China's New Law on Resolving Employment Disputes May Enhance Intellectual Property Protections

Late last December, China's National People's Congress adopted and China's President promulgated the Law on Mediation and Arbitration of Labor Disputes of the People’s Republic of China. See Order No. 80, Dec. 29, 2007.

That law went into effect on May 1, 2008 and is touted as a significant improvement over the prior law, improving fairness in the treatment of employees and employers and improving efficiencies. Among the advantages of the new law include that it expands the scope of cases that courts will accept and the statutory limitation period. It also increases opportunities for mediation and arbitration and significantly improves both of these alternative dispute resolution mechanisms.

Of particular interest regarding disputes involving intellectual property that may arise under employment contracts containing non-disclosure or related provisions, this new law applies pursuant to Article 2(2).

Under Article 23, a third-party with a material interest in the outcome of a dispute may apply to receive notice or otherwise participate in arbitration proceedings. This may provide a significant opportunity for U.S. and other companies with Chinese design or manufacturing partners to better protect their intellectual property interests.

The protection of these interests are generally required by U.S.-to-China design or OEM agreements, for example, where the Chinese company is required to put employment contracts in place by which its employees are bound by the same or substantially similar non-disclosure obligations to those that bind the employing entity. Such provisions extending to employees are included in these outsourcing and supplies contracts as a matter of best practices.

Prior to the new law, however, these provisions were largely regarded as unenforceable in China where piracy and industrial espionage are notorious and where the exclusivity of intellectual property rights is still a developing concept. From intellectual property and international transactions perspectives, China's new labor dispute law may be a welcome change indeed.

For the full text of the new law in English or for more information about Technology Law Group's international practice, please contact us at +1.208.939.4472 or info@technologylawgroup.com or visit our Web site at http://www.technologylawgroup.com/.