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Viewing cable 09SHANGHAI59, ZHEJIANG RESUMES COOPERATION WITH U.S. ON IPR
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09SHANGHAI59 | 2009-02-02 05:34 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Shanghai |
VZCZCXRO0382
RR RUEHCN RUEHVC
DE RUEHGH #0059/01 0330534
ZNR UUUUU ZZH
R 020534Z FEB 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7590
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8220
UNCLAS SECTION 01 OF 05 SHANGHAI 000059
SENSITIVE
SIPDIS
USTR FOR CHINA OFFICE - AWINTER, TWINELAND, DKATZ; IPR OFFICE -
RBAE; AND OCG - TPOSNER
DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - WPAUGH
DOC FOR ITA/MAC: SZYMANSKI
LOC/ COPYRIGHT OFFICE - STEPP
USPTO FOR INT'L AFFAIRS - LBOLAND
DOJ FOR CCIPS - TNEWBY
FBI FOR LBRYANT
DHS/ICE FOR IPR CENTER - DFAULCONER
DHS/CBP FOR IPR RIGHTS BRANCH - GMCCRAY
TREASURY FOR OASIA - DOHNER/CUSHMAN
NSC FOR JIM LOI
E.O. 12958: N/A
TAGS: KIPR ETRD EINV EFIN SCUL TBIO CH
SUBJECT: ZHEJIANG RESUMES COOPERATION WITH U.S. ON IPR
REF: ZHEJIANG RESUMES COOPERATION WITH U.S. ON IPR
SHANGHAI 00000059 001.2 OF 005
This cable is Sensitive But Unclassified (SBU) and for official
use only. Not for transmission outside USG channels.
¶1. (SBU) Summary: After nearly two years of Consulate efforts
to revive relations on intellectual property rights (IPR),
Zhejiang IP officials held a roundtable on January 12 on efforts
to protect IPR in the province. The meeting is a breakthrough
in IPR relations, representing the first engagement on IPR
issues with the province since the United States filed two
IP-related cases against China in April 2007. The roundtable
included representatives from the Zhejiang IP Administration,
Copyright Bureau, Administration of Industry and Commerce (AIC),
Public Security Bureau and provincial courts, who outlined their
respective efforts to strengthen IPR protection. IP
Administration officials noted the reluctance of U.S. companies
to use the province's administrative protection system and said
Zhejiang is trying to boost innovation through several new
policies and by encouraging more patent filings. AIC officials
said the province continues to lead the nation on the number of
trademark cases. The Copyright Bureau emphasized its
interagency and regional cooperation and also noted an increase
in the number of copyright cases referred for criminal
enforcement. Besides outlining its caseload, PSB noted a number
of unique initiatives it is pursing on criminal enforcement.
Criminal and civil court judges noted criminal cases were down
from 2007, but civil cases have increased. The judges also said
the courts are continuing to move forward on damage awards and
transparency. Separately, Zhejiang China Council for the
Promotion of International Trade (CCPIT) representatives said
the organization is taking a hard line on Zhejiang member
companies that infringe IP. Zhejiang IP officials said they
would welcome cooperation on more IP-related programs and
exchanges with the United States, and the Consulate intends to
take them up on the opportunity. End Summary.
Further Cooperation with the United States Welcome
--------------------------------------------- -----
¶2. (SBU) Zhejiang IP Administration Deputy General Wu, the
organizer of the roundtable, welcomed the opportunity to once
again engage on IP issues and expressed his desire for further
cooperation with the United States on IPR training, seminars and
exchanges. He said that Zhejiang attaches great importance to
international cooperation on IP protection, noting several
international roundtables the province recently held. One 2008
seminar was held in coordination with a number of foreign
invested companies and was attended by 17 U.S. companies.
Zhejiang also held an IPR forum in conjunction with the State of
California and roundtables with delegations from Germany and the
E.U. In addition, Zhejiang has a joint research project on IPR
protection with the British Embassy.
¶3. (SBU) Congenoffs raised the possibility of working with
Zhejiang on two U.S. Patent and Trademark Office (USPTO) office
programs aimed at boosting the understanding of local rights
holders on how to file patents and trademarks both in China and
in the United States. (Note: The program on patent filing has
already received strong support from China's State IP Office
(SIPO) and would also be co-organized with SIPO in several
locations.) Zhejiang IP Administration Director General Chen
Zhijun expressed strong interest in these programs. When asked,
Chen also said he would consider cooperating on another IP
enforcement program, similar as the program jointly sponsored
with USPTO in October 2006. He spoke favorably of cooperation
on other exchanges, such as organizing roundtables and meetings
with visiting Washington officials or U.S. IPR experts.
