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RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #2092/01 3060926
ZNR UUUUU ZZH
R 020926Z NOV 06
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 5261
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 03 GUANGZHOU 032092 
 
SIPDIS 
 
USDOC FOR 4420/ITA/MAC/MCQUEEN, DAS LEVINE, RIGOLI 
STATE FOR EB/TPP MASSINGA, FELSING 
STATE PASS COPYRIGHT FOR TEPP 
STATE PASS USPTO FOR DUDAS, BROWNING, BOLAND, ANTHONY, NESS 
STATE PASS USTR FOR MENDENHALL, MCCOY, ESPINEL, WINTER, CELICO 
USDOJ FOR SUSSMAN 
DHS/CPP FOR PIZZECK 
USPACOM FOR FPA 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KIPR ECON ETRD CH
SUBJECT: Fighting Copyright Infringement at the Canton Fair 
 
REF: A) Guangzhou 29654 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1. (SBU) Summary and Comment: Representatives from U.S. and Canadian 
art publishing companies spotted numerous vendors selling copies of 
their products at both the Canton Fair and the Jinhan Fair in 
Guangzhou on October 25, 2006.  Officials at the Canton Fair IPR 
complaint center, after first insisting on frustratingly high 
evidentiary requirements, eventually ordered vendors to remove 
infringing products from their displays.  Organizers from the Jinhan 
Fair were more cooperative, accompanying the group throughout the 
fair and ordering vendors to remove violating items.  Neither fair, 
however, imposes penalties that effectively deter piracy, and the 
rights-holders expressed doubts that their policing efforts and 
expenses are worth the cost.  The companies blame China's vast 
market of pirated goods for their current financial woes.  End 
Summary and Comment. 
 
Background on the Art Publishing Industry and IPR Infringement 
--------------------------------------------- ---- 
 
¶2. (SBU) Econoff accompanied the owners of Art in Motion and Wild 
Apple to the China Export Commodities Fair (Canton Fair) and Jinhan 
Artwork and Craft Fair (Jinhan Fair) on October 25, 2006.  Both 
companies are members of the Art Copyright Coalition, an association 
of 18 art publishing companies from the United States, Canada, and 
Europe.  The companies range in size from USD 2 to 50 million in 
sales per year. 
 
¶3. (SBU) According to the company owners, the legitimate art 
publishing industry has seen sales and employment figures fall 
significantly during the past few years, in large part due to 
rampant copyright infringement in China.  Sales for Art in Motion, 
based in Vancouver, have fallen 40 percent during the last few 
years, and the company has trimmed staff from 600 to 300.  Wild 
Apple, which is based in Vermont, has seen a similar trend.  Neither 
company sells its products in China because of concerns about 
counterfeiting. 
 
¶4. (SBU) The Canton and Jinhan Fairs are a source of a significant 
portion of the world's counterfeit art prints, according to company 
owners.  Art in Motion calculated that vendors at the Canton and 
Jinhan fairs earn between USD 500 million and USD 1 billion in 
annual sales - more than the legitimate art publishing industry. 
Company representatives have even seen fakes in large U.S. retail 
chains such as Wal-Mart and Target.  The counterfeiters generally 
buy legitimate prints and copy them with high-quality scanners. 
 
The Costs of Investigating in China 
----------------------------------- 
 
¶5. (SBU) For most members of the Art Copyright Coalition, hiring 
legal representation to investigate infringement in China is 
prohibitively expensive.  Art in Motion's operational and legal fees 
will reach USD 40,000 for this session of the Canton Fair.  Wild 
Apple did not hire a law firm because the costs were too high. 
Several years ago, Art in Motion hired an investigator to track down 
an infringing manufacturer, conduct a joint raid with Chinese 
authorities, and pursue civil action.  Expenses topped USD 100,000 
and the operation did not achieve any lasting significance, 
according to Garry Peters, owner of Art in Motion.  He said his 
company may ultimately decide that it cannot afford to continue 
funding investigation or enforcement actions in China. 
 
Canton Fair: Burdensome Documentation Requirements 
--------------------------------------------- ----- 
 
¶6. (SBU) During the spring 2006 session of the Canton fair, the 
fair's IPR complaint center did not accept Art in Motion's 
documentation showing copyright ownership.  To prepare for the fall 
session, the company selected 120 of the most commonly counterfeited 
images and, following Canton Fair requirements, obtained the 
following documents for each: copyright registration, notarized 
copyright owner authorization, legalized copyright owner 
authorization (by a Chinese Consulate in the United States), power 
of attorney for the legal representative, and Chinese translations. 
The documents filled a small suitcase.  Leon Wang, lawyer for Baker 
 
GUANGZHOU 00032092  002 OF 003 
 
 
& McKenzie, which was representing Art in Motion, said the complaint 
office's documentation requirements are overly burdensome and more 
stringent than required by Chinese law. 
 
