Woe to Assumptions!

"Assumption and Expectation ~ Two cousin brothers responsible for most of the chaos in the world."

An anonymous blogger behind the FOARP kindly pointed out a technical error in one of my previous posts: Microsoft Falls One Step Behind in Protecting “Windows” . Here is the comment that this reader left:

Mate, there is no such thing as CTPO, there is CTMO (the trademark office) and SIPO (the state intellectual property office - which deals with patents) but no CTPO.

It was an assumption on my part. Here in the United States, one is so familiar with the USPTO that one might assume that trademark and patent offices in other countries are organized and institutionalized in a similar way as in the United States. Small it is, but the error is indicative of my tendency to assume certain things. A bit of attention would have led me to the acronym "CTMO" as used by the China Trademark Office Website (English Version). In the study of law, assumption is costly because it affects one's credibility; in the practice of law, assumption is a lawyer's enemy, costing clients' business, case, and trust. For those who practice international law, the need for precision, sensitivity to cultural differences, and thoroughness is paramount. It's a wake-up call for me as well as a reminder that attention to details really matters in the legal profession.

Thank you, FOARP! Corrections have been made at your suggestion. And for readers out there, please note the changes.

And FYI:

China Trademark Office (CTMO)
State Intellectual Property Office (SIPO) ( handling patent-related matters)
National Copyright Administration (NCAC) (in Chinese only)

WTO Guru

On Tuesday (January 15, 2008), a special visitor spoke in my International Business Transactions class at SMU Law School. His background and speech are so interesting that they warrant a special post here.

Hon. James Bacchus was the guest speaker. If you haven’t heard of him, he served two terms on the appellate body of the WTO. The following is an excerpt of his bio:

He was a founding Member, and remains the longest-serving Member, of the highest global trade tribunal. He was twice appointed by consensus of the Members of the WTO, and was twice elected Chairman by his six colleagues. During his eight years of service to the WTO, he was the only American, and the only North American, on the Appellate Body.
…
His final decision for the WTO was as the presiding judge in the appeal in the complaint by the European Union, Japan, China, Brazil, and other WTO Members against a safeguard measure by the United States restricting imports of steel. Following the decision by the United States to comply with the ruling by Bacchus and his colleagues on the Appellate Body, The New York Times concluded that "this case was the rough equivalent of Marbury v. Madison, the 1803 decision that established the Supreme Court as the final arbiter of the constitution, able to force Congress and the executive branch to comply with its rulings." (Page 25, December 5, 2003). According to the American Lawyer, "James Bacchus, as much as anyone, can lay claim to being the John Marshall of the World Trade Organization." (March, 2004).

He commenced his lecture with a short pithy discussion on the relationship between trade and freedom. In his opinion, economic freedom generally precedes political freedom, and he stated that is why he supported granting China the “Most Favored Nation” trade status while he was representing Florida in the United State Congress. In his own words, “sooner or later, people are going to ask for political freedom.” Not to put words in his mouth, but a corollary of free trade is ultimate political freedom. (A highly disputed topic, which I won’t get into.)

Then, he posited that the WTO does not try to influence any sovereign nation’s politics, and that it has power over a certain nation only when the member country (countries) chooses to give such authority. In the WTO dispute resolution mechanism, there is no private right of action. In plain English, only member countries, not individual corporations in the countries, can sue. Thus, if a country does not agree to sue the company in another country, the grieved company is out of luck. Simply put, the WTO’s compulsory jurisdiction is only good when a sovereign nation complains about another country.

Further, he shed light on how a judge makes a decision on a WTO case. Generally, a judge undertakes a three-step process. First, she examines the defendant country’s WTO obligations in a certain area at bar, which are laid out in WTO accession agreements. For example, intellectual property obligations would be governed by the TRIPs agreements. Then, she explores the measures that the defendant country has taken to fulfill the WTO obligations. Third, she scrutinizes the facts and circumstances in their totality, and analyzes whether the defendant country’s measures indeed fulfill its compulsory WTO obligations. If a shortfall exists, the defendant country is “guilty,” and it will be required to adjust its measures accordingly. If it does not comply, penalties will follow in the form of withdrawn WTO benefits, i.e. higher tariffs. (Writing a WTO legal opinion is a totally different matter. Those opinions go for hundreds of pages, if you think the U.S. Supreme Court opinions are long. For example, Panel report out on Mexico-US anti-dumping dispute.)

Unlike the International Monetary Fund (IMF) or the World Bank, the WTO is not an independent legal entity. It cannot own real estate, nor can it enter into other business transactions.

During the Q & A session, questions about the U.S. WTO action against China regarding intellectual property was raised, but he did not go into details. I think it is because that he is a counsel (or maybe an advisor) of one of the involved parties.

