CONSULTANCY STUDY ON SOCIO-ECONOMIC-POLITICAL TRENDS IN PAN-PEARL RIVER DELTA REGION SPECIAL REPORT (NUMBER 1) “ENHANCING COOPERATION IN INTELLECTUAL PROPERTY RIGHTS PROTECTION BETWEEN HONG KONG AND THE PAN-PEARL RIVER DELTA REGION TO PROMOTE REGIONAL ECONOMIC GROWTH” PART I COVERING FUJIAN, JIANGXI, HUNAN, AND HAINAN CENTRAL POLICY UNIT HONG KONG SPECIAL ADMINISTRATIVE REGION Socio-Economic-Political Trends in Pan-Pearl River Delta Region Fujian, Jiangxi, Hunan, Hainan (1st Special Report) Table of Contents I. Executive Summary ----------------------------------------------------------------- 5 II. Southeastern Region ---------------------------------------------------------------- 9 Significant Achievements in Intellectual Property Rights Administration in Pan-Pearl River Delta ------------------------------------ 10 Addressing Infringement of Intellectual Property Rights in the Mainland ------------------------------------------------------------------------- 19 Fujian: Impressive Progress In Enhancing Judiciary Protection of Intellectual Property Rights --------------------------------------------------- 26 Jiangxi Encourages Invention Patent Application -------------------------- 31 Hunan Introduces Plant Varieties Protection -------------------------------- 36 Hainan Plagued by Trademark Squatting ------------------------------------ 40 III. Statistics ------------------------------------------------------------------------------- 45 Patent applications and grants in the Pan-PRD “9+2” Region ----------- 46 Applications and grants of three types of patent in the Pan-PRD “9+2” Region ---------------------------------------------------------------------------- 47 Trademark applications and registrations in the Pan-PRD “9+2” Region ---------------------------------------------------------------------------- 48 Copyrights imported and exported by the nine Pan-PRD provinces/region in 2004 ------------------------------------------------------- 49 Cases involving counterfeiting of trademarks being investigated in the nine Pan-PRD provinces/region in 2003 ------------------------------------- 50 Pirated items confiscated in the nine Pan-PRD provinces/region in 2004 ------------------------------------------------------------------------------- 51 Law enforcement cases of patent in the nine Pan-PRD provinces/region ---------------------------------------------------------------- 52 IV. English-Chinese Glossary of Terms ---------------------------------------------- 53 - 3 - Socio-Economic-Political Trends in Pan-Pearl River Delta Region Fujian, Jiangxi, Hunan, Hainan (1st Special Report) - 4 - Socio-Economic-Political Trends in Pan-Pearl River Delta Region Fujian, Jiangxi, Hunan, Hainan (1st Special Report) I. Executive Summary 1. In recent years, the Pan-PRD has made significant achievements in works related to intellectual property rights (IPR), with the execution of IPR rising steadily each year and accounting for a relatively large proportion of the national total. This reflects the vast market potential for the development of IPR intermediary services in the Pan- PRD region. Hong Kong IPR agents are thus faced with unprecedented opportunities in penetrating the Mainland market. With in-depth knowledge of the common law system and familiarity with international IPR practices, they can join hands with partners in the nine Pan-PRD provinces/region to develop business in the Mainland. 2. With growing capability in scientific innovations, the Pan-PRD region has shown significant progress in exercising patent rights. From the inception of patents application in 1985 until the end of 2004, the State Intellectual Property Rights Office (SIPO) had granted 334,339 patents to the Pan-PRD region, including Hong Kong and Macao, accounting for 30.6% of the national total. As one of the more developed provinces among the nine Pan-PRD provinces/region, Guangdong had been granted 172,554 patented items as at the end of 2004, the highest in Pan-PRD and accounted for 51.6% of the region’s total. 3. As the Mainland society becomes more aware of the concept of trademarks, trademark registrations in the Pan-PRD have increased rapidly in recent years. In 2003, the total number of trademark applications and registrations in the Pan-PRD region including Hong Kong and Macao reached 150,392 and 75,563 respectively, each accounting for more than one-third of the national total. The trend is consistent with the Pan-PRD’s status as the country’s leading exporter and the role of Guangdong’s PRD and Fujian’s southeastern region as the world’s major manufacturing processing bases. 