IPR: Enforcement Numbers Decline in Guangdong 2008 Annual

UNCLAS SECTION 01 OF 04 GUANGZHOU 000320

SENSITIVE
SIPDIS

State for EAP/CM; EEB/IPE; EEB/TPP; EEB/CIP
State for INL - JVigil
USTR for China Office; IPR Office; and OCG
Commerce for National Coordinator for IPR Enforcement
Commerce for MAS - RLAYTON, SMATHEWS
Commerce for MAC - ESzymanski, SWilson
Commerce for MAC -NMelcher, JWu
LOC/Copyright Office - STepp
USPTO for Int'l Affairs - LBoland, EWu
DOJ for CCIPS - MDuBose, SChembtob
FTC for Blumenthal
FBI for LBryant
DHS/ICE for IPR Center - THipelius, TRandazzo
DHS/CBP for IPR Rights Branch - GMcCray, PPizzeck
ITC for LLevine, LSchlitt
State Pass White House OTP Ambassador Richard Russell
NSC for JBader, JLoi


E.O. 12958: N/A
TAGS: ETRD KIPR KIND ECON PGOV CH
SUBJECT: IPR: Enforcement Numbers Decline in Guangdong 2008 Annual
Report

REF: A) BEIJING 1014, B) GUANGZHOU 218, C) BEIJING 570, D) GUANGZHOU
43, E) 2008 GUANGZHOU 267

(U) This document is sensitive but unclassified. Please protect
accordingly. Not for release outside U.S. government channels. Not
for internet publication.


1. (SBU) Summary and Comment: Intellectual Property Rights (IPR)
enforcement action in Guangdong Province appeared to decline overall
in 2008 as shown by case statistics in the province's annual white
paper. Despite official pronouncements by Guangdong authorities
that IPR enforcement continued to improve, enforcement numbers were
up only for trademark investigations and cases handled by the
courts. When questioned about the declining enforcement statistics
in all other categories at an April 24 press conference, the
province's senior IPR official said that enforcement was only one
part of the government's IPR work. Her comments suggest that
enforcement has been marginalized by other government priorities
such as encouragement of local IP development -- where the annual
white paper showed more success with new records in trademark and
patent filings.


2. (SBU) Comment Continued: U.S. rights holders still face major
enforcement problems in Guangdong, with some firms calling it
"ground zero" for counterfeiting and infringing activities. The
business community has expressed appreciation for new progress on
IPR education and awareness programs and joint Guangdong-Hong Kong
cooperation, but every discussion of IPR in south China still begins
and ends with the need for sustained, broad-based progress on
enforcement issues in Guangdong Province. Without a strong
commitment from local authorities to tackle the problem, the
"workshop of the world" will continue to be a global center for the
manufacture of counterfeit goods. End summary and comment.

Guangdong's IPR Focus Not Only Enforcement
--------------


3. (U) In the face of disappointing case statistics on IPR
enforcement, Guangdong's senior IPR official emphasized that the
work of the province's IPR agencies was not only enforcement but
also overall management of IPR at an April 24 press conference in
Guangzhou that announced the province's 2008 IPR White Paper. In
her prepared remarks and in response to pointed questions from
Japanese consulate officials and journalists, Guangdong Intellectual
Property Office Director General Tao Kaiyuan emphasized that the
four main themes of China's IP Strategy were innovation,
utilization, protection and administration, of which protection is
only one part of the government's mandate. Tao also pointed out
that this approach was consistent with Premier Wen Jiabao's remarks
on China's support for intellectual property rights as delivered
during his annual work report in March.

Disappointing Enforcement Results
--------------


4. (SBU) The numbers of enforcement actions in 2008 in most major

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IPR categories were down from the previous year, according to the
annual white paper. At the press conference, Tao revealed that
administrative patent disputes numbered 199 (compared to 256 cases
in 2007),with 198 cases resolved by IPO officials. The
Administration for Industry and Commerce (AIC) investigated 4,414
trademark-related cases (one of the few increases, up from 3,056 in
2007). Of these cases, 2,455 involved foreign rights owners.
Twenty-two cases were transferred from administrative to judicial
authorities for handling by civil or criminal courts (another
disappointing drop from 31 case transfers in 2007, and 38 in 2006).



5. (U) The Guangdong Provincial IPR White Paper said that the
Administrations of Quality and Technical Supervision (QTS)
integrated their enforcement resources in 2008, a move highlighted
as a positive step in IPR enforcement. However, the white paper's
published statistics showed another decline in the number of cases
investigated by the newly combined agency with 1,504 cases of
counterfeiting in 2008 (down from 1,801 in 2007 and 2,205 in 2006).
The white paper also said QTS closed 519 counterfeit plants (down
from 860 in 2007) with counterfeit goods seized worth approximately
RMB 54 million (USD 7.9 million - also down from 2007).


