Cheese With A Double Identity Crisis: Dutch, No Chinese, No Kiwi

Last Saturday this consumer strolled through the Park N Shop Super Store in Tsuen Wan, near the Tsuen Wan MTR line towards Central, Hong Kong, and was confused not once, but twice.

Firstly, because when he saw Edam on the package, he associated the cheese with the city in the Netherlands with the same name. Edam cheese, one assumes, is produced in Edam. However, when he read the promotional line: "A smooth Dutch-style cheese with a light fresh flavour" he knew his association was a mistake, since it is not a real Dutch cheese, but only Dutch-style.

Intrigued by the origin of the cheese, (and flattered by the combination of the words Dutch and style) he was looking for clues of the place of origin of the cheese. When one is in Hong Kong and reads 'Mainland', in the lion's share of cases the People's Republic of China is meant. Therefore yours truly was confused for the second time, since the manufacturer is a New Zealand company named Mainland, based in Dunedin.

Against this kind of confusion the Agreement on Trade-related aspects of Intellectual Property Rights (TRIPs) mandates protection via Geographical Indication (GI)'s. According to the World Intellectual Property Organization (WIPO) a Geographical Indication (GI) is "[...] a sign used on goods that have a specific geographical origin and possess qualities or a reputation that are due to that place of origin." Read more here.

The best article I have ever read about GI's was written by Professor Justin Hughes of the Cardozo School of Law, Yeshiva University of New York. Professor Hughes proposes three basic purposes of GI's: (1) to communicate geographic source, (2) to communicate (nongeographic) product qualities, and (3) to create evocative value. Read his excellent article 'Champagne, Feta, and Bourbon - the Spirited Debate About Geographical Indications'.

Professor Hughes describes the two basic approaches in national

law protecting GIs: "either a free-standing appellations law or the use of certification marks within trademark law." So appellations law, which is used in the EU versus certification marks, which is used in the US. China seems to side with EU on this issue, but on second thought it is more complicated.

How does China protect geographical indications?

• The State Administration of Industry and Commerce (SAIC) is protecting it via the trademark law, implementing regulations for the trademark law, measures regarding the registration and administration of collective marks and certification marks.
• The Administration for Quality Supervision Inspection and Quarantine (AQSIQ) protects it via the product quality law and standardization law
• Ministry of Agriculture via administrative measures.

Read more about China's solution to protect GI's in Jinhua Ham's article 'Application of geographical indication systems in China' here.

So China seems to protect GI's via three separate administrative institutions. This could on the one hand cause some coordination problems in the protection of GI's and ambiguity for manufacturers of agricultural produce about how to product their GI, and on the other hand it could increase competition between these administrative institutions, which could ameliorate the quality of protection.

Read more about China's views on GI's here (IP Dragon) and here (WIPO magazine) and here (EU-China trade project).

For a confusing title read 'China owns 600,000 geographical indication trademarks for agricultural products' (People's Daily Online). In the article, however, you will find statistics that China had 531 geographical indications and 600,000 trademarked agricultural products at the time the article was published (2008).

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Madrid, A Bit Chilly For China's International Trademark Filings

• China's international trademark filings under World Intellectual Property Organization (WIPO)'s Madrid System for the Registration of Marks decreased from 1,585 in 2008 to 1,358 in 2009 (-14.3 percent).

• China is still the most designated country, with 14.766 in 2009, which was a drop of 17.2 percent from 17,829 in 2008.

• According to the State Administration of Industry and Commerce (SAIC)'s statistics China's domestic trademark applications in 2008 were estimated to be around 800,000. See article ChinaIPR here.

• Novartis of Switzerland that was the largest filer in 2009 (136 international trademark applications) followed by Lidl (Germany), Henkel (Germany) and Zhejiang Medicine Company. How many this Chinese company filed WIPO did not say.

• China is both a member to the Madrid Agreement and Protocol.

Catherine Saez of Intellectual Property Watch wrote that WIPO's director general Francis Gurry said that the interest in China is not so much the infringement threat but the fact that China represents a massive market, and companies may face a lot of competitors.