4. The development of the Pan-PRD region in the copyright market also stands out. In 2004, the quantity of copyrights imported and exported by the nine provinces/region reached 1,097 and 64 types respectively, accounting for 9.3% and 4.7% of the national total. Imports of audio and video products for entertainment took up major shares in the country, accounting for 30.5% and 56.6% of the national total respectively. In terms of quantity, imports of copyrights by the nine Pan-PRD provinces/region were dominated by books, which reached 724 types and accounted for two-thirds of the region’s total. 5. As the Mainland system of IPR is relatively new, the society’s concept of respecting IPR is still relatively weak. Violation of IPR is commonplace. Besides, the - 5 - Socio-Economic-Political Trends in Pan-Pearl River Delta Region Fujian, Jiangxi, Hunan, Hainan (1st Special Report) imbalance in the development of regional economies and markets has led to wide discrepancies in the execution of IPR laws. Some local governments eager to boost the development of their economies and sustain employment have tolerated and protected violations of IPR, leading to the serious phenomenon of inadequacy in IPR protection in the Pan-PRD region. 6. In 2003, the Pan-PRD Industry and Commerce Administration units at different levels investigated into a total of 11,571 cases related to violations of trademarks, accounting for 30.9% of the national total. Of this sum, 8,240 cases involved counterfeiting of trademarks, happening mainly in the country’s manufacturing processing bases of Guangdong and Fujian. Violation of copyrights is also relatively serious among the nine Pan-PRD provinces/region. In 2004, the Pan-PRD Copyright Administration units at different levels confiscated a total of 33.43 million pirated items. The more rampant cases involved illegal duplication and sales of electronic publications as well as smuggling of pirated audio and video products in Guangdong. 7. Currently, illegal activities involving violations of IPR are rampant between the Mainland and Hong Kong. To safeguard the IPR of Hong Kong enterprises in the Mainland, Hong Kong businesses should promptly register their trademarks and patents when entering the Pan-PRD market. Hong Kong and the eight Pan-PRD provinces/region should also make reference to the successful experience of Hong Kong-Guangdong cooperation and establish a network for coordination and communication, to counter cross-border violations of IPR through conducting regular meetings, exchanging intelligence, and undertaking joint actions. 8. Beginning 2004, Fujian has followed the requirements imposed by the Supreme People's Court to transfer all the first trial of IPR cases to the Intermediate or Higher Courts in order to improve the quality and efficiency of the hearings. Through providing better judiciary safeguard, the move will encourage transformation of scientific research results into commercial products and innovations, which would help increase the province’s overall competitiveness. As IPR violations remain rather serious in China, Fujian’s stepping up in judicial efforts to safeguard IPR rights would have meaningful implications to Hong Kong enterprises intending to develop the Fujian market. These developments are worth noting. 9. To promote advancements in science and technology, Jiangxi has launched a special fund to subsidise patent applications to encourage patenting of inventive and innovative products. As the subsidy scheme gives priority to inventions with higher technology content and innovative elements, the composition of patent applications in Jiangxi has improved significantly. Both the quantity and quality of patent applications have witnessed breakthroughs, resulting in an increase in the demand for - 6 - Socio-Economic-Political Trends in Pan-Pearl River Delta Region Fujian, Jiangxi, Hunan, Hainan (1st Special Report) quality patent intermediary services. This provides Hong Kong patent agents, which have extensive experience in the international market and are familiar with the legal systems of the US and UK, with new opportunities for development. 10. In the past two years, Hunan has aggressively promoted the protection of new plant varieties. Through transferring plant variety rights and granting licenses to enterprises to use these rights, plant breeders have been able to obtain substantial funds for development. As Hunan is a major agricultural province, the breeding of farm crops is crucial to the income earning of the tens of thousands of rural residents and to social stability, hence spans far and wide impacts on the economy. Through promoting agriculture development and raising the incomes of Hunan’s rural residents, the protection of plant varieties has significant implications on the business and investment environment of Hunan and is worth the attention of Hong Kong investors. 11. In Hainan, a large number