China Is Tightening Chip Design Protections

China has overhauled rules governing integrated circuit layout designs, introducing tougher registration requirements and allowing courts to award punitive damages for serious intellectual property infringement as Beijing steps up efforts to protect domestic semiconductor technology.

The revised regulations, signed by Premier Li Qiang on July 23, will take effect on Oct. 15, according to a document published on Monday by state news agency Xinhua. The changes were issued by the Justice Ministry and the China National Intellectual Property Administration.

The rules apply to the detailed layouts that determine how components are arranged within a chip, designs that often represent years of engineering work and are critical to semiconductor development, including for companies that focus on chip design rather than manufacturing.

The measures stop short of imposing export controls, but underscore Beijing’s growing emphasis on safeguarding technology developed by Chinese companies.

China’s semiconductor industry has accelerated efforts to build domestic alternatives after successive U.S. restrictions limited access to advanced chip-design software and manufacturing equipment.

Chinese policymakers have also explored broader measures to prevent strategically important technologies from being transferred overseas or acquired by foreign companies, the Financial Times reported last month. Those proposals could include restrictions on overseas production of advanced chips based on Chinese designs, the newspaper said.

The new rules are intended to make it more difficult to copy chip layouts or secure legal protection for designs created by others.

Applicants will now be required to demonstrate that their filings result from genuine creative activity, submit declarations of originality and clearly identify the original elements in materials submitted to authorities.

Regulators will also have clearer authority to reject applications that fail to meet those standards and to challenge registrations that should not have been approved.

“By raising originality standards, tightening registration requirements and penalising bad-faith applications, Beijing is trying to screen out low-quality claims and distinguish companies with genuine technological capability,” said Alfredo Montufar-Helu, a Beijing-based managing director at Ankura China Advisors.

The regulations also strengthen legal remedies for infringement by allowing damages to be based on losses suffered by the rights holder or profits earned by the infringer, with courts able to award punitive damages in serious cases.

They further clarify how layout-design rights can be licensed, transferred or used as collateral, and require organizations leading their creation to provide eligible personnel with reasonable rewards and remuneration.

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