M&A Disputes Set to Rise in Latin America: How Savvy Investors Are Protecting Themselves
As deal activity shows signs of rebounding in 2025, investors are bracing for an increase in M&A-related disputes globally, and Latin America is no exception. It appears to be leading the trend.
According to Berkeley Research Group’s latest M&A Disputes Outlook, more than 80% of investors and legal experts surveyed expect the volume and value of disputes in Latin America to rise this year. The reasons are hardly surprising to anyone following the news. According to Alejandro Martinolich, a BRG associate director based in Buenos Aires, persistent political and economic uncertainty in Brazil and Mexico, the region’s two largest economies, contributes to investor anxiety, making it more difficult to price and structure deals with confidence.
“With highly valuable assets and continuous political and regulatory changes, not to mention macroeconomic uncertainty, Latin America has ideal conditions for a dispute,” said Martinolich. And he’s right. The region has seen volatility in both the Mexican peso and the Brazilian real, partly due to concerns over tariff threats and unpredictable government decisions.
What’s Driving the Disputes?
According to the BRG survey, financial and operational performance issues are the most common flashpoints, followed closely by foreign exchange volatility. Deal terms such as put and call options, redemption rights, and other contract provisions aimed at managing uncertainty often become contentious when the operating environment deteriorates or projections go unmet.
Notably, it’s not the billion-dollar megadeals that are fueling this trend. It’s the smaller transactions, the ones under $50 million, that are seeing the sharpest rise in disputes, likely because these deals often lack the deep due diligence, legal firepower, and sophisticated structuring of larger transactions.
Why Investors Are Structuring Deals to Avoid Local Jurisdictions
Considering these conditions, sophisticated investors now structure their deals to avoid having disputes resolved in the operating country altogether. Instead of relying on local courts in Brazil, Mexico, or other Latin American nations where litigation is often lengthy and sometimes unpredictable and subject to local political winds, investors increasingly route dispute resolution through corporate structures based in the United States or other common law jurisdictions like the U.K. or Singapore. Why?
Speed and Predictability: Courts in common law jurisdictions are known to be quicker and more transparent than their Latin American counterparts. Common law systems, like those in the United States and the U.K., are based on judicial precedents. More importantly, common law generally provides quicker remedies to the parties in equity and law, and this can be faster than relying on codified laws.
Higher Legal Costs as a Deterrent: The expense of litigating in the United States can act as a powerful deterrent against frivolous lawsuits. Courts can impose sanctions, fines, and payment of the other party’s expenses and attorney fees on parties who file frivolous claims or engage in abusive litigation practices.
Perceived Fairness: Investors believe they’ll receive a more balanced hearing in jurisdictions where judges and arbitrators are less likely to be influenced by local politics or pressure.
A Global Trend with Local Nuances
Latin America is part of a larger global uptick in disputes, as seen in BRG’s wider survey of 200+ financial and legal professionals. Globally, several sectors including fintech, real estate, and energy are expected to see a rise in litigation, driven by shifting regulations and deal terms that no longer align with evolving realities.
In the United States, regulatory shifts such as rollbacks of Biden-era clean energy incentives by the current administration would have rippling effects leading to disputes over valuations and government support.
Bottom Line
Latin America remains a region of opportunity with compelling valuations, rising markets, and untapped assets. However, it also comes with particular dispute risks. Dealmakers operating in Latin America have to be especially diligent in crafting precise and adaptable contracts that can withstand economic shocks, currency swings, and regulatory unpredictability to reduce the likelihood of post-transaction disputes. Ultimately, for dealmakers, the solution is not to avoid the region but to structure smarter, recognizing and anticipating instability and making sure any dispute that does arise plays out on their home turf, or at least on more neutral ground.
Latest Updates on Per- and Polyfluorinated Substances (PFAS)
European Union
PFAS in consumer products – The European Commission reiterated its support for restricting PFAS in consumer products during a structured dialogue with the European Parliament’s ENVI Committee on 13 May 2025. Vice-President Stéphane Séjourné confirmed that the Commission is prioritising a consumer product-focused approach, citing the current lack of viable alternatives for industrial applications.
Following this statement, the NGO Corporate Europe Observatory (CEO) publicly criticised the Commission’s limited scope, warning that a focus primarily on consumer products fails to address industrial emissions and PFAS waste streams.
Universal PFAS restriction – ECHA’s Committee for Socio-Economic Analysis (SEAC) will continue examining the proposed PFAS restriction at its June 2025 meeting, focusing on transport, medical devices, and lubricants.
Chemicals Industry Action Plan and Omnibus Package – The European Commission will unveil its chemicals industry action plan on 2 July 2025, addressing competitiveness amid regulatory challenges. President von der Leyen reaffirmed the Commission’s commitment to aligning industrial competitiveness with consumer protection during an industry dialogue on 12 May. A broader Chemicals Industry Package, including potential REACH simplifications and PFAS clarifications, is planned for year-end.
Classification of Trifluoroacetic Acid (TFA) as a reproductive toxicant – On 26 May 2025, the European Chemicals Agency (ECHA) launched a six-week public consultation on the proposed harmonised classification of trifluoroacetic acid (TFA) as a reproductive toxicant. The dossier, submitted by the German Federal Environment Agency, concluded that TFA meets criteria for reproductive toxicity under CLP. TFA, a PFAS-related substance and degradation product of pesticides and fluorinated gases, has demonstrated toxicological effects in animal models at concentrations above environmental levels. Classification may trigger specific labelling obligations and usage restrictions under REACH.
Extension of PFOA exemption and ban on UV-328 under POPs Regulation – On 5 May 2025, the European Commission extended the exemption permitting the use of PFOA in firefighting foams until 3 December 2025, citing industry difficulties in compliance and detection issues. The exemption applies strictly to existing liquid fuel fire suppression systems for class B fires, in line with Stockholm Convention provisions.
Water resilience and PFAS – Ahead of its official presentation by the Commission on 4 June 2025, a leak of the forthcoming Communication on the Strategy for Water Resilience was published by the media on 15 May 2025. Several stakeholders have already criticised the Commission’s draft strategy for its perceived emphasis on remediation rather than the prevention of PFAS pollution at the source. Eureau highlighted that only a swift and comprehensive ban on PFAS can effectively protect public health and condemned the shifting of pollution management costs onto water service providers. Earlier, on 7 May 2025, the European Parliament adopted a non-legislative report urging the Commission to adopt a more robust Water Resilience Strategy. The report advocates, among other measures, for broader PFAS restrictions and calls for a reassessment of the application of the polluter pays principle to the pharmaceutical industry under the Urban Wastewater Treatment Directive (UWWTD).
International / Global
Global ban on Long-Chain Perfluorocarboxylic Acids (LC-PFCAs) – On 2 May 2025, Parties to the Stockholm Convention agreed to list LC-PFCAs under Annex A, instituting a global ban on their manufacture, use, import, and export, subject to limited exemptions. These exemptions include a five-year allowance for semiconductors used in replacement parts and continued use until 2041 or end-of-life for combustion engine vessel parts and out-of-production motor vehicles.
The Carbon Border Adjustment Mechanism: How to Navigate a Complex Mechanism
This note is dedicated to importers and producers of specific goods from countries outside the European Union, who will be subject to carbon pricing equivalent to that applied to European manufacturers of the same goods, without using third-country goods.
Regulatory Framework
As a reminder, the Carbon Border Adjustment Mechanism (CBAM or MACF in French) was introduced at European Union (EU) level by three regulations dated 2023:
Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023; and
Commission implementing regulations (EU) 2023/1773 and 2025/486 dated 17 August 2023 and 17 March 2025.
It should be noted that the legal framework applicable to CBAM is likely to be simplified at EU level (see the paragraph below entitled “Potential simplification”).
Objectives
Directly applicable since 1 October 2023, this regulatory mechanism has nonetheless been implemented gradually in order to eventually bring the carbon footprint of imports into line with European standards, notably by requiring economic players to quantify the CO₂ emissions of their imported goods (the idea being to restore the balance between European and non-European producers by applying a carbon price to products imported into the EU).
This environmental policy measure also marks the phasing-out, at the same time, of the free allocation of allowances under the EU Emissions Trading Scheme (ETS) created in 2005. As a result, in the medium term, an importer and a producer established in the EU will both pay the same carbon price.
Conditions of Application
An importer[1] or an indirect customs representative acting as an authorized CBAM declarant at the time of import[2] will have to pay the carbon “tax” at the border if the following cumulative conditions are met:
the imported goods are on the list of products referred to in Annex 1 of Regulation 2023/956 (e.g., steel, aluminum, nitrogen fertilizers, cement, hydrogen or electricity)[3];
the imported goods come from a non-EU country (exemptions: Iceland, Norway, Liechtenstein, Switzerland or certain territories of member states such as Ceuta, Melilla, Livigno, Helgoland, Büsingen);
the imported goods have an intrinsic value of more than €150 per shipment (the Omnibus Proposal proposes to remove this financial threshold); and
the customs procedure applicable to the imported goods corresponds either to “release for free circulation” (i.e., the imported goods will be consumed and/or move freely within the customs territory of the Union), or to “inward processing” (i.e., the imported goods will be processed and ultimately released for free circulation without being re-exported outside the Union, even if the processed goods are no longer included in the list products referred to in Annex 1 of Regulation 2023/956).
Potential Simplification
Less than a year before the CBAM becomes fully operational, at the end of February 2025 the European Commission published a proposal to simplify the system for the benefit of “small” importers, who in reality represent around 90 percent of the economic players affected by the CBAM (Omnibus Proposal).[4]
In other words, economic players whose cumulative imports of iron, steel, aluminum, cement and nitrogen fertilizers (with the exception of electricity or hydrogen) do not exceed 50 tons over the calendar year would be exempt from any CBAM obligation. This Omnibus Proposal should considerably reduce the administrative burden for the majority of importers, while ensuring that 99 percent of carbon emissions remain covered by the CBAM.
Regarding the Omnibus Proposal, requests for “Authorized CBAM Declarant” status and access to the definitive CBAM portal will be processed by the Directorate General for Energy and Climate (called in French “DGEC”) as follows:
priority to businesses that imported more than 50 metric tons of goods in 2024 or that can demonstrate that they plan to import more than 50 metric tons in 2025 or 2026;
access to the portal maintained, but processing of the application for “Authorized CBAM Declarant” status postponed to the secondhalf of 2025 for economic operators who imported between 10 and 50 tons of goods in 2024;
refusal of both access to the registry and processing of applications for “Authorized CBAM Declarant” status for economic operators importing less than 10 tons of goods in 2024.
Since the endorsement of the Omnibus Proposal by the European Parliament on 22 May 2025, all eyes are now on the Council, who will have to examine and validate the Omnibus Proposal by end of 2025/early 2026.
CBAM Obligations
Obligations
From 1 October 2023 to 31 December 2025 (“Transitional phase“)
From 1 January 2026 (“Operational phase“)
Reporting obligations
Quarterly filing report in the CBAM Transitional Registry.
Annual filing report (even if actual imports are zero in a given year). This will be known as a “CBAM declaration” for the year Y-1, and will be made no later than 31 May of each year on the declarant’s account in the CBAM final Registry. The first CBAM declaration is due no later than 31 May 2027.
