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Viewing cable 07BEIJING2566, USTR CONCLUDES PROVINCIAL IPR REVIEW IN BEIJING

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Reference ID Created Released Classification Origin
07BEIJING2566 2007-04-18 06:44 2011-08-23 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Beijing
VZCZCXRO8846
OO RUEHCN RUEHGH
DE RUEHBJ #2566/01 1080644
ZNR UUUUU ZZH
O 180644Z APR 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6980
INFO RUEHCN/AMCONSUL CHENGDU 8192
RUEHGZ/AMCONSUL GUANGZHOU 2789
RUEHGH/AMCONSUL SHANGHAI 7403
RUEHSH/AMCONSUL SHENYANG 7870
RUEHHK/AMCONSUL HONG KONG 9230
RUEHIN/AIT TAIPEI 6406
RUEHKO/AMEMBASSY TOKYO 1335
RUEHUL/AMEMBASSY SEOUL 0081
RUEHMO/AMEMBASSY MOSCOW 8664
RUEHGV/USMISSION GENEVA 1786
RUEAHLC/DHS WASHDC
RUCPDOC/USDOC WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHMCSUU/FBI WASHINGTON DC
UNCLAS SECTION 01 OF 08 BEIJING 002566 
 
SIPDIS 
 
State for EAP/CM - JYamomoto and EB/IPE - EFelsing 
 
USTR for China Office - AWinter; IPR Office - RBae; and OCG 
- SMcCoy, ACelico 
 
Commerce for National Coordinator for IPR Enforcement - 
CIsrael 
 
Commerce for MAC 3204/LRigoli, ESzymanski 
 
Commerce for MAC 3043/McQueen 
 
LOC/Copyright Office - MPoor 
 
USPTO for Int'l Affairs - LBoland, EWu 
 
DOJ for CCIPS - Asharrin 
DOJ for SChembtob 
FTC for Blumenthal 
FBI for LBryant 
 
DHS/ICE for IPR Center - DFaulconer 
 
DHS/CBP for IPR Rights Branch - PPizzeck 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON WTRO CH
SUBJECT: USTR CONCLUDES PROVINCIAL IPR REVIEW IN BEIJING 
 
REF: Beijing 02455 
 
------- 
Summary 
------- 
 
1. (U) USTR Chief Negotiator for Intellectual Property (IP) 
Enforcement Stanford McCoy and USTR Senior Director for 
China Affairs Amy Celico visited Beijing on March 16 to 
conclude a series of provincial review meetings in several 
Chinese cities.  They discussed Internet copyright issues 
at the Beijing Copyright Bureau; raised IP enforcement in 
local markets with the Chaoyang District of Beijing 
municipal government (which denied serious problems at the 
notorious Silk Market); discussed university textbook 
piracy at the Ministry of Education; and covered general IP 
enforcement with the Ministry of Commerce.  End Summary. 
 
---------------------------- 
Online Copyright Enforcement 
---------------------------- 
 
2. (U) USTR Chief Negotiator for Intellectual Property 
Enforcement Stanford McCoy and Senior Director for China 
Affairs Amy Celico (collectively, "USTR"), Embassy Senior 
IPR Attache Mark Cohen, and Econoff met with Beijing 
Copyright Bureau (BCB) Director Wang Yefei, Copyright 
Department Director Feng Xiansheng, and Deputy Director 
Chen Xiaohong on March 16.  Wang told USTR that Beijing 
started to focus on Internet-related intellectual property 
(IP) enforcement in August 2006 with the launch of IP 
education and public awareness programs, which included a 
project to educate businesses about legal software use. 
Wang stated that all of Beijing's copyright initiatives 
have the support of Beijing Mayor Wang Qishan, who wrote 
the preface of the Bureau's "Software Copyright Protection 
Manual," published recently with the support of Microsoft 
Corporation and the Business Software Alliance.  Wang 
further stated that, through BCB's efforts, Beijing 
Municipality has extended its government software 
legalization efforts from the central municipal government 
to all township and government agencies. 
 