Read more about the impact of the global financial crisis on the number of international trademark filings in 2009 here and Catherine Saez' article for Intellectual Property Watch, here.

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Are Statutory Compensation Rules For Inventors Scary?

In the Wall Street Journal (WSJ) Asia of March 18, 2010, Andrew Browne and Jason Dean wrote an interesting article called 'Foreign businesses sour on China'.

IP Dragon was happy to see that patent law in China was on the front page and page 17 of the WSJ Asia. The authors of the article assert that China is getting more nationalistic in its business policies, therefore discriminatory toward foreign businesses. Messrs. Browne and Dean's concerns might be justified. However, when they use China's legislation on compulsory licensing and the remuneration for inventors, they do not give good examples of a China that is favouring its domestic entities.

Messrs. Browne and Dean wrote: "Patent rules imposed Feb. 1 threaten to increase costs in China for foreign innovators in industries such as pharmaceuticals, and let authorities force foreign drug companies to license production to local companies at state-set prices."

The first half of the sentence is not about compulsory licensing, because if that scenario manifests itself, the costs of production will not increase, but the profits will decrease. The authors probably mean with the first half of the sentence the 'statutory compensation rules', with which they deal later, see below.

The second part of the sentence is about compulsory licensing. Articles 48-57 Patent Law 2008 promulgate this right of emergency of the state. When a patentee has not exploited his patent within three years or when the act of the patentee is harming competition, the State Intellectual Property Office (SIPO) can grant a compulsory license to exploit the patent. In case of a national emergency or any extraordinary state of affairs, SIPO can grant a compulsory license. The articles 73-75 Implementing Regulations 2010 give further rules for the grant of a compulsory license. China signed the Agreement on Trade-related Aspect of Intellectual Property Rights (TRIPs) and Public Health (Doha Declaration) in 2001 and the Decision on the Interpretation of Paragraph 6 of the Doha Declaration in 2003 to establish legislative and administrative frameworks to allowing compulsory licensing for export purposes, in order to help other countries that lack the capabily to manufacture medicines.

"The new patent rules providing for what is called compulsory licensing are not unique to China. But China's pharmaceuticals industry is dominated by state-owned firms, and Western lawyers worry the rules will favor them."

Indeed, compulsory licensing is not unique to China. In fact, China never granted any compulsory licensing. But, I understand messrs. Browne and Dean's concern that it might be easier for SIPO to target a foreign patentee than a patentee that is a state-owned company. But since we have no data on this, it cannot be proven.

Then directly after that the authors write: "One provision requires companies to pay Chinese employees at least 2 % of profit derived from their inventions in China unless the employees explicitly waive that right.

I have some troubles with this sentence:

• First, this is not an example of an excess of compulsory licensing.
• Secondly, the sentence could be read as if employees, who are not inventors, need to get 2 percent of the profit derived from inventions of the entity.
• Thirdly, it is not a question of whether employees waive their rights or not. According to rules 76-78 Implementing Regulations of the Patent Law 2010 it is a question of whether the employers want to put in the contract with their employees that if they invent anything what their reward and remuneration will be. Only if they don't, the statutory compensation rules will kick in. Not so strange since article 16 Patent Law 2008 obligates employers to give the inventors reasonble remuneration.
• Fourthly, both Chinese entities and foreign companies in China have to abide by this rule. Articles 74-77 Implementing Regulation of the Patent Law 2001 already gave statutory compensation rules, but those were limited to state-owned enterprises/institutions. I think it is nothing more than fair that the inventors of all entities are compensated for their inventions, innovations and designs. The statutory compensation rules are a good way to press companies to include invention rewards and remuneration into the contracts with their employees.

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Nexocial, Dutch Copycat in China

Hugo Leijtens, an ex-Microsoft employee, went two years ago to Chengdu, he describes as the new Silicon Valley. There he became the Chief Technical Officer of Nexocial, a company that came up with an iPad clone in just three months: the nPad, which works on Microsoft Windows C. The nPad will be launched April 3, while the iPad will be launched next summer.

Presenter Jort Kelder of the Dutch television programme about entrepreneurs 'Bij ons in de BV' (With us in the private company) asked Mr Leijtens the following question: "Are you not a petty thief, in the best Chinese tradition?"

