1. Developments in IPR Protection in China George Fu Watson & Band Law OfficesManaging Partner IP Committee, SBA Chair May 28, 2013 1

2. www.watson-band.com IP Development in China in 2012 Administrative penalty amounts have been raised. Amendment and formulation of the law Liabilities of ISPs are defined. The “7 Focuses” in IP trials for the People’s Courts The number of administrative enforcement cases increases. The number of cases heard at courts increases. Strategic new industries are intensified. Scientific & Tech achievements can be used as investment for shares. InnovationIncrease DevelopmentJudicial focus

3. www.watson-band.com IP Development (Judicial) Comparison with 2011: Acceptance (civil nature) by local judiciary in 2012: 87,419 IP cases at an annual increase rate of 45.99%, and concluded 83,850 such cases at an increase rate of 44.07%. Acceptance (administrative nature)by local judiciary: 2,928 IP cases at an annual increase rate of 20.35%, and concluded 2,899 at an increase rate of 17.37%. Acceptance (criminal) by the judiciary: 13,104 cases at an annual increase rate of 129.61%, and concluded 12,794 such cases at an increase rate of 132.45%.

4. www.watson-band.com IP Development (Judicial) Composition of First Trial IP Related Administrative Cases accepted by the local Courts in 2012 Composition of First Trial IP Related Criminal Cases accepted by the local Courts in 2012

5. www.watson-band.com IP Development – Data (Administrative Enforcement) In 2012, the AICs around China dispatched a total of 1,527,300 persons in enforcement inspections of 394,500 wholesale and retail markets and pedlars’ markets. In these actions, 7,339 factories and stores manufacturing and selling counterfeit products were destroyed. 120,400 cases involving counterfeiting were docketed and dealt with; 851,000,000 RMB was fined and/or confiscated. 1,576 suspected criminal cases involving a total of 2,024,000,000 RMB were transferred to judicial authorities. The enforcement authorities dealt with a total of 325,271 cases involving IP right infringement and manufacturing and sales of counterfeiting products, involving a total amount of 8,890,000,000 RMB. 6,999 suspected criminal cases were transferred to judicial authorities and 20,271 factories and stores manufacturing and selling counterfeit products were destroyed. The public security uncovered a total of 43,773 cases involving infringement and counterfeiting activities, in which 60,306 suspected criminals were arrest and a total amount of 11,320,000,000 RMB was involved. 5

6. www.watson-band.com IP Development – Data (Customs Recordation) Number of Customs IP Protection Cases in 2012 In 2012, the Customs have taken protection measures in 18,300 cases, of which 15,600 involved seizure of suspected infringing goods and 9,600 involved seizure of infringing goods, reaching a total amount of 375,000,000 RMB. Customs IP Protection Worldwide in 2012 Top 5 (based on the number rights): United States (2184), France, Germany, Japan (687), Italy and China (538) Top 2 (based on the quantities of Goods): Sweden (33,753 ， 875) and China (28,482,335) Cases where the right holders are Chinese individuals or companies have reached 52% of the total IP recordation at the Customs. 6

7. www.watson-band.com IP Development – Legislation 1.Legal liabilities of ISPs are further defined. Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Cases involving Disputes over RCINs Fa Shi [2012] No.20, promulgated on January 1, 2013 2.The amounts of administrative penalties are raised. A penalty of less than 200,000 RMB can be imposed concurrently. In case no value of goods is involved or the value is less than 50,000 RMB, a penalty of less than 250,000 RMB can be imposed according to the seriousness of the case. – Rules of the P.R.C. for the Protection of New Plant Varieties (2013 amendment) – Regulations for the Protection of Computer Software (2013 amendment) – Rules for the Implementation of the P.R.C. Copyright Law (2013 Amendment) – Regulations for the Protection of the Right of Communication through Information Networks (2013 Amendment) 3.Third Amendments to the Trademark Law and the Copyright Law P.R.C. Trademark Law (amended in 1993 and 2001) – The Third Amendment is in progress. P.R.C. Copyright Law (amended in 2001 and 2004) – The Third Amendment is in progress. 7

