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Microsoft’s software license contracts with its Chinese end users provide that all disputes arising therefrom are subject to U.S. law and should be resolved in U.S. federal courts. Based on this clause, Mr. Dong, a lawyer in Beijing, requested the State Administration for Industry and Commerce (“SAIC”) to start antitrust investigation on Microsoft China.
According to Microsoft China’s in-house counsel, the software license contract used in China is based on the global form of Microsoft, which applies to all countries where Microsoft has business, and does not seem to violate PRC law.
International private law experts in China commented that China did allow application of foreign law in contracts involving foreign factors; however, it is arguable whether Microsoft’s software license contracts with Chinese end users have foreign factors. The key issue is who is the other party to such contracts. In fact, Microsoft is selling its software in China through its Chinese subsidiary (i.e., Microsoft China), which is obviously a company incorporated in China. With Chinese parties on both sides (Microsoft China and Chinese end users), plus the fact that the software sales and license transactions occurred within the territory of China, no foreign factors are seen in such contracts, according to the interviewed Chinese law expert. Application of U.S. law in such contracts is thereby baseless under PRC law.
In addition, from the consumer protection perspective, PRC law provides that product providers, when using form contracts, should not increase obligations on consumers. Given the choice of U.S. law as applicable law and U.S. federal courts as forum for dispute resolution will foreseeably increase the litigation cost and burden on consumers, this clause is also deemed as impairing consumers’ rights in China.
It is reported that the SAIC will pay more attention to such practice of Microsoft and engage investigation when necessary.
Thursday, December 4, 2008
China Granted Conditioned Approval to Inbev’s Takeover of Anheuser Busch
Since the PRC Anti-monopoly Law came into effect on August 1, 2008, the Anti-Monopoly Bureau (“AMB”) under the Ministry of Commerce (“MOFCOM”) has received over 10 applications for antitrust review of concentration of business operators. According to MOFCOM, 13 of such applications have been formally accepted, eight of which have been granted decisions. One of the most widely reported examples is the Belgian brewer Inbev’s $52 billion takeover of Anheuser Busch Inc. (“AB”).
This takeover is reported to be subject to antitrust reviews in three jurisdictions, i.e., Belgium, U.S. and China where both parties have their respective strong market positions.
The AMB of China approved the proposed takeover, but imposed the following four conditions on the new company’s post-takeover investment in China:
- it shall not increase AB’s current 27% shareholding in Tsingtao Brewery;
- it shall not increase Inbev’s current 28.56% shareholding in Zhujiang Brewery;
- it shall not seek to hold any stake in China Resources Snow Brewery or Beijing Yanjing Brewery; and
- it shall notify MOFCOM if there are any changes to its controlling shareholders or the shareholders of such controlling shareholders.
Inbev must report to MOFCOM and obtain its approval before implementing any change to the above conditions.
This takeover is reported to be subject to antitrust reviews in three jurisdictions, i.e., Belgium, U.S. and China where both parties have their respective strong market positions.
The AMB of China approved the proposed takeover, but imposed the following four conditions on the new company’s post-takeover investment in China:
- it shall not increase AB’s current 27% shareholding in Tsingtao Brewery;
- it shall not increase Inbev’s current 28.56% shareholding in Zhujiang Brewery;
- it shall not seek to hold any stake in China Resources Snow Brewery or Beijing Yanjing Brewery; and
- it shall notify MOFCOM if there are any changes to its controlling shareholders or the shareholders of such controlling shareholders.
Inbev must report to MOFCOM and obtain its approval before implementing any change to the above conditions.
Wednesday, December 3, 2008
China’s Energy Sector: Pipelines and Nuclear Power to Increase Domestic Demand
To increase the domestic demand in China, the energy sector plays an indispensible part. It is reported that certain energy infrastructure projects have been internally determined by the government, and will be formally initiated soon.
The Standing Committee of the State Council recently approved three energy related construction projects, which are two nuclear power projects (one as new construction, and the other as expansion) and one natural gas pipeline project (between Northern-Western part of China to Guangzhou and Hong Kong). The three projects amounted to a government investment of RMB188.5 billion in total.
Chinese energy experts anticipated, based on the above approvals, that pipelines and nuclear power projects would constitute the primary focus of China’s energy sector in the near future.
It is also reported that the Chinese government plans to invest RMB4 billion as fiscal support for rural and urban grid construction and/or transformation.
The Standing Committee of the State Council recently approved three energy related construction projects, which are two nuclear power projects (one as new construction, and the other as expansion) and one natural gas pipeline project (between Northern-Western part of China to Guangzhou and Hong Kong). The three projects amounted to a government investment of RMB188.5 billion in total.
