Chinese Law | China: Vol.3, No.02

Happy Chinese New Year

CHINA INTELLECTUAL PROPERTY LAW NEWSLETTER

Vol. 3 , No. 2 - February 5, 2002

TOPICS THIS ISSUE:

British The Weakest Link Hit Show Produces Unauthorized Chinese Version
SINA.com Issues Declaration Defending Mobile and Wireless IPR
Shanghai Technology Stock Exchange Signs Deal With American Representative
China Breaks World Record for Trademark Registrations
American Businesses Not Satisfied With China's IPR Protection
Adobe Contemplating Pulling Out of Chinese Market

British The Weakest Link Hit Show Produces Unauthorized Chinese Version

Before the official launch in China of the successful British game show The Weakest Link, the British Broadcasting Corporation (BBC) and their mainland partners were very surprised to hear of a Shanghai version modeled after the hit show. The show, called Fortune Test, is identical to The Weakest Link in set, format and structure, with contestants voting each other off the show.

Due to the recent successful litigation of the London-based production company ECM against a cable station in Southern China for failing to pay for using a game show format, BBC and ECM are hoping that the improvements in the legal system will allow them to protect their intellectual property rights in The Weakest Link case.

However, as Shenzhen Cable, in the southern province of Guangdong, did in fact enter into a purchasing agreement for the use of the format of the show and later neglected to pay the appropriate fees, the latest case in Shanghai may not be so simple.

Regardless of the uncertainty in China's legal system on the protection of format rights, the BBC and ECM are eager to defend their rights to The Weakest Link. BBC has already lodged formal complaints with the Central Government and informed the Shanghai station of the unmistakable similarities.

Colin Jarvis, with BBC Worldwide, said "We clearly have to protect our rights, for our own commercial reasons, but also so it doesn't damage our business in other parts of the world."

(Source: BBC)

SINA.com Issues Declaration Defending Mobile and Wireless IPR

SINA.com, a leading Chinese media and Internet services company for Chinese communities worldwide, has joined efforts with four other mobile Internet content providers to issue a joint declaration to protect intellectual property rights.

Due to China having the largest mobile phone market in the world, with over 100 million users, the individual text, graphics and music used on the phones is becoming a more and more important form of communication and entertainment. The 4 companies are aware that the rapid growth of the industry has led to the illegal use of copyrighted materials and thus is harming the industry.

In the joint declaration, Any8.com, ByAir, New Palm and Sina supported the importance of well-protected intellectual property rights in China's developing wireless and Internet industry. They stated that the IP rights of the content providers are fully protected in the current PRC legal system, but that the laws must be respected and complied with.

(Source: PR Newswire)

Shanghai Technology Stock Exchange Signs Deal With American Representative

A recent cooperation agreement between the Shanghai Technology Stock Exchange (STSE) and Genesis Technology Group has created an opportunity for American IPR holders to allow Chinese investors and companies to license and use foreign technology.

The Shanghai Technology Stock (Property Rights) Exchange (STSE) was established in 1999 as an independent vehicle sponsored by the Shanghai Municipal Government to encourage technological innovation and create opportunities for Chinese companies and Joint Ventures to use licensed high-technology.

With the most recent deal, if American companies wish to sell or license their intellectual property in China, they can do so by listing their IPRs at the STSE through Genesis Technology Group. CEO and Present of Genesis Technology, Dr. James Wang, said that "with a listing fee of $500, a technology, patent, or production process can be listed on STSE and exposed to thousands of investors, entrepreneurs and companies on a daily basis."

In the past two years, almost 3,000 deals totaling US $12 billion were made through the STSE.

(Source: IPR Strategic Business Information Database)

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China Breaks World Record for Trademark Registrations

For two consecutive years in a row, China has broken the world record for the highest number of trademarks registered in one country in one year.

Ma Lianyuan, deputy director of the State Intellectual Property Office, said that in 2001, roughly 270,000 trademarks had been registered in China.

The total of valid registered trademarks in China now totals 1.45 million, almost equal to the number of trademarks registered in Japan and the US.

