailed provisions in the Company Law, the former shall prevail.

Where a foreign-invested enterprise is terminated by its board of directors or joint management committee as (1) it cannot run its business because of great deficit; (2)it cannot run its business because of great losses and damages from force majeure like natural disasters, war and so on; (3) it cannot achieve business purposes and has no prospect; or (4) the conditions of dissolution provided under the joint venture contract or the articles of associations have matured, it shall submit to the examination and approval authority with an application letter for premature dissolution, the resolution on premature dissolution of the enterprise as made by the board of directors, meeting of the shareholders or general meeting of the shareholders as well as the approval certificate and the business license of the enterprise.

Where a party of a Chinese-foreign equity joint enterprise or a Chinese-foreign contractual (co-operation) joint enterprise unilaterally files a dissolution application as one party fails to perform the obligations provided in the agreement, contract or articles of associations and thereby makes impossible the operation of such enterprises, such application letter of premature dissolution shall be submitted to the examination and approval authority, with effective judgment or award made by the people¡¯s court or arbitration commission of valid jurisdiction; such judgment or award shall expressly judge or award the existence of the aforesaid circumstances.

Shareholder(s) holding more than 10% of the total voting rights of a foreign-invested enterprise may, in the event that the operation and management of the company fall into serious difficulties and the continuing existence will make serious impairment to the interests of the shareholders, petition a people¡¯s court for dissolution of the company if the problems thereof cannot be solved through other methods; such request shall be submitted to a people¡¯s court that has jurisdiction over the petition.

Provisions of the Supreme People¡¯s Court on Some Issues about the Trial of the Cases of Ship Collision Disputes

The ¡°Provisions of the Supreme People¡¯s Court on Some Issues about the Trial of the Cases of Ship Collision Disputes¡± (hereinafter the ¡°Provisions¡±) were promulgated by the Supreme People¡¯s Court on May 19, 2008 and shall be implemented as of May 23, 2008.

The ¡°ship collision¡± as mentioned in the Provisions refers to an accident arising from the touch of ships at sea or in other navigable waters adjacent thereto and excludes the collision between inland river ships.

For the trial of ship collision dispute as well as infringement disputes of ship touch damages arising out of ship collision, the compensation liability on the ships in collision shall be determined according to Chapter VIII of the Maritime Law, i.e., (1) neither party shall be liable if the collision is caused by force majeure or other causes not through the fault of either party or if the cause thereof is left in doubt; (2) the one in fault shall be liable if the collision is caused by the fault of the ship; or (3) each ship shall be liable in proportion to the extent of its fault if the colliding ships are all in fault; the liability of the colliding ships shall be apportioned equally if the respective faults are equal in proportion or it is impossible to determine the extent of the proportion of the respective faults. The compensation liability resulting from ship collision shall be borne by ship owners, or shall be borne by the bareboat charterer if the ship collision occurs during the bareboat charter period and the bareboat charter is registered according to the laws.

If ship collision causes casualty or death to person on board who is a third party, the ships shall be jointly and severally liable if they are jointly in fault. If a ship has paid an amount of compensation in excess of the proportion, it shall have the right of recourse against the other ship(s) in fault.

In respect of burden of proof, the Provisions provide that if the interested party of the shipped goods on the ships in collision or a third party has brought claims concerning the loss of and damage to goods or other property against one party or both parties of the ship collision, the party or parties of the ship collision shall provide proofs evidencing the proportion of fault. In the absence of such proofs without justifications, the party of the ship collision shall bear all the compensation liabilities or the parties of the ship collision shall jointly and severally bear the compensation liabilities.

Notice on Printing and Distributing the ¡°Trial Measures on Administration of Housing Registration Book¡±

The ¡°Trial Measures on Administration of Housing Registration Book¡± (hereinafter the ¡°Measures¡±) were promulgated on May 6, 2008 by the Ministry of Housing and Urban-Rural Development and shall be implemented as of July 1, 2008.

The housing registration book is a special book made and administered by housing registration authority for recording the basic conditions and title conditions of a property and other items that should be recorded as provided by law.

The building registration book is numbered on the principle of basic unit of building, and the basic unit of building owns a unique number, which shall be re-numbered in the event of division and merger of buildings.

The public premises, public devices and rooms used for property management service in the building area shall be separately registered on registration books at the time of initial registration of the property, which should relate to the registration books of the basic unit of the buildings thereof.

The Measures further provide that individuals and entities may search the registration book by using their personal or legal identification documents; the registered person, by providing personal identification documents, or the interested person, by providing personal identification materials and documents proving the relationship of interests, may search and copy the information in the housing registration book.

Notice of the State Administration of Taxation on Relevant Deed Tax Policies Concerning Assignment of Assets from the Parent Company by A Wholly-Owned Subsidiary

The ¡°Notice on Relevant Deed Tax Policies Concerning the Acceptance of Assets from Parent Company by Wholly-Owned Subsidiary¡± was promulgated by the State Administration of Taxation on May 26, 2008.

The ¡°Notice on Relevant Deed Tax Policies Concerning the Acceptance of Assets from Parent Company by Wholly-Owned Subsidiary¡± provides that, the increase of investment of a wholly-owned subsidiary by lands and buildings under the name of the parent company in the process of re-organization is internal transfer of assets within the same investment body, and the acts of the wholly-owned subsidiary for being assigned with the titles of lands and buildings from the parent company are deed tax free.

