Identifier
Created
Classification
Origin
06GUANGZHOU15726
2006-05-30 08:16:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Guangzhou
Cable title:  

Guangdong Vice Governor: IPR Protection Crucial

Tags:  KIPR PGOV ECON ETRD CH 
pdf how-to read a cable
VZCZCXRO0729
RR RUEHAG RUEHCN RUEHDF RUEHGH RUEHIK RUEHLZ
DE RUEHGZ #5726/01 1500816
ZNR UUUUU ZZH
R 300816Z MAY 06
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 9050
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
RUCPDOC/USDOC WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI
UNCLAS SECTION 01 OF 04 GUANGZHOU 015726 

SIPDIS

USDOC FOR 4420/ITA/MAC/MCQUEEN, DAS LEVINE
STATE FOR EB/TPP MASSINGA, FELSING
STATE PASS COPYRIGHT FOR TEPP
STATE PASS USPTO FOR DUDAS, BROWNING, BOLAND, ANTHONY, NESS
STATE PASS USTR FOR MENDENHALL, MCCOY, ESPINEL, CELICO
USDOJ FOR SUSSMAN
DHS/CPP FOR PIZZECK
USPACOM FOR FPA

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: KIPR PGOV ECON ETRD CH
SUBJECT: Guangdong Vice Governor: IPR Protection Crucial
for Innovation

Ref: A) Guangzhou 14710 and previous, B) 05 Guangzhou
18895

(U) This document is sensitive but unclassified. Please
protect accordingly.

UNCLAS SECTION 01 OF 04 GUANGZHOU 015726

SIPDIS

USDOC FOR 4420/ITA/MAC/MCQUEEN, DAS LEVINE
STATE FOR EB/TPP MASSINGA, FELSING
STATE PASS COPYRIGHT FOR TEPP
STATE PASS USPTO FOR DUDAS, BROWNING, BOLAND, ANTHONY, NESS
STATE PASS USTR FOR MENDENHALL, MCCOY, ESPINEL, CELICO
USDOJ FOR SUSSMAN
DHS/CPP FOR PIZZECK
USPACOM FOR FPA

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: KIPR PGOV ECON ETRD CH
SUBJECT: Guangdong Vice Governor: IPR Protection Crucial
for Innovation

Ref: A) Guangzhou 14710 and previous, B) 05 Guangzhou
18895

(U) This document is sensitive but unclassified. Please
protect accordingly.


1. (SBU) Summary: Guangdong Vice Governor Song Hai said
that the province's intellectual property rights (IPR)
protection efforts were improving but many gaps remained.
He noted that the urgency of the issue so that the province
could proceed vigorously down a path of innovation. In
that regard, Guangdong must do a better job of intellectual
property creation and management, with greater emphasis on
the private sector in research and development. He
emphasized that risk and entrepreneurship are crucial to
innovation and economic growth, which are impossible
without improved protection of the products of such risk.
Song acknowledged the need for better benchmarking on IPR
enforcement and better management of intellectual property
and expressed openness to USG and American private sector
involvement in these endeavors. End summary.

Consulate Guangzhou-Guangdong Province IPR Roundtable
-------------- --------------

2. (SBU) Before the May holidays, Congenoffs called on
Guangdong Vice Governor Song Hai for the third session of a
U.S. Consulate Guangzhou and Guangdong Province IPR
cooperation dialogue begun in the spring of 2004 (ref B and
previous). Vice Governor Song is the Guangdong
government's leading figure on IPR issues and also
participates in national level discussions as well, and
Song assembled top provincial officials from provincial
offices of the Public Security Bureau (PSB),Administration
of Industry and Commerce (AIC),Intellectual Property
Office (IPO),Customs, and Foreign Trade and Economic
Cooperation (DOFTEC) for the occasion.

IPR Protection and Innovation Essential for Growth
-------------- --------------

3. (SBU) Song stated that innovation, a key objective of

the 11th Five-Year Economic Plan, is crucial in Guangdong's
effort to upgrade its industrial structures and transform
its means of economic growth. Innovation leads to wealth,
which stimulates further innovation. He added that
innovation cannot thrive without a public respect for the
ownership of ideas, and strong IPR regulations and
effective enforcement are the lynchpins. Song expressed
regret that many of Guangdong's entrepreneurial and
innovative intellectuals are struggling because of the lack
of IPR protection. Guangdong has only 20 years of
experience in IPR protection, and thus has much to learn
from the United States, which China views as a teacher on
IPR issues.

Spotty Enforcement
--------------

4. (SBU) Song briefly noted that enforcement efforts have
been stepped in the year since the last Consulate-Guangdong
high-level dialogue on IPR, citing many of the
accomplishments reported separately in Guangdong Province's
white paper (ref A). After hearing the Consulate's
presentations of the mixed experience of American
businesses in various parts of the province, Song
acknowledged that there were still many gaps in enforcement.

Administrative Protection is Effective
--------------

5. (SBU) Song said administrative protection remains the
most effective means of IPR enforcement in Guangdong.
Though he acknowledged foreign complaints of insufficient
judicial protection of IPR, Song said administrative
offices are nevertheless responsive to disputes and
complaints and can appropriately penalize counterfeiters.
By using the administrative channel, rights-holders can
also avoid lengthy periods of litigation.

