Chinese Coffee Cats, Obscene Brand "Star Tuuuut" and the Difference Between B and F

Do you remember the Starbucks versus Xingbake case? See here. But there are many more coffee(copy)cats in China, see here. Confusion between the Starbucks and Star tuuuut might has a lot to do with culture or rather language. Confusion might not be so big in Western countries (although it was about the tort: passing-off and dealt with an unregistered trademark in a Common Law country, it reminded me of the Advocaat case), but for many Chinese the difference between a B and F in the second syllable might not have a big impact on the total picture of the word.
IP Dragon received this picture of a coffee shop in China. Not completely PC but then again it's Friday.

Thank you P.

TGIF, so have a good weekend!
IP Dragon

Research: Through Fake Sunglasses You Will See Reality Different, Behave More Unethical, Feel Less Authenic

Remember IP Dragon's post of April, 2009: 'Faustian Pact Anno 2009: Receive Counterfeit Products, Loose Your Soul'.

Francesca Gino (Kenan-Flager Business School, University of North Carolina in Chapel Hill), Michael I. Norton (Harvard Business School) and Dan Ariely (Fuqua Businss School, Duke University) wrote an interesting paper for Psychological Science about the experiments, which shed light on the influence of wearing fake sunglasses.

Conclusions:

Wearing counterfeit products makes individuals:
- feel less authentic;
- increases their likelyhood of behaving dishonestly;
- increases their likelyhood of judging others as unethical.

Read their paper in Psychological Science (10 PDF pages) here.

IP Dragon Speaks at 3rd Global Forum on Intellectual Property, Singapore, January 6 and 7, 2011

IP Dragon is very honored he is invited by the IP Academy of Singapore to speak at the 3rd Global Forum on Intellectual Property, Raffles City Convention Centre, on January 6 and 7, 2011. This years theme is very actual: "Turbulent Times: Onwards and Upwards for Intellectual Property?"

I am very impressed by the learned line-up and I am very sure special things will happen when so much IP passionate scholars and practisioners fill up the same Singaporean space.

The Chairman of the IP Academy, professor David Llewelyn, and author of the book 'Invisible Gold in Asia' which will be reviewed on this blog soon, and the following IP scholars and practisioners will be present:

• Stan Abrams, Author of China Hearsay blog / Of counsel at Golden Gate Law Firm /IP Professor, Beijing’s Central University of Finance and Economics Law;
• Dr Tanya Aplin, Reader in IP Law, King's College, London;
• Justice Richard David Arnold, Judge of the High Court, Chancery Division;
• Ms Toe-Su Aung, General Counsel, Anti-Illicit Trade, BATMark Ltd;
• Mr Shamnad Basheer, Founder, Spicy IP Blog, Ministry of HRD Professor in IP Law, National University of Juridical Sciences, India;
• Mr Bruce Berman, CEO, Brody Berman Associates (US);
• Judge Prof. Dr. Joachim Bornkamm, Presiding Judge, Federal Supreme Court of Germany;
• Prof Robert Burrell, Professor of Queensland;
• Mr George Chappelle, EVP, Chief Operating Officer, Solocup;
• Ms Peggy Cheung, Partner, Jones Day (Hong Kong);
• Mr Dimitrios Drivas, Partner & Chair, Global Intellectual Property Practice Group, White & Case LLP, New York;
• Ms Karen Fong, Managing Partner, Rouse Legal (UK);
• Mr Danny Friedmann, Consultant, IP Dragon Blog;
• Ms Dominique Grigg, Barrister (Dominique Grigg Chambers), Queensland;
• Prof Hugh Hansen, Professor, Fordham University School of Law, New York
• Mr Albert Ho, Head of the Intellectual Property Investigation Bureau, Hong Kong Customs & Excise Department;
• Prof Justin Hughes, Senior Advisor to the Under Secretary of Commerce for Intellectual Property / Professor of Law, Cardozo Law School, New York;
• Mr John Hull, Partner and Head of IP, Memery Crystal LLP (London),
• Dr. jur. Kristina Janusauskaite, Attorney at Law (Lithuania);
• Prof Anette Kur, Research Fellow, Max Planck Institute for Intellectual Property, Competition and Tax Law;
• Prof Spyros Maniatis, Director, Centre for Commercial Law Studies, Queen Mary, University of London;
• Mr Batur Oktay, Director and Corporate Counsel at Starbucks Coffee Company;
• Ms Marilee Owens, General Counsel, BetBrain;
• Ms Anna Panka, Associate, Jacobacci & Partners (Milan);
• Hon. Robert van Peursem, Vice President, District Court The Hague, The Netherlands;
• Mr Guy Proulx, Managing Director, Transpacific IP Management Group Pte Ltd;
• Dr Meir Perez Pugatch, Senior Lecturer, University of Haifa in Israel, IP Policy & Commercialisation of Knowledge Assets/ Director of Research, the Stockholm Network;
• Hon. Randall R. Rader, Chief Judge, U.S. Court of Appeals for the Federal Circuit, Washington DC;
• Mr Robert Raskopf, Partner, Quinn Emanuel Urquhart Oliver Hedges LLP;
• Prof Jan Rosén, Professor, University of Stockholm;
• Ms Gayatri Roy, Partner, Luthra and Luthra;
• Mr David Ruder, VP (Memberships), RPX Corporation / Chair of Trademark Asset Management Committee, IAFS / Founder of Terrier IP Investments LLC;
• Mr Mustafa Safiyuddin, Partner, DSK Legal
• Prof Wang Qian, Professor, East China University of Political Science and Law, Shanghai;
• Mr Victor Wang, Senior Partner, Allbright (Shanghai);
• Mr Richard Wilder, Associate General Counsel for Intellectual Property Policy, Microsoft Corporation;
• Prof Peter Williamson, Professor of International Management, Judge Business School, University of Cambridge / Chairman, Tactical Global Management / Joint Author of “Dragons at Your Door”
• Prof Marry Wong, Professor of Law & Chair, IP Programs, University of New Hampshire School of Law
• Prof Peter K. Yu, Kern Family Chair in Intellectual Property Law / Director, Intellectual Property Law Center, Drake University Law School, Des Moines, IA
• Dr Daphne Zografos, Lecturer, University of Reading

For an updated list of speakers, see here.

What Can A Famous Food Brand Do Against Footwear Using Its Mark?

As a vegetarian I do not frequent the many McDonald's fastfood joints that can be found in China and which turn the slim people obese, just as they did with the American and European populations. I am not really certain what is on sale inside a McDonald's, but when I was in Shenzhen near the beach I was surprised to see that McDonald's has been diversifying into toe slippers. You could say, well that is not really diversifying, because toes could be considered meat too, although not dead meat. Then again, maybe it was not the fast food chain's idea to put its trademark on the slippers. Let's assume that they did not. What could a(n) (in)famous company such as McDonald's do against such unauthorised use of their mark?

April 23, 2009, China's Supreme People's Court promulgated the 'Interpretation on the Application of the Law Concerning Several Issuels Regarding the Trials of Civil Disputes Relating to the Protection of Famous Trademarks' (Judicial Interpretation on Famous Trademarks judicial interpretation).

So since that time the judicial interpretation clarifies that a famous trademarks registered in certain product/service classes is protected against a mark that is identical or similar but on products/services that are dissimilar.

See Article 10 Judicial Interpretation on Trademarks:

"If the plaintiff files a motion to enjoin the defendant from using a trademark, which is identical with or similar to its famous registered trademark, or enterprise name on dissimilar commodities, the people's court shall, in light of the concrete circumstance of the case, make a ruling after comprehensively taking into account the following factors:

1. the distinctiveness of the said famous trademark;

2. how well the famous trademark is known by the relevant general public that use the commodities using the trademark against which the lawsuit is filed or using the enterprise name;

3. the connection between the commodities using the famous trademark and the commodities using the trademark against which the lawsuit is filed or using the enterprise name;

4. other relevant factors."

