In a recent move involving both the Chinese legislature (the National People’s Congress) and the executive branch (the State Council), China has overhauled two of its most important pieces of legislation governing inbound IP-related investments.
The first major change was the adoption of the new Foreign Investment Law (“FIL”) on 15 March 2019 (full text in Chinese here, English version available upon request). The new FIL will enter into force on 1 January 2020, and the existing legislation that has formed the backbone of Foreign Direct Investment regulation since the 1980s (currently scattered over three laws) will be repealed on the same day. This note will focus on IP-related developments under the FIL, while a separate note will cover the corporate law implications of the FIL.
In a development that clearly is related to one of the main bones of contention in the ongoing US-China trade talks, the new FIL contains certain explicit assurances in relation to IP protection for foreign investors, including in relation to alleged forced transfers of IP in order to gain market access rights.
The second major change linked to the passing of the FIL was the repeal, with immediate effect, of some of the most controversial and restrictive IP-related provisions of the Technology Import and Export Administrative Regulations and the Sino-Foreign Equity Joint Venture Law Implementing Regulations by administrative decree issued by the State Council on 2 March 2019, and promulgated on 18 March 2019. This change is crucial to most cross-border transactions involving licenses and transfers of technology, and has been long-awaited by foreign investors who often saw it as a barrier to bringing their IP into China.
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