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The Crisis in Intellectual Property Protection and China's Role in That Crisis

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The Crisis in Intellectual Property Protection and China's Role in That Crisis THE CRISIS IN INTELLECTUAL PROPERTY PROTECTION AND CHINA'S ROLE IN THAT CRISIS Trade Lawyers Advisory Group Terence P. Stewart, Esq. Elizabeth A. Argenti, Esq. Philip A. Butler, Esq. Stewart and Stewart May 2007 Acknowledgements: Section III (An Overview of Enforcement Measures in China and China’s Efforts to Improve Intellectual Property Enforcement) co-authored by David J. Ohrenstein of Trade Lawyers Advisory Group Associate Member, Fontheim International, LLC. Appendix 2 (U.S.- China Trade Flow Statistics) was prepared by Charles W. McMillion, Ph.D. of Trade Lawyers Advisory Group Associate Mem- ber, MBG Information Services Appendix 13 (The Global Publication of U.S. Patent Applications & Select Patent Reform Proposals) was prepared by Pat Choate of Trade Lawyers Advisory Group Associate Member, The Manufacturing Policy Project Additional research and assistance provided by Mirko Czechleba, Patrick J. McDonough, Esq., and Nobutami Shimomoto of Stewart and Stewart Copyright © 2007 by The Trade Lawyers Advisory Group LLC This project is funded by a grant from the U.S. Small Business Administration (SBA). SBA’s funding should not be construed as an endorsement of any products, opinions or services. All SBA-funded projects are extended to the public on a nondiscriminatory basis. TABLE OF CONTENTS Page I. THE CRISIS IN PROTECTING INTELLECTUAL PROPERTY RIGHTS ............................ 1 A. INTRODUCTION .................................................................................................. 1 B. THE NATURE OF THE CRISIS.............................................................................. 2 1. Global Problem........................................................................................ 5 2. China’s Role ............................................................................................. 12 C. PHARMACEUTICALS .......................................................................................... 16 1. Counterfeit Drugs ..................................................................................... 17 2. Data ........................................................................................................... 25 D. BIOTECHNOLOGY .............................................................................................. 26 E. CONSUMER GOODS ........................................................................................... 28 1. Auto Parts ................................................................................................. 32 2. Electrical.................................................................................................... 36 3. High Tech Components............................................................................ 39 4. Apparel and Accessories ........................................................................... 42 F. COPYRIGHT PIRACY........................................................................................... 44 1. Film and Music ........................................................................................ 47 2. Software ..................................................................................................... 53 3. Publications .............................................................................................. 55 G. LINKS TO ORGANIZED CRIME ........................................................................... 58 H. CUSTOMS SEIZURES OF COUNTERFEIT AND PIRATED GOODS; TRADE FLOWS OF SELECTED CATEGORIES OF GOODS ................................................ 60 II. THE DEVELOPMENT OF INTELLECTUAL PROPERTY RIGHTS IN CHINA.................... 66 i TABLE OF CONTENTS Page A. INTRODUCTION .................................................................................................. 66 B. EARLY ATTEMPTS TO INTRODUCE INTELLECTUAL PROPERTY LAW IN CHINA ................................................................................................................. 67 C. INTELLECTUAL PROPERTY LAW IN CHINA SINCE THE LATE 1940S ................ 70 D. PRESSURE ON CHINA TO DEVELOP INTELLECTUAL PROPERTY LAWS AFTER THE CULTURAL REVOLUTION ............................................................... 72 1. 1982 Trademark Law ................................................................................ 75 2. 1984 Patent Law........................................................................................ 77 3. 1990 Copyright Law .................................................................................. 79 4. 1991 Regulations for Computer Software Protection.............................. 80 E. THE UNITED STATES INCREASES PRESSURE ON CHINA TO IMPROVE IPR PROTECTION....................................................................................................... 81 F. CHINA’S ACCESSION TO THE WORLD TRADE ORGANIZATION (“WTO”) AND COMPLIANCE WITH LEGAL REQUIREMENTS OF THE WTO TRIPS AGREEMENT ...................................................................................................... 85 1. Amendments to the Copyright Law .......................................................... 88 2. Amendments to the Trademark Law ....................................................... 90 3. Amendments to the Patent Law ............................................................... 92 III. AN OVERVIEW OF ENFORCEMENT MEASURES IN CHINA AND CHINA’S EFFORTS 93 TO IMPROVE INTELLECTUAL PROPERTY ENFORCEMENT.......................................... A. ENFORCEMENT MECHANISMS ........................................................................... 94 1. Administrative Enforcement .................................................................... 94 a. Customs Enforcement..................................................................... 100 2. Criminal Enforcement ............................................................................. 101 ii TABLE OF CONTENTS Page a. Supreme People’s Court’s Judicial Interpretations on Criminal Enforcement .................................................................... 104 i. Trademarks ............................................................................. 106 ii. Copyrights ............................................................................... 107 iii. Patents..................................................................................... 109 3. Civil Enforcement..................................................................................... 109 B. STRUCTURAL OVERVIEW OF ENFORCEMENT AGENCIES ................................. 111 1. Anti-Counterfeit Enforcement.................................................................. 111 2. Copyright and other IPR Enforcement.................................................... 112 C. CHINA’S EFFORTS TO IMPROVE ITS IPR REGIME HAVE SHOWN INCREMENTAL IMPROVEMENTS ....................................................................... 118 1. China’s 2006 Action Plan on IPR Protection ......................................... 118 2. China’s Progress Pursuant to Action Plans............................................. 121 3. New IPR Website ...................................................................................... 125 4. Progress in the Province of Jiangsu......................................................... 125 5. Other Key Recent Developments............................................................... 127 6. Assessment of Enforcement Challenges................................................... 130 IV. MULTILATERAL, BILATERAL, AND PRIVATE SECTOR MONITORING OF CHINA’S IPR REGIME AND THE TECHNICAL ASSISTANCE PROVIDED TO IMPROVE 132 ENFORCEMENT ............................................................................................................ A. WTO SECRETARIAT COMMENTS ON CONTINUING HIGH LEVELS OF IPR INFRINGEMENT AND INADEQUATE IPR ENFORCEMENT IN CHINA ................... 133 1. Article 63.3 Request................................................................................... 135 iii TABLE OF CONTENTS Page B. THE UNITED STATES: MONITORING CHINA’S PROGRESS WITH THE SPECIAL 301 REVIEWS, COMPLIANCE REPORTS AND THROUGH THE JOINT COMMISSION ON COMMERCE AND TRADE........................................................ 136 1. China’s Compliance with 2004 JCCT Commitments ............................. 139 a. To significantly reduce the level of IPR infringement ................. 139 b. To promulgate a Judicial Interpretation to increase penalties and expand the range of violations subject to criminal investigation .................................................................................... 140 c. To increase pressure on IPR violators by conducting nation- wide enforcement actions and increase actions at Customs ......... 142 d. To protect copyright works on the internet by ratifying and implementing the WIPO internet-related treaties.......................... 145 e. To begin IPR education campaign................................................. 146 f. To expand the ban on pirated software in government offices ..... 147 2. Additional JCCT commitments and concerns.......................................... 148 C. EUROPEAN UNION : MONITORING CHINESE ENFORCEMENT........................... 150 D. BUSINESSES CONTINUE TO FACE HIGH LEVELS OF IPR INFRINGEMENT IN CHINA ................................................................................................................. 152 E. TECHNICAL ASSISTANCE INITIATIVES TO HELP CHINA IMPROVE ENFORCEMENT..................................................................................................
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