Haworth & Lexon Law Newsletter
No.7 2013(Total:No.135) Aug. 25, 2013
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, 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:

    Decision on Authorizing the State Council to Temporarily Adjust Administrative Examination and Approval of Relevant Laws in China (Shanghai) Free Trade Zone

    Decision of the Standing Committee of the National People¡¯s Congress on Revising the Trademark Law of the People¡¯s Republic of China

    Announcement on Issues Concerning Customs Implementation of the Catalogue of Advantageous Industries for Foreign Investment in Central and Western Regions (Revised in 2013)

    Interpretation of the Supreme People¡¯s Court and the Supreme People¡¯s Procuratorate on Certain Issues Concerning the Application of Law in Handling Criminal Cases involving Defamation and Other Acts Committed through Information Networks

    Notice on Further Clarifying Issues Concerning State-owned Share Transfers of Financial Enterprises

    Guidelines for Record Management of Private Equity Products of Securities Companies

    Announcement of the State Administration of Taxation on the Application of Preferential Income Tax Policies to Software Enterprises

    Notice of the Shanghai Stock Exchange on Providing Transfer Services for Units of Asset Management Schemes

    Rules and Procedures of Beijing Intermediate People¡¯s Court on Trial of Enterprise Bankruptcy Cases

Legal Practices:

    Shanghai Municipality Unveiled the Interim Measures for Management and Registration of Operational Private Training Institutions in Shanghai

    Certified Trademark ¡°Zhoushan Ribbonfish¡± ¡ªAnalysis of the First Case Involving Certified Trademark

Latest Laws and Regulations

Decision on Authorizing the State Council to Temporarily Adjust Administrative Examination and Approval of Relevant Laws in China (Shanghai) Free Trade Zone

On August 30, 2013, the Decision on Authorizing the State Council to Temporarily Adjust Administrative Examination and Approval of Relevant Laws in China (Shanghai) Free Trade Zone (hereinafter the Decision) was adopted at the Fourth Session of the Standing Committee of the 12th National People¡¯s Congress, effective as of October 1, 2013. According to the Decision, the State Council is authorized to temporarily adjust relevant administrative examination and approval of the Law of the People¡¯s Republic of China on Wholly Foreign-owned Enterprises, the Law of the People¡¯s Republic of China on Sino-Foreign Equity Joint Ventures, and the Law of the People¡¯s Republic of China on Sino-Foreign Cooperative Joint Ventures in respect of foreign investment that are not subject to special administrative measures for market access according to the provisions of the State within Shanghai Free Trade Zone established based on Shanghai Waigaoqiao Free Trade Zone, Shanghai Waigaoqiao Bonded Logistics Park, Yangshan Free Trade Port Area and Shanghai Pudong Airport Free Trade Zone. The adjustment to the above administrative examination and approval is piloted in three years. If the practice shows that such pilot is feasible, relevant laws shall be revised and improved; if the practice shows that the adjustment is inappropriate, the resumption of the implementation of the provisions of the relevant laws shall be made.

Pursuant to such Decision, the State Council is authorized to temporarily adjust the administrative examination and approval catalogue of relevant laws and regulations, including (1) for examination and approval of the establishment, separation, merger and other modifications and business term of foreign-owned enterprises, the Wholly Foreign-Owned Enterprise Law of the People¡¯s Republic of China shall be temporarily suspended and replaced with the record management; (2) for examination and approval of the establishment, joint venture term extension, dissolution of Sino-foreign joint venture enterprises, the Sino-Foreign Equity Joint Venture Enterprise Law of the People¡¯s Republic of China shall be temporarily suspended and replaced with the record management; (3) for examination and approval of the establishment, protocol, contract, material change of articles of association, transfer of the contractual rights and obligations of the cooperative joint venture enterprise, authorization of others for operation and management and extension of cooperation duration, the Sino-Foreign Cooperative Joint Venture Enterprise Law of the People¡¯s Republic of China shall be temporarily suspended and replaced with the record management.

 
Decision of the Standing Committee of the National People¡¯s Congress on Revising the Trademark Law of the People¡¯s Republic of China

On August 30, 2013, the 4th Session of the Standing Committee of the 12th National People¡¯s Congress of the People¡¯s Republic of China reached a resolution on revising the Trademark Law of the People¡¯s Republic of China. This is the third revision of the Trademark Law since 1982, the year of its promulgation.

Amendments to the Trademark Law are mainly as follows.

(1) ¡°Sound¡± is a registerable trademark

According to Article 8 of the Trademark Law as revised, an application may be made to register as a trademark any mark, including any text, graph, alphabetic letter, number, three-dimensional symbol, color combination, sound or any combination thereof, which is able to distinguish the goods of a natural person, legal person or other organization from those of others.

(2) Restrict advertising of ¡°well-known trademark¡±

According to Article 14 of the Trademark Law as revised, manufacturers and business operators shall neither indicate the words ¡°well-known trademark¡± on goods and the packaging or containers of goods, nor use the same for advertising, exhibition and other commercial activities.

(3) Prohibit rush registration of a pre-existing trademark.

