SHANGHAI IP ADMINISTRATIVE OFFICES MOVE FORWARD

UNCLAS SECTION 01 OF 02 SHANGHAI 000330

SENSITIVE
SIPDIS

USTR FOR CHINA OFFICE - TSTRATFORD, AWINTER, TWINELAND, DKATZ;
IPR OFFICE - RBAE; AND OCG - TPOSNER
DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - WPAUGH
DOC FOR ITA/MAC: SZYMANSKI, YOUNG
LOC/ COPYRIGHT OFFICE - STEPP
USPTO FOR INT'L AFFAIRS - LBOLAND
DOJ FOR CCIPS - TNEWBY
FBI FOR LBRYANT
DHS/ICE FOR IPR CENTER - DFAULCONER
DHS/CBP FOR IPR RIGHTS BRANCH - GMACRAY
TREASURY FOR OASIA - DOHNER/CUSHMAN
NSC FOR KURT TONG

E.O. 12958: N/A
TAGS: KIPR ECON EINV PGOV CH
SUBJECT: SHANGHAI IP ADMINISTRATIVE OFFICES MOVE FORWARD

SHANGHAI 00000330 001.2 OF 002



1. (SBU) Summary: During an August 8 farewell visit to
Shanghai, Senior IPR Attachi Mark Cohen engaged Shanghai IP
Administration (SIPA),Shanghai IPR Complaint Center, and
Shanghai Administration of Industry and Commerce (SAIC)
officials on current initiatives and opportunities for
cooperation. SIPA Director General Chen Zhixing said USTR's
2008 Special 301 Report on Shanghai is "impartial and
objective." He also welcomed comments from the USG on how
Shanghai should implement the Outline of the National IP
Strategy. The Shanghai IP Complaint Center emphasized that
foreigners are increasingly making use of the complaint center
as they are becoming familiar with its services. SAIC Deputy
Director said that as a result of efforts on landlord liability,
over 100 tenants have been evicted from markets around Shanghai.
However, foreigners frequenting counterfeit markets continue to
be a problem. End Summary.

SIPA Welcomes 301 Language and Further Cooperation
-------------- --------------


2. (SBU) DG Chen relayed his appreciation for Cohen's support
of Shanghai and welcomed further collaboration with the U.S.
Mission in China. Regarding the 2007 Special 301 Report on
China, Chen welcomed the report's language about Shanghai,
saying it is "impartial and objective." He noted his
appreciation for recognizing Shanghai as "a relatively bright
spot in China's IPR protection environment" and for pointing out
Shanghai's accomplishments in the judicial arena. Chen also
acknowledged that the report's criticism of Shanghai retail
counterfeit markets is an "accurate assessment of the
situation."


3. (SBU) According to Chen, Shanghai is striving to implement
the National IP Strategy that was released in early June. Soon
after its release, the Shanghai IP Administration established a
website welcoming public comment on the city's implementation of
the strategy. According to Chen, Shanghai is the first city in
China to welcome such public comment. Although the deadline of
July 25 had passed to submit comments, Chen agreed to still
accept comments from the U.S. Mission. In addition to
implementing the strategy, Shanghai continues to focus on
counterfeit markets, Internet-related infringement, and trade
fairs.

Complaint Center - Trademarks are Biggest Issue
-------------- --


4. (SBU) During a meeting at Shanghai's IPR Complaint Center,
Director Yang Hui briefed Cohen on the division of the office:
the Shanghai Service Center for IP Protection and the Shanghai
Consumer Complaint and Report Center. The former deals strictly
with IPR-related complaints and the latter handles complaints of
poor quality products and services. Although the Consumer
Complaint Center was established several years prior to the IPR
Protection Center, Shanghai decided to combine the two
components to help with information sharing. Yang noted that
Shanghai was one of the first cities in China to establish an
IPR Complaint Center in July 2006 and has since added 7 district
level IPR complaint centers, mostly located in high-tech
industrial parks.


5. (SBU) Since its establishment, the Center has fielded 3,273
complaints and inquiries. Of these, the Center has opened and
referred 151 IPR cases. The cases included 71 trademark cases,
66 copyright cases, 13 patent cases, and 1 case related to the
Olympics. Domestic Chinese companies had initiated 136 of the
cases, U.S. companies - 10 cases, and European companies - 5
cases. Yang added that complaints from foreign rights holders
are increasing as foreigners become more familiar with the
Center. The U.S. Motion Picture Association had also filed
several cases at the Shanghai Complaint Center upon Cohen's
suggestion, a development similar to what MPAA had done in
Beijing where a large percentage of foreign related cases
originate from MPAA. Note: The IPR complaint center was
co-located with the consumer complaint center run by SAIC. The
consumer complaint centers generally are more deeply staffed and

SHANGHAI 00000330 002.2 OF 002


receive more complaints than the IPR complaint centers. The IPR
complaint centers and consumer complaint centers also can refer
cases to each other. End note.

Counterfeit Markets and Landlord Liability
--------------


6. (SBU) At the Shanghai Administration of Industry and
Commerce (AIC),Deputy Director Chen Xuejun outlined Shanghai's
efforts to fight retail counterfeit markets and encouraged U.S.
right holders to be more proactive in working with AIC to
protect their rights. Shanghai recently began using landlord
liability as a means to crack down on offending vendors. AIC
encourages market owners to sign contracts with tenants and
provides landlords with sample contracts that can be followed.
According to Chen, if a tenant continues selling counterfeits
after the second warning, the owner should evict the tenant from
the market. (Comment: The problem with the initiative is that
it is non-compulsory in nature. End comment.) Within the past
year, over 100 tenants have been evicted under this new
guideline. (Note: One U.S. company already notified the
Consulate that it plans to file a law suit against a Shanghai
market owner under the new landlord liability provisions. End
note.)


7. (SBU) Chen expressed that part of Shanghai's counterfeit
market problem is due to the propensity of foreigners to buy
fakes. As an example, he noted a media report about singer,
Celine Dion buying fake goods in Shanghai. He added that NBA
basketball players also visited counterfeit markets during their
stay in the city. (Comment: Blaming foreigners for counterfeit
market demand is a common refrain among Shanghai IP officials.
However, Shanghai's counterfeit markets are equally full of
local shoppers.)


8. (SBU) Comment: In many respects, Shanghai's determination
to protect IP is admirable. The courts are some of the top IP
case litigation venues in the country and have a relatively high
percentage of foreign related cases as well as cases involving
Chinese litigants from outside of Shanghai; Shanghai Customs is
an active proponent of IP protection; and the city's
administrative offices actively reach out to partner with the
Chinese and foreign business communities. Shanghai has been
attracting a foreign R&D community, particularly in the biotech
sector. Yet, the purveyors of infringing goods, both on the
streets and with small retail establishments, remain largely
unchecked. Although Shanghai and the Central Government have
touted the closure of the city's premier counterfeit market,
Xiangyang, for over two years, they have allowed several other
markets to spring up and thrive in its place. In this case,
inaction speaks louder than words.


9. (U) This cable was cleared by Mark Cohen.
JARRETT