Another point of interest is that he would like to see a WTO specific legal code of ethics for those attorneys practicing at the WTO, but he sees the difficulty of it ever coming into fruition, since that would be giving the WTO too much power.

He was thoroughly enjoyable and extremely knowledgeable about WTO-related matters. What a treat!

Microsoft Falls One Step Behind in Protecting “Windows”

China Trademark Office (CTMO) dealt another blow to American software giant Microsoft in January 2008. Reportedly (here and here), it rejected Microsoft’s opposition of the registration of a trademark “Windows”by a Ningbo eye glass company. The company successfully registered “视窗” (“Shi Chuang”, which means windows of vision) in 2001, and it later tried to register “Windows” in 2003 for glasses (Class Nine). After a search at the CTMO’s database for opposition/cancellation decisions, I was not able to find the written decision regarding "Windows," and I will have to base my post on news reports. (note, I will continue to search in the next few weeks for the decision.)

Based on the report, as soon as the owner of the Ningbo Eye Glass company filed its application for the “Windows” trademark, it received a demand letter from Microsoft. As those letters typically go, it expressed its opposition of the registration of “Windows” in China, because Microsoft used it first. Sounds great, right?

Well, not necessarily for the CTMO, apparently. Prior use in the United States may establish common law trademark rights (which is not something that a major IP owner should hang its hat on), but in China prior use does not establish any trademark rights unless the mark has been registered, or unless the mark has been deemed legally famous for particular classes of goods and services.

Without further facts or the CTMO written decision, I can only assume what went wrong on the part of Microsoft. Two possible scenarios exist here that might have led to Microsoft’s misstep in protecting “Windows” in China. First, Microsoft simply forgot to register “Windows” in China, which is unlikely given its level of legal sophistication. Second, it registered “Windows” in China but did not cover Class Nine, limiting its rights to the classes of goods or services registered for.

All is not lost though. Assuming that Microsoft registered “Windows” for certain classes of goods (say, software), it could ask either the CTMO or a People’s court to give “Windows” the famous mark status, thereby availing itself of broader protection. It is unlikely that Microsoft’s counsel has not tried that at the CTMO, but it can still try at an intermediate court in Zhejiang province where Ningbo is located. The court might find “Windows” legally famous for software (and whatever Microsoft registered it for in China), and might rule that the registration or use of “Windows” by another applicant for eye glasses is likely to dilute “Windows”, the famous mark for software.

(Too many facts are not available at this moment; so much of this post is based my assumptions and speculations. Once I get my hands on more details, I will write an update.)

“Regulationism”

My apologies to lexicographers, linguists, and English teachers out there for coining the word “regulationism.” But I couldn’t help it after seeing so many regulations that come into my China New Law alerts on a daily basis. To me, regulationsim means a tendency by a government(s) to resort to administrative regulations to solve social issues that might otherwise be resolved through alternative means.

Most people who know China are aware of the plethora of regulations in China, and my mentioning of the issue is surely no news. But, I am not certain that people know how the almost ubiquitous and countless rules and regulations impact China’s efforts to establish the rule of law, and how they affect people’s daily lives (both good and bad). I am not sure I know either, but I fear that regulations, once they start to “run wild” and become a short cut to the formal legislative process, do come with high costs that citizens probably do not want to pay.

For example, there have been fierce discussions on the regulation/standard on steamed buns in China. Reportedly, all steam buns must be made of flour, and be either oval or round in shape. Understandably, there needs to be certain standards for quality and sanitation, but a required shape for buns? Yes, this regulation will benefit average consumers by ensuring that all steamed buns will have a desirable uniform quality; however, these regulations also result in fewer choices for consumers. What if a consumer wants a triangular bun? What if she desires a bun made of a mixture of flour and corn meal in the market? Therefore, an unexpected corollary of excessive regulation is the blockade of the market mechanism.

In light of the consequence of this steamed bun regulation, its necessity should be called into question. The fact is that China already has Product Quality Law (and its relevant regulations), which should be sufficient to address quality concerns. Why then is another regulation necessary just for steamed buns? The answer, I guess is that the two Chinese agencies, General Administration of Quality Supervision & Inspection and Standardization Administration, subscribe to “regulationism.”

(Note: in the midst of a fury of outcries about the standard shape of steamed buns, the Standardization Administration issued an explanation that the standard shape of steamed buns in the regulations is only a recommendation, not a requirement.) Query, why even a recommendation?

While this topic of excessive regulating is discussed, I just learned of another notice by the State Council issued on December 31, 2007, which has to do with the ban on the production, sale and use of ultra-thin plastic grocery sacks (<0.025 mm). Pursuant to the notice, this ban goes into effect on June 1, 2008, and the National Reform and Development Commission will revise the Investment Guide Catalogue to reflect this national campaign to root out ultra-thin plastic sacks. In addition, starting on June 1, 2008, all markets in China shall cease to offer plastic sacks for free, and shall charge customers a specific fee for sacks requested by customers.