U.S. Companies Not Using Administrative Protection
--------------------------------------------- -----
¶4. (SBU) Wu pointed out that the Zhejiang IP Administration had
not received any complaints from U.S. companies over the past
several years, suggesting that many U.S. firms are hesitant to
take advantage of Zhejiang's administrative IP protection
system. He urged the Consulate to encourage U.S. companies to
SHANGHAI 00000059 002.2 OF 005
fully use Zhejiang's IP protection system. The Zhejiang IP
Administration would like to establish regularly contact with
U.S. companies and industry associations.
Boosting Innovation by Encouraging Patent Filing
--------------------------------------------- ---
¶5. (SBU) Wu said Zhejiang is striving to boost the innovative
capabilities of its companies and is actively encouraging the
registration of patents. The province has instituted and
published several new policies to boost innovation, including
the "Zhejiang Action Plan on Promoting the Self-innovation
Capability in the Area of Social Development", and the "List of
Key Technologies and Important Products Which Zhejiang Should
Master", and the "2008-2012 Strategic Implementation Plan on
Intellectual Property, Standardization and Branding". As a
measure of the province's success in this effort, Wu enumerated
patent filings through Zhejiang IP Administrative offices. In
2008, there were 89,965 patent applications filed and 52,955
patents granted to Zhejiang rights holders. This represents an
increase of 30.5 percent and 25.8 percent respectively over
¶2007. Among the applications, 12,063 were invention patents,
representing 26.5 percent of total applications. Of the
invention patent applications, 3,269 were granted, representing
47.7 percent of total granted patents.
¶6. (SBU) On patent enforcement, patent officers in Zhejiang
have conducted several special enforcement actions, several of
which included trade fairs. Zhejiang IP Administrative
officials have received 150 complaints and checked 40,000 types
of goods in 2008 for patent violations. In total, 44 formal
cases were established and 50 "non-established" cases were
handled. To keep pace with the case load, provincial and city
level authorities authorized 46 district and county level
authorities to conduct patent enforcement actions. The goal of
doing so is to help detect and solve patent infringement and
dispute cases at an earlier stage.
Trademarks - Highest Number of Criminal Cases in China
--------------------------------------------- ---------
¶7. (SBU) Zhejiang Administration of Industry and Commerce (AIC)
Trademark Department Director Zhou Liguo emphasized that
Zhejiang is one of the most active jurisdictions on trademark
protection in the country. In 2008, Zhejiang continues to have
the highest number of total trademark cases and highest number
of referrals for criminal enforcement. According to Zhou,
Zhejiang has been ranked first for many years in China on
trademark enforcement. In total, the province had 7,341
trademark infringement cases in 2008. Among them, 3,100 cases
were foreign related, and 822 cases had a connection with U.S.
companies. As a result of the cases, 140 million RMB (USD 20.6
million) worth of penalties were imposed. Zhejiang AICs
referred 78 cases for criminal enforcement in 2008, accounting
for 50 percent of country's total referred trademark cases.
According to Zhou, Zhejiang AIC has established a contact
network with 30 foreign companies, among which 11 companies are
from the United States, including Nike, Johnson and Johnson,
Starwood and GM. Zhou said Zhejiang AIC is also actively
encouraging local companies to establish and protect their own
brands. The number of Zhejiang famous trademarks ranks only
second to those of Guangdong.
¶8. (SBU) Zhou emphasized that of all of Zhejiang's cities, Yiwu
has been particularly proactive on tackling counterfeits.
Measures include beefing up manpower and equipment, checking
licenses for market entrance, establishing a comprehensive
database of trademarks, and more regular inspections. In 2008,
Yiwu handled 911 trademark infringement cases worth RMB 18
million (USD 2.6 million). Zhou said that a newly detected
problem has emerged in Yiwu that some "middlemen" traders
including foreigners affix counterfeit trademarks on goods after
they purchased them from the Yiwu Small Commodities Wholesale
Market. This kind of illegal behavior damages the reputation of
Yiwu's market although the market itself has nothing to do with
the actual counterfeiting.
SHANGHAI 00000059 003.2 OF 005
Copyright Protection - Increasingly Hard in Bleak Economy
--------------------------------------------- ------------
¶9. (SBU) Zhejiang Copyright Bureau Copyright Department
Director Wang Shaojie outlined the province's efforts to protect
copyrights, noting Zhejiang conducted four "special action"
programs in 2008. These consisted of cracking down on private
on-line gaming services, illegally pre-installed software,
internet infringement and the illegal broadcasting of the
Olympic Games. In total, Zhejiang copyright authorities handled
82 copyright cases and referred three cases for criminal
investigation. Of the three referred cases, two involved U.S.
rights holders. Wang noted a case between Zhejiang University
and the Association of American Publishers. After the
association filed a complaint against Zhejiang University for
distributing counterfeit text books, the university was heavily
fined. Since that time, Zhejiang University has scrupulously
checked all its foreign language textbooks to prevent the
infringement from occurring again.
