Indigenous Innovation in China: Soup Will Not Be Eaten As Hot As Cooked

Will Freeman and Tom Miller assert for the Financial Times that China's economic nationalism is exaggerated:

"The State Council began to promote “indigenous innovation”—a plan to support the creation and commercialization of domestic technology—in 2006. Then in November 2009 a handful of ministries announced they would implement rules limiting government procurement to products with entirely home-grown intellectual property, trademarks and brands. Two weeks ago, MOST [Ministry of Science and Technology] backtracked on the most contentious elements of this plan. Intellectual property can now be licensed for use in China from abroad. Accreditation no longer requires that trademarks and brands are first registered in China. And eligible products no longer need to have technology that reaches or surpasses international standards."

Read messrs. Freeman and Miller's article here.

UPDATE:

May 1 Anonymous commented on this post. I will post it integrally below:

"If indigenous innovation were only limited to those issus, then the proposition would be partially accurate. However, even the MoST revised comments are problematic, as it leaves open the question of where R&D needs to be conducted, and it also leaves open the kinds of warranties of non-infringement/lack of controversies that are necessary for government procurement to be obtained. Moreover, many Chinese officials have recently been trying to backtrack and remove the "indigenous" from "innovation" - something that has been discused for years but never occured.

However, we are still left with a bundle of issues: (a) standardization rules that contemplate compulsory licensing; (b) extensive compulsory licensing possibilities (although none yet applied); (c) interest in third world type IP issues - folklore, genetic resources, traditional knowledge; (d) extensive exemptions from infringement, including a so-called "naked Bolar" and research and non-commercial use exemptions; (e) tax subsidization of domestic R&D which may be limited to domestically capitalized companies; (f) subsidies for patent and trademark filings; (g) local rules that protect locally established companies and give enhanced enforcement for them - typically under local "famous mark" provisions; (h) lots of low quality, unexamined patents coming from non-service Chinese inventors which may be receiving local subsidies; (i) limited remedies for TM "squatting" or patent "hijacking"; (j) low incidence of foreign related enforcement by admin agencies, and low incided of foreign related civil cases; etc. etc. Not all of these are necessarily terrible, but they do suggest government management of innovation and of IP, and not an orientation towards private rights."

Comment by Anonymous

Seventy Percent of US Business in China Values Protection of IP Critically Or Very Important

The American Chamber of Commerce in China (AmCham-China) launched its 2010 Business Climate Survey Report. It seems here too the climate is heating up. IP relevant results are:

• In 2009 18 percent (company sample size 311) reported intellectual property rights infringements issues as a top-five business challenge.
• In 2010 this has grown to 19 percent (company sample size 318).

To the question (company sample size 277) 'How important is the protection of intellectual property rights to your business?' in 2010:

• 25 percent answered 'critically important'
• 45 percent 'very important'
• 19 percent 'slightly important'
• 11 percent 'not important'

To the question 'How would you rate China's enforcement of intellectual property rights?'

In 2002 (company sample size 219): 21 percent 'totally ineffective', 63 percent 'ineffective' and 16 percent 'effective or very effective';

In 2004 (company sample size 210): 21 percent 'totally ineffective', 70 percent 'ineffective' and 9 percent 'effective or very effective';

In 2005 (company sample size 331): 15 percent 'totally ineffective', 65 percent 'ineffective' and 20 percent 'effective or very effective';

In 2008 (company sample size 389): 12 percent 'totally ineffective', 62 percent 'ineffective' and 26 percent 'effective or very effective';

In 2009 (company sample 129): 12 percent 'totally ineffective', 60 percent 'ineffective' and 26 percent 'effective or very effective';

In 2010 (company sample 146): 11 percent 'totally ineffective' , 63 percent 'ineffective' and 26 percent 'effective or very effective.

So in short the awareness of IP in China-issues as a major business challenge has risen marginally; 70 percent of business in China knows the importance of IP protection for their success in China; and 74 percent perceives that IP enforcement in China is totally ineffective or ineffective: which is about the same perception as in 2008.

