Stanford China Law Connect: Preparing for the Post-Coronavirus Era: A Closer Look at China

The world was not prepared for the coronavirus pandemic. But we need to be fully prepared for the challenging post-coronavirus era.

Among many difficult questions, one might wonder: will the coronavirus pandemic drive foreign businesses and professionals away from China? Or, on the contrary, will the need to stay afloat during this trying time make them less risk-averse and more ready to seize any opportunities that arise?

Issue 8 of China Law Connect | ???????? ?8?
Watching in Silence |????

This newsletter covers:

China’s New Foreign Investment Law and Annotations
Transparency, Predictability, and Intellectual Property (Guiding Case Nos. 113, 82, and 8)
Call for Submissions
Help Us Uncover and Share Little Known but Significant Information about China

The world was not prepared for the coronavirus pandemic. But we need to be fully prepared for the challenging post-coronavirus era.

China’s New Foreign Investment Law and Annotations

To help businesses, professionals, policymakers, and others make prudent decisions, Dr. Mei Gechlik (Founder and Director of the China Guiding Cases Project (the “CGCP”)) and Dimitri Phillips (former Co-Managing Director of the CGCP), co-authored a CLC Spotlight™ piece, which is published in Issue 8 of China Law Connect (“CLC”; ISSN 2576-1927 (PRINT); ISSN 2576-1935 (ONLINE)). In this article, they share their meticulous English translation of China’s Foreign Investment Law. They also draw on various sources, including two sets of rules issued by the country’s State Council and the Supreme People’s Court (the “SPC”), to provide key annotations on the new law.

Replacing China’s old foreign investment legal framework that had been in place for four decades, the Foreign Investment Law came into effect on January 1st of this year, with explicit commitments to, among others, “further expand[ing] the opening [of China] to the outside [world]” and “protect[ing] the legal rights and interests of foreign investment”. These commitments are not new. However, the imminent need to recover from the current economic crisis may prompt China to take extraordinary measures to realize these commitments. In the coming months, current and potential foreign investors will watch China closely to see how the country implements the Foreign Investment Law, especially provisions related to the following aspects:

“Negative lists”. Will these lists be significantly shortened so that fewer areas are precluded from foreign investment?
The enterprise credit information publicity systems. Will the requirements for building these systems be eased so as to encourage more foreign investment?
“Transparent and predictable” market environment. Will the Chinese government be more proactive in engaging foreign investors in the process of setting policies and rules and keeping them informed of measures that may affect their rights and interests?
Intellectual property (“IP”). The Foreign Investment Law vows to protect the IP of foreign investors by, for example, prohibiting administrative departments from using administrative means to force foreign investors’ transfer of technology and by holding administrative personnel who disclose foreign investors’ trade secrets liable. What specific measures will be taken to enhance IP protection?

Transparency, Predictability, and Intellectual Property

Transparency, predictability, and IP have been areas of focus for the Chinese judiciary. Ten years ago, the SPC established the Guiding Cases System with clearly identified goals: “to summarize adjudication experiences, unify the application of law, enhance adjudication quality, and safeguard judicial impartiality”. In late December 2019, shortly before the Foreign Investment Law came into effect, 27 new Guiding Cases (“GCs”) (i.e., Guiding Cases No. 113–139) were released, bringing the total number of GCs to 139.

Guiding Case No. 113 and Michael Jordan’s Long Legal Journey in China

Far left: the “??” (“Qiao Dan”) trademark
Far right: the “?? and graphic” trademark

The release of Guiding Case No. 113 (Michael Jeffrey Jordan v. The Trademark Review and Adjudication Board of the State Administration for Industry and Commerce and Qiaodan Sports Co., Ltd., An Administrative Case Concerning a Dispute over the “??” (“Qiao Dan”) Trademark) has formally turned a widely known dispute into a de facto binding precedent. This dispute involved renowned U.S. basketball player Michael Jordan’s challenge of the registration of the “??” (transliteration: “Qiao Dan”, a name that has been widely used in China to refer to Michael Jordan). Guiding Case No. 113 has provided courts handling similar subsequent cases with guidance on a few legal principles, including the following:

The right to name is a personal right that a natural person has over his name, and the right to name can constitute a prior right provided for in the Trademark Law. Where the Chinese translation of a foreign natural person’s foreign name meets [certain] conditions, [the foreign natural person] may legally claim that it be given protection as a specific name in accordance with relevant provisions regarding the right to name.
Where a foreign natural person claims the protection of the right to name with respect to a specific name, the specific name should meet the following three conditions: (1) the specific name is, to a certain degree, well-known in China and is known to the relevant public; (2) the relevant public uses the specific name to refer to the natural person; and (3) a stable correspondence relationship has already been established between the specific name and the natural person.

Apart from the release of Guiding Case No. 113, Michael Jordan’s legal victory in China reached another milestone on March 4, 2020, when the SPC rendered a judgment to challenge the registration of the “?? and graphic” (i.e., Qiao Dan and a graphic showing a basketball player) trademark. Following this judgment, relevant authorities are expected to formally cancel the registration of this trademark.

For more information about Guiding Case No. 113, see the bilingual version published in Issue 8 of CLC.

Guiding Case No. 82 & 24 Subsequent Cases: An End to Malicious Registration of Trademarks?

