CHINA INTELLECTUAL PROPERTY LAW NEWSLETTER
Vol. 4 , No.12 - September 19, 2003
TOPICS THIS ISSUE:
- Chinese Sausage Makers Ruled To Infringe KFC Brand
- Japanese Official Says China Must Tackle Intellectual Property Right Violations
- Record Haul As China Raids Pirates
- Chinese Exporters Stumble Over IP
Chinese Sausage Makers Ruled To Infringe KFC Brand
A final adjudication over a sausage brand dispute in Tianjin, a port municipality in north China, has been dissolved after the court ruled the contested name was too similar to the huge US Kentucky Fried Chicken (KFC) fast food brand.
The plaintiff, the Changcheng Meat Processing Company in Beichen district, sued the Jinxi Qitemei Food Company in Xiqing district late last year, alleging the defendant infringed its sausage brand "Kendeji."
The Jinxi Qitemei Food Company appealed to a higher court after the first hearing in the Tianjin No. 1 Intermediate People's Court, ruled that it stop using the name "Kendeji" and pay 30,000 yuan (over 3,600 US dollars) compensation to the plaintiff.
The Tianjin People's Higher Court, overturned the first verdict and rejected the plaintiff's charge.
The verdict ruled that neither company was justified in using the brand, because "Kendeji" has the same pronunciation and similar characters in Chinese as Kentucky Fried Chicken.
The verdict said that the use of the name went against the accepted principle of honesty in business and will mislead consumers to associate their products with that of the American-based fast food chain.
The sausages made by the two companies were also marked "American flavor".
The Changcheng Meat Processing Company started to produce sausages branded "Kendeji" in May, 1995 and the "Kendeji" brand was registered under its license. The Qitemei Food Company started producing "Kendeji" in 2000.
(Source: People's Daily)
Japanese Official Says China Must Tackle Intellectual Property Right Violations
Japan's senior vice minister for economy, trade and industry (METI), Taichiro Nishikawa, said in a business forum before economic ministers at the recent Asia-Europe Meeting (ASEM) that while China has improved its business environment in recent years, the country still has a mountain of urgent tasks to tackle.
Speaking at a high-level business forum in Dalian in northeastern China recently, he singled out as Beijing's priorities for now as ensuring transparency in its handling of administrative matters and fully implementing business-related rules. Noting that the continued inflow of foreign investment would be essential for China's medium-to long-term economic growth, he said that it is of extreme importance to tackle the rampant violations of Japanese and other foreign investors' intellectual property rights in China.
"Problems related to intellectual property rights have detrimental effects on corporations' desire to invest. At the same time, they erode Chinese enterprises' technological innovation," he said.
ASEM consists of 10 Asian countries - Brunei, China, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam - and 15 European Union (EU) member countries plus the European Commission, the executive branch of the EU.
The EU members are Austria, Belgium, Britain, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and Sweden.
(Source: Kyodo News Service)
Record Haul As China Raids Pirates
In a logistical feat worthy of any Hollywood blockbuster, a record 42 million smuggled and pirated DVDs and video and audio CDs have been destroyed across China. All of the discs destroyed had been confiscated during crackdowns on smuggling cases, starting in 2001.
"It is the biggest of its kind in terms of the quantity destroyed in one place and the overall quantity destroyed across China," Gui Xiaofeng, deputy director of the General Administration of Press and Publication, was reported as saying.
The mission was the latest in a series of public demonstrations of success in the fight against copyright breaches. It is part of a continuing anti-counterfeiting effort aimed at silencing critics overseas.
China is a hotbed of intellectual-property theft, and officials have long promised to crack down on the problem. When China was admitted into the World Trade Organization in 2001, it was obliged to stop such practices.
"We're trying to carry out the spirit of our smuggling crackdown and to show our determination to the international and domestic communities," The Associated Press (AP) reported Gui as saying. Gui also said, "we have attached great importance to protecting intellectual property rights."
China's national television station, CCTV, showed noisy wood-chippers -- what the official Xinhua News Agency called "pulverizers" -- swallowing discs by the hundreds and spewing the remains of movies and music onto sidewalks and parking lots, reported AP.
More than 600 people, including U.S. and Australian officials, were invited to a ceremony in southern Guangdong province's Shanwei city, where 26 million discs were shattered, Xinhua said.
The proficiency of the local copyright pirates has also been highlighted by the prompt emulation of Olympics merchandise.
Hong Kong newspapers reported that counterfeiters were turning out fake T-shirts for Beijing's 2008 Olympics just a week after the supposedly fake-proof logo was first unveiled.
