IPR - MOVING THE BALL DOWN FIELD IN ZHEJIANG WITH PATENT

UNCLAS SECTION 01 OF 04 SHANGHAI 000194

SENSITIVE
SIPDIS

USTR FOR CHINA OFFICE - AWINTER, TWINELAND; IPR OFFICE
KALVIREZ; AND OCG - TPOSNER
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
DHS/CBP FOR IPR RIGHTS BRANCH - GMCCRAY
NSC FOR JIM LOI

E.O. 12958: N/A
TAGS: KIPR ETRD EINV EFIN PGOV CH
SUBJECT: IPR - MOVING THE BALL DOWN FIELD IN ZHEJIANG WITH PATENT
PROGRAM

REF: SHANGHAI 59

SHANGHAI 00000194 001.2 OF 004



1. (SBU) Summary: Building on the Consulate's successful
engagement with Zhejiang intellectual property (IP) officials
during a roundtable in January 2009 (reftel),the U.S. Patent
and Trademark Office (USPTO) and China's State Intellectual
Property Office (SIPO) co-sponsored a joint seminar on "How to
File and Enforce Patents" on April 22. The seminar was
organized by the Consulate and the Zhejiang Intellectual
Property Administration (ZIPA). Close to 160 representatives
from both Chinese and U.S. enterprises, law firms and Chinese
government offices attended the program in Hangzhou, capital of
Zhejiang Province. About 80 percent of the attendees
represented Chinese enterprises and law firms; all of those we
spoke with particularly welcomed the opportunity to learn more
about the U.S. intellectual property (IP) system, citing
increased demand to file Chinese patents in the United States.
Continued such engagement with Zhejiang, China's fourth largest
provincial economy, is invaluable for U.S. commercial interests
to ensure the province continues down the path of increased IP
protection. End Summary.



Maintaining Momentum

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2. (U) After the United States filed several IP-related WTO
dispute settlement cases against China in April 2007, Zhejiang
effectively closed off all collaboration with the U.S.
Government on IP issues for close to two years. Cooperation
with U.S. business organizations, however, continued
sporadically. After the Consulate's continuous efforts to
revive relations, Zhejiang finally agreed to hold a roundtable
in January 2009 between Consulate officials and Zhejiang
provincial IP-related administrative, enforcement and judicial
agencies. During the roundtable, officials welcomed further
cooperation, expressing a particular interest in ways to help
Zhejiang companies better understand the U.S. IP system.
Following the meeting, USPTO and SIPO agreed to co-sponsor a
program in the province designed to provide practical
information on filing and protecting patents in both China and
the United States. After getting the green light, the Consulate
and ZIPA worked closely with USPTO and SIPO to develop a
comprehensive program. Program attendees and speakers hailed
not only from Zhejiang (majority of attendees) but also included
a scattering of law and company representatives from Jiangsu and
Anhui Provinces, Shanghai, Beijing, and the United States.



Collaboration from Both Sides

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3. (U) The Consul General kicked off the April 22 program with
remarks about the role of patents in the United States, noting
Zhejiang's efforts on patent filing and protection, and
encouraging further collaboration on IP issues. (Note: Econoff,
Entry Level Officer from Consular Section, and USPTO IPR
Specialist also participated throughout the program.) Wang
Xiaowei, Deputy Director General of the International
Cooperation Department of SIPO said that a great deal of Chinese
innovation in science and technology is originating from
Zhejiang and noted the importance of broadening the strategic
thinking of Zhejiang-based companies on IP issues. Following
his remarks, ZIPA Director General Chen Zhijun said that with
the global economic downturn, local businesses are working to
develop new markets and new strategies to turn the crisis into
an opportunity, and IP is a integral part of their strategy. He
also emphasized that the U.S. IP system is still largely
unfamiliar to Zhejiang companies, and they want to build their
knowledge on how to file and enforce patents in the United
States. Zhang Meizhen from SIPO's Patent Reexamination Board

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outlined and clarified procedural details on the processes for
patent applications, invalidations and reexaminations. Jasmine
Chambers, Director of the Technology 2900 Center at USPTO,
contrasted the U.S. application and reexamination system to that
in China.




4. (U) During the second panel, representatives from three U.S.
law firms, which have extensive experience in China, discussed
corporate filing strategies and provided tips and practical
information on how to file patent application at USPTO and SIPO.
Jones Day Partner Tony Chen pointed out ways in which Chinese
companies can use patents to achieve their business goals in the
United States, which might not be available in China. Shook
Hardy Partner Tom Moga noted the tremendous increase in Chinese
understanding of patent issues since his original visit to China
in 1997 when he taught patent law to Chinese students. He also
addressed Patent Law revisions that will take effect October 1,
2009, saying one of the key areas for concern is the new
requirement (Article 27) for a brief description of the design
application. He expressed concern that the brief description
may prove limiting and disadvantageous in the event of patent
litigation. Wilson, Sonisni, Goodrich and Rosati Partner Zhou
Wei spoke of his previous experience as a corporate IP counsel,
advised companies to use patents to generate economic value and
not just protect technology and innovation. He also offered
patent portfolio strategies that Chinese companies may consider
when going abroad.