The Measures on Administration of Export Licenses for Goods (Revised)

The ¡°Measures on Administration of Export Licenses for Goods (Revised)¡± (hereinafter ¡°the Measures¡±) were promulgated by the Ministry of Commerce on June 7, 2008 and shall be implemented as of July 1, 2008.

The Measures provide that when exporting goods that are subject to the administration of export license, foreign-invested enterprises shall ask license-issuing organs to issue export licenses according to the export quotas of foreign invested enterprises distributed by the Ministry of Commerce; the former Administration Measures of Export Licenses for Goods provided that foreign-invested enterprises shall only export goods manufactured by itself that are subject to such export license administration. The Measures also delete former requirement that ¡°If the invested project of foreign invested enterprises relates to the export of goods subject to export license administration, it shall be approved in accordance with approval procedures after permission by the Ministry of Commerce during the project proposal period¡±.

The Measures have revised the issuing time and validity term of the export license:

the former measures provided that ¡°All license-issuing organs may issue export licenses for the next year in accordance with export quotas distributed by the Ministry of Commerce or all the local competent administration for commerce as of December 16 of the current year¡±; while the Measures provide that the license-issuing organs may issue export licenses for the next year in accordance with export quotas distributed by the Ministry of Commerce or all the local competent administration for commerce as of December 10 of the current year, and the validity term shall begin from January 1 of the next year;
the former measures provided that ¡°The validity term of export license must not exceed six (6) months. If it needs to be used beyond the year, the expiration date of the export license must not exceed the end of the next February¡±; while the Measures provide that the longest validity term of a export license shall not exceed six (6) months and the expiration time of the export license shall not exceed December 31 of the year; and
if the goods exported in the form of processing trade are subject to quota license administration, the validity term of the export licenses shall also not exceed December 31 of the year; or it is necessary to apply for a new export license for the new year during the validity term.

Detailed Rules for Directional Asset Management Business of Securities Companies (for Trial)
The ¡°Detailed Rules for Directional Asset Management Business of Securities Companies (for Trial)¡± (hereinafter ¡°the Detailed Rules¡±) were promulgated by China Securities Regulatory Commission on May 31, 2008 and shall be implemented as of July 1, 2008.

The Detailed Rules apply to the activities of securities companies entrusted by single customer who concludes contracts with the customer and thereafter manages the property entrusted by the customer through the customer¡¯s account according to the methods, conditions, requirements and limitations stipulated in the contract. According to the Detailed Rules, the property entrusted by a customer shall be legally held by the customer such as cash, stock shares, bonds, share of securities investment fund, share of aggregate property management plan, notes issued by the People¡¯s Bank of China, short-term financing bonds, asset backed securities, financial derivatives and other financial properties permitted by China Securities Regulatory Commission; The investment scope of directional asset management includes stock shares, bonds, securities investment fund, aggregate property management plan, notes issued by the People¡¯s Bank of China, short-term financing bonds, asset backed securities, financial derivatives and other financial properties permitted by China Securities Regulatory Commission.

The Detailed Rules have provided a series of strict provisions on securities companies: the directors, supervisors, employees and their mates of those companies shall not become the customers of its company¡¯s directional asset management business; the minimum amount of the property entrusted by the customer shall follow the provisions of China Securities Regulatory Commission; the directional asset management contract shall contain the requisite rules made by Securities Association of China; securities companies and property depository institutions shall make sure that the property entrusted by customers shall be separated from that of securities companies and property depository institutions, and the properties between customers shall also be independently separated. The preparation settlement and management of accounts of different customer¡¯s properties shall be separately and independently undertaken.

As to detailed operation, the Detailed Rules also have strict limitations: customer¡¯s property to be invested in one company¡¯s securities shall not exceed 10% of the total amount of the company¡¯s securities; unless otherwise expressly authorized by the customer, a securities company is not allowed to hold in its specific securities account more than 5% of the total amount of a listed company¡¯s shares; in case of occurrence of such an event, the securities company and property depository institution shall support the customer to fulfill such obligations as publication, report, tender offer and the like that are provided by laws, administrative regulations and China Security Regulatory Commission

As to risk management and internal control, the Detailed Rules also have provisions concerning the division of business, investment decision making system, division of separate accounts and compliance inspection as well as other activities that securities companies are forbidden to engage in.

Provisions on Administration of Business Qualification for Domestic Waterborne Transport
The ¡°Administrative Provisions on Business Qualification for Domestic Waterborne Transport¡± (hereinafter ¡°the Provision¡±) was promulgated by the Ministry of Transport on May 26, 2008 and shall be implemented as of August 1, 2008.

The Provision is applicable to administrate the business qualification of enterprises and individuals engaging in business transport on the coastal waters, rivers, lakes and other navigable waters. The business of transportation and tugboat serving for boats, passengers and goods in the working area of a port is not governed by the Provision.

According to the Provision, except for inland water transport by a common cargo vessel lighter than 600 tons, any enterprise to operate vessel transport shall obtain the status of enterprise as a legal person. Any individual to operate inland water transport by a common cargo vessel lighter than 600 tons shall apply for registration of individual business.

