VZCZCXRO0857
RR RUEHCN RUEHGH
DE RUEHGH #0259/01 1200848
ZNR UUUUU ZZH
R 300848Z APR 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 5765
INFO RUEHGZ/AMCONSUL GUANGZHOU 0581
RUEHSH/AMCONSUL SHENYANG 0604
RUEHIN/AIT TAIPEI 0481
RUEHCN/AMCONSUL CHENGDU 0600
RUEHHK/AMCONSUL HONG KONG 0708
RUEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 0139
RUCPDOC/USDOC WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 1030
RUEHGH/AMCONSUL SHANGHAI 6158

UNCLAS SECTION 01 OF 05 SHANGHAI 000259 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USTR FOR CHINA OFFICE - AWINTER, ACELICO; IPR OFFICE - RMEYERS; 
AND OCG - SMCCOY 
DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - CISRAEL 
DOC FOR ITA - DAS KASOFF, CMCQUEEN, LRIGOLI, ESZYMANSKI 
LOC/COPYRIGHT OFFICE - STEPP 
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 
NSC FOR KTONG 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR EFIN EINV CH
SUBJECT: SHANGHAI RELEASES 2007 IPR WHITEPAPER 
 
REF: A. SHANGHAI 222 
 
     ¶B. 06 SHANGHAI 4172 
     ¶C. 06 SHANGHAI 4639 
 
(U) Sensitive but unclassified.  Not for distribution outside 
USG channels. 
 
¶1. (SBU) Summary: The Shanghai Intellectual Property 
Administration (SIPA) held its annual meeting with foreign 
Consulates and Chambers of Commerce on April 24 to mark the 
publication of its annual White Paper on intellectual property 
(IP) protection accomplishments in 2006.  With its closing down 
of the notorious Xiangyang Market and other confiscations and 
actions, the White Paper painted a rosy picture of Shanghai's 
efforts at protecting the rights of intellectual property 
holders.  Shanghai continues to make inroads against IP crime, 
and has increased its coordination with other cities in the 
region.  Nevertheless, IPR infringements remain a common part of 
everyday life in Shanghai with pirated goods being sold openly 
on the street and in stores throughout the city.  End summary. 
 
----------------------- 
A Long and Arduous Task 
----------------------- 
 
¶2. (SBU) The Office of the Shanghai Intellectual Property Rights 
Joint Conference, chaired by SIPA Director Chen Zhixing, issued 
its "White Paper of Intellectual Property Development and 
Protection Status in Shanghai 2006" on April 24.  To mark the 
publication of its white paper, SIPA hosted its eighth annual 
meeting with diplomatic missions and international chambers of 
commerce located in Shanghai.  Chen noted in his opening remarks 
that protecting intellectual property rights (IPR) "will not 
succeed without the support of the whole society.  We are fully 
cognizant that IPR protection is a long and arduous task that is 
essential to promoting innovation and constructing a harmonious 
socialist society."  SIPA provided a list of more than 100 
different outreach activities it had conducted in April alone to 
raise society's awareness of the importance of protecting IPR. 
 
--------------------------- 
Five Tasks and Ten Measures 
--------------------------- 
 
¶3. (SBU) According to Chen, the Shanghai Municipal Government 
developed its "Action Guidelines for Protecting Intellectual 
Property Rights in Shanghai" in July 2006.  One result of its 
action plan was a specialized campaign to "crack down on the 
sale of fake commodities and pirated audiovisual products."  The 
guidelines, as laid out in the White Paper, identified "Five 
major tasks" and "Ten Measures." The five tasks were: 
 
- 1) Strictly crack down on pirating activities; 
 
- 2) Continue to crack down on infringement activities in the 
trademark exchange market; 
 
- 3) Strengthen regulating efforts on key issues of patent 
infringement; 
 
- 4) Intensify IP protection in the export sector; and 
 
- 5) Reinforce IP management of exhibitions and trade shows 
 
The ten measures were: 
 
- 1) Set up reporting and complaint service centers; 
 
- 2) Improve cross-regional coordinated enforcement mechanisms; 
 
SHANGHAI 00000259  002 OF 005 
 
 
 
- 3) Work out Action Plan of IP Protection for the Shanghai 2010 
World Expo; 
 
- 4) Steadily promote the use of legal software copies in 
enterprises; 
 
- 5) Establish an IP protection status evaluation mechanism; 
 
- 6) Improve the IP protection status circulation system; 
 
- 7) Establish a regular reporting system; 
 
- 8) Enforce the random spot checking system; 
 
- 9) Put a responsibility system into effect; and 
 
- 10)Stage specialized campaigns. 
 