Chinese energy experts anticipated, based on the above approvals, that pipelines and nuclear power projects would constitute the primary focus of China’s energy sector in the near future.
It is also reported that the Chinese government plans to invest RMB4 billion as fiscal support for rural and urban grid construction and/or transformation.
Beijing: Judicial Interpretations to Clarify Commercial Bribery
Recently, the Supreme People’s Court and Supreme People’s Procuratorate jointly promulgated the Opinions on Certain Issues Concerning Application of Laws in Handling Criminal Cases of Commercial Bribery (the “Opinions”).
The Opinions clarified certain aspects of application of law in criminal cases of commercial bribery, i.e., (i) scope of commercial bribery; (ii) scope of subject of this crime; (iii) criminal liability for commercial bribery in specific sectors, such as pharmaceutical procurement and sales, construction, government procurement; (iv) delineation of illegitimate interest in commercial bribery; (v) legal basis for determining accomplice in commercial bribery.
Particularly, the Opinions addressed the issue of how to distinguish gifts between friends (which are common in a “relationship” society of China) and commercial bribery. Four factors should be taken into account: (i) historical relationship between the parties; (ii) amount of gifts; (iii) cause, timing and means of offering the gifts, especially whether to request the recipient to do something by taking advantage of his/her position; and (iv) whether the recipient takes advantage of his/her position to do that favor.
Given the complexity of commercial bribery in business practice, the Opinions also expanded the crime into offering not only property but also other proprietary interests or benefits.
The Opinions clarified certain aspects of application of law in criminal cases of commercial bribery, i.e., (i) scope of commercial bribery; (ii) scope of subject of this crime; (iii) criminal liability for commercial bribery in specific sectors, such as pharmaceutical procurement and sales, construction, government procurement; (iv) delineation of illegitimate interest in commercial bribery; (v) legal basis for determining accomplice in commercial bribery.
Particularly, the Opinions addressed the issue of how to distinguish gifts between friends (which are common in a “relationship” society of China) and commercial bribery. Four factors should be taken into account: (i) historical relationship between the parties; (ii) amount of gifts; (iii) cause, timing and means of offering the gifts, especially whether to request the recipient to do something by taking advantage of his/her position; and (iv) whether the recipient takes advantage of his/her position to do that favor.
Given the complexity of commercial bribery in business practice, the Opinions also expanded the crime into offering not only property but also other proprietary interests or benefits.
Tuesday, November 18, 2008
China’s Outbound Investment: Time to Prosper?
China’s direct outbound investment in 2007 amounted to USD26.51 billion, representing a 25.3% increase than that of 2006. By the end of 2007, over 7000 Chinese companies have established their overseas presence covering 173 countries or regions across the globe.
The statistics jointly published by the Ministry of Commerce, National Statistics Administration, and State Administration for Foreign Exchange indicated that more privately-owned enterprises in China are investing overseas, and major invested countries and regions include Hong Kong, the United States, Russia, Vietnam, Japan, the United Arab Emirates, German, Australia and Singapore.
In spite of the perceived boom, it is reported that among the acquisitions Chinese companies have had in German during the past five years, only about 20% of the acquired companies were operated relatively well and stably.
As commented by an official from the Development and Research Center of the State Council, the major issues of Chinese companies’ outbound investment are (i) lack of strategic long-term vision, (ii) insufficiency of feasibility studies, (iii) incapability in cross-border integration, (iv) more as high-risk investment by the government, and (v) insufficient participation by mega privately-owned enterprises.
As some of those international business consultants have pointed out, the primary issue for Chinese companies’ outbound investment is their lack of capabilities in cross-cultural integration, which is a vital after-acquisition process to allow Chinese companies to achieve real success of overseas acquisitions.
The statistics jointly published by the Ministry of Commerce, National Statistics Administration, and State Administration for Foreign Exchange indicated that more privately-owned enterprises in China are investing overseas, and major invested countries and regions include Hong Kong, the United States, Russia, Vietnam, Japan, the United Arab Emirates, German, Australia and Singapore.
In spite of the perceived boom, it is reported that among the acquisitions Chinese companies have had in German during the past five years, only about 20% of the acquired companies were operated relatively well and stably.
As commented by an official from the Development and Research Center of the State Council, the major issues of Chinese companies’ outbound investment are (i) lack of strategic long-term vision, (ii) insufficiency of feasibility studies, (iii) incapability in cross-border integration, (iv) more as high-risk investment by the government, and (v) insufficient participation by mega privately-owned enterprises.
As some of those international business consultants have pointed out, the primary issue for Chinese companies’ outbound investment is their lack of capabilities in cross-cultural integration, which is a vital after-acquisition process to allow Chinese companies to achieve real success of overseas acquisitions.