On second thought: Because the samples were drastically smaller in 2009 and 2010, the survey for these years might be less representative.

See the 2010 business climate survey report here.

Aigo Sues HP, Dell, Sony, Toshiba and Samsung for Patent Infringements

At a Beijing court Aigo sued HP and at a Xian court it sued Toshiba for infringement of 6 patents which cover USB plus, a storage port technology.

HP, Dell, Sony, Toshiba and Samsung all received a letter from Aigo's lawyers with an invitation to negotiate within seven days. But according to Kenny Hsieh, general manager of Aigo's R&D and IP they kept quiet.

Aigo filed for a patent in China, but has already six valid patents in PCT-member countries. Therefore it has 12 months priority to get a patent in China, counting from the filing date for the PCT-patent application.

Read the Global Times' article here and John Oates article about it for The Register here.

Symbolic IPR Enforcement and Bonfire of the Vanities

Zhang Jiawei reported for the China Daily about China's efforts to destroy pirated goods and raise awareness among the public.

• China destroyed 36 million copies of pirated and illegal publications in 31 provinces, autonomous regions and municipalities, the Guangming Daily reported.
• A total of 15 provinces, autonomous regions and municipalities each destroyed more than 1 million copies of pirated and illegal publications.
• China obtained 8.48 million illegal publications and handled 1,894 IPR cases in the first quarter of this year in preparation for the Shanghai World Expo.

It is not clear what the author means with illegal. Works of which the copyright is pirated are illegal, but censored works are illegal in China too. Maybe this is the distinction the author is making.

In Bozhou, Anhui province they seized and set fire to "3,000 illegally copied reading materials, 14,000 porn discs, 117 gambling machines and 2,000 units of illegal satellite TV receivers (..)"

Read more in the corresponding China Daily article with less than impressive pictures of a "bonfire of the vanities" which shows basically the empty caskets of gambling machines.

Read the China Daily article here.

IP Dragon has covered these kind of operations already many times and is quite pessimistic about its efficacy. Instead it prefers an emphasis on streamlining litigation, criminal and administrative procedures.

Chinese Companies Are IPR Victims Too

Lin Meilian wrote for the Global Times (China's answer to the BBC or France24) an article about a Chinese company whose IPR is being faked.

Ms Lin writes: "The report in Shenzhen-based Jing Bao quoted Fang Zhen, marketing manager of Crastal Technology (Shenzhen) Company, saying that some of the company's patented products were found to be copied overseas and then imported back to China."

In the article it becomes clear that in order to protect your invention it is essential to file for a patent application and in order to enforce your patent to register it at the customs.

Of course more Chinese inventions, brands and creative works are copied by foreign companies.

According Ms Lin, the procuratorate of Haidian district in Beijing revealed that trademark infringements represent 95 percent of all IPR cases. Of these cases 30 percent involved counterfeiting of the trademarks of local brands.

Read Ms Lin's article here.

Welsh Dragon Copied Hong Kong Dragon?

The logo of Sport Wales is very similar to the controversial Hong Kong's redesigned city brand. Only the Welsh dragon's tongue sticks out and Hong Kong has longer ribbons.

It cost 9 million HK dollar to develop the brand. And 1.4 million HK dollar to redesign the brand. The three ribbons were added. Blue ribbon: blue skies (ahem!), green ribbon: sustainable environment, Lion Rock in the red: can-do spirit of Hongkongers.

Fox Yi Hu wrote an article about it in the Sunday Morning Post of April 25, 2010. Fox quotes a spokeswoman of the Hong Kong government about the brand who said that: "If someone wants to use it, they need to apply to Brand Hong Kong. We reserve the right to take action against any unauthorised use." Read Fox Yi Hu's article here.

Also So Much to Do in IP in the USA! Happy World IP Day To All!