----------------------------------- 
Difficulty Prosecuting Online Cases 
----------------------------------- 
 
3. (U) Wang explained that some cases of Internet copyright 
infringement have been successfully transferred from the 
BCB to the Public Security Bureau (PSB) for criminal 
investigation, trial, and conviction.  However, he 
expressed concern that evidence in such cases is difficult 
 
BEIJING 00002566  002 OF 008 
 
 
to collect and, as a result, suspects who infringe 
copyrights are often ultimately convicted for illegal 
business operations because prosecutors lack sufficient 
evidence of IP infringement.  To help in prosecuting 
Internet copyright cases, the BCB in January launched a 
pilot program to use an electronic watermarking system to 
register and protect digital images.  In a separate 
discussion with Senior IPR Attache, Wang also noted that 
his office has been tasked by the Beijing Municipal 
Government to address the problem of Internet webcasting or 
rebroadcasting of the Olympics, including drafting of a 
possible special rule addressing this issue for the 
government. 
 
4. (U) The Beijing Copyright Bureau regulates all requests 
from rights holders for the removal of infringing material 
on the Internet.  Wang admitted that the procedures for 
take-down notification are only one year old and still in 
development, and said that the BCB is concerned that the 
system will be overwhelmed by the large number of parties 
(rights holders, law firms, representatives, and others) 
filing take-down notices.  He said the BCB is also 
concerned about whic noties are legitimate and which are 
sent by unauthorized parties, and is working with rights 
holders to clarify this process.  USTR responded that 
rights holders often settle on their own in the United 
States, and therefore the take-down system only involves 
the government in the very small percentage of cases that 
require judicial intervention.  UST added that 
associations often act on rights holders' behalf outside of 
the United States, and should continue to be allowed to 
file notices in China. 
 
5. (U) Wang stated that while Internet service providers 
(ISPs) often respond to take-down notices by removing links 
to illegal content quickly, the content remains resident on 
the servers of Internet content providers (ICPs), who host 
the illegal files.  As the number both of illegal files and 
ICPs grows, Wang said the BCB faces difficulties regulating 
them, particularly with respect to film and music downloads. 
USTR responded with the recommendation to work closely with 
industry to better understand the challenges they face in 
the area of illegal content. 
 
6. (U) In response to USTR's inquiry about the "deep 
linking" case brought against Yahoo China by the music 
industry in January 2007, Wang said that the BCB hosted a 
workshop in February to discuss this and similar cases with 
judges.  He said that the opinion of the judges was that 
the prosecutors in the case were "not professional enough," 
in that they faced difficulties establishing sufficient 
evidence.  Wang said such cases are very difficult to 
 
BEIJING 00002566  003 OF 008 
 
 
prosecute, and suggested that the lawyers bring charges 
that are easier to prove, including civil infringement for 
the right to communicate over information networks, as 
defined in recently issued regulations, and others. 
 
7. (U) Wang indicated his interest in seeing IPR cases 
prosecuted in a special division of the civil courts, 
making more resources available for such cases.  He noted 
that Beijing recently established several basic level IPR 
civil courts, which provide additional convenience to right 
holders seeking to litigate their cases.  He added that the 
Chinese Government is still learning to establish legal 
systems that adequately address IPR issues, and he noted, 
in response to a comment by Senior IPR Attache, that at 
least the chief judge of the Supreme People's Court civil 
IPR tribunal, Jiang Zhipei, supported such a move.  (Note: 
The increasing trend towards basic level civil IPR courts 
is of little help to foreigners, who must litigate their 
cases in intermediate courts.  Furthermore, such basic 
level courts may be more closely tied to local economic 
interests.  In general, the United States Government has 
supported the creation of either an integrated IPR court 
that combines civil, criminal, and administrative 
jurisdiction or a national appellate IPR court that permits 
litigants to immediately appeal a case in a jurisdiction 
that is less tied to local influence.  Emboffs subsequently 
met with Supreme People's Court Deputy President Zhang Jun 
on March 28.  While Zhang agrees there is benefit in 
establishing a unified IPR court in China, he said it will 
not happen until after a broad-based reform of China's 
judicial system as well as its IPR laws as a whole.  Zhang 
noted that in the event such a court were established, 
Judge Jiang Zhipei would likely serve as its chief judge, 
and he therefore naturally supports the move.  See Reftel. 
End Note.) 
 