This is based on China's WTO obligations to comply to TRIPs.

See Article 16 (3) TRIPs:

"Article 6bis of the Paris Convention (1967) shall apply, mutatus mutandis, to goods or services which ar not similar to those in respect of which a trademark is registered, provided that use of that trademark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered trademark and provided that the interests of the owner of the registered trademark are likeley to be damaged by such use."

This goes further than article 6bis of the Paris Convention of which China is a member since 1985.

See 6bis Paris Convention:

(1) "The countries of the Union undertake, ex officio if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration, and to prohibitthe use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential partof the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

(2) A period of at least five years from the date of registration shall be allowed for requesting the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be requested.

(3) No time limit shall be fixed for requesting the cancellation or the prohibition of the use of marks registered or used in bad faith."

So if we apply article 10 Judicial Interpretation on Famous Trademarks.

(1) I think we can come to the conclusion that McDonald's is a distinctive mark;

(2) And that it is well known to the relevant general public (because of its ubiquitous existence); (3) So what exactly is the connection between the commodoties of the famous mark and the dissimilar commodities of the mark that might infringe upon it? What is the connection between food and footwear? McDonald's could argue that the association with toe slippers is not conducive for fueling an appetite for its food, save for some foot fetishists. And this could dilute the brand.

(4) Other relevant factors, could be perhaps the popularity of the McDonald's toe slippers. Are they sold all over China, or just at the beach of Shenzhen. In other words the extend of the (potential) damage for the fast food chain.

Photo/text Danny Friedmann

Q&A on Trademark Proactive (TP), Tipi and Indian Givers

I was delighted by the questions after I uploaded my Asia Pacific IP Forum presentation in Hong Kong to Slideshare: 'How Social Media Challenge the Brandscape for Trademark Holders' in which I propose a solution for trademark holders: Trademark Proactive (TP).

Below I will explain some key points of TP:

Why should a trademark holder give away some of its rights? Social media users will use or abuse trademarks, whether trademark holders want it or not. Because of the characterisics of Social Media the spreading of damaging content can hardly be stopped. However, with TP they do not give away any right. To be proactive a trademark holder engages with the Social Media users and regains some of its control by authorising some use of the trademark under certain conditions.

Dan Cobley gave an interesting TED presentation about what physics taught him about marketing: "The lesson from physics is that entropy always increases, it's a fundamental law. The message for marketing is that your brand is more dispersed, you can't fight it, so embrace it, and find a way to work with it."

Why does service providers need to assume liability?
Service providers (such as Facebook, Twitter and Blogger) are more and more setting up the rules. Therefore it is fair they should also be held liable for non-enforcement of these rules. This will be pushing service providers to come up with Terms of Use that are effectively enforceable. In other words, Social Media could become more or less restrictive than trademark law, on a contractual basis. So far the Social Media sites' business model is advertising paid by trademark holders. Therefore it is justified that the trademark holders get something in return: enforcement of their trademarks.

What makes an effective and efficient enforcement of trademark authorisations possible?
Social Media could automatically compare the request for a third level domain name or content which mentions a trademark, and one database in which trademark holders have given exactly what is possible with their trademarks and under what conditions. Enforcement could be also automatically, without elaborate notice and take down procedures.

What kind of trademark use and under what kind of conditions could a trademark holder proactively authorise to a Social Media user?
A trademark holder could for example proactively authorise that a Social Media user could use a trademarked logo online, to illustrate an article about the brand, under the condition that the logo is not altered, and that the logo is linked to the official website of the brand. Or the logo could be altered, or used in parody, or used in comparative advertising (only in jurisdictions where this is allowed).

Why is the symbol of TP a tipi?
TP stands for Trademark Proactive, but can be pronounced as tipi. The tipi refers to a place where disputes can be solved. When the first Europeans came into contact with native Americans and for example they were cold, the Indians provided them with blankets. When they did not need the blankets anymore, the Indians wanted the blankets back. This lead to the misperception that the Indians wanted their presents back. That is how the saying: "Indian giver" came into being. Of course the Indians did not give a present, but just the right to use the blanket. TP should also give more clarity about how social media users are authorised to use trademarks.

What is next?
Feedback of trademark holders needs to be incorporated into a more definitive proposal.
Feedback to Danny Friedmann is welcome: ipdragon at gmail dot com

Mickey, Pokémon and Dooly Still Banned From Chinese Prime Time TV

September 30 to October 5, 2010, the second China International Animation Copyright Fair will be held in China's animation capital Dongguan, Guangdong province. Read an article by Tan Jing for News Guangdong here.

In 2010 foreign animations, such as Mickey Mouse (US), Pokemon (Japan) and Dooly (South Korean) have substantial mature industries, are still banned from prime time, a measure which started on September 1, 2006. The rationale behind the discriminatory measure is to support the fledgling domestic animation industry and to protect Chinese children from too much foreign exposure.

"The positioning of the second animation copyright fair will be clearer in order to focus on copyright protection and trade."

The American cartoon series The Transformers was provided to China Central TV (CCTV) free of charge, because they anticipate making money with the merchandise. Chinese animation companies are too small (at least in 2006), according to Crystal Wong of Asia Times, read here.

Anglo-Chinese Memorandum of Understanding on Copyright

Intellectual property minister Wilcox and the president of the National Copyright Administration of China (NCAC) Liu Binjie signed a Memorandum of Understanding (MoA) on Copyright, read more on the UK Central Office of Information site here.

Uncreative Brand, Creative Brand in China

Uncreative Brand

In Yangshuo, next to Guilin, Guangxi province, you can see one of the most characteristic mountains of China. But if you bike through the village, you will notice some interesting shops as well. Almost next to each other you can see a shop that embodies the old copycat mentality and one that characterises the new creative brandbuilding mentality.

adivon, easily recognised as a blatant adidas clone, has some remarkable things to say on its corporate website about branding and trademarks:

"The company has always adhered to the marketing philosophy of human-oriented and loyalty-led and been upright and creditable. We are competing for first place in the industry and targeting for gold medal in the market as we are to create it into a Chinese famous trademark and international famous brand." See here.

It even has a webpage dedicated to "brand honor" which shows eight certificates including

- From 2008 the annual message trust the quality of the top ten brands";

- 500 Chinese brands

- Top Ten China Industry Brand Campaign

- Famous brand products in Fujian

Talented IP student at CUHK, Brian Chen, illuminated me about the meaning of the Chinese characters of Adivon (阿迪王 pronounced as "a di wang"): "Chinese consumers use 阿 (a) 迪 (di) short for adidas. The brand is taking advantage of the association with adidas and by adding 王 (wang), which means king, it even implies it is better."

Creative Brand

But only a few shops to the right one will find one of the most creative and esthetical Chinese brands I have ever seen: Mulinsen, a shoe brand, that wants to have a green image (the question is whether this is justified, since the shoe industry is a rather polluting industry with a big water footprint, read here) is of course because of the characters used. Mu 木 means tree; lin 林 means forest and sen 森 means many trees. So all characters amplify each other, sort of alliteration with Chinese characters, and then the logo with four times the character 木 (or two times 林) is a very distinctive mark.

Mulinsen is also:

- Fujian famous brand

- Chinese famous brand

Photos/text Danny Friedmann

How Social Media Challenge the Brandscape for the Trademark Holders

Stan Abrams (China Hearsay), Chris Bailey (Rouse), Xie Lin (CUHK) and I gave presentations about the impact of Social Media on intellectual property (and vice versa).

