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RR RUEHCN RUEHVC
DE RUEHGH #0315/01 1970959
ZNR UUUUU ZZH
R 160959Z JUL 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 8129
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8780

UNCLAS SECTION 01 OF 07 SHANGHAI 000315 
 
SENSITIVE 
SIPDIS 
 
USTR FOR CHINA OFFICE - TSTRATFORD, AWINTER, TWINELAND, DKATZ; 
IPR OFFICE - RBAE; AND OCG - TPOSNER 
DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - WPAUGH 
DOC FOR ITA/MAC: SZYMANSKI, YOUNG 
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 - GMACRAY 
TREASURY FOR OASIA - DOHNER/WINSHIP 
NSC FOR LOI 
 
E.O. 12958: N/A 
TAGS: KIPR ECON ETRD PGOV PREL ECIN CH
SUBJECT: A ROUNDUP OF IPR PROTECTION IN SHANGHAI 
 
REF: SHANGHAI 314 
 
SHANGHAI 00000315  001.2 OF 007 
 
 
¶1.  (SBU) Summary:  Shanghai is one of the bright spots in 
intellectual property rights (IPR) protection in East China and 
is squarely focused on putting it best foot forward for the 2010 
World Expo.  In 2008, the city beefed up its IP strategy in 
keeping with the June 2008 National IP Strategy; it also 
developed a strategy specifically for protecting IP during the 
Expo. Shanghai has also taken the lead on IPR coordination 
between the city's IP-related agencies and with the neighboring 
provinces of Zhejiang and Jiangsu.  In April, Shanghai hosted a 
first ever joint roll-out of IPR white papers with Zhejiang and 
Jiangsu.  Shanghai administrative agencies continue to implement 
IPR programs and intensify enforcement actions, indicating its 
seriousness regarding IP protection.  Shanghai courts, which 
receive high marks from the U.S. business community for their 
professionalism, transparency, and fairness, are attracting 
large numbers of both foreign and domestic rights litigants. 
However, counterfeit markets, pirated optical discs, and 
internet-based piracy continue to be a growing problem in the 
city.  Although Shanghai and other local jurisdictions do not 
have a perfect record on IPR, recognition of their 
accomplishments in USG reports, such as the 301 Report, provide 
a powerful incentive for change.  The following report is taken 
from a series of meetings with IP administrative, judicial, 
enforcement officials from April to July 2009.  End Summary. 
 
 
 
IP Environment and Strategy in Shanghai 
 
-------------------------------------- 
 
 
 
¶2.  (SBU) As Shanghai's economy evolves from low-tech 
manufacturing to service and R&D intensive industries, 
Shanghai's authorities have increasingly emphasized the need to 
protect IPR in order to promote innovation.  Since 2004, 
Shanghai has been using the "Outline of Shanghai Intellectual 
Property Strategy" as its basic guiding document on IPR.  In 
2008, the city supplemented the existing IP strategy to bring it 
into conformance with the June 2008 "Outline of the National 
Intellectual Property Strategy" issued by the State Council. 
After seeking public comment, Shanghai issued the document 
"Several Decisions on the Implementation of the Outline of the 
National Intellectual Property Strategy" in September, 2008. 
The new strategy focused on eight main aspects: "improving local 
IP laws and regulations, promoting IP creation and application, 
strengthening IP protection, enhancing IP administration, 
developing IP services, training more IP talent, promoting 
construction of IP culture, and broadening domestic and overseas 
communication and cooperation on IP issues." In addition to the 
new strategy, it also created an IP work plan in preparation for 
the 2010 World Expo.  The city published a booklet entitled the 
"Intellectual Property Protection Manual for World Exposition 
2010 Shanghai China", which provides a short guide for the 
general public on how to protect IP during the Expo.  Shanghai 
IP Administration authorities noted that the city is especially 
intent on protecting the "Hai Bao" (Sea Treasure) symbol of the 
Expo, similar to what was done in Beijing during the 2008 Summer 
Olympics for mascots Bei, Jing, Huan, Ying and Ni. 
 
