JIPA Japan Intellecual Property Association Anti-counterfeits Activities by Japanese Companies In China Yasuhiro Tabata Managing Director, JIPA October 29, 2003

JIPA Japan Intellecual Property Association Contents (Part I Introduction) 1. Legal Environment in China 2. History of IP System in China 3. Distribution of Counterfeits on Japanese Products 4. Damage Caused by Counterfeits in China 5. General Approach of Japan toward Chinese counterfeits (Part II Specific Activities) 6. A concept of Anti- counterfeits 7. R&D, Marketing & Anti-counterfeits Strategy Forming 8. Obtainment of IP Rights 9. Information, Investigation & Identification of Counterfeits 10. Crackdown of Counterfeits 11. Assessment of Crackdown Results

JIPA Japan Intellecual Property Association Part I Introduction 1) A complex legal system consisting of custom and statute. 2) Insufficiency in “Rule of Law” 3) Insufficient independence of judicial system 4) insufficient transparency in legislative, Administrative and judicial procedure 5) Local-protectionism in legislative, Administrative and judicial procedure 1. Legal Environment in China

JIPA Japan Intellecual Property Association 2. History of IP System in China 1980 Membership in WIPO 1982 Trademark Law 1985 Patent Law 1990 Copy Right law 1993 Unfair Competition Law 2002 Entry into the WTO and adherence to the Trips

JIPA Japan Intellecual Property Association By manufacturing country 1) By Consuming country 2) 3. Distribution of Counterfeits of Japanese Products 1) 2): “Counterfeit Report 2001” by JPO

JIPA Japan Intellecual Property Association 4. Damage Caused by Counterfeits in China 1)Number of Companies suffering from counterfeits ) Number of Companies suffering from counterfeits 5-7% of the total world trade volume being that of the counterfeiting goods According to a survey of ICC. Damage suffered by Japanese companies in China market would being up to 850 billion Yen.

JIPA Japan Intellecual Property Association 5. General Approach of Japan toward Chinese counterfeits Central Administration Private Organization like JIPA Private Companies China Administration “Special Report” by Task Force on Industrial Competitiveness and Intellectual Property Policy (2001) Strengthening of actions toward China in government for better-protection IP rights of Japanese companies “Outline of National IP Strategy” by “The Strategic Council ON IP “ hosted by the Prime Minister (2002.3) Policy of strengthening protection of IP rights overseas “Guideline on the Action against Counterfeiting goods in China” by METI ( ) Establishment IP center in Beijing, Shanghai, Hong Kong in order to help Japanese company's activities against counterfeits. Cooperation with China Gov. on raising the IP-protection- moral among Chinese people Approach by Japanese Government Missions dispatched by JIP, JTMA etc. lobbing China Gov. for better- control of counterfeits Approach by Private Sectors Missions dispatched by “International IP Protection Forum” requesting China Gov. To improve its IP system and crackdown of counterfeits Joint Approach by Gov. and Private Sectors

JIPA Japan Intellecual Property Association 6. A concept of Anti- counterfeiting activity Part II Specific Activities R&D, Marketing & Anti-counterfeits Strategy Forming Obtainment of IP Rights Assessment of Crackdown Results Information, Investigation & Identification of counterfeits Crackdown of Counterfeits (1) (5) (4) (3) (2)

JIPA Japan Intellecual Property Association 7. R&D, Marketing & Anti-counterfeits Strategy Forming 1) Strengthening of technology innovation in R&D from the point of preventing counterfeits 2) Designing of products with technical characteristics being difficult to imitate 3) Development of business models capable of making counterfeiters difficult to sell their counterfeiting goods 4)Development of efficient strategy for crack down counterfeits R&D, Marketing & Anti- counterfeits Strategy Forming

JIPA Japan Intellecual Property Association 8. Obtainment of IP Rights 1) System concerning obtainment of IP rights in China People’s Congress State IP Office State Council State Administration of Industry and Commerce State Publication Bureau Patent Office Trade Mark Office Copyright Bureau Granting patent for invention, utility model and design Registration of software Registration of trade mark Obtainment of IP Rights

JIPA Japan Intellecual Property Association 2) Strengthened Obtainment of IP Rights by Japanese Companies in China Top 10 Foreign Corporation According to Their Patent Applications in 2002 Obtainment of IP Rights

JIPA Japan Intellecual Property Association (1) Too long time needed for grant of patents for invention →5-7 years at average, 7-8 years in edge-cutting field. (2) Insufficient Protection for Cutting-edge Technology →e.g. the software can not be a subject of a patent. (3) Insufficient protection of patent for industrial design →No protection for design-in-part →Many false or double patents for industrial design, because of non-substance-examination system. (4) Insufficient protection of famous foreign trade mark Still no foreign trade mark having been registered at State Administration of Industrial and Commerce (SAIC) as a famous trade mark. Obtainment of IP Rights 3) The Main Problems in the System of I Obtainment

JIPA Japan Intellecual Property Association (1) Lobbying Chinese government to review its IP laws and practices to access the global standards (2) Cooperation on staff education with China side Planed to dispatch technology experts to China to train Chinese examiner under the joint efforts by Japanese private IP organizations or companies. Acceptance Trainees from SIPO, SAIC under JPO's Human Resource Development Project every year. Obtainment of IP Rights 4) Japan’s Approach Toward the main Problems