According to the Provision, enterprises engaging in the domestic waterborne transport shall obtain the following qualifications:

own and operate a vessel or vessels suitable for the business scope of operational areas and the business type and the gross transportation capacity meets the requirement of the Provision;
have organizations concerning operation, ocean business, machine business and crew management, fixed business place and registered capital as provided by governmental provisions that are sufficient to cover the operational needs and security management requirements;
have safety management and production operation management systems such as sound safety production liability system, safety production regulation, contingency plan for safety production accidents and the like; and build a safe management system according to ¡°The Administrative Provisions of the People¡¯s Republic of China on the Safety and Pollution Prevention of Shipping Companies¡±;
have relevant full-time managers for operation, ocean business and machine business who are competent according to the Provision; and
if operating passenger transportation, have service and safety facilities that are necessary for boat berth and onboard and deboard of passengers.
The Provision requires that the enterprise engaging in the domestic waterborne transport shall have at least one full-time managers and certain number of full-time managers for ocean business and machine business, and the period of the employment contracts between the enterprise and these managers shall be 1 year or longer and these managers are not allowed to have part-time jobs on the boat or in other enterprises.

The enterprises or individuals applying for the business of domestic waterborne transport shall file application letter, feasibility study, articles of association, business license and proof of origin of vessel and other documents relating to the vessel to the competent communications administrative department of local people¡¯s government.

If (1) the major shareholder, constitution of share or registered capital of the enterprise has changed, (2) the articles of associations as well as basic management system has greatly changed, (3) the transportation capacity of the vessel has changed, or (4) there is an safety liability accident concerning the vessel under operation, the operator of domestic waterborne transport shall within 15 working days report to the competent communications administrative department of local people¡¯s government.

The Provisions on Motor Vehicle Registration (Revised)
The ¡°Provisions on Motor Vehicle Registration (Revised)¡± (hereinafter ¡°the Provision¡±) was promulgated by the Ministry of Public Security on June 3, 2008 and shall be implemented as of October 1, 2008.

The newly revised Provision has further regulated the registration of motor vehicles, which will bring great convenience to the application of motor vehicle license plate: the time period has been reduced, for instance, if legal and valid certificates and documents are presented, the time period for handling motor vehicle registration has been reduced from 5 days to 2 days, and that of the application for replacement of vehicle registration certificate has been reduced from 15 days to 1 day.

As to alteration of the color of the bodywork of vehicles, replacement of the bodywork or vehicle frame and the replacement of the engine, no advance application to vehicle administration offices is required; the motor vehicle owner may apply to vehicle administration offices for alteration within 10 days after such alteration.

Having done transfer registration or termination registration, the original owner of motor vehicle may apply to vehicle administration offices for use of original motor vehicle license plate when registering the newly purchased motor vehicle, however, the application for use of original motor vehicle license plate shall satisfy the following conditions:
1. the application shall be presented within 6 months after transfer registration or termination registration;
2. the original owner of motor vehicle has owned such motor vehicle for more than 3 years; and
3. the activity in violation of road traffic safety laws and the traffic accident of the original motor vehicle has been resolved.

Besides, as to the selection of motor vehicle license plate, the owner of motor vehicle may choose to use the computer for automatic selection or to arrange such plate by itself according to the provisions of motor vehicle license plate standards, which in the past was decided and issued by the vehicle administration offices.

As to vehicles that cannot be driven back to original place of registration, the Provision permits that the owner of motor vehicle may sell the discarding motor vehicle to the motor vehicle recycling enterprises at the place where such motor vehicle is located.

Reply of the Supreme People¡¯s Court on Whether the Accessory Punishments Could be Added when the Criminal Trial of Second Instance Has Changed the Accusation in the Judgment of the First Instance

The ¡°Reply of the Supreme People¡¯s Court on Whether the Accessory Punishments Could be Added when the Criminal Trial of Second Instance Has Changed the Accusation in the Judgment of the First Instance¡± (hereinafter ¡°the Reply¡±) was promulgated by the Supreme People¡¯s Court on June 6, 2008.

According to the Reply, the people¡¯s court of second instance shall not impose accessory punishment while the people¡¯s court of second instance has changed the accusation if the people¡¯s court of first instance had not imposed accessory punishment; if the accessory punishment imposed by people¡¯s court of first instance is relevantly lighter, the people¡¯s court of second instance shall not change it into a heavy accessory punishment, neither to remand the case to people¡¯s court of first instance for reconsideration in the reasons of unclear truth or insufficient evidence; if such case must be re-judged, it shall use trial supervision procedure to re-try the case after the judgment or verdict of the trial of second instance has become effective.

Notice on Relevant Issues of Adjustment of the Criterion for the Pre-income-tax Deduction of Individual Business Household, Sole Individual Proprietorship Enterprises and Partnership Enterprises

The ¡°Notice on Relevant Issues of Adjustment of the Criterion for the Pre-income-tax Deduction of Individual Business Household, Sole Individual Proprietorship Enterprises and Partnership Enterprises¡± (hereinafter ¡°the Notice¡±) was promulgated by the Ministry of Finance and the State Administration of Taxation on June 3, 2008.

There are three parts of the Notice:
1. when individual income taxes are calculated and levied on the production and management income of individual business households, sole individual proprietorship enterprises and partnership enterprises according to the law, the deduction rate for investor itself shall be 24,000 Yuan/Year (2000 Yuan/Month);
2. the actual costs of reasonable salary and wage paid by individual business households, sole individual proprietorship enterprises and partnership enterprises to its employees are allowed to be deducted before tax; and
3. the distributed labor union expenses, actual employees¡¯ welfare, education cost for employees, advertisement costs, business promotion expenses, and the business entertainment expenses that directly related to the production and business operation may be deducted according to the actually occurred amount under a certain limited amount or according to certain proportions. Moreover, the advertisement costs and business promotion expenses above the limited amount may be deducted at later tax years.

