Undecent Miffy Bunnies Spotted In Macau

Warning: This article contains material which may offend and may not be distributed, circulated, sold, hired, given, lent, shown, played or projected to a person under the age of 18 years.

Let me first refresh your memory about IP relevant rabbits and then tell you about my encounter with the undecent two Miffy bunnies in Macau.

Miffy is the English name of the Nijntje (konijntje = little rabit) cartoon figure, created by Dick Bruna. Kathy (in many articles this name is written with a C) looks very similar to Miffy and is a cartoon by Sanrio, the same company that created HelloKitty. To distinguish the two alleged "cute" rodents. Miffy nose is an X, and Kathy's nose is a O.

Rabbits are known for their talent to reproduce, but Mercis, the company representing Miffy's creator, Dick Bruna, held that there can be only one: Miffy, based on Miffy's Dutch copyright and Benelux trademark.
November 2, 2010, the judge responsible for interim relief (voorzieningenrechter) Amsterdam Regional Court (Rechtbank Amsterdam) agreed with Mercis that Sanrio infringes both Mr Bruna's copyright and trademark for Miffy. Read the judgment here. Sanrio decided to appeal the decision.

Then March 11, 2011 Japan was struck by natural disasters. This seems to have relativised both parties, because in the beginning of 2011 they settled the matter out of court and decided to donate 17,5 million yen (155,000 euro) to the victims of the natural disasters. And Sanrio will exit Kathy, read Catherine Lee's article for IP Kat about it here.

Read more here.

Japanarchist and Givemeabreakman with Tomoko give an overview of the Miffy versus Kathy, rabbit fight and reconciliation.

In a shop at the Calçada da Barra, a sinister street in Macau, the Dutch Miffy is depicted on each plastic bags. Now the bag does not show whether or not the maker of bags has a license to use the copyrighted Miffy. In Macau's Online Trademark Registration Search System I could not found Miffy as a Macanese trademark. My impression was that this is a school example of passing-off, although it is called judicial action for unfair competition (articles 156-173 Commercial Code of Macau).

The Calçada da Barra might as well be named Sodom and Gomorrah for its aberrant disrespect of IP.

Each sold product, unrelated to Miffy, was put in a Miffy bag

In bright daylight I was exposed to the plastic bag. 

Two Miffy bunnies are depicted here tastelessly topless.
Mr Bruna could invoke its moral rights based on his copyright.
Another option might be trademark tarnishment,
if Miffy is a well known mark in Macau and if trademark dilution is possible under Macanese law.

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Sobering Statistics Put China's Innovation Into Perspective

In the graphical perspective,
things become smaller if the distance
from the observer increases

Professor Anil Gupta and Haiyan Wang, writers of the book 'Getting China and India right', put China's innovation statistics into perspective.

Patent filings in 2008

• U.S.A. 400,769 filings
• Japan 502,054 filings
• China 203,481 filings

Gupta and Wang have a point when they argue that the Chinese inventions patented outside China are a more objective measure than the ones registered by State Intellectual Property Office (SIPO).
The most compelling statistic is the number for triadic patents or triadic patent families (patents that origin from one country but that are patented by the European Patent Office, United States Patent and Trademark Office and the Japan Patent Office).

Triadic patent families according to Organization for Economic Cooperation and Development (OECD) in 2008

• Europe 14,525 filings
• U.S.A. 14,399 filings
• Japan 13,446 filings
• China 473 filings

See the Compendium on Patent Statistics for 2008 here (pdf) on page 6. 

However, I would argue that these patent filings are not the best measure. Patent registrations would be a far more better indication of patent quality. 

Professor Gupta and Mr Wang wrote: in 2010 China accounted for

• 20% of the world's population
• 9% of the world's GDP
• 12% of the world's R&D expenditure
• 1% of the patent filings with or patents granted by any of the leading patent offices outside China. 
• 50 % of the China-origin patents were granted to subsidiaries of foreign multinationals   

Professor Gupta's and Mr Wang's Wall Street Journal article 'China's Innovation Is A Paper Tiger' can be read here and should not be confused with the title of my thesis 'Paper Tiger Or Roaring Dragon, China's TRIPs Implementations and Enforcement'.

UPDATE August 2, 2011: 
Joff Wild, editor of Intellectual Asset Management gives an update since 2008. In short: the growth in the number of China's triadic patent filings/grants paints a rosy picture. However China's innovation prospect is much bleaker. On this I concur with Mr Wild. Read more about the relation between innovation and intellectual property and innovation and censorship here.

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Populism in America: Mitt Romney Is Playing The "IP in China" Card

By Michiel Tjoe-Awie

On November 6, 2012 there will be president's elections in the U.S.A. Mr Mitt Romney is a candidate for the Republican Party.

