Liberalization & Deregulation

Internet Diffusion

Electronic Commerce

Hardware Manufacturing

Software Development 

Who uses IT?

IT Labor Market

IT Geographics

IT Financing

Government Policies

Legal Environment

Transborder Data Flows 

Analysis: IT Strengths & Weakness

Analysis: Impacts on the Business

Sources and Links

China became a member of WIPO in June 1980.  It is a member to the Paris Convention for the protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Madrid Agreement about the Registration of Marks 25. 

1.Trademark - China's trademark legal framework has been relatively well developed. The initial Trademark Law of PRC was effected in March 1983.  In 1993, China revised both its Trademark Law and the rules for its implementation. In addition, China also issued a number of national directives, regulations, Internet rules and guidelines 26. 

One of the most important features of China's trademark system is that China is a first-to-file jurisdiction. This applies even a well known trademark outside China may not be protected if a third party files first in China 26.

The unauthorized use of another party's trade mark, service mark or trade name as a web site address or domain name has proven a challenge for trade mark and trade name owners.  If the holder of a trademark or trade name registers that mark or name as an Internet domain name first in China, the holder may be hard to regain use of the domain name. Another useful name is Anti-Unfair Competition 26. 

2.Patent - the Patent law of China came into effect in Apr. 1985, and amended in September 1992.  It is granted on a "first come, first serve" basis, subject to priorities under international conventions.  The patent law may play an important role on the future. Current courts are struggling with adopting existing IP legislation to the expanded demands. In Mar. 2000, the State Council adopted new amendment, but not yet been made public 26. 

3.Copyright - China copyright law is also well developed.  In 1992, the Chinese Government became a member state of Berne Convention and Universal Copyright Convention.  China has explicitly listed computer software as the objective of protection by copyright laws.  In 1991, the Sate Council has enacted the Regulations on the Protection of Computer Software to protect computer software.  In 1992, the State Council promulgated the Regulations on the Implementation of the International Copyright Treaty to protect foreign authors' copyrights in accordance with the international treaty.    Copyright issues on the Web general deal with the theft of content. Unfortunately, China's copyright law does not address electronically transmitted materials. Thus courts impose the copyright laws onto web transmitted materials 26. 

4.Copyright Piracy
Intellectual property protection is a major source of contention between China and foreign partners/competitors in IT sector.  According to Privacy International, China piracy on video, CD, and software is widespread.  In 1994, the piracy rate is 97%, a total of $364 million in losses to the copyright owners.  Since then, China has taken considerable efforts to update its IP legal system and strengthen its legal enforcement, such as, steamrollers crushing counterfeit CDs collected on police raids. There is also a growing awareness in China of IP legal protections.  Education in IP related laws also expended dramatically.  Before 1994, IP laws were only provided in post-graduate law studies.  Now many universities add IP laws to undergraduate law students 21.    China piracy rate has continually decreased, dropping from 97% of piracy rate in 1994, to 91% in 1999. Despite significant government efforts to shut down manufactures and retailers of pirated software, piracy continues to be serous problem.  Furthermore, as IP enforcement become stricter, many CD pirates appear to have moved to Hong Kong to continue their illegal activities and put Hong Kong back on the radar screen of the U.S. 

Table 1.     China Piracy Rates  and  Lost to Piracy (US$ Millions) 27

Year     China Piracy Rate     Lost to Piracy (US$Millions) 
1994                97%                         364.0 
1995                96%                         443.0 
1996                96%                         703.8 
1997                96%                         1,449.5 
1998                95%                         1,193.4 
1999                91%                         645.5 