According to Clause 2 of Article 15 of the Trademark Law, an application for registering a trademark on the same or similar goods shall not be approved if: the trademark under application is identical with or similar to an unregistered trademark already used by another party; the applicant clearly knows the existence of the trademark of such another party due to contractual, business or other relationships with the latter other than those prescribed in the preceding Paragraph; and such another party raises objections to the applicant¡¯s trademark registration application.

(4) Period of trademark review is shortened.

The Trademark Office shall complete the examination of a trademark under registration application within nine (9) months upon receipt of the documents for trademark registration application, and shall issue a preliminary examination announcement if the registration application is in compliance with relevant provisions of this Trademark Law as revised.

(5) Infringement upon exclusive trademark constitutes unfair competition

Whoever constitutes unfair competition by using a registered trademark or an unregistered well-known trademark of another party as the trade name in its enterprise name to mislead the public shall be dealt with in accordance with the Anti-unfair Competition Law of the People¡¯s Republic of China.

(6) Determine amount of compensation against infringement upon exclusive trademark

According to Article 63 of the Trademark Law, the amount of damages for infringement on the exclusive right to use a trademark shall be determined according to the actual loss suffered by the right holder as a result of the infringement, or may be determined according to the profits gained by the infringer from the infringement if the actual loss is difficult to determine, or may be reasonably determined by reference to the multiples of the trademark royalties if both the loss of the right holder and the gains of the infringer are difficult to determine. Where an infringer maliciously infringes upon another party¡¯s exclusive right to use a trademark and falls under grave circumstances, the amount of damages may be determined as not less than one time but not more than three times the amount determined according to the foregoing methods. The amount of damages shall cover the reasonable expenses incurred by the right holder for stopping the infringement.

Where the right holder has duly discharged its obligation of burden of proof, but the account books and materials related to the infringing acts are mainly controlled by the infringer, the relevant people¡¯s court may, for the purpose of determining the amount of damages, order the infringer to submit account books and materials related to the infringing acts. Where the infringer fails to provide such account books and materials or provides false account books and materials, the people¡¯s court may render a judgment on the amount of damages by reference to the claims of the right holder and the evidence furnished thereby.

Where the actual loss suffered by the right holder as a result of the infringement, the profits gained by the infringer from the infringement and the royalties of the registered trademark concerned are difficult to determine, the people¡¯s court shall render a judgment on awarding damages of up to RMB three million depending on the circumstances of the infringing acts.

 
Announcement on Issues Concerning Customs Implementation of the Catalogue of Advantageous Industries for Foreign Investment in Central and Western Regions (Revised in 2013)

The Catalogue of Advantageous Industries for Foreign Investment in Central and Western Regions (Revised in 2013) (hereinafter the Catalogue) was effective on June 10, 2013. In respect of relevant issues concerning customs implementation, the General Administration of Customs released the Announcement on Issues Concerning Customs Implementation of the Catalogue of Advantageous Industries for Foreign Investment in Central and Western Regions (Revised in 2013) (hereinafter the Announcement).

According to the Announcement, foreign investment projects, including capital increase projects, that are approved on and after June 10, 2013 (which is the approval date of such projects) and fall within the scope under the Catalogue enjoy the preferential import tax policies for encouraged foreign investment projects. Pursuant to relevant provisions of the Circular of the State Council on Adjusting the Tax Policy of Imported Equipments (Guo Fa [1997] No. 37) and the Announcement of the General Administration of Customs No. 103 of 2008 and other relevant provisions, self-use equipment imported under relevant projects and the technology and supporting spare and accessory parts imported together with the said equipment under the contracts are to be exempted from customs duties and levied import value-added tax in accordance with regulations.

As regards foreign investment projects approved on and before June 9, 2013 pursuant to the Catalogue of Priority Industries for Foreign Investment in Central and Western Regions (2008 Amendment) (Order [2008] No. 4 of the National Development and Reform Commission and the Ministry of Commerce, hereinafter referred to as the ¡°Catalogue of Foreign Investment in Central and Western Regions (2008 Amendment)¡±), the equipment imported for self-use under relevant projects, as well as the technologies and supporting parts and spare parts imported together with the said equipment under relevant contracts may continue to be governed by the Notice and the Announcement [2008] No. 103 of the General Administration of Customs. Relevant project entities shall, by June 30, 2014, apply to customs for record-filing of tax reduction and exemption by producing the Confirmation of Domestically-funded or Foreign-funded Projects Whose Development Is Encouraged by the State (in which the ¡°item of project industrial policy examination and approval¡± shall still be filled out according to the original item of examination and approval and the original code) issued by the competent investment departments. The customs shall no longer accept applications for record-filing of tax reduction and exemption submitted beyond the prescribed deadline.

Foreign-funded projects that are still in progress and not yet listed in the Catalogue (revised in 2008) but conform to the Catalogue (revised in 2013) can apply to the competent authority for foreign investment for the Acknowledgement of a State-Encouraged Domestic or Foreign Investment Project. After obtaining the Acknowledgement of a State-Encouraged Domestic or Foreign Investment Project, the import self-used equipment for the projects in progress and the techniques and supporting parts imported along with the said equipment under the relevant contract are entitled to the import tax preferential policies in accordance with Article 1 of this Announcement. However, as to the import equipment on which taxes have been levied, such levied taxes will not be refunded.

