Chapter 5: Proprietary interests – Internet Law in China

5

Proprietary interests

Abstract:

This chapter focuses on China’s protection of three types of intellectual property: copyright, trademarks, and patents. It is particularly concerned with how existing intellectual property laws have been applied to the Internet and also with how new laws and regulations have been created to address new problems caused by various online activities.

Key words

copyright

trademarks

domain names

patents

computer software

Internet business methods

Internet service provider liability

Intellectual property (IP) refers to “creations of the mind,” such as literary and artistic works, inventions, and “symbols, names, images, and designs used in commerce.”1 It is generally divided into three categories: copyright, trademark, and patents. In China, each of these is protected by civil law, criminal law, administrative law, and other laws. Furthermore, such protection has been applied to proprietary interests in cyberspace. This chapter mainly examines three types of IP infringement, namely, copyright infringement, trademark infringement, and patent infringement. It is particularly concerned with how these infringements have emerged in cyberspace and how they have been addressed by Chinese law and regulations.

Copyright

Copyright refers to “the exclusive legal rights to reproduce, publish, sell, or distribute the matter and form of something (as a literary, musical, or artistic work).”2 The primary purpose of copyright protection is not to make writers and artists rich, but to encourage creative production for the ultimate benefit of society at large by giving individual writers, artists, and media organizations control over how and when their works will be exploited commercially. Without this legal protection, creators would be discouraged from producing because anyone else could copy and market the original creators’ works and usurp their rightful profits. Also, publishing and production companies would hesitate to invest in major projects, knowing that their creations could be pirated, without restraint, by their competitors. The theory of copyright law, then, is to give creators an economic incentive so that society will benefit from creative production.3

China’s copyright protection has undergone a long process of development. Its roots can be traced back to the Chinese Constitution adopted in 1982. Under Article 47, citizens have the freedom to engage in scientific research, literary and artistic creation, and other cultural pursuits; the state encourages and assists creative endeavors that are conducive to the interests of the people and made by citizens engaged in education, science, technology, literature, art, and other cultural work. In 1986, the NPC passed the General Principles of the Civil Law, in which Article 94 stipulates that citizens and legal persons shall enjoy copyright and be entitled to sign their names as authors, issue and publish their works, and obtain remuneration in accordance with the law. In 1990, the NPC Standing Committee enacted the Copyright Law. This is China’s first copyright law; it also provides a legal basis for protecting the right to online dissemination on information networks. In November 2000, the Supreme Court issued the Interpretation on Several Issues concerning the Application of Law in the Trial of Cases in Relation to Copyright Disputes over Computer Network, which clearly states that the provisions on copyright and other related rights in the Copyright Law shall be applicable to digitalized copyright. In October 2001, the NPC Standing Committee passed the Amendment to the Copyright Law, which proposed for the first time “the right to online dissemination of information” and also integrated it within the scope of copyright protection. Due to the rapid development of network technology and the increasing complexity of the issue of the right to online dissemination of information, however, the Amendment does not explicate this new right; instead, it states that “the measures for protecting the right to online dissemination of information shall be established separately by the State Council.” Five years later, the State Council promulgated the Regulations on the Protection of the Right to Online Dissemination of Information, which provide clear and systematic stipulations on the action of infringing upon the right to online dissemination of information. In addition, China has also joined such international conventions as the Universal Copyright Convention, the Berne Convention for the Protection of Literary and Artistic Works, and the Agreement on Trade-Related Intellectual Property Rights (TRIPS), thus becoming a crucial part of the world’s intellectual property protection system.

In the following, we first present some basic concepts about copyright, including the object of copyright, the subject of copyright, and the specific rights granted under copyright law. We then examine the issue of copyright infringement, the relationship between copyright protection and public interests, and the legal liability of Internet service providers in a copyright infringement.

Copyright basics

The object of copyright

Under the Copyright Law, the object of copyright refers to works, including literary works; oral works; music, drama, opera, dance, and acrobatic works; works of fine art and architecture; photographic works; cinematographic works and works created in similar photographic method; drawings of engineering designs and product designs; maps, sketches, and other graphic and model works; computer software; and other works as provided for in laws and regulations. In order to enjoy copyright protection, a work must meet the following four conditions: it must be original; it must be replicable; it must be a creation of literary, artistic or scientific work; it must not be a work whose content is prohibited by laws and regulations.

First, the object of copyright must be original. The work referred to by copyright law must be an original work rather than being copied from someone else’s work. Originality means that the author creates the work. Creation refers to a creative activity where the author selects, refines, and processes materials obtained through personal observation, experience, and analysis of political, economic, cultural, and social life, and combines such materials, using the author’s own ideas and skills, to produce literary, artistic, or scientific works.4 The originality required by copyright law is not of the kind of unprecedented novelty, but only of the quality that can distinguish it from other works. With a unique form of expression, an original work can be distinguished from other works, and therefore it can be regarded as having exclusiveness.5

It should be noted that copyright law protects only the expression of a thought, rather than the thought itself. The thought expressed in a copyrighted work does not have to be original. The thought can be shared and borrowed. However, the expression of the thought should be original, rather than being copied or borrowed from other sources. This is a basic principle of copyright that has been accepted internationally. Both the TRIPS and the WIPO Copyright Treaty prescribe that “copyright protection shall extend to expressions and not to ideas, procedures, methods of operation, or mathematical concepts as such.” Similarly, the Interpretation of the Beijing High People’s Court on Several Issues about the Trials of Cases Concerning Copyright Disputes emphasizes that “the Copyright Law protects the expression and presentation of the themes, thoughts, emotions, and scientific principles, not the theme, thoughts, emotions, and other scientific principles themselves.” The main consideration here is that if a thought or idea is protected, it will become an exclusive property of the author. This may lead to an ideological monopoly on the part of the author. As a result, the exchange of ideas may be hindered, and so also may be the development of human civilization.

The originality of online works has demonstrated some different characteristics. The WIPO Copyright Treaty provides that “compilations of data or other material, in any form, which by reason of the selection or arrangement of their contents constitute intellectual creations, are protected as such.” Similarly, the Copyright Law in China stipulates that “a work created by compilation of several works, parts of works, data or other materials that do not constitute a work and having originality in the selection or arrangement of its contents is a work of compilation” which is under the protection of copyright. Therefore, such online works as web page layouts, web link settings, and compilations of data and files, as long as they are original, can be regarded as compiled works and thus subject to copyright protection. Similarly to the protection of offline works, however, this protection does not extend to the data or the material itself, and does not allow infringement or damage of original rights associated with such data or materials.

Second, the object of copyright must be replicable. Replication refers to the duplication of an original work in numerous copies by printing, photocopying, or other physical means. If a work can be copied, it must exist in a physical and tangible format. For instance, written works are fixed on paper; photographic works are fixed on film; television programs, movie, and video works are fixed on film and videotape. Only through those means can such works be appreciated and copied by the public. Thoughts exist only in minds; without some fixed forms of expression, they cannot be accessed by others and thus cannot be called works. Oral works, except for well-known ones, must have a property that can be fixed on certain physical things, such as paper or tape; otherwise, they can hardly be protected by copyright law. Works can be replicated in different forms. For instance, oral works can be duplicated into literary works printed on paper, and such printed works can be changed into broadcast works when released over radio waves.6 In addition, under the Interpretation of the Supreme People’s Court on Several Issues Concerning the Laws Applicable to the Trial of Copyright Disputes Involving Computer Networks Interpretations (2006), the digital format of a work is also protected by copyright law. This is largely because the materials uploaded to the Internet can be digitalized and fixed in the computer’s hard drive, and then can be read, copied, downloaded, or printed out by readers. Therefore, works transmitted over the Internet can be considered as digitalized expressions of thoughts, which are indisputably replicable.

Third, the object of copyright must be the creation of literary, artistic, and scientific works. Intellectual creation includes a wide variety of activities, while literature, artistic, and scientific creation are just a part of intellectual activity. Such intellectual activity as taking advantage of personal experience and wisdom to improve the efficiency of a production process, or adopting a new line-up and strategy to beat opponents in sports competitions, can also be considered intellectual creation. However, where an intellectual work has not been expressed in text, graphics, or other specific forms, it does not come under the scope of literary, artistic, and scientific creation, and thus cannot be considered as copyrightable work. Furthermore, where an intellectual work is a literary, artistic, or scientific creation, it still cannot enjoy copyright protection if it concerns public affairs or the public interest. Examples include laws; administrative rules and regulations; other documents with a legislative, administrative, or judicial nature; official translations of laws, regulations, and government documents; news on current affairs; calendars; formulas; numerical tables; and forms of general use.

Finally, the content of copyrightable works must not be prohibited by laws and regulations. Under the Regulations on Publication Administration, no publication should contain anything that goes against the basic principles determined by the Constitution; that endangers the unification, sovereignty, and territorial integrity of the country; that endangers national security, reputation, and interests; that instigates national separatism, infringes on the customs and habits of minority nationalities, and disrupts the solidarity of nationalities; that discloses state secrets; that insults or slanders others; or that disseminates pornography and superstition, or incites violence, or endangers social ethics and cultural tradition. In addition, the Decision of the NPC Standing Committee on Safeguarding Internet Security, the Telecommunications Regulations, the Administrative Measures for Internet Information Services, the Regulation on Film Administration, the Regulation on Radio and Television Administration, and so on all set up similar prohibitions. Works including the above-mentioned content are neither allowed to be disseminated nor protected by copyright laws.

The subject of copyright

According to the Copyright Law, the subject of copyright is the author of a work, that is, the natural person who directly creates works by means of abstract thinking and the objective expression of such abstract thoughts. The copyright holder may also be other citizens, legal entities, or other organizations which obtain copyright through inheritance or according to relevant laws. Many works involve multiple participants in the creation and dissemination process. Accordingly, the Copyright Law has prescribed six types of copyright ownership.

Copyright owner of derivative works

A derivative work is a work based upon or derived from one or more pre-existing works. In practice, a work resulting from adaptation, translation, annotation, or arrangement of pre-existing works can be considered a derivative work. Adaptation refers to switching the original expression type of a work to another expression type, without changing the original content. Translation refers to converting the original expression language of a work to another language. Annotation refers to making comment, interpretation, and clarification on the original work. Arrangement refers to making abridgment, combination, composition, and revision of original scattered works for their readability. Under the Copyright Law, where a work is created by adaptation, translation, annotation, or arrangement of a pre-existing work, the copyright of the work is enjoyed by the adapter, translator, annotator, or arranger. But the author of a derivative work must first obtain consent from and make remuneration to its original creator; also, the exercise of the copyright of a derivative work is not allowed to prejudice the copyright of the original work.

Copyright owner of joint works

Where a work is created jointly by two or more co-authors, the copyright in the work is enjoyed jointly by those co-authors. Co-authored works include dividable and undividable works. If a work of joint authorship can be separated into independent parts and exploited separately, each co-author is entitled to independent copyright in the parts that he has created, provided that the exercise of such copyright does not prejudice the copyright in the joint work as a whole. Where a joint work cannot be used when it is divided, the copyright is owned jointly by the co-authors and will be exercised after the co-authors have reached a consensus through consultations. If the co-authors fail to reach a consensus and there is no proper reason for independent use, no party may prevent any of the other parties from exercising any right other than the right of assignment; however, the gains derived should be reasonably distributed among all the co-authors.7

Copyright owner of compilation works

Examples of compilation works include encyclopedias, dictionaries, anthologies, complete works, periodicals, newspapers, web page layouts, electronic databases, and so on. As long as a work’s content selection or arrangement reflects originality, it can be considered a work of compilation. If the selection and arrangement of the content is simply to put together pre-existing works or materials and does not reflect originality, such selection and arrangement are not new products and thus do not constitute a work of compilation. The compiler enjoys the copyright of compilation works as a whole. The compiler, when compiling others’ works, should obtain permission of the copyright owners of original works, pay remuneration to the original authors, and respect the original copyright owner’s personal rights. In exercising the copyright of compilation works, the compiler should not prejudice the copyright of the original works. In addition, if compilation works can be separated into independent parts and exploited separately, each original author is entitled to independent copyright in the parts that he has created.

Copyright owner of cinematographic works

Examples of cinematographic works include television programs, video works, and online video works. The copyright of this type of work is held by the producer of the work, but the scriptwriter, director, cameraman, lyricist, composer, and other authors enjoy the right of authorship in the work, and have the right to receive remuneration pursuant to the contract concluded with the producer. In addition, the authors of the screenplay, musical works, and other works that are incorporated into a cinematographic work or a work created by virtue of an analogous method of film production and that can be exploited separately are entitled to exercise their copyright independently. Therefore, the screenplay writer can publish his screenplay through another publisher, and the lyrics writer can produce his work in an album. In addition, the film producer, when exercising his copyright, should not go beyond the scope of normal commercial operation of the film; otherwise, he may risk violating the rights of other creators involved in the film’s production.8

Copyright owner of works made for hire

A work created by a person in the fulfillment of tasks assigned to him by his employer is viewed as a work made for hire. General speaking, the copyright of such work belongs to the author. However, the employer has a priority right to exploit the work within the scope of its professional activities. During the two years after the completion of the work, the author cannot, without the consent of the employer, authorize a third party to exploit the work in the same way as the employer does. If the author obtains the employer’s consent to allow a third party to use the work in the same way as does the employer within two years after completion of the work, the remuneration so derived should be shared by the author and the employer, according to the ratio agreed upon.9 In any of the following two cases, the author of a work made for hire enjoys only the right of authorship, while the employer enjoys other rights included in copyright laws and may reward the author: (a) drawings of engineering designs, drawings of product designs, maps, computer software, and other works created in the course of employment mainly with the material and technical resources of the employer and under its responsibility; and (b) works created in the course of employment where the copyright is, in accordance with laws, regulations or contracts, enjoyed by the employer.10

Copyright owner of commissioned works

Commissioned works refers to works created by a trustee under a contract of commission signed with a client. The ownership of the copyright in a commissioned work should be agreed upon in the contract between the commissioning and commissioned parties. This means that in the contract, the involved parties may agree that copyright belongs to the commissioning parties, the commissioned parties, or both parties, or that both parties are entitled to part of the copyright. If no such statement is stipulated in the contract, the copyright belongs to the commissioned parties.

Where the copyright of a work belongs to a person who has died, the copyright may be transferred to others during the period of copyright protection. In accordance with relevant laws and regulations, there are at least four forms of transfer: transfer through intestate succession; transfer by bequest; transfer by legacy support agreement; and transfer to the state or judicial organ, if an author’s right of exploitation and to receive remuneration has no inheritors or legatees. The transfer of copyright focuses on the transfer of property rights in the work, i.e., the rights to exploit and to receive remuneration. The author’s personal right cannot be transferred. Where the copyright in a work belongs to an organization whose legal status has been changed or terminated during the period of copyright protection, such copyright should be enjoyed by the successor organization which has taken over the former’s rights and obligations, or, in the absence of such successor, by the government.