Romney sponsored a message showing the president of an American manufacturer of machines in Pataskala, Ohio, complaining about President Barack Obama's alleged lack of effort to "take China to the mat" as he promised four years ago. One can read at the MittRomney.com website:

"Four years ago, President Obama promised to take China to the mat. Promising to create jobs by opening markets like China. We need a president who will fight for American workers."

We all know that market access is related to intellectual property rights, so in the video Steven Cohen, president of Screen Machine Technologies is making the alleged intellectual property enforcement deficit claim absolute: "There doesn't seem to be any effort at all to combat intellectual property theft in China."

After listening to mr. Romney, I decided to ask Danny Friedmann, owner and founder of this site about his views. Friedmann commented as follows:

• IP Dragon's opinion is that this is simply not true and a form of populism. The message is: president in the White House has sold us out and does not protect our interests against China. The door might be open but the guests will be robbed. This is not very subtle. Yes, there is still room for debate whether the efficacy or efficiency of IP-policy could increase, but China certainly have made many efforts in regard to IP rights protection and enforcement.
• Yes, it is bad that the IP rights of Screen Machine Technologies are being infringed. But they should and can do something about it: enforcing IP rights by suing the counterfeiters via the Chinese administrative, judicial and criminal courts has become a real option. 

A more elaborated vision is available on request. Ask mr. Friedmann for advice about IP-protection strategy in China.

Text Michiel Tjoe-Awie

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Glass Is Half Full In Regard To IPR Infringements In China, ... Is It Really?

According to Reuters Vice Minister of Commerce Jiang Zengwei either showed his sense for the rather British form of humour the understatement or he is a die-hard optimist. In the very same year when 85 percent of all counterfeit goods seized at the EU originate from China, according to the EU Customs, Mr Jiang was quoted  by Reuters saying:

"You could say that there still exist some problems with China's IPR, but I don't endorse the idea that it is extremely serious," Jiang told reporters at a press conference. Read the complete Reuters article here.

March 29, 2007 I wrote a blog with almost the same title: IPR Infringements: Glass Is Half Full Or Half Empty. Not so much has changes in regard to objective statistics and the ability to frankly admit "suboptimalities" in the enforcement of IPRs.

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If Central Government Is Not Omnipotent Deal Directly With Provinces: USPTO Jiangsu MOU

As the last article underlines, see here, the central government of Beijing is not all powerful in China. So it makes a lot of sense that the US Patent and Trademark Office went to Jiangsu, the important coastal province to sign a Memorandum of Understanding with the

According to the USPTO press release on July 21, 2011: “The purpose of this MOU is to establish a general framework for future cooperation,” said Under Secretary of Commerce for Intellectual Property and Director of the USPTO David Kappos. Read more here.

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The Bad euh ... Good euh ... Bad News On Indigenous Innovation in China

"The Mountains Are High, 
but you can always find a way through"
Yangsho, Guangxi Province
Photo: Danny Friedmann

• Since China announced its Indigenous Innovation policy in 2006 there were a lot of protests from foreign intellectual property rights holders that would be completely excluded from China's government procurement in certain product categories. According to the USITC intellectual property and indigenous innovation challenges cost the US economy 48.2 billion dollar in 2009, see here.
• Then this June 2011, it became clear that China's central government revoked three laws that link indigenous innovation with IP rights, allegedly because of the external pressure. See here.
• Good news for a level playing field ... but wait. Professor Stanley Lubman (University of California, Berkeley) warns IP holders to be not too excited, yet. As professor Lubman explains the question is whether provincial and municipal governments take heed to the revocations, given their opposite interests when they allow foreign competition. To stay in the playing field metaphor: there might be many smaller fields where you cannot play as a foreigner. Read professor Lubman's Wall Street Journal article here (no subscription needed).

"The Mountains Are High And The Emperor Is Far Away"

China is no monolithic state. And as the saying makes clear substantial power is shared with the governements of provinces and municipalities. So the confusing situation can exist that some revoked laws have a "second life" in the province or municipality if it can give local players preferential treatment, and foreign IP holders cannot really get a good overview of what is happening where. The central government better think twice before they promulgate regulations if there is a chance that they will revoke it later, especially if that regulation gives the local government some advantage. And if they do revoke a regulation the central government should control whether the local government is following up on their instructions.

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85 percent of all products seized at EU border originate from China

85 percent?!.
If only the other IP infringing countries could sue China
for anti-competitive behaviour...

For the statistically inclined, Commisioner Algirdas Šemeta, responsible for customs of the European Union, shared some results about the seizures at the EU border. According to the Lithuanian:

-  "Overal, China continued to be the main source country from where goods suspected of infringing an

IPR were sent to the EU (85% of the total amount of articles)."

