VZCZCXRO7465
PP RUEHCN RUEHGH
DE RUEHKO #2325/01 1180443
ZNR UUUUU ZZH
P 280443Z APR 06
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 1498
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHOO/CHINA POSTS COLLECTIVE
RUEHBS/USEU BRUSSELS
RUEHIN/AIT TAIPEI 5997
RUEHUL/AMEMBASSY SEOUL 8179
RUEHGV/USMISSION GENEVA 2827

UNCLAS SECTION 01 OF 03 TOKYO 002325 
 
SIPDIS 
 
STATE FOR EAP/CM, EAP/J AND EB/IPE, E -FELSING 
USTR for China Office, Japan Office, IPR Office, 
and OCG - Mendenhall, McCoy 
Commerce for National Coordinator for IPR 
Enforcement - CIsrael 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KIPR ECON JP
SUBJECT:  JAPANESE MISSION TO CHINA GETS WARM WELCOME, 
BUT FEW ANSWERS ON IPR 
 
Ref: Tokyo 617 
 
¶1.  SUMMARY:  Chinese officials from 13 ministries and 
agencies warmly received Japan's joint government- 
industry mission to China in mid-April.  Although the 
Chinese were remarkably well prepared, the Japanese 
delegation was not satisfied with the answers they got on 
China IPR laws. While the atmospherics had improved 
substantially, two members of the GOJ team told us that 
the situation on the ground in China is getting worse and 
losses are rising rapidly. 
End Summary 
 
¶2.  ECONOFF received similar, but separate readouts from 
two GOJ participants in the delegation, Masayasu Hosumi, 
Counsellor in the Office of Intellectual Property 
Protection of the Trade Ministry; and Kentaro Tanaka, 
Deputy Director, International Affairs Division of the 
Japan Copyright Office, Agency for Cultural Affairs. 
 
A New Chinese Attitude 
---------------------- 
 
¶3.  The Japanese side felt a dramatic positive change in 
attitude by the Chinese officials.  The hostility of 
recent years was gone.  Their Chinese interlocutors were 
welcoming and sincere, admitting that there were serious 
problems and weaknesses in the system.  The Chinese 
officials had obviously read the papers the GOJ had 
submitted and were prepared to respond, point by point. 
For the first time since these missions began four years 
ago, the GOJ received all of the appointments it 
requested; the appointments were confirmed in advance; 
and none were cancelled.  The Chinese emphasized that IPR 
problems could be resolved through dialogue.  Last year, 
many on the Chinese side had complained that China was 
the main victim of IPR infringement. 
 
¶4.  Commerce Minister Bo Xilai told the visiting 
delegation that the ministry had set up 50 centers in 
major cities around China to receive and handle 
information on IPR infringement.  Chinese officials gave 
the Japanese delegation data showing that they had 
transferred 70 per cent more cases from administrative 
offices to the police in 2005 than in the year before. 
They asserted that arrests under the criminal code had 
gone up 50 per cent in 2004 and 300 per cent in 2005. 
Hosumi said that Bo mentioned the number of U.S. cases 
being prosecuted, but did not have similar information 
for the number of Japanese cases.  The GOJ made a point 
of requesting it. 
 
But the problem is getting worse 
-------------------------------- 
 
¶5.  Overall, according to the two delegation members we 
talked to, the IPR climate in China is worsening, and 
Japanese companies' losses and damages climbing. 
According to JETRO (Japan External Trade Organization) 
data, Japanese companies suffered 3000 cases of 
infringement in 2005 and have already suffered 5000 cases 
in 2006 as of early April.  To make things worse, Hosumi 
pointed out, in many places around China the local media 
is actively opposed to enforcement of intellectual 
property rights and campaigns against it. 
 
Unsatisfactory Answers to Japanese Complaints 
--------------------------------------------- 
 
¶6.  The friendlier atmosphere the Japanese delegation 
encountered did not mean that China was prepared to 
change its position on many issues.  For example an 
International Intellectual Property Protection Forum 
(IIPPF) complaint to the Commerce Department about 
trademark infringement by look-alikes was greeted with 
the response that it was a "matter of law" and the 
ministry could not do anything about it because of the 
separation of the legislative and executive branches. 
(Hosumi labeled this ploy as using the "American 
 
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excuse.") 
 
¶7.  The Japanese delegation requested more stringent 
measures against repeat offenders, and recommended that 
criminal penalties should be imposed.  The Chinese 
responded that it was impossible because the thresholds 
set in the law would not allow it. 
 
¶8.  A complaint about karaoke machines was also rejected. 
In China karaoke is considered a movie, which means that 
the rights go to the producer, according to Hosumi. 
Japan wants it to be considered broadcasting, allowing 
full rights to the artists, but Chinese officials told 
them that that was impossible because "there is no one 
around to collect the information" about what is played 
when, how many times.  On falsely labeled goods, the 
Chinese Police officials also offered the excuse that 
some factories produce labels of multiple brands and it 
is difficult for them to identify the nationality of the 
IPR holder. 
 
