Free Seminar Shanghai: Intellectual Property in China That Protects Clean Technologies

The British Chamber of Commerce Shanghai announces an afternoon seminar

Clean air, 
clean technology
 and clean IPR also needed in Shenzhen
this afternoon
Photo: Danny Friedmann

'Protecting Clean Technologies: Intellectual Property in China' organised by China IPR SME Helpdesk.

Peter Corne, chair of the Energy Working Group of the European Chamber in Shanghai and partner of law firm Dorsey & Whitney in Shanghai is giving a presentation.

Date: 6 September 2011, starting at 4 o'clock

Location: Hotel Indigo Shanghai on the Bund, 

585 Zhongshan Dong Er Lu

let the rsvp-china@chinaiprhelpdesk.eu know that you are coming.

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EU, U.S. Perception: "China Is Discriminating". What Are We Going To Do Against It?

US: We have so many
stars, we deserve 
to be treated
accordingly in China

U.S. Vice President Joe Biden is visiting China to try to smooth the Sino-Chinese relations (one can argue that the U.S. is borrowing money from China to import from China) and meet with his Chinese counterpart Xi Jinping (习近平) who is expected to succeed President Hu Jintao (胡锦涛) in 2013. With the election coming up in November 2012 their is pressure on the Biden and Obama to show that they can create new jobs to get the U.S. economy going. 

Perception

Biden is going to talk also with U.S. and Chinese business leaders. Kate Andersen Brower and Michael Forsythe point out in their Bloomberg article that U.S. business leaders are more worried about the level playing field in China, which includes intellectual property protection and enforcement, than the alleged overvalued Renminbi that makes export to China more expensive. 

""Our members do not think currency is the top issue in our relationship," said Erin Ennis, vice president of the U.S.- China Business Council. Bigger concerns are "level-playing field issues," like opening up the Chinese market to U.S. exports and protecting intellectual property."

Tony Su, corporate vice president and president of DuPont Greater China was quoted saying: "We have a rising concern about IP protection," Su said, adding that it is an especially important consideration for his company, the biggest U.S. chemicals maker by market value and second-biggest seed producer in the world. "The government can be an example to industry that stealing technology will be punished by law."

We have some stars,
please consider
us as stars  in China

Surveys in both the EU and U.S. confirm the concern about discrimination of foreign firms in China. When EU business leaders were asked " will the Chinese government have policies in place that discriminate against foreign companies?"in a survey by the European Union Chamber of Commerce in China, 46 percent (36 percent in 2010) answered "Yes, in the next two years."
And when the American Chamber of Commerce (AmCham) asked whether China is discriminating against foreign companies with its licensing process, 71 percent answered yes.

It is also interesting to watch the foreign politics strategies play out in regard to China. Is the U.S. strategy, which is arguably more assertive but also more confrontational more effective than the EU strategy that is more constructive but also more passive. I think if the U.S. and EU would coordinate their efforts and come up with a combined good cop bad cop approach, they can attain better results than if they would operate on their own. What do yo think?

Read the Bloomberg article via SF Gate, here

Now That We  Some EU and US business leaders Found Perceive Love Discrimination, What Are We Going To Do With Against It?

We are talking about perception. Now what are we going to do against it? Like each year the European Chamber of Commerce has formulated some interesting suggestions in their 'European Business in China 2011/2012 Position Paper' that will be launched on September 8, 2011 in Beijing and Shanghai. The following subjects, that are all related to intellectual property rights, will be covered:

1. The positive role European companies can play in helping China reach the goals of its 12th Five-Year Plan:
-Developing the service sector
-Enhancing environmentally-friendly and advanced technologies
-Encouraging Innovation
2. An overview of the key themes of recommendations to Chinese policymakers:
-Increasing Market Access
-Enhancing Transparency & Predictability in Legislation
-Improving Regulatory Efficiency
-Encouraging Innovation through Intellectual Property Rights Protection
3. Recommendations to both European and Chinese governments on EU-China commercial relations and the prospects for a bilateral investment treaty.