 
Interpretation of the Supreme People¡¯s Court and the Supreme People¡¯s Procuratorate on Certain Issues Concerning the Application of Law in Handling Criminal Cases involving Defamation and Other Acts Committed through Information Networks

On September 9, 2013, the Supreme People¡¯s Court and the Supreme People¡¯s Procuratorate promulgated the Interpretation on Certain Issues Concerning the Application of Law in Handling Criminal Cases involving Defamation and other Acts Committed through Information Networks (Fa Shi [2013] No.21, hereinafter the Interpretation).

The Interpretation numerates the specific circumstances and assessment and identification standards for ¡°inventing stories to defame another person¡± as well as ¡°serious circumstance¡± and ¡°seriously impairing the social order and the State interests¡±. Any of the following circumstances shall be determined as ¡°inventing stories to defame another person¡± prescribed in the Paragraph 1 of Article 246 of the Criminal Law: (1) inventing stories harming the reputation of another person and spreading or organizing or instigating other persons to spread the same on information networks; and (2) altering the original information about another person on information networks into the stories harming the person's reputation and spreading or organizing or instigating other persons to spread the same on information networks; spreading on information networks the stories that are known to be invented to harm the reputation of another person shall be deemed as ¡°inventing stories to defame another person¡± if the circumstances are grave.

Meanwhile, the Interpretation has identified and differentiated the crime of defamation, creating disturbances, blackmail or illegal business operation committed through information networks.

According to the Interpretation, hurling insults to or threatening another person shall be determined as the crime of creating disturbances and shall be punished accordingly in accordance with Item (2) of Paragraph 1 of Article 293 of the Criminal Law if the circumstances are grave and harm is done to public order. Spreading or organizing or instigating other persons to spread on information networks the false information that is fabricated or known to be fabricated, which has created disturbances and caused serious public disorder, shall be determined as the crime of creating disturbances and shall be punished accordingly in accordance with Item (4) of the Paragraph 1 of Article 293 of the Criminal Law.

According to the Interpretation, threatening or coercing another person on grounds of publishing on, deleting from or otherwise disposing of the information on the networks, demanding public or private property, which is relatively large in amount or the repeated commission of the above act shall be determined as the crime of extortion and punished accordingly in accordance with Article 274 of the Criminal Law.

Also, as stipulated by the Interpretation, providing, in violation of the provisions of the State and for profit-making purposes, paid services through information networks in connection with, among other things, the deletion of information or publication of the information known to be false, thereby disturbing market order, shall be deemed as illegal business operation in accordance with Paragraph 4 of Article 225 of the Criminal Law.

 
Notice on Further Clarifying Issues Concerning State-owned Share Transfers of Financial Enterprises

On August 14, 2013, the Ministry of Finance, the State-owned Assets Supervision and Administration Commission, China Securities Regulatory Commission and National Council for Social Security Fund jointly promulgated the Notice on Further Clarifying Issues concerning State-owned Share Transfers of Financial Enterprises (Cai Jin [2013] No.78, hereinafter the Notice).

Where an enterprise invested by a financial enterprise launches an initial public offering (¡°IPO¡±) and is subsequently listed, if the capital used by the financial enterprise for equity investment is a corporate-style private equity fund set up by the financial enterprise (hereinafter referred to as the ¡°Private Equity Fund¡±), the relevant finance department shall, upon confirmation of the obligations to transfer State-owned shares to the National Council for Social Security Fund (NCSSF), distinguish the nominal investors and the actual investors of the Private Equity Fund (including the wealth management products, trust schemes and other financial products that constitute its funding sources) in a substantive manner. If the actual State-owned investors of the Private Equity Fund jointly hold more than 50% of the shares, the Private Equity Fund (if the aggregated shareholding percentage reaches 100%) or the actual State-owned investors (if the aggregated shareholding percentage exceeds 50% but falls below 100%) shall perform the obligations to transfer the State-owned shares to NCSSF in accordance with the Implementing Measures for Transferring Certain State-owned Shares on the Mainland Securities Market to Replenish the National Social Security Fund (Cai Qi [2009] No. 94) and other relevant provisions.

For insurance companies that with state-funded background, the Notice specifies that, a State-owned insurance company that invests in the equity of an enterprise to be listed shall be exempted from the obligations to transfer its holdings of shares invested with insurance funds to NCSSF upon the listing of the invested enterprise if the State-owned insurance company has consulted regulatory authorities in writing, and is able to clearly distinguish investments made with insurance funds from investments made with proprietary funds. The opinions of the regulatory authorities shall be copied to NCSSF. The State-owned insurance company shall still perform the obligations to transfer State-owned shares to NCSSF in accordance with relevant provisions as regards investments made for the purpose of capital operations, or if the financial enterprise in which it serves as the controlling shareholder issues shares and goes public.