Traditionally, the author of a work can be determined based on the authorship of the work. Where there is no authorship or where there is a dispute about authorship, the involved parties can determine the author of the work according to the ownership of the original manuscript. However, it is sometimes difficult to identify the original author of a work that is transmitted on the Internet. This is largely because an original work, after being digitalized and recorded on electronic storage devices, can be easily and quickly copied and spread without authorship. It is argued that, since an Internet user often needs to register an online account in order to publish works online, one common means of locating the original author of a work is to check the registration information of relevant parties.11

Personal rights and property rights

Copyright involves two types of exclusive rights: personal rights and property rights. Personal rights refers to the rights to obtain identity and reputation from the creation of a work and also to maintain the integrity of the work. Exclusively belonging to the author, personal rights cannot be transferred and do not involve direct economic interests, under normal circumstances. Property rights, also called economic rights, refers to the right to gain economic benefits through the right use of the work. Unlike personal rights, property rights can be transferred. Personal rights and property rights are closely related, yet they can be mutually independent. Where the property right is transferred, the copyright holder still enjoys the personal right. The receiver of the transferred copyright has no more than the property right.

The Copyright Law specifies four types of personal right: the rights of publication, of authorship, of alteration, and of integrity. The right of publication is the right to decide whether to make a work available to the public, in what format, at what time, in what place. The right of authorship refers to the right to claim authorship of the work. The author is entitled not to sign his name, or to sign his real name or a pseudonym. The author is also entitled to prohibit others from signing his work. The right of alteration refers to the right to alter or authorize others to alter one’s work. The decision whether to alter, how to alter, or whether to authorize others to alter should be made according to the author’s wish and should not be forced upon the author. The right of integrity refers to the right to protect one’s work from distortion and mutilation. The author has the right to protect his work from being demonized, abridged, added to, or distorted in other ways against his wish and thoughts.

In addition, the Copyright Law provides for twelve kinds of property rights: the rights of reproduction, distribution, rental, exhibition, performance, showing, broadcast, communication of information on networks, making cinematographic work, adaptation, translation, and compilation. The right of reproduction refers to the right to produce one or more copies of a work by printing, photocopying, lithographing, making a sound recording or video recording, duplicating a recording, or duplicating a photographic work. The right of distribution refers to the right to make available to the public the original or reproductions of a work through sale or other transfer of ownership. The right of rental refers to the right to authorize, with payment, others to temporarily use computer software, cinematographic works, or works created by virtue of an analogous method of film production. The right of exhibition refers to the right to publicly display the original or reproduction of a work of fine art and photography. The right of performance refers to the right to publicly perform a work and publicly broadcast the performance of a work by various means. The right of showing refers to the right to show to the public a work of fine art, photography, or cinematography, or a work created by analogous methods of film production through film projectors, overhead projectors or any other technical devices. The right of broadcast refers to the right to publicly broadcast or communicate a work to the public by wireless means, to communicate broadcast work to the public a by wire or relay means, and to communicate a broadcast work to the public by a loudspeaker or by any other analogous tool used to transmit symbols, sounds, or pictures. The right of communication of information on networks refers to the right to communicate a work to the public by wire or wireless means in such a way that people may access these works from a place and at a time individually chosen by them. The right of making cinematographic work refers to the right to fix a work on a carrier by way of film production or by virtue of an analogous method of film production. The right of adaptation refers to the right to change a work to create a new work of originality. The right of translation refers to the right to translate a work in one language into one in another language. The right of compilation refers to the right to compile works or parts of works into a new work by reason of selection or arrangement.

Different copyrights have different terms of protection. A term of protection for rights is the time period during which the rights of the copyright holder are subject to legal protection. During the term of protection, the author or other copyright holders enjoy the copyright of the work; anyone who intends to use the work should obtain consent from the copyright owners and pay them remuneration accordingly. According to the Copyright Law, the rights of authorship, alteration, and integrity of an author are unlimited in time. This means that when the term of protection for the author’s property rights terminates, individuals are free to use the work by copying, distributing, performing, or other means; however, they do not have the right to change the authorship or the content of the work; otherwise, they will be subject to legal liability for copyright infringement. The term of protection for the right of publication and all types of property rights has a certain time limit, that is, the lifetime of the author and 50 years after his death. In the case of a work of joint authorship, the term of protection should be 50 years after the death of the last surviving author. In the case of a work whose copyright belongs to an organization, the term should be 50 years after the first-time publication of the work. In the case of a cinematographic work or a work created by virtue of an analogous method of film production or a photographic work, the term should also be 50 years after the first-time publication of the work. When the term terminates, all personal rights except publication rights remain valid, while all property rights and the right of publication become invalid.

Apart from exceptional cases, anyone who exploits a work created by others is required to conclude a licensing contract with the copyright owner. A licensing contract should include the following content: the category of right licensed for exploitation of the work covered by the license; the exclusive or non-exclusive nature of the right to exploit the work covered by the license; the geographic area and term of the license; the form of remuneration and the method of payment; the liability in case of breach of the contract; and any other matters that the contracting parties consider necessary.12 There are two types of copyright license: exclusive licenses and non-exclusive licenses. In the case of exclusive licensing, the copyright holder can only entitle a certain person to use his work. In other words, this person has an exclusive right to use his work; the copyright owner shall not sublicense the same work to a third party within the term of licensing. In the case of non-exclusive licensing, the copyright holder can entitle different persons or organizations to use his work within a certain period of time. The form of exclusive licensing or non-exclusive licensing can be stipulated in the contract. Unless otherwise stipulated by law, the exploiter of a work can only obtain non-exclusive rights if there is no explicit statement about exclusive rights in the contract or there is no written contract. Oral licensing agreement is legally invalid.13

The property rights of a copyright holder can be assigned or transferred. Assignment of property rights requires the conclusion of a contract in writing. A contract of assignment shall contain the title of the work, the category and geographic area of the assigned right, the assignment price, the date and manner of payment of the assignment price, the liabilities for breach of the contract, and any other matters that the contracting parties consider necessary. The subject matter of copyright assignment is some or all of the property rights. As a result, the receiver of the assignment becomes the legal owner of part or all of the property rights, while the original author loses part or all of the property rights accordingly. Furthermore, the receivers of copyright assignment can license others to receive assignment. In contrast, the subject matter of copyright licensing is related to the exercise rather than the ownership of property rights. The person who is licensed to use a work is not the legal owner of the work; therefore, he cannot sublicense the same work to a third party and must gain permission from and pay remuneration to the author.14

Copyright infringement

The Copyright Law lists ten types of copyright infringement. They include publishing a work without permission of the copyright owner; publishing a work of joint authorship as a work created solely by oneself without permission of the other co-authors; having one’s name mentioned in connection with a work created by another in order to seek personal fame and gain, where one has not taken part in the creation of the work; distorting or mutilating a work created by another person; plagiarizing a work of another person; exploiting by exhibition, film production or any analogous method of film production, or by adaptation, translation, annotation, or by other means, without permission of the copyright owner; exploiting a work created by another person without paying remuneration as prescribed by regulations; renting a work, sound recording, or video recording without permission of the copyright owner of a cinematographic work, a work created by virtue of an analogous method of film production, computer software, sound recording or video recording or the owner of a copyright-related right; exploiting the typographic arrangement of a book or periodical without permission of the publisher; and broadcasting live a performance or communicating the live performance to the public, or recording his performance without permission of the performer.

In Chinese judicial practice, the above-mentioned provisions on copyright infringement have been applied to cyberspace. This is evident in China’s first case involving infringement of the copyright of an Internet home page—Beijing Ruide Co. v. Sichuan Oriental Information Services Co. (1999) (Case 5.1).

Case 5.1   Beijing Ruide Co. v. Sichuan Oriental Information Services Co.: infringement on copyright of an Internet home page15

Plaintiff Beijing Ruide claimed that defendant Sichuan Oriental had duplicated its Internet home page, including the layout, color, pattern, columns, column headings, programs, drop-down menu, and other aspects of the home page, as well as the logo and search engine on the website. The plaintiff thus sued the defendant for infringing on the copyright of Internet home pages, requesting 199,900 yuan economic compensation. The court recognized that there were obvious signs of plagiarism with regard to the defendant’s imitation of the plaintiff’s home page. As a result, the court determined that the defendant had violated the plaintiff’s copyright in the home page and should compensate the plaintiff 2,000 yuan. The plaintiff’s original claim for a larger amount of compensation was not supported by the court.


15.The source of the case: Haidian People’s Court of Beijing Civil Verdict Haidian Intellectual Property Division First Trial Case No. 21 (1999).

Case 5.2   The Wang Antao copyright infringement case16

In the Wang Antao copyright infringement case (1999), defendant Wang Antao illegally obtained a copy of computer software developed by Tianli Co., and then asked a third party to make minor revisions to the software source code in order to develop software which later generated more than 20 million yuan of profits. The court held that computer software, as intellectual property, was protected by copyright laws, and that Tianli Co. enjoyed copyright protection for any software product resulting from its independent research and development. The software developed by the defendant proved to be minor changes and modifications of Tianli’s software; it was not original, so it could not enjoy copyright protection. Moreover, the defendant, without the permission of the copyright owner, had modified the software source code by changing its text, images and logos. The court decided that the defendant had infringed on the copyright of the plaintiff and sentenced him to four years’ imprisonment, a fine of 20,000 yuan, and compensation of 286,900 yuan to be paid to the plaintiff for economic loss.


16.The source of the case: the Criminal Verdict on the Case of Wang Antao Violating Copyright, The Communiqué of Supreme People’s Court 1999 (5).

An online work may also become the object of copyright infringement (Case 5.3).

Case 5.3   The Computer Business Information copyright infringement case17

In the Computer Business Information copyright infringement case (1999), plaintiff Chen Weihua wrote an article titled “Joking MAYA” and uploaded it to his personal home page “3D Sesame Street” in May 1998. Without the consent of the plaintiff, defendant Computer Business Information published this article a few months later. The plaintiff sued the defendant for copyright infringement. The court, after hearing the case, held that the article “Joking MAYA” was an innovative literary description of three-dimensional animation technology; it could be digitalized and fixed in computer hard drives, and uploaded to a website to be accessed and copied by Internet users; the article should therefore be subject to copyright protection. The plaintiff’s uploading of his article “Joking MAYA” to the website was in fact an act of sharing and disseminating his work via the Internet. Without the plaintiff’s permission, the defendant had published his article in its newspaper for economic purposes; it had thus violated the plaintiff’s rights of exploitation and to receive remuneration. The court determined that the defendant had infringed upon the plaintiff’s copyright, and required the defendant to stop infringement, make a public apology, and pay reasonable compensation to the plaintiff for economic loss.


17.The source of the case: Haidian People’s Court of Beijing Civil Verdict Haidian Civil Division First Trial Case No. 18 (1999).

Infringement of the right to online dissemination of information

The issue of online copyright infringement is becoming increasingly complex, especially given the emergence of a new web-based copyright, i.e., the right to online dissemination of information. Such a concept is mentioned several times in the Copyright Law: Article 10 states that the copyright holder shall enjoy the right to disseminate his work via the Internet; Article 37 provides that a performer shall, in relation to his performance, enjoy the right to authorize others to communicate his performance to the public through the Internet, and to receive remuneration; Article 41 provides that anyone who is authorized to reproduce, distribute, and communicate to the public via the Internet sound recordings or video recordings shall also obtain permission from, and pay remuneration to, the copyright owner and the performer, as presented by regulations. In the Regulations on the Protection of the Right to Online Dissemination of Information, the right to provide the works, performance, video/audio products to the public in a wire or wireless manner has been summarized as the right to online dissemination of information. Accordingly, acts of violating the right to online dissemination of information may constitute copyright infringement, which can be divided into three categories as follows.

The first type of infringement is to provide without permission any work, performance, or audio-visual products to the public through the Internet. In China, the copyright holder’s right to online dissemination of information is protected by copyright laws. Unless it is otherwise prescribed by laws or regulations, an organization or individual that provides the general public with other people’s works, performance, or audio-visual products via the Internet must obtain the owner’s permission and pay the relevant remuneration.18 Without permission from or remuneration paid to the copyright owner, providing others’ works via the Internet constitutes an infringement upon the right to online dissemination of information (Case 5.4).

Case 5.4   Chen Xingliang v. China Digital Library Co.: infringement of right to online dissemination of information19

A typical case in this regard is Chen Xingliang v. China Digital Library Co. (2002). Plaintiff Chen Xingliang is a faculty member at Beijing University and the author of several books, including New Perspectives on Contemporary Chinese Criminal Law, General Principles for the Application of the Criminal Law, and On Justifiable Defense. The defendant set up the website www.d-library.com.cn to collect, compile, and publish the works of others. Without permission from the plaintiff, the defendant uploaded all of the above three books to its website. The plaintiff sued the defendant for copyright infringement. The court held that the plaintiff enjoyed the rights to publish and distribute all of his three works, including the right to license a publisher to publish his works. In the absence of contrary evidence, such licensing is limited to publication on paper. Without permission from the plaintiff, the defendant had published his work on the Internet, thus violating his right to online dissemination of information. The court concluded that the defendant had infringed the plaintiff’s right to communicate through information networks; it should immediately stop the infringing activity and also bear corresponding civil liability.


19.The case can be accessed at http://china.findlaw.cn/falvchangshi/sunhaipeichang/wangluo/anli/29475.html.

The second type of infringement is to purposely avoid or damage the adopted technical measures. For the purpose of protecting the right to online dissemination of information, copyright owners are legally allowed to adopt technical measures. The term “technical measures” here refers to the techniques, devices, and components that are used to prevent or restrict access to online works, performance and audio-visual products or the provision of works, performance and audio-visual products via the Internet in the absence of the relevant owner’s permission.20 Under Chinese law, no organization or individual may purposely avoid or break the technical measures, purposely manufacture, import, or provide the public with devices or components that are mainly used to avoid or break technical measures, or purposely provide such technical services to any other person for the purpose of avoiding or breaking the technical measures.21 This means that the act of circumventing technological measures must be intentional. Inadvertently breaking technical measures is not subject to this constraint. The act of circumventing technological measures can be either direct or indirect. Direct circumvention refers to the act of decoding encoded works, decrypting encrypted works, or avoiding, removing, breaking, or damaging the technical measures by other means. Indirect circumvention refers to the act of, for instance, uploading, transmitting, or providing measures, devices, methods, or techniques that can be used to circumvent or break technical measures. Unless it is otherwise prescribed by laws and regulations that the relevant technical measures may be avoided, both direct and indirect circumvention of technological measures are subject to legal liability.

