Shenzhen Netac sues Texas PNY Technologies for patent infringement

No, I did not put the protaganists in the title in the wrong order.

Xinhua Online covers the story of Netac, a Shenzhen based flash-memory card producer that said is has filed a lawsuit against U.S. competitor PNY Technologies for alleged infringements of one of its patents. Read more here

Roger Parloff from Fortune Magazine wrote: “In its home court in Shenzhen the litigious maker of OnlyDisk flash memory drives has already brought patent suits against domestic competitor Beijing Hua Qi, Taiwanese manufacturer Acer and Japans Sony. (Hua Qi lost in June 2004 but has appealed; Acer settled; the Sony suit is in an early phase.) Netac chief executive Deng Guoshun has also rattled sabres in the Chinese press in recent years, warning the likes of SanDisk, Dell (Research), Hewlett-Packard (Research), and Apple (Research) (which uses flash memory in its iPod Shuffle and Nano) that Netac is investigating possible infringement by them as well.” Read more here.

Peter Zura’s Two-Seventy-One Patent Blog has a good post about it called ‘Man Bites Dog’ here.

Since there has been an explosion of Chinese companies filing patents, see here, this may be a preview of things to come.

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Microsoft’s New China Strategy: Soft on Users of Pirated Software, Hard on Pirates

Sarah Schafer wrote an article about ‘Microsoft’s Cultural Revolution’ in China for Newsweek.

Ninety percent of Microsoft products used in China are pirated, and for years the company battled back with its signature mix of bullying and intimidation. But in China the government has been sympathetic to the pirates, openly hostile to the Microsoft monopoly and officially embraced Linux, the free rival to Windows.

Microsoft’s new strategy to fight piracy is:

  • to improve customer support for big Chinese companies;
  • help Beijing develop a domestic software industry trained on and tied to Microsoft products;
  • share more technology than it normally would;
  • ease up on buyers of pirated software;
  • don’t ease up on pirates.

Read more here.

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Bejing Painter Sued China Unicom for Copyright Infringement

Beijing painter Zhao Chengwei sued China Unicom and its subsidiary Guangxi Unicom. Beijing No.2 Intermediary People’s Court will rule on this alleged copyright infringement case, according to www.chinanews.com.cn.

Guangxi Unicom used Zhao’s drawings on its IP telephone cards without his permission in July 2005. The drawings were profiles of characters from Cao Xueqin’s Dream of the Red Chamber, one of China’s most famous novels. Zhao contacted China Unicom and Guangxi Unicom, but did not receive a satisfactory answer. Zhao is seeking a public apology and 730,000 Yuan in compensation from China Unicom.

Source Pacific Epoch.

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TGIF


Forbidden fruit

John Pasden, who is blogging about life in China on Sinosplice, shot this picture: ‘pure Nalencia Sunkist orange’. Of course Nalencia is not a place in Spain, but in, well … China?

Pirated fruit, photo by John Pasden

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AT Kearney on counterfeiting: ‘All Eyes are on China’

AT Kearney has published The Counterfeiting Paradox, a 4-page analysis on IP in China.
It says that although counterfeiting is illegal in China, in 2004 it added an estimated 8 percent its GDP. In a figure the learning curve of the counterfeiting industry is nicely illustrated

According to AT Kearney the problems are that:

  • the Administration of Industry and Commerce (AIC) has a conflict of interest. It has to fight IP infringement, but it is investing its funds in establishing wholesale markets and collects rent drom wholesale distributors (IP Dragon: including the counterfeiters). The AIC issues business licenses to proprietors and once a business is up and running, the agency collects management fees.

For example “the AIC of Yiwu has invested millions of dollars in constructing the wholesale markets that sell counterfeit goods.

  • counterfeiting is hard to prove;
  • enforcement is lengthy and costly;
  • there are too few trained IP prosecutors;
  • Sanctions are too lenient, thresholds to quantify and qualify IP piracy as a criminal offense are unclear and the maximum sentences are rarely given’;
  • Local leaders are evaluated by an economic performance measurement system, which does not take counterfeiting into account.

Because counterfeiting is following economic laws, eliminating economic obstacles will increase IP infringement:

In recent years, China eliminated state trading companies’ monopoly on export rights. So now counterfeiters don’t have to find a state trading company to export their goods.

AT Kearney is seeing the elimination of restrictions on export privileges with the power of the internet as a katalyst of more counterfeiting goods. When trading barriers will be reduces more counterfeiting more counterfeiting can be expected.

AT Kearney, however, is seeing more more intense clamping down on IPR violations in the future:

  • because of the WTO members’ pressure. China will accelerate the build-up of its legal infrastructure;
  • The state council set up a shared communications system among regulatory bodies;
  • The People’s Congress also amended the Laws of Patents, Trademarks and Copyrights;
  • China’s Supreme Court has issued detailed interpretations of the laws;
  • SIPO has updated regulations;
  • Customs agency signed an anti-counterfeiting memorandum with the China Association of Enterprises with Foreign Investment for Imports and Exports;
  • AT Kearney expects more involvement by public security bureaus.

Last but not least, AT Kearney made the point that a central leadership that cannot enforce IP infringement by controlling their local governements to do so is a big danger for China’s economy and thus to the world’s economy.

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Human face of IP pirates

Kristi Heim looked ‘inside the teeming world of fake goods’ for the Seattle Times, you can read at the site of ContraCostaTimes here.

In the article the difference between the national efforts to enforce IPR piracy and the local resistance is highlighted:

But thanks to the advance warning, the lackadaisical inspection was as inauthentic as many of the products at Xiangyang. By the next week, the fake designer goods were back on the shelves. Business for Huang and the others returned to normal.

Heim is giving the IP pirates a human face, not to justify their behaviour, but to explain their motives. However, it’s easier to give a find small time hawkers to give a face to, than to multimillion yuan piracy tycoons.

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Attend ‘Protecting IPR in China’ webcast featuring Mark Cohen

February 24th, you can attend a webcast organized by the US Council for International Business (USCIB), featuring Mark Cohen, Intellectual Property Attaché for the US Embassy in Beijing.

