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15 March 2010
Last-resort protection of intellectual property
Priority of civil damages
Moral damages for infringement of personal rights
Joint and several liability for abetting infringement
Joint and several liability for internet service providers
Chapter 6(3) of the General Principles of the Civil Law 1986 provides for civil liability for tort, with the provisions on bearing civil liability being set out in Chapter 6(4). After years of deliberation, the Tort Liability Law was promulgated on December 26 2009. When it comes into effect on July 1 2010, it is expected to have a far-reaching effect on the protection of intellectual property in China.
Article 2 of the law expressly puts IP rights, such as copyright, patent rights and trademark rights, within the category of protected civil rights. Article 5 provides that "where other laws specifically provide for tort liability, those laws apply". Thus, where laws such as the Copyright Law, Patent Law and Trademark Law contain specific provisions on IP infringement, such provisions prevail. However, if there are no applicable provisions, the Tort Liability Law becomes operational, effectively providing last-recourse protection for intellectual property, as well as guiding principles for IP-specific laws.
When an act of IP infringement occurs, the rights owner may demand that the culprit assume civil liability in addition to administrative or criminal liability - this is a common principle enshrined in the relevant IP laws. However, there was previously no statutory guidance on the situation where an infringer is liable for administrative or criminal fines as well as civil damages, but has insufficient means to pay such fines and damages. Law enforcement entities have often suppressed IP rights owners' claims for civil damages in order to secure administrative fines, thus preventing such rights owners from exercising their civil rights. Article 4 of the law states that:
"An infringer's assumption of any administrative or criminal liability will not affect his assumption of tort liability by law for the same act [and]... where the infringer is answerable in terms of tort, administrative and criminal liability for the same act, but has insufficient means to discharge his obligations, his tort liability takes precedence."
This newly articulated principle of 'civil damages first' means greater protection for IP rights owners.
On May 22 2006 the Higher People's Court of Beijing ruled at second instance on Zhuang Yu v Guo Jingming and ordered the defendants to pay Rmb10,000 in moral damages. The decision provoked severe criticism, as there were no provisions concerning moral damages in the Copyright Law at that time. The court made the decision pursuant to its Guidance on the Determination of Compensation Liability for Infringement of Copyright. Article 22 of the Tort Liability Law provides that "where infringement of personal rights results in serious moral damage to the victim, the victim may claim compensation for such damage". This provision has elevated a local court's practice into legislation, giving the courts a statutory basis for such a finding in similar cases. Where a copyright holder's rights of publication, authorship, alternation and integrity (or other personal rights) are violated, Article 22 provides a legal basis for the rights holder to claim for moral damages.
In 2005 to 2006 five foreign companies, including Louis Vuitton and Chanel, sued Beijing Xiushui Street Clothing Market Co Ltd for infringement of their rights in their registered trademarks. The defendant was accused as an accomplice of its tenants, rather than as a direct perpetrator of an infringement, and some commentators considered that it had been harshly treated. Article 50 of the Regulations for the Implementation of the Trademark Law states that "intentionally providing facilities such as storage, transport, mailing and concealment... for the purpose of infringing another person's exclusive right to use a registered trademark" constitutes an infringement of the exclusive right to use a registered trademark; however, the idea of assistance in infringement amounting to infringement had not taken root at that time. Article 9 of the Tort Liability Law provides that "whoever aids and abets others [in] effecting infringing acts shall be liable jointly and severally with the infringer". This unequivocal provision applies to all tort cases, including IP cases, and leaves IP infringement facilitators with no place to hide.
In the United States, the Digital Millennium Copyright Act contains a safe harbour clause which states that in respect of copyright infringement, an internet service provider (ISP) merely provides hosting services and does not generate content. When notified of an infringing activity being conducted through its online services, the ISP must remove the infringing material - failure to do so constitutes infringement. This safe harbour clause has two key elements: notification and removal. Its application has now been extended to search engines, web storage and online libraries. China's judicial interpretation regarding copyright is derived from the Supreme People's Court Interpretations of Application of the Law in the Trial of Disputes over Internet Content Copyright and from an administrative rule - the Ordinance on the Protection of the Right to Network Dissemination of Information. To some extent, China's approach draws on the Digital Millennium Copyright Act. The Tort Liability Law couches the gist of the interpretations and the ordinance in Article 36, which states that:
"Internet users and service providers that infringe others' rights by way of the Internet must bear tort liability.
Where an internet user takes advantage of online services to carry out infringing activities, the victim has the right to require the service provider to remove, block or disable access to infringing material upon notification. If the service provider fails to take necessary measures immediately after receipt of such notification, it shall be liable jointly and severally with the user for any extended damage.
If the service provider is aware of the user's infringing behaviour through its online services, but fails to take any necessary countermeasures, it shall be liable jointly and severally with the user."
This clause governs not only the violation of copyright, but also the infringement of all other online material, including other forms of intellectual property.
Article 36 of the law comprises three paragraphs. The first paragraph is concerned with general infringing acts - that is, circumstances in which the internet user and the ISP are directly responsible for infringement. The second and third paragraphs deal with circumstances in which the ISP bears liability for infringing acts by a user of its online services. The third paragraph clarifies a key requirement: there must be evidence that the ISP knew of the user's infringements independently of the victim's notification, and that its failure to take corrective measures resulted in greater harm. In the situation posited in the second paragraph, the victim informs the ISP of the infringing activities that it has identified, but the ISP takes no action to remove the infringing material. In both cases the ISP is jointly and severally liable with the infringing internet user by virtue of its knowledge of the infringing activity, regardless of the rights owner's notification. The notification mentioned in the second paragraph serves as proof of the ISP's knowledge.
For further information on this topic please contact Zhize Xia at Wan Hui Da Law Firm & Intellectual Property Agency by telephone (+86 10 6892 1000), fax (+86 10 6894 8030) or email (email@example.com).
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