IPR ATTACHI ENGAGES SHANGHAI CULTURAL TASK FORCE

UNCLAS SECTION 01 OF 02 SHANGHAI 000117

SIPDIS

SENSITIVE
SIPDIS

USTR FOR CHINA OFFICE - AWINTER, ACELICO; IPR OFFICE - RBAE; AND
OCG - TPOSNER
DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - CISREAL
DOC FOR ITA - CMCQUEEN, LRIGOLI, ESZYMANSKI
LOC/ COPYRIGHT OFFICE - MPOOR
USPTO FOR INT'L AFFAIRS - LBOLAND
DOJ FOR CCIPS - ASHARRIN
FBI FOR LBRYANT
DHS/ICE FOR IPR CENTER - DFAULCONER
DHS/CBP FOR IPR RIGHTS BRANCH - PPIZZECK
TREASURY FOR OASIA - DOHNER/CUSHMAN
NSC FOR KURT TONG

E.O. 12958: N/A
TAGS: ETRD KIPR EFIN EINV CH
SUBJECT: IPR ATTACHI ENGAGES SHANGHAI CULTURAL TASK FORCE


SHANGHAI 00000117 001.2 OF 002


(U) Sensitive but unclassified. Not for dissemination outside
USG channels.


1. (SBU) Summary: On January 19, Senior IPR Attachi Mark Cohen
met with the Director of Shanghai Culture Task Force (SCTF) Zhou
Jianmin to discuss Shanghai's efforts on copyright enforcement.
Cohen engaged Zhou on SCTF's authority over copyright
infringement matters vis-`-vis the Shanghai Copyright Bureau and
the legal means it uses to prosecute cases. Zhou outlined
SCTF's function as an enforcement agency that not only handles
copyright piracy but also handles pornography issues. Zhou
also explained that because it is easier to collect evidence
under "illegal business" criminal statutes than copyright
provisions of the criminal code, his office regularly uses this
legal avenue to prosecute cases. The trend of delegating
copyright enforcement to Cultural Affairs Bureaus is not unique
to Shanghai; Shanghai has followed the lead of Beijing and other
cities in making the transition. Zhou also detailed his
agency's cooperation with other city bureaus and its work with
industry associations. End Summary.

SCTF - A Small Agency with a Large Mandate
--------------


2. (SBU) Shanghai was the first city in China to establish a
cultural task force in 1999. The main SCTF office is comprised
of 80 staff, and there are several district level offices
located throughout Shanghai. Among other responsibilities, SCTF
plays an important role in regulating activities of licensed
businesses, including the illegal activity of selling pirated
audio and video products. By contrast, the Public Security
Bureau holds general authority over IPR infringers. The Bureau
of Industry and Commerce is in charge of stores without business
licenses while the Shanghai Administrative Task Force (SATF)
deals with street peddlers selling IPR infringing products. The
SCTF is a member of the Shanghai IPR Coordinating Committee,
SATF and the Market Order Rectification Office.


3. (SBU) Regarding copyright enforcement, the SCTF is in charge
of counting, categorizing, and transferring pirated audio-visual
products for authentication. It works in coordination with the
Shanghai Public Security Bureau Economic Crime Investigation
Team, which is responsible for criminal IPR infringement cases.
Zhou mentioned three such cases in 2006. During an
investigation in September 2006, the SPSB and the SCTF arrested
five criminals with 2.73 million illegal discs. These criminals
were punished with penalties from six months to two years in
jails and fines ranging from RMB 5,000 (USD 645) to RMB 10,000
(USD 1,290). In October 2006, SCTF spent 40 hours with PSB
investigating two criminal cases. These cases resulted in the
arrest of three people. Zhou also pointed out that SCTF had
provided assistance on numerous other IPR criminal cases carried
out by the PSB.


4. (SBU) Zhou also explained that SCTF had a separate section
in charge of Internet-based IPR infringement. SCTF uses the
charge of "inappropriately broadcasting video" to prosecute most
Internet-based IPR crimes. The highest penalty for this crime
is approximately USD 23,000 and that the SCTF can only penalize
infringers for not obtaining approval to broadcast video, not
for the contents of the video.

