M&A consultancy

Under the circumstances of the rapid development of Vietnam’s economy, the enterprises and especially the startups always have the desire to receive investment from domestic and foreign investors via M&A transactions to improve production lines, technologies, and supply chains to meet the market requirements as well as to develop in new markets. However, most of Vietnamese enterprises are facing difficulties during the negotiation and preparation of legal documents to fulfill the conditions set by investors as well as the conditions prescribed by law to enable the M&A transactions.

As an international law firm specialized in providing legal services to international and domestic enterprises in various matters from investment, corporate re-organization, real estate, labor, M&A, IPO, and intellectual property… Especially, as an expert in M&A transactions, we understand the challenges that the enterprises encounter as well as understand the desires and demands of the investors. Therefore, with our knowledge and experience, the lawyers at Apolat Legal step by step provide supports and advice to clients throughout the stages of dealing included: Legal advisory for deal structure; advice on relevant legal regulations; regulatory overview; legal diligence; consulting management re-organization; preparing/reviewing ownership and management continuity memo; negotiating, drafting / reviewing sales and purchase contracts; perform the licensing and compliance procedures in Vietnam.

From the initiation to conclusion of the transaction, Apolat Legal will always accompany and warn the clients against legal risks and issues that may arise in transactions. The protection and enhancement of our clients’ legal interests is always Apolat Legal first priority.

KEY CONTACT

Le Tien Dat

Managing Partner

Phone: +84939107387
Email: dat.le@apolatlegal.com

Pham Hong Manh

Senior Partner

Phone: +84932014986
Email: manh.pham@apolatlegal.com

RELATED ARTICLES

The need to enhance the protection of online copyrighted contents under the pressure of EVFTA

Online piracy is a growing problem in Vietnam. Experts indicate that a large volume of all digital content (music, movies, e-books, software and mobile phone applications) provided to users on the Internet in Vietnam is pirated. The copyright enforcement has been facing big challenges due to the scale and the borderless nature of the internet. In this context, the role of online service providers in protecting online contents from copyright infringement must be carefully taken into account. Under current Vietnam legal framework, the liability of online intermediaries is mainly governed by the Law on Intellectual property law 2005, amended in 2009, 2019 and the Law on Information Technology 2006 and relevant decrees, circulars. 

The current Vietnamese intellectual property legal framework has been issued on the ground of the country’s IP commitments under the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Although this also is a major important international treaty in IP field, it is obvious that the TRIPS’s standard concerning IP right protection and enforcement measures are lower than that of the EU. Thus, entering EVFTA may require Vietnam government to adjust the current IP laws to comply with the new higher commitments.

Find out more: Overview about IP regulations under EVFTA in comparison with Vietnamese IP framework.

Under Vietnam intellectual property framework, the liability of online intermediaries is mainly governed by the Law on intellectual property law 2005, the law on information technology 2006 and relevant decrees, circulars. The first decree on this issue is Decree No. 55 adopted in 2001. Regarding the EVFTA, intellectual property matters are regulated in Chapter 12 of the Agreement. The objectives of this Chapter are to facilitate the creation, production and commercialization of innovative and creative products between the Parties, contributing to a more sustainable and inclusive economy in each Party; and achieve an adequate and effective level of protection and enforcement of intellectual property rights. Furthermore, the Agreement also requires that the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

However, there are still some inconsistencies that Vietnamese laws must be enhanced to comply with commitments under EVFTA. Firstly, the Vietnam’s current IP law still lacks regulations specifying four commitments concerning (i) exclusive right of performers and phonogram producers to make public their performances and phonograms; (ii) protection of 169 EU’s geographical indications listed in the FTA; (iii) extension of terms of pharmaceutical patents as compensation for delayed licensing; and (iv) presumption of authorship or ownership.

The other legislation that governs the liabilities of online service provider on the intellectual property infringements on the internet is the Law on Information Technology 2006. Accordingly, this law explicitly exempts online intermediaries from liabilities in certain circumstances. In order to further clarify the implementation of the information technology law, the Joint Circular No. 07 was issued. Accordingly, telecommunications service suppliers, internet service suppliers, providers of online social network services, providers of information search services, and companies leasing digital information storage space are directly liable for infringing content only in limited circumstances. The circumstances include when intermediary service provider: 

a) Is the source of uploading, transmitting or providing digital information content through telecommunications networks and the Internet without the permission of the right holder;

b) Fix, mutilate, copy digital information content in any form without the permission of the right holder;

c) Deliberately cancel or disable technical measures taken by the right holder to protect copyright and related rights;

d) Act as a secondary distribution of digital information content due to copyright and related rights violations.

