Intellectual Property Rights in China:
Background and Figures
Policy Background
The Office of the US Trade Representative (USTR) placed China on its intellectual property rights (IPR) priority watch list on April 29. USTR released a report that found that China had not fulfilled commitments made last year to reduce IPR infringement, saying that China's steps to improve enforcement have been "seriously inadequate" and that "criminal enforcement in China has not demonstrated any deterrent effect on infringers."
The administration will use World Trade Organization (WTO) instruments "whenever appropriate," the report states. But USTR stopped short of labeling China a "priority foreign country"--a move that would have likely triggered a Section 301 investigation (the section of the 1974 Trade Act that empowers the US government to retaliate against unfair trade practices) and eventually a dispute-resolution case in the WTO. The USTR report demands that China comply with transparency requirements and release data on IPR enforcement activities. This data could be a step toward developing a case over time.
In the report, USTR also presents China with a six-item list of needed "Tangible Results," which are similar to previous, general calls for more criminal investigations and greater transparency. USTR has indicated that it will seek to establish clear benchmarks to measure China's progress in reducing piracy. Discussions on these benchmarks will apparently be part of the Joint Commission on Commerce and Trade (JCCT) process. The JCCT--chaired on the US side by Commerce Secretary Carlos Gutierrez and USTR Rob Portman, and on the Chinese side by Vice Premier Wu Yi--is due to take place in Beijing in July.
Statistical Highlights from the PRC White Paper on IPR
In contrast to these assessments, the PRC State Council Information Office issued a white paper on April 21 that presented an upbeat description of China's progress on protecting and enforcing IPR. The paper, entitled "New Progress in China's Protection of Intellectual Property Rights," is the first IPR white paper since 1994 and covers government legislation, policies, and statistics since that time. Though it provides a useful account of legislative developments and provides important statistics, some categories are incomplete. The white paper also lacks details on plans to strengthen IPR protection further. The following data contain key statistics from the white paper, except where noted.
Patents
The PRC Patent Law, enacted in 1985, was revised most recently in 2001 to bring China's patent regime into line with the Agreement on Trade-Related Aspects of Intellectual Property Rights. The State Intellectual Property Office administers the law. The most troubling recent patent case was the revocation of Pfizer Inc.'s PRC patent for the active ingredient in Viagra. Chinese manufacturers successfully petitioned the PRC's patent re-examination board by arguing that Pfizer had submitted insufficient information on the manufacturing of the product to be awarded the patent.
| White Paper Patent Highlights | |
|---|---|
| Patent Applications | |
| 2,284,925 | Number of patent applications 1985-2004 18% Foreign |
| 18.9% | Average annual increase from 1985 to the end of 2004 |
| 353,807 | Number of patent applications handled in 2004 (14.7% increase over 2003) 21.2% Foreign (30.8% increase over 2003) |
| Patent Approvals | |
| 1,255,499 | Number approved by end of 2004 12.9% Foreign |
| Patent Infringement Cases | |
| 12,058 | Number of cases involving patent infringement and patent disputes by the end of 2004 86.3% Percent of cases resolved |
Trademarks
The PRC Trademark Law, enacted in 1983 and amended in 2001, is administered by the State Administration for Industry and Commerce (SAIC). Foreign firms have complained about the slow recognition of foreign trademarks as "well known" despite 2003 rule changes (see below).
| White Paper Trademark Highlights | |
|---|---|
| Trademark Applications | |
| 1,906,000 | Total number received 2000-04 |
| 1,650,000 | Total number received 1980-1999 |
| 588,000 | Number of applications filed for trademark registration in 2004 30% Increase over 2003 117% Increase since 2001 |
| Registered Trademarks in China | |
| 2,240,000 | As of the end of 2004 18% Held by 129 foreign countries and regions |
| 153 | Number of well-known trademarks offered protection by SAIC in 2004 28 Number of foreign well-known trademarks (see below). |
| Trademark Violations | |
| 169,600 | Number of cases SAIC handled 2001-04 67% Percent of cases involving trademark infringement and counterfeiting 7% Percent of cases involving foreign trademarks |
| 51,851 | Number of cases SAIC investigated and dealt with in 2004 11% Percent of cases involving foreign trademarks 160% Increase in these cases from 2003 |
| 77% | Percent of cases involving trademark infringement and counterfeiting 52% Increase in these cases from 2003 |
| 0.19% | Percent of cases transferred to judicial organs for criminal prosecution |
Copyright
China's State Copyright Bureau, under the State Council, oversees implementation of the Copyright Law (enacted in 1991, amended in 2001) and numerous copyright regulations. The PRC White Paper statistics on copyright are incomplete.
| White Paper Copyright Highlights | |
|---|---|
| 51,368 | Number of copyright infringement cases the State Copyright Bureau accepted 1995-2004
97.3% Number of cases resolved 9,691 (19%) Cases accepted in 2004 9,497 (98.0%) Cases resolved in 2004 |
PRC Customs and IPR
China's official IPR border-monitoring efforts date back only to 1994, according to the white paper. The General Administration of Customs is empowered to investigate and enforce laws governing the illegal import and export of infringing goods.
| White Paper Customs Highlights | |
|---|---|
| 4,361 | Number of cases Customs discovered 1996-2004
$76 million Amount involved 0% Average annual increase in customs discoveries |
Civil and Criminal Enforcement
The PRC Supreme People's Court and Supreme People's Procuratorate issued a long-awaited legal interpretation in December 2004 that was pledged by Vice Premier Wu Yi as part of a package of actions intended to toughen criminal sanctions against intellectual property rights (IPR) violators. The Legal Interpretation on the Criminalization of IPR Violations roughly halves the criminal thresholds for IPR violation, suggests guidelines for punishment, expands copyright laws to cover Internet-based piracy, and establishes criteria for culpability.