---------------------------- 
Infringement at Universities 
---------------------------- 
 
8. (U) Asked about copyright infringement at universities, 
Wang replied that many universities use foreign textbooks, 
which are subject to illegal copying and distribution 
because of their relatively high cost.  However, he said 
that universities receive "no safe harbor" from IPR laws, 
and said that the BCB plans to meet with 56 Beijing-area 
university presidents to discuss the problem.  On the issue 
of proliferating online piracy over broadband Internet 
connections at universities, Wang said that the problem is 
still relatively new, and that BCB is developing a black 
list of known infringing web sites that have not yet been 
shut down.  In response to a question of the Senior IPR 
 
BEIJING 00002566  004 OF 008 
 
 
Attache, Wang noted that he was unaware of any specific 
university policies governing usage of the Internet to 
minimize infringement activities.  USTR recommended that 
BCB employ more transparent reporting of any IPR 
enforcement actions, since such publicity would give China 
more credit abroad for its efforts, and would help to deter 
pirates. 
 
--------------------------------------------- ---- 
Strategies for Enforcement in Counterfeit Markets 
--------------------------------------------- ---- 
 
9. (U) In a meeting with Chaoyang District Vice Governor 
Xie Chaobin, Director Liu Chuncheng, and Deputy Directors 
Zhang Yong and Zhang Guohua, the Chinese side told USTR 
that Beijing's Central Business District plays an important 
role in the development of the capital and the country, 
especially with the impending 2008 Olympic Games, and that 
IPR enforcement is central to the district's continued 
development.  Xie said the government is "involving more 
social forces" in protecting IPR, and explained that the 
government relies heavily on the management companies at 
Chaoyang's notorious counterfeit markets to enforce IPR 
protection.  For example, he said that all management 
companies now require vendors selling trademarked brands to 
report their suppliers to Chaoyang's Cultural Authority for 
certification, and that revocation of that certification 
also results in the revocation of a vendor's business 
license, thus avoiding the quick revival of illegal 
businesses. 
 
10. (U) Xie said that, based on meetings with industry 
associations, rights holders are satisfied with IPR 
protection measures and enforcement actions taken in 
Beijing's markets.  He added that the Chaoyang government 
signed a memorandum of understanding (MOU) with the 
American Chamber of Commerce (AmCham) in October 2006 that 
will create a better environment for legitimate goods and 
will increase public awareness of the counterfeit problem. 
Xie said that this strategy, combined with targeted law 
enforcement activities, is the keys to IPR enforcement.  He 
added that Chaoyang government officials would like to 
visit the United States in 2007 to exchange experiences on 
enforcement, further to a recent exchange with local law 
enforcement from the United States.  Also through the MOU 
with AmCham, Xie reported that the Chaoyang government 
meets monthly with an IPR working group to exchange ideas 
and the results of piracy cases, enhance law enforcement 
and monitoring efforts, hold workshops and seminars, and 
create campaigns to educate sellers and buyers, 
particularly younger buyers.  He added that education 
programs have to date included a visit to Microsoft and to 
 
BEIJING 00002566  005 OF 008 
 
 
Taiwan movie studios. 
 
