China Passes Foreign Investment Law to Enhance IPR Protection and Ensure Free Technology Transfers
On March 15, 2019, the National People's Congress adopted the Foreign Investment Law. Becoming effective on January 1, 2020, the Law will replace China's three current separate foreign investment laws enacted in the early years of China's reform and opening, including Chinese-Foreign Equity Joint Ventures Law, Wholly Foreign-Owned Enterprises Law and Chinese-Foreign Contractual Joint Ventures Law.
The Foreign Investment Law provides that protection of intellectual property rights and free technology transfers are core elements for investment protection.
According to Article 22 of the Law, the State shall protect the intellectual property rights of foreign investors and foreign-funded enterprises, protect the legitimate rights and interests of holders of intellectual property rights and the relevant right holders, and shall pursue legal responsibilities according to law against infringing behaviors; the State shall encourage technology cooperation on the basis of free will and business rules, technology cooperation conditions shall be determined by all investment parties upon fair and equal negotiation, and no administrative organ or functionary working therein shall force the transfer of technologies by administrative means.
Article 23 of the Law further provides that, the administrative organs or functionaries working therein shall keep the trade secrets of foreign investors and foreign-funded enterprises obtained in carrying out their duties and shall not disclose or unlawfully provide to others.
The above provisions send out a positive signal, i.e. China's government respects foreign investors' intellectual property rights and will lawfully protect the intellectual property rights of foreign investors and foreign-funded enterprises by taking solid and effective measures so that their investment will become business return effectively.
The Law encourages technology cooperation based on voluntariness and commercial norms. The conditions for technology cooperation shall be negotiated and agreed upon by the investment parties; and forced technology transfer through administrative measures is prohibited.
Those functionaries in the administrative organs having chances of accessing foreign investors' trade secrets including technology secrets and business secrets shall abide by the laws and not infringe upon those secrets. All these measures show that the Chinese government is willing to create a legal environment for foreign investment, so as to encourage foreign investment, guarantee its safety and return.
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