Intermediary service providers are responsible for removing and deleting digital information that violates copyright and related rights, cutting, stopping and suspending Internet transmission and telecommunications lines after receiving written requests of the Inspectorate of the Ministry of Information and Communications or inspectors of the Ministry of Culture and Information or other competent agencies. In terms of copyright law, based on the above regulations, Internet service providers have no duty to remove and delete digital content that violates copyright and related rights without the written requests of competent state authorities. 

Nonetheless, EVFTA imposes more specific regime related to the liability of online intermediary service providers to prevent toe IP infringements. Accordingly, this legislation requires Vietnamese government to provide for limitations or exemptions in its domestic legislation regarding the liability of intermediary service providers, in relation to the provision or use of their services, for infringements of copyright or related rights that take place on or through telecommunication network. The limitations or exemptions shall cover at least the following activities:

(a) the transmission in a telecommunication network of information provided by a user of the service, or the provision of access to a telecommunication network (“mere conduit”); 

(b) the transmission in a telecommunication network of information provided by a user of the service concerning the automatic, intermediate and temporary storage of that information, performed for the sole purpose of making more efficient the information’s onward transmission to other users of the service upon their request (“caching”);

(c) the storage of information provided by a user of the service at the request of a user of the service (“hosting”) on condition that the provider:

 (i) does not have the knowledge of illegal information; and

 (ii) upon obtaining such knowledge, acts expeditiously to remove or to disable access to information.

It seems that the EVFTA is following the notice-and-takedown mechanism. Accordingly, if online intermediaries already know about the existence of infringing contents on their platforms and have not removed it, they must be liable for such infringement. By contrast, the Vietnamese copyright law has so far not accepted an official notice-and-takedown regime and the remedies for copyright infringements so far is not really a deterrent. Thus, it still requires more effort from lawmakers and rightsholders to improve copyright legal framework and effectively deal with online copyright infringements.  

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Violating intellectual ownership rights on social media, how to handle?

2020 is a year of full turmoil; the SARS-CoV-2 pandemic commenced around November 2019 at Wuhan City, China, and its quick spread altered the method of communication of social on over the world from direct to online, from connecting to social-distancing, etc. However, the pandemic also created chances for enterprises with vigorous transformations to apply high technology in business activities, turn the digital environment into tools for business benefits. Social media such as Facebook, Instagram, Twitter, etc., gradually become the primary means of communication,  providing information among individuals and indispensable tools in business activities. 

Thanks to the rapid distribution of information and easy access and advertising products/services in large areas, online business activities have become more familiar with business entities and consumers. Social media, therefore, has become a potential market for unfair competition. However, not all enterprises, traders understand methods thoroughly to protect their business operation when doing online business, or being infringed, un-fair competed by other entities on social networking sites. This article only expresses, analyses, evaluates solutions to some popular unfair competitions on social media of businesses while doing business and commerce based on Vietnamese law regulations. 

Release “dirty” information, untrue about business activities of other enterprises

Due to its enormous amount of users, rapid spreadability, and users usually do not check the preciseness of information, social media becomes the place “dirty” and untrue information is posted. The story about the unclear quality of dairies material of Vietnam Milk Joint Stock Company (Vinamilk) at the end of 2019 is one of the typical examples of the effect of “dirty” information on businesses. Rivals only release vague information about material’s quality or information which lacks ground about products’ ingredients, rely on the dizzy speed of information sharing and transmission and the scope of the digital environment, Vinamilk had to face the risk of losing billions of VND of market capitalization in the security market. Or the information spread on Facebook about color trails at the tail of toothpaste would show the ingredients of such products, which were from natural materials or chemicals, also confuses public opinion and consumer’s psychology, affects the sales of the big toothpaste manufacturers as P/S, Colgate. 

