Chinese Securities and Competition Law

It's been an interesting week for us with respect to Chinese law. Earlier in the week we learned that China's Securities and Regulatory Commission (CSRC), although technically part of the government, also exists as a semi-corporate entity. One consequence of this status occurs in the realm of de-listing decisions: if the CSRC decides to de-list a company's stock, that company can appeal the decision to an appellate panel within the CSRC. But if that appellate panel affirms the original decision, there is no right of appeal to a court. In other words, by virtue of its status, the CSRC is not subject to China's Administrative Litigation Law with respect to de-listing decisions, so companies on the receiving end of a de-listing notice are somewhat screwed.

Also on the subject of securities' law is a new article from the Economist that discusses fraud, insider trading, and market manipulation in the the Shanghai and Shenzhen stock exchanges. The article condenses a new paper coming out in the May issue of the Columbia Law Review which posits that, even though the Chinese laws on the subject (see Articles 179-182 of China's Criminal Code) have a bit of bite, the Chinese authorities woefully under-enforce what few laws exist. So, instead of relying upon the Procuracy to prosecute offenders, the exchanges have taken to publicly shaming offending companies and people, with significant effects on market valuation.


Finally, we just returned from an interesting visit to China's State Intellectual Property Office (SIPO). We learned that the Chinese hope to use patent protection to protect new innovations in traditional Chinese medicine, not simply the old remedies which have been around for thousands of years. We also learned that China does not conduct what they call a "substantive review" of design patents, meaning that when someone submits an application for a design patent, they don't actually look to see if that particular idea has been patented yet, but only to see if the application suffers from a procedural defect. (In other words, if you have an existing design patent, you have to regularly search SIPO's records to see if someone has infringed your patent, and then you have the privilege of going to court to defend your patent) Finally, we learned that when it comes to writing patent legislation, China focuses very closely upon decisions from the United States courts.

Indeed, when China amends its new patent law in the next few years, there will be some pretty interesting developments with respect to laches, a public interest exception for permanent injunctions, and what they call a "prior art" defense to an infringement action. But when it comes to the intersection of patent law and anti-trust law, the guy we spoke with knew very little, and simply referred us to another department. He did seem to suggest, however, that some of the uncertainty surrounding the intersection of anti-trust law and intellectual property rights will be fleshed out in the forthcoming patent law revisions. Beyond that, however, he had no comment.

I did discover, however, that an interesting little group called the EU-China Trade Project just put out a report concerning the intersection of intellectual property law and antitrust. Evidently this report followed on the heels of a request from Chinese authorities about EU competition policy with respect to intellectual property rights, a request which may cause some concern for some American companies out there.