 
 
Serious About Coordination 
 
-------------------------- 
 
 
 
¶3.  (SBU) Shanghai prides itself in its coordination effort, 
both among city IP-related agencies and with neighboring 
provinces.  Within Shanghai, coordination is done via the 
Shanghai Intellectual Property Joint Council (Lianxi Huiyi), a 
body made up of a wide range of administrative, enforcement and 
judicial organs (reftel).  Shanghai authorities report the 
 
SHANGHAI 00000315  002.2 OF 007 
 
 
Council meets several times a year.  In September 2008, the 
Council met to discuss implementation of the new Shanghai 
strategy.  As a result of the meeting, authorities specified 52 
different tasks to improve local IP protection.  In addition, 
all Council member agencies were requested to incorporate the 
contents of the new IP strategy into their own work plans the 
following year. 
 
 
 
¶4.  (SBU) Shanghai also has taken the lead on coordinating IP 
issues with neighboring jurisdictions.  For the first time ever, 
Shanghai, Jiangsu, and Zhejiang held a joint-IP whitepaper 
roll-out in Shanghai in April 2009.  The event was well 
organized and attended and featured administrative, judicial and 
enforcement officials from the respective jurisdictions.  U.S. 
rights holders also regularly compliment Shanghai IP authorities 
for their assistance in transferring cases to neighboring 
jurisdictions.  One U.S. company reported that the Shanghai PSB 
drove the company representatives to meet with Jiangsu PSB 
authorities when it became clear the IP infringement involved 
that province.  Shanghai authorities themselves report that they 
regularly transfer cases because the economies of the region are 
so closely knit.  However, coordination outside the immediate 
East China region is more sporadic. 
 
 
 
Shanghai Courts Tackle IPR 
 
-------------------------- 
 
 
 
¶5.  (SBU) The court system in Shanghai is increasingly becoming 
a venue of choice for both foreign and domestic rights holders. 
American businesses consistently praise Shanghai courts for 
their high level of transparency, consistency and expertise.  In 
2003, Shanghai courts implemented a system to increase 
transparency through publishing IP-related cases on the 
Internet.  Building on its reputation as high caliber center for 
judicial IP protection, Shanghai took a number of measures in 
late 2008 to highlight and strengthen its judicial capabilities. 
 On October 29, 2008 Shanghai held a ceremony for the 
establishment of the Shanghai Intellectual Property Arbitration 
Court with the support of the Shanghai IP Administration and the 
Shanghai Arbitration Commission (SAC).  By establishing a 
special IP Arbitration Court, Shanghai hopes to gain a similar 
reputation for its arbitration abilities.  In November 2008, 
Shanghai highlighted its judicial IP work with several separate 
events:  a press conference to outline the initiative and 
summarize Shanghai courts' accomplishments in IPR protection, 
public IP trials, the announcement of judgments on several high 
profile IP cases, and a meeting to highlight judicial efforts on 
enforcing China's National IP Strategy. 
 
 
 
¶6.  (SBU) As in other regions of China, IPR judges tend to be 
the most educated members of the Chinese judiciary, although 
their docket only makes up a small percentage of total civil or 
criminal litigation.  According to media reports, all judges 
dealing with IPR cases in Shanghai hold university degrees and 
about 60 percent hold masters degrees.  In a June 3 meeting, 
Shanghai High Court officials said there are 10 judges in the 
High Court who handle IP cases, with the senior IP judge having 
15 years of experience.  Including lower courts, there are 48 
judges in Shanghai handling IP cases.  The Shanghai High Court 
said that of the 48 judges, three have doctorate degrees (two of 
whom are seated in the Shanghai High Court), six judges have 
technical backgrounds, and 20 judges have been educated 
overseas.  Shanghai has also established the Shanghai Judges 
Training Center, which holds one or two training courses on IPR 
every year to enhance judges' IPR-related knowledge. 
 
