Tuesday, June 12, 2007

How To Measure IP Enforcement: Enforcement/Infringement Ratio and "Data Data and Data"

One of the recommendations of my upcoming thesis called: 'Paper Tiger or Roaring Dragon? China's TRIPs Implementations and Enforcement' is the need to increase transparency about IP enforcement (and of course it is the raison d'être of IP Dragon). To know whether China's enforcement progresses or declines I proposed the enforcement/infringement ratio which can be compared to the preceding enforcement/infringement ratio. I got a few emails asking questions about the enforcement/infringement ratio. I hope I answered your questions with the following (if not, please let me know):

Denominator: enforcement
How to measure the enforcement activities of China? One could use the aggregate number of foreign companies that effectively made use of China's enforcement routes (administrative, litigation, criminal and customs). A problem is that companies who enforce their IPR in China do not want to tell the world about it, because they fear that this will deteriorate their businesss opportunities in China. To overcome this fear an anonymous database could be made available.

Nominator: infringement
How to measure the infringement activities in China? The total number of IP infringements is very hard to determine for China. One could use the seized infringed goods originating from China by a network of customs outside China. The checks should be done in a uniform way. Up to now, the value of China’s exports of counterfeit and pirated goods is bigger than that of counterfeited and pirated goods used for domestic consumption. That is why using the data of the seizures of counterfeit and pirated goods by a network of foreign customs are relevant.

To get feedback about this ratio I talked to the people from the World Customs Organisation (WCO), European Union Directorate General Taxation and Customs Union (EU DG Taxud) and the Organisation of Economic Cooperation and Development (OECD). The theoretical idea of the ratio was well received. But all had questions about the practicalities of the ratio: i.e. How to get reliable data?

The OECD just came out with part IV, the executive summary (parts I-III will be made public later), of a comprehensive report about the economic impact of counterfeiting and piracy world wide. Its conclusion is that transparency about IP enforcement is key, but that in practise it is is very hard to gather, even for the OECD with all its expertise and resources. A fortiori this might be the case for data about IP enforcment in China.

The executive summary of the OECD report says:
"Information on counterfeiting and piracy falls far short of what is needed for rigorous analysis and for policymaking. Priority should be given to (i) improving information that is available from enforcement activities (i.e. customs and other law enforcement agencies) and (ii) expanding the use of surveys to collect basic information on developments from right holders, consumers and governments."

These additional information should be, according to the OEDC, systematically collected, comparable and comprehensive. See pages 18-21 of Part IV The Economic Impact of Counterfeiting and Piracy Executive Summary.

Asked about what was the biggest challenge to get transparency about IP enforcement, the remark from Mr. Wolfgang Hübner, counsellor in the OECD's Directorate for Science, Technology and Industry was telling: "Data data and data." The methodology of the OECD report was to send a questionnaire to all WCO member countries of which 90 responded. The quality of those responses was not consistent.

On a smaller scale, for example in the EU or in a network of a few EU members, it might be feasible to get the systematic, comparable and comprehensive data about IP enforcement.
That is why the EU or a network of a few EU members might be a great candidate to make use of the enforcement/infringement ratio.

The realisation that transparency about IP in China is of great importance cristallised May 22, 2007 into a Memorandum on Strengthened Cooperation in Border IPR Enforcement between the General Administration of Customs (GAC) and the US Customs and Border Protection (CBP), which was signed by Mu Xinsheng, Minister of Customs and U.S. Customs and Border Protection Commissioner W. Ralph Basham (see picture).

In the memorandum the two countries agreed to exchange information on significant intellectual property rights seizures each quarter in order to track violators and conduct enforcement actions. "The country receiving information will have 90 days to report to the providing country on enforcement actions resulting from this disclosure of information.
U.S. and Chinese Customs officials have pledged to exchange counterfeit and pirated goods seizure statistics every six months for goods originating in or destined for the other country. The statistics exchange will describe the number of seizures, quantity and value of goods, description and/or Harmonized Tariff Schedule classification of the commodities, mode of transportation and the main ports of import and export for the goods in the two countries."
See the news release of the US Customs and Border Protection here.

Another thing agreed upon in the memorandum is that both countries must provide information of up to 10 specific IPR-related seizures each quarter. That sounds not very ambitious. But it might be a first step to give access to each other's IPR enforcement activities. Read Zhu Zhe's article about it for the China Daily here.

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