The Beijing launch of the paper will be held at Kempinski Hotel at 4 o'clock (free for members, 400 Renminbi for non-members) Dirk Moens, secretary general of the Chamber and Davide Cucino president of the Chamber will give a presention, see here. The Shanghai launch will be held at The Westin Bund Centre Shanghai at noon (free for members, 300 Renminbi for non-members) and Piter de Jong, vice president of the Chamber will give a presentation, see here.

Piter de Jong explains in a Squawk Box CNBC interview how the EU companies are missing out on a trillion dollar procurement, he also elaborates on the business confidentiality survey 2011 by the EU Chamber of Commerce in China, see here.

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Genuine Apple Store Fixes Problem Of Fake Apple

M.I.C. (Made in China) Gadget's Chris Chang wrote that a genuine Apple Store in Pudong Shanghai helped diagnose and troubleshoot his knock-off MacBook Air. Read here.

Now that he is sitting in your nest,
you might as well treat him as your own?

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China civil litigation analysis

IP Komodo has been playing with the Rouse litigation analysis tool Ciela.

Over 12,000 IP decisions from China have been put into a database and is available for searching, at no cost. It can be used to search by city, court, year and other variables. Most importantly you can use it to compare two cities to decide where to sue. This is especially useful when there is a choice of forum as is common in China.

Why for example are damages awards for patent infringement on average higher in Guangzhou than Shanghai? See here (One answer appears to be that its all statutory damages awards in Guangzhou). For other more estoteric questions, users can contact Rouse for assistance.

Guest post by IP Komodo Dragon

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

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

So what does the report say about China?

On the positive side:

• An increase in the number of civil IP cases in the courts (would be nice if the report states the numbers);
• Largest software piracy prosecution in Chinese history in 2009;
• "Continued and constructive discussions in the Joint Commission on Commerce and Trade (JCCT) and the JCCT Intellectual Property Rights Working Group" (this might be a diplomatic way of saying that the U.S. and China are on speaking terms, but nothing concrete has come out of the meetings, why not mention it otherwise?);
• October 2009 the National Copyright Administration of China, the Ministry of Education, the Ministry of Culture, and the National Anti-Pornography Office issued the Notice on Strengthening Library Protection of Copyright, which directs libraries to adhere to the Copyright Law;
• Judicial enforcement related to infringing activities in retail markets in Beijing and Shanghai;
• Judicial authorities sentencing wholesalers to prison terms;
• Holding retail market landlords liable for failing to take appropriate measures to prevent infringement;
• Shanghai municipality is seen as bright spot regarding IPR enforcement;
• Zhejiang province has shown progress, undertook more trademark infringement investigations than any other Chinese province (which could however also indicate that they have a higher level of infringement than the other provinces; what is needed is to use the IP enforcement/infringement ratio);
• Jiangsu province demonstrated, according to USTR, its recognition of the importance of IPR protection: "including through a Suzhou court's criminal sentences in a high-profile software piracy case (sounds rather anecdotal to come to this conclusion, then again it is also encouragement) and set an example of transparency by publishing IPR decisions online: Jiangsu.ipr.gov.cn.

Room for improvement:

• The USTR is concerned about the proliferation of the manufacture, sale, and distribution of counterfeit pharmaceuticals in China;
• China's domestic chemical manufacturers that produce Active Pharmaceutical Ingredients (API) can "avoid regulatory oversight by not declaring that the bulk chemical is intended for use in pharmaceutical products." (according to Mike Palmedo, PIJIP, this is more a health issue not an IP issue, see 'What was said during the Special 301 hearing about IP in China?' below);
• Internet piracy is significant in China. Unauthorised retransmission of live sports telecasts over the internet is a problem (see Michael Mellis, Major League Baseball Advanced Media L.B., 'What was said during the Special 301 hearing about IP in China?' below);
• Pre-loaded illegal content on cellular telephones, palm devices, flash drives and other mobile technologies (see Eric Smith, IIPA, 'What was said during the Special 301 hearing about IP in China?' below);
• "Other countries still need to adopt and implement legislation or improve existing measures to combat illegal optical disc production and distribution, including China, India, Paraguay, and Thailand, which have not made sufficient progress in this area." This is rather vague language: In case of China does the USTR need to implement legislation or improve existing measures? That remains unclear;
• Government use of legitimate software is a problem in China;
• The report gives the USTR's view about what the US achieved with the WTO Dispute Settlement cases DS362 (China - Measures Affecting the Protection and Enforcement of Intellectual Property Rights) and DS363 (China - Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products);
• USTR is concerned about the promotion of China's "indigenous innovation". They give one example: preferential government procurement. As a comment about my post about the subject "Anonymous" gave many more examples as a comment on my post about the subject. See them here.
• The share of IPR-infringing product seizures at the U.S. border that were of Chinese origin was 79 percent in 2009, a small decrease from 81 percent in 2008.
• "Business software theft (theft is a misnomer, since the software is not taken a way, but copied and used without authorisation by the rights holder) by enterprises is particularly troubling as it not only results in lost revenues to software companies but also lowers the business costs of offending enterprises and my give these firms an unfair advantage against their law-abiding competitors." Don't know why infringed business software is singled out. All companies making use of a counterfeit or pirated product have an unfair advantage in comparison to law-abiding competitors;
• That during a recent internet enforcement campaign, see here (Managing IP) or here (China Daily), in which 558 cases were investigated and 375 websites were shut down, demonstrates according to the USTR that if the Chinese government chooses to utilise its enforcement resources and personnel to deal with an IPR problem, it can produce results. The question is whether these actions are structural.
• "The United States notes that at times particular enforcement actions are directed not only at copyright or trademark infringement, but also include infringement activities that may be considered more serious under the Chinese legal system." Is this a cryptic way of saying that China is more interested in controlling the media? And one should take into account that article 41 (5) TRIPs requires no special allocation of resources to the enforcement of law in general in absolute terms, nor to the enforcement of intellectual property rights in relative term;
• Retail and wholesale market have still pervasive problems. Despite 1. attention from brand owners, the Chinese central government and foreign governments; 2. resources from brand owners; 3. contractual agreements with landlords;
• Civil damages for infringement are deemed inadequate; minor penalties levied by courts;
• U.S. trademark and copyright industries report that administrative fines are too low; and imposed too infrequent, to provide deterrence. The ambition level of TRIPs is not helping: the wording of article 61 TRIPs is not that remedies should provide a sufficient deterrent, but that they should be sufficient to provide a deterrent. China’s implementation of article 61 TRIPs is one of the most vehemently debated issues. Many WTO members seem to expect a lot of this enforcement route. But they should perhaps do some self reflection first, because criminal enforcement in IPR cases is underdeveloped in most countries, or, as professor Hugenholtz (IvIR, UvA) pointed out, not even available, as is the case with patent law. Maybe that is why there has been no jurisprudence or decision of a competent WTO body thus far;
• Market access barriers create incentives to infringe products such as movies, video games and books;
• September 2009, Ministry of Culture issued a "circular that bars providers of imported, but not domestic, digital music from distributing their content online unless they obtain content approval"; and the foreign providers have to enter into an exclusive licensing arrangement with a wholly Chinese-owned entity;
• Some landlords and infringers ignore applicable court rules;
• November 2009, the Standardization Administration of China (SAC) released the Draft Regulations for the Administration of the Formulation and Revision of Patent-Involving National Standards (Chinese) for public comment. The USTR reports that it is "concerned about the expansive scope, the feasibility of certain patent disclosure requirements and the possible use of compulsory licensing for essential patents included in national standards" (Article 9, Chapter III: "(1) The patentee agrees to license, on a reasonable and non-discriminatory basis, any organization and person to implement the patent when implementing the national standard at a price significantly lower than the normal royalties; "; Compare the just released Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, of which section 284 states that "(..) in case of a dispute, the assessment of whether fees imposed for patents in the standard-setting context are unfair or unreasonable, will be based on whether the fees bear a reasonable relationship to the economic value of the patents." Article 12, Chapter IV of the Chinese draft regulation: "In principle, a compulsory national standard shall not involve a patent."; Article 13, Chapter IV of the Chinese draft regulation: "For a compulsory national standard that indeed needs to involve a patent, the patentee shall grant license free of charge or the national administration department of standardization shall request the related departments to consult with the patentee about disposal of the patent. If the related departments fail to agree with the patentee on the disposal of patent, the approval for release of the national standard will be temporary withheld or a compulsory license will be granted according to law.") which could indeed give a disincentive for innovation by foreign rights holders in the development of standards in China. Not only the U.S. but also the European Commission is taking a different approach to standards and IPR from China;
• October 1, 2009, the Third Amendment to the Patent Law is effective (Patent Law 2008). USTR writes that rights holders have raised a number of concerns, including the effect of disclosure or origin requirements on patent validity (rightly so, because it is unclear), inventor remuneration (no reason for this fear, see 'Are Statutory Compensation Rules for Inventors Scary?';
• China's recently got a "naked" Bolar exemption, article 69 (5) Patent Law 2008, which exist of the safe harbor provision. I am not sure whether it is bad that there is no possibility of extending the term of patent protection, as is possible in the U.S. system. I am not sure whether the State Food and Drug Administration (SFDA) has long delays. And 20 years seem long enough to get a return on the investments of innovators. And otherwise generic producers have to wait longer, which might be bad for competition. And in principle, the law applies in the same way to Chinese and foreign companies in China. The USTR has concerns about effective protection against unfair commercial use, as well as unauthorised disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products;
• Guangzhou province's IPR enforcement is seen as inconsistent with respect to valuation methodologies for calculating damages, fines and penalties, and the criminal IPR cases initiated are deemed too low;
• According to the USTR, IPR enforcement at the local level is poorly coordinated among Chinese government ministries and agencies; rife with local protectionism, corruption, high thresholds for initiating investigations and prosecuting criminal cases, lack of training, inadequate and non-transparent processes.

