Comments Sought on China's New Proposed Regulations to Promote Indigenous Innovation
This post was written by Hugh Scogin, Mao Rong, and Zack Dong.
In November 2009, the Ministry of Science and Technology, the National Development and Reform Commission and the Ministry of Finance jointly issued Notice No. 618, requiring enterprises registered in China to apply for accreditation of indigenous innovation products. The program would have provided the Ministry of Science and Technology with authorization to prioritize accredited products for government procurement. Of particular interest to foreign enterprises were requirements that an applicant's use, disposal and improvements to a relevant product's intellectual property (IP) must not be subject to foreign restrictions, while any trademark used would first require registration in China and would also need to be free of restrictions from any related foreign brands. Under this program, foreign-invested companies whose products are not locally developed would not be able to participate equally with their Chinese competitors in government procurement unless they agreed to take the risk of removing licensing restrictions from their IP. In response to the notice, foreign associations and business leaders expressed concern that the system promoted domestic favoritism and would potentially result in discriminatory requirements for companies looking to take part in the government procurement market, while also restricting the capacity for innovation and development in China.
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