After China's patent law was promulgated in 1984, it has been amended in 1992 and 2000. The previous two amendments focus on encouraging the introduction of foreign advanced technology and strengthening IPR protection to foreign investors. The third amendment to Patent Law in 2008 is made to effectively promote China's independent innovation capability.

The third revision of patent law increases the penalties for patent violations and clearly provides for compensation for right holders’ reasonable expenses paid for preventing patent infringement. That is the costs of protecting rights. Meanwhile, the newly revised patent law provides that patent infringement fines shall be increased from three times of the illegal gains to 4 times; If there is no illegal gains, the amount of the fine is increase from 50,000 yuan to 200,000 yuan. And the revised law empowers patent authorities to investigate suspected acts of counterfeiting patent.

To improve the efficiency of judicial protection, the revised patent law also provides that in judicial proceedings, if the right holders suffer losses from patent infringement while it is difficult to determine the amount of profits gained by the infringer and patent licensing fees, the people's court shall determine an amount over RMB 10,000 RMB but below RMB 1,000,000 as compensation by taking into account such factors as the type of patent right, the nature of the infringement and other circumstances.

Taxation of Internet Transactions

Whether there is a need to pay taxes for the internet transactions has been a longstanding discussion. As early as in 2007, China's first criminal prosecution of individuals and companies using the Internet transactions to evade tax had been brought to trial and sentenced in Shanghai's Putuo court. In this case, the company was imposed a fine, and the company's legal representative and manager were sentenced to two-year imprisonment with probation of two years. Meanwhile, both of them were imposed a fine.

However, net shops' business is still prosperous, and their business volume is huge. It is known that these net shops usually don’t pay the taxes. According to our country's laws and regulations, do these net shops need to pay taxes?

In our existing management of e-commerce, there are extremely few regulations and provisions about the on-line transactions. The only available regulation to comply with is the Ministry’s “Guidance On-line trading” (Discussion Draft). In which the regulations about the parties in the on-line transactions are: People engaged in transactions of goods and services must have the appropriate qualification, and shall be subject to administrative authorities of industrial and commercial and other competent departments for approval. However, the guidance is not mandatory, so some people say guidance is like "Civilization Convention", it only encourages C2C (individual to individual) personal net shop to pay taxes.

At present most of the business owners on the Web site have not applied for business licenses. And the websites which provide those merchant shops have not required them to do so. In addition, in the area of B2C (Business to Consumer), there are a few registered Web sites selling products, which also have no licenses.

From the perspective of e-commerce development, current primary objective is to promote the development of electronic commerce. It’s stated in experts’ study that, although in 2006 the total amount of national online shopping grew beyond 300 billion, but it only accounts for 0.4% of the country's total retail sales, compared to 3% of the United States, while South Korea is as high as 7%.

In addition, it would be inappropriate to levy network transactions tax for several reasons:

1. There is considerable difficulty in the levy: first, the authenticity of the transaction subject is uncertain; second, it is very difficult to guarantee the accuracy of the transaction amount; third, different tax ratios apply to different subjects. It is hard to distinguish between corporate or individual behavior for the purpose of profit or the purposes for services.

2. The cost of levy: If the tax collection requires lots of efforts and resources but only very few tax revenues are collected, the gain does not deserve collection.

According to the law, paying taxes is the obligation of every corporate and every citizen. And it is inevitable to levy tax on the network transactions tax sooner or later. E-commerce is only an online trading platform for the seller, and if the parties of the offline transactions should pay taxes, then online transactions shall also pay taxes. However, the state shall balance the connection between development of e-commerce and the tax levies.