The report states that "the overall level of IPR theft in China remains unacceptable." The usage of the term 'IPR theft' could be confusing. Because the IPR are not stolen, but infringed. If they were stolen the rights holders would not have the intellectual property rights anymore.

Mike Masnick wrote an interesting article for TechDirt with the title 'USTR Announces What Countries Have Been Naughty When It Comes To Intellectual Property'.

I have put my comments on Mr Masnick's article in italic.

IP Dragon: Naughty is a term that might be perverse in the case of counterfeited medicines and food/beverages that have proved lethal in China.

Mr Masnick asserts the following about Section 301:

- standard used is mythical;

IP Dragon: Why mythical? The USTR listens to the witnesses, reads the public submissions, and reviews, evaluates and determines whether the standard of proof has been met. If so then it comes with a qualification. What exactly the standard of proof is, is difficult, because it inadequacy and ineffectiveness of intellectual property is contingent on several factors, see directly below.

- no methodology;

IP Dragon: The USTR, together with the interagency Special 301 subcommittee made an assessment. Imput: apart from public engagement, 571 submissions, there was a hearing, seetranscript of 23 witnesses (But only four talked about China, see pages

64:21 65:6,7

69:4,4,5,8 70:10

70:20 71:2,10

93:7,11,16 94:3,4

96:2,3,7,8 128:17

136:14 268:8,13

274

:9,20) For each country they took the following factors into account:

• level of development (this is hard to measure, and controversial: China for example is a country fragmented in regions of different developmental speeds);
• international obligations and commitments (this might be easy);
• concerns of rights holders and other interested parties (question is whether the rights holders and other parties heared form a representative group);
• trade and investment policies of the United States.

John Rawles' legal-philosophical theory of the Veil of Ignorance (devising a legal system without knowing whether it will be applied to you or to someone else) is hard when you want to devise a system for protection and enforcement of intellectual property rights. Especially in case your IP system takes the above-mentioned factors into consideration: it is hard to forget your own level of development, your international obligations and commitments and the particular interests of your own industries.