There may be no greater challenge to foreign investors in China today then protecting intellectual property rights (IPR). While China’s IPR legal framework is widely recognized as sufficient, enforcement remains a continuing source of disappointment. In the last six months; however, several long simmering IPR cases have been decided in favor of foreign investors in Chinese courts. The question is, are these isolated victories or the first harbingers of change?

Sounds interesting to you? You can register here.

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Chinese IP infringement: “This is not only breaking the law, but resembles drug addiction”

Zhang Yuqing, a law expert with China’s World Trade Organization negotiation delegation, at Sino-U.S. business forum is describing piracy as an addiction.

Read more here.

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SIPO Commisioner is Emphasizing Importance of Innovation and Thus IPR

In an interview with China’s government website Tian Lipu, commissioner of SIPO stressed the importance of innovation. According to Tian China should shed its focus on workshop of the world. Innovative technology is what China needs and IPR can protect is. Tian answered in reply to a question about the controversial Pfizer case (read more here): “We are confident that Chinese judicial authorities will handle the case in accordance with laws.” All in all, Tian was not saying anything unpredicatable.

Read Shanghai Daily’s take on Beijing Time’s take on Xinhua’s take on the interview of www.gov.cn here.

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Mertha’s Institutional Approach to Chinese IP Enforcement and Solution: Pressure by Foreign Companies

James F. Paradise wrote an excellent review about Andrew C. Mertha’s book, ‘The Politics of Piracy: Intellectual Property In Contemporary China’ for AsiaMedia of the UCLA Asia Institute.

If you are bit tired reading about cultural and historical factors as an explanation to China’s lack of IP enforcement and you do want to focus more on institutional factors than on the judicial and legal issues, Mertha’s book may be of interest to you.

Paradise wrote to illustrate about this focus:

An important part of the book explains variation in protection of different types of intellectual property. According to Mertha, trademarks in China have generally fared better than patents or copyrights. This, he explains, is due to the fact that two organizations have been involved with trademark enforcement — the Administration for Industry and Commerce (AIC) and the Quality Technical Supervision Bureau (QTSB) — and their administrative reaches extend deep into localities, to the county level in the case of the QTSB and to the township level in the case of the AIC.

Paradise is critisizing Mertha for his exclusive focus on action, instigated by foreign companies, at the local level and is forgetting about the national level. Since both levels are important Paradise is right. So who is going to focus on the national level? I hope James Paradise is feeling the call.

Read the review here.

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Managing Intellectual Property Briefing China February

Howard H.L. Tsang of Wilkinson & Grist is briefing about 3 topics for Managing Intellectual Property.

Firstly, Tsang wrote about the continuing legal struggle over Beijing Silk Market:
Last December 2005, Beijing No. 2 Intermediate People’s Court ruled that Beijing Xiushi Haosen Clothing Market Co Ltd., the landlord of Beijing Silk Market was an accomplice in IP infringement.

By renting space to the operators, the landlord was “willfully providing convenient conditions” to them and thus in breach of Art 50(1) of the Implementing Regulations of the Trade Mark Law.”
Now the landlord is appealing the ruling, “because it is not an enforcement body and has no duty to monitor the market and no power to stop any infringement.

See more about the Beijing Silk Market case here and here.

Secondly, he wrote about the Chinese Trade Mark Office. December 26, 2005 it has put online this database were you can search all Chinese registered/applied for trade marks.

Thirdly, Tsang wrote about well-known marks:
98 newly recognized well-known marks in China (however of these 98 marks, only five are foreign marks);
77 marks were recognized in enforcement cases by the Administration for Industry and Commerce (AIC);
10 marks in opposition proceedings by the Trade Mark Office;
11 marks by the Trade Mark Review and Adjudication Board in dispute proceedings.

Read more here.

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IP protection: “China is at an inflection point”

At the DesignCon 2006 conference all kinds of silicon IP technologies were shown. During a panel discussion a question emerged about IP protection in China. Richard Goering wrote in the last paragraph of this article for the EETimes: “Larry Rosenberg, head of the VSI Alliance working groups, rose from the audience to comment that China is at an “inflection point.” He said that Chinese officials are “building more fabs, recognizing no one trusts them, and acknowledging that it’s a problem. There are a lot of efforts to change that.”

Rosenberg was probably also refering to the fact that China Semiconductor Industry Association signed a deal with the VSI Alliance (VSIA) so they will soon be basing their products on international technical standards that enable inter-operability. In September 2005, Managing Intellectual Property wrote an article about it, here.

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TGIF

IPR attorneys say the darndest things:
“Profits of Panda names not to be enjoyed by a unique person”

ChinaDaily who uses the ShanghaiDaily as its source has an article about the websites names, named after the giant pandas that were given to Taiwan as a political gesture; www.tuantuan.com and www.yuanyuan.com, etc., are being sold by Peng Zhangsheng at www.EachNIC.com.

They even interviewed IPR attorney Gu Huimin of Shanghai NORSN Law Firm who says:
Though the Websites don’t involve trademarks or corporate names, the giant pandas are of public interest. Profits from these names shouldn’t be enjoyed by a unique person.

Right, IP Dragon thinks only the owners of the names should profit from them: in casu the pandas.

If the government thinks the Websites tarnish the seriousness of panda-giving issue or influence the relationship between the Chinese mainland and Taiwan, it may cancel them. Then buyers can face a serious loss, if they pay a lot.

Update here.

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Baijiu counterfeiters prey on drunkards

Interfax China is running a story about bootlegged spirit, called Baijiu (white spirit), which can cause health problems when it is bottled with industry-use alcohol.

The State Administration for Industry and Commerce warned consumers that much of the alcohol sold in so-called gift re-sale shops – places where people can sell or trade gifts received during the Spring Festival holiday (Chinese new year) – could be fake.

The counterfeit spirits have also turned up in bars in higher-end hotels, where bartenders wait until the customer is intoxicated, then switch to using the fake alcohol, the paper reported.

According to China Alcoholic Drinks Industry Association, this counterfeit spirit is not having much impact on the 3.12 bln liter per year Baijiu industry.

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Integration of IPR into Scientific Development : New Emperor’s Clothes?