Clearly, this new regulation aims to increase the externality for the use of plastic sacks, which is an annoying solid pollutant in China and elsewhere. Hopefully, it will be effective in achieving its administrative purpose in stemming pollution and shifting the cost of pollution to average consumers and investors in manufacturing of ultra-thin plastic sacks. I don’t doubt the wisdom of the rationale behind the regulation, but I do have qualms about how it will be enforced in China. So many enormous polluters of China’s skies, rivers, lakes, and wetlands go unpunished in spite of China's long existing environmental laws and regulations. Thus, how could a neutral China observer be convinced that the government will go after a small business owner or grocer for selling a few thin plastic sacks, following the announcement of yet another regulation? This leads to, as I see it, another unexpected consequence of regulationism—societal cynicism about excessive regulations. If regulations are not to be strictly enforced, why make them in the first place?

Any thoughts?

Death Penalty by Lethal Injection: Humane or Inhumane?

As reported below by the New York Times, China plans to replace execution by shooting in the head with lethal injection, thus providing a more “humane” method of capital punishment.

China plans to expand the use of lethal injection to replace the current method of execution, a shot to the back of the head, the newspaper China Daily quoted Jiang Xingchang, vice president of the Supreme People’s Court, as saying. Half of the 404 intermediate people’s courts, which carry out most executions, now use lethal injection, he said. “It is considered more humane” and “will eventually” be expanded to all such courts, he said without providing a timetable.

Curiously enough, the United States Supreme Court will hear arguments in the case of Baze v. Rees on January 7, 2008. The issue of this case centers not on the constitutionality of the death penalty, but on the constitutionality of the cocktail used in the lethal injections in the United States. Defendants plan to argue that, according to the FoxNews, one of the chemicals used in the cocktail causes severe pain and violates the Eighth Amendment. Basically, they advance the argument that the current chemical mix of lethal injection causes unconstitutional pain and suffering to the convicted.

Here, you have the vice president of the Supreme People’s Court of China advocating the lethal injection, citing that it is more “humane” than the somewhat out-dated (still used in some places) bullet-in-the-head execution. Juxtaposing the apparent “welcome” of lethal injection in China with the growing “challenge” it faces in the United States, one can see the huge differences in the criminal jurisprudence in the two countries.

Apart from the difference, one should, however, not ignore the attention that the death penalty has received in both countries in recent years. In the United States, there has been a de facto moratorium on the death penalty, while the Supreme People’s Court of China now automatically exercises subject matter jurisdiction over every death penalty review case. As debates surrounding the death penalty continue on both sides of the Pacific, it would be interesting to see what results in Baze v. Rees and how it will impact academic discussions in China about lethal injection.

And as we all sit tight for the ruling in Baze v. Rees to descend, the answer to the question posed in the title of this post is--stay tuned.

Migrant Workers Self Help: Extreme Edition

A group of workers camped around a fancy Audi, surrounding it in order to force the owner of the car to pay wages owed to them (h/t China Digital Times).

The picture speaks volumes about the social condition that Chinese migrant workers endure—overworked, underpaid, unappreciated, and at times violated. What is more, it epitomizes a social phenomenon where a class of people who are unaware of (or unable to utilize) another tool to exercise their rights to be paid for their blood and toil—the law.

For want of justice, people can resort to self help or the law. As the migrant workers often do, self help appears to be the most sensible and accessible method of achieving justice. A plausible reason for their tendency to self help is that they do not have the money to hire lawyers; and they probably do not know to report the violators to the proper authorities, thus availing themselves of administrative assistance. Or, they do not have faith in the legal system in its ability to dispense justice to poor migrant workers. Irrespective of the reason, this phenomenon reveals an undeniable weakness in the Chinese legal system—the poor, the weak, and the disenfranchised do not have easy access to it. (Of course, this is not a problem unique to China.)

2007 Review: A Year of Hard Hitting Legislations

As 2007 winds down to its last hours, Chinese lawmakers have made this year one of hard hitting legislations. Within this year, multiple pieces of significant laws and regulations came into being, impacting many facets of the Chinese society. This post aims to highlight a few legislations with huge influence on foreign investments.

1. Regulations on the Administration of Commercial Franchise (商业特许经营管理条例)
Promulgated and adopted by the State Council on February 6, 2007, the Regulations modified and improved upon its predecessor, rendering commercial franchising a registration-only commercial activity (instead of an “approval” activity). And as a result of the Regulations, off-shore direct commercial franchising to China is now allowed as long as the franchisor has two units in operation for more than one year. Pursuant to the Regulations, the Information Disclosure Measures and the Registration Measures were adopted to provide detailed directions on franchising in China. For more, read my three-part comments on franchising in China here, here, and here.