- Masnick alleges that Section 301 is biased, because it is based on what the entertainment and pharmaceutical industry do not like;

IP Dragon: Academics and journalists should be as objective as possible. Lawyers and marketeers should defend one side/show the best side of something. Governments should be fighting for the interests of their citizens. Including the industry. Industry groups should be fighting for the companies they are representing.

- it is not taken seriously, because "even people of the US Copyright Office" are making fun of it;

IP Dragon: This argument should not be taken seriously.

- no real interest in hearing consumer concerns;

IP Dragon: there was public engagement. 571 submissions that are public via Regulations.gov, with docket number USTR_2010_003.

- no interest in sovereign rights of countries;

IP Dragon: It is each country's right, to protect the interests of its citizens and industry as well as possible. The U.S. trying to do this for a decade with Section 301. Whether it have been effective is another question.

- Mr Masnick wrote that the USTR wants to "monitor" countries that do compulsory licensing of patents.

IP Dragon: However, one can read in the USTR report that "the United States respects our trading partners' rights to grant compulsory licenses, in a manner consistent with the provisions of the TRIPS Agreement and encourages our trading partners to consider ways to address their public health challenges while maintaining intellectual property systems that promote investment, research, and innovation." The USTR also writes that it will follow the scope and procedures related to compulsory licensing. Not so strange. And in the case of standards and IP in China there are enough reasons to be concerned.

- Canada is included in the list;

IP Dragon: I will focus on China only.

- Michael Geist's wrote: "According to the report, approximately 4.3 billion people live in countries without effective intellectual property protection." Masnick suggest that if the USTR has a problem with the countries where the majority (4.3 billion) of people live, then the problem might be the U.S..

IP Dragon: 1. this reasoning is: if most people approve of something, therefore it is true. This is a fallacy ad populum, 2. the people who live in a country do not necessarily agree with their government or their legislation.

A commentor using the name Daemon_ZOGG made some interesting remarks:

- many consumers don't care about whether the product is produced by the original manufacturer as long as the quality is good;

IP Dragon: could be the case.

- half of the time pirated media and software are as good or better than the real products;

IP Dragon: it is a trend that pirated and counterfeit goods are getting a better quality and sometimes are better in tune with the needs of local markets. The way the products are manufactured could be degrading for the environment, and employees, could involve child labour and the funding of organised crime.

- because of the global market, jobs were sent overseas and piracy is a collatoral damage.

IP Dragon: income from innovation (patents), creativity (copyrights) and commerce (trademarks) via intellectual property rights (IPR) is a growth market and creates jobs. Because of globalisation and digitisation, each company has more chances but is at the same time more vulnerable. Rewards and risks are linked.

But what is really special about Special 301?

If you are a WTO member state and you have an IP related problem with another WTO member state, you can take the take the case to the Dispute Settlement Body (DSB) of the WTO. But what if you are a company or a person? Then you first have to lobby with your government to take your case to the DSB. Every U.S. person (natural or legal) can take their case to the USTR. Until there is a possibility for industry groups, individual companies or natural persons, to bring their case against another country for not meeting their IPR obligations and commitments, there is a valid reason for the Special 301 procedure's existence.

To be continued, see Part IV.

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Multinationals Strengthen Their Commitment to China; But Are Scared of IPR Challenges

Booz & Company conducted a study (survey under 108 foreign invested manufacturing companies) together with the American Chamber of Commerce in Shanghai to see what the influence is of the economic crisis on their commitment of doing business in China.

"Nearly three-fourths (73 percent) of respondents said that enforcing intellectual property protection was “important” or “very important.” Other manufacturing sector issues ranked similarly include improving education and productivity of Chinese labor (67 percent), increasing quality and safety standards for Chinese-made products (66 percent), and welcoming foreign investment (62 percent). Respondents reported that the Chinese government has made noticeable progress on improving manufacturing infrastructure and incremental progress on protecting intellectual property rights."

Read the summary of the AmCham Shanghai/Booz & Company 'China Manufacturing Competitiveness report 2008-2009' here.

