VZCZCXRO0669
RR RUEHCN RUEHVC
DE RUEHGH #0194/01 1180831
ZNR UUUUU ZZH
R 280831Z APR 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7885
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8530

UNCLAS SECTION 01 OF 04 SHANGHAI 000194 
 
SENSITIVE 
SIPDIS 
 
USTR FOR CHINA OFFICE - AWINTER, TWINELAND; IPR OFFICE 
KALVIREZ; AND OCG - TPOSNER 
DOC FOR ITA/MAC: SZYMANSKI 
LOC/ COPYRIGHT OFFICE - STEPP 
USPTO FOR INT'L AFFAIRS - LBOLAND 
DOJ FOR CCIPS - TNEWBY 
FBI FOR LBRYANT 
DHS/ICE FOR IPR CENTER - DFAULCONER 
DHS/CBP FOR IPR RIGHTS BRANCH - GMCCRAY 
NSC FOR JIM LOI 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD EINV EFIN PGOV CH
SUBJECT: IPR - MOVING THE BALL DOWN FIELD IN ZHEJIANG WITH PATENT 
PROGRAM 
 
REF: SHANGHAI 59 
 
SHANGHAI 00000194  001.2 OF 004 
 
 
¶1.  (SBU) Summary:  Building on the Consulate's successful 
engagement with Zhejiang intellectual property (IP) officials 
during a roundtable in January 2009 (reftel), the U.S. Patent 
and Trademark Office (USPTO) and China's State Intellectual 
Property Office (SIPO) co-sponsored a joint seminar on "How to 
File and Enforce Patents" on April 22.  The seminar was 
organized by the Consulate and the Zhejiang Intellectual 
Property Administration (ZIPA).  Close to 160 representatives 
from both Chinese and U.S. enterprises, law firms and Chinese 
government offices attended the program in Hangzhou, capital of 
Zhejiang Province.  About  80 percent of the attendees 
represented Chinese enterprises and law firms; all of those we 
spoke with particularly welcomed the opportunity to learn more 
about the U.S. intellectual property (IP) system, citing 
increased demand to file Chinese patents in the United States. 
Continued such engagement with Zhejiang, China's fourth largest 
provincial economy, is invaluable for U.S. commercial interests 
to ensure the province continues down the path of increased IP 
protection.  End Summary. 
 
 
 
Maintaining Momentum 
 
-------------------- 
 
 
 
¶2.  (U) After the United States filed several IP-related WTO 
dispute settlement cases against China in April 2007, Zhejiang 
effectively closed off all collaboration with the U.S. 
Government on IP issues for close to two years.  Cooperation 
with U.S. business organizations, however, continued 
sporadically.  After the Consulate's continuous efforts to 
revive relations, Zhejiang finally agreed to hold a roundtable 
in January 2009 between Consulate officials and Zhejiang 
provincial IP-related administrative, enforcement and judicial 
agencies.  During the roundtable, officials welcomed further 
cooperation, expressing a particular interest in ways to help 
Zhejiang companies better understand the U.S. IP system. 
Following the meeting, USPTO and SIPO agreed to co-sponsor a 
program in the province designed to provide practical 
information on filing and protecting patents in both China and 
the United States.  After getting the green light, the Consulate 
and ZIPA worked closely with USPTO and SIPO to develop a 
comprehensive program.  Program attendees and speakers hailed 
not only from Zhejiang (majority of attendees) but also included 
a scattering of law and company representatives from Jiangsu and 
Anhui Provinces, Shanghai, Beijing, and the United States. 
 
 
 
Collaboration from Both Sides 
 
----------------------------- 
 
 
 
¶3.  (U) The Consul General kicked off the April 22 program with 
remarks about the role of patents in the United States, noting 
Zhejiang's efforts on patent filing and protection, and 
encouraging further collaboration on IP issues.  (Note: Econoff, 
Entry Level Officer from Consular Section, and USPTO IPR 
Specialist also participated throughout the program.)  Wang 
Xiaowei, Deputy Director General of the International 
Cooperation Department of SIPO said that a great deal of Chinese 
innovation in science and technology is originating from 
Zhejiang and noted the importance of broadening the strategic 
thinking of Zhejiang-based companies on IP issues.  Following 
his remarks, ZIPA Director General Chen Zhijun said that with 
the global economic downturn, local businesses are working to 
develop new markets and new strategies to turn the crisis into 
an opportunity, and IP is a integral part of their strategy.  He 
also emphasized that the U.S. IP system is still largely 
unfamiliar to Zhejiang companies, and they want to build their 
knowledge on how to file and enforce patents in the United 
States.  Zhang Meizhen from SIPO's Patent Reexamination Board 
 