In accordance with the relevant laws, however, technical measures may be legally avoided under four situations. These include: (a) where published works, performance, or audio-visual products are provided to a small number of people who engage in teaching or scientific research through the Internet for the purpose of teaching or scientific research, and such products can be accessed only through the Internet; (b) where written works as already published are provided to the blind through the Internet for non-commercial purposes in a unique way as particularly perceptible by the blind, and such works can be accessed only through the Internet; (c) where the state organ exercises its functions according to administrative and/or judicial procedures; and (d) where a party carries out testing of computers, computer systems, or the safety performance of the information network.22 These provisions purport to prevent an absolute monopoly of works by technical measures, since such a monopoly may have a negative impact on society at large.

The third type of infringement is to purposely delete or change the electronic information on rights administration. The term “electronic information on rights administration” refers to the information detailing the work and the author thereof, the performance and the performers thereof, the audio-visual products and the producers thereof, the information on the rights owners in the works, performance and audio-visual products, as well as the requirements for application and the digits or codes representing the aforesaid information.23 Common electronic information on rights administration includes the name of the work, the author’s name, the names of the copyright holders, the names of the authors, performers, and directors of an audio-visual work, the terms and conditions under which the work is used, and the agreement with users of a website.

The information on rights administration is mainly used to protect the authorship of a work and help the public to verify the authenticity of a work. In the digital environment, electronic information on rights administration can easily be removed or changed, thus posing great risk and damage to copyright holders’ interests. Under Chinese copyright law, intentionally deleting or altering the electronic rights management information of a work without the permission of the copyright owner constitutes infringement of the copyright owner’s right to communicate through information networks, and the infringer shall be subject to a corresponding legal liability.24 Where it is impossible to avoid deleting or changing the electronic information on rights administration, however, it is legally allowed to remove or change such information. This includes situations in which such information cannot be saved during the process of digital/analog signal conversion; or the involved works, sound recordings, and video clips are used in advertising or other programs of very short duration.25

In any of the above infringements, the offender should cease infringement, reverse the negative effects, make a public apology, and make payment of remuneration. Where the offender has also damaged the public interest, the regulatory authority may force him to stop the infringing activities, confiscate his illegal income, and sentence him to a maximum fine of 100,000 yuan. Under serious circumstances, the regulatory authority may confiscate such equipment as computers that enable network services, and investigate his criminal liability in case the conduct constitutes a crime.

Copyright and public interest

The purpose of copyright laws is to protect the rights of copyright owners and to encourage the creation and dissemination of intellectual products. To prevent abuse of such rights and maintain the interest of society at large, however, there are also certain restrictions on copyright. Indeed, an important part of copyright law is to place reasonable and necessary restrictions on copyright in order to achieve a balance between protecting copyright and preserving the public interest. In China, there are two main forms of copyright restriction, namely, fair use and permissive use.

Fair use

Fair use refers to the situation whereby a person can legally use others’ work under certain circumstances without permission from or remuneration to the copyright owner. Fair use must abide by several fundamental principles: there must be a certain legal basis for fair use; the work to be used must have been published; the purpose of fair use must be justifiable, mainly for personal study and research or for the public interest; the name of the work, the name of the author, and the work’s origin must be specified in fair use; and fair use must not violate the interests of the copyright owner.26 Based on these principles, the Copyright Law stipulates 12 circumstances for fair use. Taking into account the characteristics of the network environment, the subsequent Regulation on the Protection of the Right to Online Dissemination of Information applies 9 of the 12 fair uses to the Internet, and also includes a separate Article elaborating the fair use of libraries and other similar institutions.27

The nine circumstances in which fair use can be used as a defense against online copyright infringement are: (a) where an appropriate portion of a published work is quoted in one’s own work for the purposes of introducing or making comments on a work, or demonstrating a viewpoint; (b) where it is unavoidable to reuse or cite, for any reason, a published work in newspapers, periodicals, radio/television programs, or any other media for the purpose of reporting current events; (c) where, in order to support teaching or scientific research, a small quantity of a published work is provided to some people who engage in teaching or scientific research; (d) where a state organ uses a published work, within proper scope, for the purpose of fulfilling its official duties; (e) where a work as already published by Chinese citizens or organizations in Chinese is translated into the language of a minority ethnic group and then provided to such people within the territory of China; (f) where a published work is provided to the blind in a special way particularly perceptible to the blind and not for the purpose of making profits; (g) where a published article on current affairs such as political and economic issues is provided through the information network; (h) where a speech as delivered in a public gathering is provided to the general public; and (i) where libraries and other public cultural institutions provide collection through information networks.28

Permissive use

Permissive use refers to the situation whereby an individual may use others’ published works without consent. Under permissive use, an individual should make payment to the author or other copyright owners, and should state the author’s name, the title, and the source of the work. Both permissive use and fair use allow a person to use others’ published works without the consent of copyright holders, but the former involves forced payment of compensation, while the latter does not. The purpose of establishing the permissive use system is to simplify the copyright procedure, enhance the dissemination of works, and enable society to enjoy intellectual achievements in a more convenient way. Permissive use must abide by the following principles: it must be authorized in accordance with relevant laws and regulations; the involved work must have been published; it is subject to the author’s statement of reservations regarding use by others; it involves the payment of remuneration to the copyright owner; and it must not violate the legal rights and interest of copyright owners.29

The Copyright Law provides that, except as the copyright owner has otherwise declared, newspapers or periodicals may reprint or abridge a work that has already been published in the press, but they shall pay remuneration to the copyright owner. This provision on permissive use has been applied to the online dissemination of information. Under the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Cases in Relation to Copyright Disputes over Computer Network (2004), except that the copyright owner has otherwise claimed directly or through the press or an ISP, reprinting and adapting a work, when the source is indicated and the remuneration paid, do not constitute infringement. In fact, this provision provides both websites and traditional publishers the same right of permissive use. In other words, websites and newspapers can take advantage of permissive use to reprint or abridge published works from each other. However, some argue that reprinting and abridging works published on the Internet goes beyond the requirements of such international conventions as TRIPS. This kind of provision has thus been deleted in subsequently promulgated laws and regulations.

Regarding online communication, the Regulation on the Protection of the Right to Online Dissemination of Information sets up two circumstances in which permissive use may be exercised. One concerns distance education. Article 8 states that where the nine-year compulsory education or state education planning is implemented through the Internet, the owner’s permission is not required for using fragments of works, short written works or musical works, a single work of fine art, or photographic works to produce courseware. The long-distance education institutions that have produced courseware or acquired courseware according to law may provide such courseware to registered students through information networks, but shall pay relevant remuneration to the copyright owner. The purpose of this Article is to encourage the use of information technology in distance education, which plays an important role in improving education in China’s rural and remote areas. The other circumstance for permissive use concerns poverty alleviation. Article 9 provides that where a work on planting and breeding, disease prevention and cure, disaster prevention and relief, or a work that meets people’s basic cultural demands, has been published, the ISP should announce in advance the uploading of such a work to the website. Within 30 days of the announcement, where the copyright holder refuses to provide his work, the ISP should not provide his work. Where 30 days have elapsed since the announcement, and if the copyright holder has no different opinion, the ISP then may provide his work and pay the corresponding remuneration. Primarily designed to help in alleviating poverty in rural areas, this Article also places specific restrictions on the receiver of the exploited works, the scope of the works under permissive use, and the ways to obtain permissive use, in order to prevent abuse of this right.

Internet service provider liability

Copyright infringement in cyberspace involves Internet users as well as Internet service providers. How to define ISPs’ liability for online copyright infringement not only concerns the level and quality of copyright protection, but also directly affects the development of the Internet industry and the interests of millions of Internet users. In November 2006, the Supreme People’s Court further revised the Interpretation on Several Issues Concerning the Application of Law in the Trial of Cases in Relation to Copyright Disputes over Computer Network, which specifies the legal liability of an ISP in online copyright disputes. According to this interpretation, an ISP should bear civil liability in any of the following situations: (a) the ISP makes use of its website to participate in, incite, or assist in copyright infringement by a third party; (b) the ISP is well aware that one person has used its network to infringe upon another person’s copyright, or the copyright owner has submitted a substantiated warning regarding infringement, but it fails to take such measures as removing the infringing content in a timely manner; (c) where a copyright owner requests the ISP to provide the infringer’s registration information so as to pursue the infringer’s liability, the ISP, without justification, refuses such a request; and (d) the ISP is well aware that certain methods, equipment, or materials can be used to circumvent or break the technical measures for protecting others’ copyright, but it still uploads, transmits, or provides such methods, equipment, or materials online. As can be seen from these provisions, an ISP is not required to examine whether or not the information transmitted or stored by Internet users is infringing, but it is obliged to prevent the dissemination of infringing information when it is aware or informed of the infringement; otherwise, it will bear civil liability.30

In order to avoid imposing excessive burdens on ISPs, legislators have further identified several types of ISP liability exemption for online copyright infringement, as prescribed in the Regulation on the Protection of the Right to Online Dissemination of Information. First, an ISP providing access services or transmission services may be exempted from liability if it has met all of the following conditions: having clearly proved that access or transmission services are offered automatically by a pre-designed computer program which follows the instructions of the service objects; having not selected or altered the work, performance, or audio-visual recording provided by the service objects; and having provided the work, performance, or audio-visual recording to the designated service objects, while having prevented others beyond the designated service objects from obtaining access.

Second, an ISP providing system cache services may be exempted from liability. System cache refers to a technological means used by an ISP to improve the efficiency of network transmission and to enable its users to obtain information from other websites more quickly. One of the common means is to analyze other ISPs’ information that is frequently browsed by the service objects, and then post such information onto the website in order to inform the objects rapidly.31 An ISP offering system cache services must meet the following three conditions to exempt itself from liability for storing and providing others’ works, namely: having not altered the stored works; having not affected the original ISP of the works in managing the relevant works; when the original ISP alters, deletes, or shields the works, automatically altering, deleting, or shielding them according to the technical arrangement.

Third, an ISP providing information storage space services may also enjoy exemption. Information storage space refers to the network information platform controlled or operated by an ISP where the service objects can provide works to the public via the Internet while an ISP has the right to delete or shield them.32 As for an ISP providing information storage space services, it specifically involves providing its users with disk space where the users can store all kinds of digitalized information, or create a personal or organization website for disseminating information to the public. To be exempted from copyright infringement liability, an ISP providing information storage space must meet the following five conditions: having clearly mentioned that the information storage space is provided to the service objects, and also having publicized the name, contact information, and web address of the ISP; having not altered the work provided to the service objects; having not known and having no justified reason to know that the works provided by the service objects have infringed upon others’ right; having not directly obtained economic benefits from the service objects’ provision of the work; and after receiving the notification from the owner, having deleted the work regarded as infringing on the right of the owner.

Fourth, an ISP providing searching or linking services may be exempted. Searching services means that an ISP providing such services copies the real-time web pages of other websites to its own Internet server with the help of searching software, then classifies and indexes them, and finally stores the relevant information in these web pages together with their website addresses in the database of the ISP’s website in different categories; when an Internet user makes a search request, the ISP carries out a search automatically within the database and then sends the results to the user online.33 Linking services means that an ISP places on its own website a website address which stores the detailed content of a piece of information under the title of such information; when an Internet user clicks that title, the ISP will automatically provide the users with the content of the information. The content can be stored either on the ISP’s own website or on others’ websites.34 Where an ISP providing searching or linking services has disconnected the link to a work that infringed on others’ rights after receiving notification from the copyright owner, it should not be liable for compensation. If it knew or should have known that the linked work has infringed upon another’s rights, however, it should bear liability for joint infringement.

In addition, the Regulation on the Protection of the Right to Online Dissemination of Information also provides a specific “notice-takedown” procedure for protecting the legitimate interests of copyright owners and also for promoting the sound development of the network industry. Under Articles 14 and 15 of the Regulation, as for an ISP that offers information storage space or provides searching and linking services, if the copyright owner believes that any of the works involved in the services has injured his right to online dissemination of information, or that his electronic information on rights administration has been deleted or altered, he may file a written notice with the relevant ISP, requesting it to delete the works or cut off the link to the works. The ISP, after receiving the notice, should immediately delete or disconnect the link to the works suspected of infringing on another’s rights, and meanwhile transfer the notice to the service object of the works; if the network address of the service object is not clear and the notice cannot be transferred, the ISP should publicize the content of the notice through the Internet. If the ISP, after receiving the notice from the owner, does not immediately delete or cut off the link to the works, it will be considered to be infringing on another’s rights to online dissemination of information. The owner should be responsible for the authenticity of the notice, however. If, due to the notice of the owner, the ISP has wrongly deleted or disconnected the link to the works and thus caused a loss to the service objects, the owner should bear compensation liability.

Given that the notice could be wrong or false, the Regulation also establishes an “anti-notice” procedure to protect the legitimate interests of Internet users. In accordance with Articles 16 and 17, where an Internet user receives a notice transferred by an ISP and deems that the works have not infringed on any other person’s right, he may submit a written statement to the ISP, requesting it to recover the deleted works. The Internet user should be responsible for the authenticity of this notice. After receiving such a notice, the ISP should recover the deleted works and transfer the written statement from the user object to the owner. The owner should not request that the ISP delete or disconnect the link to the works any more. If the dispute continues, the involved parties may file a lawsuit to seek judicial settlement.

Representative cases

As for an ISP’s liability in online copyright infringement, China has obviously been searching for a proper judicial ruling. In 1999, Wang Meng and five other writers sued Beijing Online for copyright infringement. At the time, the case aroused a great deal of controversy, mainly because there was no consensus as to whether the ISP providing information storage space could be exempted from liability (5.5). In the cases of Liu Jingsheng v. Sohu (2001) (5.6) and Universal etc. v. Baidu (2005) (5.7), the court delivered a principally consistent verdict on whether ISPs providing searching and linking services could be exempted from liability. The three cases are briefly reviewed here.

Case 5.5   Wang Meng etc. v. Beijing Online: copyright in digitalized works35

On June 15, 1999, Wang Meng and five other famous writers filed a lawsuit against Shiji Internet Communication Technology Co. The plaintiffs accused the defendant’s website, Beijing Online, of infringing on their copyrights by publishing their literary works online without permission, and requested compensation for economic and emotional damages. This was China’s first dispute over copyright infringement caused by a website’s publishing others’ works.

