First-ever Chinese civil code adopted at national legislature: no 'IP section', yet still relevant

On 28 May 2020, the long-awaited civil code of China (CCC) was passed by the 13th National People's Congress (NPC) and will take effect on 1 January 2021. 

The full text of the CCC can be found here (online translatable).

<Civil Code> reading. 🐈
Created by artistic fellow Kat Riana Harvey

The long-awaited codification

‘To make a civil code of China’s own is the dream of generations of Chinese civil jurists’, said Professor Wang Liming, chairman of the Civil Law Division under the China Law Society, and executive vice president of the Renmin University of China.

The adoption of the CCC is a landmark event in Chinese civil legislation history. For decades, developing a comprehensive civil code appeared like a long-cherished wish to many. The first attempt to issue a civil code began as early as 1911, with the Draft Civil Code of the Great Qing Dynasty, and was accomplished with the help of Japanese scholars Yoshimasa Matsuoka and Kotaro Shida. Since the establishment of the PRC in 1949, four civil law codifications have been initiated (in 1954, 1962, 1979 and 2001, respectively), but all failed for various reasons.

In particular, during the 1980s, given the rapid and enormous changes in society, and the difficulties that followed China’s achievement of a social consensus on many issues closely related to people’s livelihood, legislators took a step-by-step approach by, namely, putting aside the adoption of a civil code as an end goal and starting from separate legislations (e.g. changing from wholesale to retail strategy). Several laws were promulgated at that time, such as the General Principles of Civil Law, the Contract Law, the Succession Law and the Marriage Law.

Eventually, in October 2014, the Decision on Major Issues Pertaining to Comprehensively Promoting the Rule of Law was adopted by the Fourth Plenary Session of the 18th Central Committee. They clearly put forward the requirement for codification of civil codes, which has made it an unshakeable legislative task since then.

The CCC consists of seven sections and 1,260 provisions, relating to:

· General principles

· Real rights

· Contracts

· Personality rights

· Marriage and family

· Succession

· Tort liabilities

The structure is an adoption of the German Pandekten system, which contains an introductory section about general principles, followed by several specific sections. Xinhua Net has stated that ‘The personality rights section is a major innovation in the CCC’ and it ‘covers stipulations on a civil subject's rights to his or her life, body, health, name, portrait, reputation and privacy, among others’.

As a compilation of existing civil laws, the CCC is a step towards a more systematised and straightened out civil law system. Professor Wang Liming has stated that ‘The CCC is not simply “adding up” the laws but integrating the existing individual civil laws in a science-based and logical manner with intrinsic consistency, and it is filling the legislative gaps in certain areas’.

As stipulated in Article 1260, which is the last provision of the CCC, on 1 January 2021, the following laws will be repealed:

· The Marriage Law

· The Succession Law

· The General Principles of the Civil Law

· The Adoption Law

· The Guarantee Law

· The Contract Law

· The Property Law

· The Tort Liability Law

· The General Provisions of the Civil Law

Some may find that codification brings convenience as it has amalgamated several separate legislations into one. However, that may not be the case once one starts to investigate related judicial interpretations.

No IP Section

Intellectual property (IP) is not one of the six separate sections of the CCC, which could disappoint many (see e.g. On the necessity of incorporating IP Laws into the Civil Law of China and How by Professor Chuntian Liu and Professor Kung-Chung Liu). However, some scholars might find the absence of an IP section quite reasonable.

The Legal Work Committee of the NPC explained in a press release why the conditions were considered as unripe for such a step, mainly because:

1. Traditionally, Chinese IP legislation has always adopted the (civil) special law legislation.

2. Chinese IP legislation contains administrative regulations and contents of administrative managements, which may not be highly compatible with civil legal relations between equal civil subjects that the CCC is aiming to adjust.

3. As the IP system is still undergoing rapid development and change, China's domestic legislation, law enforcement, and justice system need to be constantly adjusted and adapted. Therefore, it is not appropriate to rush towards incorporating IP laws and regulations into the civil code.