According to the National Guideline on Medium- and Long-Term Program for Science and Technology Development (2006-2020) issued by the State Council on Thursday, China will increase its science and technology innovation level by making full use of the IPR system.

It looks like the new emperor’s clothes to me. And what about:

A social credit system favorable to the protection of intellectual property right should be established and improved, the guideline says.

Doesn’t such a ‘social credit system’ already exist, called patents. Patents stimulate R&D and innovation and reward inventors and patent holders. To use a new guideline is probably more red tape. Why not start to enforce the existing IP law more vigorously?

People’s Daily Online used Xinhua as the source. Read more here

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IPR in China: Nike versus Beijing Metals and Minerals Import and Export Co.

NERA, an economic consulting firm, wrote a press release about Dr. Alan Cox and Kristina Sepetys‘ article “Intellectual Property Rights Protection in China: Litigation, Economic Damages, and Case Strategies,” which appears in a book called Economic Approaches to Intellectual Property: Policy, Litigation, and Management.

One of their findings was that the growing Chinese economy, more sophisticated laws, and greater attention to enforcement are reasons for the increase in Chinese intellectual property rights infringement cases. The press release features a frame below with some of the case studies Cox and Sepetys researched, including facts about legal contenders and claimed and awarded damages. These cases include Nike as plaintiff against Beijing Metals and Minerals Import and Export Co. as unlikely defendant. Read more here.

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What’s the score on the online anti-piracy campaign?

The article ‘online piracy campaign succes‘ written by Liu Li for ChinaDaily of course covered on the contrary measures against online piracy. The article is a list of the campaign since September by some Chinese departments including the administration, Ministry of Public Security, the Publicity Department of the CPC Central Committee and the Ministry of Information Industry.

Two concrete cases were highlighted:

The campaign uncovered a website, www.66woool.com (offline), created by Lu Xiaoliang and Chen Liang in Central China’s Hubei Province that provided illegal services on a game developed by Shanda Interactive Entertainment, China’s biggest online game operator (from Shanghai).
The Jingzhou Municipal Bureau of Copyright in Hubei Province transferred the case to local police in December last year to ascertain the suspects’ punishment.

and

A movie website, www.116.com.cn , was also fined 90,000 yuan (US$11,100) and was ordered to stop providing download services for some US movies without permission.
The Beijing Municipal Bureau of Copyright made the decision, sources said.

116.com.cn is China Netcom‘s broadband portal. Huaxia Times said not that is was fined by the Beijing Municipal Bureau of Copyright but by National China’s Copyright Administration for copyright infringment. Motion Picture Association of America (MPAA) claimed that 116.com.cn provided online viewing and downloading of movies whose copyrights are owned by MPAA-member companies without the permission of the MPAA. China’s National Copyright Administration announced on February 15 that it has investigated and punished 12 copyright infringement cases recently. Source: Pacific Epoch

It’s hard to figure out why the pirates that infringed the rights from the Shanghai based game producer had to be criminally prosecuted, while the pirates that infringed the rights from US film producers were only fined and stopped in their illegal activity. The conclusion that the foreign movie makers were discriminated,. is too simple given the lack of the facts about variables such as scope of damage etc.

According to Zhao Xiuling, director of the copyright department of the administration, most websites in the campaign provide download services to music products, movies and software.

What’s the score?

  • 76 websites were closed down across the country, according to sources within the administration;
  • 137 websites were ordered to remove illegal content;
  • 29 websites were fined a total of 789,000 yuan (US$97,000);
  • 18 criminal offence cases have been handed over to police for investigation, according to sources with the National Copyright Administration of China.
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Japanese mission to China: Our strawberries need IP protection

BlackEnterprise.com, an African American online magazine, posted an article on February 3, of Jiji Press News on the Web (fee subscribtion) about Japan’s Ministry of Agriculture, Forestry and Fisheries that send a mission to China and South Korea to urge China to protect intellectual property rights relating to agricultural products.

The mission, that will take place from Sunday to Wednesday in the two countries, is composed of 21 ministry officials, local government representatives and business people to raise awareness of “Japanese brands” to prevent their illegal cultivation and promote domestic crop exports.

Jiji Press News on the Web stated that “Japanese brand” products as strawberry and cherry have been hit by a string of illegal exports, agriculture ministry officials said.

See the BlackEnterprise.com article here.

The Japanese misson to China (and South Korea) indicates that bilateral diplomatic pressure all but died out since these mentioned states can use WTO’s dispute settlement system, when there is non-compliance with the TRIPS agreement. The WTO’s dispute settlement system is probably perceived as an ultimum remedium.
Too bad the article does not elaborate about the protection of these ‘brands’. Maybe the produce is trademarked, but more likely it is protected by geographical indication. As a contracting state of the Paris Convention China (whose entry into force was March 19, 1985) has to take measures against direct or indirect use of a false indication of the source of the goods or the identity of the producer, manufacturer or trader (article 1 juncto article 10 and article 10ter).

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How many people died in 2005 because of counterfeit drugs?

According to Global Corruption Report 2006 of Transparency International, an international NGO devoted to combatting corruption, an estimated 192,000 people died in 2001 in China because of fake drugs. 2001? That’s a pretty old number for the 2006 report about 2005. Their source was the Indian pharma portal PharmaBiz.com, 18 March 2005. I googled for this research but I could only find an article of PharmaBiz.com of September 18, 2002, that said that 192,000 people died in 2001 according to the Shenzhen Evening News.

Think talcum powder, instead of antibiotics, birth control pills filled with rice flour. Some die from toxins in counterfeit medicines, and others from infection because they are swallowing bogus pills instead of antibiotics.

But how many people died in 2005 because of faked products the report does not tell. To try make it more transparant I asked Transparancy International. They will get back to me, they promised me. So to be continued.

Download the relevant part of the report, named ‘Corruption in the pharmaceutical sector’

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Is exceptional growth of patent filings indicating that Chinese companies start to take them seriously?

February 3, WIPO released a message about the exceptional growth in international patent filings from Japan, South Korea and China:

“The rate of growth from Japan, Republic of Korea and China continues to be exceptional, reflecting the rapidly expanding technological strength of those countries. Since 2000, the number of applications from Japan, Republic of Korea, and China, has risen by 162%, 200% and 212%, respectively,” said Mr. Francis Gurry, WIPO Deputy Director General who oversees the work of the PCT.