- Hong Kong was the main source for memory cards. 

Read the complete 33-page Report on EU customs enforcement of intellectual property rights, results at the EU border 2010 here. 

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Press Conference: DaVinci Furniture GM's Nose Grows Longer Than Pinocchio's

Honest Pinnocchio by Mike He, a Chinese designer
"It is your pencil that makes him lie"
Source: Yatzer

One night, the wood carver Geppetto general manager DaVinci furniture Panzhuang Xiahua had a dream. He She dreamed that the marionette would come to life company would import high quality furniture from Italy.

Well it seems now exactly that, just a dream. It turned out that the products where made in China and after an export-and-import scheme sold in China as Italian furniture. Stan 'China Hearsay' Abrams asserted that the item was covered in the media erroneously as an IP in China subject because there was no IP infringement, see here. If you interpret the term strictly he is right. However, one can interpret IP in China a little bit broader (if only to cover this over-the-top dramatic press conference, see videos via Kenneth Tan's Shanghaiist post here). This news does put the origin function of the trademarks, coupled to the quality function in the spot light. Instead of blaming the allegedly greedy purchasers of extremely expensive furniture I propose that even the very well to do should be protected from confusion about the source of the products. And the course of events might have damaged the reputation of the Made in Italy label, see The Made In Italy Portal here.

More about Pinocchio's allegory (on those darned 1880s) see here.

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Fangchenggang Fairytale: How a Magic Mercedes-Benz Became A Humble Honda

Adam Smith dedicated his World Trademark Review blog about a Mercedes-Benz police car with a Honda logo. The local Fangchenggang police force (in Guanxi province) thought that they could fool taxpayers into believing that they did not spent too much money on a police car. Read here.

I think everybody understands that the police needs to have faster and better cars than the criminals. Third parties that are alterating, mutilating, distorting the three-pointed star logo of Mercedes-Benz by replacing it with the H-logo of Honda raises many kinds of questions:
- Can third party users of the Mercedes-Benz car after the purchase do whatever they want to do with the logo? In other words is the trademark exhausted after the sale?
- What claims can both Mercedes-Benz and Honda make based on a likelihood of (post-sale) confusion and likelihood of dilution and taking unfair advantage of the other trademark. Moral rights (droit d'intégrité) in regard to the copyright might also play a role.  
- An extra complication in this case is that not the competitor-copycat is the culprit, but a third party, and it is an interesting question whether it the trademark is used in or outside the course of trade.

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The Apple Does Not Fall Far From The Tree In Kunming

BirdAbroad is a blogger in Kunming, Yunnan province. She came across a very convincing Apple Store ripoff, and then found two other such stores. Read here investigative post in which she said she was from the Apple corp. in the U.S. in order to shoot some pictures. Read "Are you listening, Steve Jobs?" here.

UPDATE: Michael Martina, 'Chinese authorities find 22 more fake Apple stores', Reuters, August 11, 2011.

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Innovation: "Paradoxes, Google and China"

Google and China have found each other in a marriage of convenience, in order to serve the one god they both live by: innovation. This article deals with censorship and intellectual property. Two of the biggest challenges that the internet present to the legal community. The main characters are two of the biggest actors on the internet stage: Google and China. Google wants to offer all the information available to everyone, while not doing evil. China interprets having all the information available to everyone as an evil that will lead to instability.


Download the chapter here of Friedmann, Danny, Paradoxes, Google and China - How Censorship Can Harm and Intellectual Property Can Harness Innovation (July 1, 2011), which is a chapter of the book: Aurelio Lopez-Tarruella (Ed), Google and the Law, IT and the Law Series, TMC Asser, Forthcoming. 

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When You Give This Horse Wings It's Still Brand Dilution

It's a car ..., it's a plane ...
Picture: Danny Friedmann

... it's a piano.
 Times Square, Causeway Bay, Hong Kong
Picture: Danny Friedmann

The Pegasus Guoqin costs more than 2.86 million Renminbi (over US $410,000). Although it is painted in the "Ferrari rosso" (rosso corsa) colour, has a horse on top (although with wings, just like Pegasus), you will not find Ferrari "horse power" inside, instead a Schimmel piano. If Ferrari registered the famous red colour (if it gained a secondary meaning) it could have, in combination with the horse figure cause confusion with the public about whether Ferrari endorsed the product. Then again Ferrari trademarked the signs in the trademark classes for cars, not pianos. Therefore, in the case that Ferrari is not competing with pianos and in the absence of a likelihood of confusion, the real question is: Does it dilute Ferrari's world famous brand by blurring? 