5. (U) The second half of the program focused on protection and
enforcement of patents in both countries. Finnegan Henderson
Farabow, Garrett and Dunner Managing Partner Esther Lim
discussed the process for handling patent infringement cases in
the United States. She encouraged Chinese companies to use U.S.
ITC litigation as a tool for patent protection. ZIPA Officer Lv
Wenge provided details on how to enforce patents using China's
administrative and civil system. He noted that Zhejiang now has
six intermediate courts, and in 2008 there were a total of 1,634
IP civil cases in Zhejiang, 215 of which involved foreign rights
holders. Approximately 99 percent of the cases involving
foreigners were decided in favor of the foreign party. However,
he cautioned that there is still significant risk for foreigners
in litigating patent cases in the province, citing the April 15
Chint/Schneider case resolution in which the two parties settled
for USD 23 million. (Chint, a Zhejiang electronics company, won
the first instance trial against the French company Schneider
for USD 45 million in damages.)




6. (U) In a separate panel covering practical tips on patent
enforcement, Schwabe, Williamson, and Wyatt Partner Skip Fisher
discussed how to initiate a Section 337 action in the United
States, and urged Chinese companies to take warning letters
seriously to avoid charges of "willful infringement. " Founding
Partner An Xiaodi from Tian Zhang and Partners, a Beijing-based
IP firm, believed that contrary to popular opinion, Chinese IP
court cases are determined more by the weight of evidence rather
than "guanxi" or relationships. However, he noted the
difficulties of establishing IP cases outside of Beijing and
Shanghai, as well as challenges litigants face in requesting
courts to collect and preserve evidence. Judges have little
power and are often hesitant to compel others to produce
evidence. He however noted that in the Chint/Schneider case the
judge actively collected evidence on behalf of Chint. An also
emphasized that courts generally do not put much weight on
testimony because of widespread lack of witness veracity.
(Comment: Several attendees noted the boldness of such a
statement by a Chinese lawyer in the presence of Chinese
government officials and foreigners.) Jones Day Partner
Benjamin Bai noted Chinese companies generally fear litigation
in the United States because of the huge costs associated with
going to trial. He encouraged Chinese companies not to avoid
litigation in the United States as a means to protecting their
IPR, pointing out that 86 percent of U.S. patent disputes

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eventually get settled out of court and only 3 percent of
adjudicated cases actually go to trial. Each of the panels
concluded with lively question and answer sessions with
companies raising individual concerns about courts accepting
their cases and confidentiality.



Reaction from Participants and Attendees

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7. (SBU) ZIPA Deputy Director Wu Jian said that the conference
"enhanced the possibility of success for Zhejiang companies
pursing litigation in the United States. " Hangzhou Motorola
Cellular Equipment Legal Manager Robert Yao praised the
conference as "the highest quality IP seminar he had ever
attended" because of its comprehensive scope and practical tips
offered by the speakers. Hangzhou-based partner and patent
agent Wang Bin from Tian Zheng Patent and Trademark Attorneys
praised the "nuts and bolts" program on patent filing as very
practical and useful and hoped for more such seminars in the
future. He added that he attended so that he could better serve
the needs of an increasing number of clients who are seeking to
file patents in the United States. Zhejiang companies are
"waking up" to the need to file abroad, particularly as they
look for new markets outside China's borders.




8. (SBU) Patent Consultant Liu Zonghao from the Hangzhou
Jizhong Intellectual Property Agency said the speeches gave him
ideas about how to solve some problems that his clients are
currently facing. He added that such an event is also a good
forum for Chinese firms to exchange ideas and voice concerns to
their own government officials in attendance. He would gladly
attend more such programs if given the chance. Finance Director
Chen Laiqian from Interplex China, a Hangzhou electronics
company, said the program was very useful in helping him to
understand how to manage an IP system inside his company. Vice
Director of the Hangzhou Feng He Patent Attorneys Office Wang
Xiaofeng said hearing practical tips on patent registration and
enforcement from U.S. lawyers on their own system was especially
beneficial.



Continued IP Engagement Crucial for U.S. Interests

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9. (SBU) Comment: Continued engagement on IP issues with
Zhejiang Province is critical for U.S. commercial interests in
China. Zhejiang is China's fourth largest provincial economy
(USD 314 billion GDP in 2008) and a key market for U.S.
companies. There are over 4,700 U.S.-invested projects in
Zhejiang, and the United States remains among Zhejiang's top
investors. Prominent U.S. businesses in Zhejiang include
General Motors, Merck, Motorola, and General Mills. However,
the province has historically been a center for trade in
counterfeit goods. It is also home to China's largest "small
commodities" wholesale market and distribution center in Yiwu.
Although the province, including Yiwu, has made significant
progress in beefing up IP protection, the Quality Brands
Protection Committee, an industry group that represents a
wide-range of rights holders (including American firms),still
ranks the province as one of the top two areas for concern on IP
protection in China.




10. (SBU) Since Zhejiang's economy is heavily export-oriented
and many Zhejiang enterprises have expressed interest in
investing in the United States, holding such capacity-building

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programs is an ideal way to strengthen our relationship with the
province on IPR. These events not only provide U.S. rights
holders practical information on how to protect their IP in
China and direct access to Zhejiang IP officials, but also help
build a constituency of Chinese companies that can urge better
IP protection in China. The innovative spirit of Zhejiang's
many small and medium size private enterprises, which account
for 70 percent of the province's economic volume, 50 percent of
GDP and 90 percent of total employment, is already alive and
well - Zhejiang ranks third among provinces in China for the
number of patents filed and granted. Now, as Zhejiang companies
become more skilled at protecting their IP at home and abroad,
they will undoubtedly become stronger allies in the fight to
strengthen overall IP protection in the province.




11. (U) USPTO has cleared this report. The Consulate General
reiterates its thanks to USPTO for its support and expert
participation in this event.
CAMP