¶10. (SBU) Wang also noted difficulties the Zhejiang Copyright
Bureau faces when dealing with international cases. He
particularly noted that Zhejiang authorities have difficulty
continuing internet-related investigations when they discover
internet service providers are based in foreign countries,
including the United States. Wang added that some
Zhejiang-based websites have requested the assistance of the
Zhejiang Copyright Bureau to help locate U.S. rights holders to
seek authorization to post copyrighted material. However, both
the Zhejiang Copyright Bureau and the website have difficulties
tracking down the rights holders. Wang also said that the
financial crisis has made their work more difficult as companies
were more tempted to cut corners by using pirated software.
However, he vowed that the Zhejiang Copyright Bureau would
continue to urge companies that are still in operation to buy
legitimate software. The Zhejiang Copyright Bureau plans to
assist Zhejiang companies buy software with a total value of 100
million RMB (USD 15 million) from Microsoft.
¶11. (SBU) Zhejiang's internal cooperation and cooperation with
other jurisdictions is improving, Wang said. For example, if a
website needs to be closed because of infringement, the
Copyright Bureau sends a request to the Zhejiang Communication
Bureau, which readily enforces it. The Zhejiang Copyright
Bureau is also partnering with Customs to improve enforcement.
Companies that export optical disks are now required to record
their contracts with and get approval from the Copyright Bureau
before producing the optical disks. The disks are not cleared
by Customs until the exporter shows the approval from the
Zhejiang Copyright Bureau. Wang also praised the Shanghai
Copyright Bureau's Yangtze River Delta Initiative, a cooperation
framework on copyright enforcement, which is expected to greatly
improve copyright enforcement in the region. The cooperation
agreement is expected to be signed later in 2009.
PSB Finding Novel Ways to Strengthen Criminal Enforcement
--------------------------------------------- ------------
¶12. (SBU) The Zhejiang Public Security Bureau Economic Crime
Investigation Division (ECID) Deputy Director He Xiaogang said
that in 2008, the province investigated 235 IP-related criminal
cases. Thus far, 182 of the cases have been closed and 347
suspects have been detained. Among these cases, 18 involved
U.S. rights holders. In a novel approach to fighting web-based
piracy, the Zhejiang PSB opened a virtual complaint center on
the website of Alibaba, the largest business-to-business sales
network in the world. PSB also established a network with
rights holders through the Quality Brands Protection Committee,
a semi-governmental business organization that focuses on IP
protection. According to He, Zhejiang is also increasing
cooperation with administrative enforcement authorities within
and outside the province. In 2008, Zhejiang administrative
authorities referred 158 cases to PSB. More than 95 percent of
these cases resulted in a conviction. When asked about
internet-related cases, He said that ECID does not handle such
SHANGHAI 00000059 004.2 OF 005
cases, rather they are handled by the Public Order Management
Department (another department inside PSB).
¶13. (SBU) Besides participating in the nationally organized
"Mountain Eagle Action", the Zhejiang PSB also conducted some of
its own special actions, including a crackdown on counterfeit
auto spark plugs in Cixi and counterfeit trademarks printed in
Wenzhou. He also mentioned a recent action entitled "Eagle Eye"
in which factories inside and outside of China producing
counterfeit Viagra were shut down. According to He, Zhejiang
PSB has established a new criminal investigation system similar
to the "Shanghai Initiative", which allows PSB to begin
investigations based on credible evidence, rather than waiting
for a rights holder to first prove a criminal threshold has been
met. The Zhejiang PSB now launches investigations on certain
"important" cases after "strict approval procedures" have been
met, even though there is insufficient evidence to establish the
case. He also said the Zhejiang PSB welcomes further
cooperation with the United States on cross border IP case
investigations, information and evidence collection, as well as
more exchange on enforcement experience and personnel training.
Judicial Protection - Trademark Cases Make Up Vast Majority
--------------------------------------------- --------------
¶14. (SBU) Zhejiang High Court Second Criminal Division Director
Guan Youjun summarized Zhejiang's criminal court cases in 2008,
saying that the province's courts adjudicated 94 IP-related
criminal cases. Of the total, 90 cases were trademark-related
and the remaining 4 were trade secret cases. Among criminal
trademark cases, 47 cases involved U.S. trademarks, including
those of Nike, Johnson and Johnson, HP, and Singer. He added
that there were other IP-related cases not adjudicated under
criminal laws involving the infringement of IPR, but rather they
were adjudicated under other charges. There were 138 IP-related
criminal cases brought under "illegal business operations" and
67 IP-related cases brought under "producing and selling
counterfeit and spurious goods". Guan said the number of
criminal cases in 2008 decreased compared with the 112 cases in
2007, but he offered no explanation why. According to Guan,
most cases occurred in areas where the economy is relatively
developed such as Yiwu, Cixi and Cangnan. The buyers of the
counterfeit goods came from abroad in many cases. Guan also
mentioned that the Zhejiang High Court had sent a delegation to
Europe for a 3-week study of IPR issues. He welcomed a similar
opportunity to work with the United States.