My presentation focused on social media and trademark law. In this presentation I tried to shed light upon the challenges trademark holders are facing in these times of social media. With the solutions I propose I hope I can start a discussion about a more proactive role for trademark holders. Stan Abrams of China Hearsay called my proposal "a very provocative vision of the future".

Your feedback is welcome (ipdragon at gmail dot com)

Danny

How social media challenge the brandscape for trademark holders

View more presentations from ip dragon.

Q & A on Trademark Proactive, Tipi and Indian Givers, see here.

IP Dragon Speaks on 7th Annual Asia-Pacific IP Forum 2010

September 1, 2010, Stan Abrams of China Hearsay fame, and I will speak on Social Media (such as Facebook, LinkedIn, MySpace, but also blogs) and intellectual property (especially trademark and copyright) issues, during the 7th Annual Asia-Pacific IP Forum 2010.

There is a lot to say about this subject. If you deem a related subject important or have a great example about this subject matter, please do not hesitate to tell me, so that I will use it in my presentation (ipdragon at gmail dot com).

Last year's event Asia-Pacific Forum was great and this year's event seems very promising. Organised by Managing Intellectual Property and chaired by IP Dragon's friends Peter Ollier, Asia editor of Managing Intellectual Property and Dan Cole, Group Publisher (Asia), Legal Media Group.

Hope to see you there. See the agenda of the two day seminar here.

Picture/Text Danny Friedmann

IP Dragon Gives Lunch Presentation At Baker & McKenzie

Yesterday I gave a lunch presentation at the Hong Kong office of Baker & McKenzie. The title of my presentation: 'Is China's Unique Patent Law Paving the Way to Innovation?' about the challenges of foreign innovators because of the changes in the Third Amendment to China's Patent Law 2008. I was delighted to find such interested audiences at Baker & McKenzie's Hong Kong office and via video conferencing also at Baker's Shanghai and Beijing's offices and get excellent input of Baker's IP experts.

I spoke about:

- PRC history of patent law

- 'How socialism slipped out of the patent law'

- Confidentiality review in case of foreign filings

- Disclosure of genetic resources

- "Absolute" novelty standard

- Conclusions

Professor Llewelyn's Book Launched: 'Invisible Gold in Asia: Creating Wealth Through Intellectual Property'

Professor Llewelyn's new book just came out: 'Invisible Gold in Asia: Creating Wealth Through Intellectual Property'. If IP is the invisible gold in Asia, then Professor David Llewelyn is the alchemist of intangible property.

Publisher Marshall Cavendish Business writes:

"World competition in the 21st century will revolve around competition for intellectual property rights (IPRs). But what are these rights that you can’t see – the Invisible Gold of today’s Knowledge Economy. What can you do with them and how can Asian businesses foster the innovation and creativity they protect? From the patents protecting Creative Technology’s MP3 player and Tata’s ‘Nano’ car to ‘Tsingtao’ and ‘Singha’ branded beer, IPRs protect this Invisible Gold. David Llewelyn challenges Asian businesses to build up their reserves of Invisible Gold and governments to build a culture that encourages and rewards innovation and creativity. Using Asian examples throughout, David Llewelyn explains what the rights are, answers the questions and sheds much-needed light on this crucial but little-understood part of doing business in the 21st century."

IP Dragon certainly concurs with the thesis of Professor Llewelyn's book and is definitely going to read this highly relevant book.

Vax Is Not Infringing Dyson's Design Right?

Damian Reece wrote for the Telegraph that Dyson lost its claim in the High Court that its design right was infringed by the Mach Zen of Vax, a Chinese manufacturer of vacuum cleaners, whose design looks very similar indeed. See picture: left Dyson, right Vax. Judge for yourself.

Read Mr Reece's article for the Telegraph here.

I have not read why Dyson lost the case and whether Dyson registered its design rights or not (UK has also unregistered design rights, since 1989, just like throughout the European Community since 2002). Many Chinese infringing companies have the ambition to be a player on the world market, therefore they can not only be sued in China but oftentimes at a court in one of the markets they are exporting to.

TGIF: Intellectual Property Enforcement Coordinator Says The Darndest Things

Online copyright piracy is a serious problem. China has started a campaign of three months to blacklist websites with pirated content so that Chinese telecom operators can take them offline. Now one can question the effectiveness of this temporary measure, see here. But there are even worse solutions... Look at the idea of Brad Sherman, U.S. democratic representative, which goes.. let's say a bridge too far. Doug Palmer reported for Reuters that Sherman said the U.S. government should use cyber-combat techniques to take down internet sites in China, Russia and other countries that sell pirated U.S. music and movies. Of course the US could take Chinese websites offline if they are based on servers in the US, subject to US laws. But if the servers are in China, this would be obviously a violation of China's sovereignty and could be answered with similar cyber-combat strikes at US websites based on US servers.

Incredibly, Victoria Espinel, the US White House Intellectual Property Enforcement Coordinator responded allegedly, according to Palmer's Reuters article: "That is something we're actively investigating." And then Espinel allegedly continued: "But while it is technically possible, it does not take long for the sites to pop up in new locations." Was she seriously considering this or just like a thought experiment? Read more here.

The same article is a nice follow-up on the misguided use of hyperboles when one only wants to say that the level of IPR enforcement in China is unacceptably low. Sir Arthur Bamford called it "cancer", see here, and William Delahunt is taking the hyperbole one step further and calls China's low IPR enforcement "economic terrorism". These words are probably not conducive to solving the IPR enforcement challenge in China.

One might better use arguments for protection and enforcement of IPR in China (regardless whether these are in the hands of domestic or international companies/persons) that show China's advantages, based on David Ricardo's theory of comparative advantage, and disadvantage if it engages in mercantilistic policies. This is hard, now that China's economy is so successful and the importance of its domestic market is growing. Ms Espinel, and many international IPR holders are facing a daunting task to protect and enforce IPR in China.

Copyright Piracy in China: China Did Not Shed Its Fetish For Temporary Mass Campaigns

Blacklisting until the blacklisting goes on black again...

The National Copyright Administration of China (NCAC) has started a campaign on July 21, which will last until the end of October, to blacklist websites that are found to contain pirated content.

According to IPR Focus, who run the People's Daily Online article, the action was announced jointly by the National Copyright Administration, the Ministry of Public Security and the Ministry of Industry and Information Technology. Read here.

It seems that in regard to intellectual property rights (IPR) enforcement China did not lose its fetisch for temporary mass campaigns. We have seen these kind of campaigns over and over (see page 74 of my thesis Paper Tiger or Roaring Dragon). And the only thing that is missing is a nice poetic name.

The procedure to put the names on the website of the NCAC, so China's three telecom operators (China Telecom, China Unicom and China Mobile) can take them offline evokes questions. Do the websites get the chance to take down the pirated content first? What is wrong with a more durable solution to obligate websites to take down pirated content, and if they don't and the content is confirmed pirated by the NCAC, to let one of the telecom operators take the website offline.

Unsurprisingly the crack down will also focus on all content related to the Shanghai Expo and Guangzhou Asian Games. "Anyone who reports cases of infringement and piracy will get reward betwen 1,000 and 10,000 yuan." I guess the latter measure is only focused to enforce the IPR of these public events. Instead of spending the money on informers, the NCAC could enforce themselves or spend it on campaigns that should raise the awareness about IPR in general. China should know by now that there is more IPR to protect and enforce than the IPR of the Beijing Olympic Games, Shanghai World Expo and Guangzhou Asian Games.

JCB's Chairman Compares China's IPR Enforcement To Disease At Banquet With Premier Wen

Jonathan Guthrie's article for the Financial Times about the travails of JCB, the manufacturer of loaders, forklifts etc. to survive the economic crisis, includes quotes of its chairman. This Sir Anthony Bamford allegedly said to the Chinese premier Wen Jiabao during a banquet that the unlicensed copying of Western technology by Asian manufacturers equals "cancer".

