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### Viewing cable 07GUANGZHOU1241, CONSUL GENERAL'S IPR ROUNDTABLE - COMMUNICATION AND ACTION

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07GUANGZHOU1241 | 2007-11-26 02:39 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Guangzhou

`

    VZCZCXRO4864
    RR RUEHCN RUEHGH RUEHVC
    DE RUEHGZ #1241/01 3300239
    ZNR UUUUU ZZH
    R 260239Z NOV 07
    FM AMCONSUL GUANGZHOU
    TO RUEHC/SECSTATE WASHDC 6693
    INFO RUEHOO/CHINA POSTS COLLECTIVE
    RUEHIN/AIT TAIPEI 9424
    RUEAUSA/DEPT OF HHS WASHDC
    RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
    RUCPDOC/DEPT OF COMMERCE WASHDC
    RUEATRS/DEPT OF TREASURY WASHDC
    RUEAWJL/DEPTJUSTICE WASHDC
    RHMCSUU/FBI WASHINGTON DC
    RUEAIIA/CIA WASHDC
    RUEKJCS/DIA WASHDC

` `

    UNCLAS SECTION 01 OF 03 GUANGZHOU 001241

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE FOR EAP/CM - JYAMOMOTO AND EB/IPE - EFELSING
    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/LRIGOLI, 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 - GMACRAY, PPIZZECK
    ITC FOR LLEVINE, LSCHLITT

    E.O. 12958: N/A
    TAGS: ETRD KIPR ECON WTRO PGOV CH
    SUBJECT: CONSUL GENERAL'S IPR ROUNDTABLE - COMMUNICATION AND ACTION

    REF: BEIJING 7192

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

    ¶1. (SBU) Summary: Internet-based intellectual property rights (IPR)
    infringement continues to remain a pressing concern in south China,
    according to U.S. business people who participated in the Consul
    General's Annual IPR Roundtable on November 20, 2007.  The
    participants also complained of inconsistent IPR enforcement among
    Chinese agencies, including different standards of evidence to begin
    an investigation, unclear thresholds to initiate a criminal
    prosecution, and different formulas used to value seized counterfeit
    goods.  They noted poor coordination among Chinese enforcement
    agencies and asked for help in encouraging local officials to accept
    their offers to provide IPR training.  In addition, they expressed
    interest in receiving more information from U.S. Customs and Border
    Protection on seizures in the United States and asked for Consulate
    assistance in arranging a meeting with one of the express delivery
    companies that has yet to take action on combating internet piracy.
    End summary.

    Internet Infringement Increasing
    --------------------------------

    ¶2. (SBU) Websites that illegally market and sell counterfeit
    products directly to customers in China and around the world remain
    a threat to doing business for companies like Nike, according to
    Nike Brand Protection Manager Bill Wei.  Wei noted that China has no
    unified process for accepting complaints and closing down such
    sites; complainants are required to show evidence that the website
    has actually sold product and made a profit before authorities will
    act in many cases.  Chris Cosgrove, Regional Manager of Asia
    Investigations for Mattel, also remarked upon losses due to internet
    sales of infringing products, but emphasized the greater problem of
    business-to-business sales of wholesale lots of infringed goods.

    ¶3. (SBU) Internet piracy was a key topic at this year's roundtable -
    as it was in 2006 - and the main IPR challenge to the recording
    industry in China.  Rodney Tsui, Regional Operations Manger for
    IFPI, said there were thousands of websites in China offering
    illegal music downloads and called enforcement efforts "hopeless."
    He echoed the comments of Nike's Wei, pointing out that it is too
    difficult to prove that the infringers make a profit.

    Hong Kong Registering Infringing Company Names
    --------------------------------------------- -

    ¶4. (SBU) Many IP-infringers in China register multiple Hong Kong
    company names to take advantage of a weak name registration system
    that presents major challenges to U.S. IP owners.  Freeman Zhang of
    Colgate-Palmolive described infringers who may have registered as
    many as 16 different Hong Kong companies, misrepresenting themselves
    as "Hong Kong Colgate" and "Colgate Hong Kong."  Other participants,
    including Nike and Motorola, similarly expressed dismay, even as
    they pointed to Hong Kong's positive record with other aspects of IP
    enforcement.

    Inconsistent Enforcement among Chinese Authorities
    --------------------------------------------- -----

    GUANGZHOU 00001241  002 OF 003

    ¶5. (SBU) Just getting an investigation under way is a big problem,
    with provincial and local Public Security Bureau (PSB) officials
    demanding different amounts of evidence from U.S. companies to look
    into IP-infringement activities in their jurisdictions, according to
    Microsoft Senior Regional Manager Estee Tam.  Local PSB officials,
    on the other hand, often frown on IP owners investigating cases
    independently without first coordinating with law enforcement.  U.S.
    companies must sometimes "shop around" for a qualified enforcement
    body that will investigate a case.  Tam said his company spent
    months raising an enforcement case with authorities in different
    Chinese jurisdictions before a local PSB office agreed to
    investigate and prosecute an illegal software ring.  The Consul
    General pointed out that many U.S. companies are not able to spend
    the time and money necessary to follow Microsoft's example in cases
    such as this one, but said that the USG would try to be of
    assistance wherever possible.

