Lehman, Lee & Xu - China IP Insights

Legal & Regulatory Update
Interim Measures for Paying Remuneration for Broadcasting
Last month, the State Council of China published "Provisional Radio and Television Measures for Paying Remuneration for Broadcasting Sound Recordings by Radio Stations and Television Stations." These Measures will become effective January 1, 2010, and will allow broadcasters to pay royalties according to:
  • a fixed annual fee agreed upon by the user and copyright collective management organization;
  • a certain proportion received from advertising income; or
  • a payment priced on actual recording time.
The Measures, passed back in May, also establish a remuneration schedule and more-detailed standards for negotiating and calculating remuneration payment. As a leading intellectual property law firm, Lehman, Lee & Xu believes that these new Measures will significantly help its copyright clients, both foreign and domestic, to effectively exercise their broadcasting rights in China.
Pan-Pearl River Delta Provinces Unify Patent Administrative Law Standards
The nine provinces and regions of the Pan-Pearl River Delta have signed a cooperation agreement to strengthen patent administrative law enforcement in southern China. This agreement, executed in Guangdong on December 2, 2009, represents a significant shift away from the region's historically partitioned intellectual property protection system. In addition to unifying law enforcement standards, the agreement creates new methods for transferring cases between provinces and cities. The parties to the agreement include the intellectual property offices of Fujian, Jiangxi, Hunan, Guangdong, Guangxi, Hainan, Sichuan, Guizhou and Yunnan.
With offices in Guangzhou and other major cities in southern China, Lehman, Lee & Xu welcomes increased cooperation between the local intellectual property offices, and expects this move to facilitate the firm's enforcement activities in the region.

In the Courts
Microsoft found guilty of copyright infringement
The Beijing People's No. 1 Intermediate Court has ruled against Microsoft Corp. in a copyright infringement suit, and ordered the software company to stop selling eight versions of its Windows operating system in China. The suit was brought by Zhongyi Electronic Ltd., a Beijing company that previously licensed two proprietary Chinese character fonts to Microsoft for use in the Windows 95 operating system.
Zhongyi claims that its license agreements with Microsoft were limited to the Windows 95 operating system, and that the fonts' use in subsequent versions of Windows without Zhongyi's permission constitutes copyright infringement. Although Microsoft insists that the license agreements cover use of the fonts in other Windows operating systems as well, the court agreed with Zhongyi's interpretation. Microsoft stated that it will appeal the decision.
Microsoft has historically fought in China to protect its own intellectual property rights, but has rarely found itself on the defensive as in the present case.
Nivea wins trademark infringement lawsuit
Nivea, a global skin- and body-care brand owned by Beiersdorf Company of Germany, has prevailed in its trademark dispute with Yingzi Cosmetics Co., Ltd. The Beijing People's No. 2 Intermediate Court ruled that although Yingzi's "OUMEINA" trademark is not identical to Beiersdorf's "NIVEA" trademark, the pattern, word arrangement and wrapping were similar enough to cause customer confusion and constitute trademark infringement.
Yingzi argued against customer confusion, asserting that Nivea is not a well-enough known brand in China, that the marks "NIVEA" and "OUMEINA" are not similar, and that the respective customer classes are different (e.g., the respective brands have different price ranges and are carried in different stores). Yingzi also argued that the Nivea wrapping is typical cosmetics wrapping, and therefore did not distinguish Beierdorf's products.
Nevertheless, the court ruled against Yingzi, because the respective brands are used in the same industry and in association with same product type. Moreover, although the marks are different and the wrapping is arguably generic, the decorations (colors and shapes) on Nivea's wrapping are sufficiently unique to cause customer confusion where Yingzi's wrapping decorations were similar. The court ordered Yingzi to pay damages of RMB120,000 to Beiersdorf.
Student guilty of copyright infringement for illegal game servers
The Shanghai Changning District People's Court has sentenced a university student to three years imprisonment and a fine of RMB1 million for copyright infringement related to his involvement in illegally hosting online computer game servers.
In 2008, the defendant and two other young people downloaded a copy of the computer game "Audition Online" from outside of China, and installed the software onto a Chinese internet server. When arrested about six months later, the defendant and his colleagues were hosting ten servers with the game, and had received money from players totaling almost RMB2 million.
The court found that the defendant's reproduction and distribution of software without the copyright holder's permission constituted copyright infringement. Furthermore, the court found that the defendant should be criminally liable given that the copyright infringement occurred as part of a for-profit business.
Audition Online is a Korean-made multiplayer online game with over 50 million registered users in China. The game ranks first in all Baidu searches (ahead of World of Warcraft).