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2007 Special 301 Report Presents Special Provincial Review of China

It's that time of the year again. The USTR's presents its annual Special 301 Report. Which countries have protected and enforced their IPR adequately and effectively and which have not. The risers, the fallers and the usual suspects, such as China and Russia.

This year the USTR airs again the frustrations against China's alleged lack of IPR protection and enforcement. Given the fact that the US has filed formal complaints against China at the WTO, because of these alleged failures, it is no wonder that the US has the plan to maintain China on the Priority Watch List. No surprises there.

However, the USTR has done an unprecedented review which spotlights strengths, as well as weaknesses and inconsistencies, in and among special jurisdictions of six provinces that were the focus of industry comments and US Governement discussions: Beijing, Fujian, Guangdong, Jiangsu, Shanghai, and Zhejiang. For the purpose of this review, the jurisdictions at the provincial level (sheng) may include the four municipalities (shi) of Beijing, Chongqing, Shanghai, and Tianjin, as well as China's five autonomous regions (zizhiqu): Guangxi, Inner Mongolia, Ningxia Hui, Xinjiang Uyghur and Tibet.

The executive summary of this Special Provincial Review presents the following:

Strengths:

• "Beijing is showing leadership in the area of internet piracy. There have also been notable cases against internet piracy in Xiamen (Fujian) and Guangdong.
• Shanghai closed down a notorious market for infringing goods and has and has sought to enhance cooperation with right holders.
• Jiangsu has issued rules requiring audiovisual business operators to carry proof of relevant licenses and legality of products sold in their retail outlets.
• Guangzhou (Guangdong) and Beijing achieved measurable reductions in retail piracy during a 100-day crackdown in 2006, according to an industry survey.
• Customs authorities in Xiamen (Fujian) reportedly cooperate well with foreign rights holders.
• Zhejiang reportedly transferred 109 administrative trademark cases for criminal prosecution in 2005.
• Shanghai authorities have instituted a pilot program to improve administrative-judicial coordination on IPR cases and allow police to conduct raids based on suspicion of criminal activity.
• Public security authorities in Guangdong and Fujian have taken some notable actions against pharmaceutical counterfeiting and other counterfeiting directed against major US brand owners.
• China's court system is gradually improving, particularly in Beijing, which has the largest number of civil IPR cases, and in Shanghai."

Weaknesses and inconsistencies:

• "Guangdong and Zhejiang remained provinces in which right holders most consistently encountered all types of counterfeiting, according to an industry survey.
• Guangdong, Zhejiang, and Fujian are home to major ports of lading for exports of infringing goods to the US.
• In spite of the efforts of local authorities, Beijing and Shanghai remain centers for retail trade in pirated goods, and Yiwu (Zhejiang) remains a wholesale center, according to an industry survey. An industry group cited the Silk Market, Tianyi Market, and Yaxiu Market in Beijing and the Ziyuangang Market in Guangzhou (Guangdong) as well-known retail and wholesale markets for pirated products.
• Shenzhen (Guangdong) and Shanghai did not achieve measurable reductions in retail piracy during a 100-day crackdown in 2006, according to an industry survey.
• Transfers of administrative trademark cases for criminal prosecution were especially rare in Guangdong, Jiangsu, Fujian, and Shanghai in 2005, according to official statistics.
• There were reportedly no transfers of administrative copyright cases for criminal prosecution in Shanghai, Zhejiang, and Fujian in 2005."

The complete Special Provinces Review can be found on pages 43 through 53 of the 2007 Special 301 Report, see here.

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Xiangyang Market Is Dead Long Live Puxi and Pudong

Xiangyang market used to be Shanghai's playground for trademark counterfeiters and copyright pirates. No more, read more here. However, the economics of demand and supply have provided new outlets for these illigit goods. Like a waterbed, the problem has moved now to Puxi and Pudong. Read a post on these markets at the Mad about Shanghai blog here.

Read about Taobao (IPR infringements taboo?) as another contender for the position the Xiangyang market held, here.

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