UNCLAS SECTION 01 OF 05 SHANGHAI 000259

SIPDIS

SENSITIVE
SIPDIS

USTR FOR CHINA OFFICE - AWINTER, ACELICO; IPR OFFICE - RMEYERS;
AND OCG - SMCCOY
DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - CISRAEL
DOC FOR ITA - DAS KASOFF, CMCQUEEN, LRIGOLI, ESZYMANSKI
LOC/COPYRIGHT OFFICE - STEPP
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
NSC FOR KTONG

E.O. 12958: N/A
TAGS: ETRD KIPR EFIN EINV CH
SUBJECT: SHANGHAI RELEASES 2007 IPR WHITEPAPER

REF: A. SHANGHAI 222


B. 06 SHANGHAI 4172

C. 06 SHANGHAI 4639

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


1. (SBU) Summary: The Shanghai Intellectual Property
Administration (SIPA) held its annual meeting with foreign
Consulates and Chambers of Commerce on April 24 to mark the
publication of its annual White Paper on intellectual property
(IP) protection accomplishments in 2006. With its closing down
of the notorious Xiangyang Market and other confiscations and
actions, the White Paper painted a rosy picture of Shanghai's
efforts at protecting the rights of intellectual property
holders. Shanghai continues to make inroads against IP crime,
and has increased its coordination with other cities in the
region. Nevertheless, IPR infringements remain a common part of
everyday life in Shanghai with pirated goods being sold openly
on the street and in stores throughout the city. End summary.

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A Long and Arduous Task
--------------


2. (SBU) The Office of the Shanghai Intellectual Property Rights
Joint Conference, chaired by SIPA Director Chen Zhixing, issued
its "White Paper of Intellectual Property Development and
Protection Status in Shanghai 2006" on April 24. To mark the
publication of its white paper, SIPA hosted its eighth annual
meeting with diplomatic missions and international chambers of
commerce located in Shanghai. Chen noted in his opening remarks
that protecting intellectual property rights (IPR) "will not
succeed without the support of the whole society. We are fully
cognizant that IPR protection is a long and arduous task that is
essential to promoting innovation and constructing a harmonious

socialist society." SIPA provided a list of more than 100
different outreach activities it had conducted in April alone to
raise society's awareness of the importance of protecting IPR.

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Five Tasks and Ten Measures
--------------


3. (SBU) According to Chen, the Shanghai Municipal Government
developed its "Action Guidelines for Protecting Intellectual
Property Rights in Shanghai" in July 2006. One result of its
action plan was a specialized campaign to "crack down on the
sale of fake commodities and pirated audiovisual products." The
guidelines, as laid out in the White Paper, identified "Five
major tasks" and "Ten Measures." The five tasks were:

- 1) Strictly crack down on pirating activities;

- 2) Continue to crack down on infringement activities in the
trademark exchange market;

- 3) Strengthen regulating efforts on key issues of patent
infringement;

- 4) Intensify IP protection in the export sector; and

- 5) Reinforce IP management of exhibitions and trade shows

The ten measures were:

- 1) Set up reporting and complaint service centers;

- 2) Improve cross-regional coordinated enforcement mechanisms;

SHANGHAI 00000259 002 OF 005



- 3) Work out Action Plan of IP Protection for the Shanghai 2010
World Expo;

- 4) Steadily promote the use of legal software copies in
enterprises;

- 5) Establish an IP protection status evaluation mechanism;

- 6) Improve the IP protection status circulation system;

- 7) Establish a regular reporting system;

- 8) Enforce the random spot checking system;

- 9) Put a responsibility system into effect; and

- 10)Stage specialized campaigns.

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Shanghai Administration of Industry and Commerce
-------------- ---


4. (SBU) Shanghai Administration of Industry and Commerce (AIC)
Deputy Director Mr. Chen Xuejun highlighted the closure of the
Xiangyang Market (Ref C) and the shutting down of "Xiangyang
Market websites." The AIC has conducted "short-term crack
downs" and "long-term campaigns" to effectively curtail the
spread of fake-goods dealers. Chen said that more than 110,000
stalls were inspected for illicit goods and more than 100
counterfeit fabricating enterprises had been "eradicated." The
AIC also had stepped up efforts to coordinate with the Public
Security Bureau (PSB) to fight fake-goods touts on the streets.