Part 1 shall be implemented as of March 1, 2008; and the latter 2 parts shall be implemented as of January 1, 2008.

Notice of the General Office of China Banking Regulatory Commission on Relevant Issues Concerning Foreign Exchange Margin Trading Launched by Banking Financial Institutions

The ¡°Notice of the General Office of China Banking Regulatory Commission on Relevant Issues Concerning Foreign Exchange Margin Trading Launched by Banking Financial Institutions¡± (hereinafter ¡°the Notice¡±) was promulgated by the General Office of China Banking Regulatory Commission on June 6, 2008.

Foreign exchange margin trading business refers to leveraged foreign exchange trading business provided by banking financial institutions to investors and its major feature is: for the purpose of obtaining profit from foreign exchange transaction, the investor may, after investing a certain amount of fund as the trading margin, magnify the amount of the margin according to the leverage multiple and thereby make the contractual amount of foreign exchange more than the trading margin, which is the actually invested amount.

According to the Notice, banking financial institutions shall not launch or in devious manners launch foreign exchange margin trading business before China Banking Regulatory Commission has promulgated administrative measures regulating such foreign exchange margin trading launched by banking financial institutions. And the banking financial institutions that have already launched the foreign exchange margin trading businesses before the Notice are not allowed to provide such business to new customers, neither to provide new transactions to existing customer (except the clearance of the transaction position by customers). The Notice suggests that customers who already have such trading businesses in the banks should as soon as possible clear the transaction position at a suitable time.

IP Cases

Only Witness's Testimony is not Enough to Prove the Legal Resource of Infringing Products, and the Suspected Infringer is Held Liable for Infringement by People¡¯s Court

Zhejiang Higher People¡¯s Court made a final judgment on April 28, 2008 in the case of Wenzhou Hengyi Plastic Machinery Co., Ltd. (appellant, the defendant of the first instance, hereinafter ¡°Hengyi Company¡±) vs. Yanfeng General Plastic Machinery Factory (appellee, the plaintiff of the first instance, hereinafter ¡°Yanfeng Factory¡±) concerning a patent dispute, which held that the Yanfeng Factory had committed patent infringement and should be liable for compensation.

The people¡¯s court of first instance held that Hengyi Company had the patent right of the utility model No. ZL200520003656.5. According to the relevant provisions of China Patent Law, after having been granted the patent right of invention and utility model, any entity or individual shall not, without the patent right owner¡¯s license, implement such patent in such ways as production, use, offering for sale, sale, import of the patented products. The technology of Yanfeng Factory¡¯s products charged with infringement was the same as that of Hengyi Company¡¯s patented technology. In April 2007, Yanfeng Factory demonstrated a plastic circular type knitting machine containing the disputed patented product in this case in China Import and Export Fair, which should belong to offering for sale of patented products as provided under China Patent Law and should assume such civil liabilities as ceasing all acts of infringement. However, the patented products offered for sale by Yanfeng Factory had been purchased from Pingyang Xufeng Plastic Machinery Parts Co., Ltd. (hereinafter ¡°Xufeng Company¡±) in January 2007 while Hengyi Company could not prove that Yanfeng Factory did not have the knowledge at the time of offering for sale that such plastic circular type knitting machine was manufactured and sold without the patent right owner¡¯s permit. Therefore, Yanfeng Factory should not be liable for compensation.

After the judgment of first instance, Hengyi Company appealed.

Hengyi Company appealed that: the people¡¯s court of the first instance had found that the patented products were installed in five plastic circular type knitting machines when imposing evidence preservation in the plant of Yanfeng Factory; However, the people¡¯s court of the first instance thereafter held that Yanfeng Factory had not committed the infringement only on the ground that the five plastic circular type knitting machines were purchased in January 2007, which had no legal ground; further more, since the people¡¯s court of the first instance had already held that ¡°Yanfeng Factory should immediately cease to sell infringing products¡±, it indicated that Yanfeng Factory had used, manufactured and sold infringing products. However, Yanfeng Factory was not ordered by the first-instance people¡¯s court to assume the liabilities of indemnification according to the commitment letter, which should be wrong.

Yanfeng Company replied that, the products charged for infringement that were preserved by the first-instance people¡¯s court were purchased from Xufeng Company in January 2007 and Yanfeng Factory had no knowledge of infringement; Yanfeng Factory had attended the China Import and Export Fair, but it had never manufactured and sold such products charged for infringement and thereby should not assume the liabilities of compensation.