Currently, handling behavior of posting untrue information on social media is prescribed specifically by the Government in the Decree 15/2020/ND-CP on penalties for administrative violations against regulations on postal services, telecommunications, radio frequencies, information technology and electronic transactions, in which: 

Acts taking advantage of social media to:

  • Provide, share fake, untrue information, deform, vilify, offend prestige of agencies, organizations, honor, and dignity of individuals;
  • Provide, share pure fabrication, cause confusion among people, create violence, crime, social evils, gambling or serving gambling activities;

It may be sanctioned from VND 10,000,000 to VND 20,000,000 as prescribed at Article 101, the Decree 15/2020/ND-CP, or depend on the level and behaviors of posting fake information, organizations/individuals putting news may be sanctioned if they offer untrue information about other enterprises per Clause 1,2 Article 18 the Decree 75/2019/ND-CP, the fine shall be in range VND 100,000,000 to VND 300,000,000. Affected organizations, individuals due to acts of posing fake information, can request police or people’s committee to handle these above acts.

Violating intellectual ownership rights on social media

Besides posting false information cause influences to business activities of enterprises, establishing social media account having coinciding or similar signs, symbols to trademarks, tradenames, identification marks of other enterprises without agreement from the owner of those trademarks, trade names, signs is also a popular infringement nowadays.

These behaviors may be considered as violations of industrial property right registered for protection at competent agencies or unfair competition according to as specified at the Law on Intellectual Property, includes:

“Article 130. Acts of unfair competition

1. The following acts shall be deemed to be acts of unfair competition:

  • Using commercial indications to confuse as to business entities, business activities or commercial origin of goods or services;
  • Using commercial indications to confuse as to the origin, production method, utilities, quality, quantity or other characteristics of goods or services; or as to the conditions for the provision of goods or services.

2. Commercial indications at clause 1 of this article are signs, information serving guidelines to the trading of goods or services including marks, trade names, business symbols, business slogans, geographical indications, designs of packages and/or labels of goods.

3. Acts of using commercial indications stipulated in clause 1 of this article include acts of affixing such commercial indications on goods, goods packages, means of service provision, business transaction documents or advertising means; and selling, advertising for sale, stocking for sale and importing goods affixed with such commercial indications”.

When finding out infringements on intellectual property rights on social media, enterprises can report such violations on intellectual property rights to social media managers and ask them to remove violating contents or block infringing accounts. In addition, violated organizations/individuals may also request authorized agencies such as police, people’s committee to handle and settle infringements on intellectual property rights and/or unfair competition concerning the intellectual property rights according to the laws, with the applicable penalty can be up to VND 20,000,000 as stipulated at the Decree 99/2013/ND-CP on sanctioning of administrative violations in industrial property.

These above mentioned acts only two among many unfair competition methods in practice, and each act, depending on the type and level of such violation, the subject being violated, will be handled according to different regulations. In business, competition is unavoidable, however, enterprises need to identify which acts are unfair competition to avoid and how to resolve unfair competition to cut down damage for themselves. 

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Law on Enterprise 2020 – Some remarkable changes

On June 17th, 2020, the National Assembly promulgated the new Law on Enterprises (“Law on Enterprise 2020”), which shall be effective on January 01st 2021 with some remarkable shifts compared to the previous version, such as cutting administrative procedures, allowing the conversion of sole proprietorship into joint stock company…. Let’s us take a look on several important changes of Law on Enterprise 2020 which may impact on the operation of the Enterprise as follows:

1. Timeline for capital contribution 

Law on Enterprise 2020 retains the requirement that the charter capital must be contributed as undertaken within 90 days from the date of issuance of the Enterprise Registration Certificate. However, the duration of transporting or importing assets contributed as capital and conducting administrative procedures for conversion of ownership of assets shall be excluded under Law on Enterprise 2020[1]. This adjustment is practical for capital contribution activities of the Enterprise. For contributed assets from other countries, there should be a certain amount of time for the transportation, the customs procedures or other assets which require to register the owner conversion for real estates, transports, intellectual property rights, especially real estates with tremendous value need more time to carry out the ownership conversion into the Enterprise. Law on Enterprise 2020, though, has not specified the time at which members/founding shareholders are required to begin transporting, importing or implementing administrative procedures to make the initial capital contribution, it is generally understood that members or founding shareholders  must follow the essential procedures to convert the ownership of contributed assets from them into the Enterprise within 90 days from the date of issuance of the Enterprise Registration Certificate.