Meanwhile, the Notice further specifies that, where an enterprise invested by a financial enterprise launches an IPO and is subsequently listed, and the sources of the investment funds are in compliance with Article 1 herein, State-owned shares shall be transferred to NCSSF according to the following procedures:

(1) The financial enterprise shall apply to the finance department at the same level for confirmation of its obligations to transfer State-owned shares to NCSSF. Application materials shall include an application report, the prospectus of the Private Equity Fund, information on the structure of funding sources, list of shareholders, the corresponding legal opinions, etc. Specifically, a financial enterprise under central administration shall submit the application to the Ministry of Finance, while a financial enterprise under local administration shall submit the application to the finance department (bureau) of the relevant province (autonomous region, municipality directly under the Central Government or city separately designated in the State plan). Where multiple financial enterprises serve as the shareholders of the invested enterprise, the financial enterprise with the highest shareholding shall take the lead in submitting the application;

(2) The finance department shall, pursuant to this Notice, issue a confirmation letter to the applying financial enterprise on its obligations to transfer State-owned shares to NCSSF;

(3) The financial enterprise shall submit the confirmation letter on the obligations to transfer State-owned shares to NCSSF to the largest State-owned shareholder of the enterprise to be listed, and the latter shall, according to the procedures under the Implementing Measures for Transferring Certain State-owned Shares on the Mainland Securities Market to Replenish the National Social Security Fund (Cai Qi [2009] No. 94), apply to the relevant State-owned assets supervision and administration commission for confirmation of the identities of the State-owned shareholders and the number of the State-owned shares to be transferred; and

(4) The State-owned assets supervision and administration commission shall, in accordance with this Notice and relevant provisions, properly define the scope of the State-owned shares to be transferred to NCSSF, and issue a reply on the transfer scheme of State-owned shares. Such a reply shall be included as a required document for the relevant enterprise to apply for IPO and listing.

 
Guidelines for Record Management of Private Equity Products of Securities Companies

On September 9, 2013, in the context of the promulgation and implementation of the Measures for Record Management of Private Equity Products of Securities Companies, China Securities Capital Market Development Monitor Centre Co., Ltd. promulgated the Notice on Matters Relating to the Promulgation of the Guidelines for Record Management of Private Equity Products of Securities Companies (hereinafter referred to as the Notice), further specifying details for record management of the private equity products of securities companies.

The Notice requires the market monitoring centre to be responsible for record review, operation supervision, practicing inspection and other routine management affairs of the private equity products of securities companies and to establish and improve the record management mechanism in accordance with the Record Management Measures and the Guidelines. In the meantime, categorized record management shall be applicable to the private equity products of securities companies. As of January 1, 2013, where the private equity products of securities companies are subject to regulatory measures from supervision authority, the market monitoring centre will enforce such record management measures as restriction or suspension on the relevant securities companies in accordance with the relevant regulations of the Guidelines.

The Guidelines for Record Management of Private Equity Products of Securities Companies (hereinafter referred to as the Guidelines) specify that, the market monitoring centre shall review the completeness and compliance of the record materials of private equity products of securities companies in manners such as written review, inquiry, invitation to discussion, on-site inspection, etc. However, the record confirmation will not exempt a securities company from legal liabilities for authenticity, compliance, accuracy, completeness, timely disclosure of information.

Meanwhile, the market monitoring centre will carry out classified record management in accordance with the compliance control conditions and reporting conditions of the private equity business of securities companies and classify the record management for private equity business as normal, restricted and suspended and accordingly differentiate in facets of record review, routine supervision, practicing inspection and so on.

As specified by the Guidelines, where the private equity business of securities companies is classified as restricted, the market monitoring centre shall adopt the following record management measures, including initiating and establishing private equity products, and record the same through the private equity product record management system of securities companies after on-site discussion; prior to obtaining an acknowledgement for record of the private equity products, the securities companies shall not engage in actual investments; the centre will improve the practising inspection frequency and continuously supervise over the product risk. Where the private equity business of securities companies is classified as suspended, the market monitoring centre will suspend application for record of such private equity business. The securities companies shall not newly establish any of such private equity products and the continuous private equity products shall not newly increase any investor.

Also, as specified by the Guidelines, where the securities companies establish subsidiaries to operate private equity business, their subsidiaries will perform the obligation for recording private equity products in accordance with these Guidelines. The securities companies shall strengthen the management of their subsidiaries¡¯ recording acts.

 
Announcement of the State Administration of Taxation on the Application of Preferential Income Tax Policies to Software Enterprises

On July 25, 2013, the State Administration of Taxation promulgated the Announcement on the Application of Preferential Income Tax Policies to Software Enterprises (SAT No.43 2013, hereinafter referred to as the Announcement), clarifying and specifying the issues relating to preferential income tax policies to software enterprises:

According to the Announcement, preferential income tax policies applicable to software enterprises shall be applied to software enterprises that have been recognized and that are subject to taxation by way of actual account verification. ¡°Having been recognized¡± shall mean that such software enterprises have been recognized by software enterprise recognition authorities prescribed by the State in accordance with relevant provisions on the recognition and management of software enterprises and have obtained the recognition certificates of software enterprises.

Furthermore, the Announcement clarified some details regarding the enterprise income tax preferential policies entitled to by software enterprises. The total revenue of a software enterprise shall refer to the total revenue prescribed by Article 6 of the Enterprise Income Tax Law. The profitable year of a software enterprise shall refer to the first year after the software enterprise commences business operations where its taxable income is larger than zero, including the taxation year where enterprise income tax is levied by assessment. The period during which a software enterprise enjoys the preferential treatment of fixed-term tax reduction and exemption shall be calculated continuously, and shall not be interrupted due to losses or other reasons during such period. Unless otherwise prescribed by State policies (including the provisions on national independent innovation demonstration zones), the research and development expenses of a software enterprise shall be calculated in accordance with the Notice of the State Administration of Taxation on Printing and Distributing the Administrative Measures for Pre-tax Deduction of the Research and Development Expenses of Enterprises (for Trial Implementation) (Guo Shui Fa [2008] No. 116).