------------------------------------------- 
Chaoyang Challenges Silk Street Allegations 
------------------------------------------- 
 
11. (U) USTR asked Chaoyang government officials what more 
the United States and China must do to cooperatively manage 
the problem at Silk Street Market, the "world's most famous 
market" for counterfeit goods.  Liu interrupted the 
interpreter to note that "the embassy did not provide us 
with this question [in advance]."  He continued to say that 
those familiar with the market's history will have a more 
objective view of recent progress n enforcement, and that 
those who "pay more attention to recent litigations" and 
cooperation with the EU will have a better understanding of 
the situation.  USTR cited recent industry data showing 
that, in some categories, up to 80-90% of goods at Silk 
Street are counterfeits.  The Chinese side challenged those 
figures and requested that such data be shared, asserting 
that rights holders are pleased with the situation at the 
market.  (Note: Director Liu referred in particular to a 
widely reported incident in which a European lawyer, who is 
also counsel to two companies concerned about infringement 
at the Silk Market and who chairs European Chamber's IPR 
Committee, entered into a separate agreement with the Silk 
Market to settle his clients' civil litigation.  The 
signing ceremony was widely reported in the media as an 
indication of European "satisfaction" with IP enforcement 
at Silk Market.  Emboffs were advised by rights holders' 
counsel not to attend this meeting, lest it be used for 
propaganda purposes, and therefore declined to participate. 
End Note). 
 
12. (U) Director Liu said that data on high rates of 
counterfeit products at local markets is "forced" by 
intermediaries who profit from IPR cases, and stated that 
Chaoyang district has never relied on the sale of 
counterfeit goods for economic development.  USTR suggested 
that both sides acknowledge frankly the situation at the 
market and work constructively to address it, to which Liu 
replied by encouraging USTR to visit Silk Street Market, 
and expressed his hope to work together in the future based 
on real data.  Vice Governor Xie added that Chaoyang 
district is firmly determined to fighting piracy and that, 
as WTO members, China assures that all rights holders 
receive the same treatment as domestic rights holders.  He 
said that he hopes to promote future discussion and avoid 
misunderstandings. 
 
------------------------------------------ 
Online and Textbook Piracy at Universities 
 
BEIJING 00002566  006 OF 008 
 
 
------------------------------------------ 
 
13. (U) In a meeting with the Ministry of Education's 
Department of International Exchanges, Assistant Director 
General Xu Yongji told USTR that, especially since 2000, 
Chinese universities have increasingly begun to use foreign 
textbooks.  In such cases, the Ministry of Education 
requests that the books be licensed for publishing in China 
to reduce the cost to students.  He said there are nine 
presses in China that print such licensed foreign books, 
with a total of more than 6,000 foreign textbooks in print 
in China today, amounting to several hundred million RMB in 
royalties. 
 
14. (U) Xu said that the Ministry of Education currently 
monitors copyright compliance at universities, and 
stipulates measures, available online, for schools to 
follow.  However, enforcement responsibility falls to the 
National Copyright Administration, which worked together 
with the Ministry of Education from August to September 
2006 to punish textbook infringers, and will collaborate 
longer term to establish mechanisms to fight piracy. 
 
----------------------------------- 
MOFCOM's IPR Enforcement Strategies 
----------------------------------- 
 
15. (U) USTR also met with on March 16 with the Ministry of 
Commerce (MOFCOM) Market Order Rectification Office (MORO), 
including China International Electronic Commerce Center 
(CIECC) Vice Director Wang Kaiqian, IPR Affairs Vice 
General Manager An Ning, and State Office of IP Protection 
Division Director Qiu Zhongyi.  USTR provided MOFCOM with a 
summary of provincial review activities and findings, 
covering athletic shoe counterfeiting, Internet and book 
piracy, IPR complaint centers, and discussion of Silk 
Market with Chaoyang District Government.  Vice General 
Manager An expressed MOFCOM's appreciation for USTR's 
observations on IPR and cited recent examples of IPR 
enforcement and the establishment of 50 nationwide IPR 
complaint centers, which he noted are consistent with 
MOFCOM's principle to consistently promote IPR issues at 
all levels of government. 
 