2. Abrogating the regulations on reporting changes of enterprise managers:

Under Law on Enterprise 2014, the Enterprise must make a report to the business registration division within 05 working days from the date of information changes of any of the following persons: member of the Board of Directors, member of the Inspection Committee or the Inspector, Director or General Director[2]. The fact that this provision arises unnecessary administrative procedures, causing difficulties for enterprises, especially for the joint stock company when information changes of the member of the Board of Directors must also be notified to the competent State agency. However, Law on Enterprise 2020  has officially abrogated this requirement and cut the red tape off. There’s one concern is that how the processing of manager information recorded and published on the National Business Registration Portal will be solved. Whether the Enterprise has to execute any information adjustment steps or such information is automatically removed by the business registration division. The Enterprise shall wait for the Decree guiding Law on Enterprise 2020 to determine next procedures.

3. Regulations on Legal Representative 

Both Law on Enterprise 2014 and Law on Enterprise 2020 have allowed the limited liability company and the joint stock company to be represented by one or more legal representatives. Rights, obligations and titles of the legal representatives have been regulated in the company’s Charter. However, the Law on Enterprise 2020 supplements the case that the division of rights and obligations of each legal representative is not specified in the company’s Charter, each legal representative of the company is the representative with the full authority of the Enterprise to the third party. All of them must take joint responsibility for any damage to the Enterprise as prescribed by civil laws and relevant laws[3]. Through the above provision, should the charter be silent as to such allocation of duties of each legal representative, each legal representative may be considered as “unlimited liability partner” and has joint liability for total damages, creating a mechanism that involves “members monitoring each other”. Should there is a mistake, all unlimited liability partners will use their own assets and be jointly and severally liable for losses. Besides, each legal representative should be cautious and careful with other legal representative’s decisions because the poor decisions may impact on them, even if they were neither involved in the alleged incident nor aware of it.

4. Allowing for the issuance of corporate bonds by a limited liability company [LLC]

Given that the Law on Enterprise 2014 have not stipulated that an LLC may issue corporate bonds, there seems unfamiliar to many people. With Decree No. 163/2018/ND-CP amended and supplemented by Decree No. 81/2020/ND-CP, it is acknowledged that an LLC is entitled to issue bonds when certain conditions are met[4]. Typically, the huge commotion has emerged where the Xich Lo Do Trading Service Company Limited recently announced a successful capital raise of VND 738 billion by issuing bonds, owing to the correlation of capital size, business situation compared to the money raised from bond issuance. Law on Enterprise 2020 has officially stipulated the right to issue bonds in accordance with the Law on Enterprise and other relevant laws[5]. Consequently, an LLC is permitted to issue individual bonds when satisfying the following conditions: audited financial report, full payment of principal, a guarantee of financial safety ratio and interest rate of previously offered bonds (if any), etc. In terms of the order, detailed procedures may have to wait until the Government has written guidance.

5. Additional Protections for Minority Shareholders

Law on Enterprise 2020 has added up the rights of a shareholder or a group of shareholders owning five percent or more, unless the charter stipulates a smaller percentage. These new regulations allow a shareholder or a group of shareholders to sight, consult and make an extract of the book of minutes and resolutions or decisions of the Board of Directors, mid-year and annual financial statements, reports of the Inspection Committee, and contracts and transactions which must be passed by the Board of Directors and other data except for data relating to commercial secrets or business secrets of the company[6]. Accordingly, Law on Enterprise 2020 has excluded documents relating to commercial secrets and business secrets of the company from the scope of the rights of this group of shareholders or minority shareholders. The concept of “business secrets” has been stipulated in the current Intellectual Property Law[7], but, commercial secrets definition is still not specified clearly by any legal documents. Major shareholders or the Board of Directors may, for some reasons, abuse this regulation to make any document a commercial secret if it is not accessible to a minority shareholder or group of shareholders accounting for 5% or more, due to the rule of “documents related to commercial secrets, business secrets” is said to be a too broad scope of adjustment. Removing access to information relating to commercial secrets has inadvertently narrowed the access to information of a minority shareholder or group of shareholders. What if a major group of shareholders control the board and this group does not want a minority shareholder or group of shareholders to access information, it is possible to stipulate that the entire contract adopted by the Board of Directors is labelled “commercial secrets”. However, it should be acknowledged that the addition of individual rights to the minority shareholder or group of shareholders with a ratio of 5% or more is also considered a positive new point of the Law Enterprise 2020 to protect the interests of vulnerable groups.

