Late last year, the Chinese Government adopted sweeping new policies that could potentially foreclose government procurement from companies outside of China. In leveraging intellectual property rights to exclude non-Chinese companies from obtaining Chinese Government contracts, however, these new indigenous innovation in government procurement rules, which establish criteria for a national catalog of products eligible for preferential treatment in government procurement, may be inconsistent with China’s international obligations. In particular, while China is entering its third year of negotiating accession to the World Trade Organization's (WTO’s) Government Procurement Agreement (GPA), the rules would be in direct conflict with China’s obligations under the GPA.

On November 15, 2009, the Chinese Ministry of Science and Technology (MOST), National Development and Reform Commission, and Ministry of Finance issued a joint release detailing the 2009 National Indigenous Innovation Products Accreditation Program (Notice 618). [1] As part of the Chinese Government’s National Science and Technology Development Middle- to Long-Term Plan for 2006-2020, the notice announced the creation of a new national-level catalog of products eligible for procurement by the Chinese Government. The circular further stated a new Chinese Government policy aimed at promoting “indigenous innovation” by which vendors to the government would be required to gain accreditation for their products before they could be included in the government procurement catalog. According to the circular, companies excluded from the catalog will be permitted to bid on contracts with the Chinese Government, but preference will be given to companies listed in the catalog.

The notice focuses on six high- and new-technology fields: 1) computers and application equipment; 2) communications products; 3) modern office equipment; 4) software; 5) new energy and new energy devices; and 6) high-efficiency and energy-saving products. In order to gain accreditation, companies and their products in these fields must satisfy a number of criteria. Specifically, the notice restates several criteria contained in the precursor to the 2009 notice, the Trial Measures for the Administration of the Accreditation of National Indigenous Innovation Products. To qualify for the catalog:

  • A product must have been produced by an enterprise that has full ownership of intellectual property in China through its own research and development. Alternatively, a product may have been produced by a Chinese enterprise, work unit or citizen that has legally obtained the China intellectual property rights or legal rights.
  • The product trademark must be owned by a Chinese company registered in China.
  • The product must demonstrate a high degree of creativity and innovation.
  • The product must be of high reliability and quality, and must be certified by the China National Certification Administration or its provincial departmental branches.

However, the application guidelines attached to the notice impose additional conditions that could present a high hurdle to non-Chinese companies. In particular, any use, disposal or improvement of the intellectual property underlying the accredited product must not be subject to any foreign restrictions. Further, any trademark associated with the product must be registered in China first and may not be restricted by foreign brands. In this respect, products created by non-Chinese companies appear to be at a severe disadvantage in gaining accreditation under the program.