Short March: Shantou -- Still in the Dark On IPR,

UNCLAS SECTION 01 OF 02 GUANGZHOU 011043

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SENSITIVE
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STATE FOR EB, R, EAP/CM, EAP/PD, DRL
STATE PASS USTR
USDOC FOR 4420/ITA/MAC/MCQUEEN, CELICO, DAS LEVINE
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: KIPR ECON SCUL EINV PHUM KPAO PINR CH
SUBJECT: Short March: Shantou -- Still in the Dark On IPR,
But Students OK on Innovation

REF: Guangzhou 10542 and previous

(U) This document is sensitive but unclassified. Please
protect accordingly. Not for release outside U.S.
Government Channels. Not for internet publication.


1. (SBU) SUMMARY: Shantou officials state that despite
its notoriety in the past as a haven for the production of
counterfeit goods, the city has reformed dramatically in
intellectual property rights (IPR). Through education, new
laws, and law enforcement, Shantou is cracking down on
producers, sellers, and purchasers of counterfeit goods in
the city and changing their views to more forthrightly
support IPR protection. Despite grand sounding plans,
Shantou officials did not provide many details of their
plans or of their implementation and blamed most IPR
infringements on "uneducated peasants" rather than on
sophisticated manufacturers. Congenoffs also had a lively
discussion on innovation and IPR with students at Shantou
University. End Summary.

"Shantou Back on the IPR Wagon"
--------------

2. (SBU) Shantou is a regional level city in Eastern
Guangdong. In addition to being an important historic and
regional port, it has a nefarious reputation for IPR
violations. Many counterfeit goods are produced and sold
in the city. The director of the Shantou Intellectual
Property Rights Bureau (IPB),Zheng Xingguo, and the
director of the Market Order Rectification and
Standardization Office (MORO),Zheng Guimu, stated that
protecting IPR is a top priority of City officials. The
IPB has focused on educating locals about IPR issues in an
attempt to curb IPR violations. The IPB promotes IPR
awareness by visiting schools, running TV and radio ads,
and requiring public servants to take tests on IPR issues.
The IPB has established an IPR foundation for teenagers in
the city and strongly promotes World IPR Day. The city
government has also encouraged various business groups to
establish their own IPR associations. Shantou is one of
the few cities in China, which has its own IPR court
capable of trying cases locally. The IPB says that despite
a modest budget, the bureau has made great strides in
combating IPR infringement in the municipality.


3. (SBU) The IPB also claims to offer mediation between
companies with disputes over IPR issues. The IPB
representative told a story of how an U.S. company was
upset when it discovered that a local company was
counterfeiting its product. The IPB then intervened and
convinced the local counterfeiter to break the mold used
for production and everyone was then happy. However, when
Congenoffs requested more details, specifically the name of
the U.S. company involved, the IPB representative said he
would have to provide these details at a later date. City
officials mostly blamed IPR infringements on "uneducated
peasants" rather than on sophisticated manufacturers.
Officials say that its urban dwellers are much too
sophisticated to violate IPR laws.


4. (SBU) The IPB is also encouraging Shantou companies to
file for patents as a way to encourage innovation among
local firms. The bureau has set up a website, which
contains patent information from the U.S., the E.U., and
Japan. Local companies can search this website in order to
see if an idea has already been patented. Shantou won the
designation of "China's City of Brands" in 2005 from the
central government. Shantou has four "famous" brand names
and the local government is working hard to develop more.

More -- Or Less -- On MORO
--------------

5. (SBU) MORO Director Zheng said that his office in
reforming the market, and "supervising" IPR enforcement.
In Beijing, MORO falls under the authority of the Ministry
of Commerce, but in Shantou it is under the authority of
the local executive office. The MORO representative says
this gives them more authority and flexibility when dealing
with IPR issues. The Shantou Executive Vice-Mayor heads

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MORO locally and another Vice Mayor and the Secretary
General are both deputy directors of the organization.
MORO also coordinates efforts between other agencies and
the IPB. The goal of MORO is to ensure the implementation
of IPR tasks set forth by the central government.


6. (SBU) MORO has four main duties in Shantou:
researching and drafting IPR action plans; organizing
enforcement activities at the local level; monitoring
complaints from companies; and conducting temporary IPR
enforcement campaigns. Zheng could not give any examples,
however, of any intervention by MORO in specific cases that
had any impact on their resolution.

Shantou U. Students Get It and Don't Get It
--------------

7. (SBU) Moving to Shantou University, Congenoffs addressed
approximately 125 university mostly law students on the
importance of protecting IPR and the U.S. experience in
developing an innovation culture. In the good-humored
question and answer session, the students clearly
demonstrated their confidence that China would become a
highly innovative society through taking risks and
developing IPR themselves. Nevertheless, not a few
students argued, for example, that China should be given a
grace period so that it can develop its version of Windows
and Oracle (we responded that the world will not stand
still and that China would fall behind if it wanted to
reinvent some software) or that pharmaceuticals should not
be as expensive as they are (we noted the high research
costs in developing drugs and the high failure rate). At
the end of the event, many students expressed their keen
interest in the American IPR development and protection
system that buttresses perhaps the most innovative society
in the world, with indications of their interest in
studying these and other topics in the U.S.

Comment: "Those Pesky Peasants Again"
--------------

8. (SBU) On the surface, government officials in the
Shantou area appear to be making progress in the area of
protecting IPR. It was not clear, however, how well the
government is implementing these plans, and officials seem
to be short on details. Shantou officials did say that
they arrested two IPR violators in 2005 in addition to
their aforementioned example of helping a U.S. company work
out their IPR problems, but the Shantou officials were not
forthcoming with any details about these events or the
parties involved. The officials also kept stressing that
urban inhabitants of Shantou are very respectful of IPR and
that all IPR infringers are peasants from the countryside
who are not educated well enough to know better. They
repeated this point again and again, and used it as an
excuse for any shortcomings.


9. (SBU) The next leg of the "short march" took the
Consular party to Jieyang, one of the most densely
populated prefectural cities in Guangdong and seemingly
devoid of the erratic swagger to be found in Shantou.

Dong