6. Dismissal of the Board of the Directors member of a joint stock company [JSC]

Law on Enterprise 2020 has put discharge, removal, replacement and addition of members of the Board of Directors into a separate provision[8]. Accordingly, the General Meeting of Shareholders discharges any member of the Board of Directors when such member of the Board is unqualified or submits written notice of resignation which is approved, or other cases prescribed by the company’s Charter. The issue to be clarified here is a dismissal in case of “having written notice of resignation which is approved”. In the circumstance that the company’s Charter does not regulate this content if, for some reason, a member of the Board of Directors wants to resign, but disapproved by the General Meeting of Shareholders. Will that the member of the Board of Directors be allowed to resign? By the provisions of the law, it is not due to inadequate eligibility for approval of the General Meeting of Shareholders.  

At present, Law on Enterprise 2020 has not taken effect, and we have not yet verified the actual effectiveness of the application of some of the new regulations mentioned above. Moreover, Law on Enterprise 2020 will also be guided by Government decrees, circulars of relevant ministries and the Enterprise that can clearly understand these new regulations and apply to business activities of the Enterprise.

 

[1] Article 47, Article 75, Article 113 Law on Enterprise 2020

[2] Article 12 Law on Enterprise 2014

[3] Article 12 Law on Enterprise 2020

[4] Clause 3 Article 1 Decree 81/2020/ND-CP

[5] Clause 4 Article 46 and Clause 4 Article 74 Law on Enterprise 2020

[6] Point a Clause 2 Article 115 Law on Enterprise 2020

[7] Clause 23 Article 4 Law on Intellectual Property 2005

[8] Article 160 Law on Enterprise 2020

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Amending the Law on Intellectual Property: Protecting the copyright in the context of the economic foundation

In 2005, The first Law on Intellectual Property of Vietnam is through under pressure of The World Trade Organization accession process. Although, awareness of the function of this Law, protect and execute Intellectual Property rights are not the number one priority yet of the lawmaker at that time. In 2020, Amending the Law on Intellectual program is warmed up. In 2020, Amending the Law on Intellectual program is warmed up under pressure Vietnam signs series of new generation trade agreements with very high standards on intellectual property issues. However, The present background has changed very much compared to 15 years ago, besides the external pressure of joining economic agreements, we are also deal with practical more motivation come from within ourself, that is the dominance of “platforms” in the digital economy.

Commenting on the challenge of short video sharing platform Tiktok, David Isrealite (President of the National Association of Music Publishers) used to think that Intellectual Property Lawsuit can not avoid this rising platform. Now, This prediction has come true in Vietnam. Specifically, May 28, 2020, Joint Stock Company VNG (owner platform of listening to music online Zing MP3) has sued Tiktok Inc (owner platform of social networking sharing short video Tiktok) to People’s Court of Ho Chi Minh City with accusing. Tiktok has carried out behaviour communicating to the public many audio and video recordings of musical works performed by VNG without the consent of VNG, constitutes infringements of related rights under Clause 8, Article 35 of the Intellectual Property Law.

In the context of the current legal provisions on the responsibility of platforms to enforce copyright in the digital environment is a hot (and sensitive) issue in Vietnam and many countries around the world, the parts of VNG and TikTok Inc. will be the fight attractive between powerful platforms. This fight result will likely be resolved throughout measures outside the court. However, when it is recalled that VNG itself also used to be the defendant of similar lawsuits from actors, artists. The final question to be resolved is not the judgment of the case on which is how such lawsuits may become effective legal tool even for person create content.

Enterprises providing intermediary services (ISP) have long benefited from exception cases their neutral state. Whereby, ISPs only have to remove the copyright infringement contents if they are properly notified of such infringement. Announcer normally is the owner of the copyright has been violated (personal content creation). The question is that with the huge amount of information posted to the internet every day, how artists, musicians, YouTubers, etc can control the content of other people to upload that infringes my rights?