SHANGHAI 00000194  002.2 OF 004 
 
 
outlined and clarified procedural details on the processes for 
patent applications, invalidations and reexaminations.  Jasmine 
Chambers, Director of the Technology 2900 Center at USPTO, 
contrasted the U.S. application and reexamination system to that 
in China. 
 
 
 
¶4.  (U) During the second panel, representatives from three U.S. 
law firms, which have extensive experience in China, discussed 
corporate filing strategies and provided tips and practical 
information on how to file patent application at USPTO and SIPO. 
 Jones Day Partner Tony Chen pointed out ways in which Chinese 
companies can use patents to achieve their business goals in the 
United States, which might not be available in China.  Shook 
Hardy Partner Tom Moga noted the tremendous increase in Chinese 
understanding of patent issues since his original visit to China 
in 1997 when he taught patent law to Chinese students.  He also 
addressed Patent Law revisions that will take effect October 1, 
2009, saying one of the key areas for concern is the new 
requirement (Article 27) for a brief description of the design 
application.  He expressed concern that the brief description 
may prove limiting and disadvantageous in the event of patent 
litigation.  Wilson, Sonisni, Goodrich and Rosati Partner Zhou 
Wei spoke of his previous experience as a corporate IP counsel, 
advised companies to use patents to generate economic value and 
not just protect technology and innovation.  He also offered 
patent portfolio strategies that Chinese companies may consider 
when going abroad. 
 
 
 
¶5.  (U) The second half of the program focused on protection and 
enforcement of patents in both countries.  Finnegan Henderson 
Farabow, Garrett and Dunner Managing Partner Esther Lim 
discussed the process for handling patent infringement cases in 
the United States.  She encouraged Chinese companies to use U.S. 
ITC litigation as a tool for patent protection.  ZIPA Officer Lv 
Wenge provided details on how to enforce patents using China's 
administrative and civil system.  He noted that Zhejiang now has 
six intermediate courts, and in 2008 there were a total of 1,634 
IP civil cases in Zhejiang, 215 of which involved foreign rights 
holders.  Approximately 99 percent of the cases involving 
foreigners were decided in favor of the foreign party.  However, 
he cautioned that there is still significant risk for foreigners 
in litigating patent cases in the province, citing the April 15 
Chint/Schneider case resolution in which the two parties settled 
for USD 23 million.  (Chint, a Zhejiang electronics company, won 
the first instance trial against the French company Schneider 
for USD 45 million in damages.) 
 
 
 
¶6.  (U) In a separate panel covering practical tips on patent 
enforcement, Schwabe, Williamson, and Wyatt Partner Skip Fisher 
discussed how to initiate a Section 337 action in the United 
States, and urged Chinese companies to take warning letters 
seriously to avoid charges of "willful infringement. "  Founding 
Partner An Xiaodi from Tian Zhang and Partners, a Beijing-based 
IP firm, believed that contrary to popular opinion, Chinese IP 
court cases are determined more by the weight of evidence rather 
than "guanxi" or relationships.  However, he noted the 
difficulties of establishing IP cases outside of Beijing and 
Shanghai, as well as challenges litigants face in requesting 
courts to collect and preserve evidence.  Judges have little 
power and are often hesitant to compel others to produce 
evidence.  He however noted that in the Chint/Schneider case the 
judge actively collected evidence on behalf of Chint.  An also 
emphasized that courts generally do not put much weight on 
testimony because of widespread lack of witness veracity. 
(Comment:  Several attendees noted the boldness of such a 
statement by a Chinese lawyer in the presence of Chinese 
government officials and foreigners.)  Jones Day Partner 
Benjamin Bai noted Chinese companies generally fear litigation 
in the United States because of the huge costs associated with 
going to trial.  He encouraged Chinese companies not to avoid 
litigation in the United States as a means to protecting their 
IPR, pointing out that 86 percent of U.S. patent disputes 
 
SHANGHAI 00000194  003.2 OF 004 
 
 
eventually get settled out of court and only 3 percent of 
adjudicated cases actually go to trial.  Each of the panels 
concluded with lively question and answer sessions with 
companies raising individual concerns about courts accepting 
their cases and confidentiality. 
 