As specified by the Announcement, software enterprises that are duly established within the territory of China by December 31, 2010 but are not yet recognized shall continue to go through relevant formalities pursuant to Article 1 of the Notice of the Ministry of Finance and the State Administration of Taxation on Several Preferential Enterprise Income Tax Policies (Cai Shui [2008] No.1) and the conditions for recognition under the Recognition Standards and Management Measures of Software Enterprise (for Trial Implementation) (Xin Bu Lian Chan [2000] No. 968), and shall continue to enjoy relevant preferential policies until their expiry. During the period of preferential treatment, such enterprises shall also be subject to annual inspection pursuant to the conditions for recognition under the document of Xin Bu Lian Chan [2000] No. 968. This Announcement shall come into effect on January 1, 2011. Transitional issues concerning the recognition and administration of software enterprises duly established within the territory of China on and after January 1, 2011 shall continue to be governed by the Announcement 2012 No. 19 of the State Administration of Taxation. Policies and transitional issues of recognition and administration concerning software enterprises duly established within the territory of China by December 31, 2010 shall be governed by Article 5 herein. Foregoing issues involved in the recognition and preferential administration of integrated circuit manufacturing enterprises and integrated circuit design enterprises shall be governed by this Announcement.

 
Notice of the Shanghai Stock Exchange on Providing Transfer Services for Units of Asset Management Schemes

On August 19, 2013, Shanghai Stock Exchange promulgated the Notice on Providing Transfer Services for Units of Asset Management Schemes (hereinafter referred to as the Notice). Securities companies, fund management companies and their subsidiaries specializing in asset management business (hereinafter collectively referred to as the ¡°Asset Management Institutions¡±) may apply for the transfer of the following units of their asset management schemes that are lawfully established and are still in existence among qualified investors via the Exchange: (1) units of the collective asset management schemes of securities companies; (2) units of the client-specific asset management schemes of fund management companies; and (3) units of other asset management schemes recognized by the Exchange.

The Notice request the assets management authority to disclose to the qualified investors the announcement on assets management plan shares. The assets management plan is to be progressed in the form of a contractual transfer. The investor may submit the transfer declaration to the stock exchange through the assets management authority in written form or via the internet within the transaction time; the form of completion declaration is applicable to the declaration and the completion declaration shall include the securities codes, user accounts, transaction orientations, transaction price, transaction amount, etc.

The greatest impact of the Notice on the financial market is probably that the transfer of units of asset management will probably open a new channel for the standardization of bank financial capital. In March this year, China Banking Regulatory Commission promulgated the Notice of the China Banking Regulatory Commission on Regulating the Investment Operations of the Wealth Management Business of Commercial Banks (hereinafter referred to as the No.8 Document), requiring that the balance of the investment in non-standardized debt assets by client funds under a wealth management product shall, at any time, not be higher than 35% of the balance of the wealth management product or 4% of the total assets of the commercial bank as disclosed in its audit report for the preceding year, whichever is lower.

As to the definition of the non-standardized creditor¡¯s right in the No.8 Document, i.e. ¡°non-standardized debt assets shall refer to debt assets that are not traded on the interbank market and stock exchanges, including, among others, credit assets, trust loans, entrusted claims, acceptance bills, letters of credit, accounts receivable, all kinds of beneficiary rights and rights to proceeds, equity financing with repurchase conditions, etc.¡±.

Therefore, if the capital control plan linked to the bank financing investment in the stock exchange platform, the non-standardized creditor¡¯s right may be converted to the standardized creditor¡¯s right and thus avoid the restriction set by the No.8 Document. However, such pattern is not acknowledged by the bank supervision system, it is still upon the formal confirmation from the bank supervision system as to whether the bank financing investment may thereby dodge the restriction put forward by the above provision.

 
Rules and Procedures of Beijing Intermediate People¡¯s Court on Trial of Enterprise Bankruptcy Cases

On July 22, 2013, Beijing Intermediate People¡¯s Court promulgated the Rules and Procedures of Beijing Intermediate People¡¯s Court on Trial of Enterprise Bankruptcy Cases (hereinafter referred to as the Trial Rules and Procedures), specifying and detailing the legal issues regarding the trial of enterprise bankruptcy cases.

According to the Trial Rules and Procedures, a bankruptcy case shall be governed by the people¡¯s court where the debtor is located. In the meantime, the local people¡¯s court governs the bankruptcy cases of enterprises registered at the county or the district administration for industry and commerce. The intermediate people¡¯s court is responsible for governing the bankruptcy cases of enterprises registered at the municipal or above-level administration for industry and commerce. Bankruptcy cases of small-size enterprises of a relatively simple debit-credit relationship under the jurisdiction of the intermediate people¡¯s court can forwarded to the local people¡¯s court for trial without a prior approval from the higher people¡¯s court.