Is this an effective metaphor or a hyperbole that is offensive to those who suffer from it directly or indirectly? According to Wikipedia, cancer is a class of diseases in which a group of cells display uncontrolled growth, invasion and sometimes metastasis. Many times the counterfeit and piracy can grow beyond the control of the rights holder. Invastion (intrusion on and destruction of adjacent tissues): it can destroy market share of the genuine product. Metastasis (spread to other locations in the body via lymph or blood): spread to other locations via export or up and downloading. It might be accurate at some level, but very stylish it is not. And these expletives lead to inflation of meaning. What's next? Godwin's law comes to mind.

One cannot accuse Sir Anthony of using euphemisms or much talent for diplomacy. Then again he is not mentioning China but uses the more generic category of Asian manufacturers. But premier Wen took the hint that he was meaning China and Guthrie reported that premier Wen answered according to Sir Anthony: "He said that China was a big country with millions of mouths to be fed, and that many Chinese businesses were suing Chinese competitors for the same reason".

In the first part of the answer "China is a big country with millions of mouths to be fed" the premier plays the "China as a developing country" argument. And the latter part "many Chinese businesses were suing Chinese competitors" contends that the problem that bothers foreign businesses also bothers Chinese companies. In other words the problem is distributed equally over foreign and domestic companies. This remains to be the question. China can easily come up with a number of intellectual property rights (IPR) disputes between Chinese companies that outnumber those IPR disputes where a foreign companies' IPR in China is involved, in absolute terms. However, if one looks at the relative numbers I am positive that the percentage of foreign firms whose IPR are infringed in China is higher than the percentage of domestic companies' IPR that is being infringed in China.

In short: domestic companies' IPR infringed divided by all domestic companies with IPR versus

foreign companies' IPR in China infringed divided by all foreign companies with IPR in China

Openly critizising China's IPR enforcement to the Chinese premier during a banquet is a route not much travelled by fellow captains of industry. To my knowledge it is the first time (let me know if I have missed other examples). Most company representatives are afraid that critique will lead to repercussions, in the form of covert barriers. Let's look how JCB fares in China in the future.

Read Mr Guthrie's article here.

CNBC: "The Most Profitable Criminal Enterprise: Counterfeit Goods"

CNBC presents "Crime Inc.: Counterfeit Goods," presented by Carl Quintanilla will be aired July 14. "At around 7% of all global trade, Counterfeit Goods are a big business with low overhead. It makes too much money to go away any time soon."

UPDATE, Friday July 30, 2010: Lies, damn lies and statistics. Felix Salmon could already fry the numbers used in the trailer for the CNBC documentary on counterfeit goods, read here.

Chinese Counterfeit Cisco Products Because of Profit Seeking Or State Sponsored Cyber Terrorism?

After 'Cisco Raider/Operation Network Raider' about counterfeit Cisco Systems router products which originate from China, Professor Peter Navarro poses the question whether the intention was only profit seeking by unscrupulous Chinese counterfeiters, or whether these products are trojan horses that are designed to make the US defense more vulnerable to state sponsored cyberterrorism. Professor Navarro (University of California-Irvine) is the author of 'The Coming China Wars'.

Professor Navarro lashes out against China's alleged mercantilist trade practices in 2008, see here.

Ms Pagnattaro Does Not Keep It A Secret How To Protect Your Trade Secret In China

Marisa Anne Pagnattaro wrote a very good paper: ‘‘‘The Google Challenge’’: Enforcement of Noncompete and Trade Secret Agreements for Employees Working in China’, American Business Law Journal Volume 44, Issue 4, 603–637, Winter 2007, available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1565040.

If you don't need to share a product, idea or ingredient with the world, then don't. Keep it a business secret, just like Coca-Cola who never patented its drink's ingredients. Easier said than done, though. At Coca-Cola only two people in the board of directors have each half the number combination to a safe. And there are a lot of things you should pay attention to protecting your trade secret. Trade secret is considered often as the ugly stepdaughter of the IP system. But it can be very effective.

In China the Provisional Regulations of the State Council on Technology Transfer, promulgated
January 10, 1985, http://novexcn.com/technology_transfer.html and the Regulations on the Administration of Technology Acquisition Contracts, May 24, 1985, http://www.novexcn.com/tech_acquisit_contract.html [hereinafter Technology Acquisition Regulations Detailed Rules and Regulations for the Implementation of the Regulations on the Administration of Technology Import Contracts, December 30, 1987, http://www.novexcn.com/admin_tech_export_k.html are relevant. However, all of these rules and regulations are contract based and, accordingly, are not binding on third parties. Additionally, no legal penalties are specified; the only remedy is for
breach of agreement.

The Law Against Unfair Competition, September 2, 1993, http://www.law-bridge.net/english/LAW/20065/1322511795243.html and Regional regulations: Labour Contract Regulations of Shanghai Municipality, effective May 1, 2002, http://www.12333.gov.cn/english/rules/rule/t20041028_4648.html http://www.shanghai.gov.cn/shanghai/node8059/FAQ/node8462/node8464/index.html.

Ms Pagnattaro illustrates the relevance of protecting trade secrets by showing the case of Dr. Kai-fu Lee who first worked for Microsoft and then for Google. Even more interesting is the conclusions she is drawing from this case.

The duration of the noncompete agreement should be limited to the amount that is just enough to protect the employer. "The longer the period, the more evidence you need to prove that the period is reasonable and necessary to protect against unfair competition and not an undue restrain on the employee’s right to work."

Limit the Scope of the Information covered by the noncompete agreement. "It is advisable that the noncompete clause expressly states that it is designed to preserve business secrets, thereby tying the agreement to a legitimate business reason and undermining any defense that the agreement is an unfair restriction on labor or creates undue hardship on the employee."

Tailor the geographic scope of the noncompete agreement to protect legitimate business interests.

Provide compensation in exchange for the noncompete agreement.

Limit access to the trade secret information. Files and other places containing trade secrets should be labeled.

Ensure that the information claimed to be a trade secret has economic value and practical applicability realizable utility.

Take active steps to protect the business secret.

The policy should also include penalties for improper use or disclosure of the information and enforcement of the penalties.

Incorporate a provision addressing trade secrets developed by the employee.

Take Action When an Employee Resigns. "Notify new employers of the secrecy obligations after a key employee leaves, the employer may want to follow upon where the employee goes, to protect against breaches of the noncompete agreement as well as the development of any competitive practices that infringe on business secrets to which the former employee was privy."

Is Hong Kong's Copyright Stopping the Publication of Li Peng's Historic Significant Diary?

Benjamin Kam Lim reports for Reuters that the diary of Li Peng that describes Li's version of what happened during the events that lead up to the June 3, 1989 massacre, that Hong Kong publisher New Centuty Press was going publish this June 22, will be halted, because the copyright holder allegedly is banning it.

The South China Morning Post quotes Cai Yongmei, editor-in-chief of Hong Kong's Open Magazine saying that she believes that Beijing intervened, because the diary could stir controversy, especially about premier Wen Jiaobao and president Hu Jintao's allegedly agreement over the intervention of the People's Liberation Army at the Square of the Heavenly Peace. Another possibility is that Hong Kong exerted self-censorship.

Whether the prohibition of the publication of the diary because of the copyright is not applicable, Ms Cai is alleging, because of the significance of its historical content, is dubious. One can still study it and write about it, without publishing the original.

In Germany the publication of Hitler's 'Mein Kampf' is prohibited because the copyright holder, the State of Bavaria does not allow it. Only after the German copyright (death of the author plus 70 years) expires, which will be in 2015, the book falls into the public domain. See more here.

According to Hong Kong's Copyright Ordinance (which is in this respect the same as China's Copyright Law), the copyright length is life of the author plus 50 years. Li Peng, is still alive, so after his death it will take another 50 years.