JIPA Japan Intellecual Property Association 9. Information, Investigation & Identification of counterfeits 1) Information Collecting ( Information source): Chinese administrations in charge of controlling counterfeits ( AIC, TSB, Customs, etc.) Chinese private investigation companies Local branches or dealers of Japanese company informants 2) Investigation of suspected counterfeits : Use of Chinese local investigation companies for carrying out further investigations of the suspected counterfeits based the information gathered from above information source, to reveal the detail of the suspects. Information, Investigation & Identification of counterfeits

JIPA Japan Intellecual Property Association 3) Preliminary Identification of Alleged Counterfeiting Goods Usually for the case the counterfeiter is a whole seller or retailer 4) Problems (1) Insufficient information share between parent company and its Chinese local subsidiaries or dealers (for a few companies). (2) Difficulties on catching the good timing to take action (3) Time consuming for the identification of counterfeiting goods (as deadly copied original products). Information, Investigation & Identification of counterfeits To Dispatch IP experts responsible for anti-counterfeits from parent company to its Chinese affiliate Measure No good idea yet ! To Develop identification technology to make counterfeiting goods easy to identify Measure

JIPA Japan Intellecual Property Association 10. Crackdown of Counterfeits 1) IP enforcement System in China Crackdown of Counterfeits Central Level Regional Level State IP Office State Admini- stration of Industry and Commerce People’s Congress State Council State Publi- cation Bureau Copyright Bureau Ministry of Public Security Local Patent Administration Bureau Local AIC Controlling Infringement of patent Local Copyright Bureau Local PSB Local government Controlling TM infringement and Unfair Competition Controlling Copyright Infringement Controlling products with Poor Quality Supreme Prosecutor Office Supreme Court Local Pros Local Court State Technology Supervision Bureau Local TS B Criminal procedure

JIPA Japan Intellecual Property Association 2) Crackdown of Anti-counterfeits activity by Japanese Company in China (1) Remarkable Progress made Canon K.K. 2001/Oct. to 2002/Mar.: 5 to 6 cases/month raid, supplies sale raised up to 30% 2002/Mar. to 2002/Jun.: 43 cases raid, supplies sale raised up to 70% (Key Success factor ) a) 2 full-time IP experts dispatched to Beijing in charge of anti-counterfeits affair b) Continuous action against counterfeits c) Strong position against counterfeits, which having been demonstrated through the activities of corporation top officer with China administrative bodies, law firms and investigation companies. Crackdown of Counterfeits

JIPA Japan Intellecual Property Association Seiko-Epson K.K. 37 cases raid(2002); Seized the counterfeiting goods being of value of about 380 million Yen. (Key success factor) a) Special Project Team with the leader being director in charge of corporation IP affair b) Raiding counterfeits systemically and strategically campaign against counterfeits with full use of mass-media to demonstrate strong position toward counterfeiters. Crackdown of Counterfeits

JIPA Japan Intellecual Property Association Matsushita Electric Industrial Co, Ltd. a) Two IP experts having dispatched to China( one to Beijing in1994, another one to Guangzhou in 1997) b) Each of 43 Chinese branches has One staff in charge of IP. c) Group IP meeting held twice each year. (Key Success factor ) To build a win-win relations with China(Administration, Law firms, etc.) Crackdown of Counterfeits

JIPA Japan Intellecual Property Association 3) Problems Concerning anti-counterfeits in China ( 1) problems at Chinese side Insufficient number of qualified IP enforcement Staffs (AIC staff s, TSB staffs or local court judges) Local-protectionism in a few local IP enforcement bodies (a) No action on its own initiative to take against counterfeits in quite a few local IP enforcement bodies (b) A few decisions on counterfeits case without fairness and transparency No damages in Administrative Enforcement (by AIC,TSB) Expensive and time-consuming in civil Procedure (courts) compared with administration procedure. Criminal Enforcement(police, prosecutor) not fully engaged yet Crackdown of Counterfeits (1) Lobbying Chinese government to review its IP laws and practices to access the global standards (2) Cooperation on human source with China side Measure

JIPA Japan Intellecual Property Association 2) issues to solve at Japan side (1) No full-time staff in its Chinese subsidiary in charge of affair of anti-counterfeits in quite a few Japanese companies. (2) Insufficient budget for anti-counterfeits in quite a few Japanese companies (3) Inefficient case-by-case raid tactics Crackdown of Counterfeits To persuade the top managing officer by assessing exactly anti-counterfeiting activities to make its merit more clear Measure No good idea yet !

JIPA Japan Intellecual Property Association 11. Assessment of Crackdown Results 1) assessment to the marketing result of anti-counterfeits activities 2) feeding-back of the assessment results to the stage of “R&D, Marketing & Anti-counterfeits Strategy Forming” to develop a better anti-counterfeits strategy and realize the spiraling-up of anti-counterfeits cycles. 3)Issues to solve how to assess exactly the marketing result which caused by the anti-counterfeits activity having been taken. And attention to be paid on the possible conflict with other laws e. g. anti-trust law (competition law), while carrying out the anti-counterfeits activities. Assessment of Crackdown Results

JIPA Japan Intellecual Property Association - END - Thank you !