Cablegate: South China Ipr: Visiting Us Federal Judge and Prosecutor

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RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0625/01 3030851
ZNR UUUUU ZZH
R 290851Z OCT 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 7657
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHIN/AIT TAIPEI 9517
RUEAUSA/DEPT OF HHS WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
RHMCSUU/FBI WASHINGTON DC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 03 GUANGZHOU 000625

SIPDIS

State for EAP/CM - SFlatt; EEB - JUrban
State for INL - JVigil
USTR for China Office - AWinter; IPR Office - RBae; and OCG -
SMcCoy
Commerce for National Coordinator for IPR Enforcement
Commerce for CIsrael
Commerce for MAC 3204/ESzymanski
Commerce for MAC 3043/McQueen
Commerce for MAC 3042/SWilson, JYoung
Commerce for NWinetke
LOC/Copyright Office - MPoor
USPTO for Int'l Affairs - LBoland, EWu
DOJ for CCIPS - MDubose
DOJ for SChembtob
FTC for Blumenthal
FBI for LBryant
DHS/ICE for IPR Center - DFaulconer, TRandazzo
DHS/CBP for IPR Rights Branch - GMcCray, PPizzeck
ITC for LLevine, LSchlitt

E.O. 12958: N/A
TAGS: ETRD KIPR ECON PGOV CH
SUBJECT: South China IPR: Visiting US Federal Judge and Prosecutor
Help Open Doors

REF: A) GUANGZHOU 438, B) 2007 GUANGZHOU 1241

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

1. (U) Summary: Conventional wisdom says that judges can talk with
judges, police can talk with police. During a PTO-sponsored two-day
program in south China, a Senior U.S. District Judge and a
Department of Justice (DOJ) Prosecutor talked with both, and
students too, sharing ideas on how to protect intellectual property
rights and building on previous exchanges. Appellate courts for
Guangdong Province and Shenzhen City and the U.S. visitors discussed
common challenges as well as specific concerns of U.S. rights
holders, such as the valuation of infringing goods. The visiting
U.S. officials were impressed by the strong understanding of U.S.
copyright law and recent cases of students majoring in IPR at the
South China University of Technology. In addition, the Director of
the Shenzhen Economic Crimes Investigation Division (ECID) called
for increased bilateral law enforcement cooperation, especially in
cases of Chinese economic crimes where defendants flee to other
countries like the U.S. and Canada. End summary.

Guangdong High Court Welcomes Visit
-----------------------------------

2. (U) Senior U.S. District Judge Ronald Lew and DOJ Prosecutor
Matthew Bassiur held productive exchanges during their two-day
program sponsored by the Guangzhou branch of the U.S. Patent and
Trademark Office (PTO). (Note: Mr. Bassiur serves in a specialized
IPR prosecution unit of the Department of Justice, the Computer
Crime and Intellectual Property Section or "CCIPS." End note.) The
visit to the Guangdong High Court built on the July visit by other
U.S. jurists (ref A). Participants on both sides learned that Judge
Lew's Central California Federal District faces similar challenges
to those faced by the Guangdong High Court, as each handles their
respective country's largest IPR caseloads. Guangdong High Court
Chief IPR Judge Lin Guanghai said that the 4,000 IP cases filed each
year in Guangdong represent 20 percent of the total IP cases filed
annually in all of China.

Students Show Understanding of U.S. IPR Law
-------------------------------------------

3. (U) In a presentation to students majoring in Intellectual
Property Rights at South China University of Technology's (SCUT)
School of Law, DOJ Prosecutor Bassiur emphasized the value of having
prosecutors play an integral part at every stage of a police
investigation, as is the practice in the United States. China's
system currently gives police almost sole discretion for
investigating a case and gathering evidence before transferring
everything to prosecutors, who make a final decision about whether
to take it to court. U.S. rights holders frequently complain that
the current law enforcement/prosecutor divide means that completed
investigations often are not tried because prosecutors have no
personal stake in a case when it is submitted to them for trial. In
addition, rights holders say they cannot communicate with
prosecutors to learn why specific cases are not tried, leaving them
with no recourse when trying to seek legal remedies for infringement
of their intellectual property.