Please note: the Omnibus Proposal proposes shifting the annual filing deadline to 31 August of each year.
No payments, no adjustments.
Verification report of the CBAM declaration by an independent third-party auditor accredited (by COFRAC[5] in France) becomes compulsory and at the importer’s expense.
Please note: the Omnibus Proposal proposes relaxing the obligation to verify the calculation of imported emissions for goods for which actual emissions data (rather than default data) are used.
Data collected (non-exhaustive and different if the declarant is an importer/producer):
– total quantity of each type of merchandise– total real intrinsic direct emissions (emissions linked to the production process)– total indirect emissions (emissions linked to electricity consumption during the production process)– production process used, information about the production site– details of the emissions calculation method used– carbon price paid in a country of origin, taking into account any rebates or other forms of compensation available
When using default data, a mark-up will be automatically integrated into the data itself, impacting the carbon price.
An implementing regulation specifying the content of the annual CBAM declaration is expected in summer 2025.
CBAM Authorized Declarant” status obtained
As of 31 March 2025, it is recommended to apply for ASAP status directly on the definitive CBAM definitive registry, as this status will become mandatory and will be required prior to all imports.
Please note: the application processing time may vary between 4 and 6 months, if additional information is requested by the DGEC. If an application for CBAM status is in progress on 1 January 2026, it will not be possible to import CBAM goods.
Mandatory Obtaining this status has the value of an import license (also known as an “import permit”) The issuance of this status is conditional upon the submission of the following two documents:– proof of tax status less than 3 months old (available from impôts.gouv.fr); and– if you have been established for more than two years, the tax return; or– if you have been established for less than two years, a financial guarantee such as a surety bond issued by a bank or insurance company (guarantee to be released immediately after 31 May of the second year in which the application was made; exact amount to be specified by the DGEC). Once the status has been obtained, it will be valid in all member states.
Purchase and management of CBAM certificates, via a purchasing platform interconnected with the definitive CBAM registry
N/A
1 CBAM certificate = 1 t CO2eq. Minimum stock required at the end of each quarter corresponding to 80% of intrinsic emissions linked to the import of goods since the beginning of the calendar year. Importers will need to anticipate the number of CBAM certificates they will need to cover the emissions generated by the goods they plan to import. Each week, the Commission calculates the price of CBAM certificates as the average closing price of emission allowances in the European Emissions Trading Scheme (ETS). In the event of an excess of certificates, and up to a limit of one-third of the total number of certificates purchased during year N-1, the excess may be bought back by the DGEC at the price at which the importer purchased it[6] On 1 July of each year, the European Commission cancels the certificates purchased during year Y-2 and remaining in the account.
Please note: the Omnibus Proposal envisages a reduction in the minimum stock of certificates from 80% to 50% (making the financial commitment of the importer represented by these certificates more acceptable), and the obligation to purchase certificates should only begin in February 2027 (it being specified that the deadline for repurchasing certificates would be set at 30 September of each year, while the cancellation of certificates by the Commission would be postponed to 1 October).
CBAM Registry Connection Mode Changes
The CBAM registry connection mode will change on 1 January 2026.
If the importer already has access to the CBAM registry (i.e., by creating an account based on the EORI SIRET number and accessing it via the douane.gouv website), the 2025 quarterly reports must continue to be filed via the current CBAM account. The OLGA online service will remain active to address any problems of access to these “old” CBAM accounts via the douane.gouv website. However, it is recommended that you save the pdf and xml formats of the quarterly reports linked to this account, to keep them after 2026 in view of the future withdrawal of access, the date of which has yet to be determined.
Without waiting for 1 January 2026, you will need to contact the CCE (in French cellule-conseil aux entreprises) within the economic action unit of the regional customs directorate responsible for the company’s head office, to request the creation of a new account on the CBAM registry, based on the EORI SIREN number (accessible free of charge via the SOPRANO online service available on the douane.gouv website). To secure the data in this new account, an EU Login will be needed for each connection to the register
In practice, you will need to email the relevant CCE a completed form requesting the creation of a new CBAM account on the permanent registry (form available on the douane.gouv website), with “UUMDS “CBA/ MACF” account creation request” in the subject line.
If the importer is not located in an EU member state and does not have an EORI, he will not be able to obtain Authorized CBAM Declarant status directly. In this case, an indirect customs representative will be required to take the necessary steps on the importer’s behalf (since the indirect customs representative has an EORI).
Once the account has been created, and from 1 January2026, it will be possible to access the definitive CBAM registry directly via the TAXUD European authentication portal (https://cbam.ec.europa.eu/authorised-declarant).
Takeaway
At this stage, importers should:
Follow up closely the Omnibus Proposal (amendment, adoption, etc.);
Continue to provide information and training to suppliers, to ensure that they receive a satisfactory flow of information on time, and to ensure the quality of reporting.
Contacts
The Carbon Markets Office of the French Directorate General for Energy and Climate (DGEC; [email protected]) is responsible for all practical and methodological questions relating to emissions calculations.
As far as customs are concerned, you should contact the Restrictions and Securing Trade office of the General Directorate of Customs and Indirect Taxation (DGDDI; [email protected]).
[1] Economic actor established in an EU member state identified by a Community identification number called “EORI”; this number has been essential since 2023 to manage relations with intra-Community customs authorities, and you can request it by logging on to douane.gouv.fr via the Soprano platform: https://www.douane.gouv.fr/service-en-ligne/demande-dautorisation-douaniere-et-fiscale-soprano.
[2] In particular, if the importer uses a DDP incoterm (Delivered Duty Paid) and is not established in an EU member state, he will use an indirect representative
[3] The identification of imports covered by CBAM is based on the customs nomenclature. To find the CN product code associated with the imported merchandise, you need to refer to the RITA database (please note that the CN codes 7616 and 7326 refer respectively to “other articles” in aluminum and steel, as these codes are likely to cover a wider range of products; they are referred to as “sweeper” codes, extending CBAM to a large number of merchandise items).
[4] Omnibus I – COM(2025)87
[5] France’s leading certification body. The list of accredited auditors is not yet available.
[6] It will not be possible to trade or sell certificates between authorized CBAM declarants (unlike on the ETS market). However, an authorized CBAM declarant will be able to optimize purchases of CBAM certificates by acquiring hedging products on the ETS market, or by purchasing more CBAM certificates in year Y than anticipated imports, which will enable the registrant to request reimbursement of the most expensive certificates.
Read this article in French
Dubai Court of Appeal Annuls Anti-Suit Injunction Issued in ICC Arbitration Proceedings
Introduction
In a recent decision, the Dubai Court of Appeal (Court of Appeal) in Case No. 8 of 2025 (issued on 28 April 2025) annulled an interim award, issued by an arbitral tribunal in an ongoing International Chamber of Commerce (ICC) arbitration, which prohibited the respondent from filing proceedings before any court. The Court of Appeal held that arbitration proceedings cannot suspend or override a party’s constitutional right to access the courts unless expressly permitted by law, and the anti-suit injunction issued by the arbitral tribunal did not qualify as a valid interim or precautionary measure under the laws of the United Arab Emirates (UAE).
Background
The arbitral tribunal in an ICC arbitration, seated in Dubai, issued an interim award preventing the respondent in the arbitration from filing any claim before any court with respect to the matters in dispute in the arbitration. The respondent applied to the Court of Appeal to annul the award on the basis that it prevented the respondent from exercising its constitutional right to file court proceedings and that the anti-suit injunction did not constitute a valid interim or precautionary measure under Article 21 of Federal Law No. 6 of 2018 (the UAE Arbitration Law).
Although the Court of Appeal recognised the purpose of anti-suit injunctions (noting that they can be used to guarantee the effectiveness of an arbitration agreement and avoid the risk of conflicting judgments), the Court of Appeal held that the right to litigation is a constitutional right prescribed by law and that a court or arbitral tribunal cannot issue an anti-suit injunction unless the law expressly permits. As the arbitration was seated in Dubai, the applicable law was the UAE Arbitration Law. The Court of Appeal held that the UAE Arbitration Law does not permit an arbitral tribunal to issue an anti-suit injunction, and therefore, the tribunal’s interim award lacked legal basis and had to be annulled.
Analysis
Article 21 of the UAE Arbitration Law entitles an arbitral tribunal to issue interim or preventive measures as it may deem necessary. One of the permitted orders, contained in Article 21(1)(e) of the UAE Arbitration Law, is an order directing or refraining a party from taking action that is likely to cause current or imminent harm or prejudice to the arbitral process itself. The Court of Appeal’s decision in Case No. 8 of 2025 indicates that the onshore UAE courts do not consider that an anti-suit injunction falls within the scope of this provision.
It remains to be seen whether the approach taken by the Court of Appeal in this case will be maintained by the onshore UAE courts. If followed, parties in arbitration proceedings seated in Dubai (or elsewhere in the UAE) face the prospect of being required to incur the time and cost of engaging a local advocate to file a jurisdictional objection against parallel proceedings in the onshore UAE courts on the basis of the parties’ arbitration agreement.
Beijing IP Court Releases 2024 Annual Cases
On April 30, 2025, the Beijing IP Court (BIPC) released their list of 2024 annual cases including 7 IP-related cases and 1 antitrust case. The Court explained that the cases “cover the four major intellectual property trial areas of patents, trademarks, copyrights, and competition and monopoly, involving innovative achievements in emerging industries in key areas such as medicine, communications, seed industry, platform economy and data. These cases reflect five major characteristics: increasing efforts to protect industrial innovation in key areas, cracking down on intellectual property infringements, helping to build a high-level socialist market economic system, serving the development of the intellectual property rule of law, and contributing Chinese wisdom to world intellectual property governance.”
Press conference releasing the 2024 annual cases.
The original text is available here via social media as the BIPC seems to be geoblocked as of the time of writing.
