China Steps Up Enforcement of Piracy Laws : Trade: Jurist tells U.S. that courts are serious about cleaning up patent and trademark abuse.
Stung by criticism that it permits thefts of intellectual property and other copyright infringement, the Chinese government has mounted a campaign to assure its foreign trading partners that it is serious about cleaning up abuses.
Patent and trademark laws are relatively new in China, but have been improving over time, Fei Zongyi, a justice of China’s highest court, said in Los Angeles recently. “Compared to other countries, our legal system has developed very fast. We’ve demonstrated that China has made tremendous progress,” said Fei, who was touring U.S. cities to explain his court’s plans for legal enforcement to industry representatives concerned about the problem.
In an interview, the justice said he is now involved in drafting new contract, property, and arbitration laws. Such laws will help companies to enforce their contracts and seek remedies for violations, he said. Under the proposed laws, copyright violators could face criminal penalties for the first time.
In another measure designed to provide assurances that it is serious about eliminating violations, the government also said recently that it would sponsor seminars in China to inform business people and others about copyright laws now in effect. “Since last year, the emphasis is to let the public know the law, understand the law and follow the law,” Fei said.
As part of continuing efforts to strengthen the law, the government last year extended copyright laws covering company products to trademarks owned by service industries.
At the same time, the government extended patent protection to chemical and pharmaceutical products and has extended the life of patents to 20 years, from 12 years.
Although business executives who met with Fei said they were impressed by his willingness to come to the United States and explain Chinese policies, many said that China is still a long way from solving the problem of piracy.
“It’s productive to have these meetings to let people know it’s a serious problem, but you can’t stop counterfeiting completely,” said Howard C. Lincoln, chairman of Nintendo of America Inc.
Lincoln said Nintendo, the Redmond, Wash.-based subsidiary of the Japanese video game concern, lost more than $1 million last year because of piracy by state-owned or state-financed business in China, which distributed pirated Nintendo video games in China and around the world.
Nintendo isn’t alone. Last year, U.S. businesses lost about $827 million because of piracy in China, according to the International Intellectual Property Alliance in Washington. Industries affected include computer software, music recordings, motion pictures and books.
The problem, industry officials said, lies in the enforcement of the laws.
“The penalty for piracy is rather insignificant. It’s not a deterrent; there’s practically no enforcement,” said Jonas Rosenfield, president of the American Film Marketing Assn., a trade organization that represents about 110 independent film companies worldwide.
The intellectual property alliance estimated that the motion picture industry lost about $50 million last year because of piracy in China. Many of the losses can be traced to a notorious factory in Shenzhen, an industrial Chinese city, which makes pirated laser discs with films from the United States, film industry officials said.
But the industry taking perhaps the biggest loss in China is computer software. Infringement cost the industry about about $322 million last year, according to the intellectual property alliance.
The problem, said Kenji Eigner, director of Asia Pacific sales at Rexon Inc., is that a pirate with one copy of software can duplicate as many as he wishes with no fear of retribution.
Despite success in computer hardware sales in China, Rexon, a Simi Valley-based manufacturer of personal computer accessories and software, said it has been reluctant to risk losses from piracy by introducing software in China.
Copyright protection is “the foundation for the entire software industry,” said Brian McEachron, a senior corporate attorney for Microsoft Inc. who also met last week with Fei.
Despite Fei’s assurance of legal enforcement, many U.S. representative said they are still skeptical about taking legal actions in Chinese courts.
Fei acknowledged that China does not have a discovery process to uncover records from parties in a lawsuit. While he maintained that the lack of discovery is a benefit toward quickly resolving disputes, American executives say that without discovery, it’s often difficult to prove a claim.
In addition, the Americans say, Chinese enforcement is weak because of the often minimal compensation to victims.
When a Chinese company was caught illegally using the Walt Disney Co.’s Mickey Mouse trademark character, it was only fined $91. That figure would have been a hundred times more here, said Peter Nolan, Disney vice president and general counsel.
“We’ve tried through court actions, and the remedies we’re getting from the judicial system (are) pitiful,” he said.
