——opening address on people to people conference

by pan zhicheng

shanghai m&a law firm

i      major criticisms against chinese ipr protection

when we mentioned chinese ipr protection, several images might jump into your mind: pirated dvds, counterfeit famous brands, pirated software.

nearly three years ago, when u.s. assistant secretary of commerce william lash visited beijing, at his press conference he displayed for reporters many pirated dvds, all of them were just released from hollywood. mr. lash even claimed that u.s. government would bring china into the wto dispute settle center.

two years ago, if you visit shanghai ,you can easily find so many world-famous brands such as louis vuitton, chanel and prada in the xiangyang road market, where some 80 percent of garments, bags and other small commodities involved in trademark infringement, according to the city authorities for industry and commerce.

ii    reasons

why are there so many intellectual property infringements in china?

whether is it because that we do not have a well knit ipr protection system? we think the answer is “no”. china had set up a quite complete legal system of ipr protection in the 1990s. after becoming a member of the world trade organization, china has strictly abided by the wto obligations in terms of ipr protection, and trips is also applicable in china. our trademark law, patent law and copyright law are amended accordingly.

to some points, our legal system of ipr protection is quite advanced. let’s take the preliminary injunction for example, now we have the preliminary injunction application procedure as required by trips, in fact, our preliminary injunction procedure is a kind of ex-party injunction procedure. i remember in common law countries, the judge will follow the american cyanamid guideline when they consider whether grand the injunction, the percentage of injunction being granted in common law country is less than 10%. on the contrary, statistics from the supreme court show that 88% of our preliminary injunctions were granted.

whether is it because that the ipr product sold in china has an unreasonable price? we think the answer is “maybe”. how much profit a counterfeiter can earn from the piracy business? 900% percent profit. karl marx once said that if a man can earn 100% profit by doing an illegal practice, he can trespass every laws, if he can earn 300% profit by doing that business, he can risk his life. according to international criminal police organization, now even the terrorist groups began to involve into the piracy business, because they can earn more from it than the drug trafficking business.

whether is it because that china is undergoing a specific historical stage? we think the answer is “maybe”, or “a sort of”. back to the 19 centuries, american law offered copyright protection but only to citizens and residents of the united states. the works of english authors were copied with abandon and sold cheap to an american public hungry for books. it is said that the famous english author charles dickens’ "christmas carol" was only sold for 6 cents a copy in america, versus $2.50 in england. for that reason he toured the united states in 1842, urging the adoption of international copyright protection as being in the long-term interest of american authors and publishers. such appeals proved unpersuasive until 1891, when the united states had a thriving literary culture and a book industry that wanted its own intellectual property protection abroad.

iii.  the present progresses of chinese ipr protection

2 years ago, our law firm attended a meeting in shanghai administration for industry and commerce. after this meeting shanghai aic announced a market ban order prohibiting the venders in xiangyang road and other flea market to sell famous brands. if the aic finds the vender selling such famous brands, the commodities will be confiscated without verification. it is really a big step on ipr protection.

one year ago, a decision made by beijing number two intermediate people’s court, ordering the landlord and the venders are liable for compensation. this ruling is a landmark ruling on our ipr protection. it was the first time a chinese court found a shopping center operator liable for pirated goods sold by private vendors.

a recent effort of the ipr protection is that shanghai’s popular xiangyang road market was closed in june 2006. this move shows that chinese central and local government are determined to crack down the counterfeits.

i hope these cases can show you the rapid improvement of china’s ipr protection.

iv   china’s ipr system is confronted with new problems

ipr protection is not a complete story of china’s ipr system. the task of china’s ipr system is not only to protect foreign proprietors’ rights. foreign proprietors misusing their ipr are a new problem we are confronted with.in recent years, as many transnational companies growing big in china, their behaviors of misusing market dominant position and misusing intellectual property rights drew attentions for all circles.

let me show you some examples:

1.    tying product: on jan.11th 2006, shanghai no.1 intermediate people’s court held a preliminary hearing for the monopoly case between sichuan tsumpower co, ltd vs. shanghai suoguang electronics co., ltd & sony corporation. it is china’s first monopoly case ever heard by court in china. the plaintiff is a private enterprise in sichuan province which manufactures digital battery. the plaintiff accuses that the defendants installed a patented intelligent recognition system “infolithium” into their digital camera and video products, which can recognize those batteries not produced by sony, and can prevent such batteries from being used in sony’s digital products. the plaintiff holds that since the defendants’ digital products occupy dominant position in china’s relevant market, such intelligent recognition system virtually obstruct their lower stream battery manufacturing enterprises from entering digital battery market, therefore their behavior has the nature of misusing market dominant position.

2.    price discrimination: it is reported that the software windows 98 was sold in u.s. with the price of 70usd, nearly 700rmb, while in china this software was sold with the price of 1980rmb. office2000 was sold in china with the price of 200rmb, but this software was offered in u.s. free of charge. some experts estimated that because of price discrimination the chinese consumers have to pay 1 billion usd more every year than the original price.

above all, to set up anti-trust law and anti-ipr-misusing law is an urgent need to china’s ipr system. united states has more experiences in this area and we can have a lot to learn from the united states.

finally, we concluded that exchange is necessary. we sincerely hope we can have more opportunities to exchange ideas with our american friends, to share experiences together.