So who has the copyright over the book? Did Li Peng assign his copyright to someone else who does not give his permission?

Read Benjamin Kang Lim's article here.

With An Eye On ACTA: China Champion of TRIPs Freedoms and Flexibilities

During the TRIPs Council, which was held June 8 and 9, China told delegates it was concerned about developed countries that want provisions (for example the lower thresholds for criminal enforcement of counterfeiting and piracy) that go beyong TRIPs. This could lead according to China, to barriers to legitimate trade (when customs can seizure goods too easily) and restrict the flexibilities of TRIPs. And each country should be able to make decisions about the allocation of resources to enforce IPRs.

China points out all the provisions of TRIPs that makes their dramatic low IPR enforcement level arguably not noncompliant to TRIPs.

- Article 7 and 8 TRIPs: which gives a country leeway to not enforce in case of a public health or security emergency.
- Article 41(5) TRIPs: I called this in my master's thesis the Achilles heel of TRIPs: because it says that a country has the souvereignty to decide how much of its resources it would allocate to TRIPs.
The DSU panel at the WTO who decided over DS663 'China - Measures Affecting the Protection and Enforcement of Intellectual Property Rights' made it clear that China's level of numerical thresholds of criminal enforcement was not noncompliant to TRIPs.

Obviously China is not falling for ACTA's charms of the promise of high enforcement levels. And maybe even some obligations of measures. One could say that ACTA is demanding a monotonous relationship with right holders. China rather wants to continue its marriage of convenience with TRIPs because it gives it only the obligation to legislate, not a single obligation of measure, let alone obligation of result. TRIPs allows room for a romance with other goals than only enforcement on behalf of right holders: technology transfer, public dissemination of information, developing regions, indigenous innovation.

Read Catherine Saez' article about the TRIPs Council meeting for Intellectual Property Watch here.

Professor Llewelyn: "Leverage Your IP Rights"

This Morning IP Dragon attended a breakfast seminar by Professor David Llewelyn (IP Academy of Singapore and Of Counsel at White & Case in Singapore). Even though it was quite early, many people interested in how to maximise the use of IP did show up at the office of White & Case in Central, Hong Kong. Professor Llewelyn's presentation was about Intellectual Property Rights as a Balance Sheet Asset. In other words how to commercialise your intellectual property rights. Below is a brief impression:

Professor Llewelyn rightly made the point that IP is not just a legal tool. That the IP assets are fast becoming a focus of the investment world. The securitization of intellecutal property rights is in Asia nascent. Article 26 Copyright Law 2010 even mentions this possibility explicitly: "Where a copyright is used as a pledge, both the pledgor and pledgee shall register the pledge with the copyright administrative authorities of the State Council."

China's leadership understands that it has to climb the value chain in order to continue its economic growth. And IP is protecting this added value. Professor Llewelyn covered the different kinds of intellectual property rights (he can cover all IPR in one hour, see here) and explained the origin of patent (to disclose the information in exchange for a temporary monopoly) as the opposite of latent (which one could apply to trade secrets).

Llewelyn described how Li Ning (athletic shoes and sporting goods) used a combination of the swoosh of Nike, the stripes of Adidas and the wave of Puma and using the slogan "Everything is possible" (while Adidas uses the slogan "Impossible is nothing", read an article by Drog Poleg on Danwei here) and still gets away with it.

About trademarks Professor Llewelyn said that many companies did not pick a very good name. He illustrated this by drawing the travails of China's computer manufacturer Lenovo, who used be called Legend. But this laudatory name was very hard to trademark in other countries. So it had to rename itself to Lenovo (Legend + Novo), which must have been a costly operation.

He made the distinction between copyrights which give the copyright holder the right to exclude others from copying their work, but is not giving a monopoly to the holder as is the case with patents.

In China most companies have utility patents which are not examined, therefore cheap, but really do not tell competitors anything about whether they are valid or not. Professor Llewelyn told about the IP game, of patent trolls (non-practising entities), licensing and sub licensing etc. which, of course, is a serious game, because a lot can be at stake. Valuation of IP can be very difficult. But it is getting more important, since many companies start to park their IP assets in "tax neutral" jurisdictions such as the Cayman Islands, Guernsey, Jersey etc.

You should know first what you have. Then use what you have. Leverage your IP rights.

Professor Llewelyn made a case for using IP strategically. And to bring IP out of the marketing and legal departments into the boardroom. One of the board should own the IP issue internally and deal with the IP challenges.

I am looking forward to read his book: 'Invisible Gold in Asia', which deals about the same crucial subject matter that only becomes more important for each and every company: Creating wealth through intellectual property.

China's National Intellectual Property Strategy, What's The Progress? Website To Stay Updated

September 11, 2008 IP Dragon published 'China's National IP Strategy 2008: Feasible Commitments or Road to Nowhere Paved With Good Intentions.' To "popularise" and to keep those interested in the progress of China in implementing its National IP Strategy a website was launched on June 5th, see here (Chinese).

The site has 10 main categories:

• Important news;
• Media viewpoint;
• National strategy;
• Ministry developments;
• Regional strategy;
• Industry strategy;
• IPR protection;
• International developments;
• Strategy research;
• Strategy special.

Below I summarise the first article in the category 'Important news':

Li Changchun (a Politburo politician at the Standing Committee): 'Cultural Industries Are the Resource for Intellectual Property Rights Output'. June 16th, 2010, Mr Li's article 'Correctly understanding and handling the cultural construction and development efforts to the relationship between a number of aspects of major socialist culture with Chinese characteristics and the path of development.

Mr Li understands that by developing Chinese culture new intellectual property rights will be created. This will involve many jobs, for which no plants are needed nor land. For this the relationship between culture and intellectual property must be researched. Also the relationship between culture and economy; culture and technology must be correctly understood. And the relationship between domestic and foreign culture. "Foreign culture must be actively absorbed."

Read the full article here in Chinese.

Guest Blogger Mathijs van Basten Batenburg On The People's Courts of China

IP Dragon asked Matthijs van Basten Batenburg legal counsel of several Chinese and Dutch SME at MvBB Ltd. in Shanghai to write a guest column. IP Dragon does not necessarily agree with the content, but wants to present a forum for all opinions that have something to do with IPR in China.

Inside a Chinese Courtroom presentation for the EU Chamber of Commerce Shanghai by Stéphanie Balme of the China EU School of Law.

By Mathijs van Basten Batenburg in Shanghai

On Thursday March 4 I attend a breakfast seminar organised by the EU Chamber of Commerce in Shanghai. At 8 in the morning I join one of the tables with legal professionals who have flocked to hear a reading that has the tantalizing title “Inside a Chinese Courtroom”. Today’s subject has indeed made many curious, including myself, and I later learn that the turnout for this meeting is indeed well above average. This curiosity might be explained due to the fact that many foreigners have extremely low hopes for a fair trial in a Chinese Courtroom. The result of a small survey over the first cups of coffee of the day is in line with my own prejudices: all the lawyers on my table regard the Chinese judiciary system as a venue to be avoided at all costs, and if unavoidable, either find a Chinese lawyer to “negotiate” with the judge handling the case, or just write the file off altogether. No small wonder we are all keen to hear an expert’s opinion on this subject.

Ms. Balme turns out to be very enthusiastic speaker and it is immediately clear she has a passion for China and its judicial system. For her research she has travelled extensively throughout the country, has interviewed judges and attended court sessions.

We learn that the Chinese government is seriously committed to improve accessibility to the legal system and to modernize the courts. In practise this is mostly taken literally: old, shabby, courts are demolished and replaced by shiny, steel and concrete palaces. The government has also instated some Western rituals such as the robe and gavel, although many Chinese judges are apparently still not sure what to use these weird objects for.