    ¶6. (SBU) Criminal thresholds also differ among Chinese
    jurisdictions, with many U.S. companies preferring to focus
    enforcement efforts in north China rather than the south.  Although
    the criminal thresholds for IP infringement cases were officially
    reduced in April 2007, participants reported that local
    municipalities like Shenzhen in south China still require a much
    higher standard before taking enforcement action on behalf of IP
    owners.  James Luo described Motorola's policy of confirming that
    criminal thresholds are exceeded by at least 150 percent before the
    company submits an enforcement request to Chinese authorities.

    ¶7. (SBU) Problems persist in how seized counterfeit goods are
    valued, but there is sign of improvement, according to the
    roundtable participants.  Luo explained that in a recent case,
    Shenzhen authorities had used a formula to calculate the value of
    seized goods that returned a value nearly equal to the retail price.
     Although still slightly lower than retail, the value was much
    higher than the street price of counterfeit goods, which has often
    been used in the past.

    ¶8. (SBU) Participants also lamented interagency coordination
    problems among Chinese IP enforcement bodies.  The Technical
    Supervision Bureau (TSB) can often be relied upon to act when
    counterfeit products can be shown to pose a risk to consumer health
    or safety, but participants also told how local TSB branches can be
    reluctant to enforce IP rights in other cases.  The Administration
    for Industry and Commerce (AIC) is similarly inconsistent, often
    engaging in what appears to be local protectionism for infringers of
    copyrights and trademarks.  Motorola's Luo commented that in those
    cases where TSB initiates the investigation, the handover of
    evidence to PSB once it becomes a criminal case can be problematic.
    As a result, Motorola always endeavors to bring cases directly to
    PSB without involving other agencies.

    Rejected Offers to Provide Training
    -----------------------------------

    ¶9. (SBU) U.S. IP holders in south China are often frustrated by the
    failure of local Chinese agencies to take up their offer to provide
    training in IPR enforcement.  Procter and Gamble Legal Counsel Gary
    Zeng described his company's efforts to arrange training for local
    PSB, TSB and AIC officials.  He noted that the firm was particularly
    eager to provide product identification training in Shantou,
    Guangdong.  He asked the Consulate to assist in P&G's outreach by
    encouraging local agencies to work with U.S. companies and accept

    GUANGZHOU 00001241  003 OF 003

    training offers.  Mattel's Cosgrove endorsed this approach.

    Unique Challenges for Patent Holders
    ------------------------------------

    ¶10. (SBU) Patent violation cases are extremely difficult to pursue,
    according to DTS Digital Entertainment Greater China Managing
    Director Kin Chan.  He said his attorney had advised him not even to
    pursue patent infringement law suits because they would be too
    expensive and afforded little opportunity for success.  He urged
    that the Chinese work with us to devise a special channel to pursue
    patent cases.  Commenting that companies in China often see foreign
    technology patents as a form of imperialism, Chan called on the U.S.
    Mission to continue its efforts to explain the importance of IPR
    protection to China's economic development.

    U.S. Government Can Help - Customs Information...
    --------------------------------------------- ----

    ¶11. (SBU) U.S. company representatives from several industries were
    united in their desire for access to more U.S. Customs data after
    seizures take place in the United States.  Chris Cosgrove from
    Mattel and Kin Chan from DTS both reported excellent cooperation
    with U.S. Customs, including receiving shipping data after
    counterfeits were seized in U.S. ports.  Other U.S. companies,
    including Motorola and Colgate-Palmolive, indicated they too would
    like to receive this type of information, specifically the container
    number and port of embarkation for any Chinese counterfeit shipments
    seized in the U.S.  Without this information, participants said the
    investigative trail turns cold in China.

    ...And Reaching Out to Express Delivery Companies
    --------------------------------------------- ----

    ¶12. (SBU) U.S. companies described express delivery services as a
    key link in China's counterfeit sales supply chain.  Nike's Bill Wei
    said a Consulate-hosted roundtable discussion among major private
    express delivery companies last year had been highly successful at
    enhancing cooperation between these companies and IP owners, but
    representatives of the government's EMS service did not participate
    and have not been as cooperative.  He asked that the Consulate host
    a follow-up discussion with express delivery companies, including
    EMS, to further cooperation and help prevent future delivery of
    infringing products.

    Comment - Communicating B2G, G2B and B2B too
    --------------------------------------------

    ¶13. (U) The Roundtable gave U.S. IP holders a chance to express
    their individual and shared IPR enforcement concerns with the Consul
    General and other Congenoffs. In turn, we briefed on what the
    government is doing to assist them and undertook to further our
    dialogue in addressing their concerns.  In addition, the
    participants took advantage of the opportunity to communicate with
    each other and identify ways they can work together to enhance
    industry efforts to improve IPR protection in south China.  The
    addition of a new PTO officer - Conrad Wong - was commented upon
    favorably by local U.S. company reps and rights holders.

    GOLDBERG

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