The court held that the plaintiffs were the owners of the copyright in their literary works, and thus had the exclusive right to use their works or authorize others to use their works in any manner and form. After being digitalized, a work could be delivered on the Internet but did not turn out to be a new work. Thus, the plaintiffs were still entitled to the copyright in their digitalized works. Without permission, the defendant had stored and uploaded the plaintiffs’ works to its website, thus infringing on the plaintiffs’ rights to use their works and accordingly receive remuneration. The court ruled that the defendant should stop infringement and make a public apology on its website.


35.The source of the case: Haidian People’s Court of Beijing Civil Verdict Haidian Intellectual Property Division First Trial Case No. 57 (1999).

Case 5.6   Liu Jingsheng v. Sohu.com: infringement of copyright by a linking service36

Plaintiff Liu Jingsheng claimed that, without permission, defendant Sohu.com had provided linking services to his translation of Don Quixote in three formats so that the public could get access to his translation on other websites through the defendant’s searching and linking services. The plaintiff sued the defendant for copyright infringement.

The court held that the plaintiff enjoyed the copyright of the original work as well as the electronic version converted from the original work. The focus of this case was how to determine the liability of an ISP providing searching and linking services. Technically speaking, search engines enable users to quickly find specific content in the ocean of online information, while linking techniques enable users to quickly get access to certain websites or web pages. Both techniques enhance people’s use of the Internet, and are beneficial to the public interest. Currently, no law requires an ISP providing searching and linking services to examine whether a linked website commits any infringement. If such a law existed, the ISP might give up providing searching and linking services for fear of bearing infringement liability. This might eventually damage the interests of individuals and of society at large. Therefore, if the linked website contains infringing content, the court should investigate the liability of the content creator. Where an ISP knows that the linked website involves copyright infringement but insists on providing a linking service, it functions as enlarging infringement and thus should bear civil liability.

In the present case, the defendant had no obligation to check whether the linked sites involved infringing activities. But after being informed by the plaintiff, the defendant insisted on providing the linking services to the infringing website. The court thus held that the defendant had in fact enlarged the infringement, so that it should bear civil liability. The court ruled that the defendant should make an apology and pay the plaintiff 3,000 yuan for economic loss.


36.See The Communiqué of the Supreme People’s Court 2001 (5).

Case 5.7   Universal Music Group etc. v. Baidu.com: right to online dissemination not infringed by searching service37

In July 2005, seven world-famous music companies, including Universal Music Group, Warner Music Group, and EMI Music, filed a lawsuit against Baidu.com for music copyright infringement. The plaintiffs charged that, without permission, the defendant provided online music playing and music downloading services, which involved more than 100 songs owned by the plaintiffs.

After hearing the case, the court held that the function of search engine services is to help Internet users find the needed information as fast as possible. When providing the MP3 searching service, the defendant was unable to forecast, recognize, and control the legality of the searched-for content. In other words, the MP3 searching service provided by the defendant did not constitute an infringement of the right to online dissemination of information. As for the playing and downloading functions of the defendant, the court also did not find that they infringed on others’ right to online dissemination of information. That is because playing is a display of the search results, helping people to recognize and make judgments about the information. In addition, the music works for playing and download were not from Baidu.com but from third-party websites that were not prohibited from being linked. The court said that if a plaintiff thought that a search engine had infringed on his right to online dissemination of information, he could send a written notice to the search service provider, requesting it to cut off the link to his works; after receiving the notice, the search service provider should immediately cut off the link. In this case, the plaintiffs had not performed the duty of informing the defendant. As a result, the court rejected all claims of the plaintiffs.


37.The source of the case: Beijing No. 1 Immediate People’s Court Civil Verdict Beijing No. 1 Immediate Civil Division First Trial Case No. 8995 (2005).

Trademarks

A trademark is the mark that distinguishes one enterprise’s goods or services from those of others. It appeared with commodity production and is the product of a commodity-based economy. A trademark has a variety of functions, such as indicating the source of goods, enhancing the sales and marketing of products, ensuring product quality, and establishing the reputation of products. Therefore, a trademark is considered as a right arising from creative activities and the accumulation of experience in the production process. In other words, a trademark results from an enterprise’s intellectual activity. This type of intellectual activity has been recognized and protected by intellectual property laws, ultimately leading to the establishment of the trademark system around the world.

In 1950, the then Government Administration Council promulgated the Provisional Regulation on Trademark Registration, which was arguably China’s first regulation on trademarks. In 1963, the State Council enacted the Regulation for Trademark Administration. In 1982, the NPC Standing Committee passed the Trademark Law of the PRC, which became China’s most important and comprehensive law on trademarks. The law aimed at “improving the administration of trademarks, protecting the right to exclusive use of trademarks, and encouraging producers and operators to guarantee the quality of their goods and services and maintain the reputation of their trademarks, so as to protect the interests of consumers and of producers and operators.”38 The law was amended in 1993 and in 2001 in order to meet the needs of the times and build a more effective trademark system. In 1993, the NPC Standing Committee enacted the Law against Unfair Competition of the PRC, which constitutes an integral part of China’s trademark law system.

In this section, some basic concepts of trademarks are presented, including the creation of trademarks, the categories of trademarks, and the registration of trademarks. Acts of infringing on the exclusive rights of trademarks are then discussed, as well as exceptional circumstances. Finally, the issue of trademark protection and Internet domain names is investigated. The application of traditional trademarks to the network environment is of particular concern.

Trademark basics

Creation of trademarks

According to the Trademark Law, an application for trademark registration may be filed for any visible mark, including word, design, letter, number, three-dimensional mark, or color combination, or a combination of the elements above mentioned, that can distinguish the commodities of one individual or organization from those of others. This indicates that a trademark should have two features, namely, distinctiveness and visibility. Distinctiveness means that the trademark is distinguishable—it can distinguish the products or services of one enterprise from those of others. Visibility means that the trademark is visible—it is obvious or perceptible to the eye of the public. It can be seen that these two features of a trademark are closely related.

The Trademark Law also stipulates that certain marks are prohibited from being used as trademarks. These prohibition provisions are commonly regarded as the standard for the creation of trademarks. Neither registered nor non-registered trademarks may violate such a standard. Specifically, the law provides that all of the following marks should not be used as trademarks: (a) those identical with or similar to the national name, national flag, national emblem, military flag, or medals of the PRC, as well as those identical with the names of the specific sites or the names and designs of the symbolic buildings in the places where the central government agencies are located; (b) those identical with or similar to the national name, national flag, national emblem, or military flag of any foreign country, except with the consent of the government of that country; (c) those identical with or similar to the name, flag, or emblem of any intergovernmental international organization, except with the consent of that organization and those unlikely to mislead the public; (d) those identical with or similar to the official mark or inspection stamp that indicate control and guarantee, except with authorization; (e) those identical with or similar to the name or symbol of the Red Cross or the Red Crescent; (f) those being in the nature of discrimination against any nationality; (g) those constituting exaggerated advertising and that are deceitful; and (h) those detrimental to socialist morality or customs, or having other harmful influences. In addition, the place names of an administrative district at the level of county or above or a foreign place name known by the public may not be used as a trademark.39 But a place name that has other meanings or is used as part of a collective mark or a certification mark can be an exception; also, a registered trademark that has already used place names remains legally valid.

Categories of trademark

Trademarks can be divided into different categories based on their object of use, purpose, form, and popularity. The diversified classification of trademarks in fact reflects the increasing functions of trademarks and the gradual perfection of trademark laws. In accordance with the Trademark Law of the PRC, trademarks can be divided into the following categories.

Commodity marks and service marks

The division of commodity marks and service marks is based on the different objects being marked. While commodity marks show the source of goods, service marks distinguish one service provider from others. Under the Trademark Law, individuals or organizations that intend to acquire the right to exclusive use of a trademark for the commodities they produce, manufacture, process, select, or promote should file an application for commodity mark registration with the Trademark Office. Similarly, individuals or organizations that intend to acquire the right to exclusive use of a trademark for the service items they provide should file an application for service mark registration with the same regulatory authority. This provision shows that the most significant difference between commodity marks and service marks is the object of use of trademarks. In practice, insurance, banking, tourism, education, hospitals, advertising, transportation, and telecommunications are considered service industries. But both commodity marks and service marks are subject to the same protection of the trademark law.

Collective marks and certification marks

The categorization of collective marks and certification marks is based on the different purposes for which marks are used. According to the Trademark Law, a collective mark refers to a mark that is registered in the name of a group, association, or other organization and then provided to the members of the organization for use in business activity. It is used to indicate that the goods or services belong to a group, so that such goods and services can be distinguished from those of other groups. A collective mark can be used only by members of the group registered under the mark; non-members cannot use it. A certification mark refers to a mark that is registered by an organization with supervisory power over certain types of commodities or services but is used by individuals and organizations outside of the supervisory organization on their commodities or services. The purpose of certification marks is to certify the origin, raw materials, manufacturing methods, quality, or other specific characteristics of the involved commodities or services. Different from the case of collective marks, the registrar of a certification mark cannot use its mark. Both the collective mark and the certification mark serve to enhance the coverage and competitiveness of the trademark. In addition, in accordance with China’s trademark laws, any individuals or organizations should be allowed to register geographical marks as their certification marks or collective marks if their goods and services meet the requirements for the use of geographical marks.

Two-dimensional marks and three-dimensional marks

The categorization of two-dimensional marks and three-dimensional marks is based on the marks’ forms. A two-dimensional mark refers to a mark that consists of word, design, letter, number, color, or the combination of these elements and that is presented horizontally. However, a three-dimensional mark is made up of three-dimensional symbols, such as the Coca-Cola bottle mark of the Coca-Cola Company. It is permissible to apply for the registration of three-dimensional marks, subject to certain restrictions. The Trademark Law of the PRC stipulates that an application for a three-dimensional mark shall not be approved if the three-dimensional figure of the mark originates from the nature of the commodity, is required to solve certain technical problems, or makes the commodity substantially valuable. The purpose of setting up these restrictions is mainly to maintain fair competition and promote technological progress.

Ordinary marks and famous marks

The division of ordinary marks and famous marks is based on the popularity of the marks. Ordinary marks are relative to famous marks. In judicial practice, a court often considers the following factors when determining whether a mark is famous: (a) how well the trademark is known by the relevant public; (b) the period during which that trademark has been in use; (c) the period, extent, and geographic scope of any publicity for that trademark; (d) the record of protection of that trademark as a well-known trademark; and (5) other factors for which that trademark is well known. These basic standards help to distinguish well-known trademarks from other, ordinary trademarks. In China, famous trademarks are protected by law. Article 13 of the Trademark Law provides that if a trademark is a copy, imitation, or translation of a well-known trademark for the same or a similar commodity that has not been registered in China, and is likely to cause confusion among the public, it shall not be registered or used; if a trademark is a copy, imitation, or translation of a well-known trademark for a different or dissimilar commodity that has been registered in China, and will mislead the public and lead to possible damage to the interests of the registrant of that well-known trademark, it shall not be registered or used. This means that if a famous mark has not been registered in China, the law only prohibits others from registering and using the trademark for the same or a similar commodity; if a famous mark has been registered in China, however, the law prohibits others from registering and using the trademark for any kind of commodity, no matter whether or not it is the same or similar.

Trademark registration

In China, the registration of trademarks is based on voluntary principles, and thus there are both registered and unregistered trademarks. Both kinds of trademark are legal, but they enjoy different rights. Trademark rights refers to the qualification or ability of an individual or organization to possess, use, profit from, and dispose of a particular trademark. Registered trademarks enjoy the right of exclusive exploitation, which is in fact the focus of Chinese trademark law. Unregistered trademarks, including those well-known trademarks registered in other countries, also enjoy certain rights, which, however, are not exclusive.

In accordance with the Trademark Law, an application for trademark registration needs to meet two basic requirements. One requirement is that the trademark should be distinctive and easily identified. This is because the basic function of trademarks is to distinguish one commodity from others. Therefore, the Trademark Law stipulates that if a mark has the only generic names, designs, and models of the commodities concerned, or simply directly indicates the quality, main raw materials, functions, use, weight, quantity, or other characteristics of the commodities concerned, it may be considered to be lacking distinctive characteristics and thus may not be registered as a trademark. But this restriction is not absolute. The Trademark Law also provides that if such a mark listed above has, through usage, obtained distinctive characteristics and can be easily identified, it is still allowed to apply for registration as a trademark. In short, distinctive features are a prerequisite for trademark registration, but they can be obtained through use.

Another requirement is that a trademark for registration should not conflict with the existing rights of others obtained by priority. Under the Trademark Law, “anyone who applies for trademark registration should not damage the existing rights of others obtained by priority, neither may he register, in advance, the trademark that has been used by others and has become influential.”40 This provision establishes the principle of prior registration, while also setting up one exception, i.e., no one is allowed to register another’s influential mark, even if that mark has not been registered. The purpose is to ensure that trademark registration abides by the principle of fair competition in a market economy.

In China, the Trademark Office of the SAIC is in charge of trademark registration and administration throughout the country. The SAIC also establishes the Trademark Review and Adjudication Board to handle trademark disputes. In addition, a registered trademark can be assigned. When a registered trademark is to be assigned, the assignor and the assignee should sign an agreement of assignment and also jointly file an application with the Trademark Office. A trademark registrant may, by concluding a trademark licensing contract, authorize another person to use its registered trademark. Similarly, the trademark licensing contract should be submitted to the Trademark Office for archiving purposes.

Trademark infringement

One primary purpose of the Trademark Law is to protect the right to exclusive use of trademarks. The Trademark Law clearly states that trademark registrants are entitled to the exclusive use of their trademarks. However, this exclusive right is not unlimited. The Trademark Law stipulates that entitlement to exclusive use of trademarks must be limited to trademarks that have been approved for registration and to commodities on which the use of a trademark has been approved. In order to effectively protect trademark rights and help to eliminate confusion or misidentification among the consumers, China has enlarged the scope of protection, applying the right to exclusive use of trademarks to similar trademarks and goods. Thus, any use of the same or similar trademarks for the same or similar goods will be protected by the law. According to Chinese trademark law, trademark infringement includes the following situations.

First, a party uses a trademark which is the same as or similar to a registered trademark on the same or similar commodities, without a license from the trademark registrant. This practice is referred to as “passing off.” Specifically, “passing off” involves four situations: using a trademark which is the same as another party’s registered trademark on the same commodities; using a trademark which is the same as another party’s registered trademark on similar commodities; using a trademark which is similar to another party’s registered trademark on the same commodities; and using a trademark which is similar to another party’s registered trademark on similar commodities. Any of the above uses of trademarks will cause confusion or misidentification among consumers, thus infringing on the rights of both trademark registrants and consumers.