Whether or not IP shall become a separate section of the civil code is a question discussed not only in China (see e.g. Waar is boek 9 dan gebleven? by Professor Dirk Visser and Professor Hanneke Spath, in Dutch). However, this post will leave this conundrum here and continue to discuss the highlighted IP-related provisions of the CCC.

IP-Related Highlights

Although IP has not become a separate section of the CCC, there are many provisions related to IPRs. As noted in the Notes on the CCC Draft ( ‘the notes’), presented by the NPC at the third meeting of the 13th NPC on 22 May 2020, there are two main IP-related highlights of particular importance:

1. The general provision

The notes read that ‘In order to build an innovative country, the CCC Draft provides a general provision on IPRs to govern individual IP laws’ as stated in article 123 of the CCC:

The parties to civil legal relations enjoy intellectual property rights in accordance with the law. Intellectual property rights are the proprietary rights enjoyed by right holders in accordance with the law in respect of the following objects: (1) Works; (2) Inventions, utility models, designs; (3) Trade marks; (4) Geographic indications; (5) Trade secrets; (6) Layout designs of integrated circuits; (7) New varieties of plants; (8) Other objects specified by laws.

While it is thoughtful to incorporate a general article in the CCC that mainly promotes IPR protections, it will probably trigger many discussions regarding, e.g., the exclusivity of some of the listed items.

2. Punitive damages

The CCC incorporates punitive damages into IPR infringement cases. The notes explain:

“In order to strengthen the protection of IPRs and increase the cost of illegal infringement, the Draft added provisions regarding that, for intentionally infringing on the IPRs of others, if the circumstances are serious, the infringed party has the right to request corresponding punitive damages.”

Accordingly, article 1185 of the CCC states that ‘for the intentional infringement on the IPRs of others, if the circumstances are serious, the infringed person has the right to request corresponding punitive damages.’

The provision above, which uses the glaring term punitive damages, may constitute an overwhelming nightmare for some. It can also be seen as a sort of revolution, which brings a strong factual ground to an argument in debates around punitive damages, in which opponents often cite the fact that punitive damages are not widely accepted in most countries. That being said, it seems to be an untenable approach to conclude just by considering the factor of degree of acceptance, in the first place.

On the one hand, some of the reasons for the resistance to punitive damages, such as concerns relating to the deviation of tort law traditions and advocations for using existing mechanisms as better alternatives, are understandable. On the other hand, punitive damages per se have unique advantages. If handled with cautious limitations, due process and a considerable amount of supervision and criticism, would punitive damages not be deemed impossible or unfeasible, at the least? To quote Supreme Court Justice O’Connor:

‘Punitive damages are a powerful weapon. When imposed wisely and with restraint, they have the potential to advance legitimate state interests. When imposed indiscriminately, however, they have a devastating potential for harm.’

In other words, punitive damages should not be flatly resisted without putting effort into the design of its application.

Ultimately, whether to incorporate punitive damages into law or not is a matter of policy. Currently, in China, punitive damages have been incorporated into the Law on the Protection of Consumer Rights and Interests, the Trade Mark Law, and the Anti-Unfair Competition Law, as well as being proposed within the drafted revisions of the Patent Law and the Copyright Law (see a recent Katpost here).

Take the Trade Mark Law of China, the first IP Law in China to incorporate punitive damages into its 2013 revision, as an example. The actual application rate for punitive damages has been quite low (source: the PaperNews):

‘According to the documents issued by the China Judgment and Decision Documents Network, in the past seven years, of the nearly 50,000 civil judgments on trade mark ownership and infringement disputes, about 3,000 involved punitive damages, but only 38 of them applied for punitive damages; There are about 9,000 documents or cases quoting the compensation clause of Article 63 of the Trademark Law, and only 11 cases have adopted the method of calculating punitive damages, accounting for about 0.12%.’

It is still too soon to tell whether bringing punitive damages into the CCC, or to the aforementioned laws, are wise policy choices. At the end of the day, the answer will be a matter that requires multi-directional inspection and must take the dimension of time into account.

To be continued!