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China Steps up IPR Protection to Promote Innovation
2006-09-30

 

By Ding Yimin, China Features

Landlords of Beijing's biggest retail markets including the Silk Alley Market signed a memorandum with a group of international manufacturers of brand-name products in early June, 2006.

They pledged to suspend or evict any tenants found selling pirated versions of products from a group of 23 international brands including Louis Vuitton, Prada, Adidas and Levi's.

The memorandum will help ban fake goods from the major retail markets of Beijing, said European trade commissioner Peter Mandelson, who hailed the brands' unprecedented memorandum with the market owners as a "trailblazing action".

The memo represented just one of China's recent measures to step up intellectual property right (IPR) protection, amidst the leaders' call for building up a nation of innovation. The country has strengthened enforcement of IPR protection laws and launched campaigns against violations at wholesale and retail markets, Minister of Commerce Bo Xilai said while meeting Mandelson.

In 1982, China issued the Trademark Law. Then in 1984 and in 1990, the Patent Law and Copyright Law were also issued one after another. "China had managed to set up a quite complete legal system of IPR protection in the 1990s," said Zhao Chunshan, secretary-general of China Intellectual Property Society (CIPS).

Statistics from the Supreme Court show that in 2005, local courts at all levels received 3,567 criminal cases and 16,583 civil cases of IPR violation, up 28.36% and 20.66% respectively over 2004.

"As far as I know, at least 300,000 law-enforcers and other people are involved in IPR protection in China," Commerce Minister Bo said, adding that 13,000 people were arrested for IPR violations between 2000 and 2005.

China's fast economic development has been based on improved IPR protection, not the other way round, said Bo, "we would definitely not promote development of trade growth at the cost of IPR infringement."

After becoming a member of the World Trade Organization, China has strictly abided by the WTO obligations in terms of IPR protection and has been dealing with IPR disputes with the United States, the EU and Japan in a cooperative way, said Deputy Minister of Commerce Jiang Zengwei at a press conference in April.

Meanwhile, China's own needs to protect its intellectual property are also on the rise, Bo stressed. The country last year handled more than 470,000 patent applications, published 6.4 billion books and produced 260 movies and 13,000 TV series episodes.

High-tech products accounted for 28 percent of China's more than US$760 billion exports last year, and machinery and electronic products exceeded 56 percent, much of which involved protected intellectual property.

To protect the IPR of both domestic and foreign products, the State Administration for Industry and Commerce issued a circular in February demanding rectification of the wholesale and retail markets in Beijing, Shanghai, and Guangdong and Zhejiang provinces to clamp down on fake goods, Jiang said.

China is also implementing a range of IPR steps to pre-install software programs. Statistics show that local governments and departments in 36 provinces and municipal cities nationwide have purchased and installed legal software programs, and 330 district and county governments are dealing with the installation of legal software programs. In 2006, large state-run enterprises will also begin to install legal software programs.

These actions have been taken because in recent years the Chinese government has realized the importance of IPR protection in the process of building up a nation of innovation, Zhao said.

China should bring the role of IPR into full play in improving the country's economic, scientific and technological strength and thus provide strong support for the building of a nation of innovation, President Hu Jintao said during a group study of the Political Bureau of the ruling Communist Party of China's Central Committee in May.

Hu also stressed at a summit of the "APEC (Asia-Pacific Economic Cooperation Organization) Economic Leaders" last November in the Republic of Korea that China would strengthen IPR protection to contribute to the global trade growth. He said later while meeting U.S. President George W. Bush that the Chinese government would willingly beef up muscle in fighting IPR infringement.

China is facing the arduous task of building up a well-off society, while at the same time it has to solve the problems of energy, resources and environment brought by rapid economic growth, said Xu Guanhua, minister of science and technology. He added that during the process of economic development, the costs of labor are increasing, and China cannot always depend on low-cost labor as an advantage for economic development. He said that China has to create more proprietary IPRs to get more profits and to support the development of the whole country.

The competition of the future world is a competition for IPRs, said Premier Wen Jiabao. Based on this insight, China has increased its financial support to IPR-related work. The State Council, or the central government, has decided to hold regular meetings to deal with IPR-related issues, and the National People's Congress, the top legislature, has put implementation of patent law at top of the agenda for its law enforcement inspection work.

IPR protection must precede innovation, said Ren Zhengfei, president of Huawei Technologies, which is well known for IT research and development in China. "Otherwise, the real victims of bad IPR protection will be Chinese companies with innovation potentials, instead of their western counterparts," Ren said.

He explained that western enterprises will be free from infringement as their core intellectual property rights are securely protected in their home countries.

However, many problems on IPR-related issues still remain to be solved, said Zhao Chunshan of the CIPS. The most pressing issue is that both the quantity and quality of China's domestic intellectual property rights are not gratifying.

The problem of lacking intellectual property rights has become more outstanding as China's economy has grown stronger in recent years, Zhao said. Statistics with the State Intellectual Property Office (SIPC) show that only 2,000-plus Chinese enterprises, or every three out of 10,000 enterprises, have proprietary IPRs.

Some Chinese enterprises are highly dependent on foreign-patented technologies. Without the patents for core technologies, Chinese manufacturers have to pay 20% of the price of each domestically-made mobile phone, 30% of each computer and about 20-40% of each numerical control machine tool to foreign patent holders.

To address this problem, China is trying to encourage enterprises, research institutes and universities to produce patented technologies and products. China aims at ranking fifth in the world in terms of the domestically-produced invention patents by 2020, according to China's new 15-year plan for scientific and technological innovation and development, released by the State Council in February.

The Chinese government's inadequate punishment for IPR violation looms as another problem in IPR protection. The price IPR violators have to pay is still low in China, making it of poor deterrent value, said Gong Li, chairman of Accenture Company, greater China. Gong also suggested Chinese public awareness of IPR protection needs improving.

"The Chinese government is trying to solve those problems," said Li Dongsheng, deputy director of the State Administration of Industry and Commerce. "We will also try to improve public awareness and motivate the whole society to make concerted efforts alongside the government at IPR protection."

To improve public awareness of IPR protection, China will set up claim centers in 50 cities this year to handle domestic complaints on the infringement of intellectual property rights, according to the Ministry of Commerce.

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