China Law Insight : China Law Insight: China Commercial and Intellectual Property Lawyers and Attorneys, Full Service Law Firm: King & Wood

With these issues and others to consider the P.R.C. government recently announced a national campaign (herein referred to as the “Campaign”) whereby it will “crack down” on infringers of intellectual property rights¹. The focus of the Campaign, which will last the six months from October 2010 to March 2011, will encompass a broad range of infringing activities, including production/distribution of counterfeit goods, “pirating” of various forms of audio-visual media, the import/export of infringing goods, and the Campaign will have a special focus on infringements carried out over the Internet.² Furthermore, the Campaign will have a specific focus on P.R.C. governmental agencies, with a mandate to ensure that all agencies purchase legitimate business software in their operations. ³

The Campaign will be conducted in three phases, including a “Mobilization period (October 2010)”, “Implementation period (November 2010 to February 2011)” and an “Acceptance inspection period (March 2011)”, where the latter period will be for reviewing the results of the Campaign and reporting the results to the relevant governmental authorities. ⁴ The Campaign is very comprehensive in scope and, in essence, claims to address virtually every aspect of IPR enforcement. Major classifications of actions to be taken include “Increasing source control of production”, “Enhancing market expansion and administration”, “Intensifying IP protection in import and export and on the Internet”, “Intensifying criminal and judicial crackdown”, “Urging governmental bodies nationwide to use genuine software”, and “Enforcing promulgation on IP protection”. ⁵ Key aspects emphasized in the Campaign are the responsibility and accountability of the relevant governmental leaders, the cooperation amongst agencies needed for the Campaign’s success, the nationwide scope of the Campaign, the requirement of not only national-level, but also provincial- and local-level participation, and the active and welcome participation in the Campaign by the general public. ⁶ The Campaign is a comprehensive effort and will require a significant investment on the part of the P.R.C. government.

There is little doubt that this Campaign is positive news for intellectual property rights owners, both foreign and domestic, but is this “crackdown” and others like it really a key driver in improving IPR enforcement in China? Or are other factors, such as technological change, growing economic power, and changes in societal norms in today’s China actually creating a new landscape which requires all rights owners to reevaluate how they protect, manage, and monetize their IPRs? A recent report by MOFCOM (Ministry of Commerce of the People’s Republic of China) laid out what it viewed as the driving force behind the Campaign as follows:

 “[t]he 5th Plenary Session of the 17th National Congress of the CPC has made clear that the     12th Five –Year Program will focus on scientific development and accelerating the transformation of the economic development pattern. Scientific and technological progress and innovation will be regarded as an important tool for accelerating the transformation of economic development pattern. In order to better adapt to new situations and tasks and further strengthen IPR protection, the State Council has decided to carry out this Special campaign.”⁷

As such, the Campaign is not about merely responding to complaints from foreign governments/foreign companies regarding China’s record in protecting IPRs, but rather is seen as part of an economic development initiative for the next phase of China’s development. It is still, as such, incumbent upon rights owners to craft their own specific IPR protection strategy for today’s rapidly-emerging China, though the Campaign will likely provide a welcome assist.

Conclusion

In some areas, the Campaign will yield positive, tangible results (such as in government procurement of legitimate business software), while other results will be less easy to quantify, though still likely positive. As noted by Jack Chang, Senior IP counsel of GE, “I think this six-month enforcement operation is a very important move to strengthen foreign investors’ confidence in China’s efforts to improve the so-called soft investment environment”. ⁸ Mr. Chang went further to say that “…I am confident that the domestic IP environment will continue to improve through the government’s efforts….”⁹ Is the Campaign going to stop all IP infringement in China? No, but it will likely have a very significant and positive impact. The Campaign is based upon the premise that China’s economic development is tied to intellectual property protection and, on that point, foreign and domestic IPR holders should all agree and benefit.

1.Xinhua, “China to start new campaign against IPR violations”, Oct., 19, 2010, found at http://www.chinaipr.gov.cn/newsarticle/news/government/201010/974226_1.html (last visited on Dec. 15, 2010).

2.Ibid.

3.Ibid.

4.IPR in China, “Program for Special Campaign on Combating IPR Infringement and Manufacture and Sales of Counterfeiting and Shoddy Commodities”, Nov. 11, 2010, found at http://www.chinaipr.gov.cn/newsarticle/news/headlines/201011/976853_1.html (last visited on Dec. 16, 2010).

5.Ibid.

6.Ibid.

7.Ministry of Commerce of the People’s Republic of China, “Overview of the Special Campaign against IPR Infringement and Counterfeits”, Dec. 6, 2010, found at http://english.mofcom.gov.cn/aarticle/counselorsreport/europereport/201012/20101207288356.html (last visited on Dec. 16, 2010).

8.China Daily, “IP enforcement operation welcomed”, Dec. 14, 2010, pg. 17.

9. Ibid.

In the first half of 2008, overseas investment of Chinese companies has more than doubled from last year. This year, Chinese outbound investment has already reached 16 billion euros (nearly $23 billion) according to Bloomberg.

Correspondingly, we have seen an increasing number of our domestic Chinese clients invest abroad for both market seeking and resource seeking opportunities. We expect this trend to accelerate in the coming years as outbound rules continue to be relaxed and domestic companies shift their strategies to compete globally.

This trend, coupled with close working relationships with a significant number of American companies and law firms have lead King & Wood to establish its New York office opening September 9th, 2008. As a firm with an extensive client list in the banking industry, our location on Madison Avenue will serve as serve as a local presence for many of our American clients and also provide international support for our clients at home. Since 2001, King & Wood has made a series of international moves such as San Francisco, Hong Kong, Tokyo and most recently with our Sydney Strategic Alliance at the end of 2007.

For years we have seen U.S. and European law firms expand into China. As the global clout of Chinese companies grows, we will see continue to see Chinese law firms expand with them.