Beijing: Draft Judicial Interpretations on Well-Known Trademarks in China
Owners of Chinese well-known trademarks are entitled to broader protection than ordinary trademarks registered in China. Above said, whether a trademark constitutes a well-known one in China becomes a significant issue to its owner.
The Supreme People’s Court of China promulgated draft Interpretations Concerning Certain Issues on Application of Laws in Recognizing and Protecting Well-Known Trademarks in Trails of Civil Disputes Related to Trademark Infringement (“Draft Interpretations”) on November 11, 2008.
The Draft Interpretations aim at addressing those common issues that have been revealed in judicial practice of recognizing Chinese well-known trademarks, and further strengthening protection over such trademarks in China.
Under the Draft Interpretations, only if the issue whether a disputed trademark constitutes Chinese well-known trademark is legally or factually significant in determining trademark infringement or unfair competition, such issue will be analyzed and determined by relevant people’s court.
It is noted that in order to be recognized as Chinese well-known trademark, the relevant trademark must be widely known within the territory of China. In other words, mere evidence of being well-known outside China (such as an international brand) is not sufficient to establish existence of a Chinese well-known trademark, even though overseas reputation or recognition may be taken into account in certain circumstances.
With respect to jurisdiction over cases involving judicial recognition of Chinese well-known trademarks, the views are split, and the Draft Interpretations provide for two possible options. One holds that intermediate people’s courts or above shall have such jurisdiction, while the other deem it necessary to further narrow it down to intermediate people’s court or above in major cities or others at the same level as approved by the Supreme People’s Court.
The Supreme People’s Court of China promulgated draft Interpretations Concerning Certain Issues on Application of Laws in Recognizing and Protecting Well-Known Trademarks in Trails of Civil Disputes Related to Trademark Infringement (“Draft Interpretations”) on November 11, 2008.
The Draft Interpretations aim at addressing those common issues that have been revealed in judicial practice of recognizing Chinese well-known trademarks, and further strengthening protection over such trademarks in China.
Under the Draft Interpretations, only if the issue whether a disputed trademark constitutes Chinese well-known trademark is legally or factually significant in determining trademark infringement or unfair competition, such issue will be analyzed and determined by relevant people’s court.
It is noted that in order to be recognized as Chinese well-known trademark, the relevant trademark must be widely known within the territory of China. In other words, mere evidence of being well-known outside China (such as an international brand) is not sufficient to establish existence of a Chinese well-known trademark, even though overseas reputation or recognition may be taken into account in certain circumstances.
With respect to jurisdiction over cases involving judicial recognition of Chinese well-known trademarks, the views are split, and the Draft Interpretations provide for two possible options. One holds that intermediate people’s courts or above shall have such jurisdiction, while the other deem it necessary to further narrow it down to intermediate people’s court or above in major cities or others at the same level as approved by the Supreme People’s Court.
Thursday, November 13, 2008
Beijing: Supreme People’s Court to Try A Copyright Case Live
On November 14, 2008, the Supreme People’s of China will try a copyright infringement case, which is to be live broadcasted online via China Court Net (www.chinacourt.org).
The trial was brought up by a famous singer in China, Sun Nan. In 2006, agent of Sun Nan purchased a CD of songs performed by Sun Nan. Based on this, Sun Nan filed a lawsuit against the CD publishers on the cause of unauthorized copying and publishing of such songs, which infringed his right to perform. He claimed the damage of RMB300,000 and requested the court to order the defendants to cease sales of, and destroy such infringing products.
The trial court supported all of Sun Nan’s claims, which was appealed by the defendants. The appellant court reversed the trial court’s judgment, and held in favor of the defendants.
Unsatisfied with the judgment of appellant court, Sun Nan applied for re-trial of this case by the Supreme People’s Court of China. It will be the first time for the Supreme People’s Court to try a case with live broadcasting online.
The trial was brought up by a famous singer in China, Sun Nan. In 2006, agent of Sun Nan purchased a CD of songs performed by Sun Nan. Based on this, Sun Nan filed a lawsuit against the CD publishers on the cause of unauthorized copying and publishing of such songs, which infringed his right to perform. He claimed the damage of RMB300,000 and requested the court to order the defendants to cease sales of, and destroy such infringing products.
The trial court supported all of Sun Nan’s claims, which was appealed by the defendants. The appellant court reversed the trial court’s judgment, and held in favor of the defendants.
Unsatisfied with the judgment of appellant court, Sun Nan applied for re-trial of this case by the Supreme People’s Court of China. It will be the first time for the Supreme People’s Court to try a case with live broadcasting online.
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