2. Property Law of the People’s Republic of China (中华人民共和国物权法)
After more than a decade of discussions and political compromises, the National People’s Congress finally adopted the Property Law on March 16, 2007, making it one of the most significant pieces of laws in modern China’s history (if not the most significant). Regardless of its differences from the western concept of private property law, the Chinese Property Law is a landmark legislation in that it defines for first time the rights and obligations of private property ownership. China Law Blog has an excellent series on this topic, and I posted a piece on a dispute involving this law.

3. Corporate Taxation Law (中华人民共和国企业所得税)
For better or worse (depending on your perspective), the National People’s Congress adopted this law on March 16, 2007, thus ending years of a bifurcated taxation practice where foreign and domestic corporations were taxed at different rates. This law provides a uniform base tax rate of 25% for all corporations, while giving significant tax incentives to high-tech and environmentally-friendly projects. Fearing a backlash of foreign taxpayers, the drafters included a five-year phase-in provision. For more, read this.

4. Labor Contract Law (中华人民共和国劳动合同法)
Employment Enhancement Law (中华人民共和国就业促进法)
Labor Dispute Mediation & Arbitration Act (中华人民共和国劳动争议调解仲裁法)

The Chinese legislators, in the National People’s Congress and its Standing Committee, went on a coordinated and lasting mission to tackle labor/employment relations in China in 2007. They came up with three pieces of legislation, of which the Labor Contract Law garnered the most attention and interest. The New York Times characterized the Labor Contract Law as “sweeping.” Sweeping indeed! It redefines the employment relationship by imposing the restrictive terms, among others, that an employer can stipulate in a labor contract. As far as commentators go, nobody has been as diligent and thorough on this law than our Dan Harris at China Law Blog.

5. Anti-Monopoly Law (中华人民共和国反垄断法)
On August 30, 2007, the Standing Committee of the National People’s Congress put an end to ad hoc anti-competition regulations in China. It adopted China’s first ever comprehensive competition law—the Anti-Monopoly Law (to be effective on August 1, 2008). As China’s economy continues to expand, as foreign investors keep pumping capital into certain sectors into China, and as Chinese companies grow larger in scale and influence, the Anti-Monopoly Law came at a very good time. Referred to as the “economic constitution”, will the Anti-Monopoly Law be a bliss or a curse to interested parties? Will it end (to a certain degree) local protectionism? Keep your eyes peeled on new developments on this law.

6. Law on Lawyers (Amendments) (中华人民共和国律师法)
Amendments were adopted by the Standing Committee on August 30 to address growing concerns on the legal profession. Since the promulgation of the Lawyer’s Law in 1996, the legal profession has experienced exponential growth, in terms of the importance of the profession and lawyers in the society. These amendments were meant to make lawyers’ lives better, especially criminal lawyers by giving them access to gov’t documents, access to clients without interference, and immunity for arguments and comments made in courtrooms while representing clients. Legal ethics is one of my favorite topics in law school, and read my posts on this topic here.

7. Civil Procedure Law (Amendments) (全国人大常委会关于修改《民事诉讼法》的决定)
These amendments mainly address some persistent issues in civil litigation in China—enforcement of civil judgments. By virtue of the amendments, those who refuse to execute a civil court ruling -- fines climb from 1,000 yuan to 10,000 yuan (1300 U.S. dollars) for individual offenders, and from 30,000 yuan to 300,000 yuan (39,000 U.S. dollars) for companies. The law also provides that those who refuse to cooperate with civil courts in making sure a ruling is executed may be detained.

8. National Holidays Schedule Modified (国务院关于修改《全国年节及纪念日放假办法》的决定
Golden holidays for the Labor Day and “Independence Day” will no longer be holidays of disaster. Prior to the change, holidays in China were mostly for commemorating political events, and they provided two longest holidays in China when the entire country basically went on vacation. That brought immeasurable opportunities and hardship to the transportation, tourism and service industries. The new holiday schedule adds three traditional holidays (Grave Sweeping Day, Dragon Boat Festival and the Moon Festival); correspondingly, the Labor Day and Independence Day holidays are shortened to one day and three days respectively.

I included this in the review because I thought that this change not only makes sense but also reflects the wishes of the people. In addition, the change gives traditional/cultural holidays a higher status, which is a very good thing for the dying traditions in China. Cheers to traditions!

As we wait for the ball to drop (bell to ring, or whatever way you celebrate) to usher in the year of the Rat, 2007 will be remembered as a year of hard-hitting legislations. Let’s see what 2008 has in store for the China law blogosphere.

For a complete of all the legislations adopted in 2007, visit here (in Chinese only).