As summarized by the BIPC:
Case Ⅰ: Standard-Essential Patent Infringement and Royalty Rate Dispute——Assisting a Renowned Enterprise in the Communications Field to Reach a Global Settlement1. Case InformationPlaintiff: X CompanyDefendant: X Guangdong Mobile Communications Company.2. Basic FactsBoth parties to this case are renowned enterprises in the field of communications. At the time of this trial, the two parties had been engaged in licensing negotiations for many years over the 3G and 4G standard – essential patent portfolios, and there were numerous related parallel litigations in various jurisdictions globally, including infringement claims and tariff claims. The plaintiff is the holder of the invention patent titled ‘Base Station Device, Mobile Station Device and Communication Method’. It claims that the patent involved is a standard – essential patent of the LTE communication standard, and believes that the defendant’s acts of manufacturing, selling and offering for sale the two models of mobile phones involved constitute an infringement of the patent right involved, and requests the court to order the defendant to stop the infringing acts.The plaintiff did not file a claim for damages and stated that the purpose of its lawsuit was to advance the licensing negotiations. The defendant filed a counterclaim in the dispute over the royalties of the standard essential patents in this case, requesting the court to make a judgment on the licensing conditions, including but not limited to the licensing royalties, within the scope of mainland China for the 3G and 4G standard essential patents which the plaintiff owns and has the right to license for the intelligent terminal products manufactured and sold by the defendant. After trial, the Beijing Intellectual Property Court held that the counterclaim filed by the defendant met the acceptance conditions, thereby accepted the defendant’s counterclaim and actively promoted the joint trial of the two lawsuits, and finally facilitated the two parties to successfully reach a global patent cross – licensing agreement. On the same day, the parties applied for the withdrawal of this case and the counterclaim respectively on the grounds of reaching a settlement, and the Beijing Intellectual Property Court ruled to approve the withdrawal of the lawsuit by both parties.3. Judgment GistWhen a standard-essential patent holder files a patent infringement lawsuit, requesting the court to order the implementer to stop infringing the patent involved, and the implementer files a counterclaim, requesting the court to rule on the licensing conditions of the standard – essential patent portfolio including the patent involved, the court may take into account the fact that both the counterclaim and the original claim need to examine the same fact, that is, the licensing negotiation matters between the patent holder and the implementer regarding the patent involved and the related standard – essential patent portfolio.The counterclaim should be accepted and jointly tried, in a situation where there is a high degree of correlation between the counterclaim and the original claim.4.Typical SignificanceUnder civil procedure law theory, the relationship between the counterclaim and the original claim serves as the basis for their joint trial. The closer the substantive legal relationship between the original claim and the counterclaim, the more necessary it is to jointly try them in the same case. Article 233 of the “Interpretation of the Supreme People’s Court Concerning the Application of the Civil Procedure Law of the People’s Republic of China (Amended in 2022)” (referred to as the Judicial Interpretation Concerning the Civil Procedure Law) stipulates the acceptance conditions for counterclaims, stating that if the counterclaim and the original claim are based on the same legal relationship, there is a causal relationship between the claims, or the counterclaim and the original claim are based on the same fact, the people’s court should jointly try them. Generally, the counterclaims and original claims accepted by the people’s court are based on the same legal relationship or the same fact, but there are certain particularities in the field of standard – essential patents.A patent that must be used to implement a certain technical standard is called a standard-essential patent. With the vigorous development of the digital economy, standard-essential patent technologies are widely applied in fields such as mobile communication, intelligent connected vehicles, and the Internet of Things. A smart terminal product often contains thousands of standard – essential patents. Against the backdrop of intensified market competition and accelerated technological iteration, licensing negotiations and disputes surrounding standard-essential patents are increasing day by day. In a standard-essential patent infringement case, the right basis usually only involves one or several patents, and the alleged infringing product is also specific. However, in actual licensing negotiations, the two parties often conduct negotiations concerning the entire standard – essential patent portfolio of the patent holder and all related products of the implementer. This leads to a situation where a standard – essential patent infringement lawsuit and a royalty rate lawsuit are not consistent in the scope of patents and products involved. So, on the surface, it does not meet the general acceptance conditions for counterclaims in the civil procedure law. This is exactly the case in this lawsuit. Based on this, the Company claimed that the counterclaim filed by the Mobile Communications Company should not be accepted, and further claimed that the original claim and the counterclaim did not involve the same fact because it did not request the calculation and payment of infringement damages based on the licensing fees in this case.In response to this claim, the court referred to the previous judicial practice of standard – essential patent trials, comprehensively considered the trial ideas and judgment logic of standard – essential patent infringement lawsuits and royalty rate lawsuits, and held that in an infringement lawsuit involving standard-essential patents, whether to order the defendant to stop the infringement is not only determined by whether the defendant has implemented the patent involved without permission, but also by whether the negotiating parties have violated the FRAND obligation. To determine whether the patent holder has violated the FRAND licensing obligation and whether the implementer has violated the obligation of good faith negotiation, in addition to examining the negotiating behaviors of both parties, it is also necessary to examine whether the licensing conditions proposed by both parties during the negotiation process are obviously unreasonable. These licensing conditions are not only for the patent involved, but for all 3G and 4G standard-essential patents for which the X Company has the right to grant licenses. To determine whether the licensing conditions proposed by both parties are obviously unreasonable, it is necessary to determine the reasonable range of licensing conditions, and the trial content of the royalty rate lawsuit for standard-essential patents is exactly the licensing conditions.Based on this special trial logic, although the counterclaim and the original claim in this case are not based on the same legal relationship, there is a causal connection between them, and both are closely related to the fact of the licensing negotiation between the two parties. On this basis, the Beijing Intellectual Property Court held that the the counterclaim should be accepted and jointly tried.The acceptance of the counterclaim aligns with the interests of the parties, which was mutually acknowledged by both sides. The essence of standard -essential patent disputes is to promote negotiation consensus through litigation confrontation, and seek negotiation benefits through litigation procedures. In this case, on the one hand, the patent holder has already initiated an infringement lawsuit and sought injunctive relief in advance, on the other hand, the patent implementer hopes that the court will rule on the licensing conditions. If the counterclaim of the patent implementer is not accepted, it can only initiate another subsequent lawsuit, and a new lawsuit may still need to go through complex and time-consuming procedures such as service of process in foreign-related cases and objections to jurisdiction. This is not only inefficient, but also the sequence and speed of the two lawsuits may affect the negotiating positions of the two parties. Facts have proved that the joint trial of the two lawsuits promoted the two parties to successfully reach a global cross-licensing agreement and subsequent cooperation plan, which resolved the long-standing patent disputes between the two parties and achieved a win-win cooperation between the two parties.This case not only delves deep into the application of the law and clarifies the conditions for the joint trial of a standard-essential patent infringement lawsuit and a counterclaim for standard-essential patent royalties, but also adheres to the judicial concept of “promoting negotiation through trial and substantially resolving disputes”, promoting the substantial resolution of disputes, maximizing the interests of both parties, and promoting industrial licensing. The fair and efficient trial of this case demonstrates the high level and professionalism of China’s judicial protection of intellectual property rights, and reflects the wisdom and responsibility of Chinese courts in the new era in resolving international disputes, as a useful reference for the trial of similar cases in the future.
Case Ⅱ: Administrative Litigation Case Regarding the Invalidation of the Patent Right for “A Crystalline Form of Rocuronium Bromide”—— Assessing the Inventiveness of a Pharmaceutical crystalline form Patent Based on Technical Effects1. Case InformationPlaintiff: Chengdu Xin X pharmaceutical companyDefendant: National Intellectual Property AdministrationThird Party: Wang XX2. Basic FactsThe plaintiff is the patentee of an invention patent titled “A Crystalline Form of Rocuronium Bromide”. The third party filed a request with the National Intellectual Property Administration to declare the patent invalid. The National Intellectual Property Administration issued a decision under appeal declaring the entire patent invalid. Then the patentee filed an administrative lawsuit with the Beijing Intellectual Property Court, claiming that this patent achieved unexpected technical effects and had been commercialized and marketed with actual industrial value, and that the Claim 1 of this patent is inventive and the decision under appeal is incorrect. After the trial, the Beijing Intellectual Property Court held that crystalline form A of rocuronium bromide in this patent had better technical effects compared to the rocuronium bromide solid disclosed in the prior art, and that this patent is inventive and the decision under appeal was incorrect in this regard. Accordingly the court ruled to revoke the decision under appeal and ordered the National Intellectual Property Administration to make a new examination decision. After the judgment was pronounced, none of the parties appealed, and the first-instance judgment of this case has taken effect.3. Judgment GistWhen assessing the inventiveness of a pharmaceutical crystalline form patent, even if obtaining the crystalline form itself is obvious, it doesn’t necessarily mean it lacks inventiveness. It’s still necessary to consider its technical effects compared to the prior art. If the crystalline form achieves better technical effects than the prior art, and these effects are closely related to the formation of the medicine, it can be determined that the crystalline form patent is inventive.4. Typical SignificanceThe pharmaceutical and healthcare industry is not only a core component of China’s strategic emerging industries but also an important area related to people’s livelihood and well-being. Its sustainable development has a profound impact on the overall economic and social situation. As a typical technology – intensive industry, the pharmaceutical field is characterized by high investment in research and development, long cycles, and high risks. Therefore, intellectual property protection plays a prominent role in stimulating technological innovation, improving drug accessibility, and promoting industrial upgrading.Pharmaceutical patents are the most core intellectual property achievements of pharmaceutical enterprises. Regarding a certain drug, the patents obtained by pharmaceutical enterprises for different technical solutions form a complete patent system, including the effective active compound as well as the corresponding crystalline form and the composition. This system is like a “firewall” or a “moat”, and it effectively ensures that pharmaceutical enterprises can fully realize the commercial interests of the drug during the patent exclusivity period, enhancing their market competitiveness. The crystalline form patent in question in this case is a common type of pharmaceutical patent. The crystalline form usually refers to the solid existence form of the drug’s active compound. Due to different crystallization conditions and processes, the active compound of the same drug may yield crystalline forms with different spatial structures and molecular arrangements. This phenomenon of polymorphism in drugs is very important for drug research and development, because different crystalline forms exhibit different physical and chemical properties. This not only affects the preparation, processing, and storage of the drug, but also affects the dissolution and release characteristics of the drug in the human body, thus affecting the efficacy and safety of the drug. On the one hand, the selection of the crystalline form is of great significance for drugs. On the other hand, enterprises have invested a large amount of manpower and financial resources in the research and development of crystalline forms. Therefore, original research pharmaceutical companies usually include the crystalline form, compound, composition, and other inventions in the scope of patent applications together to form a multi-level and all-round pharmaceutical patent protection system.Generic pharmaceutical companies will also increase their efforts in researching the crystalline forms of known active compounds of drugs, and strive to avoid the crystalline form patents of original research pharmaceutical companies, in order to compete in the market for this drug. It can be seen how important crystalline form patents are for pharmaceutical enterprises and the pharmaceutical industry.As the exclusive jurisdiction court for administrative cases regarding patent authorization and confirmation across the country, the Beijing Intellectual Property Court has always attached great importance to the trial of administrative cases of requests for invalidation of patents related to pharmaceutical crystalline forms. By applying the rules of inventiveness judgement correctly, the judgment of this case clarifies the factors to be considered for the technical effects of pharmaceutical crystalline form patents, providing a reference and guidance for the decision of such cases.In this case, it is fully recognized by the court that the prior art has a strong demand as well as provide inspiration on forming crystalline forms of known active compounds and changing known crystalline forms. Compared with the process of creating a compound from scratch, the development of crystalline forms usually results from multiple attempts to use different crystallization methods for known active compounds. crystalline form inventions usually use the general properties of crystals known to those skilled in the art and conventional crystal preparation methods, which makes it extremely difficult for the technical means of such patents themselves to meet the requirement of non-obviousness in the inventiveness judgment. If the exclusive protection of an invention patent is granted merely because there are technical effects predictable by those skilled in the art, it is obviously inconsistent with the contribution made by the inventor to the prior art. There have always been different understandings in practice on how to consider the role played by the technical effects of crystalline forms in the inventiveness judgment. The judgment of this case proposes the rule that to determine whether a crystalline form has achieved technical effects that make it inventive compared with the prior art, it is possible to consider whether the technical effects recorded in the specification are related to the finished medicine.The technical effects described should be specific rather than general physical and chemical properties, such as purity, melting point, and hygroscopicity. If the recorded technical effects are highly related to the finished medicine and the marketed drug uses this crystalline form, it can be considered that it has beneficial technical effects. Correspondingly, the crystalline form patent is inventive and should be protected by the Patent Law.This case is a typical example of Beijing Intellectual Property Court’s active implementation of the innovation-driven development strategy based on the judicial practice of the pharmaceutical and healthcare industry. For the inventiveness judgment of drug-related patents, within the framework of the current rules system, it is necessary to comprehensively consider the relationship between marketed drugs and technical effects, fully protecting the interests of patent holders. The specific judicial rules of this case are helpful to promote the continuous innovation and development of the pharmaceutical industry, thus providing judicial support for ensuring the accessibility of medicines for the people and promoting the implementation of the Healthy China Strategy.