| White Paper Civil & Criminal Enforcement Highlights | |
|---|---|
| 5,305 | Number of cases Chinese public security organs cracked 2000-04 $266 million Amount involved 7,100 Number of suspects arrested 80% Percent of cases concerning trademark ownership |
| 38,228 | Number of IPR-related civil cases concluded by courts 1998-2004 8,332 (22%) Number of cases concluded in 2004 |
| 2,057 | Number of IPR-related criminal cases concluded by courts 1998-2004 385 (19%) Number of cases concluded in 2004 |
| 2,375 | Number of criminals sentenced 1998-2004 528 (22%) Number of criminals sentenced in 2004 |
| 932 | Number of criminal cases of production and sale of fake goods in 2004 1,453 Number of criminals punished |
| 1,434 | Number of criminal cases of illegal business operation in 2004 2,103 Number of criminals punished |
| 18.9% | Year-on-year increase of criminal cases received in the first quarter of 2005 regarding the infringement of IPR, production and sales of counterfeit or inferior quality goods, and illegal business operation |
Foreign "Well-Known" Trademarks
The 28 "well-known" foreign trademarks officially recognized by SAIC are listed below. In 2003 SAIC released a long-awaited revision to rules governing the administration of well-known (chiming) trademarks in China. As a signatory to the Paris Convention for the Protection of Industrial Property, China had agreed to protect well-known trademarks, defined in the new rule as a trademark that is widely known by, and enjoys a comparatively high public reputation in, China. The 2003 Regulation on Well-Known Trademark Certification and Protection replaced 1996 interim provisions. The revised rule allows companies to contest an application for an allegedly conflicting trademark by submitting evidence that the company's existing trademark is well known in China, regardless of whether the trademark is registered in China.
| Well-Known Foreign Trademarks in China | |
|---|---|
| United States (15) | Dakening (Johnson & Johnson)
PNPC Gillette Sprite (Coca-Cola) Disney McDonald's and the M logo Motorola's M logo DuPont Doublemint (Wrigley) American Standard Barbie (Mattel) Band-Aid (Johnson & Johnson) Hyatt (Hyatt Hotels) Safeguard (Procter & Gamble Co.) Wal-Mart (Wal-Mart Stores, Inc.) Honeywell |
| France (4) |
Lancöme Montagut Montagut's flower logo (Montagut's Chinese name) (Bonneteric Cevenole S.A.R.L.) |
| The Netherlands (3) |
Philips and logo F1 (Formula 1) Cartier |
| Switzerland (2) |
Tissot and logo Tudor and Logo |
| United Kingdom (2) | Jaguar and logo |
| Germany (1) | BOSS |
| Italy (1) | Ferrari |
| Sources: Rouse & Co.; State Administration for Industry and Commerce; The US-China Business Council | |
US Customs & Border Protection's IPR-Seizure Statistics
US Customs is on the front lines in the battle to prevent counterfeit goods from making their way into the US supply chain. The agency's statistics reveal that almost two-thirds of all counterfeit IPR imports by value are from China. They paint a grim picture of the scale of the problem.
| US Customs Counterfeit Seizures October 1, 2003-March 31, 2004 |
||
|---|---|---|
| Trading Partner | Value of Counterfeits Seized |
% of Value |
| China | $37,578,952 | 58% |
| South Africa | $4,444,218 | 7% |
| Russia | $3,865,043 | 6% |
| Hong Kong | $2,205,328 | 3% |
| Vietnam | $2,181,094 | 3% |
| All other trading partners | $14,128,704 | 23% |
| Total domestic value | $64,403,339 | |
| Total number of seizures | 3,693 | |
| Source: US Customs and Border Protection | ||
| US Customs Counterfeit Seizures October 1, 2002-March 31, 2003 |
||
|---|---|---|
| Trading Partner | Value of Counterfeits Seized |
% of Value |
| China | $26,693,641 | 70% |
| Hong Kong | $1,882,366 | 5% |
| Mexico | $1,519,150 | 4% |
| South Korea | $1,433,690 | 4% |
| Malaysia | $902,532 | 2% |
| All other trading partners | $5,553,764 | 15% |
| Total domestic value | $37,985,143 | |
| Total number of seizures | 3,117 | |
| Source: US Customs and Border Protection | ||
| Counterfeit Chinese Products Seized by US Customs October 1, 2003-March 31, 2004 |
||
|---|---|---|
| China | Value of Counterfeits Seized |
% of Total |
| Apparel | $10,140,971 | 27% |
| Cigarettes | $9,790,690 | 26% |
| Handbags/Wallets/Backpacks | $5,194,980 | 14% |
| Consumer Electronics | $4,488,045 | 12% |
| Toys | $1,740,453 | 5% |
| Batteries | $1,587,891 | 4% |
| Identifying Elements | $788,896 | 2% |
| Media | $433,501 | 1% |
| Watches/Parts | $405,299 | 1% |
| Computers/Hardware | $398,936 | 1% |
| All other commodities | $2,609,290 | 7% |
| Total Domestic Value | $37,578,952 | |
| Total Number of Seizures | 1,488 | |
| Source: US Customs and Border Protection | ||
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Last Updated: 7-Jul-05