5. (SBU) According to White Paper statistics, in 2006 the AIC
detected 2217 illegal trademark-related activities, confiscated
and destroyed 1.5 million fake commodities worth approximately
RMB 160 million (USD 21 million), and handed nine cases over to
the courts. Of the 2217 trademark infringing cases detected,
1569 (75 percent) were foreign-related trademarks. These cases
had a total value of RMB 30.72 million (USD 3.9 million). Of
these, 476 were infringements on U.S. trademarks, 248 were
French, 216 were Japanese, and 142 were German.

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SIPA's Commodity IPR Plan for 2007
--------------


6. (SBU) SIPA's Chen also announced that, in 2007, Shanghai
would pursue four new goals for cracking down on pirated-goods
commodity markets similar to the now-closed Xiangyang Market.
The Administration of Industry and Commerce would:

- 1) Classify different commodity markets in Shanghai according
to the severity of their infringement activities in order to
prioritize their work.

- 2) Issue a list products and brands, such as Louis Vuitton,
that were against the law to sell in small commodity markets.

- 3) Involve the commodity markets landlords to create
self-disciplining measures with in their leases so that shops
are forced out of their lease after receiving only one warning
for selling illegal goods.

- 4) Strengthen coordination with Shanghai's IPR hotline (see
paragraph 15).


SHANGHAI 00000259 003 OF 005


--------------
Software, Audio-Visuals, Maps & 10 Textbooks
--------------


7. (SBU) Shanghai's Municipal Copyright Bureau investigated over
500 business units and locations, seized 130,000 pirated copies
of software, and closed down "some websites." Shanghai ranked
third in China for its quantity of audio and visual products
destroyed, having destroyed 6.77 million pieces. In a
"One-Hundred Day Anti-Piracy Campaign," 177,000 copies of
pirated books and newspapers were confiscated and three cases
were handed over to criminal courts.


8. (SBU) According to Shanghai Copyright Bureau Deputy Director
Lou Rongmin, one of his department's biggest cases involved the
confiscation of more than 120,000 illegal maps. The
"ringleaders" were sentenced to jail terms of up to four years.
This cased required coordination with the PSBs in neighboring
Anhui and Zhejiang Provinces where the actual printing took
place.


9. (SBU) Lou also noted that, on behalf of U.S. publisher McGraw
Hill, the Copyright Bureau had conducted investigations of
photo-copy shops frequented by university students and
confiscated 10 copies of pirated textbooks.

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Yangtze River Delta Coordination
--------------


10. (SBU) SIPA Deputy Director Ms. Gao Xiaomei said that
Shanghai had increased its cooperation with other Yangtze River
Delta (YRD) IP protection. SIPA has developed a Joint Law
Enforcement Action Plan with IP administrations in 24 cities in
Jiangsu and Zhejiang Provinces. In August 2006, they held their
first joint conference. In addition, they had attempted to
coordinate the handling of cases and the transfer of evidence
between different legal jurisdictions while exchanging
information about different cases. The goal of this cooperation
was to "focus energy, save costs, obtain evidence in a timely
manner, and prevent infringement." Director Chen later promised
to have more information in the next year about the YRD
coordination, noting that the Central Government had taken a
keen interest in this initiative.

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Shanghai Courts "Sedulously" Address IP Infringements
-------------- --------------


11. (SBU) The White Paper states that, in 2006, "Shanghai courts
sedulously started trial work on IP-related cases and worked
hard to enhance judicial protection of IP." Shanghai courts
accepted 1100 civil cases for either first or second trials.
This was a new high, up from 1092 in 2005 and 851 in 2004. The
Shanghai courts also touted the fact that they had accomplished
"a high rate of intermediation and cancellation, a low rate of
appeal, and a low rate of changed sentences following an appeal.
The intermediation and cancellation rate in 2006 was 65 percent.