Illegal Business Operations vs. Copyright Infringement
-------------- --------------


5. (SBU) Cohen also engaged Zhou on the use of illegal business
operation statutes to prosecute IPR crimes. In 2003, PSB, in
coordination with SCTF, arrested eight criminals based on the
crime of "illegal business operations." Zhou explained that
one criminal was sentenced to 10 years in jail and the rest were
in jail from two years to eight years. Zhou and Cohen also
discussed the Randolph Guthrie case in which Guthrie was
sentenced based on the crime of "selling illegal copies" under
the criminal copyright law. Zhou said that, after this case,
the Supreme Court noted that similar cases should be sentenced
based on the copyright law. Zhou opined that it was easier to

SHANGHAI 00000117 002.2 OF 002


collect evidence under the charge of "illegal business
operations" since the SCTF can issue the certificate for
"illegal operation" without the IPR owner's verification. He
added that under the criminal copyright law provision regarding
"sales of illegal copies," it was very difficult to collect
evidence for verifying sales, since transactions often were in
cash and there were no records. Furthermore, Zhou acknowledged
the workload to prosecute a case under the "sales of illegal
copies" provision was much larger because the SCTF needed to
obtain verification from different copyright owners. In
addition, he said copyright owners often have limited resources
to provide verification of pirated discs. Thus, typically, one
copyright association, such as Motion Picture Association of
America (MPAA) will participate, and provide verification solely
for its member companies.

A Partnership of Convenience with Limited "Plea Bargaining"
-------------- --------------


6. (SBU) Zhou opined that the large demand for DVD/CD products
in the Shanghai market created a vast opportunity for pirates.
However, he claimed that the joint operation with the SCATF was
very effective in cutting the supply of pirated optical discs.
Zhou went on to explain the details of the joint operation,
saying since SCATF had no right to confiscate pirated discs, it
only collected pirated discs and then transferred them to the
SCTF for confiscation. He added that to encourage the SCATF to
collect pirated discs, the SCTF rewarded the SCATF, based on the
numbers of pirate discs it collected. SCTF also encouraged
people involved in selling pirated discs to report the
underground wholesalers and producers in exchange for reduced
penalties.

Cooperation with the Public
--------------


7. (SBU) On the issue of public complaints, Zhou claimed that
SCTF would investigate upon receiving a complaint, and the SCTF
also tracked closely the watch lists issued by the MPAA and the
International Federation of the Phonographic Industries (IFPI).
He added the SCTF maintained close relationships with industrial
organizations such as IFPI and mentioned that SCTF had a good
training system with IFPI and the MPAA. Zhou said SCTF had
coordinated training on topics such as how to distinguish
pirated DVDs /CDs and the trends in the pirated DVD/CD market.
Zhou also noted that, in general, it was quite difficult for his
staff to differentiate between fake and legitimate discs.

Acknowledging Market Access is a Problem
--------------


8. (SBU) In conclusion, Zhou suggested that easing the
restrictions on selling audio and video products would assist
the distribution of legitimated audio and video products. He
explained that current rules in Shanghai required that, in order
to obtain a license to sell audio and video products, a business
must have at least 40 square meters of store space. He noted
that this requirement was too high for big cities such as
Shanghai since the profit in selling legitimate audio and video
products was not high and the rent in big cities was relatively
more expensive.

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


9. (SBU) Shanghai's efforts on copyright are similar to efforts
in several other cities in China to reallocate responsibility of
copyright enforcement, in particular criminal copyright
enforcement. As in Beijing, Shanghai Copyright Bureau's
authority over copyright infringement matters was virtually
eliminated. In addition, Shanghai has established an
enforcement "taskforce" similar to that in Beijing. While these
changes appear to have little impact on copyright enforcement,
they may eventually prove beneficial given Shanghai Copyright
Bureau's thin staffing.
KJARRETT