Mr Leijtens reply: "I believe Apple has said once 'Good artists borrow. Great artists steal.' "

IP Dragon is wondering whether Apple will sue Nexocial. If they do, let's see if Mr Leijtens will repeat that one liner in court.

The Nexocial site http://www.nexocial.com is not in the air. Don't know what that means.

Read also Willemien Groot's article about Nexocial for Radio Netherlands Worldwide here.

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iPhoney: "This Is Different, It Is Fake!"

Nice CCTV 2 news item: Apple is coming with a second generation iPhone in July for 199 US dollar. But Chinese counterfeiters sell the 2G iPhone already for less than 100 US dollar.

Listen to the excited voice-over, read the subtitles and see a surprised customer:

"How comes it is so much cheaper?"

"This is different, it is fake!"

Footage found, captured, translated and subtitled by yummyporky.com, a video production company in Taiwan.

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National IP Strategy 2010 Is Coming

In 2008 China launched a comprehensive National IP Strategy, read 'Feasible Commitments or Road To Nowhere Paved With Good Intentions'.

March 1, 2010, China's State Intellectual Property Office (SIPO) announced that during the second liaison officer meeting a draft of new National IP Strategy is discussed. See here.

Wondering what the changes will be. To be continued.

text/picture: Danny Friedmann

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IP Dragon's Roar

Dear reader,

IP Dragon offers you a newsletter that will be distributed via pdf file.

The content will be articles of IP Dragon that were posted that month, plus some exclusive content for the newsletter.

If you are interested in receiving IP Dragon's Roar, please send me an email with 'subscribe' in the subject line. If you want to unsubscribe, please send me an email with 'unsubscribe' in the subject line. Simple.

email me at: ipdragon (at) gmail (dot) com

Cheers,

Danny Friedmann

IP Dragon

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Chinese Courts Are Getting More Independent, But Rule Of Law Needed To Enforce IPRs Is Far Away

In my thesis 'Paper Tiger or Roaring Dragon' I come to the conclusion that the lack of effective enforcement of intellectual property rights in China can be partly explained by some extra-judicial factors, such as:

- no rule of law (where the rule of law has the supremacy, instead of the government);

- lack of transparency;

- lack of an independent judiciary;

- non-uniform application of laws;

- local protectionism;

- corruption and lack of education;

- lack of expertise in and respect for intellectual property;

- market access restrictions.

Professor Stanley Lubman has an interesting article, see here, about legal reform in which he refers to 'China's Courts: Restricted Reform', an excellent paper written by Professor Benjamin Liebman. In it Professor Liebman determines that Chinese judges are much more educated then ever before and that in case of a difficult case courts are often consulting other courts at the same level (horizontally) instead of asking advice of a higher court (vertically). This makes the judiciary more independent and less usable as an instrument to implement the policies of the government. Professor Liebman contends that therefore the government uses the media to influence the opinion of the population in some cases, so that they can mobilise popular protest against a court decision. With the result that some court decisions are overturned because of the "vox populi".

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Declaration of Copyright Self-Regulation of the Chinese Internet Sector

About 100 websites, among others Sohu, Baidu and Youku have signed a declaration of copyright self-regulation. Rogier Creemers translated the declaration. Thank you.

Declaration of Copyright Self-Regulation of the Chinese Internet Sector

In order to safeguard copyright and related right holders' lawful rights and interest, stimulate the healthy development of the Internet industry, safeguard social and public interests, the representatives of the Internet sector make the following declaration of self-regulation to society:

I, Internet enterprises shall undertake their obligations to society, earnestly respect and propagate State propaganda laws and related policies, resist activities of piracy and copyright infringement, safeguard the lawful rights and interests of copyright holders, safeguard the healthy order of the Internet sector.

II, Persisting in the principle of first obtaining authorization and only then using works, not disseminating in any way works without authorization from the copyright holder.

III, Strengthening supervision and management of internet users uploading works, prompting users that they may not upload works of others, preventing third parties from using information network platforms of a certain work unit to engage in unlawful activities of copyright infringement.

