The Chinese government has comprehensively revised its Regulations on the Protection of Layout-Designs of Integrated Circuits, which protect the arrangement of components and interconnections in semiconductor integrated circuits. The revised regulations will take effect on October 15, 2026. They introduce stricter application requirements concerning originality, procedures for revoking improper registrations, punitive damages for serious infringements, and rules governing the assignment, licensing, and use of rights as collateral. This is the first comprehensive revision of the regulations in 25 years, since they took effect in 2001.
The reform is not intended merely to prevent the copying of semiconductor designs. It signifies that China has begun establishing a legal foundation for protecting the design technologies of domestic companies and recognizing their value as tradable intellectual property.
Layout-Designs as a Key Determinant of Semiconductor Competitiveness
An integrated circuit layout-design is design information that specifies how the elements, interconnections, and other components constituting a semiconductor are arranged in two or three dimensions.
A semiconductor’s performance, power consumption, physical area, manufacturing efficiency, and other characteristics are significantly affected by its layout-design. For fabless companies that do not own manufacturing facilities and specialize in design, design information—including layout-designs—is a core business asset.
The revised regulations expand the scope of protection beyond conventional electronic circuits to include layout-designs for new types of integrated circuits incorporating functions based on photons, quantum technologies, and other technologies. This indicates that China is looking not only at the existing semiconductor industry but also at next-generation fields, including photonic semiconductors and quantum technology.
Prioritizing the Quality of Rights Over the Number of Registrations
One of the most significant aspects of the reform is the tightening of the registration system.
Applicants will be required to demonstrate that the layout-design for which protection is sought is based on actual creative activity. They will also be required to submit a newly introduced “statement of originality,” clearly identifying which elements of the submitted drawings and other materials are original.
Applications that clearly fail to satisfy the requirements will be rejected. Even after registration, third parties will be permitted to request the revocation of an improper registration. When a registration is revoked, the right will be treated as though it had never existed.
This represents a shift from a system in which rights could be obtained through the submission of largely formal documentation to one in which applicants must explain the basis and scope of their rights at the application stage.
A statement of originality will make it more difficult for a rights holder to subsequently assert an excessively broad scope of protection. At the same time, clearly identifying the original elements at the time of registration will make it easier to assess the value of the right in infringement litigation, licensing negotiations, mergers and acquisitions, and other transactions. Chinese government experts have also explained that, although the new requirements will increase the burden at the application stage, they can reduce the subsequent costs of confirming rights, enforcing them, and conducting transactions.
The reform may therefore be viewed as symbolizing a transition from the quantitative expansion of intellectual property rights to a policy that places greater emphasis on their quality and reliability.
How Punitive Damages Will Change Infringement Risk
The revised regulations also strengthen the remedies available for infringement.
Damages will be calculated on the basis of either the actual losses suffered by the rights holder or the profits obtained by the infringer. When it is difficult to calculate either amount, damages will be determined by reference to a multiple of an appropriate licensing fee. Punitive damages may also be awarded when the circumstances of the infringement are particularly serious.
In the past, even when a company had obtained rights in a layout-design, it could be difficult to prove the amount of loss caused by an infringement, preventing the company from obtaining adequate compensation. The reform may strengthen the economic deterrent against malicious copying and unauthorized use.
Foreign companies that manufacture or sell semiconductors and electronic equipment in the Chinese market should, however, be aware that their infringement exposure may also increase. In addition to investigating layout-design rights held by Chinese companies, they will need to manage more clearly than before the development history of their own designs, the scope of licenses covering design assets introduced from third parties, and the ownership of deliverables created by contractors.
Transforming Intellectual Property from a Protective Right into a Commercial Asset
The revised regulations also establish rules governing the assignment, licensing, and pledging of layout-design rights. They further provide that, when a corporation or other organization leads the creation of a layout-design, engineers who satisfy certain conditions should receive reasonable rewards or remuneration.
These provisions indicate an intention to position layout-design rights not merely as a means of preventing imitation, but as economic assets that can be used in technology transactions and financing.
When the scope of a right is clear, the risk of invalidation is low, and effective remedies are available in the event of infringement, financial institutions and investors can more readily evaluate that right as part of a company’s value. Startups may be able to raise funds by pledging layout-design rights as collateral, while larger companies may acquire design technologies through licensing arrangements or corporate acquisitions.
In other words, China is seeking to transform its semiconductor intellectual property system into industrial infrastructure connecting technological development, the acquisition of rights, commercialization, and financing.
Building a Domestic Legal Framework in Response to U.S. Export Controls
China’s semiconductor industry has accelerated the development of domestic technologies in response to U.S. export controls covering advanced semiconductors, design software, manufacturing equipment, and other items. Although the revised regulations do not directly restrict technology exports or overseas manufacturing, they demonstrate that the Chinese government regards the design technologies of domestic companies as strategically important assets.
Preventing technology leakage first requires domestic law to clearly establish which technologies belong to whom and the extent to which they are protected. Statements of originality, clarification of the scope of rights, and rules governing assignment and licensing provide the necessary foundation.
Accordingly, although the reform does not itself constitute an export-control regime, it could provide a basis for China to manage the overseas transfer of important technologies, acquisitions by foreign companies, offshore manufacturing, and similar activities in the future.
China’s semiconductor policy is moving beyond the stage of introducing foreign technologies and expanding domestic production. It is entering a stage in which technologies created domestically are identified, protected, commercialized, and controlled to prevent their outflow abroad.
Measures Required of Japanese Companies
For Japanese companies, the reform is not an issue that concerns Chinese companies alone.
Companies seeking layout-design rights in China will need to prepare materials from the application stage that explain which elements are original. It will be important to maintain records of design revisions, the identities of creators, creation dates, pre-existing designs that were used, and the scope of outsourced work, thereby establishing a system capable of demonstrating that the design was developed independently.
In joint-development and commissioned-development projects with Chinese companies, contracts will need to clarify not only the ownership of deliverables, but also who is entitled to apply for registration, who may use improved designs, and whether the designs may be manufactured or sold outside China.
When acquiring a Chinese company or obtaining a license to its technology, companies will be expected to examine not only whether a registration certificate exists, but also the contents of the statement of originality, the circumstances surrounding the creation of the design, and the possibility that a third party may seek revocation of the registration.
Stronger protection will benefit companies seeking to safeguard their own technologies. For companies that fail to adequately investigate the rights of others, however, the new framework will create additional business risks, including exposure to punitive damages.
Semiconductor Supremacy Depends on More Than Manufacturing Capacity
International competition in the semiconductor sector often focuses on investment in manufacturing equipment and fabrication plants. In practice, however, competitiveness is built on multiple forms of intellectual property, including circuit designs, layout-designs, manufacturing processes, materials, and software.
The regulatory reform demonstrates that China does not view semiconductor self-reliance simply as a matter of constructing domestic factories. It is seeking to establish a system that identifies design technologies created within China, protects them through reliable rights, and enables them to be used in licensing and as collateral.
China’s semiconductor intellectual property policy is shifting from a “system for registering rights” to a “system for identifying valuable technologies, converting them into corporate value, and preserving them as a source of national competitiveness.”
The new regulations taking effect on October 15 are likely to represent an important step in giving concrete form to that transition.