In the News
Shanghai Patent Auction sets new records
At last month's Shanghai Patent Auction, five patent portfolios were successfully sold for a total value of RMB65.36 million (US$9.61 million) -- a new record, and almost twice the amount brought in at last year's Auction.
Seven patent portfolios were on the auction block, of which three related to biomedical technologies and four related to environmental-protection and energy-saving technologies. A series of pharmaceutical patents on recombinant human keratinocyte growth factor-2 (an intensely researched and developed technology for repairing burned skin and combating wrinkles) was sold for RMB29 million (US$4.27 million). In contrast, at last year's Shanghai Patent Auction a patent on lymphilized recombinant human keratinocyte growth factor-2 fetched RMB18 million (US$2.65 million) from a domestic pharmaceutical company.
The Shanghai Patent Auction is part of the larger 2009 China Patent Week, and is viewed as not only an effective means of bringing patented technologies to market quickly, but also of popularizing patent knowledge and increasing public awareness of intellectual property rights.
China sees surge in patent application filings in key technology areas
This year, the State Intellectual Property Office of the P.R.C. (SIPO) was once again the recipient of record numbers of patent applications in the fields of chemistry and information technology -- key sectors in the ongoing development of the Chinese economy.
China has now become the world's leading producer of patent invention applications in chemistry, according to a November 2009 report by Chemical Abstracts Service (CAS). Moreover, CAS expects China's reign to continue. SIPO surpassed the United States Patent and Trademark Office (USPTO) in 2005, the Word Intellectual Property Organization (WIPO) in 2006, and now the Japan Patent Office (JPO), after previously trailing these Offices for more than a decade. "Chinese invention applications increased by nearly 1,400 percent [in the last decade], with much of that growth taking place in the pharmaceutical sector. More than half of the China patent applications during this period were from inventors within China, which surely indicates that Chinese scientists now also recognize the importance of monetizing research discoveries."
Similarly, China's information technology (IT) patent accumulation has continued to expand at record pace, according to a 2009 Analysis Report published by the technology department of China's Ministry of Industry and Information. As of October 2009, SIPO had accumulated more than 980,000 IT-related patent applications, representing an increase of more than 180,000 applications compared to last year. Particularly rapid growth was observed in the areas of computers and automation, measuring and testing, and radar navigation. Domestic enterprises continue to dominate patent filing in the IT sector, with Huawei Technologies and Zhong Xing Telecommunication Equipment (ZTE) holding the largest portfolios.
As one of China's top patent prosecution firms, Lehman, Lee & Xu expects the filing trends observed in the chemistry and IT sectors to not only continue, but to permeate to other Chinese growth industries as well.

International application on ".zhongguo" domain name submitted
Bayer Cropscience wins patent case in Jiangsu
Fujian shoemaker defeats FORTEI (Italy) after 5-year trademark dispute
Pirated DVD mogul facing possible fine and imprisonment

Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial, intellectual property, and labor and employment matters. For further information on any issue discussed in this edition of China IP Insights, or for all other enquiries, please e-mail us at mail@lehmanlaw.com or visit our website at www.lehmanlaw.com.

© Lehman, Lee & Xu 2009.
This document has been created for educational purposes for clients, potential clients and referrers of services to Lehman, Lee & Xu, and to alert readers to the services provided by Lehman, Lee & Xu. It is not intended to serve as definitive professional or legal advice, and should not be relied upon as such. Lehman, Lee & Xu does not endorse any personal opinions which may be contained herein.
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