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RR RUEHCN RUEHVC
DE RUEHGH #0117/01 0471011
ZNR UUUUU ZZH
R 161011Z FEB 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 5578
INFO RHEHAAA/NSC WASHINGTON DC
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 5938

UNCLAS SECTION 01 OF 02 SHANGHAI 000117 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USTR FOR CHINA OFFICE - AWINTER, ACELICO; IPR OFFICE - RBAE; AND 
OCG - TPOSNER 
DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - CISREAL 
DOC FOR ITA - CMCQUEEN, LRIGOLI, ESZYMANSKI 
LOC/ COPYRIGHT OFFICE - MPOOR 
USPTO FOR INT'L AFFAIRS - LBOLAND 
DOJ FOR CCIPS - ASHARRIN 
FBI FOR LBRYANT 
DHS/ICE FOR IPR CENTER - DFAULCONER 
DHS/CBP FOR IPR RIGHTS BRANCH - PPIZZECK 
TREASURY FOR OASIA - DOHNER/CUSHMAN 
NSC FOR KURT TONG 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR EFIN EINV CH
SUBJECT: IPR ATTACHI ENGAGES SHANGHAI CULTURAL TASK FORCE 
 
 
SHANGHAI 00000117  001.2 OF 002 
 
 
(U) Sensitive but unclassified.  Not for dissemination outside 
USG channels. 
 
¶1.  (SBU) Summary:  On January 19, Senior IPR Attachi Mark Cohen 
met with the Director of Shanghai Culture Task Force (SCTF) Zhou 
Jianmin to discuss Shanghai's efforts on copyright enforcement. 
Cohen engaged Zhou on SCTF's authority over copyright 
infringement matters vis-`-vis the Shanghai Copyright Bureau and 
the legal means it uses to prosecute cases.  Zhou outlined 
SCTF's function as an enforcement agency that not only handles 
copyright piracy but also handles pornography issues.   Zhou 
also explained that because it is easier to collect evidence 
under "illegal business" criminal statutes than copyright 
provisions of the criminal code, his office regularly uses this 
legal avenue to prosecute cases.   The trend of delegating 
copyright enforcement to Cultural Affairs Bureaus is not unique 
to Shanghai; Shanghai has followed the lead of Beijing and other 
cities in making the transition.  Zhou also detailed his 
agency's cooperation with other city bureaus and its work with 
industry associations.  End Summary. 
 
SCTF - A Small Agency with a Large Mandate 
------------------------------------------ 
 
¶2.  (SBU) Shanghai was the first city in China to establish a 
cultural task force in 1999.   The main SCTF office is comprised 
of 80 staff, and there are several district level offices 
located throughout Shanghai.  Among other responsibilities, SCTF 
plays an important role in regulating activities of licensed 
businesses, including the illegal activity of selling pirated 
audio and video products.  By contrast, the Public Security 
Bureau holds general authority over IPR infringers.  The Bureau 
of Industry and Commerce is in charge of stores without business 
licenses while the Shanghai Administrative Task Force (SATF) 
deals with street peddlers selling IPR infringing products.  The 
SCTF is a member of the Shanghai IPR Coordinating Committee, 
SATF and the Market Order Rectification Office. 
 
¶3.  (SBU) Regarding copyright enforcement, the SCTF is in charge 
of counting, categorizing, and transferring pirated audio-visual 
products for authentication.   It works in coordination with the 
Shanghai Public Security Bureau Economic Crime Investigation 
Team, which is responsible for criminal IPR infringement cases. 
Zhou mentioned three such cases in 2006.   During an 
investigation in September 2006, the SPSB and the SCTF arrested 
five criminals with 2.73 million illegal discs. These criminals 
were punished with penalties from six months to two years in 
jails and fines ranging from RMB 5,000 (USD 645) to RMB 10,000 
(USD 1,290).   In October 2006, SCTF spent 40 hours with PSB 
investigating two criminal cases.  These cases resulted in the 
arrest of three people.  Zhou also pointed out that SCTF had 
provided assistance on numerous other IPR criminal cases carried 
out by the PSB. 
 
¶4.  (SBU) Zhou also explained that SCTF had a separate section 
in charge of Internet-based IPR infringement.   SCTF uses the 
charge of "inappropriately broadcasting video" to prosecute most 
Internet-based IPR crimes.  The highest penalty for this crime 
is approximately USD 23,000 and that the SCTF can only penalize 
infringers for not obtaining approval to broadcast video, not 
for the contents of the video. 
 