The people¡¯s court of the second instance held that, Yanfeng Factory had committed the infringement of Hengyi Company¡¯s patent rights, and issued a commitment letter on April 20, 2007, in which Yanfeng Factory promised to cease the infringement and indemnify Hengyi Company of RMB one million if infringement occurred again. Later, Hengyi Company sued Yanfeng Factory to the first-instance people¡¯s court on June 15, 2007 for continuous infringement. The focus of the parties was whether Yanfeng Factory had committed infringement on patent right after April 20, 2007. The first-instance people¡¯s court imposed evidence preservation on June 20, 2007 in the plant of Yanfeng Factory and found the products charged for infringement in five plastic circular type knitting machines. Yanfeng Factory confirmed that such products charged for infringement were the same as the patent technologies owned to Hengyi Company, but defended that the products charged for infringement that were preserved by people¡¯s court were bought from Xufeng Company in January 2007. To prove this, Yanfeng Factory had provided the payment documents, receipt of goods and the conversation record between its agent Wu Jidao and Chen Peixu, the legal representative of Xufeng Company. The original people¡¯s court also made a conversation record on November 30, 2007 with Chen Peixu who confessed that the products charged for infringement were manufactured by Xufeng Company, and it held that as the latter conversation record matched to the former one, it was enough to prove that the products charged for infringement were purchased from Xufeng Company by Yanfeng Factory in January 2007. As to this opinion, the people¡¯s court of the second instance held that, Hengyi Company had completed its burden of proof in patent infringement litigation by applying evidence preservation through people¡¯s court. Therefore, Yanfeng Factory was obligated to assume correspondent burden of proof to prove that such products were purchased in January 2007. The evidence provided by Yanfeng Factory were stemmed from Xufeng Company, and both the conversation record made by Wu Jidao to the legal representative of Xufeng Company and that made by the original people¡¯s court to Chen Peixu were witness¡¯s testimony, which were not enough to defend against the legal effects of original people¡¯s court¡¯s evidence preservation if such evidences were not accepted by Hengyi Company and supported by other evidences. Therefore, the plea made by Yanfeng Factory that the products charged for infringement was purchased from Xufeng Company in January 2007 cannot be supported. The people¡¯s court of the second instance held that Yanfeng Factory had committed acts infringing on Hengyi Company¡¯s patent rights and Yanfeng Factory was not able to prove the legal resource of such products. Besides, as Yanfeng Factory had confessed that it had ever purchased the patented products from Hengyi Company for times and knew that Hengyi Company is the bearer of patent rights, it is obligated to examine whether the seller had received the license from patent right owner when purchasing the goods from Xufeng Company which was the same as that of Hengyi Company¡¯s patented products, therefore, the defense by Yanfeng Factory that it had no knowledge that the products charged for infringement were manufactured and sold without patent bearer¡¯s license could not be supported. At last, the people¡¯s court of second instance held that Yanfeng Factory had committed infringement on patent rights for manufacturing infringing products and should assume the liabilities of compensation.

If a Registered Trademark was Revoked by the Trademark Review and Hearing Board upon Effective Judgment, the Parties cannot Initiate a Separate Action against Such Revocation

Beijing Higher People¡¯s Court made a final judgment on April 29, 2008 in the case of Hainan Tian Ya Hai Jiao Shareholding Co., Ltd. (appellant, the plaintiff of the first instance, hereinafter ¡°Tian Ya Hai Jiao Company¡±) vs. Trademark Review and Hearing Board of the Sate Administration for Industry and Commerce (appellee, the defendant of the first instance, hereinafter ¡°Trademark Review and Hearing Board¡±), and the liquidation team of Sanya Travelling Investment Co., Ltd. (the third party of the first instance, hereinafter ¡°Sanya Travelling Company¡±) concerning a trademark dispute, which held that Tian Ya Hai Jiao Company had brought a litigation twice on one basis and should not be supported.

On August 18, 1997, Tian Ya Hai Jiao Company had applied to the Trademark Office of State Administration for Industry and Commerce (hereinafter ¡°Trademark Office¡±) for the registration of ¡°Tian Ya Hai Jiao & picture¡± (hereinafter ¡°the Disputed Trademark¡±), which was later approved for registration on September 28, 1998 on the service items relating to ¡°travelling, travel reservation, travel agency, traveling escort, traveling arrangement¡±. Sanya Travelling Company applied to Trademark Review and Hearing Board on November 18, 1998 for revocation of the Disputed Trademark, The Trademark Review and Hearing Board made a Decision of Shang Ping Zi [2005] No. 3429 (hereinafter ¡°the Decision¡±) on October 24, 2005 to affirm the validity of the Disputed Trademark. Sanya Travelling Company refused to accept the Decision and brought a lawsuit to Beijing No.1 Intermediate People¡¯s Court, which rendered a judgment of (2006) Yi Zhong Xing Chu Zi No. 82 to revoke the Decision of No. 3429 and requested that Trademark Review and Hearing Board should make a new decision concerning the Disputed Trademark. Later, Tian Ya Hai Jiao Company appealed against the judgment to Beijing Higher People¡¯s Court, which rendered a final judgment of (2007) Gao Xing Zhong Zi No. 26 to reject the appeal of Tian Ya Hai Jiao Company and upheld the original judgment. Thereafter, Trademark Review and Hearing Board made a Decision (hereinafter ¡°No. 62 Review Decision¡±) on April 18, 2007 concerning the review of the former decision of Shang Ping Zi [2005] No. 3429, which revoked the Disputed Trademark. Tian Ya Hai Jiao Company later brought a lawsuit to Beijing No.1 Intermediate People¡¯s Court against such review decision.

Beijing No.1 Intermediate People¡¯s Court held that: the final judgment of (2007) Gao Xing Zhong Zi No. 26 made by Beijing Higher People¡¯s Court was effective and expressly provided that the Disputed Trademark should be revoked. The No. 62 Review Decision in fact was an act of implementing the effective judgment as it was made upon such final judgment and the content therein was the same as the final judgment. Tian Ya Hai Jiao Company had no factual or legal ground to bring the lawsuit again on the same fact, which would not be upheld by the people¡¯s court.