Civil Cases Increase Substantially Over 2007
--------------------------------------------
¶15. (SBU) Zhejiang High Court Third Civil Division Director
Zhou Gencai said Zhejiang had 1,634 civil IPR cases in 2008, an
increase of 25.6 percent over 2007. Among these cases, 150
cases involved foreigners, including rights holders from Hong
Kong, Macao and Taiwan. From 2006 through 2008, there were 102
first instance civil IP cases involving US companies in Zhejiang
- 45 of which were in Ningbo alone. According to Zhou, the Yiwu
Court on July 1, 2007, established an IPR tribunal combining the
adjudication of civil, criminal and administrative cases. Thus
far, the special tribunal had adjudicated 118 IPR cases. Among
these cases, 65 were civil case, 50 were criminal cases and 3
were administrative cases. Zhou said there are currently 140
IPR judges in Zhejiang. Half of them hold a masters degree, and
some of them have backgrounds in technology.
¶16. (SBU) Zhou noted that all judgments of civil IPR cases in
Zhejiang are published on the internet. The courts in Zhejiang
have also used live internet broadcasting to allow public access
to some IP-related cases. According to Zhou, Zhejiang courts
are "creative on damage calculations." (Comment: Based on
Shneider's experience, this "creativity" is not necessarily a
good thing. End comment.) For example, a plaintiff was
recently awarded damages against a defendant for a second
infringement. The amount of the award was based on an agreement
signed during the settlement of the first infringement case.
According to the agreement, the defendant promised to pay a
SHANGHAI 00000059 005.2 OF 005
certain amount for second infringement if it occurred.
According to Zhou, Zhejiang courts have adjudicated about 15
cases with which the damages awarded were higher than RMB 10
million (USD 1.5 million). (Note: In 2007, there was a case
involving a French company, Schneider Electric, in which the
Wenzhou Intermediate Court ordered Schneider Electric to pay RMB
335 million(USD 48 million) to a local Chinese company, Chint
Group, for patent infringement in 2007. Many foreign rights
holders viewed the excessively high amount of damages in
relation to the value of the case as local protectionism.)
Zhejiang CCPIT Also Speaks Out on IPR Protection
--------------------------------------------- ---
¶17. (SBU) Separately, Tie Jianshe, Chairman of the Zhejiang
Chamber of Commerce and China Council for the Promotion of
International Trade (CCPIT) Zhejiang Sub-council also emphasized
that Zhejiang is working hard to increase IP protection in the
province and welcomed more exchange with the United States on
the issue. He noted that Zhejiang CCPIT held a conference with
the U.S. Chamber of Commerce on IP protection in early 2008. It
was the third time Zhejiang CCPIT held a conference on IP
protection in conjunction with a foreign organization. The
event was attended by a large number of Zhejiang provincial
officials as well as China Customs officials and provided an
opportunity for them to interact with local and foreign
companies. In addition, Yiwu's small commodities market has
established an IP protection office to increase IP awareness and
manage IP infringement cases.
¶18. (SBU) According to Tie, Zhejiang CCPIT is also taking a
hard line on IP violations. One of its major responsibilities
is to coordinate and administer overseas exhibitions from the
province - over the past five years, it has arranged for over
50,000 companies to attend exhibitions around the world. If a
member company is found to have infringed a rights holder's IP,
it affects the company's standing in the organization and
participation in events.
Comment
-------
¶19. (SBU) Since the spring of 2007, Zhejiang's Foreign Affairs
Office routinely denied IP-related meeting requests from
Washington, Embassy, and Consulate officials. Even when the
request was part of a visit on a broad range of issues, the IPR
component was singled out for denial. The ban not only included
provincial level meetings, but also extended down to all
municipal level meetings. Consulate officials were also no
longer invited to industry IP seminars and other meetings that
were held in conjunction with the Zhejiang Government or
municipal governments. We believe the January 12 roundtable,
initiated at the Consulate's request, represents a real
breakthrough in the stalemate that existed with Zhejiang on IPR
for nigh two years. Zhejiang's about-face is likely due to
Consulate officials persistently raising the issue with high
levels of the Provincial Government, often pointing out that
Jiangsu and Shanghai have remained open to cooperation, while
Zhejiang lagged behind. Given the history, we are cautiously
optimistic about future cooperation with the province and intend
to seize this opportunity to once again build strong relations
on IP with a province that has the fourth largest provincial
economy in China and is an important trading partner with the
United States
CAMP