China Threatens To Ban eCommerce Sites for IP Violations

16 September 2021

China intends to strengthen regulation of e-commerce firms such as Alibaba Group Holding Ltd. and Pinduoduo Inc., including holding them liable for intellectual property infringement.

According to a draft revision of the country's e-commerce law posted by the State Administration for Market Regulation, e- commerce platforms will be barred from operating online businesses or even have their licenses revoked if they fail to deal with serious violations of IP rights by vendors on their platforms. Until Oct. 14, the market watchdog is collecting feedback on the proposed version.

"China has been the world's top online retail market for eight consecutive years," says YANG Mingming, Partner, Wanhuida Intellectual Property in China. "There is no doubt that it is necessary for China to further strengthen the protection of intellectual property rights, regulate the e-commerce platforms, and promote the sustainable and healthy development of e-commerce.

He adds that the draft amendments are relevant to the Phase-One Economic and Trade Agreement signed by China and the United States on January 15, 2020, section E of which is about strengthening cooperation and jointly and individually combat infringement and counterfeiting in the e-commerce market.

"Part of the draft amendments of the E-Commerce Law are consisting of the provisions in the Phase-One Economic and Trade Agreement," he says. "For instance, it is provided in Phase-One Economic and Trade Agreement that China shall extend to 20 working days the deadline for right holders to file a judicial or administrative complaint after receipt of a counter-notification, and China shall provide that e-commerce platforms may have their operating licenses revoked for repeated failures to curb the sale of counterfeit or pirated goods, which have been contained the draft amendments of E-Commerce Law."

With this, China will undoubtedly continue to strengthen the supervision of e-commerce platforms and continuously establish and improve the corresponding laws and regulations to create a fair and healthy competition environment. On August 24, 2020, the Supreme Court issued the "Reply of the Supreme People's Court on Several Issues of Application of Law Regarding Disputes Involving Online Intellectual Property Rights Infringement", which come into force on September 14, 2020. On September 10, 2020, the Supreme Court issued the Guiding Opinions on Hearing Civil Cases Involving Intellectual Property Rights on E-Commerce Platforms. On November 9, 2020, the National Standard on the Management of Intellectual Property Rights Protection on E-Commerce Platforms, jointly led by the State Administration of Market Supervision and Administration and the State Intellectual Property Office, was released. On March 15, 2021, the State Administration of Market Supervision and Administration issued the Measures for the Supervision and Administration of Internet Transactions, which shall come into force from May 1, 2021.

"The e-commerce platforms should pay attention to the legislative and judicial developments and trends, and take up the social responsibility," says Yang. "They shall carry out industry self-discipline, solve the problems that arise during the high-speed disorderly development of e-commerce, and promote the healthy and orderly development of the e-commerce economy."

Johnny Chan

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