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Cablegate: Sw China Conference Raises Questions About Progress On

VZCZCXRO4531
PP RUEHGH RUEHVC
DE RUEHCN #0300/01 3462255
ZNR UUUUU ZZH
P 122255Z DEC 09
FM AMCONSUL CHENGDU
TO RUEHC/SECSTATE WASHDC PRIORITY 3625
INFO RUCPDOC/USDOC WASHDC PRIORITY 0030
RUEHOO/CHINA POSTS COLLECTIVE
RUEHCN/AMCONSUL CHENGDU 4338

UNCLAS SECTION 01 OF 02 CHENGDU 000300

SENSITIVE
SIPDIS

DEPT FOR EAP/CM

E.O. 12958: N/A
TAGS: ECON EINV EIND ETRD PGOV KIPR CH
SUBJECT: SW CHINA CONFERENCE RAISES QUESTIONS ABOUT PROGRESS ON
INTELLECTUAL PROPERTY RIGHTS

CHENGDU 00000300 001.2 OF 002


1. (U) This cable contains sensitive but unclassified
information - not for distribution on the Internet.

2. (SBU) Summary. Notwithstanding official optimism, serious
doubts about PRC intellectual property rights protection
progress were voiced by foreign-invested Chinese companies
participating in annual national IPR conference held recently in
Chongqing. One foreign-invested company representative asserted
that organized criminal gangs and possibly officials were
involved in the production of counterfeit goods, noting that
criminals have attacked intellectual property investigators,
causing hospitalization and death. One company representative
asked government officials to allow greater participation by
private enterprises in the legal processes to protect
intellectual property. End Summary.

Government Organizations Emphasize Progress on IPR ...

--------------------------------------------- ---------

3. (SBU) Government officials and industry representatives
gathered November 18 in the southwest Chinese city of Chongqing
for the 2009 National Symposium on Intellectual Property
Protection for Foreign Invested Enterprises. The State
Intellectual Property Office (SIPO), the Chongqing Municipal
Science Commission, and the Chongqing Municipal Intellectual
Property Bureau sponsored the one-day conference. SIPO Deputy
Director Gan Shaoning opened the meeting by emphasizing that
China was making progress on intellectual property (IP) rights
protection, but still had a long way to go. He likened the IP
protection delays China had encountered to a delayed plane
flight to Shanghai; you arrive in Shanghai, but somewhat later
than planned. As evidence that China was making progress on IP
protection, he noted that all related bureaus had increased
their manpower.

4. (SBU) Liu Guanglei, Chongqing Municipal Party Committee
member and Secretary of the Politics and Law Committee,
emphasized the local aspects of IP protection. He said that
Municipal Party Secretary Bo Xilai aimed to make the city a
"model city" for IP protection, which will encourage foreign
investment and encourage rapid economic development. Liu said
that Chongqing seeks to become a base for scientific research
and noted the authorities would continue their crackdown on
counterfeit products. The themes highlighted by Gan at the
national level, and Liu at the local level, were generally
echoed by officials from the General Administration of Customs,
the Supreme People's Procuratorate, and the Public Security
Bureau.

... But Businesses Voice Skepticism of IP Success

--------------------------------------------- ----

5. (SBU) Zhang Weian, the Senior Intellectual Property Lawyer
for General Electric's China operations and the Chairman of the
China Association of Enterprises with Foreign Investment's
(CAEFI) Quality Brands Protection Committee (QBPC), said that
QBPC members believe that counterfeiting is a greater problem
this year than last. Zhang said that some provinces, which he
did not name, refused to receive QBPC's reports on IP. (Note:
QBPC claims to have over 180 multinational member companies
including Texas Instruments, Caterpillar, Tyco Electronics,
Dell, and the National Football League. CAEFI is affiliated
with the Ministry of Commerce. End Note.)

6. (SBU) Zhang said that China's current IP efforts focused too
heavily on patent registration, which does not necessarily boost
innovation or IP protection. He asserted that the focus on
patents may encourage local governments to produce junk patents,
and cited the example of a Shanghai man who filed over 1,000
patents. Zhang stated that, at present, China is not
innovating, but merely accumulating patents. He argued that
China should learn from the Japanese patent and trademark model

CHENGDU 00000300 002.2 OF 002


in order to improve its IP protection.

Gangsters and Possibly Officials Involved in Counterfeiting

--------------------------------------------- --------------

7. (SBU) A QBPC member from Johnson and Johnson claimed that
organized criminal groups participated in the production of
counterfeit goods in China. He said these groups operated from
factories in smaller towns and villages, and that some officials
might also be involved in the production of counterfeits. He
stated that QBPC members had been attacked while attempting to
investigate claims of counterfeit production. Some of the
injuries suffered during the attacks led to hospitalization and,
in one case, death. Some counterfeiters masquerading as police
officers asked investigators to delete video recordings of
counterfeiting operations. (Note: The member provided one
general example of an attack in Hubei province, but did not give
more specifics on other cases. End Note.)

Companies Encourage Improved Intellectual Property Protection

--------------------------------------------- ----------------

8. (SBU) An official from Tyco Electronics said that firms
needed China's help to protect IP, and this protection could
help make China a more innovative center of commerce. The
official said that better IP protection could help businesses
transition from stamping "made in China" on their products, to
boasting that goods were "created in China."

9. (SBU) Another company went further in its recommendations to
government officials. The representative from a golf company
asserted that enterprises should be allowed to participate in
legal proceedings to protect IP. He said that the punishment
for IP infringement is not strong enough, and the legal standard
to prove infringement in court varied across China. The
official said that the courts in some areas required the company
claiming IP violations to supply samples of the allegedly
infringing product. Some penalties and violations depend on the
total weight of the infringed goods, as opposed to the value of
the goods. Moreover, criminal punishment for producers of
pirated goods could be reduced if the infringer paid larger
amount of restitution. The official claimed that an offender
who received a three-year prison sentence for IP violations
could pay larger amounts of restitution to reduce his sentence
to a total of 1-2 years.

Officials Staring Off into Space or Taking Message to Heart?

--------------------------------------------- ---------------

10. (SBU) Government officials involved in the conference read
their prepared opening and closing remarks and appeared only
moderately engaged when QBPC representatives spoke. Liu left
well before all ministry officials had a chance to give their
opening remarks, and did not return for the statements from
private companies. The official from the Ministry of Commerce
appeared particularly disengaged during companies'
presentations, starring off into an opposite corner of the
meeting hall. Gan read what appeared to be his pre-prepared
closing remarks, saying that he had taken note of the comments
made during the different presentations. He then said that the
international community should look at China's IP problems from
a holistic perspective. He said that China is still a
developing country and the international standard for IP
protection is a relatively high bar for China at this time.
BROWN

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