ANHUI OPENS THE DOOR TO COOPERATION ON IPR

UNCLAS SECTION 01 OF 04 SHANGHAI 000132

SENSITIVE
SIPDIS

EMBASSY ALSO PASS WUHAN
USTR FOR CHINA OFFICE - AWINTER, TWINELAND; IPR OFFICE - RBAE; OCG - TPOSNER

DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - WPAUGH
DOC FOR ITA/MAC: SZYMANSKI
LOC/COPYRIGHT OFFICE - STEPP
USPTO FOR INT'L AFFAIRS - LBOLAND
DOJ FOR CCIPS - TNEWBY
FBI FOR LBRYANT
DHS/ICE FOR IPR CENTER - DFAULCONER
DHC/CBP FOR IPR RIGHTS BRANCH - GMCCRAY
TREASURY FOR OASIA - HAARSAGER, WINSHIP
NSC FOR LOI, SHRIER

E.O. 12958: N/A
TAGS: EFIN EINV ETRD KIPR PREL CH
SUBJECT: ANHUI OPENS THE DOOR TO COOPERATION ON IPR

SHANGHAI 00000132 001.2 OF 004



1. (SBU) Summary: On February 10, Anhui Province opened the
door to cooperation on intellectual property rights (IPR) with
the United State by holding a roundtable at the Consulate's
request. The meeting was a breakthrough for the Consulate,
representing the first engagement on IP issues with the province
after numerous requests in recent years. Although IP protection
in the province appears to be at a beginning stage, Anhui's
effort will become increasingly important as U.S. companies
increase investment in Anhui and counterfeiters driven from
neighboring provinces search for new places to establish
operations. The roundtable included representatives from the
Anhui IP Administration, Copyright Bureau, Administration of
Industry and Commerce (AIC),Public Security Bureau (PSB) and
High Court, who outlined their efforts to strengthen IPR
protection in the province. Anhui IP officials warmly welcomed
the idea of cooperating on more IP-related programs and
exchanges. IP Administration officials noted their efforts
boost people's IP awareness and encouraged more patent filing.
AIC officials said that over 90 percent of trademark cases were
ex officio and urged U.S. rights holders to be more proactive in
filing complaints. The Copyright Bureau emphasized their
achievements on software protection and clamping down on
internet-related IP infringement. PSB noted that IPR criminal
cases have decreased in recent years and attributed this to
"increased IP awareness in the population." On civil cases, an
Anhui High Court judge noted there has been a steady increase in
IPR-related civil cases, but most were relatively small in
scale. End Summary.

Further Cooperation with the United States Welcome
-------------- --------------


2. (SBU) Anhui IP Administration (AIPA) Director General Dong
Rong regretted that the province had not been as actively
involved in international cooperation on intellectual property
rights issues as Shanghai and neighboring Jiangsu Province. He
welcomed increased engagement on IP issues and expressed his
desire for more regular communication with U.S. IPR officials.
He noted that the province is planning to hold an IPR roundtable
for foreign-invested companies. After hearing of U.S. Patent
and Trademark Office (USPTO)-sponsored "how-to-file" trademark
and patent programs that are being planned for other provinces
in China, Anhui AIC Trademark Office Director Liu Guojian
expressed a strong interest, saying that Anhui would highly
benefit from such programs. (Note: The two programs are aimed
at boosting the understanding of local rights holders on how to
file patents and trademarks both in China and in the United
States. End note.) Other Anhui officials attending the
February roundtable also added to the call for further
cooperation and exchanges with the United States on IP issues
and offered suggestions, including more roundtables and meetings
with visiting Washington officials or other U.S. IPR experts.

Promoting IPR Awareness and Encouraging Patent Filing
-------------- --------------


3. (SBU) Director General Dong said that AIPA placed great
emphasis on disseminating IP knowledge and promoting IP
awareness, including providing training courses for university
students and organizing promotion activities on World IP Day.
The province expanded its patent subsidy policy from the city
level to the county level to encourage more patent applications.
As a result, the number of patent applications increased 71.5
percent from 2007 to 10,409 in 2008. The rate of increase in
patent applications ranked second among all provinces in China,
Dong added. AIPA opened a patent application receiving office
under the auspices of the State IP Office (SIPO) on December 17,
2008 for the convenience of applicants. (SIPO in Beijing is the
only government unit that can officially examine patent

SHANGHAI 00000132 002.2 OF 004


application in China. However, currently there are 25 patent
application receiving offices in different provinces to receive
patent applications and fees for the convenience of local
applicants.) To facilitate the commercialization of patents,
the province established three patent "trade and exhibition
centers." Dong added that AIPA is drafting implementing
regulations for the National IP Strategy for use by Anhui
administrative agencies.


