Update on Revisions to the Antiunfair Competition Law

According to the Beijing Intellectual Property Institute  (“BIPI”) (June 2015 newsletter) and other press sources  the State Administration of Industry and Commerce (SAIC) had completed its draft revisions of the Antiunfair Competition Law  (“AUCL”) at the end of May 2015, and is preparing to submit the draft to the State Council Legislative Affairs Office.

According to  press reports, the research on the revision was done by a mixed team of academics and a provincial AIC, which spent a year working on eight separate research topics.  Universities involved in discussing the draft included Peking University, Wuhan University and Renmin University.

This would be the first major revision to the AUCL since it was enacted 22 years ago.  BIPI suggests that the two biggest changes are: (a) an increase in the types of conduct that constitute unfair competition, and an (b) increase administrative enforcement penalties.

The types of conduct covered have increased, notably to include anticompetitive online conduct, on the basis that these types of conduct are different from those found in traditional physical markets.   Rather than elaborate on specific types of conduct one by one the new draft has included a prohibition against “conduct that is against commercial ethics ” to capture additional conduct that is not otherwise specified.

Depending on the type of infringing conduct, administrative enforcement penalties would be increased to between 1,000,000 and 4,000,000 RMB.

Finally, BIPI points out that the draft clarifies that the enforcement authority under the AUCL  is the authority for supervising and investigating conduct arising under  the AUCL and the draft AUCL also gives the SAIC additional power.   This clarification, other press sources note,  is intended to address conflicts arising under the existing law, where other agencies, such as AQSIQ, Ministry of Culture and Pricing Bureaus, had authority if separately specified under applicable law or regulations (Article 3 of the AUCL).  The draft is intended to address a problem of the type that arose under the existing AUCL, such as  a case involving Xinglong County in Hebei (河北省兴隆县工商局) where there was a conflict with the local AIC over the local telecommunications authority in its insisting that customers used services and equipment designated by it, which caused the local AIC to drop an investigation under the AUCL.

I have not personally had a chance to review this draft, although I did review a draft of several years ago.  Based on the press reports, I have two areas of concern:

The press reports do not elaborate on changes in the law regarding trade secrets or trade dress, which are two of the IP rights that are covered by the AUCL that have long been subjects of discussion.  Improved trade secret protection is also the subject of specific bilateral commitments.  An early draft of the revisions of the AUCL also included provisions regarding regulatory data protection (which is a type of trade secret protection under TRIPS) for pharmaceutical products and agricultural chemicals, which are not mentioned in the recent reports.  Increased interests in design protection by China, whether through design patents, applied art in copyright or through trade dress, would seem to be consistent with Chinese interests.  Trade secret protection may also be incorporated into a revised civil code, which hopefully will address some of the weaknesses of the current law and its enforcement.

The revisions appear to adopt many proposals of other laws undergoing revision, including increasing administrative deterrence, expanding the roles of the administrative enforcement agency, increased attention to on-line enforcement and even a focus on commercial ethics which may not equally benefit IP cases.  Particularly important for trade secret litigation, for example, will be providing more robust discovery, clear standards for evidence preservation and preliminary injunctions, and harmonization of the law with rules regarding labor mobility and non-compete agreements.  I believe that more robust civil and criminal trade secret remedies are likely to bring more benefit than administrative trade secret remedies.    Concepts of commercial ethics also parallel developments regarding practices to address bad faith prosecution practices in China’s trademark and patent offices.  While the concept of commercial ethics is noble, we will need to wait to see how, if adopted, it will be specifically applied in trade dress and trade secret matters, as well as on-line issues, and if gaps in existing coverage or enforcement, which might include areas varied as inevitable disclosure, regulatory data protection or more robust trade dress protection, are addressed.

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