Illegal Business Operations vs. Copyright Infringement 
--------------------------------------------- --------- 
 
¶5.  (SBU) Cohen also engaged Zhou on the use of illegal business 
operation statutes to prosecute IPR crimes.  In 2003, PSB,  in 
coordination with SCTF, arrested eight criminals based on the 
crime of "illegal business operations."   Zhou explained that 
one criminal was sentenced to 10 years in jail and the rest were 
in jail from two years to eight years.  Zhou and Cohen also 
discussed the Randolph Guthrie case in which Guthrie was 
sentenced based on the crime of "selling illegal copies" under 
the criminal copyright law.  Zhou said that, after this case, 
the Supreme Court noted that similar cases should be sentenced 
based on the copyright law.  Zhou opined that it was easier to 
 
SHANGHAI 00000117  002.2 OF 002 
 
 
collect evidence under the charge of "illegal business 
operations" since the SCTF can issue the certificate for 
"illegal operation" without the IPR owner's verification.  He 
added that under the criminal copyright law provision regarding 
"sales of illegal copies," it was very difficult to collect 
evidence for verifying sales, since transactions often were in 
cash and there were no records.  Furthermore, Zhou acknowledged 
the workload to prosecute a case under the "sales of illegal 
copies" provision was much larger because the SCTF needed to 
obtain verification from different copyright owners.  In 
addition, he said copyright owners often have limited resources 
to provide verification of pirated discs. Thus, typically, one 
copyright association, such as Motion Picture Association of 
America (MPAA) will participate, and provide verification solely 
for its member companies. 
 
A Partnership of Convenience with Limited "Plea Bargaining" 
--------------------------------------------- -------------- 
 
¶6.  (SBU) Zhou opined that the large demand for DVD/CD products 
in the Shanghai market created a vast opportunity for pirates. 
However, he claimed that the joint operation with the SCATF was 
very effective in cutting the supply of pirated optical discs. 
Zhou went on to explain the details of the joint operation, 
saying since SCATF had no right to confiscate pirated discs, it 
only collected pirated discs and then transferred them to the 
SCTF for confiscation.   He added that to encourage the SCATF to 
collect pirated discs, the SCTF rewarded the SCATF, based on the 
numbers of pirate discs it collected.  SCTF also encouraged 
people involved in selling pirated discs to report the 
underground wholesalers and producers in exchange for reduced 
penalties. 
 
Cooperation with the Public 
--------------------------- 
 
¶7.  (SBU) On the issue of public complaints, Zhou claimed that 
SCTF would investigate upon receiving a complaint, and the SCTF 
also tracked closely the watch lists issued by the MPAA and the 
International Federation of the Phonographic Industries (IFPI). 
He added the SCTF maintained close relationships with industrial 
organizations such as IFPI and mentioned that SCTF had a good 
training system with IFPI and the MPAA.  Zhou said SCTF had 
coordinated training on topics such as how to distinguish 
pirated DVDs /CDs and the trends in the pirated DVD/CD market. 
Zhou also noted that, in general, it was quite difficult for his 
staff to differentiate between fake and legitimate discs. 
 
Acknowledging Market Access is a Problem 
---------------------------------------- 
 
¶8.  (SBU) In conclusion, Zhou suggested that easing the 
restrictions on selling audio and video products would assist 
the distribution of legitimated audio and video products.  He 
explained that current rules in Shanghai required that, in order 
to obtain a license to sell audio and video products, a business 
must have at least 40 square meters of store space.  He noted 
that this requirement was too high for big cities such as 
Shanghai since the profit in selling legitimate audio and video 
products was not high and the rent in big cities was relatively 
more expensive. 
 
Comment 
------- 
 
¶9.  (SBU) Shanghai's efforts on copyright are similar to efforts 
in several other cities in China to reallocate responsibility of 
copyright enforcement, in particular criminal copyright 
enforcement.   As in Beijing, Shanghai Copyright Bureau's 
authority over copyright infringement matters was virtually 
eliminated.   In addition, Shanghai has established an 
enforcement "taskforce" similar to that in Beijing.  While these 
changes appear to have little impact on copyright enforcement, 
they may eventually prove beneficial given Shanghai Copyright 
Bureau's thin staffing. 
KJARRETT