IPR Roundtables on Apparel and Sporting Goods: Legal

UNCLAS SECTION 01 OF 02 GUANGZHOU 000753

SIPDIS

SENSITIVE
SIPDIS

USDOC FOR 4420/ITA/MAC/MCQUEEN, DAS KASOFF, HIJIKATA, GENERAL
COUNSEL'S OFFICE JOEL BLANK, AND GENERAL COUNSEL SULLIVAN
STATE FOR EB/TPP MASSINGA, FELSING
STATE PASS COPYRIGHT FOR POOR
STATE PASS USPTO FOR BOLAND
STATE PASS USTR FOR MARUYAMA, WINTER MCCOY, ESPINEL, CELICO
USDOJ FOR NEWBY
DHS/CPP FOR MACRAY
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: KIPR ECON ETRD CH
SUBJECT: IPR Roundtables on Apparel and Sporting Goods: Legal
Restraints and Enforcement Strategies



1. (SBU) SUMMARY: China's IPR regulations are vague and its
enforcement agencies are weak, according to apparel and
sporting-goods companies as well as U.S. and Chinese lawyers. The
IPR enforcement efforts of most companies are primarily focused on
shutting down domestic IPR violators and preventing the export of
counterfeits. Companies encouraged the U.S. Government to target
trade fairs and publicize "hot spots" to domestic audiences. A Nike
representative said Guangzhou wholesale markets and trade fairs
continue to be full of fake shoes. END SUMMARY.

Legal Restraints
--------------


2. (SBU) At a recent seminar led by Tim Browning, Attorney Advisor
with the Patent and Trademark Office, U.S. lawyer and Amcham-South
China IPR Committee head David Buxbaum said that while China's
national IP laws are generally good, the regulations are often vague
and should be strengthened. Jason Yao, Asia-Pacific Counsel for
golf manufacturer Acushnet, said China took a step backward by
eliminating a provision requiring violators with multiple IPR
offences to face criminal penalties. Yao said that it is too
difficult to use landlord liability laws to remove infringing
markets. He added that China's new IPR complaint centers are "a
joke," as the telephone operators are unable to provide any
assistance other than to refer the case to the relevant authorities.



3. (SBU) Several of the participants said that documentary
requirements for IPR cases continue to be overly burdensome,
including notarization, legalization, and approval from a U.S.-based
Chinese Consulate. A U.S. lawyer said he encourages all U.S.
companies to register their patents in China, regardless of whether
they plan to manufacture there. Other lawyers noted that because IP
classifications differ among countries, companies need to be careful
when registering abroad. A Chinese lawyer added that foreign
companies should always have an IPR agreement with OEM
manufacturers.

Central-Local Divide
--------------


4. (SBU) Participants differed on whether central or local
authorities are more to blame for China's lack of progress in IPR
enforcement. David Hon, owner of a folding bicycle manufacturer,
said central authorities are unwilling to pressure local officials
to implement the law. Others said central authorities simply lack
the ability to control local offices and ensure adequate
enforcement. Buxbaum pinned much of the blame on the inherent
weakness of the IPR enforcement agencies, including AIC, IPO, the
courts, and the PSB. He said these agencies need to professionalize
and institute "pay as you go" systems in investigations to generate
sufficient resources.


5. (SBU) Buxbaum noted that improved IPR enforcement is in China's
self-interest, since the vast majority of cases involve Chinese
companies. Browning said he had calculated that only 2.4 percent of
China's civil IPR cases have involved foreign litigants (those from
Hong Kong, Macau, and Taiwan are counted as domestic).

Enforcement Strategies
--------------


6. (SBU) Several company representatives said they will continue to
target most of their enforcement efforts in shutting down domestic
violators. Acushnet places more emphasis on exports than domestic
sales and has pursued vendors in the United States with mixed
success. Sharla Settlemier, General Manager of Production in Nike's
Guangzhou office, said Nike actively tries to identify U.S.-based
distributors of counterfeit goods.


7. (SBU) Hon said trade shows remain his primary concern because
they are a crucial marketing venue for counterfeiters. He
encouraged the U.S. Government to press China to improve trade fair
IPR enforcement. Acushnet's Yao said industry and government should
publicize to Chinese audiences the names of cities with high rates
of counterfeiting (similar to what is done in the USTR's Special 301
Report).

GUANGZHOU 00000753 002 OF 002



Fake Shoes Everywhere
--------------


8. (SBU) Nike's Settlemier said wholesale counterfeit markets in
Guangzhou continue to sell large volumes of fake shoes. Many of the
vendors are not even interested in discussing single item purchases.
She recently visited a fair in Guangzhou where a local equipment
manufacturer was displaying shoe manufacturing equipment identical
(including the color of paint) to the equipment being sold by a
well-known Italian shoe company also at the fair.


9. (U) This cable has been cleared by PTO Attorney Advisor Tim
Browning.

GOLDBERG