 
¶9.  At the Supreme People's Court the Japanese 
recommended revising the unfair competition law because 
it did not address the problem of "slavish imitation" of 
a well-known design, e.g. the "Tamagochi" toys.  The 
response was that the Chinese parliament may address the 
issue when it revises the Patent Law in 2008.  The 
Chinese expect to complete a draft of the new law in 2007 
and said that it would be opened for public comments in 
May or June of next year. 
 
¶10.  The Japanese also complained about the situation for 
agricultural chemicals which are covered by both the 
Patent Law and the Administrative Law on Pharmaceuticals. 
The latter has "special contingent application measures" 
which allow production of the chemicals.  As a result 
Japanese companies have no Chinese licensees and are 
losing out. 
 
¶11.  This was the first time the Japanese mission was 
able to meet with the prosecutor's office (Supreme 
People's Procuratorate).  The Japanese message to the 
prosecutors was that enforcement of IPR laws should be a 
government-wide priority and carried out by local 
officials wherever needed. 
 
¶12.  Some Chinese officials told them that dealing with 
villagers on IPR issues was politically sensitive and 
difficult because the villagers have so little 
information available to them.  China is considering 
whether to "make copyright holders disclose information 
on the Internet."   Hosumi was not sure what this would 
entail. 
 
Thresholds 
  ---------- 
 
¶13.  Chinese officials explained that there are now three 
options for threshold criteria: 1) production or 2) sales 
or 3) profits.  The Japanese side had previously thought 
it was necessary to meet all three, not just one of the 
three.  The Japanese complained about the fact that the 
Chinese had raised the threshold in one category at the 
same time they lowered thresholds in the other two.  The 
Japanese side also criticized the provision which sets 
the criminal thresholds for individuals at three times 
that for corporations, which the Japanese told the 
Chinese was the opposite of the way it should be.  The 
Chinese response was that benefits and responsibilities 
are shared in corporations, but the Japanese believe it 
is because Chinese Communist Party members own the 
corporations. 
 
Japanese Technical Assistance 
----------------------------- 
 
¶14.  The GOJ, working with the private sector through 
JETRO, plans to continue and expand its programs to 
 
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provide training and textbooks for Chinese Customs and 
Trademark officials.  (See reftel on Japan Intellectual 
Property Association's related activities in China.) 
They are compiling a list of names of those who have been 
convicted of IPR crimes for the Customs service and Fair 
Trade Bureau.  Japanese electronics firms have pledged to 
provide training and technical information to Chinese 
Patent Office examiners on certain technologies such as 
liquid crystal displays, in order to speed up patent 
approvals.  JETRO has compiled several textbooks for its 
workshops which include handbooks to distinguish real 
Japanese brand marks from counterfeits.  Hosumi remarked 
that the head of the Chinese Customs office was 
especially positive during their meetings, appreciative 
of the training programs and displaying a complete change 
of attitude from earlier visits. 
 
¶15.  JETRO is also planning a METI (Ministry of Economy, 
Trade, and Industry) funded seminar for the Supreme 
People's Court, Fair Trade Bureau and legislative 
officials in response to China's interest in studying the 
Japanese IPR legal framework, including anti-trust and 
fair competition laws.  (Econoff shared information with 
Hosumi about upcoming IPR enforcement workshop at U.S. 
Consulate-General, Hong Kong.) 
 
¶16.  The GOJ will be watching to see if and how China 
enforces its IPR laws and will be keeping track of actual 
damages and losses by Japanese companies. 
 
Background on the Mission 
------------------------- 
 
¶17.  This was the fourth year that the GOJ has sent a 
joint government-private mission to China.  The April 10- 
14 mission was lead by Trade Ministry (METI) Director 
General for Manufacturing Industries Policy DG Tomofuni 
Hiraku.  The working level group paves the way for the 
high-level mission which will travel the first week in 
June.  Although Hosumi did not want to share the full 
list of delegation members, the GOJ side included 
representatives of METI, the Japan Patent Office, the 
Agency for Cultural Affairs, the quasi-government trade 
promotion agency, JETRO, industry associations such as 
the Japan Intellectual Property Association (JIPA), The 
International Intellectual Property Protection Forum 
(IIPPF), and the Japan Electronics and Information 
Technology Association (JEITA), plus representatives of 
some large Japanese corporations. 
 
¶18.  List of Chinese government agencies visited by the 
Japanese mission (as given by METI): 
 
Supreme People's Court 
Supreme People's Procuratorate (prosecutors) 
Ministry of Public Security 
Ministry of Commerce 
     Office of National Working Group for IPR Protection 
Ministry of Agriculture 
General Administration of Customs 
Legislative Affairs Office of the State Council 
State Intellectual Property Office 
State Administration for Industry and Commerce 
     Trademark Office 
     Fair Trade Bureau 
Administration of Quality Inspection, Supervision, and 
     Quarantine 
National Copyright Administration 
State Forestry Administration 
 
 
Donovan