4. (SBU) DG Dong further explained that AIPA has a close
working relationship with other IPR authorities in Anhui. From
January 2006 to December 2008, AIPA organized 21 joint
enforcement actions with the Anhui AIC and the Anhui Copyright
Bureau. With the support of the PSB, patent offices in Anhui
conducted several special enforcement actions and handled 76
patent transfers from January 2006 through December 2008 (patent
transfers: the company who sold goods without patent granted
claimed that their goods were patented). Patent officers in
Anhui handled 7 patent infringement cases in 2008. Dong said
that AIPA also participates in two inter-provincial IP
cooperation systems. One is the East China IP Cooperation
System including Anhui, Shanghai, Zhejiang, Jiangsu and Fujian.
The other is the mid-China IP Cooperation System, including
Anhui, Jiangxi, Henan, Hubei, Hunan and Shanxi.

IP Complaint Centers Find a New Home
--------------


5. (SBU) Dong also noted that the national telephone IPR hot
line number might change from 12312 to 12330 because the
responsibility has been changed from the Ministry of Commerce to
the State Intellectual Property Office (SIPO). Currently,
callers can dial 12312 anywhere in China to file an IP-related
complaint with IPR Complaint Centers located throughout the
country. To mirror the change at the national level, AIPA will
take charge of the Anhui Complaint Center, which is currently
under the supervision of the Anhui Market Order Rectification
Office.

Trademarks - High Percentage of Ex-Officio Cases
-------------- ---


6. (SBU) Anhui Administration of Industry and Commerce (AIC)
Trademark Department Director Liu Guojian pointed out that less
than 10 percent of total trademark cases were filed by right
holders - the remainder of the cases were ex-officio. The
province handled 1,903 trademark cases in 2008, most of which
were low value cases. Among these cases, only 105 (5.5 percent)
were foreign-related. He emphasized that the province attaches
special importance to foreign-related cases and wants to
actively work with foreign rights holders to ensure their rights
are protected. He noted that U.S. rights holders generally do
not file cases with Anhui AIC offices and asked the Consulate to
encourage U.S. companies to more actively use Anhui's
administrative enforcement system. He also recommended that
U.S. companies follow Japanese companies' example of holding
seminars for Anhui IP enforcement officials on how to
differentiate counterfeit goods from legitimate goods. He said
that this practice greatly helps administrative and enforcement
agencies detect counterfeits and raises the awareness of foreign
brands.


7. (SBU) On IP protection at trade fairs, Director Liu
explained that the local AICs are responsible for ensuring the
trade fairs within their jurisdictions are free of counterfeit
goods. To combat infringement, Liu explained that Anhui
initiated the "trademark authorization system" at wholesale
markets in 17 cities in 2008. Under the system, vendors must
show trademark registration certificates or authorization

SHANGHAI 00000132 003.2 OF 004


certificates prior to market entrance. AICs in Anhui will
expand this experimental system to all markets of the province
in 2009.

Proud of Anhui's Software Copyright Protection
-------------- -


8. (SBU) Anhui Copyright Bureau Copyright Department Director
Wu Anming outlined the province's efforts to protect copyrights,
highlighting the department's achievements in software copyright
protection and cracking down on internet-related infringement.
All "upper level" government offices in Anhui now use legitimate
software. In addition, the province is now focusing on urging
companies, particularly state-owned enterprises, to follow suit.
The province requires the pre-installation of software before
any computer can be sold to the public. To facilitate this
work, enforcement agencies have signed contracts with management
departments of big shopping malls. Shopping malls have in turn
signed contracts with lessees. In total, Anhui copyright
bureaus confiscated over 80,000 pirated optical discs in 2008.
Wu said that representatives from Microsoft recently sent a
banner to the Anhui Copyright Bureau in recognition of Anhui's
"effective enforcement," which increased the use of legitimate
software in Anhui.


9. (SBU) Director Wu noted that in 2008 Anhui copyright bureaus
handled a total of 11 internet infringement cases and
transferred one case for criminal enforcement. In June 2008,
Anhui held a seminar on IP protection on the internet with the
National Copyright Administration. The International Federation
of Phonographic Industry (IFPI) and the Motion Picture
Association of America (MPAA) attended the seminar. In July
2008, the Anhui Copyright Bureau started to "supervise" local
well-known websites and reach out to companies if violations
were found.