Gui said the smugglers not only breached China's copyright laws but also evaded tax. Severe punishment of lawbreakers should be combined with a policy of rewarding those who give useful information to the authorities, Gui added.
Shen Rengan, deputy director of the National Copyright Administration, said piracy is an international issue. Pirated software alone accounts for 24% of all software in North America, 35% in Western Europe, and 55% in the Asia-Pacific area.
Counterfeiting from China costs Western businesses an estimated USD16 billion in sales each year, trade groups say. The problem has so annoyed the manufacturers in the U.S.A that it almost led to trade sanctions against China in the 1990s.
It was reported that more than 140 illegal disc-production operations have been raided by Chinese authorities.
(Source: CNN)
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Chinese Exporters Stumble Over IP
According to the authors of an article, they said that until now, China's telecoms equipment suppliers have had a relaxed attitude towards intellectual rights.
When Cisco Systems of the US sued Huawei Technologies, the Chinese telecoms equipment maker, in January, for allegedly copying the US company's technology, the episode was seen as marking a new phase in the development of China Inc.
Like their Japanese counterparts 30 years before them, China's emerging telecoms giants are beginning to look to Western markets for growth. But in the process, they are stumbling up against intellectual property rights issues that have seldom been a problem in the free-wheeling environment of their home market.
"In essence, the Huawei example will be the first of a series in which three or four major players might begin to get into the same kind of problems," said Steve Vickers, president and chief executive of International Risk, a corporate consultancy.
Since its establishment in 1988, Huawei has grown to become China's biggest domestic producer of routers, switchers and other equipment for fixed-line, mobile and data networks with sales last year of USD2.67 billion.
Once it had conquered its own market, the company expanded into Asia, Africa, the Middle East and eastern Europe before venturing into Europe and the USA.
Exports last year reached USD550 million, up from USD328 million a year earlier, and are forecast by the company at USD1.2 billion this year.
However, this international push has come at a price. Lawyers say Cisco, which has about 60% of the mainland equipment market, has long considered challenging Huawei over intellectual property rights. China's legal apparatus is ill-equipped to handle complex patent suits, making it difficult to challenge mainland companies on their own soil.
"When mainland companies are in China, they are sloppy about IP because nobody is challenging them," said Marcia Ellis, a senior associate at law firm Paul Weiss. But when the Chinese company began pushing into the US, Cisco pounced, alleging Huawei had stolen and copied Cisco source code, user manuals and other intellectual property. After initially rejecting Cisco's allegations, Huawei pledged to withdraw a line of routers, admitting it had inadvertently obtained Cisco software and that some code had found its way into a small portion of the operating system Huawei was using in its routers. Cisco scored another partial victory in June when a US federal judge ordered Huawei to stop using software Cisco says was illegally copied.
The ongoing case has proven less damaging than might be expected. Huawei said the preliminary injunction would have no material effect on its business and immediately bounced back by signing a deal with 3Com, the US technology group.
Even so, the final outcome of the suit will be closely watched by Huawei's mainland rivals, such as Zhongxing Telecommunications, which also makes network equipment, and the country's 36 or more mobile handset manufacturers.
They will be looking to avoid the same pitfalls as they also begin their inevitable expansion offshore. As the biggest, fastest-growing, most cut-throat telecoms market in the world, the mainland is beginning to produce potential global players across the sector.
"It's a bit like the "New York-New York" market: if you can make it here in China, you can make it anywhere," said Duncan Clark, managing director at BDA China, a Beijing-based telecoms consultancy.
SARS taught Chinese companies of the need to diversify their earnings by moving into overseas markets. Offshore sales also offer a chance to rebuild margins crushed by competition in the mainland market.
Mr. Clark says the share of domestic handset producers in the 200 million subscriber mainland cellular market rose to more than 35% by the end of the first quarter of this year, from about 20% to 30% last year, challenging foreign producers.
Domestic brands such as TCL, Kejian and Bird are already competing aggressively in Hong Kong. TCL is also targeting south-east Asian markets.
Giants such as Huawei and Zhongxing owe part of their success in developing markets to political lobbying by the leaders of the country.
In western countries, they have proven eager to compete on price but have yet fully to grapple with important issues such as after-sales service and, of course, intellectual property rights.
In that sense, the Huawei-Cisco suit could end up being positive not only for Huawei but also for technological and legal development of China's telecoms industry as a whole.
"Once Huawei, for example, has to go out and spend the amount it has to in the international market in order to make its technology stand up, then it's not going to want to have anyone else in China stealing its stuff," said Ms Ellis.
(Source: Financial Times)
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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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