Case Ⅲ: Administrative Litigation Case Involving Invalidation of the “Dou Hai Yin” Trademark Right——Recognizing the Core Service Trademark of XX Internet Platform Enterprise as Well-Known1. Case InformationPlaintiff: Beijing XX Network Technology Co., Ltd. (hereinafter referred to as “XX Network Company”)Defendant: National Intellectual Property AdministrationThird Party: Shanghai XX Technology Co., Ltd. (hereinafter referred to as “XX Technology Company”)2. Basic FactsXX Technology Company applied for registration of the trademark “Dou Hai Yin” on August 31, 2018, which was approved for use in Class 39 services including “travel reservations.” On January 4, 2022, XX Network Company filed an invalidation request on the grounds that the disputed trademark violated Article 13 of the Trademark Law of the People’s Republic of China (prohibition against imitation of well-known trademarks). The National Intellectual Property Administration reviewed the case and determined that the “Dou Yin” trademark claimed by XX Network Company has a short period of use and insufficient evidence to prove it had achieved well-known status. It thus ruled to maintain the disputed trademark. XX Network Company refused to accept the ruling and filed an administrative lawsuit with the Beijing Intellectual Property Court. The court held in its first-instance judgment that although the “Dou Yin” trademark had been used for less than two years before the application date of the disputed trademark, the Dou Yin App had experienced explosive growth with short videos and social platforms as the core business since its launch in September 2016. By June 2018, it had become the top domestic short-video platform with a market penetration rate of 29.8%, reached over 500 million monthly active users (MAU) by July 2018, and accumulated over 3.1 billion total downloads by September 2018. In this case, XX Technology Company used promotional slogans such as “Check-in with Dou Yin,” demonstrating obviously malicious intent to free-ride on XX Network Company’s goodwill. So the “Dou Hai Yin” trademark should be deemed an imitation of “Dou Yin,” violating paragraph 3 of Article 13 of the Trademark Law. The Beijing Intellectual Property Court revoked the administrative ruling. The National Intellectual Property Administration filed an appeal against the decision, and the Beijing High People’s Court issued a final judgment rejecting the appeal and upholding the original judgment.3. Judgment GistWhen determining whether a trademark in the internet sector has achieved well-known status, courts must fully consider the internet industry’s unique characteristics and comprehensively assess factors such as the actual use effects of the trademark, market coverage, user growth rate, and other multidimensional criteria to evaluate whether the trademark meets the standard of being “widely recognized by the relevant public.”4. Typical SignificanceThe platform economy has emerged as a pivotal engine driving the digital transformation of the real economy and unleashing new-quality productive forces. Platform enterprises rapidly accumulate market reputation through technological innovation and business model updates, with their highly influential brand value in particular becoming a core competitiveness driving innovative development. As the trademark of these enterprises hold enormous commercial value, the more well-known a trademark becomes, the more likely it is to be targeted for malicious registration or free-riding.In China’s trademark registration system, protection for registered trademarks is confined to identical or similar goods/services. To combat cross-class malicious registrations, rights holders must prove their trademark has achieved “ wide recognition by the relevant public” to obtain cross-class protection for a well-known trademark. A well-known trademark, as the highest embodiment of corporate goodwill, represents consumers’ utmost trust in product quality and service standards—it is not merely an honorary title. In judicial practice, courts apply the principles of “ case-by-case determination” “passive protection” and “ protection as needed” to dynamically examine well-known trademark recognition. This approach balances precise strikes against cross-class bad-faith registrations with avoiding over-expansion of protection that could stifle market innovation. This case establishes adjudication rules for the recognition and protection of well-known trademarks in the internet sector:First, Significantly Shortening the Traditional Time-in-Use Requirement for Well-Known Status. Under the Provisions on the Recognition and Protection of Well-Known Trademarks issued by the former State Administration for Industry and Commerce, evidence proving a registered trademark’s well-known status must demonstrate at least three years of registration or five years of continuous use. In this case, the National Intellectual Property Administration initially denied recognition primarily because the “Dou Yin” trademark had been in use for a short period before the disputed trademark’s application. The judgment of this case which is based on the trademark law and judicial interpretations pointed out that with the innovative advantages of short video content distribution and algorithmic recommendation mechanism, Dou Yin APP has shown exponential growth in users and downloads in a short period of time, and rapidly accumulated a wide user base and market influence, and the cycle of its trademark popularity formation has been significantly shortened. If the traditional length-of-use requirement of the recognition standard is applied mechanically, it will be inconsistent with the development law of the Internet industry and the actual influence of the trademark.Second, Deepening Analysis of Well-Known Status Recognition in the Traffic Era. With the popularization of the Internet, short videos, artificial intelligence and other technologies, it has become a common business model for merchants to obtain economic benefits by attracting public attention. This case combines the characteristics of the “attention economy” of the Internet with an in-depth analysis of the considerations for the determination of well-known trademarks as stipulated in Article 14, Paragraph 1 of the Trademark Law of the People’s Republic of China. Beijing Intellectual Property Court holds that important indicators with the characteristics of the internet industry, such as the number of daily and monthly active users, average online duration, and market penetration rate, should be used as the basis for determining “the degree of recognition among relevant public.” Taking into account the characteristics of the internet environment, such as fast information dissemination, wide reach, tendency for explosive growth, and the common revenue model in the internet industry where users are acquired for free and income is generated through advertising and other means, the Court will assess adjudication factors such as “duration of continuous use” and “promotional efforts.”Third, Reasonably Defining the Scope of Protection for Internet Well-Known Trademarks. In this case, XX technology company, as an Internet practitioner providing travel information and other services through the Internet platform, used the trademark “Dou Hai Yin”with obvious intention of imitating and climbing, objectively weakened the identification function of the company’s trademark “Dou Yin”, improperly seized the goodwill resources legally accumulated by others, and constituted a substantial damage to the rights and interests of well-known trademarks. Therefore, it was determined that the trademark of the platform Company has reached the status of well-known, and the cross-class protection was in line with the principle of case-by-case and on-demand determination.This case provides clear judicial guidance for recognizing well-known trademarks in the internet sector, demonstrating courts’ firm support for the healthy development of high-value brands. By reasonably defining the boundaries of well-known trademark protection and regulating competition in the digital economy, it also guides platform enterprises and tech innovators to enhance trademark strategy and protection awareness, offering tangible judicial safeguards for high-quality development of new productive forces.
Case Ⅳ: Trademark Infringement and Unfair Competition Dispute Involving the “Lao Ban” Mark— Crackdown on Full-Chain Counterfeit Trademark Infringement1.Case InformationPlaintiff: Hangzhou X Electric Co., Ltd. (hereinafter referred to as “X Electric Company”)Defendants: Chaozhou X Ceramics Factory (hereinafter referred to as “X Ceramics Factory”), Chaozhou X Intelligent Technology Co., Ltd. (hereinafter referred to as “X Tech Company”), Lü X, Chen X, and Wu X2.Basic FactsThe plaintiff, X Electric Company, is the exclusive owner of the registered trademark “Lao Ban”, which is approved for use on Class 11 goods including kitchen range hoods. The five defendants, via multiple business entities including X Ceramics Factory (a sole proprietorship operated by Chen X), X Tech Company (jointly held by the married couple Lü X and Wu X), with other entities such as a Guangdong-based kitchen and bath company (which was suggested to be deregistered during litigation) and a Hong Kong-registered company solely directed by Lü X and in their individual capacities, used the marks “Lao Ban” “LAOBAN WEIYU” and “www.LAOBAN WEIYU.net” on sanitary ware products such as toilets, showers, and sinks. Meanwhile, the Defendants repeatedly used the term “Lao Ban” in their company names, personal or corporate account names, and store names. The plaintiff alleged that the collective actions of the five defendants infringed its exclusive trademark rights and constituted acts of unfair competition. Accordingly, it sought injunctive relief and joint compensation of RMB 5 million for economic losses and RMB 290,000 for reasonable expenses. Upon trial, Beijing Intellectual Property Court found that the five defendants had engaged in trademark infringement and unfair competition, and ordered them to cease the infringing activities and jointly pay the plaintiff RMB 5 million in damages and RMB 150,000 in reasonable costs.The defendants appealed, but Beijing High People’s Court dismissed the appeal and upheld the original judgment.3.Judgment GistWhere a company shareholder deregisters a company during litigation without legally liquidating it and has made relevant commitments at the time of deregistration, the shareholder shall bear corresponding legal liability for the company’s pre-deregistration acts of infringement.If a company committing the infringement was jointly funded by a married couple during their marriage, and no proof or agreement of property division exists between them, the company’s ownership may be deemed substantively unified. Accordingly, in line with rules applicable to single-member limited liability companies, the shareholder couple may be held jointly liable with the company for the infringement-related debts.4.Typical SignificanceAs a core intellectual property asset of a business, a trademark symbolizes its market competitiveness and serves as a vital tool for distinguishing the source of goods and services, building commercial reputation, and establishing brand recognition among consumers. The protection of trademark rights lies at the heart of China’s Trademark Law and is a key aspect of intellectual property protection. It plays a critical role in fostering a sound business environment and safeguarding fair market competition. Beijing Intellectual Property Court has jurisdiction over first-instance civil cases involving the recognition of well-known trademarks within Beijing, as well as other second-instance civil trademark cases. Since its establishment, the court has adjudicated over 3,200 first- and second-instance trademark infringement cases. In adjudicating such cases, the Court has consistently applied trademark laws and judicial interpretations with rigor and accuracy, distilled judicial principles from individual cases and unified standards of adjudication, adhering firmly to the principle of “strict protection” and continuously strengthening judicial safeguards for trademark rights.The development of new technologies and new business models has posed challenges to the legal system for trademark protection. Especially in the context of the digital economy and the diversification of commercial entities, the hidden and interconnected characteristics of trademark infringement subjects have become increasingly prominent. How to correctly understand the legislative intent and legal provisions, accurately identify trademark infringement behaviors that involve novel forms and complex associations, and ensure that all types of entities maliciously engaging in infringement along the entire chain bear corresponding legal liabilities—so as to create an effective deterrent against trademark infringement—is a critical issue worthy of attention and study in the adjudication of such cases. In this respect, the present case has made a valuable exploration and provides effective solutions to difficult judicial issues such as the determination of joint infringement and the attribution of infringement liability in trademark disputes.Based on the correct identification of the trademark infringement act, the judgment in this case adopts a penetrating adjudication approach, and employs a combination of institutional measures such as piercing the veil of shareholder liability and expanding joint and several liability. These measures significantly increase the cost of trademark infringement and effectively curb full-chain infringement behaviors that exploit legal loopholes to construct “firewalls” of liability, thus preventing infringers from concealing their identity and escaping responsibility.This case made meaningful breakthroughs in the following aspects and provided substantive guidance for resolving complex issues in trademark infringement disputes.Firstly, Piercing the Corporate Veil to Address “Shell Company” Infringement. According to the basic theory of company law, each shareholder of a limited liability company shall be liable for the company to the extent of the capital contribution subscribed for by it. In intellectual property infringement lawsuits, including those involving trademark infringement, an increasing number of infringing parties have used this fundamental principle of company law as a shield to evade liability by establishing companies—sometimes even cross-border or across different jurisdictions—they provide a “legal shell” for actual infringers to escape liability. The judgment in this case creatively applies Article 20 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (II) to clearly define the scope of liability borne by shareholders who carry out simplified deregistration of a company without liquidation during the course of litigation. During the proceedings of this case, Chen X and Wu X, the shareholders of a Guangdong-based kitchen and bath company, implemented a simplified deregistration. Although formally extinguished the company’s legal status, the judgment pierced the corporate veil by examining the correlation between the shareholders’ signed commitment letters and their undertakings to assume debt liability, thereby holding the shareholders accountable. This effectively curbed the malpractice of actual infringers maliciously deregistering companies to avoid debts, and imposed punishment on infringing acts that exploit the formation and unlawful deregistration of companies to achieve a “getaway” from liability.Secondly, establishing a judicial standard of recognizing spouse-owned companies as sole proprietorships and refining the evidentiary rules for asset commingling. When determining the liability of the defendant, the Tech Company, the court went beyond the literal interpretation of Article 63 of the Company Law of the People’s Republic of China (2018 Amendment), and, in light of the joint shareholding by the spouses and the absence of any property division, held that the entirety of the company’s equity essentially derived from a single property interest, which was jointly owned and exercised as a single property right, with the equity interest exhibiting substantive unity and alignment of economic interests, thereby construing the company as a de facto single-shareholder limited liability company, and, pursuant to the principle of asset commingling, imposed joint and several liability on both spouses—the two shareholders—for the infringing acts committed by the company. This judgment established a judicial review standard that infers asset commingling from the common origin of shareholding, thereby effectively curbing infringing conduct that seeks to evade legal liability through intricate equity structures.Thirdly, establishing a framework for joint liability among related entities to crack down on industrial-scale infringement. In response to the coordinated infringing acts conducted by five defendants across different regions and legal entities, the case adopted a comprehensive adjudicative approach combining “behavioral relevance” and “concerted intention,” which involved examining factual elements such as cross-shareholding among the entities and shared trademark usage, and further relied on evidentiary chains including trademark licensing arrangements and coordinated online-offline sales activities among the defendants, to ascertain their shared intent to commit joint infringement. The adjudicative reasoning provides valuable guidance in resolving the complex issue of establishing joint infringement across a fragmented chain of “manufacturing–sales–brand operation.”This judgment systematically applied a multi-dimensional set of legal instruments, including the Company Law, Trademark Law, and the Civil Code, and achieved three major breakthroughs in the judicial determination of trademark infringement subjects: a shift from reviewing individual entities to examining related parties, an elevation from formal compliance assessment to substantive illegality determination, and an evolution from imposing individual liability to regulating joint and several liability. This innovation in adjudicative philosophy not only enhances the judicial protection of trademark rights, but also serves as a paradigm for establishing a robust regime of strict intellectual property protection.