Despite these investments by the government, the quality of the rulings is still questionable. By and large, judges lack a law degree and principles such as “equality before the law” are not applied. It is also good to note that there is no “division of the powers” in China: judges are considered civil servants and are subordinate to the government. Furthermore, public opinion exerts great influence over the rulings of Chinese judges. The well-known case Danone vs. Wahaha (where the Chinese company established mirror companies of their joint-venture with Danone, later forcing the French company out of the joint-venture altogether) is given as a typical example. What doesn’t come as a surprise to most of the listening lawyers is that corruption is still very real and very common, also in China’s major cities. Most of the time litigation fees are still paid cash and judges are commonly presented with “gifts” by the litigants.

Even if the judiciary system would function as in Western countries, the law itself would pose a challenge since laws are still quite chaotic and are often internally contradictory. Nevertheless, Chinese people increasingly use the courts as a way to settle problems as is shown by the stats of civil cases being filed each year. As opposed to the West, in China a judicial ruling is the start of the settlement of a conflict, not dissimilar to that the signing of a contract is still mostly the start of negotiations in this country. From a Western perspective this also means that enforceability of Chinese rulings is extremely difficult. Even if you find a judge that is prepared to rule in your favour, this doesn’t mean you can enforce the verdict!

Unfortunately we run out of time before Ms Balme is even halfway through her presentation. Reinforced in my slightly cynic ideas about the Chinese judiciary system, but once again fascinated by this country, I leave the gathering.

Written by Mathijs van Basten Batenburg, legal counsel at MvBB Ltd. in Shanghai.

IP Dragon does not necessarily agree with the content of this guest blog, but wants to offer a forum to all opinions that have something to do with IPR in China.

China Copyright and Media Looks At the Law of China's Entertainment Media

IP Dragon's friend Rogier Creemers has started a great website called 'China Copyright and Media, Looking at the Law of China's Entertainment Media', see here.

For this field of study it includes many relevant laws, regulations and rules, from the State Council of the National People's Congress, Central Committee, Supreme People's Court, Public Security Bureau (PSB), State Administration for Radio Film and Television (SARFT), General Administration for Press and Publications (GAPP), State Administration for Industry and Commerce (SAIC), Ministry of Commerce (MOFCOM), etc.

The database is in "beta", but it is already very interesting.
So check it out: China Copyright and Media.

Shanghai World Expo 2010 Exposes Organisers' Lack of Creativity

In 2007 the Bureau of the Shanghai World Expo 2010 Coordination promulgated a special regulatation (See here: No. 11) concerning intellectual property rights. In short all participants to the World Expo were warned that they should comply to China's IPR laws, regulations and rules far in advance. "The General Administration of Press and Publication and the National Copyright Administration have also called for a rapid-response mechanism to protect the intellectual property rights of the Shanghai World Expo, meaning that copyright departments at all levels will check materials that may infringe on the copyrights of the Shanghai World Expo as soon as they are found." Read more here. That is laudatory indeed, but what about the Shanghai World Expo 2010 organization themselves? Do they also have to comply to the very same IPR laws, regulations and rules?

You probably have seen that 'Haibao', the expo mascot, was an unauthorised copy of an American cartoon figure Gumpy, read the Japan Probe article about it here.

Then the Shanghai Expo theme song 'Right here waiting for you' is an almost completely plagiarized song by Maya Okamoto from 1997 called 'Stay the way you are', listen to the two songs and read Japan Probe's article here.
The Shanghai World Expo and organizers first paid 10 million yuan for the plagiarized song and then had to pay 300 million yen to Ms Okamoto to settle the case. According Elaine Kurtenbach who wrote an article about ti for the Associated Press, the Shanghai World Expo organizers said that Ms Okamoto was honored to have a chance to cooperate with the event. Read the AP article here.

IP Dragon's "Shock and Awe" Holiday Tips

When in Paris, IP Dragon does not only highly recommend you to visit le Louvre at the rive droite and le Musée d'Orsay at the rive gauche so you will be awed by the original works of great artists. For a more, let's call it balanced world view, you must also hop on le métro and stop at Porte Dauphine in the XVI arrondissment, and stroll to Rue de la Faisanderie where you will find a very special place at number 16. Here you can witness the shockingly ingenuity and deception of the pirated and counterfeited products devised by devious but sometimes likewise brilliant minds at Le musée de la Contrefaçon. Quelle horreur, but how interesting! The Union des Fabricants pour la Protection Internationale de la Proprieté Intellectuelle (UNIFAB) has founded this museum already in 1951. See here. Therefore you can see the developments of the fakes over more than half a century and you will be confronted with some of its dramatic consequences. "The imitation will not have a secret for you anymore", as UNIFAB states. At the museum you will see that many of the counterfeits originate from China.

If you are not going to Paris this year you can visit another museum which exhibits the same subject matter: the Counterfeit Museum, sponsored by law firm Lehman Lee and Xu. Most law firms that deal with intellectual property law have a kind IP altar in the office where the fake and genuine goods are standing next to each other. It is a great idea to share them with the world via a virtual museum. Each law firm could do this, or even better when they join in so the collection at one museum will be more interesting. So far the Counterfeit Museum has four rooms: Clothing and Accessories, Food and Restaurants, Movies and Music, and Appliances.

Is It a Plane? Is It a Bird? No It is the Bleagle! Made in China

Stan Abrams of the China Hearsay (which has been totally upgraded) reports straing from the INTA in Boston about ... Geely's Gleagle. Mr Abrams is giving his always entertaining thoughts about trademarks that consist of made-up words.

Read more here.

IPR elasticity of FDI is back in China?

The last years there seemed to be no relation between the level of protection and enforcement of intellectual property rights and foreign direct investments (FDI) in China. Most companies did not let them scare by the intellectual property related challenges in China and invested massively. Of course one can argue that if China had a higher level of protection and enforcement of intellectual property rights it would attract even more FDI. So because of this China faces some opportunity costs. But China is not complaining, it is doing economically much better than the rest of the world.

Businesses always have to make the decision whether the opportunities really weigh up against the risks. Let us apply the 'price elasticity of demand' formula on this topic. In this case the level of intellectual property rights protection and enforcement is like price a more or less endogenous factor. And the outcome; the amount of FDI is just as the demand an exogenous factor. One can compare quality of a product with the opportunity of investing in China. Therefore the intellectual property rights elasticity of FDI in China might have worked all the time, but the perceived opportunities in China were just too high to show any negative impact of the IPR protection and enforcement level on the FDI in China.

For Microsoft the tipping point might just happened. It is complaining that it has a market share in China of 15 to 20 percent but which is only good for 1 percent of the revenues. All thanks to copyright piracy.

Microsoft is considering focussing more on India and Indonesia, according to Steve Ballmer, CEO of the software manufacturer from Redmond, Washington, U.S.A. Then again, Mr Ballmer's expesses himself sometimes a bit dramatic, see here. Read Alex Kennedy's article about it for the Associated Press.

Geertje Hesseling's thesis about Intellectual Property Rights in Fashion in China

Geertje Hesseling wrote an interesting Master's thesis 'Intellectutal Property rights in fashion in China and the knowledge of young Chinese designers on this topic' for Cultural Economics & Cultural Entrepreneurship at the Erasmus University Rotterdam.

She develops her thesis by testing the following hypotheses:

H1. With stronger intellectual property rights law, China will attract more investments in fashion.

H2. The most useful way to implement stronger intellectual property rights in fashion is to strengthen and adjust in particular the copyright and trademark policies, but next to this also cultural and governmental adjustments are needed.

H3. Intellectual property rights strengthen the fashion cycle instead of damaging it.

H4. Younger designers care and know little about intellectual property rights concerning their designs.