As to the review of the debtor¡¯s ability of bankruptcy, the Trial Rules and Procedures provide that, the enterprise filed for bankruptcy shall possess the qualification of enterprise legal person. Whether the actual capital contribution is fulfilled does not affect the enterprise legal person¡¯s ability of bankruptcy. Meanwhile, as to the ability of bankruptcy of any organization other than the enterprise legal person, the Trial Rules and Procedures specify that, at present, partnerships, private run schools, farmers¡¯ professional cooperatives and sole proprietorship enterprises can refer to the bankruptcy liquidation procedure. The Trial Rules and Procedures specifically point out that, where affiliates inappropriately utilize the affiliate relationship so as to cause serious confusion over corporate personality of affiliates¡¯ members and impair the creditor¡¯s fair interests of reimbursement, then the affiliates¡¯ members, members¡¯ creditors, members¡¯ liquidators and members¡¯ administrators already in the bankruptcy procedure may apply to a people¡¯s court for consolidated bankruptcy of the affiliates.

With regard to review of the qualification of a creditor applicant, the Trial Rules and Procedures, specify that, where the creditor¡¯s rights conform to the following circumstances, the creditor may apply to the people¡¯s court for the debtor bankruptcy: (1) the credit refers to the credit in due with money or property payments: (2) the credit is valid and legitimate and does not exceed the limitation of action or the limitation of application for enforcement. As for the special creditor, such as an employee, the Trial Rules and Procedures provide that, where the debtor is found to be in the circumstance prescribed by Article 2 of the Enterprise Bankruptcy Law of the People¡¯s Republic of China, the debtor employee may, with consent from the Employee Representative Congress or two thirds or more of all the employees, apply for bankruptcy liquidation of debtor upon strength of the creditor¡¯s rights prescribed by Paragraph 1 of Clause 1 of Article 113 of the Enterprise Bankruptcy Law. For tax authorities and social insurance administrative departments, the Trial Procedures also define the circumstances provided by Article 2 of the Enterprise Bankruptcy Law that have occurred to the debtor, such as default of tax payment and taxable amount payable by enterprises (exclusive of late fees and penalties), the tax authorities and social insurance administrative departments may apply to the people¡¯s court for bankruptcy liquidation of the debtor.

The Trial Rules and Procedures have further detailed the list of materials required to be submitted by the debtor and creditor for bankruptcy and exemplified all the conditions and reasons for ¡°bankruptcy¡±.

Meanwhile, the Trial Rules and Procedures further define the tasks after the review acceptance procedure and acceptance of bankruptcy application as well as the administrator system involved in the bankruptcy application and disposal of bankruptcy estates, etc.

Legal Practices

Shanghai Municipality Unveiled the Interim Measures for Management of Operational Private Training Institutions in Shanghai

To promote a sound development of the educational training market and standardized operation of operational privately-run training institutions, Shanghai Municipal Administration for Industry and Commerce, Shanghai Municipal Commission of Education and Shanghai Municipal Human Resources and Social Security Bureau jointly promulgated the Interim Measures for Registration of Operational Private Training Institutions (hereinafter referred to as the Registration Measures) and the Interim Measures for Management of Operational Private Training Institutions (hereinafter referred to as the Management Measures) in accordance with the Law of the People¡¯s Republic of China on the Promotion of Privately-run Schools and the Regulations of Shanghai Municipality on Promotion of Lifelong Education (hereinafter referred to as the Life-long Education Regulations), both of which shall become effective as of July 20, 2013.

I. Definition of Operational Private Training Institutions

Article 2 of the Registration Measures stipulates that, ¡°operational private training institutions¡± refer to domestically-funded incorporated enterprises (excluding operational private early-education service institutions) that are registered by the administration for industry and commerce after the opinions of the administrative authority of education or the human resources and social security bureau are solicited and that are approved to engage in operational training activities.

The aforesaid operational private training activities refer to the training services that provide profit-based culture and education related and occupational skill related to the public.

Operational private training institutions shall not engage in any degree-based educational training project. Other companies shall not engage in operational training activities in the name of educational consultation or educational household services, etc.

1. Operational Nature

Operational private training institutions provide paid and non-profit training services, which are different from non-operational training institutions in that the former is profit driven and the latter (such as private-run schools and academies) provides educational training services on a non-profit basis.

Speaking of the registration procedure, an applicant for operational private training institution shall apply to the administration for industry and commerce for pre (modification)-approval of its name and registration, have the administration for industry and commerce review the application materials after opinions from the administrative authority of education or the human resources and social security bureau are solicited, following which a decision will be made on whether an Enterprise Legal Person Business License shall be issued to such applicant. An applicant for non-operational private training institution shall handle the examination and approval procedure at the administrative authority of education or the human resources and social security bureau in accordance with the Life-long Education Regulations; and after obtaining a license for establishment of a school, the applicant shall handle the legal person registration of an institution or the legal person registration of a private-run non-enterprise unit.

2. The contents of training are cultural education and occupational skills

The contents of training provided by operational private training institutions are divided into cultural education and occupational skill education, and the training projects provided by a cultural education related training institution shall conform to the PRC Discipline Categorization and Code Standards.