Case V : Copyright Infringement Dispute involving over a hundred paintings that allegedly plagiarized works including Fallen Leaves.——Determination of Copyright Infringement of Artworks1. Case InformationAppellant (the defendant in the first instance): Ye XXAppellee (the plaintiff in the first instance): Xi XX2.Basic FactsThe Plaintiff Xi XX, a Belgian painter, alleged that the Defendant Ye XX had plagiarized over a hundred paintings created since 1993 over a span of 25 years, including artworks such as Fallen Leaves to which the Plaintiff held copyright. The Beijing Intellectual Property Court, after conducting a holistic comparison of the accused infringing paintings with the 13 copyrighted artworks involved in the case, along with comparative analyses of partial element combinations and individual element analyses, concluded that the 122 accused infringing paintings exhibited substantial similarity to the 13 copyrighted artworks in terms of visual artistic effects. Consequently, the court ruled that Ye XX’s acts of creating, publishing, and auctioning the disputed paintings infringed Xi XX’s exclusive rights to the 13 copyrighted artworks, including reproduction rights, modification rights, attribution rights, and distribution rights. Accordingly, the Beijing Intellectual Property Court ordered Ye XX to cease the infringement, make a public apology, rectify adverse effects, and compensate for economic losses amounting to 5 million RMB yuan. Ye XX filed an appeal, but the Beijing High People’s Court dismissed the appeal and upheld the original judgement.3.Judgment GistTo determine whether a work of art constitutes substantial similarity, it is generally assessed through a holistic examination and comprehensive evaluation of the artistic expression embodied in the work. This process focuses on visual characteristics such as constituent elements, specific expressions and the overall visual effect, which collectively define the work’s creative manifestation. If the differences between two artworks are merely minor in their entirety to the extent that an ordinary observer would tend to overlook such distinctions unless intentionally searching for them, such works may be deemed substantially similar.When a large number of copyrighted works and allegedly infringing works are involved in the comparison, all works under dispute should be considered holistically. Meanwhile, factors such as the author’s creative history, methods, and style should be comprehensively evaluated to determine of the extent of infringement, which serves as the basis for establishing the standards for damages compensation.4. Typical SignificanceArtworks carry the cultural connotations and artistic styles of a specific era and are an important component of the cultural industry. Protecting the copyright of artworks not only safeguards and inspires creators but also is of significant importance for promoting the standardized development of the cultural and artistic sector and enhancing a nation’s cultural soft power. This case is a typical copyright infringement case which clarifies two aspects of judicial rules: Ideas and expressions in artworks should be distinguished based on creative principles and characteristics, and judgment of substantial similarity should take into account the visual imagery characteristics of artworks.First, considerations regarding the differentiation between ideas and expressions in artworks.
The first consideration is the creative principles of artworks. The creative process of artworks is a gradual process of transforming ideas into expressions. Before the final completion of artworks, authors typically engage in ideational activities such as material collection and creative conceptualization. These mental processes generally extend from before the initiation of the creative act through the entire creative journey, encompassing the author’s subjective observations of specific objects, social phenomena, and personal life experiences, as well as their individual perspectives and emotional insights. Additionally, the final artistic outcome is closely intertwined with the author’s technical proficiency, artistic vision, and aesthetic sensibilities. Through external expressions in specific forms, the author finalizes and publicizes the aesthetic imagery within their consciousness, enabling others to appreciate, evaluate, and understand their artistic attainments and aesthetic preferences through the medium of the artwork. Objectively, this process also defines the scope of expressions protected by copyright.The characteristics of artworks should also be considered. According to the definition in the Implementing Regulations of the Copyright Law, the expression of an artwork primarily lies in the artistic representation objectively presented through the organic integration of aesthetic elements such as composition, lines, colors, and forms. The artistic image of an artwork is manifested as a visual image, characterized by visual immediacy, definiteness, and visibility. Copyright protection for artistic works focuses more on the external form of expression rather than the specific depicted content, which distinguishes it significantly from the protection of literary works that places greater emphasis on the substantive written content.Second, the criteria for determining substantial similarity between artworks.In copyright infringement disputes involving artworks, determining whether there is substantial similarity between the allegedly infringing works and the copyrighted works should involve comparing whether the choices, selections,arrangements, and designs made by the author in the expression of the artworks are the same or similar. As previously mentioned, artistic works are a form of visual art, and thus the external form of expression they embody constitutes the essence of their value. While different types of artistic works may cater to audiences with varying characteristics and levels of appreciation, once an artwork is publicly disclosed, it primarily targets the general public for appreciation and evaluation.Therefore, the determination of whether two artistic works constitute substantial similarity should be based on the perspective of ordinary observers. This involves a holistic assessment and comprehensive judgment of the visual characteristics of both the copyrighted artwork and the allegedly infringing artwork. If the two works only exhibit minor differences in details that would only be noticeable to ordinary observers through deliberate searching and comparison, then it can be concluded that the works constitute substantial similarity.After the judgment took effect, the defendant voluntarily issued a public apology in Legal Daily, a Chinese newspaper, marking the resolution of a five-year, cross-border copyright dispute over artistic works. The judgment undertook a total of 303 comparative analyses between over 100 allegedly infringing artworks and the copyrighted works, examining them across multiple dimensions including compositional elements, modes of expression, and overall aesthetic effect, ensuring no detail was overlooked. On this foundation, the court conducted a comprehensive assessment of potential infringement by integrating factors such as the author’s creative history, methodologies, and stylistic idiosyncrasies. Through this process, it fastidiously demarcated the boundary between permissible artistic reference and infringing plagiarism in artworks. The judgment ultimately safeguarded the copyright rights of the Belgian artist in strict accordance with legal provisions. While providing valuable guidance for the adjudication of similar cases, the judgment also demonstrates a judicial stance of equal protection for the lawful rights and interests of foreign entities, thereby conveying the spirit of justice, transparency, and openness inherent in the rule of law.