Tian Ya Hai Jiao Company refused to accept such decision and appealed to the people¡¯s court of higher level for revocation of the No. 62 Review Decision and thereby affirming the registration of the Disputed Trademark. The major reasons were: the third party had not established yet when the appellant was applying for registration of the Disputed Trademark; there was no actual ground for the opinions in the No. 62 Review Decision that the third party as well as its predecessor had developed, constructed and managed the ¡°Tian Ya Hai Jiao¡± resort. What appellant had applied for the Disputed Trademark was travelling services, which had no conflict of interests with third party¡¯s development, construction and management of the ¡°Tian Ya Hai Jiao¡± resort. The opinion in the No. 62 Review Decision that the second meaning of ¡°Tian Ya Hai Jiao¡± shall be the ¡°Tian Ya Hai Jiao¡± resort in Hainan island was improper.

The people¡¯s court of the second instance held that: the final judgment of (2007) Gao Xing Zhong Zi No. 26 made on March 15, 2007 was an effective judgment, which held that the Tian Ya Hai Jiao Company was intentionally malicious when registering the Disputed Trademark and had broken the rule of good faith and thereby had impaired the legal rights and interests of Sanya Travelling Company, and thus the Disputed Trademark should be revoked. As the No. 62 Review Decision was made by Trademark Review and Hearing Board upon the foresaid final judgment, and was the same as such final judgment, it was in fact an act of implementing the effective judgment. Therefore, Tian Ya Hai Jiao Company was bringing a lawsuit on the same basis and the people¡¯s court would not uphold the claim.

If Not Specifically Stipulated, the Rights of Special Decoration and Packing of Famous Commodity are Jointly Owned by the Manufacturer and the Seller
Shanghai No.1 Intermediate People¡¯s Court made a final judgment on May 10, 2008 in the case of Shanghai Jin Men Marketing Co., Ltd. (appellant, the plaintiff of the first instance, hereinafter ¡°Jin Men Company¡±) vs. Shanghai NGS Industrial Development Co., Ltd. (appellee, the defendant of the first instance, hereinafter ¡°HGS Company¡±), and Shanghai Jian Bi Yi Health Products Factory (appellee, the defendant of the first instance, hereinafter ¡°Jian Bi Yi Factory¡±) concerning a unfair competition dispute, which rejected the claims of Jin Men Company.

The original people¡¯s court held that: NGS Company invested and established Jian Bi Yi Factory after accepting the Jian Bi Yi nutritional beverage technology from Yuan Yicheng, the outsider of this case, since the beginning of 1994 and has been engaging in the production of Jian Bi Yi nutritional beverage till now. Therefore, NGS Company and Jian Bi Yi Factory were legally allowed to engage in the business such as the production and sale of Jian Bi Yi nutritional beverage subject to the law. Jin Men Company has used for a long term the name and decoration of the disputed Jian Bi Yi nutritional beverage in the cooperation with NGS Company, and the manufacturer¡¯s name was printed on the decoration of Jian Bi Yi nutritional beverage. Generally, the consumers would have deep knowledge and later the trust of the quality of a product through long-term experience of purchasing and using, when they have seen the name and decoration of Jian Bi Yi nutritional beverage, they would determine whether or not to buy according to previous experiences. Therefore, as the manufacturer of Jian Bi Yi nutritional beverage, NGS Company and Jian Bi Yi Factory had not only made positive contributions to the famous reputation of the quality of such products, but also built un-separable relationship with the name and decoration of Jian Bi Yi nutritional beverage, and thereby they allowed to use the name and decoration of such product within the scope provided by the law. In the meantime, as the disputed decoration was jointly determined and used by Jin Men Company and NGS Company, and neither party had ever objected to the use of such decoration on Jian Bi Yi nutritional beverage, therefore, Jin Men Company had no legal ground to use the defense that the outsider Wei Yan was the designer of such decoration to object to the original defendants¡¯ legal use of the disputed decoration. The people¡¯s court of first instance at last rejected Jin Men Company¡¯s claims.

After the judgment of first instance, Jin Men Company appealed.

The main reasons of Jin Men Company were: according to the agreement with NGS Company, the packing and the decoration of such products shall be provided by the appellant; however, the people¡¯s court of the first instance rejected the copyrights o the decoration designer because of the un-severability between the decoration and name of a product, and also rejected the exclusive right of use of the appellant.

