China's SAIC Issues Second Draft of Proposed Amendments to its Law Against Unfair Competition


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On 5 September 2017, the National People’s Congress (NPC) issued a Second Draft for Review of the Anti-Unfair Competition Law (Second Draft for Review), which is open for public comment until 25 September 2017.

The draft contains further modifications and improvements on commercial bribery, infringement of trade secrets and unfair competition in the internet field.

Its major modifications are as follows:

1. Further clarification of the scope of commercial bribery (Article 7 of the Second Draft for Review)

Item 1, Article 7 of the First Draft for Review of the Anti-Unfair Competition
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Law (First Draft for Review) provides that the business operators shall not use their property or other means to bribe trading counterparty or any third party who may have an impact on the transaction; furthermore, the provision give the definition for “any third party who may have an impact on the transaction” – any units and individuals which may use its/his or her authority to make impact on the transaction.

There has been criticism, that the scope of “the units and individuals that may use its/his or her authority to make impact on the transaction”, is not clear enough for people to understand. So the related Law Committee decided to combine Item 1 with Item 4. Therefore, Article 7 of the Second Draft for Review clarifies the four types of parties, that cannot be provided any property or other means, in order to seek trading opportunities or competitive advantages:

a) The stuff of trading counterparty;
b) Units and individuals handling related matters entrusted by the trading counterparty;
c) State organs, state-owned companies and enterprises, public institutions, people’s organizations, or national staff;
d) Units and individuals, which may use its/his or her authority on national staff to make an impact on the transaction.

2. Further clarification of the provisions of the violation of trade secrets (Article 9 and 10 of the Second Draft for Review)

Article 9 and 10 of the First Draft for Review concerns the protection of trade secrets. Article 10 prohibits employees and former employees to violate any trade secrets, and requires state officials, lawyers, qualified accountants and other professionals to keep them as well.

However, there is the opinion, that the main body of the Anti-Unfair Competition Law is a business operator, the employees and the former employees of the trade secrets owners are not business operators. Besides this, trade secrets owners may obtain relieves through other legal means for the infringement of trade secrets conducted by employees, state officials and lawyers, qualified accountants and other professionals, such as applying Labor Law, Company Law. Thus, Article 10 of the First Draft for Review was removed.

Furthermore, Article 9 of the Second Draft for Review further clarifies, that obtaining, disclosing, using or allowing a third party to use the trade secrets is deemed as an infringement upon trade secrets if the third party is aware of or should be aware of the fact, that the trade secrets were obtained from the illegal conduct of employees and former employees, or other units and individuals.

3. Adding of general provisions and miscellaneous clauses on unfair competition in the internet field (Article 12 of the Second Draft for Review)

Article 14 of the First Draft for Review lists the unfair competition behaviors in the internet field by using technical means.

However, there is an opinion considering, that internet technologies and business models develop and change very quickly. It is therefore criticized, that the above-mentioned list of unfair competition behaviors cannot cover the new internet technologies and business models appear in the future. Therefore, the general provisions and miscellaneous clauses are necessary.

In this sense, Article 12 of the Second Draft for Review adds a general provision: The operator shall not use the technical means, by affecting the user’s choice or other means and may not engage in obstruction, destruction of the normal operation on network products or services provided by other operators. Besides this, Article 12 of the Second Draft for Review contains a miscellaneous clause: The operator shall not conduct other impediments to the obstruction, destruction of the normal operation on network products or services provided by other operators.

4. Increase in the amount of statutory damages (Articles 17 – 25 of the Second Draft for Review)

Article 17 provides that the amount of compensation is to be determined by the “actual loss suffered due to infringement”; if this is difficult to calculate, the amount of compensation is the amount, that the infringer has gained from the infringement, including expenses to stop the infringement behavior conducted by the business operators. The rights owner may also be awarded compensation up to RMB 3 million yuan for violations of Article 6 and 9. Article 25 newly states that if a violation is “minor” and “corrected in a timely manner”, the operator is exempt from administrative penalty.

ABOUT THE AUTHOR: Sarah Xuan
Sarah Xuan is a Senior Associate in the MMLC Group.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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