South China IPR: Cooperation with Fujian Authorities

UNCLAS SECTION 01 OF 03 GUANGZHOU 000514

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 OSTP Ambassador Richard Russell
NSC for JBader, JLoi


E.O. 12958: N/A
TAGS: ETRD KIPR KIND ECON EINV PGOV CH
SUBJECT: South China IPR: Cooperation with Fujian Authorities
Gradually Improving

REF: A) GUANGZHOU 505, B) GUANGZHOU 503, C) BEIJING 1463, D)
GUANGZHOU 320, E) BEIJING 1014, F) BEIJING 570

GUANGZHOU 00000514 001.2 OF 003


(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: The willingness of Fujian Provincial
Intellectual Property Office (IPO) and Fuzhou Customs officials to
meet and share information with the Consul General on August 12 and
13 was an important step after a two-year freeze that began when the
United States filed intellectual property related cases against
China in 2007. Fuzhou Customs told us they had broken several
landmark IP-related cases in recent years. However, figures on
enforcement cases appear to show a troubling decline in enforcement
action for the first half of 2009. Fujian IPO officials highlighted
their expanded role promoting intellectual property rights (IPR)
protection as part of the West [Taiwan] Strait Economic Development
Plan announced by China's State Council in May, 2009. Customs
officials also said they were taking part in a nationwide campaign
targeting IP infringers and counterfeiters who use express delivery
services to smuggle illegal products to customers, an area of
particular concern for several major American brand owners in south
China.


2. (SBU) Comment continued: As only the second set of meetings since
the Fujian government resumed IPR discussion with us after the U.S.
filed IP-focused WTO cases in 2007, the Consul General's visits to
Fujian IPO and Fuzhou Customs delivered an unmistakable message to
local authorities that improved IPR cooperation is a top priority
for the U.S. government in south China. Relations with IPO
officials were polite but will require continued confidence building
efforts, and the warmer reception by Fuzhou Customs may represent an
opportunity for increased cooperation that might eventually serve as
a model for other Fujian-based government agencies. During his
meetings, the CG noted that China hopes to move up the technology
ladder; he stressed that IPR protection is critical to investor
decisions regarding sharing advanced technologies. For example, IPR
protection is needed if China hopes to gain access to U.S. cutting
edge clean energy and environmental protection technologies,
technologies China desperately needs. End summary and comment.

Numbers Incomplete, Might Indicate Enforcement Decline
-------------- --------------


3. (SBU) In conjunction with the Consul General's first official
visit to Fujian August 12-14 (ref A),the CG, Econoff, TDoff, and
Conoff met August 12 with Fujian IPO Legal Affairs Department Chief
Chen Xiaojing. This was only the second USG meeting with Fujian
intellectual property officials, who for more than two years had
refused to cooperate with us after the United States filed two WTO

GUANGZHOU 00000514 002.2 OF 003


cases regarding China's IPR protection in 2007. Chen offered a more
extensive and detailed work report on the province's IP efforts than
that provided at a previous meeting with Congenoffs in February

2009. She described how those efforts have expanded in the last
year despite challenging economic conditions. However, the Fujian
IPO still stopped short of releasing detailed enforcement numbers
like those provided annually by the Guangdong provincial government
(ref D). Chen instead told the Consul General that Fujian's patent
applications increased by 16.2% in 2008, to 13,185 applications,
ranking 13th among China's 26 provinces. More importantly, 7,933
patents were granted in 2008, an increase of 2.27% that ranked
Fujian 11th in China. Chen said the majority of patents granted,
57.7%, were classified as invention patents, as opposed to the
generally weaker utility patents also granted by China's patent
office.


4. (SBU) In a separate meeting with Fuzhou Customs on August 13,
Deputy Commissioner Zhao Jianzhong told the Consul General his
agency would welcome more cooperation and exchange with the United
States, but joint efforts would be smoothest by including Beijing's
General Administration of Customs in discussions at an early stage.
Zhao said Fuzhou Customs handled 537 IPR cases in 2007, more than
doubling to 1095 cases in 2008. However, the first half of 2009
suggests a dramatic decline this year with only 168 cases in the
first six months. Zhao declined to explain the reason for the drop
(ref F). He said that among the 2009 cases handled so far, 67
related to U.S. rights holders, with a value of 2.56 million RMB
(USD 375,000),or 47% of the total case value this year. Several
major U.S. brands were involved in prominent Fuzhou Customs cases,
and Zhao said his agency was recognized by Beijing for its work on
major shoe infringement cases in 2005 and 2007, and counterfeit
pharmaceuticals in March 2008.

IP Protection and West Strait Economic Development
-------------- -


5. (SBU) Fujian IPO Legal Affairs Department Chief Chen Xiaojing
told the Consul General her office would take the lead in promoting
IP protection throughout Fujian Province as part of the State
Council's West [Taiwan] Strait Economic Development Plan that was
announced in May, 2009. Prior to releasing the new comprehensive
economic plan, Chen said an interagency provincial leaders group was
formed to help coordinate IPR efforts within the province and a
memorandum of understanding on IPR protection and coordination was
signed with China's State Intellectual Property Office. Over the
past 18 months, Fujian has shown renewed effort to attract
international investment and stimulate high-value-added
manufacturing and service industries in the province, according to
Chen. Fujian Provincial IPO also organized the second cross-strait
IP forum in 2008 and sponsored several other exchanges including a
China-EU discussion on IP protection in March 2009.

GUANGZHOU 00000514 003.2 OF 003



Fujian IPO Proudest of Public Outreach Activities
-------------- -


6. (SBU) In an effort to show the Fujian IPO's more open attitude
towards cooperation with the U.S. government, Legal Affairs
Department Chief Chen Xiaojing single-mindedly read her work report
to us focusing on a litany of outreach programs and initiatives from
2008 and 2009. Highlights included the IPO's establishment of
complaint centers at major trade fairs and investment seminars
throughout Fujian and campaigns to identify and reduce the number of
patent infringers in retail and wholesale markets across the
province. Chen said public information campaigns had focused on a
range of target audiences. An IPR week campaign targets the public
each April; while efforts to target industry include providing
how-to-file information on the Internet and at trade fairs; and
major media coverage heralding the conclusion of important IPR
cases. Chen also said that over 60% of Fujian's new patent
applications were filed by licensed patent agents, which the IPO has
been trying to cultivate as a channel for promoting stronger IP
protection in the business community.

Fuzhou Customs Welcomes Increased Cooperation
--------------


7. (SBU) Fuzhou Customs' jurisdiction covers Fuzhou, Putian,
Sanming, Nanping, Ningde and 40 counties and towns with a land area
of 65,000 square kilometers and almost 2,300 kilometers of
coastline, but with fewer than 1,200 customs officials. Of
particular interest to U.S. brand owners is the area around Putian,
which is home to the highest concentration of top-tier athletic
shoes, sportswear and sports equipment factories in the world. In a
detailed and professional presentation, Deputy Commissioner Zhao and
his staff thanked the U.S. for our recent efforts to send local
officials for training in the United States, which eventually led to
an official from Xiamen Customs participating in a USPTO-APEC
meeting in Hawaii last month. Customs officials also said they were
taking part in a nationwide campaign targeting IP infringers and
counterfeiters who use express delivery services to smuggle illegal
products to customers, an area of particular concern for several
major American brand owners in south China. Zhao welcomed increased
cooperation with both the U.S. government and with U.S. rights
holders, whom he said had regularly been invited to train customs
inspectors to identify counterfeit products. Zhao commented that
his agency is best able to work with U.S. officials if Beijing's
General Administration of Customs is included at an early stage of
planning.

GOLDBECK