While GCs are important, their real significance lies in their positive impact on subsequent cases with respect to increasing predictability. In Issue 8 of CLC, two China Cases Insight™ pieces shed light on this topic. In the first piece titled Guiding Case No. 82 and 24 Related Subsequent Judgments/Rulings: How to Coherently Apply the Principle of Good Faith in Trademark Infringement, Ruoyu Ren, Assistant Managing Editor of the CGCP, analyzes 24 subsequent cases that explicitly mentioned Guiding Case No. 82 (WANG Suiyong v. Shenzhen Ellassay Fashion Co., Ltd. and Hangzhou Intime Century Department Store Co., Ltd., A Dispute over Infringement of Trademark Rights). Guiding Case No. 82’s “Main Points of the Adjudication” section lays out this important principle:

Where a party violates the principle of good faith, harms the legal rights and interests of others, disrupts the fair competition order of the market, maliciously obtains and exercises trademark rights, and claims that others have infringed on his rights, a people’s court should, on the grounds that [these acts] constitute an abuse of rights, decide not to support [the party’s] litigation requests.

Ms. Ren explains, through her thorough analysis, how courts handling the subsequent cases have shown their different understandings of the line of reasoning used in Guiding Case No. 82. She observes:

These different insights can promote various interested parties’ in-depth discussions of the scope of application of Guiding Cases so as to lay a solid foundation for the establishment of a better Guiding Cases System.

Guiding Case No. 8 and 66 Subsequent Cases on Corporate Dissolution

In the second China Cases Insight™ piece titled Guiding Case No. 8 and 66 Related Subsequent Judgments/Rulings: How to Determine “Whether Serious Difficulty Occurs in the Operation and Management of a Company”, Zihao Zhou, Associate Managing Editor of the CGCP, and Chi Che, Editor of the CGCP, analyze 66 subsequent cases that cited Guiding Case No. 8 (LIN Fangqing v. Changshu Kailai Industrial Co., Ltd. and DAI Xiaoming, A Corporate Dissolution Dispute). The “Main Points of the Adjudication” of Guiding Case No. 8 are:

Article 183 of the Company Law makes “serious difficulty occurs in the operation and management of a company” one of the conditions under which shareholders may bring a corporate dissolution lawsuit. To determine “whether serious difficulty occurs in the operation and management of a company”, the operational state of the company’s organizational structure should be comprehensively analyzed. For a company that is in a profitable state but has long-term failure in its shareholders’ meeting mechanism and serious impediments in its internal management and has plunged into a state of deadlock, it can still be determined that serious difficulty occurs in the operation and management of the company. If other conditions stated in the Company Law and relevant judicial interpretations are met, a people’s court may decide to dissolve a company in accordance with law.

In 22 of these 66 subsequent cases, the courts reviewed the above main points in the reasoning section. Some courts carefully applied the GC, while others distinguished the GC from the pending case. Although the courts’ analyses are quite brief, they reflect the emergence of a case-based judicial culture in a country that has traditionally relied on legislation only.

The authors also examine two interesting cases adjudicated by the SPC and discuss the controversial topic about whether “social interests” should be considered in corporation dissolution disputes. For detailed discussion of these and related topics and a complete list of all 66 subsequent judgments/rulings which explicitly mention Guiding Case No. 8 (identified through December 31, 2019), see http://cgc.law.stanford.edu/commentaries/clc-8-202003-insights-9-zhou-che.

Recent Talks Before the Lockdown

Transparency, predictability, IP, as well as the rule of law were topics discussed in three meetings that Dr. Gechlik attended before the current lockdown:

In December 2019, Dr. Gechlik met with a delegation from the Jiangxi Development and Reform Commission to discuss e-governance and e-justice (https://cgc.law.stanford.edu/event/dec-2019-meeting-with-jiangxi-delegation).
In February 2020, she gave a presentation to the Chief Intellectual Property Officers Council of the Conference Board, where she particularly emphasized the role of GCs in IP disputes and the implications of these cases for the implementation of the U.S.–China Economic and Trade (Phase One) Agreement (https://cgc.law.stanford.edu/event/feb-2020-discussion-re-ip-with-conference-board).
Also, in February 2020, Dr. Gechlik met with a group of Stanford students to explain how one might understand recent challenges in Hong Kong through the lens of legal and political changes affecting the entire People’s Republic of China.

Issue 8 of CLC ends with a page featuring ceramic master Mr. CHEN Xuncheng’s series titled Watching in Silence. The series consists of four pieces, each of which will be used to decorate the covers of the four issues of CLC published in 2020. We are very grateful to Mr. Chen for his continued support.

Call for Submissions

We hope you enjoy the insights and information shared in Issue 8 of CLC! To bolster our efforts, we plan to publish in the upcoming issues of CLC a series of Experts Connect™ pieces contributed by experts and other professionals who have first-hand information to analyze various topics, including:

the latest developments that shed light on China’s new foreign investment framework;
the dynamics behind the scenes of significant cases (e.g., the above-mentioned cases about Michael Jordan’s legal battle in China) and the impact of Guiding Cases on China law practice inside and outside China; and
best legal practices to overcome challenges encountered in the lockdown world (e.g. the significance of Internet courts, etc.)

Please review the CLC submission guidelines at https://cgc.law.stanford.edu/clc-submission-guidelines. We look forward to receiving your submission.

Help Us Uncover and Share Little Known but Significant Information about China

Despite all the challenges during this difficult time, the CGCP team strives to bring to the world information about China that is not only significant but also little known.

You can help by joining our outstanding team consisting of nearly 200 members residing in different parts of the world. Many of them have gradually matured to contribute informative pieces that have been published in CLC.

You can also help by buying CLC. Readers’ support provides an important source of revenue to sustain the CGCP’s non-profit work.

Since the CGCP launched CLC in June 2018, the number of our website users has increased from 75,000 to more than 140,000. We are extremely grateful for everyone’s support.