Keith Johnson reports today in the Wall Street Journal that:

- Last Christmas the US seized 26 million US dollar worth of counterfeit goods.
- Now the National Intellectual Property Rights Coordination Center confiscated 40 million US dollar worth of couterfeit goods in more than 30 US cities. This operation was called: Spring Cleaning. Seems that the US is copying China's gusto for fancy names for enforcement operations.
- And as part of a separate and long running investigation at the port of Baltimore another 200 million US dollar worth of fake goods were seized.

Mr Johnson wrote: "Chinese criminal gangs are the biggest purveyors of fake goods in the U.S., accounting for about 80%, by value, of the counterfeit goods seized last year, according to U.S. government data."

Shanghai Court Awards Microsoft 318,000 US dollar Damages For Copyright Infringement

Kathrin Hille wrote for the Financial Times that a Shanghai court ordered Dazhong Insurance, "a Shanghai-based insurer backed by Chinese state-owned and listed companies" to pay 318,000 US dollar to Microsoft for use of illegal copies of its software. The Global Times reported that the court was the Shanghai Pudong New Area District Court, read here.

Stan Abrams of China Hearsay has a lot to say about the case, he gives a disclaimer because there was limited information on a case that was just decided. "Even without details, I thought it was worth making a series of assumptions so I could discuss some general points. I undoubtedly made some incorrect assumptions about this specific case, so please keep that in mind." Mr Abrams' analysis is interesting as always, read here.

In August four men who ran the website Tomato Garden were given prison sentences and fines for distributing counterfeit Microsoft software. Read Chris Buckley's article for Reuters about it here.

Google Government Requests Tool Copyrighted Content Included and What About China?

Google has launched a Google Maps tool, called Google Government Requests to show statistics of all government requests it is getting to supply data or to remove content and the percentage it is fully or partially complying with these requests.

• Because, according to Google, "Chinese officials consider censorship demands as state secrets", Google "is not disclosing that information at this time."
• "[F]or YouTube, we have not included government requests for removal of copyrighted content. The vast majority of requests for removal of copyrighted material on YouTube are received from private parties; some may come from state or foreign governments, but that number is very low. Regardless, such requests are not reflected in these statistics."

Great that Google is disclosing its dealing with governments, but the following is unclear to me:

• This emphasis on the exclusion of government requests for removal of copyrighted content for YouTube, suggests that the requests for the removal of copyrighted content at other Google sites is included in the statistics. Is it? However, when you click on China, the only information you are getting is about censorship.
• And this suggests that the Chinese government never requested a removal of data because of copyright infringement. Did it?

Youku Fingerprints Against Copyright Piracy and Can Advertisers Be Liable Too?

Loretta Chao wrote a good article for the WSJ (Asian edition April 21, 2010) about Youku.com and its efforts to clean up its act toward copyrights. Youku.com is the most popular video site in China (15.7 million unique daily visitors according to iResearch), followed by Tudou.com (12 million), Xunlei.com (9.8 million) and 56.com (5 million).

Ms Chao points out that Youku's fingerprinting software costs roughly 146,000 US dollar to develop (identifying codes based on characteristics such as colour combinations or brightness) and that it is also used to remove prohibited content that is censored by the Chinese government.

Last year one could find very recent movies at Youku that were still in the cinema. At first sight this seems to be no longer the case. However, old movies such as the Godfather, Scarface and the English Patient can all be seen.

Youkou, Ms Chao writes, wants to attract more advertisers that don't want to be associated with copyright piracy. And it even might risky too from a legal perspective:

"Last year an antipiracy group of Chinese Internet companies filed a number of lawsuites against Youku in Chinese courts, including one that alleged that a Coca-Cola Co. ad had run on Youku accompanying a clip from a Chinese TV show that Youku hadn't licensed."

Whether an advertiser can be liable in case he advertises on a platform that is used by copyright infringers is a good question. It should be relevant if the advertiser knows or should have known that the platform is used predominantly for the distribution of copyrighted contents that are pirated. I would love to hear more about the copyright infringement case in which Coca-Cola was involved. If you know more about it, please let me know.

Ms Chao finishes on a realistic note that Youku's efforts are unlikely to improve piracy rates in China.