Impressive, but what does it really mean that China dislodged Canada, Italy and Australia to take the position of 10th largest Patent Cooperation Treaty (PCT) user?

The obvious explanation is that the center of gravity in the world is shifting to North East Asia. You could hypothesize that an increase of patent filings equals economic growth. But more patents does not necessarily guarantee this, of course. It all depends on the quality of the inventions and the level of enforcement of the patent protection. Now, the growth of international patents by Chinese companies, such as Huawei Technologies and ZTE Corporation, could indicate that Chinese companies begin to see the importance to prevent their competitors to copy their inventions.

So this growth could signal an increase in the level of trust Chinese companies have in the deterrent aspects and enforceability of patents. This, in turn, could pressure the Chinese government to enforce IPR in general and patents in particular. So it could be an indication, based on circumstantial evidence.

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Translation Challenge: “Never Give a Sucker an Even Break”

By Richard Kuslan, editor of Asia Business Intelligence, IP Dragon’s first guest blogger

The world knows of China’s leadership in the business of counterfeiting. If it – Delco car battery, tiger claw, night-scan telescoping mast, Viagra, holy relic of Tibetan Buddhism – can be copied cheaply and sold for profit, some entrepreneur (thief?) will grab hold of the opportunity and shake vigorously.

Counterfeiting harms rights holders. That was a “duh, fer sure, dude” statement. But the 2004 testimony of Anthony Wayne, U.S. Assistant Secretary for Economic and Business Affairs, makes one want to holler “Oh, my God!” as if we’d personally discovered alien seed pods in Santa Mira. [See Invasion of the Body Snatchers.] Mr. Wayne “estimate[s] that U.S. companies’ worldwide losses to counterfeiting and piracy range from $200 to $250 billion per year.” That figure far exceeds the GDP of many nations.

And yet counterfeit products are rarely interdicted at the borders. China’s share? Daniel Chow, a law professor at Ohio State University, testified:

“In 2003, China accounted for 66% or over $62 million of the $94 million of all counterfeit and infringing goods seized by the US Customs Service at ports of entry into the United States. Mid-year figures in 2004 indicate that seizures are sharply higher with $64 million seized in the first half of 2004 alone.” Extrapolating, Chinese counterfeits may account for US$150 billion of worldwide IP losses.

No wonder A.T. Kearney estimates that counterfeiting produces as much as 8% of China’s GDP. Counterfeiting inevitably accompanies – and benefits — the growth of infant economies. In the 18th century, using cobalt mined in Connecticut, American potters imitated the fabulously popular China blue and white porcelain. And remember that Japan in the 1950s and 60s was rife with fake goods. Or more recently, Taiwan.

In the 1980s, a cousin did business in Taiwan. Being a profligate entertainer of major customers, he once decided to impress by holding an emperor’s banquet (金玉滿堂) at the Hilton in Hsi Men Ting (西門町), the older downtown section of Taipei (台北). The centerpiece of the table was bear paw (熊掌), a traditional delicacy in Chinese cuisine, favored by only the very wealthiest. In the Taipei of the 1980s, a prepared dish of bear paw cost a King’s Ransom of nearly US$750, equivalent to the monthly salary of an
office worker. A raw paw was shown to the guests before it was cooked. If I remember correctly, his guests were enormously impressed.

Several years later, a lady who had worked as a waitress in that same restaurant told me there was but one real paw in the refrigerator. Whenever the dish was ordered, the paw was trotted out to show the beaming guests and then immediately returned to cold storage. The chef would proceed to cook whatever meat he might have lying around that was less common than beef – alligator, venison, elk – and far less expensive. !Profit! And with just a little sleight of hand it descends in sheets. The crux of the bear paw con is dual, requiring a customer who’s neither ever tasted bear nor sees the paw cut up and cooked.

Yes, counterfeiting is a classic con. It needs but one sure thing — a paying customer (a sucker?). An entrepreneur with energy, capital, nerve, imagination and a great product may still fail. The counterfeiting of an established brand requires similar elements, within a business environment favorable to the unhindered trespass upon individual property rights, to allow the con to flourish.

Counterfeiters in China have established world-class CD duplication facilities (capital); harnessed the production power of entire villages (energy); threatened the lives of children with fake infant formula (nerve); built secret manufactories or factories in ship containers for mobility (imagination). But there’s hardly any genuine risk in the endeavor. Someone else has built and crossed that bridge. The brand has already been established. The demand, created. The buyer, a certainty.

Even at a youthful age, I could not believe the premise of the movie, “The Sting,” (1973) the hit that starred my favorite pseudo-Oreo manufacturer, Paul Newman. Two good-natured gangsters (an oxymoron?) ante significant funds up front to replicate a bookie joint on the off chance they might score many times more dough from their mark. Several times, the scheme was nearly blown. The sucker could have simply walked away. Too much risk for a counterfeiter, don’t you think?

Despite two millennia of discourse and instruction on the Confucian ideal of 天下為公 (usually translated as “the world is a commonwealth”) and its modern diminutive, the Communist slogan, 为人民服务 (“serve the
people”), Chinese find impractical, to say the least, the integration of the individual and the family into a greater “public good.” [Is this simply a display of my western liberal arts education or a genuine preoccupation with a beneficial and unifying ideal?] That “public good” apparently mandates the more than occasional sacrifice of individual advantage to complete strangers with whom no bond is valued. Most undesirable. The Chinese individual thinks, “What is the value to me and mine?”

The novel concept of individual rights under the law, often seen written into a subtext of the phrase 合法权益, has been received to a powerfully positive reception by P.R.C. Chinese. Everyone now, it seems, has been granted an incompletely defined, nebulous, individual power. But the larger framework for these rights is barely constructed. The remnants of the old system do not suffice as its foundation. What can be built on detritus?

My strong impression from readings and discussions on this subject is that mainland Chinese view the law as but a tool – a means to an end – whereby individual gain can be gotten at the expense of a rival. They do not respect it – yet — as a particularized expression of an encompassing framework established to protect the welfare of the populace at large, despite sloganeering to the contrary. The law is for “me,” but not, more importantly, for “us.”