 
 
Reaction from Participants and Attendees 
 
---------------------------------------- 
 
 
 
¶7.  (SBU) ZIPA Deputy Director Wu Jian said that the conference 
"enhanced the possibility of success for Zhejiang companies 
pursing litigation in the United States. "  Hangzhou Motorola 
Cellular Equipment Legal Manager Robert Yao praised the 
conference as "the highest quality IP seminar he had ever 
attended" because of its comprehensive scope and practical tips 
offered by the speakers.  Hangzhou-based partner and patent 
agent Wang Bin from Tian Zheng Patent and Trademark Attorneys 
praised the "nuts and bolts" program on patent filing as very 
practical and useful and hoped for more such seminars in the 
future.  He added that he attended so that he could better serve 
the needs of an increasing number of clients who are seeking to 
file patents in the United States.  Zhejiang companies are 
"waking up" to the need to file abroad, particularly as they 
look for new markets outside China's borders. 
 
 
 
¶8.  (SBU) Patent Consultant Liu Zonghao from the Hangzhou 
Jizhong Intellectual Property Agency said the speeches gave him 
ideas about how to solve some problems that his clients are 
currently facing.  He added that such an event is also a good 
forum for Chinese firms to exchange ideas and voice concerns to 
their own government officials in attendance.  He would gladly 
attend more such programs if given the chance.  Finance Director 
Chen Laiqian from Interplex China, a Hangzhou electronics 
company, said the program was very useful in helping him to 
understand how to manage an IP system inside his company.  Vice 
Director of the Hangzhou Feng He Patent Attorneys Office Wang 
Xiaofeng said hearing practical tips on patent registration and 
enforcement from U.S. lawyers on their own system was especially 
beneficial. 
 
 
 
Continued IP Engagement Crucial for U.S. Interests 
 
--------------------------------------------- ----- 
 
 
 
¶9.  (SBU) Comment:  Continued engagement on IP issues with 
Zhejiang Province is critical for U.S. commercial interests in 
China.  Zhejiang is China's fourth largest provincial economy 
(USD 314 billion GDP in 2008) and a key market for U.S. 
companies.  There are over 4,700 U.S.-invested projects in 
Zhejiang, and the United States remains among Zhejiang's top 
investors.  Prominent U.S. businesses in Zhejiang include 
General Motors, Merck, Motorola, and General Mills.  However, 
the province has historically been a center for trade in 
counterfeit goods.  It is also home to China's largest "small 
commodities" wholesale market and distribution center in Yiwu. 
Although the province, including Yiwu, has made significant 
progress in beefing up IP protection, the Quality Brands 
Protection Committee, an industry group that represents a 
wide-range of rights holders (including American firms), still 
ranks the province as one of the top two areas for concern on IP 
protection in China. 
 
 
 
¶10.  (SBU) Since Zhejiang's economy is heavily export-oriented 
and many Zhejiang enterprises have expressed interest in 
investing in the United States, holding such capacity-building 
 
SHANGHAI 00000194  004.2 OF 004 
 
 
programs is an ideal way to strengthen our relationship with the 
province on IPR.  These events not only provide U.S. rights 
holders practical information on how to protect their IP in 
China and direct access to Zhejiang IP officials, but also help 
build a constituency of Chinese companies that can  urge better 
IP protection in China.  The innovative spirit of Zhejiang's 
many small and medium size private enterprises, which account 
for 70 percent of the province's economic volume, 50 percent of 
GDP and 90 percent of total employment, is already alive and 
well - Zhejiang ranks third among provinces in China for the 
number of patents filed and granted.  Now, as Zhejiang companies 
become more skilled at protecting their IP at home and abroad, 
they will undoubtedly become stronger allies in the fight to 
strengthen overall IP protection in the province. 
 
 
 
¶11.  (U) USPTO has cleared this report.  The Consulate General 
reiterates its thanks to USPTO for its support and expert 
participation in this event. 
CAMP