 
 
SHANGHAI 00000315  003.2 OF 007 
 
 
 
¶7.  (SBU) Shanghai High Court officials noted that there has 
been a marked increase in IP-related cases.  They speculate that 
under the current economic downturn, as profits decrease, 
companies have been stepping up their efforts to recover losses 
from IP infringements.  The Shanghai High Court reported that 50 
percent of all IP-related cases are copyright-related, 30 
percent are patent and trademark cases, and the remaining 20 
percent involve trade secrets and unfair competition.  Among 
cases accepted in 2008, 231 involved foreigners. 
Foreign-related IPR cases in Shanghai last year made up 
approximately 15.2 percent of all IPR-related cases, compared to 
the national average of approximately 3.5 percent. 
 
 
 
¶8.  (SBU) In total, Shanghai courts accepted 1,757 IPR civil 
cases in 2008, of which 1,634 were settled, an increase of 43.1 
percent and 33.2 percent respectively over 2007.  Shanghai 
courts also accepted 79 criminal cases and closed 81.  This 
represents an 11.3 percent increase in the number of cases 
accepted and a 14.1 percent increase in the number of closures 
over 2007.  In 2008, Shanghai's courts accepted over 600 online 
infringement cases of first instance, accounting for more than 
40 percent of the total cases accepted.  This represents an 
increase of 200 percent over 2007. In 2008, Luwan People's Court 
set up an IP Tribunal. The Shanghai Number 2 Intermediate 
People's Court established the first Anti-monopoly Collegiate 
Bench in the country. 
 
 
 
¶9.  (SBU) Shanghai has now implemented a combined trial model, 
which integrates all basic level courts in Shanghai with IP 
tribunals, and handles civil, administrative and criminal IP 
cases.  The model was based on a trial model at the Pudong 
District Court in Shanghai, which established the combined 
system in 2000.  From 2001 through March of 2008, this tribunal 
handled 602 civil cases and 44 criminal cases.  (Comment:  While 
we welcome Shanghai courts' more vigorous protection of IP, the 
trend towards establishing more basic-level courts to resolve 
IPR cases is, in some respects, a move in the opposite direction 
of U.S. interests -- to encourage a national-level appellate IPR 
court to minimize local protectionism and influence.  Currently, 
with cases heard at an intermediate level, a case can be 
appealed only to the provincial high court, and the litigant has 
no right to have the case heard in a province outside of the 
province where the case was originally heard.  End comment.) 
 
 
 
Shanghai IP Administrative Efforts 
 
---------------------------------- 
 
 
 
¶10.  (SBU) The Shanghai IP Administration (SIPA), which not only 
functions as the receiving agency for patents, but is also the 
lead IP coordinating agency, continues to be a strong partner 
and ally of the Consulate.  The IP Administration reaches out to 
the Consulate on a regular basis, eliciting suggestions and 
inviting the Consulate to participate in events.  Recently SIPA 
has focused much of its efforts on setting up the "Shanghai 
Information Service Platform", which will enable all Shanghai 
IP-related agencies to share information and provide improved 
service to rights holders.  Most importantly the platform will 
link IP administrative enforcement and criminal enforcement to 
facilitate the transfer of cases.  Phase I of the operation has 
already started a trial operation.  The Shanghai IP 
Administration noted that it is also focused on creating an 
"Intellectual Property Experimental Park", exploring new models 
for patent trusteeship, and providing improved IP services for 
local SMEs.  Regarding its patent load, SIPA accepted 23 patent 
dispute cases in 2008 (a decrease of 45.2 percent over 2007). 
Of these, it closed 31 cases (a decrease of 31.1 percent over 
 
SHANGHAI 00000315  004.2 OF 007 
 
 
2007), of which 6 were foreign-related cases. 
 