Until that conceptual foundation has been built – who knows when and if, despite the efforts of brilliant intellectuals – the rights you hold in your intellectual property will be the object of stubborn disrespect and counterfeiting will continue to be a staple of the Chinese economy. The reach of the authorities is too weak to police it and the popular desire for wealth too strong to curtail it.

Well, dude, maybe that was just a bit too serious. Let us turn to some hilarity. Remember W.C. Fields’s epithet that one should never give a sucker an even break? [Translate that if you can!] Read this article for the story of a Chinese counterfeiter with a preposterous con who played upon the profundity of his wealthy collector-customer’s inexpertise. In doing so, he collected US$500 and the attention of the world’s media. Ah (deep breath) — success!

Richard Kuslan (Asia Business Intelligence)

Note of IP Dragon: Bears and other animals that end up at plates in China are near extinction and are treated inhumanely, which is a euphemism, see China Bear Rescue.

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TGIF

2004 Documentary About Counterfeiting Still Relevant

How long would it take to make copies of Nikes?
Chinese counterfeiters can do it:

“within 10 days, 1,000 shoes at $4 a pair.”
No costly R&D needed, nor marketing. The counterfeiters seem te have given a whole new meaning to Nike’s ‘Just do it’ slogan.

The CBS News 60 minutes’ The World’s Greatest Fakes documentary is, except for the little part about Silk Alley, still very relevant. See the article and especially video (on your left hand, just below the title) here.

Bob Simon interviewed Daniel C.K. Chow, law professor of Ohio University who specialises in the fight against Chinese counterfeiters (see his statement before the Congressional-Executive Commission on China here), attorney Harley I. Lewin, who is chasing counterfeiters for more than 20 years, Jack Clode, an investigator for Kroll Associates and Gao Feng, of the Chinese Public Security Bureau (part of the Ministry of Public Security) that has to police against counterfeiters).

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Wal-mart domain name case and Royal Digital Technolgy Development website case of January 2006

The Wall Street Journal gives a briefing about the strained relationship between the US and China, more here. Nothing new, really. However, it also gives an overview of the IPR infringement cases the Chinese courts tackled in December 2005 and January 2006. Two highlights were not yet covered by IP Dragon. So here there are:

“January 2006: Beijing court orders a Nanjing company to return to Wal-Mart Stores Inc. four Internet domain names registered under the US retail giant’s name.

January 2006: Harbin Court orders Harbin Fuzhao Technology Development Co. to pay 10,000 yuan in compensation and stop using the design, color and animation of a website of Shenzhen Royal Digital Technology Development Co.”

On IP Dragon you can find the Ferrero Rocher (January 2006) case, Starbucks case (December 2005), Hennessy case (December 2005) and Bejing Silk Streek case (December 2005).

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USPTO sponsors seminar on General IP Enforcement in China

The Commerce Department’s United States Patent and Trademark Office (USPTO) will sponsor a seminar on “General IP Enforcement in China” on Wednesday, April 13, 2005, in Baltimore, Maryland.

Prominent IP in China experts will give presentations:
Mark Cohen, the IP attaché assigned to the U.S. Embassy in Beijing, will give an introduction to the Chinese IP system and a summary of the Chinese Supreme People’s Court’s recently issued judicial interpretation on “Handling Criminal Cases of Infringing Intellectual Property.”
Andy Dubosky of Rouse & Co., International, will offer a presentation on conducting IP investigations in China
John Del Ponti, general counsel for Black & Decker, will speak about his company’s experiences in protecting and enforcing their IP rights in China.
Elaine Wu, attorney-advisor with the USPTO, will give a brief presentation on the STOP! (Strategy Targeting Organized Piracy) Initiative.

Read the press release here.

IP Dragon would love to attend, but cannot make it. If you attend this seminar, please share the information of the event with IP Dragon (ipdragon(at)gmail.com). Thanks.

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Counterfeiters in HK: the unwanted early adopters

Alessandra Galloni’s wrote an article for the Wall Street Journal about Giuseppe Festa, an Italian counterfeiter. Reporting on his tale sheds light on counterfeiting connections with Hong Kong and China.

In China, where the majority of knock-offs are made, counterfeiters can visit boutiques opened by luxury-goods companies. Some fashion houses also have moved parts of their production to Asia in order to trim costs. The proximity to actual luxury goods has enabled counterfeiters to raise quality and copy products faster. The Internet is spurring sales, too: Counterfeiters’ Web sites show photos of real watches and then pitch replicas at a fraction of the price.

If I understand it correctly, counterfeiters could ship parts of counterfeit products that customs whould only recognise as such when assembled.

This month, a Hong Kong market was selling copies of Louis Vuitton handbags that had been unveiled in Paris but weren’t yet in stores, says Nathalie Moulle-Berteaux, intellectual-property director of LVMH Moet Hennessy Louis Vuitton SA’s fashion group.

Counterfeiters are clearly the unwanted early adopters.

Read Alessandra Galloni’s article, with contributions of Ellen Byron, for The Wall Street Journal here.

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Rich Kuslan will be IP Dragon’s first guest blogger

IP Dragon is very honoured that Rich Kuslan, editor of Asia Business Intelligence, will be its first guest blogger.

Rich Kuslan, is an Old China Hand, a very experienced consultant, focused on the Greater China market. Kuslan is sharing his vision on IP in China exclusively in the article called ‘Translation: “Never Give a Sucker an Even Break”, which is both enlightening and funny.
Kuslan’s article will be live this Friday. Update, here is a link to the article.

Kuslan gained his extensive experience doing consulting projects for GE Medical Systems, Timken, Corning, Lucent, United Technologies and others, in English and Mandarin. Rich is a Principal of AsiaWide Sales and Marketing Consultancy and a licensed New York state attorney. The BBC, MSNBC, Tom Peters, China Digital Times, the China Stock Blog and IP Dragon link to Asia Business Intelligence.