Case VI: The First Case on Administrative litigation Involving Anti-Monopoly Review of Concentrations Between Undertakings——First Judicial Clarification of Concentrations Between Undertakings Review Standards
[Omitted]
Case VII: The First Case Involving Validity Confirmation of Data Intellectual Property Registration Certificates in an Anti-Unfair Competition Dispute——First Judicial Recognition of the Legal Effect of a Data Intellectual Property Registration Certificate1. Case InformationAppellant (Defendant in the First Instance): Yin X (Shanghai) Technology Co., Ltd. (hereinafter referred to as Yin X Company)Appellee (Plaintiff in the First Instance): Shu X (Beijing) Technology Co., Ltd. (hereinafter referred to as Shu X Company)2. Basic FactsShu X Company, having lawfully obtained authorization, collected a Mandarin Chinese speech dataset totaling 1,505 hours and registered it with a Data Intellectual Property Registration Certificate. Shu X Company sued Yin X Company for providing a 200-hour subset of this dataset without permission, alleging infringement of data property rights, copyright, trade secrets, and unfair competition, and sought damages of over RMB 700,000 yuan. The court of first instance ruled that the dataset constituted a trade secret and found Yin X Company liable for disclosing and using it unlawfully, ordering compensation of 102,300 RMB.Yin X Company appealed, arguing that the dataset had been open-sourced before the alleged conduct occurred and therefore lacked secrecy, which did not qualify as a compilation due to lack of originality, and the alleged conduct did not constitute unfair competition. The Beijing Intellectual Property Court, on appeal, held that the Data Intellectual Property Registration Certificate could serve as preliminary evidence of Shu X Company’s lawful acquisition and property interest in the dataset. However, since the dataset was publicly available, it did not meet the criteria for trade secret protection. Furthermore, the dataset’s selection and arrangement lacked originality and did not constitute a compilation.Nonetheless, Shu X Hui X Company invested significant technology, capital, and labor in collecting and organizing the data, resulting in commercially valuable entries that conferred competitive advantages and business opportunities. These interests deserved protection under the Anti-Unfair Competition Law. Yin X Company failed to follow the terms of the open-source license, violated commercial ethics, harmed Shu X Company ’ s interests and the competitive market order, and thereby committed an act of unfair competition under Article 2 of the Anti-Unfair Competition Law. The appellate court corrected the erroneous finding on trade secrets but upheld the lower court ’ s compensation ruling and dismissed the appeal.3.Judgement GistThe Data Intellectual Property Registration Certificate may serve as preliminary evidence of a data holder’s proprietary interest in the dataset and of the dataset’s lawful origin and collection. Without the data holder’s consent, no party may publicly disseminate a dataset lawfully and substantially collected by the holder. Where a data holder has open-sourced a dataset, whether a user complies with the license terms is a critical factor in assessing whether the use violates commercial ethics in the data services field.If the dataset is publicly available and features original selection or arrangement of content, it is preferably protected as a compilation under copyright law. If the dataset is not readily accessible to those in the relevant field, it may be protected as a trade secret. If the dataset is public and lacks originality in its selection or arrangement, it does not qualify for copyright or trade secret protection, but may be protected under Article 2 of the Anti-Unfair Competition Law depending on the circumstances.4.Typical SignificanceAs the digital economy becomes deeply integrated into production and daily life, data is increasingly recognized as a core production factor. Efficient circulation and secure protection of data are crucial for stimulating market innovation. The data registration system, by standardizing the registration of rights related to data ownership, processing, and commercialization, lays the groundwork for the market-based allocation of data resources. On one hand, it uses public disclosure and credibility mechanisms to clarify rights boundaries, reduce verification costs and legal risks in data transactions, and provide a “base map ” for cross-industry and cross-regional data flows. On the other, it recognizes and protects legitimate input by data processors, incentivizing real innovation in data collection, cleaning, and labeling, thereby promoting the transformation of data from a “resource” into an “asset.” This case is the first in China to examine the legal effect of a Data Intellectual Property Registration Certificate. The appellate judgment, guided by the policy directive in the “Opinions of the CPC Central Committee and the State Council on Establishing a Data Infrastructure System to Better Leverage the Role of Data as a Production Factor ” (the “ 20 Measures on Data ” ), which calls for “ exploring new approaches to data property rights registration,” responds to the regulatory needs of the data registration regime through judicial innovation, establishing a legal foundation for the healthy development of the data element market.In recent years, the Beijing Intellectual Property Court has handled a diverse and technically complex range of data rights cases, 95% of which involved unfair competition, covering emerging disputes like data scraping, trade secret protection, and open-source data and involving AI training datasets and speech datasets. The appellate ruling in this case establishes rules for judicial protection of data rights, especially in clearly defining the legal effect of registration certificates and guiding corporate data protection strategies.First, it affirms the preliminary evidentiary effect of Data Intellectual Property Registration Certificates. Such certificates can initially prove lawful possession and source legitimacy, unless rebutted by contrary evidence. However, this recognition must be understood in three ways: (1) the certificate’s effect is case-specific and rebuttable; (2) its weight depends on the registration agency’s qualifications, review standards, and content; and (3) data holders may assert rights by other means even without registration. This balanced approach both affirms the role of registration and preserves judicial restraint.Second, it establishes a tiered path for protecting enterprise data rights based on the dataset ’ s legal nature. Datasets with original selection or arrangement are protected by copyright law; non-public datasets meeting trade secret criteria fall under relevant unfair competition provisions; and public datasets lacking originality but involving substantial input may be protected under Article 2 of the Anti-Unfair Competition Law. In this case, although the dataset did not qualify as a trade secret due to its public nature, the court recognized Shu X Company’s lawful investment and certificate-based proof, and penalized Yin X Company’s breach of the open-source license under the unfair competition framework, establishing boundaries for “ethical use and respect for prior investment” in the use of public data.Third, it strengthens regulatory constraints on the circulation of open-source data. The ruling explicitly states for the first time that users must strictly comply with open-source license terms, and unlicensed commercial use constitutes unfair competition. This rule addresses the tension between free use and rights protection in an open-source context and establishes clear expectations for enterprises to unlock data value through open-source licenses by affirming that legitimate open-sourcing does not equate to relinquishing rights, while emphasizing that unauthorized commercial exploitation in violation of the agreement terms will still incur legal liability.This case marks a transition in China toward coordinated governance through data rights registration and judicial protection. It provides clear behavioral guidance for data processors and signals to the market that the development and utilization of data must occur within the rule of law. Legitimate rights are protected, and violations carry consequences. With continued accumulation of such judicial principles, China’s data element market is poised to develop into a legally regulated environment where “ registration has standards, transactions have legal grounds, and disputes have solutions,” laying a strong foundation for high-quality growth in the digital economy.
Case VIII: “FL218” Corn Plant Variety Right Invalidity Administrative Dispute——Clarifying Novelty, Specificity Standards and Burden of Proof in Plant Variety Invalidity Procedures1. Case InformationPlaintiff: Hui X Seed Industry Co., Ltd. Of ZunYi city, GuiZhou Province. (hereinafter referred to as Hui X Company）Defendant: The Reexamination Board for New Varieties of Plants, Ministry of Agriculture and Rural Affairs (hereinafter referred to as The Reexamination Board for New Varieties of Plants)Third Party: Hubei Kang X Seed Industry Co., Ltd.2. Basic FactsThe disputed variety in this case is a new corn variety named “FL218” for which Company K holds the plant variety rights. Hui X Company filed a request for invalidation with the Reexamination Board for New Varieties of Plants, which made the decision to maintain the validity of the disputed plant variety right. Hui X Company disagreed and filed an administrative lawsuit with the Beijing Intellectual Property Court, arguing that the disputed variety is the same as the parent varieties of several approved corn varieties, such as “Eyu 16” and that prior to the application date, the disputed variety had already been widely produced and sold, and was used as a parent to breed other corn varieties. The other varieties bred from it were also widely produced and sold, thus the involved variety had lost its distinctness and novelty, therefore the decision was incorrect. Furthermore, the Reexamination Board for New Varieties of Plants did not accept Hui X Company’s application to identify that the disputed variety and other varieties ’ parent plants were the same variety, claiming procedural violations. After hearing the case, the Beijing Intellectual Property Court found that the procedures were not improper, and the conclusion of the decision was correct, thus dismissing Hui X Company ’ s claim. Hui X Company appealed, and the Supreme People’s Court made a final ruling, dismissed the appeal and upheld the original judgment.3. Judgement GistThe examination of the novelty of a new plant variety involves determining whether the variety was sold or promoted prior to the application date. The act of using a variety as a parent to breed hybrids does not constitute commercialization. Furthermore, commercialization activities pertain to the protected variety itself, not to hybrids bred using that variety as a parent. Therefore, the sale of hybrids, in principle, cannot be regarded as the sale of the parent variety.The examination of distinctness for a new plant variety determines whether the variety is clearly distinguishable from known varieties. In invalidation proceedings for plant variety rights, the invalidation petitioner bears the burden of proof regarding the existence of clear distinctness, and the Reexamination Board for New Varieties of Plants is not obligated to conduct investigations.4. Typical SignificanceSeeds are the “ chips ” of agriculture, and the seed industry is a core national industry that plays a crucial role in agricultural stability and national food security. Intellectual property protection in the seed industry is vital for its revitalization and prosperity, and it is an indispensable part of the intellectual property protection system. Plant variety rights, as a major component of intellectual property rights in the seed industry, focus on the protection of reproductive materials, namely seeds. It has been proven that granting exclusive rights to seeds that are clearly distinguishable from other known varieties and have not been sold or promoted before the application date—thus possessing the characteristics of specificity and novelty as stipulated in the Seed Law of the People’s Republic of China — strengthens intellectual property protection for plant varieties, providing breeders with a fair economic return for their innovative contributions. This, in turn, effectively increases breeding activity and encourages breeding innovation.In the legal system governing plant variety rights, the authorization and invalidity review of plant variety rights are key procedures. The Reexamination Board for New Varieties of Plants is the administrative authority responsible for conducting these reviews. Whether the variety applicant, the variety right holder, or the party petitioning for invalidation of the plant variety right, all may file an administrative lawsuit with the Beijing Intellectual Property Court if they are dissatisfied with the decisions made by the Reexamination Board for New Varieties of Plants.The Beijing Intellectual Property Court, as the exclusive court with nationwide jurisdiction over this type of special and “ niche ” intellectual property administrative dispute, has established a multi-disciplinary technical fact-finding mechanism led by academicians from agricultural science institutions, and a specialized review system for seed industry cases. By leveraging the advantages of a specialized court, the court actively explores a judicial protection model for intellectual property in the seed industry that aligns with its unique characteristics, having heard a number of landmark administrative cases regarding plant variety right authorization and confirmation. This case is a typical example, and the judgment provides clear guidance on the standards for assessing novelty and specificity of plant varieties and the burden of proof in the plant variety invalidity process.Unlike the novelty requirement for patents, there is only one way to destroy the novelty of a new plant variety, namely through public sale or promotion in the market. This judgment starts from the intrinsic meaning of the novelty characteristic of new plant varieties and strictly adheres to the provisions of the Seed Law of the People’s Republic of China and the Regulations on the Protection of New Plant Varieties of the People’s Republic of China. It clarifies that sales and promotional activities should be accurately understood as actions that enable relevant technicians to obtain propagating materials in the market. The act of using propagating materials as parent plants to breed other hybrid varieties should not be broadly interpreted as sales or promotional activities. Furthermore, the sales or promotional activities that undermine novelty only apply to the protected variety itself, not to hybrid varieties bred using it as a parent.The “clear distinction” of a new plant variety from known varieties constitutes its distinctness. This distinctness must be scientifically demonstrated through field trial results. In this ruling, the court carefully examined the methods for proving distinctness, including the requirement to submit field test reports when applying for variety rights. It clarified that in invalidation proceedings, the party seeking invalidation bears the burden of proving that the disputed plant variety lacks distinctness, while the administrative authority is not obligated to conduct its own investigations. Simply requesting a field examination from the Plant Variety Review Board does not fulfill this burden of proof. By clarifying the allocation of the burden of proof, this decision helps standardize the review process for plant variety right invalidations.This judgment also serves as a reminder to industry participants that they must accurately understand the legal system surrounding plant variety protection. While legally protecting their innovative crops and commercial outcomes, they must also properly utilize the plant variety invalidity procedure, actively fulfilling their burden of proof, and discharging their evidentiary obligations in accordance with the law. This will help resolve disputes amicably and maintain the effective operation of the plant variety protection system, promoting the high-quality development of China’s seed industry and ensuring that the Chinese people always keep our food security firmly in our own hands.
U.S. Budget Bill Targets Foreign Companies with New Tax Hikes: What French Businesses Need to Know
The One Big Beautiful Bill Act (OBBBA) was passed by the U.S. House of Representatives on May 22, 2025, by a narrow vote of 215-214. OBBBA includes a new U.S. tax provision that could significantly increase taxes on foreign companies and investors—especially those from countries like France that have implemented digital services taxes or other similar measures. The new bill introduces a new section to the U.S. Internal Revenue Code Section 899.
What Is Section 899?
Section 899 is a proposed tax provision that would raise U.S. tax rates on foreign individuals and companies from countries the U.S. deems to have “unfair” tax policies. These include:
Digital Services Taxes (DST)
Diverted Profits Taxes (DPT)
Undertaxed Profits Rules (UTPR) under the global minimum tax framework
How Would the Tax Work?
The U.S. tax rate would increase by 5 percentage points in the first year.