The piano is on offer in Hong Kong. Does Hong Kong's jurisdiction have anti-dilution laws?

Article 18 (4) Trademarks Ordinance 2003: A person infringes a registered trade mark if-

(a) he uses in the course of trade or business a sign which is identical or similar to the trade mark in relation to goods or services which are not identical or similar to those for which the trade mark is registered;

(b) the trade mark is entitled to protection under the Paris Convention as a well-known trade mark; and
(c) the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.

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IP Dragon's Book Review: Dragons At Your Door

Learn to innovate with Chinese characteristics

Before writing The World Is Flat (see his presentation at NUS here) Thomas Friedman realised that his “intellectual software was out-of-date”. His framework of measuring what is important and what is not, needed an update. I think Mr Friedman's humble confession is an exhortation to any Western business manager. One of the updates recommendable to Western business managers is the excellent book by professors Ming Zeng (Cheung Kong Graduate School of Business) and Peter J. Williamson (University of Cambridge, Judge Business School): Dragons at Your Door, How Chinese Cost Innovation Is Disrupting Global Competition. 

In a 2007 column I wrote that companies that complain about the bad enforcement of intellectual property rights in China should be even more worried about legitimate competition coming from China. Professors Ming and Williamson researched this competition and are fully aware of this disruptive force that is in full swing. Professors Ming and Williamson have thoroughly analysed this fierce competition with Chinese characteristics. Better still, they instruct non-Chinese companies how to use this potentially devastating force to their own benefit. Dragons At Your Door, although published in 2007, is still a very relevant guide and a must-read for professionals that are active anywhere in the product chain; from R&D, design to manufacturing or marketing. Even if you are not active in China, have no interest in becoming active in China, this book is relevant for you. Because if you do not learn the lessons this book provides, you will not be prepared  if  when dragons arrive at your door, flood your market and eat up your market share. And they won't even knock before entering.

Analysis

Most Western companies' business paradigm is that the innovation should be directed at making the product more sophisticated, so that they first offer the product for a premium to the (Rogers model for the adoption and diffusion of innovation) market segments: innovators and early adopters. So that they can get a high margin with a low volume. The idea is that the price will be sliced when the early majority is ready for the innovation (middle margin, high volume). And in order to convince the late majority and laggards to enter the market, the price will be sliced even more (low margin, low volume).

Premise

But as many examples in the book illustrate skimming can leave the company vulnerable. The premise of the book is that Chinese companies compete via a dramatic different strategy: Chinese companies find innovations (innovative processes, methods, and product attributes) and lower the costs in order to lower the price, increase the variety in order to increase the choice, and apply the innovation to specialty products markets where before only expensive sophisticated products were on offer.

If one combines the economic theory of fully informed markets with the theory of globalisation it makes sense that companies win market share that know how to slice costs, add varieties and specialty products. 

One can say that the Chinese companies satisfice the market. The verb to satisfice, coined by Herbert Simon, see here, applies to the decision making process that is both sufficiently satisfactory (meeting criteria for adequacy, rather than to identify an optimal solution). By decreasing the margins and increasing the volume, the Chinese companies can conquer market share, and then take-over ailing companies that focused on the premium-segment. 

Solution

The message of the book is: China is the most competitive market in the world. Make yourself China-ready by using the cost innovation. If you can make it there, you can make it anywhere. Professors Ming and Williamson are advising non-Chinese companies to empower their Chinese subsidiaries to make the same kind of cost-innovation efforts as the Chinese companies. Or otherwise start cooperating with a Chinese company that is savvy in cost innovation. The book gives many examples of companies that thrived using this strategy by shifting high-value activities to China and some that failed miserably by not going full-out to make the change.

Lessons for IP holders.

What about IP leakage? As professors Ming and Williamson write: “You will never make the shop completely watertight against IP leakage. But there is a trade-off to be made: either surrender the potential advantages of undertaking more knowledge-intensive, high-value activities in china as a way of tackling the challenges posed by the emerging dragons; or reap those advantages by giving China a more significant role and carefully managing the IP risks."

Although labour costs have been rising significantly the last few years, there is still a contingent of millions of Chinese people coming from the hinterland of China that need work. For some time to come labour will be abundant and costs relatively low coupled with a stable economy and good infrastructure. The biggest challenge is to develop the talent of your employees and, related to IP leakage, make them into loyal employees.

This cleverly written book, which reads like a pageturner but one with academic rigour, has a wealth of illustrative examples and make professors Ming and Williamson's the most powerful advocates of cost innovation.

Ming Zeng and Peter J. Williamson, 'Dragons At Your Door, How Chinese Cost Innovation Is Disrupting Global Competition', Harvard Business School Press 2007 

See index and first 10 pages of the introduction here.

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