10. (SBU) According to Wu, textbook piracy in Anhui has
decreased markedly in recent years. Anhui copyright bureaus
strengthened management and held courses to train textbook
providers and university staff on copyright protection. Wu
underscored that the province has also spent a great deal of
effort on protecting its own folklore, such as Huanmei Opera.

Criminal Enforcement - A Slowdown in Cases
--------------


11. (SBU) The Anhui Public Security Bureau Economic Crime
Investigation Division (ECID) Political Commissioner Chen
Xunzhang said that in 2008, the province investigated 82
IP-related criminal cases worth 12 million RMB (USD 1.8
million). Of the 2008 cases, 55 cases had been closed (as of
our discussion on February 10) and 40 suspects had been
detained. There were about 300 IP-related criminal cases
investigated in 2006 and 130 cases in 2007. Chen attributed the
decrease in criminal cases to the "increased IP awareness" among
the general population in Anhui.


12. (SBU) Anhui PSB ECID officer Fei Guangdong discussed about
the "Shanghai Initiative, " which allows PSB to begin
investigations based on credible evidence, rather than waiting
for a rights holder to first prove a criminal threshold has been
met. Fei was dubious that such an initiative would be
effective, saying that if the case has not met the criminal
threshold, the investigation by PSB would be restricted. For
example, the PSB could not freeze accounts before the case was
established.

Civil Cases on the Rise
--------------

SHANGHAI 00000132 004.2 OF 004




13. (SBU) Anhui High Court Third Civil Division Deputy Director
Zhang Kun said Anhui had 430 first instance civil IP cases in

2008. There were a total of 545 civil IPR cases in 2006 and
2007 combined. Although the number of civil cases per year was
on the rise, most cases were relatively small in value,
according to Zhang. Patent cases took the lion's share,
accounting for one third of all cases, followed by copyright
cases. In 2008, there were eight cases involving foreigners,
representing an increase of 60 percent over 2007 (five cases).
From 1999 through 2008, the province handled 1935 civil IP cases
in total. Zhang said some new types of cases had emerged in
recent years, including cases on new plant varieties and
copyright infringement on the internet. Cases filed in Hefei
courts (Hefei is the provincial capital) accounted for 52
percent of Anhui Province's case load. Zhang assured that the
province has a strong record of enforcing verdicts in IP civil
cases. He attributed this to the fact that 70 percent of cases
were handled through mediation. According to Zhang, there have
been no IP case retrials in the province.


14. (SBU) Deputy Director Zhang said that Anhui has no special
IP tribunal combining the adjudication of civil, criminal and
administrative cases. However, the province is researching the
possibility of establishing a special IP tribunal. Zhang said
there are currently 112 IPR judges in Anhui. More than 95
percent of them hold a bachelors degree, and 20 percent of them
hold a masters degree. The Anhui High Court regularly holds
courses to train IPR judges and published several guidance
regulations on IP case adjudication, including the Implementing
Regulation on the National IP Strategy for use by Anhui courts
published in December 2008. Zhang pointed out that Anhui was
the first province to establish a system of hiring outside
experts as consultants for technical issues in IP case trials.
Anhui courts are also boosting transparency through several
measures such as holding media conferences and publishing IP
case decisions on the internet. The province has published 90
percent of recent IP civil case judgments on the internet, said
Zhang.

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


15. (SBU) Although Anhui, with a per capita GDP of USD 2,085,
is the poor step-sister of Zhejiang and Jiangsu (per capita GDPs
of USD 6,078 and USD 5,700 respectively),Anhui's efforts to
boost IP protection are increasingly important. Growing numbers
of major companies are setting up operations in the province;
currently more than 40 Fortune 500 companies have facilities in
Anhui. Leading U.S. presences include FedEx, Wal-Mart and
Johnson Controls. At the same time, U.S. rights holders and
investigative companies have said that counterfeiters are
increasingly moving to more rural areas such as Anhui and
northern parts of Jiangsu Province as more affluent
jurisdictions in the Yangtze River Delta become more effective
in shutting down counterfeiting operations. While Anhui's
capacity and experience in IP protection seem to be in nascent
stages, the province is beginning to move in the right
direction. Moreover, the recent willingness of Anhui to engage
with the United States on IP protection is a good sign that the
province is beginning to understand the global nature of the IP
problem.
CAMP