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December 14th, 2011 WW Staff | NikeLeaks Cables: Asia
 

IPR Roundtables on Apparel and Sporting Goods: Legal Restraints and Enforcement Strategies

     
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Reference ID: 07GUANGZHOU753
Created: 2007-07-02 08:00
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
Origin: Consulate Guangzhou

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FM AMCONSUL GUANGZHOU
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INFO RUEHOO/CHINA POSTS COLLECTIVE
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RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
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UNCLAS SECTION 01 OF 02 GUANGZHOU 000753

SIPDIS

SENSITIVE
SIPDIS

USDOC FOR 4420/ITA/MAC/MCQUEEN, DAS KASOFF, HIJIKATA, GENERAL COUNSEL'S OFFICE JOEL BLANK, AND GENERAL COUNSEL SULLIVAN
STATE FOR EB/TPP MASSINGA, FELSING
STATE PASS COPYRIGHT FOR POOR
STATE PASS USPTO FOR BOLAND
STATE PASS USTR FOR MARUYAMA, WINTER MCCOY, ESPINEL, CELICO
USDOJ FOR NEWBY
DHS/CPP FOR MACRAY
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: KIPR ECON ETRD CH
SUBJECT: IPR Roundtables on Apparel and Sporting Goods: Legal Restraints and Enforcement Strategies

1. (SBU) SUMMARY: China's IPR regulations are vague and its enforcement agencies are weak, according to apparel and sporting-goods companies as well as U.S. and Chinese lawyers. The IPR enforcement efforts of most companies are primarily focused on shutting down domestic IPR violators and preventing the export of counterfeits. Companies encouraged the U.S. Government to target trade fairs and publicize "hot spots" to domestic audiences. A Nike representative said Guangzhou wholesale markets and trade fairs continue to be full of fake shoes. END SUMMARY.

Legal Restraints
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2. (SBU) At a recent seminar led by Tim Browning, Attorney Advisor with the Patent and Trademark Office, U.S. lawyer and Amcham-South China IPR Committee head David Buxbaum said that while China's national IP laws are generally good, the regulations are often vague and should be strengthened. Jason Yao, Asia-Pacific Counsel for golf manufacturer Acushnet, said China took a step backward by eliminating a provision requiring violators with multiple IPR offences to face criminal penalties. Yao said that it is too difficult to use landlord liability laws to remove infringing markets. He added that China's new IPR complaint centers are "a joke," as the telephone operators are unable to provide any assistance other than to refer the case to the relevant authorities.

3. (SBU) Several of the participants said that documentary requirements for IPR cases continue to be overly burdensome, including notarization, legalization, and approval from a U.S.-based Chinese Consulate. A U.S. lawyer said he encourages all U.S. companies to register their patents in China, regardless of whether they plan to manufacture there. Other lawyers noted that because IP classifications differ among countries, companies need to be careful when registering abroad. A Chinese lawyer added that foreign companies should always have an IPR agreement with OEM manufacturers.

Central-Local Divide
--------------------

4. (SBU) Participants differed on whether central or local authorities are more to blame for China's lack of progress in IPR enforcement. David Hon, owner of a folding bicycle manufacturer, said central authorities are unwilling to pressure local officials to implement the law. Others said central authorities simply lack the ability to control local offices and ensure adequate enforcement. Buxbaum pinned much of the blame on the inherent weakness of the IPR enforcement agencies, including AIC, IPO, the courts, and the PSB. He said these agencies need to professionalize and institute "pay as you go" systems in investigations to generate sufficient resources.

5. (SBU) Buxbaum noted that improved IPR enforcement is in China's self-interest, since the vast majority of cases involve Chinese companies. Browning said he had calculated that only 2.4 percent of China's civil IPR cases have involved foreign litigants (those from Hong Kong, Macau, and Taiwan are counted as domestic).

Enforcement Strategies
----------------------

6. (SBU) Several company representatives said they will continue to target most of their enforcement efforts in shutting down domestic violators. Acushnet places more emphasis on exports than domestic sales and has pursued vendors in the United States with mixed success. Sharla Settlemier, General Manager of Production in Nike's Guangzhou office, said Nike actively tries to identify U.S.-based distributors of counterfeit goods.

7. (SBU) Hon said trade shows remain his primary concern because they are a crucial marketing venue for counterfeiters. He encouraged the U.S. Government to press China to improve trade fair IPR enforcement. Acushnet's Yao said industry and government should publicize to Chinese audiences the names of cities with high rates of counterfeiting (similar to what is done in the USTR's Special 301 Report).

GUANGZHOU 00000753 002 OF 002

Fake Shoes Everywhere
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8. (SBU) Nike's Settlemier said wholesale counterfeit markets in Guangzhou continue to sell large volumes of fake shoes. Many of the vendors are not even interested in discussing single item purchases. She recently visited a fair in Guangzhou where a local equipment manufacturer was displaying shoe manufacturing equipment identical (including the color of paint) to the equipment being sold by a well-known Italian shoe company also at the fair.

9. (U) This cable has been cleared by PTO Attorney Advisor Tim Browning.

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