H5. Young designers are in more need of IP rights protection than bigger and already established companies.

Next to do desk research Ms Hesseling did empirical research by interviewing the following people:

• Paul Smidt of Baker & McKenzie in Hong Kong;
• Paul Ranjard, co-chair of the EU China Chamber of Commerce in Beijing and representative of Unifab;
• Queenie Leung, young designer, graduate Fashion and Textile Design of Polytechnic University Hong Kong;
• Ivan Yip, young designer, third year of Textile and Design of Raffles University Shanghai;
• Gerry Ng Yuen Yi, young designer, third year of Accessory Design at Mod' Art International School Beijing;
• Yin Shu, young designer, graduate Textile and Design of International Fashion Academy, Shanghai;
• Sheila Pitigala, young designer, working on her own label in Shanghai;
• Tim Hoar, Business Development Manager Student IP, Central Saint Martins College of Art and Design;
• Dominique Simard, Marketing and Business Development Director, International Fashion Academy Shanghai.
• Yours truly.

Geertje Hesseling interviewed me in June 2009:

Geertje Hesseling: What should be changed in policies in China so that piracy is a issue of less concern?

Danny Friedmann: If you have to evaluate China's intellectual property protection it looks good in the books but on the ground it is not effective. Enforcement is not always taken seriously (massive anti-counterfeiting campaigns are not effective in the long run, and are often announced in advance so the infringers are warned), but the development of China is getting at a point where it is in the interest of China to enforce intellectual property rights. So, in case of fashion, when Chinese fashion creators, such as Shanghai Tang's copyright is infringed, it will start to enforce intellectual property rights in a more effective way, since Chinese companies demands this.

Geertje Hesseling: Is IP rights protection more important for smaller companies or is it equally important for the large companies?

Danny Friedmann: Large companies in general have more famous brands. Therefore, probably in more cases, they will be targeted by trademark counterfeiters and copyright pirates. Then again, large companies can have more budget to protect (via design rights and copyrights) and enforce their intellectual property rights.

Geertje Hesseling: What do you think will be the future of fashion with little IP rights, in countries such as in China?

Danny Friedmann: Fashion trends will change even faster. I can speculate that consumers will start to look more at quality. Trends in fashion infringements: first brands and designs were copied. Now, although this still happens, a new category of infringements is becoming more prominent: only the design is infringed under a Chinese brand name. In other words, the trademark counterfeiters/copyright pirates are becoming only copyright pirates because they start to build their own brand name.

By the way: In the European Union each fashion designer who has created a design obtains (just like copyright) at the moment of creation a European Design Right for three years, which can be enforced in the EU. This is without registration! Just like copyrights.

Geertje Hesseling: What do you think are China’s most influential factors for attracting piracy when it comes to the rampant copying of the fashion industry in this country?

Danny Friedmann: China can manufacture clothes relatively much more cost-effective compared to companies in the West. And the distribution of wealth in China is uneven and much lower than in the West. Even in the West fashion is copied very frequently, or to put it differently: fashion designers are inspired by other fashion designers. And maybe fashion is not so suitable for copyright protection, because by definition fashion designers build upon the designs or remix the designs of others. And fashion trends change so quickly anyway, first mover advantage is probably more important in fashion business than intellectual property protection. Please see chapter 8 'Extra-judicial factors' of my thesis.

Read Ms Hesseling's thesis here.

Don't Feed The Patent Trolls in China and Start Your Own IP Team

Tian Lipu, commissioner of the State Intellectual Property Office (SIPO) visited Samsung, according to the China Daily. Mr Tian was told by the Keun-Hee Park, president of Samsung's operations in China that patent trolls were on the rise.

One can argue that a patent troll, or more neutrally called a non-practising entity (NPE) abuses its intellectual property: the patent is only used to enforce or threaten to enforce it via litigation. This way, they do not create added value to society, because (except for lawyers and magistrates) and form an obstacle to research and/or manufacturing of some product.

According to PatentFreedom, a website providing research on and strategy about NPEs, Samsung has been relentlessly pursued and ranks sixth by the number of NPE lawsuits it was involved in in 2009. See the list at the site of PatentFreedom here.

Mr Tian was quoted saying: "Since the Chinese government adopted a national intellectual property strategy in 2008, fighting such inappropriate use of patents has been listed as one of five top priorities on our agenda."

If one reads Article 4 (Preventing Abuses of IPRs) of Chapter III Strategic Focus of the National Intellectual Property Strategy 2008 you will see: (14) Formulate relevant laws and regulations d to reasonably define the scope of intellectual property. Prevent abuses of intellectual property. Maintain fair market competition. Safeguard the public lawful rights and interests.

The fact that Samsung founded a special intellectual property team was praised by Mr Tian. It is "of demonstrational significance" to Chinese companies, according to Mr Tian. Whether Samsung's example will be followed remains to be seen.

Read the China Daily article here.

UPDATE: Anonymous wrote a very interesting comment:

"As many Chinese commentators have noted, what constitutes patent "misuse" or "abuse" is unclear in China. Also, what constitutes an "NPE" or "troll" or (in Chinese) "cockroach" is also unclear. If it is simply a "non-practicing entity" then all research institutions may be trolls. The concept of "abuse" in Chinese (lanyong) likely encompasses "abuse" under the Chinese antitrust law (Art. 55) and may also encompass "misuse" - which is typically a defense to infringement and not an affirmative claim in the US. Moreover, there are aspects of the issue which involve patent examinations/grants/novelty requirements and patent litigation (damages/availability of injunctive relief). A country, such as China can have a relatively high level of NPE's (or non-service inventions), esp. in patents that are not examined for substance (utility model and design patents), or in patents that were once examined only on grounds of "relative novelty" (under the former patent law), but the patents may have a low value for litigation (damages or injunctions, or preliminary injunctions). Moreover, there may be limited means of compensating a victim for abusive assertion of rights - under US "Walker Process" type remedies, or "Rule 11" or other doctrines."

Would You Tell A Stranger On The Phone Whether You Have Pirated Software?

China Daily has an optimistic article about the declining software piracy rates in China. At least according to a survey by Chinalabs.com commissioned by the State Administration for Industry and Commerce. The surveys were done by phone and one can question the reliability of the answers. Even though the anonymity of the respondents might be guaranteed (Was this the case?), many people give social acceptable answers, especially in China where the government keeps tight control over all things related to the internet, computers and copyright. So this could mean that at least the respondents are aware that pirated software is illegal. Or, best case scenario, they speak the truth.

Business Software Alliance (BSA) has commissioned IDC to do an annual survey about software piracy in China as well. The difference between the BSA/IDC and SAIC/Chinalabs.com results is significance. In 2005 there has been a controversy about BSA's statistics (see the Economist article, “BSA or just BS”, about dodgy piracy data, so this year a video of John Gantz, Chief Research Officer of IDC is posted where he explains the methodology for the BSA/IDC Global Software Piracy Study.

"There are three kinds of lies: lies, damn lies and statistics" (19th century British Prime Minister Benjamin Disraeli)

• 2005 66 percent (SAIC/Chinalabs.com); 86 percent (BSA/IDC);
• 2006 63 percent (SAIC/Chinalabs.com); 82 percent (BSA/IDC);
• 2007 56 percent (SAIC/Chinalabs.com); 82 percent (BSA/IDC);
• 2008 47 percent (SAIC/Chinalabs.com); 80 percent (BSA/IDC);
• 2009 45 percent (SAIC/Chinalabs.com); 79 percent (BSA/IDC).

Unsurprisingly Chinalabs.com questions BSA's methods. And IP Dragon questions's Chinalabs.com methods. So if you question my methods, please send your comment below.

See the China Daily article here.