IV, Vigorously adopting technological steps conform to generally acknowledged industry standards, preventing the occurrence of infringing activities. Works listed in administrative copyright management entity notices or in notices of the implementing organ of this Declaration as not being permitted to be uploaded without authorization, technological measures shall be taken to restrict users from uploading; technological measures shall be taken to restrict users from uploading video works in their period of movie theatre screening, and hot broadcasting.

V, Measures such as deletion of corresponding information, cessation of service, etc. will be taken to users violating service agreements, do not listen to advice, and engage in multiple infringing activities in order to stop them, and the corresponding competent authorities will be notified.

VI, Earnestly dealing with notification of copyright and corresponding copyright holders, guaranteeing that within 24 hours, steps are taken to delete or should corresponding information according to the law.

VII, Vigorously developing applied copyright authentication and claim systems, providing convenient passages for copyright holders in claiming copyright and authorizing.

VIII, Vigorously communicating with copyright holders and related industry associations, together researching the establishment of convenient work authorization application systems under an information network environment, stimulating the lawful dissemination of works.

IX, Vigorously coordinating with administrative copyright management entities' daily supervision and administrative enforcement investigation, safeguarding a desirable network copyright protection order.

X, Establishing Internet sector information common assistance systems, preventing malicious lawsuits and unfair competition activities, maintaining healthy Internet sector development.

But will it work?

What do you think will be the influence of the declaration?

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Brand Politics: China Should Take Advantage of Chinese Design

"Chinese companies still copy a lot of foreign design. The most important thing for China is that its businesses learn the importance of design and start designing for themselves." Read the whole article 'Brand Politics', in which yours truly was interviewed by Adam Smith for World Trademark Review here (pdf).

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China's New Article 4 Copyright Law: Censored Works Are Copyrighted Too

How would China change its article 4 Copyright Law after the panel decision in the World Trade Organization's Dispute Settlement (DS 362) case determined that that provision was not compatible with China's obligations under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) and the Berne Convention for the Protection of Literary and Artistic Works?


IP Dragon's friend Rogier Creemers sheds light on the matter:

"Following the Panel Report in the China - Intellectual Property Rights case (DS 362), the Chinese Copyright Law has been slightly revised. Article 4, which was deemed to deny copyright to certain classes of rights holders in violation of China's obligations under TRIPs and the Berne Convention, has been updated from:

Works the publication or distribution of which is prohibited by law shall not be protected by this Law.

Copyright owners, in exercising their copyright, shall not violate the Constitution or laws or prejudice the public interests.

第四条 依法禁止出版、传播的作品，不受本法保护。

著作权人行使著作权，不得违反宪法和法律，不得损害公共利益。

to:

Copyright holders, when exercising their copyright, may not violate the Constitution and laws, and may not damage the public interest. The State implements supervision and management over publishing and dissemination according to the law.

著作权人行使著作权，不得违反宪法和法律，不得损害公共利益。国家对作品的出版、传播依法进行监督管理。

This update removes the provision containing copyright denial, while the added sentence makes clear that nonetheless, the censorship process remains unaffected."

Unexpectedly a new article 26 Copyright Law

Creemers writes:

"At the same time, a new Article 26 was added to the Law, stipulating:

Where copyrights are used as collateral, the pledgor and pledgee register the pledge with the State Council administrative copyright management entity.

以著作权出质的，由出质人和质权人向国务院著作权行政管理部门办理出质登记。

The use of copyright as collateral had already been regulated since 1996 through administrative registration, but this addition strengthens the legal position of such transactions."

Thank you Rogier.

IP Dragon: About article 4 Copyright Law, it says on the one hand that works are protected by copyright even if they are censored, but that censored works may not be disseminated. The great advantage for copyright holders is that they can file a lawsuit against copyright infringers so in principle they can obtain an injunction and/or damages. Before, holders of censored works were totally dependent on the efficacy of the Public Security Bureau in stopping any dissemination of their works.

The revisions will be effective as of April 1, 2010. This is for real, and has probably nothing to do with April Fool's Day, which is celebrated in China too.

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