6. (SBU) Criminal investigation numbers showed discouraging declines
as well. Provincial and local branches of the Public Security
Bureau (PSB) investigated 387 cases (a decline from 503 cases in
2007 and 396 in 2006) and cracked 250 criminal cases of IPR
infringement and product counterfeiting (also down from 345 cases in
2007 and 288 in 2006). It arrested 482 criminal suspects (a decline
of almost 50 per cent from 894 arrests in 2007 and 806 in 2006).
Notable cases included a crackdown on counterfeit drug production
and sales that disrupted a network worth RMB 40 million (USD 5.9
million) and led to 15 arrests. Also noted in the 2008 white paper
were continued successes by Guangdong authorities in disrupting the
manufacturing, sale and distribution of counterfeit cigarettes and
other tobacco products.


7. (U) IPR enforcement at trade fairs continued to be a focus in
2008, according to the white paper. At last year's two sessions of
the Canton Fair, 1,592 enterprises were involved in IPR complaints
(compared with 1,621 in 2007 and 1,045 in 2006),with 968
enterprises identified as infringing other firms' rights. Guangdong
IPO cited 1,083 cases of patent-related disputes across the province
for trade fairs and trade associations in 2008, similar results to

2007.

Increased Guangdong Judicial Action in 2008
--------------


8. (SBU) Judicial action was one of the few areas where case
statistics suggested an increase in enforcement activities.
Guangdong courts received 4,427 civil cases of first instance (up
from 3,122 in 2007) and 690 cases of second instance (appeals),
concluding more than 99 percent of IPR cases received. The courts
received 381 criminal IPR cases of first instance (a dramatic
increase over the previous two years, from 86 cases in 2007, and 116

GUANGZHOU 00000320 003 OF 004


in 2006),involving 804 criminal suspects, with all but one criminal
case concluded before the end of the year.


9. (SBU) The white paper also said Guangdong courts continued their
efforts to resolve civil cases through mediation rather than trial
in 2008. The courts have steadily increased the number of settled
cases in recent years, reaching a record 2,611 mediated cases in

2008. These cases represented a 52.4 percent increase from 1,627
mediated cases in 2007 and included cases where plaintiffs withdrew
their complaints after court-sponsored mediation was initiated.
Guangdong courts also continued to lead the country by posting a
total of 4,025 effective IPR verdicts on the internet (increasing
from 3,155 verdicts in 2007) at http://ipr.chinacourt.org.

14 Years as China's Patent and Trademark Leader
-------------- --


10. (U) Reflecting the emphasis placed on local IP development, the
Guangdong IPO reported another banner year for patent and trademark
filings in 2008. New patent filings in the province totaled 103,883
with 62,081 patents granted, annual increases of 1.4 percent and
9.88 percent, respectively. Invention-patent applications totaled
28,099, with 7,604 granted, up 5.3 percent and 104.7 percent,
respectively. Guangdong Province ranked first in China for patent
filings and grants for the 14th straight year; it also was first
among provinces for invention-patent applications for the third
straight year. 2008 marked the first time the province ranked first
in China for invention patents granted, which was highlighted as a
major success by provincial IPR authorities.


11. (U) Director General Tao also announced continuing growth in
Guangdong's trademark filings. The accumulated number of registered
trademarks exceeded 480,000 in 2008, an increase of 100,000
trademarks, or 26.3 percent, from 2007. According to the white
paper, the province maintained its top position for trademark
applications and registrations for the 14th straight year.
Guangdong continued to rank among the top provinces at promoting
national and provincial well-known and famous trademarks.

Neighborly Cooperation Continued
--------------


12. (U) IPR cooperation with Hong Kong, Macau, and other
jurisdictions in the Pan-Pearl River Delta (Pan-PRD) has continued
to expand, according to the white paper and official comments at the
press conference. Guangdong Customs, in particular, actively
cooperated with Hong Kong and Macau Customs officials to exchange
intelligence and investigate smuggling rings and other cases related
to IPR protection. The Seventh Guangdong-Hong Kong Expert Group on
the Protection of IPR convened in mid-2008, and a joint IPR seminar
was subsequently held in Shantou, a Guangdong area with historically
weak IPR protection and high levels of infringing activities.

New Efforts: Software Licensing, Education
--------------


GUANGZHOU 00000320 004.2 OF 004



13. (SBU) The white paper claimed that illegal use of software
products by provincial-level, state-owned enterprises (SOEs) had
been eliminated. Nevertheless, the Business Software Alliance and
major U.S. rights holders still complain that south China government
offices and SOEs continue using unlicensed software. Inclusion of
the issue in this year's white paper may be a positive sign that IPR
authorities are working to address the problem, but the problem has
not been resolved as completely as characterized in the annual
report.


14. (U) At the press conference, Tao highlighted the province's work
to increase IPR awareness and education in 2008 and said the
government would further expand education plans in 2009. In
addition to working with enterprises and the public, the white paper
said IPR-related primary- and middle-school curricula would be
expanded beyond the 107 schools where they had been introduced by
the end of 2008. However, Tao noted that efforts to introduce
IPR-related curricula at universities would depend on further
coordination with the Ministry of Education.

GOLDBERG