It would rise by an additional 5 points each year, up to a maximum of 20 percentage points above the standard rate.
These increases would apply on top of existing U.S. tax rates, including:
21% corporate tax
30% withholding tax on certain income
Other applicable individual and corporate taxes
Who Is Affected?
Countries likely to be labeled as “discriminatory” include France, Germany, the UK, Japan, South Korea, and others that have adopted DSTs or UTPRs. In total, more than 30 countries could be impacted.
DST in France
France currently has a Digital Services Tax (DST) in place that applies to major U.S. technology companies and other large digital firms. Introduced in 2019, the French DST targets revenues generated from digital services such as:
Online advertising
Digital platforms
Intermediation services involving user data
Despite international negotiations aimed at replacing such taxes with a global framework (like the OECD’s Pillar One), France has maintained its DST. As of 2025, French Finance Minister Éric Lombard confirmed that the tax remains in force and is not being used as a bargaining chip in trade discussions with the U.S.
This continued application of the DST is one of the key reasons France could be classified as a “discriminatory foreign country” under the proposed U.S. Section 899, potentially subjecting French companies to higher U.S. tax rates.
Why Is the U.S. Doing This?
The U.S. government argues that certain foreign tax policies unfairly target American companies—especially tech giants. Section 899 is designed to:
Counteract foreign digital taxes
Protect U.S. economic interests
Strengthen the U.S. position in global tax negotiations
Economic Impact
According to estimates, this provision could generate $116 billion in revenue over 10 years. Legal experts describe it as a major shift in U.S. international tax policy, introducing new risks for foreign investors.
When Would It Take Effect?
Although passed by the U.S. Congress, OBBBA is now being reviewed and must be passed by the U.S. Senate and then signed by President Trump to become law. Unless the Senate passes OBBBA as drafted, any amendments of the bill would have to be returned to the House for approval of the changes, or a conference committee of both chambers formed to reconcile differences.
The additional taxes would apply 180 days after a country enacts a DST, DPT, or UTPR.
What Should French Companies Do?
If your business operates in the U.S. or has American subsidiaries, now is the time to:
Monitor the legislative process of OBBBA and Section 899
Assess your U.S. tax exposure
Review your international tax strategy
Consult with cross-border tax advisors
European Commission Publishes Q&A on AI Literacy
On May 7, 2025, the European Commission published a Q&A addressing AI literacy obligations under the EU AI Act. The Q&A provides further detail on Article 4 of the EU AI Act, clarifying the measures that entities in scope are required to employ to ensure AI literacy.
Key Takeaways
The European Commission sets out the steps and objectives that should be achieved by an entity when developing and implementing an AI literacy compliance program, including to:
Ensure a general understanding of AI within the entity covering the following topics: What is AI? How does it work? What AI is used in the entity? What are its opportunities and dangers?
Consider the role of the entity in scope (e.g., provider or deployer of the AI systems).
Consider the risk of the AI systems provided or deployed, including the following questions: what do staff need to know when dealing with such AI systems? What are the risks they need to be aware of and do they need to be aware of mitigation?
Concretely build the AI literacy compliance program taking into account the analysis of the points above and: (1) the differences in technical knowledge, experience, education and training of the staff and other persons; and (2) the context in which the AI systems are to be used in and the persons on whom the AI systems are to be used.
With regards training, the European Commission notes that frequent and specific training will need to be part of AI literacy compliance programs; simply referring staff members to instructions that accompany AI systems will generally not be considered sufficient. The content of trainings will not be fixed, may vary based on the experience of the staff, and will have to be evaluated on a case-by-case basis. Trainings should also cover the risks that may emerge from the use of common generative AI systems when such systems are used (e.g., hallucination). If staff members from third-parties engage with the AI systems, training may be provided directly by the entity in scope and/or training requirements may be, for example, established in contracts with such third-parties.
The European Commission confirms that entities in scope should record and document the measures implemented to comply with Article 4 of the AI Act. However, external certification is not required.
Timing
Article 4 of the AI Act entered into application on February 2, 2025. Hence, the obligations relating to AI literacy already apply to in-scope entities.
However, in the Q&A, the European Commission clarifies that supervision and enforcement rules will only apply from August 3, 2026, onwards. Penalties for non-compliance with AI literacy obligations will be based on the national laws to be adopted by EU Member States by August 2, 2025. Private enforcement is already possible where an individual suffers harm and considers that this is due to an entity in scope not complying with the obligations deriving from Article 4 of the AI Act.
Read the European Commission’s AI Literacy Q&A.
Humanitarian Parole Uncertainty: SCOTUS Halts CHNV Program, While Lower Court Orders Continued for Processing for CHNV, Afghans, Ukrainians
The U.S. Supreme Court has lifted an April 14, 2025, temporary injunction blocking the Department of Homeland Security’s (DHS’s) decision to terminate humanitarian parole for individuals from Cuba, Haiti, Nicaragua, and Venezuela under the CHNV program. Noem v. Svitlana Doe, et al., No. 24A1079 (May 30, 2025).
U.S. District Court Judge Indira Talwani’s order is stayed pending the outcome of an appeal filed by DHS in the U.S. Court of Appeals for the First Circuit and a decision on a petition for writ of certiorari to the Supreme Court regarding the merits of the case, if one is ultimately sought by either side.
The CHNV program has allowed approximately 450,000 people to live and work legally in the United States.
DHS has not yet provided guidance regarding the status of CHNV parolees in light of the Supreme Court decision.
On May 28, 2025, Judge Talwani ordered DHS to resume processing of parole and reparole applications for individuals covered under the Uniting for Ukraine, Operation Allies Welcome (Afghanistan), Central American Minors Parole, Family Reunification Parole, Military Parole-In-Place, and CHNV Humanitarian Parole.
It is not clear whether DHS will continue to adjudicate parole applications for CHNV beneficiaries in light of the Supreme Court decision.
Update on DHS Efforts to Terminate TPS and Parole Status for Various Immigrant Groups
The U.S. Department of Homeland Security (DHS) has been actively working to terminate Temporary Protected Status (TPS) and Parole status for several immigrant groups, impacting their work authorization and residency status. This update aims to provide human resource professionals with the latest developments and implications for their workforce. Given the whirlwind of activity, employers must constantly monitor the news and the status of their employees on temporary work authorization so they can be sure to not employ individuals who have lost work authorization.
Temporary Protected Status (TPS)
Venezuela: The situation for Venezuelans under TPS has been complex, in part because there were multiple grants of TPS status to Venezuelan nationals at different times with different expiration dates. On May 19, 2025, the U.S. Supreme Court temporarily paused a federal court ruling that had blocked the Trump administration’s attempt to revoke TPS for Venezuelans. The current legal status for this group is murky. Venezuelans under the 2021 TPS designation can remain in the U.S. and retain their work authorization until September 10, 2025.
Afghanistan: DHS announced the termination of TPS for Afghanistan, effective July 2025. This decision affects approximately 12,000 Afghans who will lose their protection from deportation and work authorization.
Parole Programs
CHNV Parole Program: The Supreme Court recently allowed the Trump administration to terminate the CHNV Parole Program, which had provided temporary protection to over 530,000 individuals from Cuba, Haiti, Nicaragua, and Venezuela. This decision means that these individuals are now at risk of deportation and will lose their work authorization. DHS has emphasized that this move is part of a broader effort to enforce immigration laws and prioritize public safety.
Implications for Employers
These changes have significant implications for employers and HR professionals. The termination of TPS and Parole status means that affected employees will lose their work authorization, potentially leading to workforce disruptions. Employers should:
Review Form I-9s: Identify employees who may be affected by these changes and verify their current work authorization status.
Communicate with Affected Employees: Provide clear communication about the changes and determine if those individuals losing one of these immigration statuses have alternative opportunities to retain work authorization.
Plan for Workforce Adjustments: Develop contingency plans to address potential workforce shortages and maintain business continuity.
Get Legal Advice: Work with immigration attorneys to navigate the complexities of these changes and ensure compliance with the rapidly evolving status of the law.
DHS’s efforts to terminate TPS and Parole status for various immigrant groups are creating significant challenges for both the affected individuals and their employers. The legal landscape is literally changing daily. Staying informed and proactive in addressing these changes will be crucial for employers in managing their workforce effectively.
Puerto Rico High Court Confirms Employers Need to Check NLRA Preemption of Local Employment Law Claims
Takeaways
Puerto Rico courts lack jurisdiction over claims involving conduct “arguably” protected or prohibited by the NLRA, even if framed under local laws.
The NLRB has exclusive authority to adjudicate unfair labor practice claims covered by the NLRA — state or local courts must defer unless the NLRB declines jurisdiction.
Employers facing claims related to union activity or retaliation should evaluate NLRA preemption early and coordinate with labor counsel to assert defenses or direct claims to the NLRB.
Related link
Rodríguez Vázquez and Santana Marrero v. Hospital Español Auxilio Mutuo (opinion)
Article
The Puerto Rico Supreme Court has reaffirmed that Puerto Rico courts lack subject-matter jurisdiction over employment claims that arguably involve unfair labor practices covered by the National Labor Relations Act (NLRA). Rodríguez Vázquez and Santana Marrero v. Hospital Español Auxilio Mutuo, 2025 TSPR 55 (May 21, 2025).
This ruling underscore the exclusive jurisdiction of the National Labor Relations Board (NLRB) over such claims — even when plaintiffs seek relief under local laws.
Background
Two unionized employees filed separate lawsuits against their former employer, Auxilio Mutuo Hospital, under Puerto Rico’s Law 115 (Retaliation) and Law 80 (Wrongful Discharge). They alleged that they were terminated in retaliation for participating as witnesses in a union-backed complaint filed with the Puerto Rico Department of Health against the Hospital.
In response, the Hospital filed motions to dismiss both cases for lack of subject-matter jurisdiction, arguing that the alleged conduct, retaliation for union-related activity, fell within the scope of Sections 7 and 8 of the NLRA and, therefore, must be adjudicated exclusively by the NLRB.
The trial court denied the motions to dismiss, but the Puerto Rico Supreme Court reversed the denial.
Court’s Ruling
The Puerto Rico Supreme Court agreed with the employer and held that local courts are preempted from hearing claims that fall within the scope of the NLRA, even when the plaintiffs framed and brought their claims under Puerto Rico statutes.
Accordingly:
Substance over labels: The Court emphasized that the preemption analysis focuses not on the nature of the remedy sought or the law invoked but on the type of conduct alleged. If the conduct is arguably a violation of the NLRA, the case belongs before the NLRB.
Identical allegations: The Court noted that the employees had already filed charges with the NLRB based on the same facts — testifying against their employer in a union-backed complaint. This allegation is covered by Section 8 of the NLRA, which prohibits employers from retaliating against employees for filing charges or giving testimony under the Act.
Federal preemption: The Court held that the U.S. Congress has approved laws preempting the regulation of NLRA-protected or -prohibited conduct. As a result, federal preemption applies, and neither state courts nor federal courts have jurisdiction over such disputes unless the NLRB declines to assert jurisdiction.
Deference to the NLRB: The opinion clarified that only after the NLRB determines the alleged conduct is not protected or prohibited by the NLRA could a state court potentially exercise jurisdiction over related claims.