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Chinese intellectual property in the grander scheme of things

William R. Hawkins, senior fellow for national-security studies at the US Business and Industry Council has a pessimistic view about China’s intentions to straighten its IP protection policy. He places those efforts in line with an ominous list of reform promises in other fields of governement policy:

Beijing’s claim in “Peaceful Development” that it will never turn its increasing wealth into international power is no more credible than the claims it has made in other white papers issued in 2005. The list includes:

“Building a Political Democracy in China” (October);
“China’s Endeavors for Arms Control, Disarmament and Non-Proliferation” (September);
New Progress in China’s Protection of Intellectual Property Rights” (April);
“China’s Progress in Human Rights” (April).

Do you see a pattern?

Read Hawkins’ article for the National Review Online here.

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Harry Potter will be first released in China, thanks to piracy

CAV Warner Home Entertainment, a joint venture of Warner Home Video and China Audio and Video Corporation will launch Harry Potter and the Goblet of Fire DVD first in China. If it would do otherwise, it reckoned, pirated DVDs would flood the Chinese market and there would be no market left for legitimate products.

Read here.

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HK Hight Court’s message: uploaders you can hide, but we’ll find you

The Hong Kong High Court ruled Thursday that uploaders of copyrighted music could no longer hide behind a “cloak of anonymity” on the Internet.

Jonathan Cheng wrote an article about it for the HK Standard here.

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When will rampant piracy in China stop? Mark Cohen: “Don’t know.” Bill Gates: “2016”

Mark Cohen, the intellectual property lawyer dispatched to China in 2004 to protect U.S. IP rightholders against piracy. Cohen is officially on assignment from the U.S. Patent and Trademark Office.

Cohen: “The question is not, is there law. It’s what law is being enforced and where.” The problem, say attorneys and industry executives, is as much one of infrastructure as of experience. Improving China’s enforcement of its IPR laws requires substantial changes to its legal system.”

“Part of the difficulty in enforcement rests in overall problems with China’s legal system, as well as the Chinese Government’s desire to ensure that the economy is stable, particularly in the countryside. If courts are corrupt, or government officials accept bribes, or if local courts or administrative officials tend to rule in favour of local interests, without any corresponding checks and balances, then the IPR system will necessarily be compromised,” Cohen told Managing Intellectual Property.

Read more here.

The Financial Times features a profile of Cohen here (paid subscribtion). Cohen may be specialist in IP in China but when asked when the compliance in China will be up to US and European levels, he said he didn’t know. Bill Gates, however, thinks it will end in a decade.

Read more here.

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HK governement recruits youth as informers in battle against internet piracy

The experience with the Red Guards, overzealous youth who handed in their peers to the communist authorities, if they manifested anything ‘bourgeois’ during the Cultural Revolution, is painfully fresh for many people in China. Now it seems that the Hong Kong government is inspired by something familiar; recruiting youths to root out online piracy. Bit scary.

See the Managing Intellectual Property article here.

Hat tip to LawGeek Jason Schultz.

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TGIF

The Chinese meaning of copyright

“Copyright; the right to copy”

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Chinese perception of IP: ‘fair game’

Peter Warren wrote an article for The Guardian about the Chinese perception of hacking and to a lesser extend about their perception towards infringement of intellectual property. You will find the latter passages quoted below.

Feng Ma, an expert on China for the Taiwanese intellectual property law firm Osha Liang:

most illicit users in China are concerned with more mundane issues such as getting free goods and software and making money. “Intellectual property is seen as fair game, especially because western companies put their factories in China so they can get cheap labour and avoid environmental rules.

Arthur Yuan, a lawyer at US-based Senniger Powers, a leading intellectual property (IP) firm:
The [Chinese] population does not consider the IP of companies abroad of value. They think that as long as it is for the glorification of the government, then the taking of information is justified – and they see no reason why they should not take a shortcut if it is possible.

Read here more.

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NFL takes action against counterfeit merchandise in US from China

The National Football League, Pittsburgh Steelers and Seattle Seahawks filed suit in Wayne Circuit Court on Monday naming three suspected counterfeiters and 400 “John Doe” counterfeiters. Circuit Judge John A. Murphy signed a temporary restraining order allowing NFL investigators to seize phony goods and dispose of the merchandise by destroying it or donating it to charity.
Most of the counterfeit merchandise seems to come from China and enters the United States through New York and Los Angeles.

Some of the counterfeiters seem to use some creativity:
One seized hat, for example, has “Detroit” stitched onto it and an Olde English “D” like the one worn by the Tigers baseball team inside the flaming circle logo used by the Tennessee Titans football team.

Read David Shepardson and Ronald J. Hansen’s artikel for the Detroit News here.

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Taiwanese crackdown on Sgt. Keroro frogs

The Japanese animated film Sgt. Keroro is popular in Taiwan, Hong Kong, China and other Asian countries. It features five alien frog characters. Rampant piracy of the merchandise and unauthorized downloading of the animated film from the Internet is infringing the intellectual property rights of Mighty Media Co., the Taiwanese franchisee of the Sgt. Keroro copyright holder in Japan.

Read more here.

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Three months campaign against servers with pirated content and software

Remember the somewhat vague report about the Chinese crackdown at the end of last year on the 17 production lines that were making pirate CD’s were shut down and 79 newspapers and 50 types of software games were banned? See here.

Now Faye Wang has written for Interfax China an article about a crackdown that also took place at the end of last year (September to December) on internet servers that infringed intellectual property rights. Her source is Zhao Xiuling, head of the copyright management department under the National Copyright Administration of China (中文).

During a three-month campaign from September to December of last year, authorities either fined or brought criminal indictments against 29 Chinese websites found to be providing pirated online gaming services and cheat-software, Zhao said at the 2005 China Game Industry Annual Conference (CGIAC) in the city of Xiamen, Fujian Province.

Results of the three months anti-piracy campaign:
Shut down a total of 76 websites that were providing pirated internet services and content
Confiscated 39 network servers that were used to host pirated content and services
Ordered 137 websites to remove content and services that violated intellectual property rights.
Investigation of a total of 172 cases of internet copyright infringement, these involved a total of 173 Chinese websites and 405 network servers

Wang ends her article with an illuminating line-up of all governement organisations involved:

  • Publicity Department of the Central Committee of the Communist Party of China
  • Anti-pornographic and Illegal Publications Working Group
  • General Administration of Press and Publication
  • National Copyright Administration
  • Ministry of Public Security
  • Ministry of Information Industry
  • Ministry of Culture
  • State Administration for Industry & Commerce

It may be a comprehensive campaign, but all these organisations involved is bit much, to my taste. Why can’t the Ministry of Public Security, who has a kind of police force, not handle it alone?