Training projects that fall under the occupational skill training institution shall, first of all, conform to the disciplines set forth in the Occupation Classification Dictionary of PRC jointly formulated by the Labor and Social Security Bureau, General Administration of Quality Supervision, Inspection and Quarantine of the People¡¯s Republic of China and National Bureau of Statistics; and in particular the training categories shall fall within the scope provided in the Announcement of Shanghai Municipality on Vocational Qualification Certification. Therefore, for operational private training institutions intended to establish occupational skill related education, their training services shall satisfy the aforesaid prerequisites in order to obtain a permit for registration.

3. Domestically-funded incorporated enterprise

Both the Registration Measures and the Management Measures have specified that, the operational private training institutions refer to domestically-funded incorporated enterprises, which are different from the private-run education institutions that act as legal persons of social associations in that operational private training institutions shall conform to the limited liability companies and companies limited by shares as provided in the PRC Company Law as well as the requirements for establishment as provided in Article 28 of the Life-long Education Regulations and Article 7 of the Registration Measures, i.e. the conditions required by training institutions for school-running sites and teachers.

4. Prohibited Projects

Both the Registration Measures and the Management Measures have stipulated that, operational private training institutions shall not engage in any educational training project related to degree-based education, or else will be penalized by the competent administrative authority of education in accordance with the law.

In addition, provisions of prohibition on companies short of relevant licenses and permits operating on the margins of legality and engaging in operational training activities in disguised form of education consultation, education-related household service, etc. have also been incorporated into the Registration Measures.

II. Division of Duties and Responsibilities of Various Competent Authorities Have Been Defined

The previous Life-long Education Regulations only provide that the education, human resources and social security authorities and other relevant departments shall act as supervisors and inspectors, but have not specified the specific division. However, the new regulations this time further specify in details the scope of inspection, materials to be submitted and turnover period for the three administrative departments. The administrative authority of education and the human resources and social security bureau will act as the competent authority of educational training and the authority of occupational skill training separately and conduct qualification review, routine management and supervision & inspection of the training institutions, and the administration for industry and commerce and the public security organ will regulate the enterprise business activities within their original scope of authority.

III. Foreign-invested Operational Private Training Institutions

According to Article 16 of the Management Measures, if an operational private training institution engages in Sino-foreign cooperative education with overseas institutions, the Regulations of the People¡¯s Republic of China on Sino-Foreign Cooperative Operation of Educational Institutions and other relevant rules and regulations shall apply. Therefore, if any foreign-funded institution intends to invest in educational and training institutions, it shall be subject to the Regulations of the People¡¯s Republic of China on Sino-Foreign Cooperative Operation of Educational Institutions and other relevant laws and regulations but cannot apply for a business license in accordance with the aforesaid Registration Measures.

(The author¡¯s contact information: baileyxu@hllawyers.com, wincylu@hllawyers.com)

 

Certified Trademark ¡°Zhoushan Ribbonfish¡± ¡ªAnalysis of the First Case Involving Certified Trademark

Certified trademark is a form of trademark used to indicate a certain product¡¯s place of origin, raw materials, manufacturing process, quality or other particular features in order to demonstrate to the general public the specific traits possessed by a certain product or service. Ever since the promulgation of the PRC Trademark Law, cases known to the public with respect to certified trademarks are almost nowhere to find. The case of ¡°Zhoushan Ribbonfish¡± adjudicated by the Beijing High People¡¯s Court in the end of 2012 is known as the first case of a certified trademark in China, so retrospect into this case is conducive to our knowledge about how to identify and establish a certified trademark infringement act and how to allocate the burden of proof in cases involving certified trademarks.

[Case Profile]

On November 23, 2005, Zhoushan Municipal Aquatic Products Circulation and Processing Association applied for registration of the No.5020381 certified trademark ¡°ÖÛɽ´øÓãZHOUSHANDAIYU¼°Í¼¡± (hereinafter referred to as the ¡°Involved Trademark¡±), verifying that the products bearing such trademark should be Ribbonfish (not alive) and Ribbonfish Slice under class 29. On November 20, 2008, such trademark entered into the preliminary examination for approval, and at the same time the Administrative Rules for Applying Certified Trademark ¡°ÖÛɽ´øÓãZHOUSHANDAIYU¡± was announced. Pursuant to the Administrative Rules, ¡°ÖÛɽ´øÓãZHOUSHANDAIYU¡± is a registered certified trademark applied to demonstrate the quality of ¡°ÖÛɽ´øÓãZHOUSHANDAIYU¡± and the area for applying the trademark shall be the specified production areas of Zhoushan Fishing Ground. On August 13, 2009, the registrant of the certified trademark ¡°ÖÛɽ´øÓãZHOUSHANDAIYU¡± nominally became Zhoushan Aquatic Products Association.

In December 2010, Zhoushan Aquatic Products Association discovered that, Huaguan Shopping Centre, subordinate to Beijing Huaguan Commercial Trading Co., Ltd. (hereinafter referred to as ¡°Huaguan Co.¡±), was selling the Ribbonfish products in the name of the certified trademark ¡°ÖÛɽ´øÓãZHOUSHANDAIYU¡± and that the product manufacturer was Beijing Shenmaren Food Co., Ltd. (hereinafter referred to as ¡°Shenmaren Co.¡±) and the place of origin of the relevant raw materials was Zhoushan. Therefore, Zhoushan Aquatic Products Association sent lawyer¡¯s letters to Huaguan Co. and Shenmaren Co., requesting suspension of the relevant infringement act.