Risk of inconsistent rulings: The Court warned that permitting state-level adjudication of such claims could interfere with the uniform administration of federal labor policy that can lead to inconsistent outcomes and undermine the NLRB’s authority.
Takeaways for Employers
This decision sends a clear message: employers and employees cannot bypass the NLRA’s framework by repackaging unfair labor practice claims under local employment statutes. Employers facing claims involving union activity, retaliation for testimony, or concerted employee action should closely assess whether the NLRB has, or should have, exclusive jurisdiction.
How Important Is It to Document Directors’ Decisions and Keep Contemporaneous Evidence? (UK)
The recent High Court case of Stacks Living Limited & Ors v Shergill & Ors (“Stacks Decision”) has further highlighted the importance of taking advice and documenting decisions following the much-publicised decision of Wright v Chappell (the “BHS Case”).
By way of reminder (see our previous blog here), the BHS Case introduced the concept of misfeasance trading and found that a director can be liable for misfeasance trading if they continue trading in breach of their duties when the company should have gone into administration or insolvent liquidation. Notably, this claim could arise much earlier than a wrongful trading claim, bringing into sharper focus the need for directors to be very mindful of their duties.
The BHS Case provided useful lessons about steps directors ought to take, to reduce the chance of a claim against them for misfeasance trading (and therefore personal liability) including holding regular, fully documented board meetings and taking (and applying) appropriate professional advice. The Stacks Decision expands further on the importance of contemporaneous documentation and proper record keeping when approaching insolvency.
Background
The case concerned applications by the joint liquidators of two companies, Stacks Living Limited (“Stacks”) and Staffs Furnishing Limited (“Staffs”), which entered compulsory liquidation following a failure of the companies to pay national non-domestic rates tax to the Council. The companies were wholly-owned by Mr Balvinder Shergill who also acted as director. For a limited period, Miss Miranda Smith, Mr Shergill’s partner, was appointed as director of Staffs, although Miss Smith admitted to having no involvement at all in the affairs and business of Staffs.
The liquidators brought claims: i) for fraudulent trading; ii) for wrongful trading; and iii) misfeasance against both Mr Shergill and Miss Smith in respect of allegedly unexplained and/or otherwise improper or unjustified payments by the companies. The claims were opposed and Mr Shergill and Miss Smith sought to rely on s 1157 of the Companies Act 2006 (“CA 2006”) to claim relief from liability, which was rejected.
The findings against the directors
Fraudulent trading
The Court found Mr Shergill liable for fraudulent trading, due to “no real or honest belief that those debts would be discharged and no real expectation of a reduction or discount”.
The judge criticised Mr Shergill for an intention to trade through a series of phoenix companies and incurring, but not paying, the rates liability and HMRC debts.
Wrongful trading
The Court found both directors liable for wrongful trading (albeit Miss Smith for Staffs only during the period of her directorship), notwithstanding Miss Smith had no actual knowledge of the prospect of insolvent liquidation – in her capacity as a director Miss Smith ought to have enquired into the company’s financial position.
Crucially the Court found that the company could not evidence how it could pay the monies owed. In addition, despite suggestions that there was a hope of trading through difficulties, the Court noted that there was:
no evidence of any advice to support a believe of any genuine prospect of doing so, particularly where Staffs took over from the business of Stacks with no discernible shift in business plan;
no business plan, management accounts or other detailed financial or management records and no foundation on which to conclude that the business could survive; and
no evidence to support Mr Shergill’s assertions that he was acting on a genuine belief that relief was available.
Misfeasance
Company directors owe several duties to the company, including a fiduciary duty to apply the company’s assets for the proper purposes of the company and to account for their use. In this case, the liquidators identified:
several payments to Mr Shergill personally (which were labelled as “wages”, but Mr Shergill provided inconsistent oral evidence to argue that this was to pay supplies);
cash withdrawals; and
payments to certain organisations (e.g. Sky), which did not appear to be legitimate business expenditure.
The court noted that once a liquidator identifies a payment has been made, the burden of proving the payment was made for proper purposes falls upon the respondents. The directors ought to be able to rely on contemporaneous documentation to prove the origins of any payment. The Court was very critical of the quality of Mr Shergill’s oral evidence and was therefore reluctant to place much reliance on his submissions, in the absence of any documentary evidence to demonstrate that such payments were for the company’s benefit.
The court noted that non-production of documentation may be conspicuous by its absence, if it is likely that it would exist, and that the court may draw inferences from its absence.
Therefore, as Mr Shergill was unable to provide credible evidence that the withdrawals/payments were for a proper purpose, owing to a failure to keep proper records (e.g. receipts and/or contracts), the court ordered the directors to compensate the respective companies for the unexplained payments.
The Importance of Contemporaneous Evidence
In this case, the respondents adduced little to no documentary evidence to support their assertions, and the judge was heavily critical of Mr Shergill’s oral evidence, noting that it was “fundamentally inconsistent with known facts and documents”.
The Court referred to various “observations” made in previous cases regarding the importance of contemporaneous evidence, namely:
memory is “especially unreliable” when it comes to recalling past beliefs, which are revised to make them “more consistent” with present beliefs
the best approach is to place “little if any reliance” on recollections of conversations and to base factual findings on documentary evidence and known/probable facts
the importance of contemporary documentation to ascertain the motivation and state of mind of those concerned (particularly internal documents)
the value to be placed on contemporaneous evidence for credibility – it was noted in particular that lacking contemporaneous evidence may be conspicuous and lead a judge to draw negative inferences from its absence
the “fallibility” of human memory and the need for memory to be assessed alongside contemporaneous documentary evidence
Crucially, the council (a creditor in respect of the rates liabilities) had records of telephone conversations and emails, providing contemporaneous evidence in which the company acknowledged that it could not pay the rates liabilities – contrary to Mr Shergill’s version of events.
Concluding Thoughts
The case highlights the importance of contemporaneous documentation and proper record keeping by directors who may later be required to provide an explanation for past events. As noted “recollections” of conversations and “memory” are not as credible as written documentation.
We cannot comment on whether the existence of such would have changed the outcome for the respondents in this particular case, but the case does demonstrate that without contemporaneous paperwork directors will find it much harder to convince the court of the reasons for their actions.
Abigail Harcombe also contributed to this article.
Turbo-Zertifikate im Visier – BaFin plant neue Produktintervention
Die Bundesanstalt für Finanzdienstleistungsaufsicht hat bekannt gegeben, dass sie den Handel mit sog. „Turbo-Zertifikaten“, also MiFID-Schuldverschreibungen, die die Wertentwicklung eines Basiswerts gehebelt abbilden und bei Erreichen einer festgelegten Knock-Out-Schwelle unmittelbar verfallen, im Wege einer Produktintervention einschränken möchte.
Hintergrund dessen ist der Verbraucherschutz, für den die BaFin im vorliegenden Fall gleich „erhebliche Bedenken“ ausgemacht hat. Dabei stützt sie sich auf eine von ihr selbst erstellte Untersuchung (der aufsichtsrechtlichen Pflichtmeldungen) des zugehörigen Markts für den Zeitraum 2019 bis 2023. Demnach würden ca. 75 Prozent der Kleinanleger beim Erwerb von Turbo-Zertifikaten Verluste erleiden, die sich durchschnittlich auf ca. EUR 6.300,- pro Anleger verteilten und für den beobachteten Zeitraum insgesamt ca. EUR 3,4 Mrd. betragen hätten. Die Wertpapieraufsicht der BaFin sieht den Handel mit Turbo-Zertifikaten allein dadurch bereits „näher am Glücksspiel als an langfristiger Vermögensanlage“ (Thorsten Pötzsch, BaFin).
Um dem entgegenzutreten, hat die BaFin drei konkrete Maßnahmen im Entwurf einer Allgemeinverfügung vorgesehen:
Standardisierte Risikowarnung
Jede Mitteilung zu Vermarktung/Vertrieb/Verkauf von Turbo-Zertifikaten soll zukünftig eine standardisierte Risikowarnung enthalten, die explizit darauf hinweist, dass sieben von zehn Kleinanlegern bei einer Anlage in Turbo-Zertifikate Verluste erleiden.
Keine Vorteile
Es sollen zukünftig weder monetäre noch nicht-monetäre Vorteile (insbesondere keine Reduzierung von Gebühren, kein Neukundenbonus, keine Geschenke) als Anreiz für eine Anlage in Turbo-Zertifikaten angeboten werden.
Erweiterte Angemessenheitsprüfung
Kleinanleger, die Turbo-Zertifikate erwerben möchten, sollen zukünftig eine erweiterte Angemessenheitsprüfung durchführen müssen, die ihnen einerseits wesentliche Eigenschaften der Turbo-Zertifikate vermittelt und andererseits mindestens sechs zutreffend zu beantwortende Fragen zu Turbo-Zertifikaten vorsieht. Dieser Test soll alle sechs Monate wiederholt werden müssen.
Die BaFin will damit insgesamt ein angemessenes und einheitliches Schutzniveau für alle Kleinanleger herstellen.
Es ist erfreulich, dass man hier nicht gleich zum Äußersten greift und (noch) kein Verbot des Erwerbs von Turbo-Zertifikaten durch Kleinanleger erlassen hat bzw. dies beabsichtigt. Überraschend ist, dass die BaFin diese Produkte grundsätzlich in die Nähe von „Glücksspiel“ stellt. Dass Turbo-Zertifikate zur kontrollierten Absicherung eines Gesamtdepots tatsächlich der langfristigen Vermögensanlage nützen können, findet im Entwurf keine angemessene Berücksichtigung. Je nach Marktlage lassen sich durch verhältnismäßig günstige Turbo-Zertifikate auch sorgsam aufgebaute Altersvorsorge-Depots gezielt und risikobewusst absichern. Die BaFin kommt hingegen in ihrer eigenen Untersuchung zu dem Schluss, dass es keine Hinweise auf eine Nutzung von Turbo-Zertifikaten als Absicherungsinstrument von Kleinanlegern geben würde. Dies scheint vor allem darauf zu fußen, dass mehr long- als short-Positionen identifiziert wurden.
Der Erfolg der beabsichtigten Maßnahmen ist noch unklar. Nachdem die BaFin früher bereits (und dort noch invasiver) in Bezug auf etwa Contracts-For-Difference (CFDs) vorgegangen ist, wäre eine Untersuchung dahingehend, inwiefern die dort bereits ergriffenen Maßnahmen einen verbraucherschützenden Effekt erzielt haben, wünschenswert. Daraus ließen sich besonders Rückschlüsse auf die Erfolgsaussichten der neuen Produktintervention betreffend Turbo-Zertifikate ziehen.
Wer wirklich Turbo-Zertifikate erwerben möchte, wird sich weder von Hinweisen auf Verlustrisiken noch vom neu geschaffenen, zusätzlichen bürokratischen Aufwand abbringen lassen. Dann wären die
Maßnahmen letztlich eine unnötige Belastung – insbesondere der adressierten Intermediäre, Emittenten und Anbieter, aber eben auch der Kleinanleger.
Die Anhörung der BaFin zur Produktintervention ist hier auf der Website der BaFin zugänglich.
Die BaFin-Studie zum Vertrieb von Turbo-Zertifikaten an deutsche Kleinanlegerinnen und Kleinanleger ist hier auf der Website der BaFin abrufbar.