Read Wangs Interfax China article here

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Second USTR request to China to pinpoint deficiences in IP enforcement


On January 20th, 2006 deputy U.S. Trade Representative Peter Allgeier explained the legal rationale of the first request based on article 63 (3) of the TRIPS Agreement to outline the steps China is taking to comply with TRIPS in a letter to China’s ambassador to the WTO, Mr. Sun Zhenyu.

In the letter (IP Dragon: October 25th, 2005), Allgeier said the USTR is concerned about Chinese statements noting that the relevant section of the international agreement on intellectual property, or the TRIPS Agreement, refers to a member’s right to request information but makes no mention of another member’s requirement to respond to those requests.

Should China fail to show progress in curbing rampant piracy and counterfeiting (IP Dragon: China should do so based on article 41 (1) of the TRIPS agreements), the White House -now under intense pressure from members of Congress concerned about the issue – could ask for a WTO panel to settle the dispute. See more about this here.

USTR demands information in six areas (all in the spirit cooperation and mutual understanding of course):
1. legal basis for the claim;
2. types of remedies imposed
3. timing and location of the enforcement actions;
4. whether cases were transferred to criminal authorities;
5. whether rights holders were foreign or Chinese;
6. types of products involved.

According to the USTR China has recognised the cases as being related to the question of its compliance with the TRIPS agreement. China mentioned these cases December 9, 2004 during the TRIPS council review, see IP/C/34, paragraphes 6, 52-55, 62, 75 and 76.

Read Elisabeth Price’s article for Dow Jones News here, Doug Palmer’s take on the matter for Reuters here, FT’s Christopher Swann and Edward Alden’s article here or read the USTR letter yourself here.   

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Crackdown on online copyright infringements

According to an article in CRI a spokesperson for the National Copyright Administration (中文)said that China solved 172 web copyright infringements cases over the past three months since the launch to curb online piracy.

Read more here.

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China and Taiwan Toolkits against IP infringement

The US goverment has started with Strategy Targeting Organized Piracy (STOP!) and provides a China Toolkit, Taiwan Toolkit etc. Here the basics are explained about copyright, trademark and patent law and how you could reduce infringement of goods at trade fairs etc.

Relevant US governement resources can be found here.

See StopFakes.gov.

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Crackdown on pirated disks in Guangxi

In the Guangxi Zhuang Autonomous Region 364.000 pirated audio and vido discs were seized.

Ning Xiuyu, an official with the region’s cultural administration said that the campaign has produced tangible effects. “But we know piracy is still rampant in some places, especially in the production and sale of discs under pseudonyms,” Ning said.

Read more here.

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ChinaDaily: some IPR related facts of last year

ChinaDaily is giving some IPR related facts of last year. For example:
In August Managing Intellectual Property (paid subscribtion), named four Chinese people, including Vice-Premier Wu Yi, as the World’s 50 Most Important IP Figures in 2005. Wu was also on the 2004 list.

Read here.

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Dequan’s overview of patent strategies

ChinaDaily asked Beijing based Dequan Law Firm to give an overview of patent strategies, including cross-patenting and the patent net.

Read here.

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TGIF


IP lawyers, modern warriors with different weapons

Winning a legal battle in China requires more than the will to succeed. Jones Day’s J. Benjamin Bai quoted Sun Tzu’s Art of War in relation to competitors that want to invalidate your clients’ patents:

“Know your enemy, know yourself, fight a hundred battles, win a hundred battles.”
But he also warned, “If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.” This century-old war strategy still applies today, albeit a different battle.

Read here Bai’s ‘Are your Chinese patents at risk?’ (already reviewed yesterday, see here).

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WTO dispute over geographical indication looms between Taiwan and China

Taiwan’s Mainland Affairs Council (MAC) is considering whether it will send a complaint to the WTO dispute resolution body about infringement of trademarks and copyrights.

What’s the problem? Chinese companies have registered their products with names of places in Taiwan, such as “Kukeng Coffee,” “Hsinchu Rice Noodle,” “Hsinchu Meat Balls,” and “Chihshang Rice.” And Chinese tea products that bore names of places in Taiwan, such as “Alishan,” “Yushan,” “Sun Moon Lake,” and “Hsitou.” So it’s about geographical indications, a sign used on goods that have a specific geographical origin and possess qualities or a reputation that are due to that place of origin, more.

Citing a survey report, MAC Chairman Joseph Wu said that China’s trademark department appears to have have approved applications of trademarks bearing the names of those well-known places in Taiwan. Of these applications, four were filed by companies invested in by Taiwanese people and three by Chinese companies, he said.

According to WTO and other agreements, the names of well-known places should never be part of any registered trademark, as it might create a false impression of the origin of the product which is more than likely to have been manufactured in another place.

See article here.

Relevant law:

Article 1(2) of the Paris Convention includes some indications of source and appellations of origin as subject matter of industrial property protection:
The protection of industrial property has as its object patents, utility models, industrial designs, trademarks, service marks, trade names, indications of source or appellations of origin, and the repression of unfair competition.

Article 10(1) provides for indications of source the same remedies prescribed in respect of goods unlawfully bearing a trademark or a trade name in case of direct or indirect use of a false indication of source of the goods or the identity of the producer, manufacturer, or merchant:
The provisions of the preceding Article shall apply in cases of direct or indirect use of a false indication of the source of the goods or the identity of the producer, manufacturer, or merchant.

Article 1(1) of the Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods :
All goods bearing a false or deceptive indication by which one of the countries to which this Agreement applies, or a place situated therein, is directly or indirectly indicated as being the country or place of origin shall be seized on importation into any of the said countries.