16. (U) Asked about the existence of a rewards system for 
IPR enforcement, MOFCOM replied that different enforcement 
and administrative systems exist for trademarks, copyrights, 
and patents, and that rewards and punishments, including 
rewards for case transfer, are part of each.  However, 
MOFCOM noted that there is no central system for evaluating 
and rewarding IPR enforcement.  Asked what incentives have 
been added since 2006 for increased case transfer, MOFCOM 
 
BEIJING 00002566  007 OF 008 
 
 
reported that four new rules have been made, and a 
monitoring system established.  The two problems they 
report to face are evidence collection and cooperation with 
rights holders. 
 
17. (U) All IPR enforcement actions are reported on the 
CIECC website, and MOFCOM said that 20 percent of visitors 
to the site in February 2007 were from the United States, 
indicating that it has become a valuable tool to foreign 
rights holders.  United States visitors represented the 
largest proportion of foreign visitors to the site.  USTR 
pointed out that very little information is available 
online, leaving rights holders uncertain whether their 
particular case has been dealt with or not, and that 
publishing so little information may reduce the deterrent 
effect.  USTR suggested releasing more information about 
take-down actions, in compliance with Chinese law.  MOFCOM 
replied that this has to do with confidentiality of rights 
holders.  USTR pointed out that following a March 2006 
conversation about transparency, MOFCOM had not yet made 
available enforcement statistics for 2006. 
 
------- 
Comment 
------- 
 
18. (SBU) USTR's provincial review meetings in China, which 
were held prior to the April 10 WTO filings by USTR, were 
largely granted at the last minute and only after 
considerable direct intervention by the Embassy.  To 
arrange the meetings, Emboffs told MOFCOM that if China 
wanted an objective report in USTR's provincial review, it 
should either support USTR's visits to local governments, 
or at least refrain from interfering with them.  In 
response, MOFCOM denied any interference; however, Chinese 
agencies did not grant any requested meetings until MOFCOM 
stopped "not interfering."  With the April 10 filing of the 
WTO dispute resolution cases on Chinese IPR-related matters 
(enforcement and market access), Chinese officials have 
repeatedly noted in various fora that all bilateral 
cooperation on IPR issues between the United States and 
China is henceforth suspended, which casts considerable 
doubt on the ease with which such meetings may be arranged 
in the future. 
 
19.  (SBU) Despite recent WTO fallout, however, USTR's 
March meetings in Beijing demonstrated the effectiveness of 
continued engagement with local officials to build 
relationships and trust to support better IPR enforcement. 
Emboffs have met with BCB dozens of times and have 
sponsored several joint programs together.  In a prior 
meeting with Emboffs, the BCB even confided their own 
 
BEIJING 00002566  008 OF 008 
 
 
initial disbelief when first advised by Emboffs that 
Internet copyright piracy was a problem in China.  Now, 
however, they say they are fully engaged on the issue. 
Similarly, Emboffs attended several bilateral meetings with 
CIECC before it established its now popular online IPR 
complaint mechanism.  Vice Director Wang Kaiqian has 
credited advice from Emboffs about how to make the site 
more user-friendly and useful to foreigners with the site's 
recent dramatic increase in foreign users. 
 
20. (SBU) Continuing local engagement remains especially 
critical in the post-WTO case world.  The Embassy was 
pleased to nominate and send a delegation of four Chinese 
Internet copyright enforcement officials to the United 
States on an International Visitors Program in March and 
April 2007.  The visitors were hosted by USTR and other 
agencies, and are now planning a number of technical 
assistance programs with the CIECC, which the Embassy hopes 
will survive the high profile public rhetoric of 
disappointment and anger from the Chinese Government.  End 
Comment. 
 
21. (U) This report was cleared by USTR. 
 
RANDT