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On December 26, 2020, the Amendment (XI) to the Criminal Law of the People's Republic of China (the Amendment) was enacted at the 24th Session of the Standing Committee of the 13th National People's Congress, and it came into force on March 1, 2021.




Criminal compliance in relation to Intellectual property in Criminal Amendment (XI)

On December 26, 2020, the Amendment (XI) to the Criminal Law of the People’s Republic of China (the Amendment) was enacted at the 24th Session of the Standing Committee of the 13th National People’s Congress, and it came into force on March 1, 2021. This amendment has made a big change in the field of intellectual property.  Through studying the relevant provisions of the Amendment, the author found the following three characteristics which can reflect that the country attaches great importance to the protection of intellectual property in the construction of the rule of law. 

1. New Crime —— Crime of stealing, prying into, buying, or illegally providing any trade secret for an overseas institution, organization or individual

Article 23 of the Amendment added one article after Article 219 of the Criminal Law as Article 219A, that “whoever steals, pries into, buys, or illegally provides any trade secret for any overseas institution, organization, or individual shall be sentenced to imprisonment of not more than five years and a fine or be sentenced to a fine only; or if the circumstances are serious, the person would be sentenced to imprisonment of not less than five years and a fine.” This provision derives from article 111 of the Criminal Law in relation to the crime of stealing, prying into, buying, illegally providing any state secret and intelligence, which suggests that the protection for the trade secret shall have the same importance as the protection for the state secrets and intelligence, from the level of social consensus and the legislative construction.  In addition, this provision emphasizes that providing the trade secret for “any overseas institution, organization, or individual”, indicating that it is urgent to protect the economic fruits of the Reform and Opening-up under the fast-changing international situation in the coming years.

2. Harsher penalties

The Amendment made uniform changes to the penalties in relation to “Crime of counterfeiting Trademarks”, “Crime of selling goods with counterfeiting Trademarks”, “Crime of illegally manufacturing and selling illegally manufactured registered trademarks and signs”, “Crime of copyright infringement”, “Crime of selling infringing reproductions” and “Crime of trade secrets infringement”. Specifically, on the one hand, the Amendment deleted the sentences of detention and public surveillance of the above-mentioned crimes, On the other hand, it changed the maximum sentence of these crimes from 7 years to 10 years. The amendment of the maximum sentence demonstrates that the penalties would be harsher, and the country determines to crack down the intellectual property infringement via criminal judicial weapons.

3. Larger scope of the criminal behaviours

The Amendment increased the scope of the criminal behaviours of some crimes. For instance, the amendment added the means that “communicating to the public through information networks”,” reproducing and distributing and audio or video recording of, or communicating to the public through and information network, and performance without the permission of its performer” and “intentionally evading or disrupting the technical measures” in the crime of copyright infringement. Besides, it substitutes “inducements” with “bribery, fraud, coercion, electronic intrusion”. Based on the above, these amendments reflect the importance of information technology in the current society. Nowadays, the infringement and criminal acts are no longer dominated by physical infringement, but are more and more represented by emerging technological means such as the internet and big data. Therefore, it is a great test for the criminal compliance ability of legislators, judicial personnel and lawyers to define the intellectual property crime and identify the serious consequence of the tort of intellectual property under the new legal background.

After decades of the Reform and Opening-up policy and globalization, our country has had its economic wisdom. During this period, a large number of modern enterprises with an international vision and based on international cooperation have risen. In the daily management of enterprises, the criminal compliance of intellectual property is quite vital. Through studying the Amendment, the author suggests that enterprises should pay attention to the following three points in terms of the criminal compliance of the intellectual property.

A. Noting the source of the intellectual property.

In the modern society where the division of labour is becoming more detailed, talents with professional skills are more and more welcome in the relevant fields, and they only moving within the enterprises in the relevant industries. In order to achieve immediate results, many enterprises introduce talents to reduce the time cost of research. However, this kind of way might put the enterprise at risk for infringing the intellectual property. To be specific, the source of the technology possessed by talents may be considered as a trade secret, or it might be patented. Plus, in the circumstance where the introduced talent is subject to the obligations of confidentiality or non-competition, there will be a huge business risk for the enterprises. In order to prevent the risk, enterprises should carry out reasonable avoidance when introducing talents and purchasing technologies, such as the obligations in relation to confidentiality or non-competition of introducing talents, the content and duration of above obligations, and whether the price of the technology matches the difficulty of technology development, etc. By understanding the above points mentioned, when related to litigation or arbitration, enterprises can be prepared.

B. Applying for the relevant protection of intellectual property timely to introducing coercive force of the state.

To protect the intellectual property acquired by the collective wisdom and creativity of enterprises, the author suggests that the enterprises are supposed to apply for and register qualified patents, trademarks, copyrights and other related intellectual property rights in time, to confirm the enterprises as the intellectual property rights owner by the coercive force of the state, so that enterprises can make the property only protected by themselves into the wealth protected by the whole country.

C. Protecting intellectual property via technological means.

However, there are many intellectual property rights that are not able to be disclosed to the public. One of the reasons is that the duration of protection for the relevant rights is too short. For example, the longest duration of protection for the invention patent is only 20 years. Meanwhile, compared to the high cost of discernment, the low cost of imitation may also lead to the phenomenon where intellectual property rights are not able to be disclosed to the public. Therefore, the author suggests enterprises protect the trade secret via technological means, such as standardizing the procedures and time of access to trade secrets, protecting the technology of storage media, dividing trade secrets into separate parts and distributing them to employees, strictly implementing the system of confidentiality and competition restrictions. The principle of “confidentiality” in trade secret cases requires enterprises to protect their trade secrets effectively, while enterprises are expected to explore which way is effective according to their own characteristics.

Intellectual property is the wealth of the whole society. At the 25th Group Study Session of the Political Bureau of the CPC Central Committee, General Secretary Xi Jinping proposed the requirement of improving the level of the rule of law in intellectual property protection. In the meanwhile, the introduction of the Amendment indicates that criminal compliance in relation to intellectual property is a priority of corporate criminal compliance, and it is also a key step for future enterprise management. The criminal compliance system of intellectual property should not only be integrated into the level of enterprise executive, but also into the level of decision-making and management, so as to eventually realize the integration of criminal compliance and corporate governance, and provide a feasible criminal risk prevention mechanism for enterprises.

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