June 25, Seminar: 'Managing IPR As A Business Asset in Greater China'

IP Dragon is delighted to invite everyone interested in IPR in China to a seminar called 'Managing IPR as a Business Asset in Greater China' organised by EUBIP and China IPR-SME Helpdesk. (Take note: some speakers still need to confirm). I confirmed.

When? Friday 25 June, 2010

Where? HK Convention & Exhibition Center

What is the programme?

8:30-8:50 Registration and Coffee

8:50-9:00 Welcoming remarks

Morning: General China IPR Overview for European SMEs

9:00-10.00 Session 1:

Protecting your intellectual property in China? Why it is so important.

• Is IPR protection in China possible and how?
• China IPR environment and what businesses need to know?

Speaker presentation 2x20 min + Q&A

• Elliot Papageorgiou, Rouse & Co (speaker)
• Other speaker (to be confirmed)

10.00-10:15 Coffee break

10:15-11:15 Session 2:

• How to identify and leverage your IP assets?
• Working with Chinese business partners - how to structure relationships to protect your assets?

Speaker presentation 2x20 min. + Q&A

• Serena Tierney, Consultant at Wragge & Co LLP (speaker)
• Willi Vett, Beiten Burkhardt Hong Kong (speaker)
• Dr. Christopher Heath, member of the Boards of Appeal of the European Patent Office, former head of the Asia Department of the Max Planck Institute for Intellectual Property law, Munich (moderator)

11:15- 11:30 Coffee break

11:30-12:30 Session 3

IP Management and Enforcement

• How to prevent IPR infringements and steps to take if you discover infringements
• IPR Enforcement process in China

Speaker presentation 2x20 min. + Q&A

• Danny Friedmann, Chinese University of Hong Kong / IP Dragon (speaker)
• Henry Wheare, Partner Lovells Hong Kong (speaker)
• Professor Anselm Kamperman Sanders (moderator)

12:30-13:30 Lunch

Afternoon Panel Discussion / Clini Sessions + Networking

13:30-14:30 Panel Discussion

• Dr. Christopher Heath
• speaker
• Serena Tierney
• Elliot Papgeorgiou
• Anselm Kamperman Sanders (moderator)

14:40-15:00 Clinic Session 1/Networking

15:10-15:30 Clinic Session 2/Networking

15:40-16:00 Clinic Session 3/Networking

16:00 Closure

What is so special about Special 301 vis-à-vis China? Part IV

Previous parts can be seen here: Part I, Part II, Part III.

What was said during the Special 301 hearing about Intellectual Property in China?

So who were the four witnesses that spoke about IPR in China?

Ambassador Shaun Donnelly (Senior Director for International Business Policy of the National Organization of Manufacturers) proposed to use both a carrot and a stick. Carrot: the U.S. is already involved in capacity building, training, exchange and industry has been involved a s trade partner. "We have to convince the Chinese to deliver results. To make them clear that we hold them in IPR to a much higher standard." Stick: "If they don't that it has concrete consequences." He urged the USTR to start an Out-of-Cycle review, which involves a systematic evaluation of China's entire IPR enforcement regime, supported by submissions from U.S. manufacturers and businesses to document IPR infringement to the extent possible. This way a strategy could be devised, and a decision be made about benchmarks and on the implications of failure to deliver on the set benchmarks.

Eric Smith (International Intellectual Property Alliance (IIPA) pointed out that although physical copyright piracy remains a problem, for most industries, the internet has taken over as the means to distribute content, including pirated content. China, with its 750 million mobile device users and where 3G broadband has just been introduced, poses a huge problem. For the IIPA criminal action against piracy is the holy grail: "We should ask our trading partners too, first, undertake more criminal actions against piracy of software in the corporate environment, against growing online and mobile device piracy of music, motion pictures, software, video games and books and journals, against continuing piracy of optical disk products and the unauthorized printing and commercial photocopying of books and journals and against the manufacturing and trafficking and circumvention devices."

Mr Smith's wish list continues:

• Enough enforcement resources and training commensurate to the problem;
• To remove onerous and unnecessary procedural barriers to the judiciary acting in civil and criminal cases;
• Impose deterrent penalties in criminal cases and adequate and deterrent damages and remedies in civil cases;
• U.S. government should ask its trading partners to encourage cooperation of ISPs with all content owners so that workable and fair notice and takedown systems and a graduated response mechanisms (3-strikes) to deal with repeat infringers online can be implemented;
• Government agencies, contractors and educational institutions should be urged to use only legal software and legal copies of textbooks and it should be ensured that their networks and computers are not used for infringement of any copyrighted content;
• That laws against camcording motion pictures are enacted and enforced.

Michael Mellis (Senior Vice President and General Counsel of MLB (Major League Baseball) Advanced Media L.B.) testified that his company was affected by an emerging type of telecast IP infringement: unauthorised streaming over the internet of live television programming of all types including live sports telecasts and related programming. The number of sites and services involved in this phenomenon is significant (on an annual bases tens of thousands of hours of live television programming from networks around the world are being pirated) and has grown rapidly. "Many are open doors permitting any type of television programming to be streamed live persistently and globally without authorization from copyright owners." This can be accomplished through the use of this $70 device and some software. "In our rights enforcement efforts through the past several years, during which we have identified and logged thousands of piracy incidents, the dominant pattern we have seen is piracy occurring through a streaming over peer-to-peer services based in China." According to Mr Mellis approximately 75 percent of the pirated retransmissions of the telecast have occurred through offshore sites and services and approximately 50 percent of the total through Chinese sites and services."

Streaming video via the internet presents new challenges to copyright law:

Mr Mellis: "Our domestic copyright law is clear that this is copyright infringement. However, litigation in the United States is a remedial tool available to U.S. exporters of television programming only in limited circumstances."

Mr Mellis pointed out two relevant reports about this matter:

- U.S. House of Representative, Committee of the Judiciary, 'Hearing on Piracy of Live Sport Broadcasting Over the Internet', December 16, 2009.

- OECD, 'Piracy of Digital Content', 2009.

Major League of Baseball works together with the Coalition Against Online Video Piracy(CAOVP) which has had informal discussions with Chinese government agencies.

In reply to a question Mr Mellis makes clear that he cannot quantify the damages of the telecast infringements, because of "the recency of the problem" and the unknown parts such as the size of the audience size is, who was involved beyond what we can find out through our own limited means of figuring that out, patterns of piracy. Mellis sends routinely cease and desist letters and notices to infringers abroad, in particular China. To no avail, with one exception.

Mike Palmedo (Assistent Director of the American University Washington College of Law Program on Information Justice and Intellectual Property (PIJIP) criticized the Pharmaceuticals and Research Manufacturers of America (PhRMA) for criticizing China's government about Active Pharmaceutical Ingredients (API), that the enforcement of health regulations for API, noting that chemical manufacturers may sell and ship API products to locations within China and abroad with either no regard for the intended use of the API or choosing not to comply with existing regulations. However, the enforcement of Chinese regulation of APIs is, according to Mr Palmedo, outside the scope of the Special 301 report, since it doesn't address the adequacy or effectiveness of intellectual property rights and PhRMA doesn't suggest that these Chinese health regulations deny fair and equitable market access to United States persons that

rely upon intellectual property protection. Mr Palmedo has a point. However, his conclusion "So if this complaint is included in the Special 301 report, it will be nothing more than an attempt to intimidate Chinese companies which many developing country producers rely on to produce affordable generics." is based on an assumption which is not necessarily true. The reason for it is that counterfeit pharmaceuticals that originate in China have proved lethal. In the report it says: "(..) in China, domestic chemical manufacturers that produce APIs can avoid regulatory oversight by not declaring that the bulk chemical is intended for use in pharmaceutical products. This contributes to China being a major source country for APIs used in counterfeit pharmaceutical products."

Text/Picture: Danny Friedmann