After examination, the people¡¯s court of the second instance held that: Jin Men Company and NGS Company had entered into three (3) agreements concerning the production and sale of the disputed products and been keeping the contract relationship for a long period of ten (10) years. Standing on the provisions concerning the rights and obligations of the parties and the revisions of relevant terms and languages in these three (3) agreements between Jin Men Company and NGS Company, it could be seen that the relationship between Jin Men Company and NGS Company was not merely purchase-sale relationship but cooperative business relationship for the production and sale of Jian Bi Yi nutritional beverage through the establishment and long-term maintenance of purchase-sale relationship. There were evidences proving that, except the Jian Bi Yi nutritional beverage itself and its name, the use of trademark and packing was generated through performance of the contract, therefore, the relevant rights so generated should not be enjoyed by only one party if not specifically stipulated. So before dividing the ownership of the joint rights generated from the cooperation in past several years after the termination of cooperative relationship, Jin Men Company could not claim on the basis of an exclusive right owner that the use of disputed trademark and packing by NGS Company and Jian Bi Yi Factory had constituted infringement or unfair competition. As to Jin Men Company¡¯s opinion that the packing and decoration were provided by it according to the agreement, and the people¡¯s court of first instance should not reject its exclusive right of use for un-severability of decoration and name, the people¡¯s court of second instance held that, although the agreement involved stated that the packing should be provided by Jin Men Company, it did not necessarily mean that Jin Men Company exclusively enjoyed the relevant rights of the packing. The provision of packing by one party could be deemed as a division of labor in the process of cooperation, and both of the cooperative parties could have voice on the matter whether the packing provided by Jin Men Company was suitable to the products of joint business. On the other side, once the packing was finally developed as the packing and decoration of famous products, there must be the long-term and joint contribution and investment from both of the business co-operators such as manufacturer, seller and the like, therefore, the intellectual property rights so generated should be jointly owned by the cooperative parties, which was also the ground for the original people¡¯s court to hold the non-separability of the name and decoration with the NGS Company and Jian Bi Yi Factory. At last, the people¡¯s court of the second instance held that the decision of original people¡¯s court was correct and rejected the claims of Jin Men Company.

The Profit Earned from the Infringement shall be Returned to the Bearer in Despite of Tortfeasor¡¯s Fault
Beijing Haiding District People¡¯s Court made a judgment of first instance on April 1, 2008 in the case of Beijing Secular Bird Culture & Art Development Center (plaintiff, hereinafter ¡°the Secular Bird Centre¡±) vs. Beijing HL95 Information Industry Co., Ltd. (defendant, hereinafter ¡°the HL95¡±) concerning the dispute of infringement on the right of sound recording producer, which held that the acts committed by the defendant had constituted infringement.

The Secular Bird Centre claimed that: it was the sound recording producer of Wang Qiang¡¯s Album ¡°Autumn Isn¡¯t Coming Back¡±, in which there were 11 songs such as ¡°Autumn Isn¡¯t Coming Back¡±, ¡°Don't Want You To Cry¡± and the like, and it enjoyed the right as sound recording producer in respect of the said 11 songs. However, HL95, for profit purpose, intentionally provided the song ¡°Don't Want You To Cry¡± to China Mobile Tianjin Branch as the multimedia ring on the internet to be downloaded by mobile phone users without its authorization, which infringed on its sound recording producer right over the song ¡°Don't Want You To Cry¡±.

HL95 pleaded that: the song ¡°Don't Want You To Cry¡± provided by it to China Mobile Tianjin Branch was recorded and completed by the ¡°Fox Music Studio¡± owned to Hu Guobing, and Hu Guobing had licensed in the name of sound producer Guangzhou Hua Yu Culture Broadcast Co., Ltd. (hereinafter ¡°Guangzhou Hua Yu¡±) to use and promote the said song in such areas as wireless internet and mobile value added business. In addition, Hu Guobing had authorized Guangzhou Hua Yu the right of sub-license. Thereafter, Guangzhou Hua Yu sub-licensed HL95 to provide the song to mobile communication operators as internet multimedia ring. Further, it had inspected the license between Hu Guobing and Guangzhou Hua Yu before providing the song to China Mobile Tianjin Branch, therefore, it had fulfilled the duty of due diligence and had not infringed any of the plaintiff¡¯s rights.

After trial, the people¡¯s court held that: the arbitral award rendered by Beijing Arbitration Commission was a valid award, which confirmed that the plaintiff was the sound recording producer of Wang Qiang¡¯s album ¡°Autumn Isn¡¯t Coming Back¡± and stated that Hu Guobing ¡°was the producer of such album who had made contribution to the creation and recording of the music and was entitled to be indentified as producer on this album¡±. Although the ownership of the sound recording producer right in the authorship and identification of right of such album was not clear, , as such album was examined and approved as one of the evidences by Beijing Arbitration Commission in the process of arbitration, this album should not be the counter-evidence against the valid arbitral award; still, as HL95 had not submitted to the people¡¯s court any counter-evidence that was able to overturn such valid arbitral award, the people¡¯s court held that the Secular Bird Centre was the sound recording producer of Wang Qiang¡¯s album ¡°Autumn Isn¡¯t Coming Back¡± and thereby enjoyed the sound recording producer right over the song ¡°Don¡¯t Want You To Cry¡±. As to whether HL95 had constituted infringement or not, the people¡¯s court held that it should be analyzed upon different phases. HL95 began to provide the song ¡°Don¡¯t Want You To Cry¡± to China Mobile Tianjin Branch as the multimedia ring on the internet to be downloaded by mobile phone users for profit since November 20, 2006, when Wang Qiang¡¯s album ¡°Autumn Isn¡¯t Coming Back¡± had not been published yet. As HL95 had examined the copy of Guangzhou Hua Yu¡¯s business license and the authorization relationship between Guangzhou Hua Yu and Hu Guobing, and the singer Wang Qiang as well as the producer Hu Guobing of the song ¡°Don¡¯t Want You To Cry¡± had the reasonable and trustable identification as licensors who jointly guaranteed that such song was recorded and completed in the Fox Music Studio owned to Hu Guobing and the copyright, sound recording producer right, information network broadcast right and other legal copyrights thereof were jointly owned by Hu Guobing and Wang Qiang. Under this circumstance, the people¡¯s court held that HL95 had fulfilled the duty of due care and was innocent at the beginning when providing the song ¡°Don¡¯t Want You To Cry¡± to China Mobile Tianjin Branch as the multimedia ring in the internet to be downloaded by mobile phone users for profit. Later, Hu Guobing and the Secular Bird Centre applied for arbitration concerning the ownership of the sound recording producer right of Wang Qiang¡¯s album ¡°Autumn Isn¡¯t Coming Back¡±, and as HL95 was not a party to the arbitral award of Jing Arbitration No. 0073 rendered by Beijing Arbitration Commission, it could not certainly know the content of such award. According to present evidences, the people¡¯s court confirmed that the time when HL95 had knowledge of the arbitral award was the time when receiving the evidences of this case, i.e., February 26, 2008. Therefore, before February 26, 2008, HL95 had fulfilled due care obligation and was innocent in providing the song ¡°Don¡¯t Want You To Cry¡± to China Mobile Tianjin Branch as the multimedia ring on the internet to be downloaded by mobile phone users for profit. Nevertheless, the fact was that it was providing without legal authorization the song ¡°Don¡¯t Want You To Cry¡± to China Mobile Tianjin Branch as the multimedia ring on the internet to be downloaded by mobile phone users for profit, which shall be ceased immediately by HL95. As HL95 was innocent to the damage and the consequences, it shall be discharged from the liabilities of compensation of the damages; however, the profit so received is of no legal ground and shall be returned as unjustified enrichment. After February 26, 2008, i.e., having received the evidences of this case, HL95 had already known that the Secular Bird Centre had the sound recording producer right over the song ¡°Don¡¯t Want You To Cry¡± and the license from Guangzhou Hua Yu was of defects, and thus HL95 had fault in continuing providing the song ¡°Don¡¯t Want You To Cry¡± to China Mobile Tianjin Branch as the multimedia ring. As HL95 had not fulfilled the duty of due diligence at such phase which infringed on the Secular Bird Centre¡¯s sound recording producer right over the song ¡°Don¡¯t Want You To Cry¡±, it shall immediately cease the infringement and indemnify to the Secular Bird Centre the economic losses.