Second, a party sells commodities that infringe upon the right to exclusive use of a registered trademark. When a seller supplies consumers with infringing commodities, he is actually helping the infringer to fulfill the purpose of the infringement. Therefore, the Trademark Law regards such acts as infringements of the right to exclusive use of registered trademarks, and it attempts to prevent trademark infringement occurring through the circulation of goods. It should be noted that the original version of the Trademark Law established only the “principle of fault liability” for this type of infringement, that is, only when the seller “knows” or “should know” that the commodities he is selling involve infringement can the seller be held liable. This is mainly to reduce the burden on sellers, since it is often difficult for sellers to detect trademark infringement for numerous goods. In judicial practice, however, it is often difficult to determine whether the seller “knows” or “should know” of the infringement activity. The revised Trademark Law of 2001 thus deleted the provisions of “know” and “should know,” in order to strengthen the protection of registered trademarks as well as to enhance enforcement of the law.

Third, a party forges or manufactures without authorization the marks of another party’s registered trademark, or sells the marks of a registered trademark forged or manufactured without authorization. A trademark is a mark that identifies the source of a commodity. Its physical form is the mark or logo by means of which the trademark distinguishes commodities. Marks generally refers to the material entities bearing marks such as automobile logos, manufacturers’ labels on clothing, and stickers on beverage bottles. Because marks can be used to express the right to exclusive use of a trademark, forging or manufacturing without permission the marks of another party’s registered trademark, or selling such marks, is regarded as a trademark infringement.

Fourth, a party misrepresents the source by removing or obliterating the original trademark. This practice is often termed “reverse passing off.” In “passing off,” a party associates another party’s mark with a good or service. In “reverse passing off,” a party removes another party’s mark prior to sale. It is argued that there is an inherent connection between trademarks and the commodities they represent. When such a connection is removed, as in “reverse passing off,” the trademark’s function of distinguishing commodities is terminated and the rights of the trademark registrant are thus infringed. This is why “reverse passing off” is also viewed as a type of trademark infringement.

Finally, there are also several other types of trademark infringement. According to the Regulation for the Implementation of the Trademark Law and the Supreme Court’s judicial interpretations, among other infringements are: using a sign which is identical or similar to the registered trademark of another party as the name of an identical or similar commodity, or as the decoration of the commodity; deliberately facilitating the actions of others in violation of trademark rights by providing such services as storing, delivering, and concealing the infringing goods; and copying, imitating, and translating all or part of the registered trademark of another party for different or dissimilar goods. All of the above types of action may damage the exclusive right to use registered trademarks and thus are considered to be trademark infringement.

Under the Trademark Law, when there is an infringement of the right to exclusive use of a registered trademark, and a dispute arises accordingly, the involved parties shall negotiate to settle it. If any party refuses to negotiate or the negotiation has failed, the involved parties may bring a suit before a court or request the administrative department for industry and commerce to handle the matter. If the administrative department for industry and commerce concludes that an infringement has occurred, it may order immediate cessation of the infringement and may confiscate or destroy the infringing commodities and the tools, and may, in addition, impose a fine. If a party disagrees with the decision, it may bring a suit before a court within a specified period. The above shows that China’s handling of trademark infringement involves both judicial and administrative measures to enable the parties to settle trademark infringement disputes according to their own wishes and methods.

Exceptions to trademark infringement

To protect the interests of all parties, Chinese trademark law and regulations have also established restrictions on the exclusive right to use trademarks. In exceptional circumstances, producers and operators may use trademarks identical with or similar to the trademarks of others on the same kind of commodity without this being considered as infringement. Specifically, there are three main exceptions to trademark infringement.

Fair use

Fair use refers to the situation whereby a person can use trademarks identical with or similar to the trademarks of another party on the same or a similar kind of commodity without authorization. Commentators argue that fair use can help regulators to strike a balance between preventing trademark infringement and preserving fair competition. Under the Regulation for the Implementation of the Trademark Law, where a registered trademark contains the generic name, shape, or model of the goods, or directly indicates the quality, main raw material, function, use, weight, quantity, and other features of the goods, or contains a place name, the holder of the exclusive right to use the registered trademark has no right to prohibit others from using it. Based on this provision, fair use may include the rational use of descriptive words for goods; the use of registered trademarks of other parties to show the functions and characteristics of goods; and the normal use of personal names (titles) or addresses. It is noted that fair use must be motivated by goodwill, i.e., the user has no intention to conduct unfair competition with the trademark owner. Moreover, fair use must not violate the legitimate rights and interests of trademark owners; when necessary, the user may add marks to distinguish his commodities from those of the trademark holder.41

The right of priority

If, prior to the registration of a trademark, others have used a similar or identical trademark in good faith and gained a certain level of reputation, the registrant should allow them to continue to use that trademark. In other words, a claim to the right of priority is based on two conditions: first, the use of a similar or identical trademark by others has occurred prior to the trademark’s registration; and second, the similar or identical mark used by others has gained a certain level of reputation. In judicial practice, the right of priority is often used as a defense against trademark infringement, but such a defense is subject to certain restrictions. For instance, anyone applying for trademark registration may not register in advance a trademark that has been used by others and has become influential. Otherwise, his action may constitute malicious trademark squatting, which is clearly prohibited by the Trademark Law.

The existing rights of others

These include such rights as copyright, patent, the right to pictures, and the right to personal, enterprise, or geographical names that have existed prior to the application for trademark registration. Under the Trademark Law, an application for trademark registration should not damage such existing rights of others obtained by priority. Thus, if a person who is charged with trademark infringement can prove that he has certain existing rights regarding the trademark, he may be exempted from liability.

In cyberspace, the matter of trademark infringement has become much more complicated. It is especially difficult to define the liability of ISPs, as is shown in Shanghai Dazhong Banchang Co. v. Baidu Inc., China’s first case of online trademark infringement (Case 5.8).

Case 5.8   Shanghai Dazhong Banchang Co. v. Baidu Inc.: trademark infringement in cyberspace42

Plaintiff Shanghai Dazhong Banchang Co. is a company that specializes in providing moving services, while defendant Baidu Inc. is China’s largest search engine. In April 2007, the plaintiff found that on the sections of “bid ranking” and “hot zone” of the defendant’s website there were a number of fake site links under the plaintiff’s name. Without permission, the operators of these sites were using the registered trademark of Dazhong to promote their moving services. The plaintiff claimed that the defendant had failed to fulfill its obligation and was allowing the relevant search results to include the fake websites that violated the plaintiff’s trademark rights. The plaintiff charged that the defendant had deliberately facilitated other parties’ infringing actions by providing such services as storage and transportation, and so it should bear corresponding liability.

The court remarked that, differently from the normal ranking provided by search engines, “bid ranking” not only charges service fees but also requires the party applying for such a service to submit keywords for its products; so that defendant Baidu, a provider of “bid ranking” service, has an obligation to examine the legitimacy of the keywords. If the keywords submitted by the applicant involve the possibility of trademark infringement, the defendant should further review the relevant qualification documents, such as the applicant’s business licenses; otherwise, the defendant will be regarded as being subjectively at fault. In the present case, the court held that the defendant should be aware of the trademark of the plaintiff, which had gained a reputation in the market; however, it had allowed many parties that had no relationship with the plaintiff to use “Dazhong Banchang” or “Shanghai Dazhong Banchang Moving Service Co.” as the keywords to apply for its bid ranking service, thus causing various websites with identical business names and business operations to be displayed in the search results. The court recognized that the defendant was subjectively at fault because it had failed to fulfill its obligation to pay appropriate attention to the infringing action; objectively, it had facilitated the third parties’ actions of violating the plaintiff’s trademark rights and conducting unfair competition, causing harm to the plaintiff. The court thus decided that the defendant’s action, along with that of the infringing third-party sites, constituted joint infringement, so that it should be subject to collateral liability.


42.The source of the case: Shanghai No. 2 Immediate People’s Court Civil Verdict Shanghai No. 2 Immediate Civil Division 5 First Trial Case No. 147 (2007).

Issues relating to domain names

In cyberspace, each host or intranet is assigned a unique address, often referred to as the Internet Protocol (IP) address. An IP address is initially a group of 32-bit binary numbers that is converted into the corresponding decimal numbers and then divided into four parts with dots. For example, Baidu’s IP address is currently 202.108.22.5. Since it is hard for the public to remember IP addresses, domain names have emerged to enhance the publicity of the Internet. Domain names refers to the hierarchical character identifiers used to identify and locate a computer on the Internet, and they correspond to a computer’s IP address.43 A domain name generally consists of characters, numbers, and symbols; it has two parts separated by dots, as in www.baidu.com. In a complete domain name, the part to the right of the last dot is often referred to as the top-level domain or the first-level domain; the part to the left of the last dot is the second-level domain, to the left of that is the third-level domain, and so on. Since domain names are more convenient for users to memorize, they constitute a fundamental means for users to access the Internet.

With the development of the Internet, a large number of companies have launched websites to promote their products. Each website represents a unique domain name, which has become an important tool for a company to distinguish itself from others in the market. Specifically, a company often uses its name, trademark, or trade name as the central domain, while Internet users often search for and access the company’s website by its name or trademark plus “.com”. This means that the domain name has become a symbol or a mark of the company. It is a distinct identifier, representing the company’s unique value and orientation. It can thus become a key factor in determining the popularity and visibility of the company.

In recent years, domain names have been viewed as closely related to trademarks. Like trademark holders, domain name owners have the right to possess, use, and transfer their domains. Due to the economic value of domain names, companies have witnessed such activities as cybersquatting and the selling, purchasing, loaning, pledging, and licensing of domain names. Many people argue that domain names are the natural extension of trademarks in cyberspace. Once the domain name is registered, the owner will have the same rights as a trademark owner, that is, the domain name right. However, it should be pointed out that there are some substantial differences between trademarks and domain names. For example, a domain name is unique worldwide and represents only one user, while an identical or similar trademark may be used in different countries, on different categories of goods, by different people, at the same time. A domain name is international, while a trademark is regional: the holder of a trademark can enjoy relevant rights only in the country in which the trademark is registered. Unlike trademarks, domain names cannot be licensed; they can only be transferred. In addition, domain names must follow the principle of “register first.” Without registration, domain names may not be used in cyberspace. Trademarks may be established through “register first,” “use first,” or a compromise between the two.44

Domain name registration

In China, the MIIT is in charge of the administration of Internet domain names. With the authorization of the MIIT, the CNNIC has the responsibility, as China’s domain name registry, to operate and administer the “.cn” country-code top-level domain and Chinese domain name system.45 Therefore, in order to provide domain name registration services, one must obtain a certificate from the CNNIC and also get approval from the MIIT.

Under the Administrative Measure for Internet Domain Names in China, a party must meet the following requirements in order to engage in domain name registration services: be a legal person or a legal institution established in accordance with the law; have a registered capital of not less than 1 million yuan; have established a domain name registration service system within China; have technicians and customer service personnel dedicated to domain name registration services; have a reputation for providing or have the ability to provide long-term service to clients; have a business development plan and a relevant technical plan; have proper facilities for safeguarding network and information security; and have a proper domain name registration service withdrawal mechanism. In addition, the CNNIC Implementing Rules of Domain Name Registration stipulates that, in the process of providing domain name registration services, service providers are prohibited from: providing domain name registration services in the name of government agencies, other enterprises or institutions, or any social organizations; registering domain names with false information to take up domain name resources in disguised form; providing domain name registration services by means of unfair competition, e.g., misleading or threatening clients; rejecting the applications of the domain name holders for domain name transfer codes or charging holders for transfer applications; and disclosing the registration-related information of clients that infringes the legitimate rights and interests of clients, or using such information to obtain illegitimate interests.

Taking into account the possible conflict between domain names and trademarks, trade names, or geographical names, the Interim Administrative Measures on the Registration of Internet Domains establishes a series of restrictions on domain name registration. It stipulates that without the approval of relevant state organs, no one should use “China,” “Chinese,” “cn,” “national,” or other similar words as a domain name; with the approval of relevant local governments, no one should use the full or abbreviated names of administrative districts at or above the county level; in addition, no one should use the names of other countries or regions, foreign places, and international organizations known to the public; the names of industries; the generic names of goods; the names of enterprises or trademarks that have been registered in China; and names that may cause harm to the public interest.

One may submit an application for domain name registration by registering online, by e-mail, or in writing, and should sign the domain name registration agreements with the domain name registration service providers. A person who applies for domain name registration should be solely responsible for the domain name that they select, making sure that the domain name of their choice does not damage any third party’s interests. In case of any changes to the registration information, the domain name holder should apply to the registrars to change the registration information within 30 days after the changes take place. In cases of domain name transfer, the domain name holder should submit the application form for domain name transfer and identification documents that either bear the official seals of the organization or that have been notarized to the registrars.

Domain name disputes

As discussed above, domain names can be regarded as a company’s trademark in cyberspace. Since domain names have distinctive features and a high commercial value, the number of domain name disputes has increased rapidly over the past decade. In Chinese judicial practice, there are mainly three forms of domain name dispute, i.e., cybersquatting, reverse cybersquatting, and disputes caused by similarities among domain names.

Cybersquatting refers to “the practice of registering a trademark as a domain name with the intent of profiting from it by selling it, usually to the trademark holder. As long as the cybersquatter holds the domain name, the trademark holder cannot register its own trademark as a domain name” (Cases 5.9 and 5.10). The cybersquatter thus violates the basic right of the trademark holder to use his trademark.46

Cases 5.9 and 5.10   Two cases of cybersquatting

A typical case occurred in the United States, where Panavision sued Toeppen for trademark infringement.47 Toeppen registered the domain name www.panavision.com and then offered to sell it to Panavision for $13,000. After review, the court determined that, by having offered the domain for sale, the defendant had shown his intent to use the mark in commerce. The court further remarked that a domain name carried the reputation of a trademark, and the defendant’s conduct diluted the plaintiff’s mark.

In the case of Cummins Inc. v. Chongqing Machinery Co., the defendant registered the domain name www.cummins.com.cn in order to promote its own products, which were similar to the plaintiff’s.48 Similarly, the court determined that the defendant’s conduct constituted a trademark infringement; it issued a restraining order to the defendant, prohibiting him from using the domain name.


47.The source of the case: Panavision International v. Toeppen, United States Court of Appeals for the Ninth Circuit 1998, 141 F.3d 1316.

48.The source of the case: Beijing High People’s Court Civil Verdict Beijing High Civil Division Final Trial Case No. 859 (2002).