GUANGZHOU 00000625 002 OF 003

4. (U) Note: Judge Lew commented afterwards that he was impressed
with the students' familiarity and understanding of applicable U.S.
law and recent decisions. Thirty graduate and undergraduate
students participated in the joint seminar program. SCUT Party
Secretary, Professor Sun Guozhong, as well as several prominent IP
professors also participated in the event, and joined in the
question-and-answer session. The school currently enrolls 100
students in its IPR program, with approximately 80 undergraduate
students and 20 students in graduate and post-graduate programs.
End Note.

Shenzhen Courts Discuss Valuation of Infringing Goods
--------------------------------------------- --

5. (U) In a broad discussion of the differences between the handling
of U.S. and Chinese IPR cases with Judge Huang Guoxin, President of
Shenzhen Intermediate People's Court and some of his colleagues, the
officials explored key differences in the valuation of counterfeit
and infringing goods in Chinese IPR cases. The Shenzhen judges
described a system that initially sounded very similar to U.S.
procedures. However, further discussion revealed what many U.S.
rights holders have found most troubling: China's courts and
enforcement agencies enjoy wide latitude when deciding how to value
the infringing goods. The Shenzhen judges said that proof of
illegal sales volume and illegal income are the most important basis
for valuations in Shenzhen. U.S. rights holders find this
troublesome because the Chinese courts' lack of a formal evidence
discovery process means that U.S. firms often fail to find
sufficient evidence of illegal income to meet civil and criminal
thresholds in many IPR cases (ref B).

6. Note: (U) The specialized IPR tribunal of the Shenzhen
Intermediate People's Court was established in 1994. It represents
one of China's earliest moves towards specialized IPR courts. The
Shenzhen court system currently employs 756 staff -- including 7
"grassroots" courts reporting to the Intermediate Court. The entire
caseload totals 140,000 per year, of which 27,000 cases are handled
by the Intermediate Court. The Intermediate Court's IPR Tribunal is
composed of 10 judges and 11 clerks who are divided among
specifically designated civil and criminal courts. Judge Ye Ruosi,
Chief Judge of the IPR Court, said 1,005 IP cases were heard in
2007, which is above the average of 800 to 900 cases in recent
years. Patent cases accounted for the largest share. End Note.

Shenzhen ECID Wants Increased International Cooperation
--------------------------------------------- --

7. (U) Li Hong, Deputy Director General of the Shenzhen Public
Security Bureau, said the Shenzhen government is working hard to
improve IPR protection. Li described several cases from the last
few years in which his division cracked major counterfeiting
operations that involved international rights holders like
Microsoft, IBM, Louis Vuitton and Cisco. Li said Shenzhen leaders
and law enforcement personnel are convinced that without effective
IP protection, foreign investors will leave, which would be
detrimental to the city's efforts to establish an identity as
"Shenzhen, capital of investment." ECID has implemented several
community outreach and education programs in order to help reduce
demand for infringing products, while continuing to investigate and
prosecute individual cases. Li also expressed hope for increased
bilateral law enforcement cooperation, especially in cases where

GUANGZHOU 00000625 003 OF 003

fugitives have fled to the United States, Canada and other
countries. Li said Shenzhen ECID has 42 cases in which criminals
have fled to other countries and the Chinese public does not
understand why local authorities cannot bring these criminals to
justice.

8. (U) Li has been head of Shenzhen ECID for almost four years,
after previously serving as a prosecutor for 14 years. Shenzhen
ECID was formed in 2002 and currently employs 300 officers, with 182
at headquarters and 120 officers spread among the city's six
districts. In addition to investigating IPR-related cases, the
division also handles tax crime, corporate crime, money laundering
and financial crimes.

GOLDBERG

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