 
 
Shanghai Copyright Bureau 
 
------------------------- 
 
 
 
¶11.  (SBU) During a July 10 meeting with the Shanghai Copyright 
Bureau, Director General Jiao Yang noted the establishment of a 
new Copyright Industry Promotion Department in addition to the 
Copyright Enforcement Department to promote the copyright 
industry. Also in 2009, Shanghai set up a Copyright Industry 
Trade Center, which is gathering statistics on the development 
of copyright industry in Shanghai.  According to Jiao, Shanghai 
has taken several measures on copyright enforcement.  Under the 
Copyright Bureau's guidance, shopping malls in Shanghai are 
working with enforcement authorities to fight pre-installed 
illegal software.  Shanghai also initiated a crack down named 
"City Protection" to stop vehicles with pirate goods from 
entering the city.  Jiao said the Shanghai Copy Bureau has 
signed joint enforcement agreements with sister agencies in 
Jiangsu and Zhejiang and an electronic system was built to 
provide assistance to right holders.  In 2008, Shanghai 
Copyright Bureau inspected 61 operating units, closed 15 
websites, issued punishments in 27 administrative cases, and 
confiscated illegal profits and issued penalties totaling 
210,000 RMB (USD 30,882). 
 
 
 
 
 
Shanghai Administration of Industry and Commerce 
 
--------------------------------------------- --- 
 
 
 
¶12.  (SBU) During a July 10 meeting with the Shanghai 
Administration of Industry and Commerce (SAIC), Deputy Director 
General Chen Xuejun noted the agency's main focus over the past 
year has been on implementing new polices to support trademark 
development.  For example, the city developed a "model IP 
enterprise" program to recognize companies that are IP 
compliant.  Chen also pointed out that the protection of 
international well-known trademarks is another main focus of 
trademark administrative enforcement.  Under the direction of 
SAIC, shopping malls are establishing a trademark research 
system and checking the trademark when purchasing stock.  In 
addition, Shanghai has expanded its list of "no buy" foreign 
brands to 60, along with increased enforcement of the list.  The 
list prohibits the selling of the listed goods in certain areas 
such as "street" and "fashion" markets, so that authorized sales 
agents known to be marketing genuine products can fare better. 
 
 
 
 
¶13.  (SBU) SAIC Trademark Department Director Xing Dongsheng 
added that SAIC is studying Beijing's experience on protection 
IP during the Olympics, especially small markets and street 
vendors.  He acknowledged that many vendors selling counterfeit 
goods moved to many other markets after the closure of the 
infamous counterfeit market, Xiangyang Market, in 2006.  He 
added that SAIC is actively issuing injunctions on selling 
certain brands and requesting that market owners sign contracts 
on trademark protection with tenants.  SAIC is also providing 
landlords with sample contracts that can be followed.  Thus far, 
over 20,000 tenants have signed this type of contract with 
market owners and 200 tenants were required to move out of 
markets because of their trademark infringement activities in 
¶2008. According to Xing, vendors in Yatai Market in Pudong, 
currently the largest counterfeit market in Shanghai, are now 
 
SHANGHAI 00000315  005.2 OF 007 
 
 
trying to promote their own brands or are seeking authorization 
from trademark owners to sell legitimate products. 
 
 
 
¶14.  (SBU) In a discussion about Shanghai's landlord liability 
laws, Xing said that said it is a good thing for right holders 
to proactively protect their right, but he was doubtful the 
courts would actually hold landlords liable in such cases. 
(Note:  In a separate meeting on June 18, legal representatives 
from Coach Luggage notified the Consulate that they had 
initiated three lawsuits against different Shanghai landlords 
under the landlord liability law.  Two of the cases were filed 
in lower courts, and one in an intermediate court.  The cases 
represent the first known cases to be filed by foreigners in 
Shanghai under the law.  When Econoff raised the issue of the 
cases, Xing was pessimistic about Coach winning the cases.  End 
note.) 
 