8. www.watson-band.com Third Amendment of the Trademark Law – Major Revisions Draft version published on the NPC’s website on December 28 th, 2012 Additions Voice trademark “one mark for multi- classes” mechanism Mechanism of invalidity declaration of registered trademarks Types of trademark infringement (contributory infringement) Provisions on conflicts between trademarks and trade names Provisions on fair use of trademarks Trademark owner’s burden of proof for certifying actual use of the trademark Deletions One-year exclusive period for registration The process of the Trademark Office’s decision on trademark objection is abolished. The Trademark Office will directly decide on whether or not the trademark should be registered after examining the trademark objection. Improvements Recognition of a well-known trademark is defined as “factual recognition”. The trademark objection mechanism is restricted. Penalties for trademark infringement are heavier. Provisions on preliminary injunction are perfected. Definitions Cyber-squatting of a trademark, which the party knows from business connections is in prior use by the other party, is explicitly prohibited. “Use” under the Trademark Law is clearly defined. Legal status of recordation of a trademark license contract is clearly defined. 8

9. www.watson-band.com Third Amendment of the Copyright Law – Major Revisions “Droit de suite” is added for fine art works, and protection periods are added for singing and photography works. Right of rental and the right of remuneration in audio and video works is added for performers. Right of remuneration for other’s use of audio works by broadcasting and public transmission is added for producers of the audio works The rights of radio and television broadcasting organizations are revised from prohibitive rights into exclusive rights. The standard for statutory compensation is raised. Provisions of punitive damages are added. The scope of fault presumption on the infringer’s side is expanded. 9

10. www.watson-band.com IP Development – Policies of the Administration for Industry and Commerce Strengthening administrative IP enforcement by the AIC in conjunction with the criminal law enforcement authorities. – Circular of the State AIC on the Special Enforcement Action against “Free Ride” Activities (Gong Shang Jing Zheng Zi [2013] No.42), promulgated on February 27, 2013 – Opinions of the State AIC, the Ministry of Public Security and the Supreme People’s Procuratorate on Strengthening the Interlocks between Administrative Enforcement and Criminal Judicial Work (Gong Shang Fa Zi [2012] No.227), promulgated on December 18, 2012 – Opinions of the SAIC on Building a Long-term Protection Mechanism for Trademarks, promulgated on June 27, 2012 10

11. www.watson-band.com Judicial Interpretation on the Right of Communication through Information Networks The Provisions on Several Issues concerning the Application of Law in the Trial of Cases involving Disputes over the Right of Communication through Information Networks (“RCINs”) supersede the Interpretations on the Several Issues concerning the Application of Law in the Trial of Cases involving Disputes over Computer Network Copyrights as of January 1, 2013. Cases involving RCIN copyright infringement are the main infringement in the court cases, which consist of over 50% of IP related lawsuits in China. 11

12. www.watson-band.com Latest Case involving Infringement upon the RCIN Beijing: first time that a website is found guilty for abetting infringement (first trial) In Beijing Chinese Online Digital Publication Co., Ltd v. Beijing Zhizhu Network Technology Co., Ltd.(involving E-book of “Legend of Concubine Zhen Huan”), Chaoyang Court first applied the Supreme Court’s 2013 judicial interpretations and found the defendant guilty for “abetting infringement” and granted Plaitiff the compensation for over 40,000 RMB.

13. www.watson-band.com Latest Case involving Infringement upon the RCIN Beijing: the first case involving infringement by both the videos and the application (first trial): in Sohu v Bale, the Court adopted “user perception” doctrine instead of “server” doctrine to find Bale guilty for the infringement. Wuhan (first trial): Different from Beijing, in Baidu case, the court held that it is unreasonable to put burden on ISP, refusing to adopt “user perception” doctrine.

14. www.watson-band.com Prospects of IP Protection in China  The Third National Courts’ IP Related Trial Work Conference in 2013: 7 Focus Tasks for Chinese Judiciary  2013 Plan for the Implementation and Promotion of the National Intellectual Property Strategy