--------------------------------------------- --- 
Shanghai Administration of Industry and Commerce 
--------------------------------------------- --- 
 
¶4. (SBU) Shanghai Administration of Industry and Commerce (AIC) 
Deputy Director Mr. Chen Xuejun highlighted the closure of the 
Xiangyang Market (Ref C) and the shutting down of "Xiangyang 
Market websites."  The AIC has conducted "short-term crack 
downs" and "long-term campaigns" to effectively curtail the 
spread of fake-goods dealers.  Chen said that more than 110,000 
stalls were inspected for illicit goods and more than 100 
counterfeit fabricating enterprises had been "eradicated."  The 
AIC also had stepped up efforts to coordinate with the Public 
Security Bureau (PSB) to fight fake-goods touts on the streets. 
 
¶5. (SBU) According to White Paper statistics, in 2006 the AIC 
detected 2217 illegal trademark-related activities, confiscated 
and destroyed 1.5 million fake commodities worth approximately 
RMB 160 million (USD 21 million), and handed nine cases over to 
the courts.  Of the 2217 trademark infringing cases detected, 
1569 (75 percent) were foreign-related trademarks.  These cases 
had a total value of RMB 30.72 million (USD 3.9 million).  Of 
these, 476 were infringements on U.S. trademarks, 248 were 
French, 216 were Japanese, and 142 were German. 
 
---------------------------------- 
SIPA's Commodity IPR Plan for 2007 
---------------------------------- 
 
¶6. (SBU) SIPA's Chen also announced that, in 2007, Shanghai 
would pursue four new goals for cracking down on pirated-goods 
commodity markets similar to the now-closed Xiangyang Market. 
The Administration of Industry and Commerce would: 
 
- 1) Classify different commodity markets in Shanghai according 
to the severity of their infringement activities in order to 
prioritize their work. 
 
- 2) Issue a list products and brands, such as Louis Vuitton, 
that were against the law to sell in small commodity markets. 
 
- 3) Involve the commodity markets landlords to create 
self-disciplining measures with in their leases so that shops 
are forced out of their lease after receiving only one warning 
for selling illegal goods. 
 
- 4) Strengthen coordination with Shanghai's IPR hotline (see 
paragraph 15). 
 
 
SHANGHAI 00000259  003 OF 005 
 
 
-------------------------------------------- 
Software, Audio-Visuals, Maps & 10 Textbooks 
-------------------------------------------- 
 
¶7. (SBU) Shanghai's Municipal Copyright Bureau investigated over 
500 business units and locations, seized 130,000 pirated copies 
of software, and closed down "some websites."  Shanghai ranked 
third in China for its quantity of audio and visual products 
destroyed, having destroyed 6.77 million pieces.  In a 
"One-Hundred Day Anti-Piracy Campaign," 177,000 copies of 
pirated books and newspapers were confiscated and three cases 
were handed over to criminal courts. 
 
¶8. (SBU) According to Shanghai Copyright Bureau Deputy Director 
Lou Rongmin, one of his department's biggest cases involved the 
confiscation of more than 120,000 illegal maps.  The 
"ringleaders" were sentenced to jail terms of up to four years. 
This cased required coordination with the PSBs in neighboring 
Anhui and Zhejiang Provinces where the actual printing took 
place. 
 
¶9. (SBU) Lou also noted that, on behalf of U.S. publisher McGraw 
Hill, the Copyright Bureau had conducted investigations of 
photo-copy shops frequented by university students and 
confiscated 10 copies of pirated textbooks. 
 
-------------------------------- 
Yangtze River Delta Coordination 
-------------------------------- 
 
¶10. (SBU) SIPA Deputy Director Ms. Gao Xiaomei said that 
Shanghai had increased its cooperation with other Yangtze River 
Delta (YRD) IP protection.  SIPA has developed a Joint Law 
Enforcement Action Plan with IP administrations in 24 cities in 
Jiangsu and Zhejiang Provinces.  In August 2006, they held their 
first joint conference.  In addition, they had attempted to 
coordinate the handling of cases and the transfer of evidence 
between different legal jurisdictions while exchanging 
information about different cases.  The goal of this cooperation 
was to "focus energy, save costs, obtain evidence in a timely 
manner, and prevent infringement."  Director Chen later promised 
to have more information in the next year about the YRD 
coordination, noting that the Central Government had taken a 
keen interest in this initiative. 
 