•  The Chinese Culture.  The widespread resistance to proper adherence to the copyright laws of China is partly attributed its particular culture: the influence of Confucianism and the notion of sharing creative works and ideas.  In the West, copying is perceived as a form of inferior imitation, but for the Chinese, but it is in fact the opposite 28. 
• The notion of sharing.   Sharing creative works has been the mandate for over forty years in this Communist China. Implementation of intellectual property rights would contravene one of the most fundamental beliefs in a Communist society, and it would be a tough process for many of the Chinese to attune to the moral concepts of protection of intellectual property 28. 
• Public Awareness.  In Ho's  view, the  size of China and its 1.2 billion population are major obstacles in achieving the goal of establishing a proper awareness of the various legislation.  As noted by Tan (1994) , That given the low level of legal knowledge in China, people may be unaware that its activities violate Chinese intellectual property laws.  Ho concluded " The idea that monetary values can be placed on intangible items is new to many Chinese people, and the thought of having to pay for expressions of ideas is certainly very difficult for them to comprehend. " 28
• Education. Wingrove  29 (1995)  noted that  "the entire Chinese education system was based on the principle of the rote learning of the works of established literary masters".  Such educational system obstructs original thinking and foster the tendency to copy new works instead create one. 
• Demand for Counterfeit Computer Software. Another major factor in the continued widespread levels of piracy in China is the wide accessibility of counterfeit computer software.  "The wide-range variety of software available is a further reason why pirated software are so much in demand. Not only are these vendors easily accessible, the range of software which are sold certainly far outstrips many of the outlets which sell legitimate software " Ho, 1995. 28
• Attitude of software manufacturers. Some software manufacturers may realize that they may not gain a significant amount of business as a result of non-piracy. "They may wish not to pursue actions to attempt to combat piracy, and instead deliberately allow such activities to take place, in the hope that their software may become widely used and establishes as industry standard, preferably becoming a necessity in many organizations" Ho, 1995 . The second point concerns the pricing policies of the software manufacturers.  Many of the software sold in China is more expensive that in America. Thus many people in China cannot afford to pay a premium in order to obtain legitimate copies of software (Ho, 1995). 28
• Lack of Localized Software Industry.  In China, the software industry is still less developed.  There were on strong voice from local manufacturers against piracy.  The encouraging trend is that China’s software firms increasingly support anti-piracy efforts. 30

7. Domain Name
“China has followed the lead of many other jurisdictions in attempting to create legislation to address the new legal issues brought by the internet” (KayIn, et al, 2000).  Since 1997, China has set up its regulatory framework for administration of domain name registration.  The rules and their implementing regulations include the People’s Republic of China Administration of Registration of Domain Name for Chinese (domain name procedures), the People’s Republic of China Administration of the registration of Domain Names for the Chinese Internet Implement Rules (Domain name implementing rules), and the Provisional Administrative Rules for Registration of Domain Names on China’s Internet (Provisional administrative rules) 26 . 

There are three levels in domain name registration system. The highest level is with ".cn" for China. Abbreviations of provincial units and category domain name (eg .com, .org,.gov.edu ).are at the second level. The owner's name is at the third level.  China restricts the third level domain name usage.  Original the domain names in China are registered in English Letters. Since September 2000, domain names in China can be registered in Chinese Characters.  Thousand of users rush to register domain names in Chinese to compete for first to file. 

8. Cyber-squatting 
The unauthorized use of another party’s trade mark, trade name or service name as domain name challenge the rights of the owners of trademark, trade name and service mark.  The owners may find they are in disadvantaged position to challenge a domain name that used their trademark or service mark name, when their trade or service mark is not a well-known brand, on the principle of “non-exclusive use.”   If a trademark is well know, the owner may be in favor under the Trademark Law. 26

The registered domain names may be changed or cancelled, but not transferred or traded .  This another rule to addresses the issue of cyber-squatters. 

The holder of a trademark or service mark is highly recommended to first register the Internet domain name in China. Otherwise, it may be costly to regain the use of the domain name  . 
Another available protection measure for register trademark holders against cyber-squatters in China is the Anti-Unfair Competition Law. 

9. ICANN participation. 
China is an member of ICANN, and actively participates in both Asian-Pacific and international activities.