Actual above also go with the problem of mole game (whack-a-mole problem). Where by, if player try to catch mouse on this case. Whereby, if the player tries to catch a mouse on this cave, the mouse will appear in another cave after that. The player will not be able to know which cave the mouse will continue to reappear. The game continues like that. So, the problem is not catching the mouse, that more important is how to make the mouse don’t easily reappear on another cave. Fighting copyright infringement on today’s social networking platforms is like playing mole. If a infringement content is removed on this post, that once can be easily reposted on another status. Therefore, if there aren’t any support solutions for authors “catch mouse” effectively, the game will be increasingly unbalanced in a negative direction for content creators.

To partly solve the above problem, March 26, 2019, The European Parliament has passed the copyright law in the digital environment in an effort to find the status “reasonable balance” between the rights holders and the platform. The most controversial point is article 17 of this Act, in which European lawmakers require internet service intermediaries to actively control and remove content that infringes the copyright of other subjects without notice from the right owners. The above law will take effect from 2021 throughout Euro. Although there are still a lot of argumentative that new copyrights Law will negatively influence freedom of speech, freedom of access to information and will “change the Internet forever”, The immediate positive impact is the copyright of the content creators will protect better. This is the first step in eliminating extreme neutrality status that ISPs are benefiting from.

In VietNam, Now, Basically, Joint Circular 07/2012/TTLT-BTTTT-BVHTTDL solves responsibility of ISPs which is applying notice and takedown mechanism (“notice-and-takedown”) as approaching way of the US and the EU. Even so, While the EU and the US request IPSs removing the content if there are trustworthy announce from copyrights owners, Vietnam only requires ISPs to remove the content according to notified of state agencies. However, rarely State agencies appraisal request remove content copyright classification of an individual. Thus, although there is a learning approach, Vietnam did not achieve the level of protection of authors as strong as the United States and the EU are applied.

The difference in approaching way of Vietnamese Law comes in part from differences in Western and Eastern Cultural about protecting copyrights problem. While Western common law countries appreciate Jonh Locke’s theory for the fruit of labour, civil law countries and Eastern countries appreciate community Value of product rather than personal ownership. Besides, Law on Intellectual Property VietNam, with borning in 2005 as a requirement to meet WTO accession, is out of date and can not predict the current boom of internet and present platform economy.

As one of the fastest-growing internet in the world and aiming to build a digital economy, Vietnam is being a later country in the completed process of copyrights law on the internet. Although following to nation digital transfer project, to 2025, Vietnam will have about 50% of enterprises doing business on digital platforms, Legal framework for copyrights protection in the digital environment in Vietnam is still incomplete. Joint Circular 07/2012/TTLT-BTTTT-BVHTTDL as mentioned is only eight articles, of which there are only two articles direct stipulate about handle responsibility mechanism of ISPs in Vietnam. Currently, Draft decree amending and supplementing the Decree 72/2013/ND-CP dated July 15, 2013, of Government about management, supplement, using the internet and electrical information services that Ministry of Information and Communication is taking opinions still keep silence about this issue. This is a blockage point easiest to see in  the current legal framework of responsibility of ISPs in Vietnam.

The information technology revolution has risen in the context of the value of copyright law being challenged by its own traditional principles. Now, Vietnam is facing the biggest problem that Law on Modern Copyrights is facing: Solving traditional exceptions of law in the context of the new environment and at the same time maintain the developing motivation of digital economy as a developing country.

No matter want or not, Vietnam has to give a choice. Promulgating a draft law too harsh like the way EU is carrying out can not be a good solution for a developing country as Vietnam. However, Vietnam can completely approach that solution in a softer and more flexible way. The regulations about the responsibility of ISPs in copyrights protections need to be adjusted to make sure satisfactory level of protection and balance between a side is the right of the right holder and a side is rights to use and access to knowledge and technology of the society as well as appreciate role (“gate guard”) of ISPs. In the context of preparing to amend intellectual property law and implement the EU-Vietnam Free Trade Agreement, lawmakers should consider the above issues. Only then will we be able to ensure the diversity and sustainability of the digital economy.

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