Network Cultural Business License of a Website shall not be the Unique Evidence to Confirm the Website Operator

Beijing Chaoyang District People¡¯s Court made a judgment of first instance on April 14, 2008 in the case of Beijing Vision Power Movie and Television Culture Co., Ltd. (plaintiff, hereinafter ¡°Vision Power Company¡±) v. Beijing Rui Ao Shi Technology Co., Ltd. (defendant, hereinafter ¡°Rui Ao Shi Company¡±), and Yuncheng Sun-Media Co., Ltd. (defendant, hereinafter ¡°Sun-Media Company¡±) concerning copyright infringement dispute, which held that Sun-media Company should be liable for copyright infringement and Rui Ao Shi Company was innocent.
Vision Power Company claimed that it had photographed the TV series ¡°Lost In The Dream¡± together with companies such as Jiangsu TDZH Movie and Television Culture Investment Co., Ltd. (hereinafter ¡°TDZH Company¡±) and the like, and the copyright of the said TV series was jointly owned by all the photographers. Also it was announced by all other copyright owners that all the rights in all of the litigations arising out of the copyright infringement to such TV series should be exercised exclusively by Vision Power Company, therefore it had the right in its own name to strike at any infringement on copyright of such TV series according to the law. In September 2007, Rui Ao Shi Company and Sun-Media Company illegally broadcasted such TV series on the websites owned by them without any authorization, which severely infringed on the copy and information network broadcast right owned by it over such TV series.

Rui Ao Shi Company pleaded that: the Yuncheng 0359TV.com broadcasting the disputed TV series as sued by Vision Power Company was not owned by its company, and the network cultural business license number on such website was imitated by Sun-media Company. It asked that claims directed to its company by Vision Power Company should be rejected by the people¡¯s court.

Sun-Media Company pleaded that the use of Rui Ao Shi Company¡¯s network cultural business license number on its website was caused by its internal mistakes without Rui Ao Shi Company¡¯s license and Rui Ao Shi Company had no knowledge of such circumstances. All the legal liabilities thereof, in the event of recognition of the infringement, should be borne by its company itself with no connection with Rui Ao Shi Company.

The people¡¯s court held that, according to the announcement, authorization letter and contract issued by all other co-photographers and co-producers of ¡°Lost in the Dream¡±, Vision Power Company had the right to claim litigation rights alone as the copyright owner and initiate the lawsuit for infringement on the copyright of such TV series. As Sun-Media Company intentionally uploaded the disputed TV series to its website without authorization and provided broadcasting services for profit, it had infringed the copy and information network broadcasting right owned by the right holder and should assume the legal liabilities as ceasing the infringement and indemnification. As to Vision Power Company¡¯s claim that Rui Ao Shi Company had engaged in the infringement because the network cultural business license number on the infringing website was owned by Rui Ao Shi Company, the people¡¯s court held that the network cultural business license number expressed on the website was not enough to support the ownership of the infringing website, thereby it cannot be construed that the infringement involved was committed by Rui Ao Shi Company; in the meantime, Sun-Media Company confirmed that the infringement was of not relationship with Rui Ao Shi Company and agreed to assume all the liabilities. Therefore, the evidences provided by Vision Power Company were not enough to prove that Rui Ao Shi Company had broadcasted the disputed TV series. At last, the people¡¯s court rejected to uphold Vision Power Company¡¯s claims against Rui Ao Shi Company.