However, thereafter, Huaguan Co. received a lawyer¡¯s letter from the lawyer representing Shenmaren Co., with opinions on withdrawal of Zhoushan Ribbonfish Products of Shenmaren Co. that Shenmaren Co. did not infringe the trademark of Zhoushan Aquatic Products Association and hence Huaguan should perform their trade contract consistently in accordance with the law.

Therefore, Zhoushan Aquatic Products Association filed a lawsuit to Beijing No.1 Intermediate People¡¯s Court, with claims: (1) Shenmaren Co. should immediately stop producing and selling the involved products and Huaguan Co. should stop selling the involved products; (2) Shenmaren Co. and Huaguan Co. should jointly make a compensation of RMB200,000.

[Court Judgement]

After first trial, Beijing No.1 Intermediate People¡¯s Court determined that, whether an infringement upon a certified trademark is established or not cannot serve as the standard for judging whether the alleged infringement act will probably confuse the public over the sources of commodities; rather instead, the standard for judging shall be whether the alleged infringement act will probably confuse the related public over the specific features of the commodities, such as the place of origin. It is an incorrect legal understanding of Zhoushan Aquatic Products Association to claim that Shenmaren Co. highlighted its use of the characters ¡°ÖÛɽ´øÓãZHOUSHANDAIYU¡± to such an extent that the public might be confused over the products bearing such trademark and that Shenmaren Co. has already constituted an infringement. As a matter of fact, Zhoushan Aquatic Products Association has mistaken the certified trademark for the same thing as the commodity trademark. Whether there was a highlight of the certified trademark ¡°ÖÛɽ´øÓãZHOUSHANDAIYU¡± or a confusion of the public over the commodity sources has nothing to do with the infringement upon the certified trademark. In this case, the involved trademark serves as a geographical mark of registered with the certified trademark to demonstrate that the place of origin of the related commodities is the marine area of Zhoushan. According to Article 2 of the Several Provisions of the Supreme People¡¯s Court on Evidence in Civil Proceedings, when Zhoushan Aquatic Products Association claimed infringement by Shenmaren Co. upon its trademark right, it shall bear the burden of proof for the fact that the place of origin of the product ¡°Zhoushan Selected Ribbonfish Sections¡± sold by Shenmaren Co. is not the marine area of Zhoushan. However, based on the current evidence obtained, Shenmaren Co. cannot demonstrate that the product ¡°Zhoushan Selected Ribbonfish Sections¡± sold by Shenmaren Co. will confuse the public over its place of origin. Therefore, Beijing No.1 Intermediate People¡¯s Court rejected the claim of Zhoushan Aquatic Products Association for suspension the alleged infringement by Shenmaren Co.

Objecting to the judgement of first trial, Zhoushan Aquatic Products Association then appealed to Beijing High People¡¯s Court. After trial, Beijing High People¡¯s Court determined that, although Shenmaren Co. did not propose to Zhoushan Aquatic Products Association for using the involved trademark, if the products sold by Shenmaren Co. were actually manufactured in the marine area of Zhoushan, Zhoushan Aquatic Products Association cannot deprive Shenmaren Co. of its right to mark ¡°Zhoushan¡± on its products. As per the rule for burden of proof, as the manufacturer of the products, Shenmaren Co. failed to produce sufficient evidence to demonstrate that the place of origin is the marine area of Zhoushan, under which circumstance it constituted an inappropriate use of the ¡°Zhoushan Selected Ribbonfish Sections¡± marked on the involved products and infringed the involved trademark. Therefore, the Court ruled that Shenmaren Co. should stop its infringement act and compensate for all the related losses. Accordingly, the judgment of the first trial was revoked and the Court ruled that Shenmaren Co. factually constituted an infringement act.

[Legal Comment]

Therefore, from the case of ¡°Zhoushan Ribbonfish¡±, we need to take such points as follows into account when a judgement is made on whether an infringement upon certified trademark is constituted:

1. Whether an infringement upon certified trademark is constituted or not cannot rely on whether the alleged infringement act will probably lead the relevant public to confusion over the commodity sources but rather whether such alleged infringement act will lead the relevant public to misconception about the matters (such as the product¡¯s place of origin) certified by the certified trademark.

2. Keeping, management and maintenance shall be the essential core for safeguarding the right of the certified trademark owner and it is permissible that the natural person, legal person and other organization with specific features marked in the certified trademark can use the place of origin of such certified trademark. That is to say, even the alleged infringer does not propose request to the certified trademark registration for use of such certified trademark, such alleged infringement act does not constitute trademark infringement provided that the manufactured or sold products bearing such certified trademark are consistent with the matters that need to be certified.

3. In the case of the alleged certified trademark infringement, as manufacturer and seller of the involved products, the alleged infringer, rather than the registrant of the certified trademark, shall bear the burden of proof for the matters (such as the place of origin of the products) certified by the certified trademark.

(The author¡¯s contact information: kevincheng@hllawyers.com)