Infringement at the Canton Fair 
------------------------------- 
 
¶7. (SBU) The group located nine vendors at the Canton Fair selling 
artwork that infringed on their copyrights, up from eight vendors in 
the spring session.  These numbers only include vendors that had at 
least four infringing items on display.  Some of the vendors had 
catalogues that included hundreds of Art in Motion and Wild Apple 
images.  The company owners said that, generally speaking, every 
vendor with art prints at the fair was selling works that infringed 
on a copyright. 
 
Canton Fair IPR Complaint Center: Inconsistent But Cooperative 
--------------------------------------------- ----- 
 
¶8. (SBU) The Canton Fair's IPR complaint center consisted of two 
small offices, one for copyrights and the other for trademarks and 
patents.  The copyright office, which was noticeably less busy than 
the trademark/patent office, included six desks staffed by officials 
from the Trade Fair, the Guangdong Copyright Bureau, and the 
Guangdong Administration for Industry and Commerce.  English 
instructions describing the complaint process were posted outside 
the offices.  The offices did not, however, have English versions of 
the complaint submission forms.  (Note: The Consulate and Embassy 
have in the past asked Canton Fair organizers to make translated 
documents available. End Note.) 
 
¶9. (SBU) The complaint office staff accepted Art in Motion's 
copyright ownership documents.  However, they raised a new hurdle 
that potentially stalled further action by insisting on photographs 
showing the displayed counterfeit goods.  In addition, they would 
not accept as evidence vendors' catalogues with infringing images. 
However, the following morning, when the group returned to the 
complaint office, officials dropped the photographic requirement. 
The officials visited the exhibition halls and ordered the vendors 
to remove infringing products.  In two cases, they detained vendors 
for further questioning. 
 
¶10. (SBU) Despite the eventual cooperation by Canton Fair officials, 
company owners expressed frustration at the lack of deterrent 
penalties.  In all nine cases, the vendors continued to operate for 
the duration of the fair. Infringers are only banned from the fair 
after three cases of infringement.  In addition, according to Wang, 
enforcement decisions made by the complaint office are not 
applicable in separate administrative or legal cases. 
 
Canton Fair IPR Statistics 
-------------------------- 
 
¶11. (SBU) This session of the Canton Fair, which ended October 30, 
saw 573 complaints of IPR violations and 509 enterprises penalized, 
according to press reports.  These figures are up 21.4 per cent and 
21.5 percent, respectively, compared with the spring 2006 session. 
Canton Fair officials permanently banned three exhibitors from the 
fair.  More than 190,000 visitors attended the fair, signing 
contracts worth USD 34.06 billion. 
 
The Jinhan Fair: Better But Still Discouraging 
--------------------------------------------- - 
 
¶12. (SBU) The Jinhan Fair was adjacent to the Canton Fair and had a 
comparable volume of art prints for sale.  Jinhan organizers 
required only basic proof of copyright ownership (e.g., legal proof 
of the company and catalogues) and were willing to accompany the 
group on a walk-through of all 10 floors of the fair building.  The 
group located 10 vendors selling art that infringed on their 
copyrights, down from 15 vendors in the spring 2006 session.  The 
company owners noted that the overall amount of artwork on display 
was less than the prior session.  Almost all of the companies 
selling prints were from Fujian's Minghou County, which is located 
near Fuzhou.  Wang noted that Minghou is a center of legitimate and 
illegitimate art printing in China, much as Fujian's Putian is for 
shoe manufacturing. 
 
¶13. (SBU) Jinhan Fair organizers ordered the vendors to remove the 
 
GUANGZHOU 00032092  003 OF 003 
 
 
infringing items from their booths and from their catalogues.  Wang 
returned to the booths two days later and found that one of the 10 
vendors had placed the items back on display.  Despite the 
cooperation of Jinhan Fair organizers, the company owners were wary 
of their commitment to policing the vendors.  Indeed, during the 
walk-through, one of the fair organizers was overheard warning 
someone on her cell phone to "be careful" because the group was on 
its way. 
 
GOLDBERG