On February 25 2016, the Legislative Affairs Office of the
State Council released a draft version of an amended
Anti-Unfair Competition Law (draft AUCL) for public
The draft was reportedly prepared by the State
Administration for Industry and Commerce (SAIC), the
ministry-level organ responsible for administrative enforcement
under the current law.
The AUCL was enacted in 1993 and this is its first revision
The draft is intended to fill obvious gaps in the scope of
protection of the law, increase the level of administrative
fines against violators and address new issues not contemplated
when the law was originally issued.
Expanded protection for "business identifiers"
With respect to IP, the Draft AUCL would fill one of the
biggest gaps in the current law: the lack of protection for
unregistered logos, domain names and other business identifiers
not enumerated in the current AUCL.
Article 5 of the draft defines "famous business identifiers"
to include the following:
…symbols that distinguish goods,
producers, or operations; including but not limited to the
name, packaging, decoration, and shape of famous goods;
trademarks, the name or the abbreviation of an enterprise or an
enterprise group, brands, the main body of a domain name, a
website name, webpages, full names, pen names, stage names, the
name of a channel's programming and symbols, etc.
Article 5 of the current AUCL protects a much narrower range
of identifiers, including trade dress, packaging designs,
personal names, trade names and unregistered word marks.
Article 5 of the draft AUCL would offer protection for the
"shapes" of products, and not just their packaging or trade
dress. If included in the final version of the law, this would
add a potentially powerful new tool for stopping slavish
copying by local factories, thereby filling gaps in the scope
of protection offered by design patents and copyright.
Trade names/company names
Article 5(3) of the current AUCL prohibits business
operators from using the name of an enterprise or a person's
name in a manner that causes consumer confusion. The draft AUCL
would replace this provision with one that requires a
petitioner to have a trade mark that is registered in China or,
if unregistered, that is deemed "well-known", presumably under
the same standards set out in the Trade Mark Law.
Article 5(4) of the draft AUCL meanwhile offers inverse
protection to trade names against mis-use as trade marks or
domain names, provided that the trade name is famous.
Competitor relationship and confusion
Notably, the draft AUCL omits language in Article 5
requiring an explicit showing that use of a particular
"unfair method (has) harmed a competitor."
This provision was generally interpreted to require a
petitioner to be a direct competitor with the infringer, or to
show an inference that an infringer had acted in obvious bad
faith. In the draft AUCL, this requirement is removed.
The draft AUCL imposes a requirement of "market confusion"
for all violations under Article 5.
Notably, a 2007 judicial interpretation by the Supreme
People's Court (SPC) specifies that evidence of actual
confusion is unnecessary under the current AUCL, and that the
implied standard is one of a "high likelihood of confusion".
This same standard is already reflected in Article 57 of the
PRC Trade Mark Law, amended in 2013, and thus it is likely the
future AUCL amendment will adopt a similar approach.
The draft AUCL includes only mild changes to the existing
law, with the only substantive change being a new prohibition
against infringers authorising third parties to use protected
The AUCL only governs civil and administrative enforcement.
China's Criminal Code provides criminal sanctions for "serious"
violations of trade secrets, but not for any of the other forms
of unfair competition enumerated under the AUCL.
Article 216 of the Criminal Code and related judicial
interpretations of the Supreme People's Court set out a
threshold of Rmb500,000 (US$77,000) for criminalisation of
trade secret violations. These provisions have been widely
criticised due to the requirement that the threshold be
calculated by reference not to the value of the trade secret,
but rather harm caused to the trade secret owner in the form of
lost sales. These provisions effectively require evidence that
the secret has already been commercialised and significant harm
already created before prosecutions can be initiated –
an approach that frustrates criminal complaints against most
violations and is largely inconsistent with international
Administrative and civil enforcement
Consistent with changes to the PRC Trade Mark Law introduced
in 2013, the Draft AUCL proposes significant increases in the
maximum level of administrative fines against infringers.
Under the draft AUCL, violations of Article 5 may result in
confiscation of the illegal goods, and, where the infringer's
revenue exceeds Rmb50,000 (US$ 9,000), imposition of a fine of
up to five times the total revenue. For cases involving
revenues under Rmb50,000, the maximum fine is set at Rmb250,000
(US$45,000). By comparison, the current AUCL establishes a
maximum fine of three times the infringer's illegal
On the civil side, the most notable provision in the Draft
AUCL is Article 17, which expands the category of potential
plaintiffs to include consumers, and not just victim business
Unlike the Trade Mark Law, the current and Draft AUCL do not
provide for statutory damages or treble damages against
Under a best-case scenario, the State Council will collect
public comment on the draft AUCL and may issue a further draft
for public comment in late 2016 before formally submitting the
draft for consideration by the national legislature, China's
National People's Congress, in 2017.
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