Article 2 of the Lisbon Agreement:
(1) In this Agreement, “appellation of origin” means the geographical name of a country, region, or locality, which serves to designate a product originating therein, the quality and characteristics of which are due exclusively or essentially to the geographical environment, including natural and human factors.
(2) The country of origin is the country whose name, or the country in which is situated the region or locality whose name, constitutes the appellation of origin which has given the product its reputation.

Article 22 of Trade aspects of Intellectual Property Rights TRIPS on the protection of geographical indications within the framework of the WTO:
1. Geographical indications are, for the purposes of this Agreement, indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin.
2. In respect of geographical indications, Members shall provide the legal means for interested parties to prevent:
(a) the use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a geographical area other than the true place of origin in a manner which misleads the public as to the geographical origin of the good;
(b) any use which constitutes an act of unfair competition within the meaning of Article 10bis of the Paris Convention (1967).
3. A Member shall, ex officio if its legislation so permits or at the request of an interested party, refuse or invalidate the registration of a trademark which contains or consists of a geographical indication with respect to goods not originating in the territory indicated, if use of the indication in the trademark for such goods in that Member is of such a nature as to mislead the public as to the true place of origin.
4. The protection under paragraphs 1, 2 and 3 shall be applicable against a geographical indication which, although literally true as to the territory, region or locality in which the goods originate, falsely represents to the public that the goods originate in another territory.

Articles 23 and 24 of TRIPS can be relevant too.

More about international treaties protecting geographical indication here.

Article 16 of the Chinese Trademark Act:
Where a trademark contains a geographic indication of the goods in respect of which the trademark is used, the goods is not from the region indicated therein and it misleads the public, it shall be rejected for registration and prohibited from use; however, any trademark that has been registered in good faith shall remain valid. The geographic indications mentioned in the preceding paragraph refer to the signs that signify the place of origin of the goods in respect of which the signs are used, their specific quality, reputation or other features as mainly decided by the natural or cultural factors of the regions.

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Chinese crackdown targeted at production lines of pirated CD’s and illegal newspapers and games

At a crackdown last year, 17 production lines that were making pirate CD’s were shut down and 79 newspapers and 50 types of software games were banned. Last Tuesday Liu Yunshan, head of the governing Communist party’s Publicity Department said according to CanoeMoney of Canada at a conference: officials must “severely crack down on illegal publications, purify the cultural market, effectively curb various kinds of piracy and strengthen intellectual property right protection”

Read more here.

A better article about it you’ll find here.

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Philips introduces Veeza to curb illegal use of CD-R


Dutch company Philips Electronics is to adopt within six months a new licensing system, called Veeza, to curb the illegal use of its patented CD-R technology.

Veeza was developed so that throughout the chain from customs, traders, retailers to consumers you can easily differentiate a licensed disc from an unlicensed one. This is possible because Veeza has three marks:

  • a logo and site registration number on each disc;
  • a fraud-resistant label with the logo and serial number on each packing carton;
  • and documentation for each shipment.

Philips co-invented the CD-R disc system and has a portfolio of patents essential for the manufacture and sale of CD-R discs. Under Veeza, Philips has cut royalties from 4.5 US cents to 2.5 US cents per piece, and it will charge patent royalties based on the number of shipments.
Under the previous system, CD-R manufacturers received a licence from Philips for total production that was valid until the patent expired, Peters explained.

Currently about 95 per cent of the CD-R discs in the world are produced in China, including Taiwan. An estimated 50 per cent of those made in China are licensed, according to James Liu, senior legal counsel of Philips IP and Standard.

Read Zhu Boru’s article for the ChinaDaily here.

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Patent procurement, licensing and litigation in China

The Institute for Law and Technology (ILT) conference on patents in China will start today (January 19-20) in San Francisco, see here. According to the ILT there are still US patent attorneys that counsel against seeking patent protection in China and “waisting your money”.
It wrote that only one US company (standing next to its Chinese, Japanese, Korean and European peers) ranks among the top 10 patent filers. Which one? IP Dragon doesn’t know yet. Please let me know.

A case in point of the value of Chinese patents for foreign companies is the story about SigmaTel. Read the article Kirk Ladendorf wrote for the American-Statesman here.

Ok, but what if you got yourself Chinese patents, is your company safe? One of the speakers on the conference is Marjory Searing, vice president Public Affairs of Pfizer Inc., the pharmaceutical company that found out that their Chinese patent was invalidated by the SIPO’s Patent Re-examination Board, read here. J. Benjamin Bai of Jones Day wrote an interesting piece about the process of invalidation and the criteria the Patent Re-examination Board is using, read here.

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Forged trademark memory sticks seized by HK customs

Hong Kong customs seized memory sticks of forged trademark worth 1.03 million HK dollars (132,989 U.S. dollars). The 535 memory sticks were found in a 26 year old man’s rucksack when he entered the Hong Kong Special Administrative Region (HKSAR) of China through one check point connecting the southeastern Chinese city of Shenzhen. He will be charged with ‘importing goods to which a false trade description was applied.’ Importing goods to which a false trade description is applied is a serious offense, according to HK law. The maximum penalty is five years’ imprisonment and a fine of 500,000HK dollars (about 64,557 U.S. dollars).

Source Xinhua News

More about Customs as an inexpensive and effective alternative to private litigation here.

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In-Stat is drawing rosy picture Chinese music industry

Piracy is still the key blocking issue to developing China’s digital music industry, but online piracy is being attacked both by the government and industry music labels.”

But according to a report (paid) by In-Stat there is light at the end of the tunnel:

The end of 2007 will be the turning point for China’s legitimate digital music market. Unauthorized music companies are now in the process of, or have already made their services legitimate. Also, with the emergence of mega online music stores, legitimate online music will become a dominant service for users.

Music labels, in association with the International Federation of Phonographic Industry (IFPI), are filing and winning copyright lawsuits in China.

Read more here

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SIPO welcomes cooperation with Danish Patent and Trademark Office


Director General Jesper Kongstad of Danish Patent and Trademark Office (DKPTO) visited SIPO deputy commissioner Li Yuguang. The latter made proposals on future cooperation between SIPO and DKPTO. The two sides agreed to strengthen their cooperative relations, especially on IP legislation, patent examination, patent information services and international cooperation. Right, but no concrete coordination treaties were signed.

Read SIPO press release here.

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