GUANGZHOU 00015726 002 OF 004



Public Education Efforts
--------------

6. (SBU) Song also touted Guangdong's IPR public awareness
efforts associated with World IPR Day on April 26. He said
all IPR-related government agencies were involved, with
white papers coming not only from Guangdong but also
Guangzhou and Shenzhen. In addition, Song instructed the
Guangdong IPO to extend its relevant activities for April's
IPR Week from one week to one month. Song said Guangdong
has introduced IPR awareness courses into local high
schools to ensure that students understand that it is
illegal to buy counterfeit products. The Consul General
noted that in a visit to Shantou University, a student said
she was quite aware of the illegality of downloading
American movies from the internet but felt that she needed
to do so to improve her English language abilities. This
encapsulates the challenge -- public education is indeed
effective in raising awareness, but the violations
nevertheless continue. Song agreed that this was a
challenge.

Using the Private Sector to Protect IPR
--------------

7. (SBU) Song continued that said Guangdong would like
local enterprises to play a major role in intellectual
property development and protection. Local companies have
the skills to aggressively innovate their technical and
management systems. Such innovation would lower their
costs and accelerate their growth. The Guangdong
government has encouraged industrial associations to play a
more significant role in IPR development and self-
enforcement. Song said Shenzhen's fast growth and
prosperity is due in part to an improved IPR environment.
Song said Guangdong is transforming its economy from a
labor-intensive focus to increasingly high-tech industries,
stating that that the province's high-tech output value has
increased from RMB 280 billion (USB 35 billion) in 2000 to
RMB 1,016.8 billion (USD 127 billion) in 2005.

Song's 2005 Visit to the United States
--------------

8. (SBU) Song also said that his trip to the United States
in December 2005 had helped the Guangdong and central
governments in shaping new approaches. He met with U.S.
government IPR-related agencies and several members of the
U.S. Chamber of Commerce. With the U.S. Chamber he
discussed future joint training programs both at a
conceptual level and in detail. Song also hopes to set up
an information-sharing program with the Chamber, which will
focus on IPR-related statistics and enforcement efforts.
(The U.S. Chamber hopes to use a late June seminar to help
develop benchmarking tools to measure Guangdong's IPR
enforcement progress in real terms.) Song added that,
after talking with U.S. journalists, including a reporter
from New York Times, he believes the American public
continues to underestimate the Chinese government's IPR
protection efforts. He also said, however, that this
situation meant that neither the Guangdong authorities nor
the central government has been doing a good job in
publicizing China's IPR accomplishments, a situation that
he reported to Beijing. Song said that Guangdong was very
much interested in working with the USG and American
business associations in this area.

Disappointing Commercialization of IP
--------------

9. (SBU) Turning back to the topic of innovation, Song
said local institutions of higher education have failed to
become major sources of intellectual property (IP),and the
amount of commercialized IP developed by them has been
limited. He welcomed U.S. input on how to stimulate more
IP commercialization from local research organizations,
including those in the private sector. Song also
highlighted three universities in Guangzhou that have set

GUANGZHOU 00015726 003 OF 004


up IPR schools -- Jinan University, Zhongshan University,
and South China University of Technology -- all of which
offer masters degrees.

Building a Culture of Innovation
--------------

10. (SBU) Song said that these were all elements of a
larger challenge for Guangdong and China -- building an
entire culture of innovation in which inventiveness,
creativity, efficiency, and productivity are fundamentally
ingrained into the government and private sectors with IPR
protection in full play. This is clearly the path that
Guangdong must take if it is to maintain its edge as the
most prosperous province in China.

"Tolerance of Failure"
--------------

11. (SBU) Song cited the "tolerance of failure" as a key
facet in innovation. Government officials and
entrepreneurs must recognize that many more ideas fail than
succeed. To punish failure would only create a cautious
culture, unwilling to take risks. To encourage risk-taking
and entrepreneurship, the Guangdong government included the
of "tolerance of failure" in its 11th Five-Year Plan, and
the Shenzhen government is using it in its economic
development guidelines

Evaluating Officials
--------------

12. (SBU) When asked how Guangdong evaluates the
performance of IPR officials, the attendant officials
admitted that their offices lack specific guidelines. The
Guangdong IPO deputy director-general said IPO work largely
involves encouraging enterprises to develop their IP and to
increase public awareness. To evaluate this type of
activity one would need to measure whether more people are
aware of the IPR issue and whether more enterprises develop
their own IP. He added that he would be interested in to
developing an evaluation standard with the input of U.S.
experts. Song echoed this, saying he supports the
establishment of a scientific system of standards to
evaluate the usefulness of government IPR efforts.

Valuation of Seized Products
--------------

13. (SBU) In response to a question about valuation
methods, officials from AIC and IPO said they typically use
market price as the standard in valuing counterfeit
trademark goods. They explained that the Supreme Court's
2004 Judicial Interpretation permits three evaluation
standards: market price, real value, or a middle price.
They added that government agencies choose a middle-level
price when it is difficult to determine the market price.

Comment
--------------

14. (SBU) Even if the Vice Governor's comments are rhetoric,
at least they are the right rhetoric. He clearly
understands that innovation and IP-creation -- and the
encouragement of risk-taking enterprises -- are vital for
Guangdong's continued growth. There is also significance
in the fact that Song brought his entire IP team to the
meeting, including the PSB -- which usually doesn't show up
for such things. Nevertheless, his defense of Guangdong's
IP administrative agencies distracts from the issue at hand
-- namely the lack of deterrent effect of administrative
enforcement to date not to mention the spotty record of
criminal prosecution. Song's and IPO's interest in
evaluating IP officials might be a worthwhile opening for
USG assistance in establishing an effective evaluation
system. More importantly, the willingness of Guangdong to
engage in genuinely transparent benchmarking would be a
considerable contribution -- a proposition that we will
test at the U.S. Chamber of Commerce seminar in late June.


GUANGZHOU 00015726 004 OF 004

N