--------------------------------------------- -------- 
Shanghai Courts "Sedulously" Address IP Infringements 
--------------------------------------------- -------- 
 
¶11. (SBU) The White Paper states that, in 2006, "Shanghai courts 
sedulously started trial work on IP-related cases and worked 
hard to enhance judicial protection of IP."  Shanghai courts 
accepted 1100 civil cases for either first or second trials. 
This was a new high, up from 1092 in 2005 and 851 in 2004.  The 
Shanghai courts also touted the fact that they had accomplished 
"a high rate of intermediation and cancellation, a low rate of 
appeal, and a low rate of changed sentences following an appeal. 
 The intermediation and cancellation rate in 2006 was 65 percent. 
 
¶12. (SBU) The White Paper also indicated that the Shanghai 
courts' IP case-law and experience expanded in 2006.  It says: 
"A batch of new-type and representative cases settled, providing 
trial thoughts and experiences for later, similar, cases."  It 
cites the example of the Beijing Jingdiao Technology Company 
suit brought against "some company in Shanghai" for computer 
software infringements.  This decision provided the precedent 
that data and file format of output by computer software is not 
part of the computer software so that the software's copyright 
 
SHANGHAI 00000259  004 OF 005 
 
 
did not apply. 
 
¶13. (SBU) The White Paper also noted that the settlement of 
high-profile international cases brought by such firms as 
Starbucks, Louis-Vuitton, and Synopsys, "established a good 
image of Shanghai providing timely and effective IP protection 
according to law." 
 
-------------------------------- 
Making Sure It's Not in the Mail 
-------------------------------- 
 
¶14. (SBU) Shanghai Customs Enforcement Department Head Wu 
Huading highlighted its special campaign to crack down on the 
export of pirated goods through China Post.  Wu said that 
Customs had detected 190 cases worth RMB 180 million (USD 23 
million).  This was a 205 percent increase over 2005.  He 
attributed this success to the implementation of new risk 
management techniques for IP protection that had been directly 
responsible for more than 50 percent of its cases.  Shanghai 
Customs was also increasing its outreach to other customs 
administrative levels in the YRD area, including Nanjing and 
Ningbo. 
 
------------------------------------- 
Shanghai's Hotline for IPR Complaints 
------------------------------------- 
 
¶15. (SBU) Since its establishment in July 2006, Shanghai's 
Reporting and Complaint Service Center for IPR Protection's 
hotline received 9305 calls, and accepted 58 complaints.  Of 
these 58 complaints, 49 cases had been settled.  Complainants 
call the center by dialing a special number, 12312.  The center 
operates on what it has styled an "X+182 coordination mode." 
"X" stands for the IP holder, "1" stands for the service center 
under the Municipal AIC, "8" stands for the eight administrative 
enforcement departments responsible for investigation, and "2" 
for the Municipal Office of Rectification and Standardization of 
Market Economic Order and the IP Joint Meeting Office, which 
together coordinate and handle the reported cases. 
 
------------------------------------- 
Despite Success, Still a Sore Subject 
------------------------------------- 
 
¶16. (SBU) The Consul General inquired about what Shanghai was 
doing to proactively increase IP protection for the many 
research and development institutions in Shanghai and noted that 
many had expressed reservations to him about their IP rights. 
SIPA's Chen said that the concentration of R&D centers in 
Shanghai was perhaps the best testament to Shanghai's IPR 
climate.  He welcomed suggestions from the audience on how to 
further improve and commented that IPR protection for the R&D 
sector should be the topic of a future seminar.  Later, 
Copyright Bureau Deputy Director Lou alluded to the Consul 
General's question and, in a defensive tone, said that while his 
office heard lots of talk about IPR infringements, relatively 
few actually filed official complaints.  Without an official 
complaint, his office was unable to open an investigation.  He 
claimed that Shanghai's IPR protection was better than that in 
the United States.  "We are superior to you since we have 
administrative measures as well as legal frameworks and whole 
sets of government agencies" devoted to IP protection, he said. 
"You have to have a concrete problem and not just express a 
general fear.  Simply saying that your IPR might be infringed is 
not helpful." 
 
------- 
 
SHANGHAI 00000259  005 OF 005 
 
 
Comment 
------- 
 
¶17. (SBU) The rollout of Shanghai's annual IPR White Paper is 
changing to reflect the added attention that is being paid to 
IPR.  Opening this year's meeting not only to Consulates, but 
also to chambers of commerce and large foreign companies, as 
well as changing the format to include a slick eight-minute 
English language video and a panel-like discussion all lend to 
the appearance that Shanghai takes IPR seriously.  This is a 
positive step forward, but in many ways appearances do not 
wholly reflect reality.  Fake goods continue to be so readily 
and easily available in Shanghai that it is almost impossible to 
walk down any commercial street in Shanghai without seeing them. 
 We will continue to work closely with the Shanghai government 
to try to address our continuing IPR concerns in Shanghai. 
JARRETT