In total for the year 2001, China had successfully handled over 38,000 cases of infringement of intellectual property rights.

(Source: AFX-Asia)

American Businesses Not Satisfied With China's IPR Protection

Assistant US Trade Representative Jospeh Papovich isn't convinced China is doing enough for the protection of Intellectual Property Rights in China.

On a recent trip to the mainland, he noted that although the Chinese government has improved recently, "they have a very long way to go." It could be that he was referring to the pirated movies bought openly on the street for US $1, or maybe the counterfeit Nike and Boss goods also sold openly in Silk Market. Or perhaps he was talking about the numerous complaints from various countries who threaten to lodge complaints with the WTO dispute forums about the blatant lack of IP protection in the People's Republic of China.

However, as far as Popovich is aware, the U.S. will not file such a complaint. He says that China has been more active in providing better training, clearer guidelines and better systems of enforcement.

Papovich, who is in China to discuss enforcement of the pacts that the People's Republic of China made to strengthen IP protection, realizes the plight some companies are in. "Companies are telling me that they are becoming increasingly frustrated by the high levels of piracy in China," he told a press conference after holding discussions with the Chinese government. Due to the frustration and the seemingly slim hope of improvement, some companies are questioning their long-term future in China.

Referring to U.S. companies, he said that they "can absorb such high levels for a certain period of time, and it's a business decision for them if they make a definitive decision to leave."

Papovich said that the main victims of piracy are manufacturers of music, movies, software, shampoo, cosmetics, batteries and other brand-name consumer products.

Despite the recently enacted patent, trademark and copyright laws, he says the "penalties usually are limited to fines that are too low" and amount to a "slap on the wrist."

Noting that some of the counterfeit goods are not confined to the domestic consumer market and are even exported, Popovich stated that more of the counterfeiting cases "need to be referred for criminal prosecution." He also said that although the US will not impose a timetable on China for implementation of its commitments, it is prepared to encourage China to increase its enforcement efforts.

(Source: The Irish Times, AP Worldstream, AFX-Asia)

Adobe Contemplating Pulling Out of Chinese Market

Adobe Systems may stop producing a regional product for mainland China and other Asian markets due to the high rates of piracy prevalent in these countries.

Chief executive Bruce Chizen reported that Adobe is considering not offering Chinese-language support for upcoming versions of its products, such as Acrobat file-sharing software and Photoshop image editor.

Chizen, chief executive of the second-largest software producer in the United States, blamed the rampant piracy in China during an interview at the MacWorld Expo. He stated that "until the Chinese Government and its citizens realize they are hurting themselves, it is hard for us to make an investment. It is a simple business decision. It costs US $750,000 to localise an application for Chinese language and if we are only going to make US $500,000 in revenue it does not make sense for us to go ahead."

Adobe and other software firms have long complained about the piracy problem in China. They have estimated that in 2000, piracy alone cost them US $4.1 billion in lost revenue.

The Business Software Alliance, of which Adobe is a member, believes that 94% of the software used in China is illegally copied. For the 13.2 million computers that are estimated to be sold next year, the expected loss will be US $1.1 billion.

Chizen said that Adobe realized that some governments in Asia were making efforts to confront piracy, but admitted he was less than positive about China's highly publicized and propagandized anti-piracy campaign. "We have not seen the impact. China is a big challenge for us," he said.

Denying that the reason for the high rate of piracy is the excessively high prices that manufacturers charge, he noted that "it does not make a difference what our prices are. It is hard to beat US $3."

Adobe's software is popular in every Asian country, yet outside of the Japanese market, Asia accounted for only 4% of the company's US $1.2 billion in annual revenue. Japan, where piracy rates are much lower than the rest of the Asian region, accounted for 16% of Adobe's sales.

Because of the wide use of Adobe's products, which provides a platform for viewing, creating and modifying most of the files and documents on the Internet, the company has become an easy target.

However, if the company decides to not regionalize its products and stop creating versions that support the Chinese language, it could have a major effect on the software industry.

(Source: South China Morning Post)

Lehman Lee & Xu

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The China Intellectual Property Law Newsletter is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.

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Vol.3, No.02