 
 
 
 
¶15.  (SBU) Shanghai's Administrations of Commerce and Industry 
(AIC) handled 2,964 trademark infringement cases (a decrease of 
2.2 percent over 2007) and transferred five cases for criminal 
prosecution.  Among all of the cases handled, 2,112 cases were 
foreign related, accounting for 71.3 percent of the total (a 
decrease of 1.1 percent over 2007). 
 
 
 
Many Ways to File a Complaint 
 
----------------------------- 
 
 
 
¶16.  (SBU) Shanghai was one of the first cities in China to 
establish an IPR complaint center in July 2006 and has since 
added 7 district level IPR complaint centers, mostly located in 
high-tech industrial parks.  It also established an IPR Aid 
Center in April 2008 to give IP advice to small and medium size 
businesses free of charge.  In a May 20 meeting at the Shanghai 
IP Complaint Center, Complaint Center Vice Director Cai Haibing 
said the center transferred about 40 cases to IP authorities in 
2008, but only two or three cases were filed by foreigners.  He 
pointed out that the number of total cases filed had actually 
decreased because another IP Complaint hotline "12330" was set 
up under the control of Shanghai IP Administration as a result 
of government agency reform.  (Note: At the national level, the 
previous IP complaint hotline "12312" was under the control of 
the National Rectification and Standardization of Market 
Economic Order Office.  After reform at the national level, this 
hotline changed to "12330", which fell under the control of the 
State Intellectual Property Office.  During the "transition 
period", there are now two hotlines receiving IP complaints at 
the same time.  End Note.)  According to Cai, rights holders are 
now more actively filing complaints directly with the relevant 
government agencies, which has also caused the number of 
complaints to drop.  He also noted that the center ensure that 
staff is present at every trade fair to receive complaints. 
(Note:  On numerous occasions over the past year, Consulate 
staff have verified this is the case at trade fairs in Shanghai. 
 End note.) 
 
 
 
Shanghai's PSB Enforcement 
 
-------------------------- 
 
 
 
¶17.  (SBU) In 2008, Shanghai Public Security Bureau (PSB) 
investigated 1458 IPR-related cases and confiscated RMB 448 
 
SHANGHAI 00000315  006.2 OF 007 
 
 
million (USD 66 million) worth of money and commodities. 
(Comment:  We suspect this amount may be inflated by cases that 
are not true IP-infringement cases.  End comment.) Approximately 
1,708 infringers received fines or other punishment.  In August 
2008, the Economic Criminal Investigation Department of Shanghai 
Public Security Bureau shut down an illegal store selling fake 
products of international well-known brands to foreigners (one 
famous international film star visited the store and bought a 
batch of illegal products during her stay in Shanghai).  Two 
suspects were captured and over 290 counterfeit articles worth 
1.4 million RMB (USD 200 million) were confiscated.  According 
to Tang, the Shanghai PSB not only attaches great importance to 
cooperation with foreign enforcement agencies, but it also 
cooperates closely with foreign right holders such as Johnson 
and Johnson, Pfizer, and associations such as the Quality Brands 
Protection Committee. 
 
 
 
Counterfeit Markets Remain Unchecked 
 
------------------------------------ 
 
 
 
¶18.  (SBU) While production of IPR infringing goods is 
decreasing in Shanghai, purveyors of infringing goods, both on 
the streets and with small retail establishments, remain largely 
unchecked in the city.  In July 2006, Shanghai closed its 
premier counterfeit market, Xiangyang.  However, several other 
markets have sprung up and thrive in its place.  Many of the 
Xiangyang merchants simply moved to these other locations 
throughout the city.  In our own informal survey, we found 
vendors from the old Xiangyang Market at three new counterfeit 
markets around Shanghai. The first market is the Shanghai Yatai 
Shenhui Recreational Shopping Center in Pudong, near the subway 
station of the Shanghai Science and Technology Building.  The 
second market is Fengxiang Fashion and Gift Market in the 
Nanzheng Building on Nanjing Road.  The market has three stories 
in the building and is widely touted on websites and blogs for 
expats and foreign tourists to Shanghai. (Comment:  It is 
ironically located in the same building as the Shanghai IP 
Service Center.)  The third market is the Shanghai Longhua 
Fashion and Gift Market in the Longhua area in the Xuhui 
District.  This market also occupies three floors, but did not 
appear as busy as the other two markets during a recent visit. 
 