Case 5.11   Procter & Gamble Co. v. Beijing Tiandi Co.: the extension of trademark rights to domain names49

In Procter & Gamble Co. v. Beijing Tiandi Co., the court held that the trademark rights of famous trademarks should extend to domain names. The court remarked that “Tide” was a well-known trademark, which was owned by the plaintiff; by adopting “tide” as its domain name, the defendant had diluted the trademark, caused confusion among consumers about the source of the product, and prevented the plaintiff from registering a domain name in the most concise way. The court decided that the defendant had infringed on the exclusive right of the plaintiff and that the action also constituted unfair competition.


49.The source of the case: Beijing High People’s Court Civil Verdict Beijing High Civil Division Final Trial Case No. 286 (2002).

It is observed that, because of their high commercial value, well-known trademarks have become the worst-hit areas in cybersquatting and also the focus of judicial protection in China (5.11 and 5.12).

Case 5.12   E. I. Du Pont de Nemours & Co. v. Beijing Guowang Information Ltd.: protection of a well-known mark50

In E. I. Du Pont de Nemours & Co. v. Beijing Guowang Information Ltd., the plaintiff was the owner of the DuPont trademark but the defendant had registered dupont.com.cn as a domain name. The court held that “DuPont” was a well-known mark, which should enjoy a higher level of protection than an ordinary mark. The defendant had no justified reason for registering a domain name that was similar to the DuPont mark, and such registration could cause confusion among the public. Therefore, the court ruled that the defendant’s trademark constituted an infringement and unfair competition.


50.The source of the case: Beijing No. 1 Immediate People’s Court Civil Verdict Beijing No. 1 Immediate Intellectual Property Division First Trial Case No. 11 (2000).

Reverse cybersquatting refers to the situation whereby, in bad faith, a person registers another person’s domain name as his own trademark. In China, many famous domain names have renowned Chinese names. For example, China’s largest port site, www.sina.com.cn, is often referred to as 新浪; another influential site, www.163.com, is often called 网易. These Chinese names may not match the enterprise names of the domain name owners. As a result, people may attempt to register these famous Chinese names as their enterprise names, thus causing trademark infringement disputes (5.13).

Case 5.13   Chinese enterprise names and trademark infringement51

In May 1997, Suzhou Yilong Electronic Ltd. (Yilong) applied for the registration of the 雅虎 mark; Yahoo! Inc., an American Internet company, put forward an objection, claiming that the 雅虎 mark was the Chinese transliteration of its enterprise name. However, China’s trademark regulator, the SAIC, approved Yilong’s application. The SAIC held that Yahoo! Inc. had registered only the Yahoo! Mark in China; it had not registered the 雅虎 mark, so it should not enjoy the exclusive right to use an unregistered mark. Furthermore, the goods and services provided by Yilong under the 雅虎 mark were different from those provided by Yahoo! Inc. in terms of their functions and distribution channels, so that the registration of the 雅虎 mark by Yilong would not cause confusion among consumers. It is argued that the SAIC merely stuck to China’s trademark law and failed to give full consideration to the protection of a company’s domain name.


51.The case is adapted from Chunbao Yang (2001) “A Study on Several Legal Issues Concerning Domain Names and Relevant Management,” Master’s thesis, East China University of Political Science and Law.

Reverse cybersquatting may also be reflected in trademark abuse, where the trademark owner improperly uses its position to threaten or file a lawsuit against someone who is not infringing when registering a domain name. In fact, in such cases a company is attempting to exercise control over a trademark beyond that legally offered by trademark law (5.14).

Case 5.14   Shijiazhuang Fulande Co. v. Beijing Mitian Jiaye Ltd.: protecting domain name right from expansion of the scope of trademark right52

In the case of Shijiazhuang Fulande Co. v. Beijing Mitian Jiaye Ltd., the plaintiff, who had registered the PDA trademark in 1997, sued the defendant, who had registered the domain name pda.com.cn in 1998, for trademark infringement. The court held that PDA was a commodity mark, and the registration of the PDA mark as a domain name by the defendant should not be regarded as using the trademark on identical or similar commodities. The court recognized that the defendant was using the PDA mark on its website, but the goods and services promoted on the website were not owned by the defendant. In other words, the defendant was using PDA as a service mark, while the plaintiff was using it as a commodity mark. The court decided that since the plaintiff could not prove that the PDA mark was a well-known mark, the defendant’s conduct did not constitute trademark infringement. In this case, the court made its decision mainly to prevent the plaintiff from expanding the legal scope of trademark right, and thus damaging the rights of domain name owners.


52.The source of the case: Beijing No. 1 Immediate People’s Court Civil Verdict Beijing No. 1 Immediate Intellectual Property Division First Trial Case No. 48 (1999).

Domain names disputes may also be caused by similarity among domain names. Someone may register a domain name that is similar to a well-known one, in order to obtain illegitimate benefits. Such practices may have a negative impact on the registrant of the well-known domain name (Cases 5.15 and 5.16).

It is observed, however, that two parties that provide different goods or services may have identical or similar trademarks. If they both intend to register their identical or similar marks as their domain names, it is probable that the domain names of their choice may be identical or similar. In this case, there will be both a coexistence of and a conflict between legitimate rights.

Solutions to domain name disputes

At present, China mainly uses two methods to resolve the above-described domain name disputes: one is to resort to law, particularly trademark law and unfair competition law; the other is to resort to a ruling by the CNNIC, a semi-governmental administrative agency responsible for Internet affairs in China.

The legal model

In the legal model, China mainly adopts the law against trademark infringement and the law against unfair competition to resolve domain name disputes. Under the 2001 Interpretation of the Supreme People’s Court on the Application of Laws in the Trial of Civil Disputes over Domain Names of Computer Network (hereinafter referred to as the SPC Interpretation on Domain Names), a court shall find a defendant’s action of registration or use of a domain name to be an infringement or unfair competition if each of the following criteria is satisfied: the rights and interests that the plaintiff claims are legal; the defendant’s domain name or the main part of the domain name constitutes a copy, imitation, translation, or transliteration of a well-known trademark of the plaintiff, or is the same as or sufficiently similar to the plaintiff’s registered trademark or domain name that the concerned public would be misled; the defendant has neither rights nor interests in the domain name or its main part, nor reasonable grounds to register and/or use the domain name; and the defendant’s registration or use of the domain name has malice. Furthermore, the SPC Interpretation on Domain Names provides specific guidelines about what constitutes malice in the registration or use of a domain name. It states that a court should convict a defendant of malicious action if he is proved to have registered another’s well-known trademark as a domain name for commercial purposes; to have registered or used a domain name that is the same as or similar to the plaintiff’s registered trademark or domain name for commercial purposes, and for the purposes of deliberate confusion with the plaintiff’s products, services, or websites in order to mislead Internet users into visiting his own website or another website; to have made efforts to sell, lease, or transfer the domain name in other ways at a high price to obtain unfair gain; and to have not used or prepared to use the domain name after registration, but to have intentionally hindered the plaintiff’s registration. However, if the defendant produces evidence that the domain name he owns has gained certain fame before the lawsuit and can be distinguished from the plaintiff’s registered trademark or domain name, or if there are other circumstances that prove he did not act in bad faith, the court may convict the defendant of a non-malicious action. This provision is designed to balance the interests of the involved parties, and paves the way for the establishment of laws against reverse cybersquatting.

It has been recognized that there are some differences between the right to domain names and the right to trademarks or fair competition; and due to these differences, the current legal model is sometimes found to be insufficient to protect the rights or interests of domain name holders. For example, where a tort involving domain names is established, the court can only require the defendant to stop infringement and make compensation; it cannot determine the owner of the domain name at issue. In this sense, the court cannot fully protect the legal rights of the domain name holder. Therefore, with reference to the ICANN in the United States,55 China has established a non-profit organization, namely the China Internet Network and Information Center (CNNIC), to help solve various domain name disputes.

The CNNIC model

Founded in 1997 according to relevant laws, the CNNIC is an organization responsible for the registration and administration of .cn national domain names. With reference to the practice of the ICANN, it has since promulgated a series of rules and regulations for resolving domain name disputes. The most important rule is the CNNIC Domain Name Dispute Resolution Policy, which was enacted in 2002 and revised in 2006. It should be noted that these rules are applicable only to .cn domain names and Chinese domain names that are administered by the CNNIC.

Under the CNNIC Domain Name Dispute Resolution Policy, a complaint against a registered domain name can be established if any of the following situations is involved: the disputed domain name is identical with or confusingly similar to the complainant’s name or mark in which the complainant enjoys legal rights or interests; the disputed domain name holder has no right or legitimate interest in respect of the domain name or major part of the domain name; or the disputed domain name holder has registered or has been using the domain name in bad faith. Like the above-mentioned judicial interpretation on domain name disputes, this CNNIC resolution policy also specifies the situations in which the registration or use of a domain name is regarded as malicious.

These situations include: the purpose for registering or acquiring the domain name is to sell, rent, or transfer the domain name registration to the complainant, who is the owner of the name or mark, or to a competitor of that complainant, and to obtain unjustified benefits; the disputed domain name holder frequently registers domain names in order to prevent the owners of names or marks from using those names or marks as domain names; or the disputed domain name holder has registered or acquired the domain name for the purpose of damaging the complainant’s reputation, interrupting the complainant’s normal business activities, or creating confusion about the complainant’s name or mark among the public. However, a party can demonstrate that it is entitled to the rights and interests of the disputed domain name if any of the following circumstances is verified: before receiving any notice of the dispute, the party used or intended to use the domain name for the purpose of offering goods or services with good faith; the party as an individual or an organization has been widely known to the public by the domain name, even if it has not obtained the trademark or service mark rights; or the fair or non-commercial use of the domain name by the party neither purports to mislead or divert consumers for commercial gains, nor does it tarnish the trademark or service mark at issue. These rules can thus be used by the domain name registrant as a defense against allegations of trademark infringement.

Any party who considers that a domain name registered by others conflicts with its legal rights and interests may file a complaint with a dispute resolution service provider. Upon acceptance of the complaint, the dispute resolution service provider should form a panel, which is often composed of one or three experts on the Internet and relevant legal affairs. The providers of domain name dispute resolution services should provide lists of the names of online experts for plaintiffs and defendants to choose from. The panel is expected to abide by the principles of independence and impartiality, and render a decision on the dispute within 14 days from the date of the appointment of the panel.

It should be pointed out that, although the CNNIC imitates the ICANN model to some extent, it also has its own characteristics. For example, the CNNIC rules are not merely applicable to conflicts between domain names and trademarks; they have been extended to the conflict between domain names and other names or logos enjoying legal rights, such as business names and personal names.56 In addition, the CNNIC model has received legislative recognition and support, which is not the case with ICANN. Under the Administrative Measure for Internet Domain Names in China, the administrative authority for domain name registration such as the CNNIC can designate an independent organization to resolve domain name disputes. The decisions made by such an organization should apply only to changes in the information on the holders of disputed domain names. If the decision of a domain name dispute resolution organization is not in accord with a legally effective ruling made by a court or an arbitration institution, the ruling of the court or the arbitration institution should prevail. This provision not only lends legal support to the CNNIC resolution model, but also defines its relationship to the courts or arbitration bodies (5.17)).

Cases 5.15 and 5.16   Registration of similar domain names

Someone registered the domain name www.goqq.com, which was similar to China’s renowned website www.qq.com, in order to engage in the business of transferring and selling QQ accounts.53 This caused many consumers to mistakenly think that the former site had been established by Tencent Co., the owner of the second site, and trademark infringement thus occurred.

Another example involved a newspaper called Urban Express, which registered the domain name www.19floor.net in 2001.54 After several years of operation, this domain name earned a good reputation among Internet users. In 2005, a person named Wang Linyang registered the domain name www.19floor.com. The name, website columns, and page layout were all similar to those of Urban Express. This also led to a domain name dispute.


53.See Licong Chen (2009) “Perfecting the Legal Protection for Domain Names,” retrieved July 12, 2011 from http://www.pkulaw.cn/fulltext_form. aspx?db = art&gid = 335596481.

54.The source of the case: Zhejiang High People’s Court Civil Verdict Zhejiang High Civil Division 3 Final Trial Case No. 286 (2008).

Case 5.17   Royal Canin v. Liu Weize: a dispute resolved by judicial proceedings and CNNIC57

In the case of Royal Canin v., involving trademark infringement and unfair competition, both judicial proceedings and the CNNIC resolution model were used. In August 1997, plaintiff Royal Canin, a French pet foods company, registered the Royal Canin trademark and related figures with China’s Trademark Office; in 2002, it established two subsidiary companies in China; in 2004, it registered the domain name www.royal-canin.com.cn, which had not been put into use. The official websites of the French company included www.royal-canin.com and www.royal-canin.cn. In 2006, defendant Liu Weize registered the domain name www.royalcanin.cn to answer various questions encountered by users in the use of Royal Canin’s dog food. At the top of the home page, the website carried the following statement in a red font: “Please distinguish this site from the Chinese website of Royal Canin; if you want to visit the official website of French Royal Canin, please login to www.royal-canin.com or www.royal-canin.cn.”

In August 2006, the plaintiff appealed to a domain name disputes resolution center in China, claiming that the defendant did not enjoy any legitimate rights to the domain name www.royalcanin.cn and had registered that domain name in bad faith. The plaintiff requested the defendant to transfer the involved domain name to Royal Canin. The request was rejected by the domain name disputes resolution center. On the basis of equal consultation, the two parties then signed an agreement on the transfer of the domain name. The defendant did not go through the domain name transferring procedure, however. The plaintiff therefore filed a case at a court, requiring the defendant to stop infringement, cancel the registration of the involved domain name, make an apology to the plaintiff, and bear all costs of litigation.

The first-trial court held that the registration and use of the domain name at issue by the defendant were in bad faith; the defendant did not enjoy the rights to and interests in the main part of the domain name “royalcanin,” and had no justifiable reasons for registering or using the domain name. Besides, the main part of the domain name was similar to the enterprise name, trademark, and domain names of the plaintiff, thus causing confusion among consumers. The court decided that the defendant’s conduct constituted unfair competition and the plaintiff’s claim was supported. Objecting to the decision of the first-trial court, defendant Liu Weize appealed to a higher court. After investigation, the second-trial court ruled that the use of the involved domain name by Liu Weize would not cause confusion among the public; also, Liu Weize was not using the domain name to engage in commercial activities, and the agreement that he had reached with Royal Canin on the sale of the domain name was insufficient to prove that he had purported to obtain improper benefits, so that his conduct should not be regarded as malicious. The final verdict rejected all claims by Royal Canin.


57.The source of the case: Beijing High People’s Court Civil Verdict Beijing High Civil Division Final Trial Case No. 1157 (2008).