12. (SBU) The White Paper also indicated that the Shanghai
courts' IP case-law and experience expanded in 2006. It says:
"A batch of new-type and representative cases settled, providing
trial thoughts and experiences for later, similar, cases." It
cites the example of the Beijing Jingdiao Technology Company
suit brought against "some company in Shanghai" for computer
software infringements. This decision provided the precedent
that data and file format of output by computer software is not
part of the computer software so that the software's copyright

SHANGHAI 00000259 004 OF 005


did not apply.


13. (SBU) The White Paper also noted that the settlement of
high-profile international cases brought by such firms as
Starbucks, Louis-Vuitton, and Synopsys, "established a good
image of Shanghai providing timely and effective IP protection
according to law."

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Making Sure It's Not in the Mail
--------------


14. (SBU) Shanghai Customs Enforcement Department Head Wu
Huading highlighted its special campaign to crack down on the
export of pirated goods through China Post. Wu said that
Customs had detected 190 cases worth RMB 180 million (USD 23
million). This was a 205 percent increase over 2005. He
attributed this success to the implementation of new risk
management techniques for IP protection that had been directly
responsible for more than 50 percent of its cases. Shanghai
Customs was also increasing its outreach to other customs
administrative levels in the YRD area, including Nanjing and
Ningbo.

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Shanghai's Hotline for IPR Complaints
--------------


15. (SBU) Since its establishment in July 2006, Shanghai's
Reporting and Complaint Service Center for IPR Protection's
hotline received 9305 calls, and accepted 58 complaints. Of
these 58 complaints, 49 cases had been settled. Complainants
call the center by dialing a special number, 12312. The center
operates on what it has styled an "X+182 coordination mode."
"X" stands for the IP holder, "1" stands for the service center
under the Municipal AIC, "8" stands for the eight administrative
enforcement departments responsible for investigation, and "2"
for the Municipal Office of Rectification and Standardization of
Market Economic Order and the IP Joint Meeting Office, which
together coordinate and handle the reported cases.

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Despite Success, Still a Sore Subject
--------------


16. (SBU) The Consul General inquired about what Shanghai was
doing to proactively increase IP protection for the many
research and development institutions in Shanghai and noted that
many had expressed reservations to him about their IP rights.
SIPA's Chen said that the concentration of R&D centers in
Shanghai was perhaps the best testament to Shanghai's IPR
climate. He welcomed suggestions from the audience on how to
further improve and commented that IPR protection for the R&D
sector should be the topic of a future seminar. Later,
Copyright Bureau Deputy Director Lou alluded to the Consul
General's question and, in a defensive tone, said that while his
office heard lots of talk about IPR infringements, relatively
few actually filed official complaints. Without an official
complaint, his office was unable to open an investigation. He
claimed that Shanghai's IPR protection was better than that in
the United States. "We are superior to you since we have
administrative measures as well as legal frameworks and whole
sets of government agencies" devoted to IP protection, he said.
"You have to have a concrete problem and not just express a
general fear. Simply saying that your IPR might be infringed is
not helpful."

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SHANGHAI 00000259 005 OF 005


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


17. (SBU) The rollout of Shanghai's annual IPR White Paper is
changing to reflect the added attention that is being paid to
IPR. Opening this year's meeting not only to Consulates, but
also to chambers of commerce and large foreign companies, as
well as changing the format to include a slick eight-minute
English language video and a panel-like discussion all lend to
the appearance that Shanghai takes IPR seriously. This is a
positive step forward, but in many ways appearances do not
wholly reflect reality. Fake goods continue to be so readily
and easily available in Shanghai that it is almost impossible to
walk down any commercial street in Shanghai without seeing them.
We will continue to work closely with the Shanghai government
to try to address our continuing IPR concerns in Shanghai.
JARRETT