 
 
¶19.  (SBU) The items purveyed at the markets run the gamut from 
fake designer jeans to counterfeit golf clubs.  The vendors said 
that their target consumers are mainly foreigners.  And, from 
the looks of it, many foreigners are visiting the three markets, 
largely as tourist groups.  When the vendors were asked if they 
are afraid of being raided, many seemed indifferent.  Others 
replied that it is easy to hide the goods during the raids.  In 
the markets in the Nanzheng Building and at Yatai, we found some 
vendors used cupboards with special doors to conceal the 
counterfeit products.  One vendor told us that they opened this 
special door only for foreigners because they were afraid of 
raids.  Besides the large counterfeit markets, countless street 
vendors and small shops sell pirated DVDs and fake products. 
Walking down any major thoroughfare in Shanghai, one will be 
confronted with numerous vendors selling their counterfeit 
products. 
 
 
 
Customs is Key in Shanghai 
 
-------------------------- 
 
 
 
¶20.  (SBU) Shanghai, as China's largest port, also plays an 
important role in preventing the export and import of 
 
SHANGHAI 00000315  007.2 OF 007 
 
 
counterfeit products.  (Note:  China provides a remedy for 
seizures of exported infringing products, which is not 
specifically required by relevant WTO agreements.  End note.) 
Shanghai Customs reported that in 2008 it handled 479 IP 
infringement cases, an increased of 54.5 percent over 2007 and 
involving goods worth RMB 71 million (USD 10.4 million).  Among 
these, 90 percent were trademark-related cases.  Shanghai 
Customs reports that it is seeing an increase in counterfeits 
sent via the postal service.  To fight the problem, Shanghai 
Customs added 2 more officers (after which, four in total) 
specifically to investigate these cases.  Despite Shanghai 
Customs' efforts, large amounts of counterfeit goods continue to 
transit the port and the mails.  U.S. investigators and rights 
holders point out that the vast majority of these counterfeits 
have entered the system through Customs at other points in the 
Yangtze River Delta area and beyond.  Shanghai Customs does not 
re-inspect goods that have been cleared by other Customs units. 
(The bill of lading will, however, show Shanghai as the port.) 
 
 
 
Comment:  Pointing Out the Positive - A Powerful Tool 
 
--------------------------------------------- --------- 
 
 
 
¶21.  (SBU) At the April 24 IP whitepaper roll-out, which was 
jointly-sponsored by Shanghai, Jiangsu and Zhejiang, each 
jurisdiction in turn outlined 2008 accomplishments.  Among other 
things, each jurisdiction highlighted the cooperation and 
programs conducted with the U.S. Consulate General in Shanghai. 
Moreover, the Shanghai IP Administration pointed out the 
positive citation about Shanghai in the USTR's 2008 301 Report. 
Following the meeting, representatives from both Zhejiang and 
Jiangsu queried Econoff about how they too could receive 
recognition in the 301 Report for positive work done on IPR.  In 
a separate meeting in November 2008, Jiangsu High Court 
officials noted that Shanghai's judicial system was praised in 
the 2008 301 Report and also queried how they could receive such 
recognition.  Although Shanghai and other municipalities in East 
China are far from having a perfect record on IPR, they do pay 
great attention to the 301 Report and other USG commentary on 
their work.  Moreover, when their accomplishments are recognized 
in front of their colleagues, it provides a tremendous incentive 
to follow suit. 
SCHUCHAT