Patents

A patent is a property right granted by a government to an inventor. Specifically, a patent gives the inventor the right to exclude others from making, using, offering for sale, or selling his invention throughout the country or importing his invention into the country for a limited period of time, in exchange for the public disclosure of the invention. As an important type of intellectual property, patent is recognized and protected by Chinese law. The PRC Patent Law was adopted in 1984, and amended for the first time in 1992 and for the second time in 2008. In addition, China also promulgated the Implementation Regulation of the Patent Law in 1985. The main purpose of patent legislation is to protect the legitimate interests of patent holders, encourage inventions and creations, foster the spreading and application of inventions and creations, and promote technological improvement and economic/social progress. During the past decade, the rapid development of Internet technology has had a significant impact on China’s patent system. This section first discusses some basic concepts of patent rights, including the subject and object of patent, the conditions for patent licenses, and patent protection. It then explores the application of patent law to the Internet. The section has a particular focus on the patentability of computer codes and Internet business models.

Patent basics

The subject and object of patent

The subject of a patent is a person who enjoys the protection of patent law and also undertakes corresponding obligations. It includes an “inventor” and “creator,” which refers to a person who has made creative contributions to the substantive features of an invention/creation. A person who engages only in organizational work, provides facilities for making use of material and technical means, or takes part in other auxiliary functions during the course of accomplishing the invention/creation is not considered to be an inventor or a creator. Under the Patent Law there are two types of invention/creation: service invention/creation and non-service invention/creation. Service invention/creation refers to an invention/creation that is made by a person in execution of the tasks of the entity to which he belongs, or that is made by him mainly through the use of material and technical means provided by that entity. For a service invention/creation, the right to apply for a patent belongs to the entity. After the application is approved, the entity becomes the patentee. For a non-service invention/creation, the right to apply for a patent belongs to the inventor or creator. After the application is approved, the inventor or creator becomes the patentee. Where a non-service invention/creation is completed by two or more inventors and creators, all of these people are considered as co-inventors or co-creators. The right to apply for and possess a patent belongs to all creators and inventors. The right to apply for a patent and the patent right may be assigned. Where the right to apply for a patent is assigned and the application for that patent is then approved, the assignee becomes the patentee. After the assignment of the right to apply for a patent and the patent right, however, the assignee cannot become the creator/inventor, and the creator/inventor does not lose his personal rights.

The object of patent refers to the invention/creation that is entitled to patent rights according to patent law. In China, the object of patent includes inventions, utility models, and designs. Inventions refers to new technical solutions put forward for a product, method, or the improvement thereof. An invention must be a technical solution; it results from the application of the laws of nature to specific technical problems, not being the laws of nature itself. Therefore, an invention is usually achieved through intellectual activities within natural science. An achievement in literature, arts, and social sciences does not constitute an invention recognized by patent law, and thus is not subject to patent protection. Inventions can be divided into inventions of products and inventions of methods. Inventions of products refers to the invention of new products and new substances, such as new materials, utensils, equipment, and machinery. Inventions of methods refers to the invention of new methods and procedures that are applied to solving specific technical problems, such as new manufacturing methods, new processing methods, and new methods for product use. Inventions can be either original or improving. An improving invention is to improve existing products or methods through substantive new technical solutions. For example, an incandescent lamp whose quality and life have been improved significantly may be the object of a patent under improving invention. In short, inventions are technical solutions that produce new products or methods.

Utility models refers to new practical technology solutions for a product’s form, structure, or the combination thereof. In China, a patent for utility models protects only those products that are manufactured by industrial methods and that take up space. Unprocessed and natural products and all related methods, such as manufacturing methods, processing methods, communication methods, and methods of use, do not come under the protection of the utility models patent. In addition, a patent for utility models focuses on the product’s form, structure, or the combination thereof, that is, such a patent concerns a new technical solution for the product’s external form, internal structure, or the combination thereof. A new design that alters the form, pattern, color, or the combination thereof for aesthetic purposes is not a technical solution as required by the utility models patent.

Designs refers to new designs for a product’s shape, pattern, or their combination, and the combination of color with shape or pattern which is aesthetically pleasing and industrially applicable. Under China’s Patent Examination Guidelines, the carrier of a design must be a product. Handicrafts, agricultural products, livestock products, and natural products cannot be the carriers of a design since they cannot be produced repeatedly. Specifically, what may constitute a design includes: the shape of a product; the pattern of a product; the shape and pattern of a product; the shape and color of a product; the pattern and color of a product; and the shape, pattern, and color of a product. In addition, a design may be used in industry and manufactured in batches.

The grant of patent right

Inventions cannot be automatically granted patent rights; instead, the relevant party must file an application with the patents administrative organ. In accordance with the Patent Law, an invention must meet two basic requirements to be granted patent right: it cannot violate state laws, social morality, or public interest; and it cannot be completed on the basis of genetic resources, the acquisition or use of which breaches the stipulations of related laws and regulations. In addition to meeting these two basic requirements, any invention for which a patent may be granted must satisfy three substantial requirements, namely, novelty, inventiveness, and practical applicability.

Novelty means that the invention or utility has neither existed nor been publicized before the filing date of the patent application. Therefore, an invention or utility model that has novelty is neither a prior art nor described in an application that was filed by any other person before its date of filing and published on or after its date of filing. The term “prior art” mainly refers to an invention or utility model that has been publicly disclosed in publications in the country or abroad, or has been publicly used or made known to the public by any other means in the country, before the filing date of the application.

Inventiveness means that, as compared with existing technology, the invention has prominent substantive features and represents notable progress. The term “existing technology” refers to technology that has been disclosed through publication in the country and abroad or has been known to the public in the country by any means. The term “prominent substantive features” means that the invention is non-obvious to a person skilled in the art.58 If such a person can achieve the invention simply through logical analysis, deduction, generalization, or limited experimentation on the basis of existing technology, the invention is obvious and thus possesses no prominent substantive features. The term “notable progress” means that, compared to existing technology, the invention can produce an advantageous technical effect, such as overcoming the defects and deficiencies of existing technology, providing a different technical solution to solve a certain technical problem, and representing a certain new trend in technical development.

Practical applicability means that the invention or utility model can be made or used and can bring positive results. In other words, the invention for which a patent may be granted must be practical rather than purely theoretical. If it is a product, it must be able to be made industrially and solve a technical problem; if it is a method, it must be able to be used industrially and solve a technical problem. In addition, the invention must be able to generate positive economic or social effects, such as increasing the quantity of products, improving product quality, adding more functions to a product, saving energy or resources, and preventing environmental pollution. Only when a patent application for a product or a method satisfies such conditions can a patent be granted.

The acquisition of patent rights should not only meet the above-mentioned basic and substantive requirements, but also follow the procedures provided by patent law, including the initiation of a patent application, preliminary examination, substantive examination, and approval of the grant of patent. After a patent is granted, its validity is limited. For an invention, the duration of patent right is 20 years; for a utility model or a design, it is 10 years. The patentee should pay an annual fee beginning from the year in which the patent is granted.

The protection of patent right

Patent protection is an integral part of the patent law. To effectively protect a patent, the Patent Law first clarifies how to determine the scope of patent protection, that is, the scope of protection of the patent right for an invention or utility model should be determined by the terms of the claims, which can be interpreted through the description and the appended drawings; the scope of protection of the patent right for a design should be determined by the product’s design, as shown in the drawings or photographs, a brief description of which can be used to explain the patentable design of the product. Based on these provisions, China’s patent law and related regulations define three forms of patent infringement, including direct patent infringement, indirect patent infringement, and passing off a patent.

Direct patent infringement refers to the act of exploiting a patent without the permission of the patentee. The act of “exploiting a patent” mainly includes making, using, offering to sell, selling, or importing the patented product; using the patented process; using, offering to use, selling, or importing the product directly obtained by the patented process; or making, selling, or importing the product incorporating its patented design, for production or commercial purposes. As long as such an act is conducted without the authorization of the patentee, it constitutes direct infringement.

Under the Patent Law, the patentee has the exclusive right to exploit his patented products or methods. This does not mean that only the patentee can exploit the patent, however. The Patent Law also provides that, with the permission of the patentee, any individual or entity other than the patentee may exploit the patented products or methods. In certain circumstances, a patent may be exploited without the permission of the patentee. For instance, where a national emergency or any extraordinary state affair occurs, the Patent Office may grant a compulsory license to exploit a patent for invention or utility model.59

Indirect patent infringement refers to the situation whereby the offender intentionally induces, incites, or helps others to directly infringe on a patent, although his action does not directly constitute patent infringement. The common forms of indirect infringement include: without the permission of the patentee, selling the components of the patented product, selling the molds specifically designed to use the patented product, selling the equipment specifically designed to exploit the patented methods, or assigning the patented technology. In Chinese judicial practice, these acts are usually handled as joint infringement, and the offender will bear corresponding civil liability.

Passing off a patent involves two forms of illegal act. The first form is to pass the patent to another person, which includes the following acts: without permission, marking the patent number of another person on the product produced or sold by himself, or on the package of that product; without permission, using the patent number of another person in the contract, advertisement, or other promotional materials; and forging or altering the patent certificate, patent documents, or patent application documents of another person.60 The second form is to pass off an unpatented product as a patented product or to pass off an unpatented method as a patented method.61 Examples include producing or selling an unpatented product marked with a patent mark; after a patent right has been declared invalid, continuing to mark a patent mark on the product produced or sold by himself; declaring an unpatented technology in the contract, advertisement, or other promotional materials to be a patented technology; and forging or altering the patent certificate, patent documents, or patent application documents.62

Where a patent infringement dispute occurs, the involved parties may settle it themselves through consultation. If the parties are reluctant to settle the dispute through consultation or the consultation fails to result in an agreement, the parties may resort to a court or request the relevant authority to handle the matter. Where a person passes off a patent, he will be required by the relevant authority to correct his action, in addition to bearing civil liability. If the infringement constitutes a crime, he may be prosecuted for criminal liability.

It should be noted that in China’s patent protection system, none of the following is viewed as an infringement of the patent right: (a) where, after the sale of a patented product that was made or imported by the patentee or with the authorization of the patentee, or that was directly obtained through the use of the patented process, any other person uses, offers to sell, or sells that product; (b) where, before the filing date of the patent application, any person who has already made the identical product, used the identical process, or made necessary preparations for its making or use, continues to make or use it within the original scope only; (c) where any foreign transportation vehicle which temporarily passes through China’s territory uses the patent in its devices and installations according to relevant agreements; (d) where any person uses the patent solely for the purposes of scientific research and experimentation; (e) where any person uses, manufactures, applies, or imports patented drugs or medical devices for the purpose of providing information to the authority handling patent applications; and (f) where a person uses or sells a patented product without knowing that it was made and sold without the authorization of the patentee, while being able to prove that he has obtained the product from legitimate distribution channels.63 These are the situations in which patent infringement may be exempted. If the perpetrator is unable to prove such a situation, his action shall be deemed illegal.

Patenting computer software

As indicated earlier, the essence of the patent system is to provide legal protection for invention/creation, encourage scientific and technological development, and promote economic and social progress. Thus, with the rapid development of Internet technology, to offer patent protection for Internet-related inventions has become the focus of the development of patent law. In China and some other countries, a hot topic is whether or not computer software should be included within the scope of patent protection.

Computer software usually refers to computer programs and related documentation. Computer programs refers to the coded instructional sequences which can be operated on information processing equipment such as computers for the purpose of obtaining certain results.64 Computer programs include source code programs and object code programs. The source code text and the object code text of a piece of software should be seen as one work. Documentation refers to the materials and diagrams which are written in natural or formal language and used to describe the content, components, design, functions, testing results, and method of use of a computer program. Examples of documentation include explanations for program design, flow charts, and user manuals.

As an intellectual achievement, computer software is protected in China by intellectual property law. However, there are different views and practices with regard to the choice of the mode of protection. According to the Regulations on the Protection of Computer Software published in 2001, computer software comes under the category of copyright protection. It is argued that using copyright law to protect computer software has the following three advantages. First, computer software is creative and replicable, which are features of the object of copyright protection. Moreover, infringements of computer software are mainly presented by the illegal copying of computer software and the disseminating and selling of the copies; these kinds of action are prohibited by Chinese copyright law. Second, under Chinese copyright law, copyright can be obtained automatically. Therefore, any computer software, after its completion, may obtain the protection of copyright law without going through such procedures as application and approval. Third, it is easier to obtain protection from international treaties. International intellectual property agreements such as the Berne Convention and the Universal Copyright Convention often include computer software within the scope of copyright protection. Abiding by these treaties is conducive to obtaining international protection for Chinese computer software.65

It is well recognized, however, that there are some problems with copyright protection for computer software. First, the copyright law protects only the expression of a thought rather than the thought itself. For computer software, the most valuable aspect is its inner thought. Once the thought has been disclosed, professionals can develop similar software in different ways. Second, the copyright law doesn’t prohibit others from using the work; but the value of computer software lies in its use. The copyright protection available to computer software is obviously insufficient. Third, the copyright law aims at encouraging the development of literature and art, but the purpose of protection for software is to promote industrial development. In other words, the development of software relates to its practical function, rather than to satisfying people’s spiritual needs. In particular, it is difficult to apply the protection of the author’s personal rights in the copyright law to computer programmers, since a patent for software usually goes to the company rather than to the company’s programmers.

Given the deficiencies of the copyright protection model, many countries have attempted to adopt contract law, trade secrets acts, and anti-unfair competition law for the protection of computer software. Since questions remain, however, these models have failed to become mainstream solutions. After a comprehensive weighing up of the pros and cons, the patent protection mode for software has been confirmed in many countries. In the case of Diamond v. Diehr in the 1980s, the U.S. Supreme Court determined that the execution of a physical process controlled by running a computer program is patentable. The Court reiterated its earlier rulings that mathematical formulas in the abstract are not eligible for patent protection, but it held that the mere presence of a software element does not make an otherwise patent-eligible machine or process unpatentable. If the invention as a whole meets the requirements of patentability, it then can be patented, even if it includes software components. This case was a turning point in the course of software protection. Since then, the United States has gradually applied patent protection to computer software, and this practice has been followed by the international community.

Commentators note that patent protection for software has many advantages. For example, patent law protects creative thinking, which is precisely the most valuable part of computer software. Patent protection is exclusive: once a patent has been granted, other similar inventions are no longer protected and used. This is crucial for computer programmers in protecting their software designs and technical methods. In addition, the acquisition of a patent is premised on making the technical proposal known to the public. Making the software source code known to the public can effectively avoid the repeated development of the software. Moreover, the protection of a patent is effective for only 20 years, which is much shorter than the 50 years of copyright protection, but closer to the economic life of computer software.

However, the patent protection model for software is not without its questions. Under patent law, for example, the mathematical formulas created by intellectual activity cannot receive patents; but computer programmers mainly use mathematical methods. In other words, computer codes cannot be the object of patent law. In addition, a patent must possess novelty, inventiveness, and practical applicability; and because of its technical characteristics, most software can hardly meet the former two requirements. Moreover, the review cycle of an application for a patent is relatively long, but the economic life of software is very short. The best-selling time of software would have passed before the application review was completed. This may not conform to the interests of software developers. Finally, patent law requires the patentee to publicize his invention, including the software design. This makes it easy to imitate and copy computer programs; and accordingly, software developers find it difficult to protect their software by means of patents.66

Currently, computer software is explicitly included within the scope of protection of Chinese copyright law, but it is not excluded from the protection of Chinese patent law. The Patent Examination Guide released by the State Intellectual Property Office in 2010 provides that an invention application relating to computer software can be the subject matter of patent protection if it constitutes a technical solution. This involves computer software that is designed to perform control over an industrial process or a measurement/test process, to process external data, or to improve the internal performance of a computer system. If an invention application involves the execution of any of these software programs, it can be viewed as dealing with technical problems, using technical means, and being able to obtain technical effects, and is thus subject to patent protection. In addition, the Guide states that if the method for encoding Chinese characters is integrated with a special keyboard so that it works as a method for inputting Chinese characters into a computer system or for a computer to process Chinese character information, such a method is also subject to patent protection. It can be seen that China has adopted a more open software patent protection system, which is consistent with the trend of international development. In judicial practice, however, China has not rejected software protection by means of other laws. Through the use of different laws, China has tried to achieve a balance between protecting the interests of software developers and preserving the public interest.

Patenting Internet business methods

Business methods are mainly concerned with the use of computer software and hardware for achieving business purposes. Business method patents are a type of patent which claim and disclose new methods of doing business. In judicial practice, business method patents not only share common characteristics with computer software but also possess special features that originate from the combination of computer technology with business activities.67 As in the case of software patent protection, the United States is also the pioneer and advocate of patenting business methods. In 1996, the U.S. Patent and Trademark Office revised the Examination Guidelines for Computer-Related Inventions, stressing that the examination of business methods should be treated equally to other technical methods. In 1998, the U.S. Court of Appeals for the Federal Circuit ruled in the case of State Street Bank that business methods were patentable. This case opened the door for the subsequent patent applications of a variety of business methods. Following the United States, Japan, the European Union and other countries also began to adopt patent protection of business methods.

Chinese patent law and related laws have not included specific provisions for business methods, but there has been a dispute about the patentability of business methods. One important issue concerns whether business methods should be viewed as the rules and methods of intellectual activities. Intellectual activities refers to a person’s thinking activities that produce abstract results through reasoning, analysis, and judgment. The rules and methods of intellectual activities are those rules and methods governing a person’s thinking, expression, judgment, and memorization; they do not use technical means, nor do they solve any technical problem or produce any technical effect. Since the rules and methods of intellectual activities do not constitute technical solutions, they are not granted patent rights. In China, business methods had long been viewed as rules and methods of intellectual activities, and so they did not fall within the scope of patent protection.68 By 2006, China’s State Intellectual Property Office had revised the Patent Examination Guide, making it possible to patent business methods in some circumstances. According to the revised Guide, if a claim relates only to the rules or methods of intellectual activities, it should not be granted patent rights; if a claim contains not only the rules or methods of intellectual activities but also technical features, then the claim as a whole is not a rule or method of intellectual activities, and the possibility of obtaining patent rights should not be ruled out. This means that if business methods not only concern the rules and methods of intellectual activities but also include certain technical solutions, then they may be granted patent protection.

Regarding the patentability of business methods, another important issue is whether business methods should be viewed as technical solutions. By tradition, business methods have been considered as the rules and methods of business activities rather than as technical solutions.69 In accordance with the revised Patent Examination Guide, a technical solution is an aggregation of technical means that apply the laws of nature to solve a technical problem; where a solution does not adopt technical means to solve a technical problem and thereby does not achieve a technical effect, it is not qualified to receive patent protection; where a solution is essentially about solving a technical problem through the use of technical means, it should not be excluded from patent protection. Therefore, if a business method has no relation to computer technology, largely deals with commercial activity rather than technical problems, and mainly obtains business results rather than technical effects, it can then be treated as a rule or method of intellectual activities and thereby cannot be the object of patent protection. To judge whether a business method is a technical solution, three criteria for technical solutions can be used, namely, novelty, inventiveness, and practical applicability. If an Internet business method meets these three elements, it is patentable.

At present, patent applications relating to business methods lie mainly in the two areas of financial services and electronic commerce (5.18).).

Case 5.18   Citibank: applications to patent business methods

With regard to financial services, a famous case concerns Citibank, a major international bank headquartered in the United States. Since 1992, Citibank has submitted more than 20 patent applications to China’s Intellectual Property Office, 2 of which have received approval. One was “the electronic money system,” which was approved in 2002.70 It was an integrated processing system which covered e-money issuance, payment, and settlement, the substitution of other payment instruments (such as currency, checks, and bank cards), and accounting management. Another patented business method was “the computer system for data management and related methods of operating the said system,” which was approved in 2003.71 This patent application was a kind of computer system and method by which a bank might trade securities on behalf of its clients.


70.It was reported that this patent automatically became invalid in 2006, since it had long lacked maintenance.

71.It was reported that this patent was announced invalid by the State Intellectual Property Office in May 2009.

In the area of electronic commerce, business method patents may relate to online advertising, buying, auctions, and payments. Since payment is integral to all aspects of e-commerce activities, online payment has become one crucial area of patent applications. Based on an analysis of patenting documents, China’s patent applications for online payment so far have involved the following areas: payment methods for Internet content; Internet service charging methods; payment by voice methods for e-commerce; immediate payment methods; payment methods for communication services; pre-payment methods for online shopping; mobile payment methods based on image analysis; payment methods based on communication terminals; bank card-based payment methods; and authentication methods for safe online payment.72

Patentable business methods are not limited to financial services and e-commerce. With the development of Internet technology, more and more business methods may be able to obtain patent protection. However, some commentators argue that the expansion of business method patents may affect the balance mechanism of the existing patent system, so that reasonable restrictions on such expansion should be made. There are also some commentators who hold that, since China’s local enterprises lag far behind large foreign enterprises in terms of business management, and the patenting of business methods may be more conducive for foreign companies, it is currently inappropriate to draft business methods directly into the patent law.73 In spite of this, it can be safely concluded that, with China’s Internet industry and its market economic system becoming more mature, a more effective business method patent system will be established in the future.


1.WIPO (2011) “What Is Intellectual Property?” retrieved May 12, 2011 from http://www.wipo.int/about-ip/en/.

2.Merriam-Webster Dictionary, “Copyright,” retrieved June 20, 2011 from http://www.merriam-webster.com/dictionary/copyright.

3.John D. Zelezny (2011) Communication Law: Liberties, Restraints, and the Modern Media, 6th edition, Wadsworth: Cengage Learning, p. 320.

4.See the Legal Explanation on the Copyright Law, which can be accessed at http://www.npc.gov.cn/npc/flsyywd/minshang/node_2200.htm.

5.Yongzheng Wei (2006) Lectures on Journalism and Communication Law, 2nd edition, Beijing, China: Renmin University of China Press.

6.Yongzheng Wei (2006) Lectures on Journalism and Communication Law, 2nd edition, Beijing, China: Renmin University of China Press.

7.See the Provisions on the Implementation of the PRC Copyright Law.

8.See the Legal Explanation on the Copyright Law, which can be accessed at http://www.npc.gov.cn/npc/flsyywd/minshang/node_2200.htm.

9.See the Provisions on the Implementation of the Copyright Law.

10.See Article 16 of the Copyright Law of the PRC.

11.See Jun Qian (2009) “On Online Copyright Protection,” retrieved October 12, 2010 from http://www.pkulaw.cn/fulltext_form.aspx?db=art&gid=335 591330.

12.See Article 24 of the Copyright Law of the PRC.

13.Yongzheng Wei (2006) Lectures on Journalism and Communication Law, 2nd edition, Beijing, China: Renmin University of China Press.

14.Yongzheng Wei (2006) Lectures on Journalism and Communication Law, 2nd edition, Beijing, China: Renmin University of China Press, p. 343.

18.See Article 2 of the Regulations on the Protection of the Right to Online Dissemination of Information.

20.See Article 4(1) of the Regulations on the Protection of the Right to Online Dissemination of Information.

21.See Article 4(2) of the Regulations on the Protection of the Right to Online Dissemination of Information.

22.See Article 12 of the Regulations on the Protection of the Right to Online Dissemination of Information.

23.See Article 4(3) of the Regulations on the Protection of the Right to Online Dissemination of Information.

24.See Article 5 of the Regulations on the Protection of the Right to Online Dissemination of Information.

25.See the Legal Explanation on the Regulation on the Protection of the Right to Online Dissemination of Information, which can be accessed at http://china.findlaw.cn/chanquan/zhuzuoquanfa/zzqlw/8453.html.

26.Yongzheng Wei (2006) Lectures on Journalism and Communication Law, 2nd edition, Beijing, China: Renmin University of China Press, p. 348.

27.Among 12 cases of fair use listed in the Copyright Law of the PRC, personal use, free performances, imitation of calligraphy or painting, etc. are not applicable to the Internet and thus are excluded from the Regulations on the Protection of the Right to Online Dissemination of Information.

28.See Articles 6 and 7 of the Regulations on the Protection of the Right to Online Dissemination of Information.

29.Yongzheng Wei (2006) Lectures on Journalism and Communication Law, 2nd edition, Beijing, China: Renmin University of China Press.

30.See Jun Qian (2009) “On Online Copyright Protection,” retrieved October 12, 2010 from http://www.pkulaw.cn/fulltext_form.aspx?db=art&gid=335 591330.

31.See the Legal Explanation on the Regulations on the Protection of the Right to Online Dissemination of Information, which can be accessed at http://china.findlaw.cn/chanquan/zhuzuoquanfa/zzqlw/8453.html.

32.See the Legal Explanation on the Regulations on the Protection of the Right to Online Dissemination of Information, which can be accessed at http://china.findlaw.cn/chanquan/zhuzuoquanfa/zzqlw/8453.html.

33.See the Legal Explanation on the Regulations on the Protection of the Right to Online Dissemination of Information, which can be accessed at http://china.findlaw.cn/chanquan/zhuzuoquanfa/zzqlw/8453.html.

34.See the Legal Explanation on the Regulations on the Protection of the Right to Online Dissemination of Information, which can be accessed at http://china.findlaw.cn/chanquan/zhuzuoquanfa/zzqlw/8453.html.

38.See Article 1 of the Trademark Law of the PRC.

39.See Article 10 of the Trademark Law of the PRC.

40.See Article 31 of the Trademark Law of the PRC.

41.See Shaozhang Li (2008) “Trademark Infringement,” in Huang Ping (ed.) Tort Law, Beijing: China University of Political Science and Law Press.

43.See Article 3(1) of the Administrative Measures on Internet Domain Names in China, which can be accessed at http://www.cnnic.cn/html/Dir/2004/11/25/2592.htm.

44.It should be noted that different countries or regions have different rules in this regard.

45.There are currently two types of top-level domain, namely, the generic top-level domain name and the country/region code top-level domain name. China’s country code top-level domain name is .cn. The system of Chinese domain name registration largely involves the administration of domain names registered under .cn.

46.Monica Kilian (2000) “Cybersquatting and Trademark Infringement,” Murdoch University Electronic Journal of Law 7(3), retrieved July 30, 2011 from http://www.murdoch.edu.au/elaw/issues/v7n3/kilian73.html.

55.Founded in the United States in 1998, the Internet Corporation for Assigned Names and Numbers (ICANN) is a non-profit organization that is responsible for managing the IP address spaces and assignment of address blocks to regional Internet registries, for maintaining registries of IP identifiers, and for the management of the top-level domain name space.

56.See Zhibin Yi (2002) “The Mandatory Administrative Proceeding on Domain Name Disputes and Related Legal Value,” retrieved August 1, 2011 from http://www.pkulaw.cn/fulltext_form.aspx?db=art&gid=335566349.

58.“The person skilled in art” in the Patent Law of the PRC refers to a fictional person who is presumed to be aware of all the common technical knowledge, to have access to all the existing technologies, and to have the capability to apply all the routine experimental measures in the involved technical field.

59.Article 14 and Article 48–58 of the Patent Law of the PRC stipulate a set of circumstances and procedures in which a patent may be exploited without the authorization of the patentee for the purpose of protecting the public interest.

60.See Article 84 of the Rules for the Implementation of the Patent Law of the PRC.

61.It should be pointed out that this act is illegal but may not be regarded as an infringement in China.

62.See Article 85 of the Rules for the Implementation of the Patent Law of the PRC.

63.See Article 69–70 of the Patent Law of the PRC.

64.Computer programs also include those symbolic instructional sequences or numeric language sequences that can be automatically converted into coded instructional sequences.

65.See Guangtao Deng (2006) “On the Intellectual Property Protection for Computer Software,” retrieved September 11, 2011 from http://vip. chinalawinfo.com/newlaw2002/slc/slc.asp?db = art&gid = 335577275; Jin Lei (2006) “On the Patent Protection Model for Computer Software,” retrieved September 10, 2011 from http://article.chinalawinfo.com/Article_ Detail.asp?ArticleID = 35248.

66.See Guangtao Deng (2006) “On the Intellectual Property Protection for Computer Software,” retrieved May 11, 2011 from http://vip.chinalawinfo. com/newlaw2002/slc/slc.asp?db = art&gid = 335577275; Jin Lei (2006) “On the Patent Protection Model for Computer Software,” retrieved May 10, 2011 from http://article.chinalawinfo.com/Article_Detail. asp?ArticleID = 35248.

67.See the Examination Principles on the Patent Application for Inventions Related to Business Methods (Tentative) promulgated in 2004 by the State Intellectual Property Office.

68.See Song Beibei (2007) “On the Issue of the Patentability of Business Methods,” Auditing and Finance, 3.

69.See Beibei Song (2007) “On the Issue of the Patentability of Business Methods,” Auditing and Finance, 3.

72.See Yanliang Wei (2007) “How to Profit from the Patents for Online Payment Methods,” retrieved August 10, 2011 from http://article. chinalawinfo.com/Article_Detail.asp?ArticleID = 36476.

73.See Xiaoqing Feng (2010) “On Business Method Patents,” retrieved May 1, 2011 from http://www.civillaw.com.cn/article/default.asp?id=49307.