Coudert Brothers LLP Jingzhou Tao Managing Partner Coudert Brothers LLP China Practice ABA Office, Washington, D.C., February 14, 2005 IPR Enforcement in China: Problems and New Legislative Developments

Coudert Brothers LLP 2 IPR Enforcement in China: Problems and New Legislative Developments I.Overview of PRC IPR Legislation Reforms since China’s WTO Accession II.Problems in IPR Enforcement in China III. The Latest Legislative Developments in PRC IPR Enforcement

Coudert Brothers LLP 3 I.Overview of PRC IPR Legislation Reforms since China’s WTO Accession Significant Legal Reforms since 2000  Patent Law: Amended on Aug. 25, 2000 and made effective as of July 1, 2001  Trademark Law: Amended on Oct. 27, 2001 and made effective as of Dec. 1, 2001  Copyright Law: Amended on Oct. 27, 2001 and made effective as of Oct. 27, 2001  Regulations on the Protection of Computer Software: Amended on Dec. 20, 2001 and made effective as of Jan. 1, 2002  Regulations on the protection of integrated circuit layout designs: Issued on Apr. 2, 2001 and made effective as of Oct. 1, 2001  Regulations on the Administration of the Import and Export of Technology: Issued on Dec. 10, 2001 and made effective as of Jan. 1, 2002  PRC Regulations on Customs Protection of Intellectual Property Rights: Issued on Dec. 2, 2003 and made effective as of March 1, 2004 Conclusion: a lot of paperwork has been done

Coudert Brothers LLP 4 II.Problems in IPR Enforcement in China A.Rampant Counterfeiting and Piracy B.Poor Administrative Enforcement C.Weak Judicial Enforcement D. Lack of Transparency & Poor Public Awareness

Coudert Brothers LLP 5 II.Problems in IPR Enforcement in China  Rampant Counterfeiting and Piracy  The U.S. GAO report and the Amcham in China evaluation report reveal certain issues in IPR enforcement  37,489 trademark-related violation cases were handled by AIC in 2003, with the number of trademark infringement and counterfeiting cases accounting for 70.66% of all trademark- related violation cases  6,860 IP cases were handled by PRC courts in 2003  90% of all business software in China at a value of USD1.5 billion is pirated B.Poor Administrative Enforcement  Weak Enforcement Teams and Poor Coordination  Local Protectionism  Non-deterrent Administrative Penalty  Costly Burden on IPR Owners

Coudert Brothers LLP 6 II.Problems in IPR Enforcement in China C.Weak Judicial Enforcement  Inefficient civil proceedings  Weak criminal charge to infringers  Few infringers receive criminal punishment D.Lack of Transparency & Poor Public Awareness  Lack of transparency  Poor public awareness

Coudert Brothers LLP 7 III. The Latest Legislative Developments in PRC IPR Enforcement A.Newly Updated IPR Customs Protection Regulations B.Newly Issued Judicial Interpretations on the Handling of Criminal IP Cases

Coudert Brothers LLP 8 III.The Latest Legislative Developments in PRC IPR Enforcement A.Newly Updated IPR Customs Protection Regulations  Favorable Improvements  Disadvantages  How Does the Customs IPR Protection Regime Work?  Recordal of IP Rights (Patent, Trademark and Copyright) With the GCA  Local Customs' Handling of IPR Infringement Cases Official Statistics: 5247 IPRS Recorded With the GCA ( ); Multinational Corporations that Made Customs Recordal in China: GM, IBM, P&G, Adidas, Nike, Philip Morris, Pfizer, Sony, Panasonic, etc.

Coudert Brothers LLP 9 III.The Latest Legislative Developments in PRC IPR Enforcement B.Newly Issued Judicial Interpretations on the Handling of Criminal IP Cases (Issued on Nov.2, 2004 and Effective as of Dec. 22, 2004)  Chinese legislation on the criminal liabilities of IP crimes: involving four types of IPR infringements and two levels of sanctions  No More Than 3 Years; or  No Less Than 3 Years and No More Than 7 Years

Coudert Brothers LLP 10 III.The Latest Legislative Developments in PRC IPR Enforcement B.Newly Issued Judicial Interpretations on the Handling of IPR Criminal Cases (cont’d.)  Significant provisions in the new interpretations  Considerably lower thresholds for prosecution of IP crimes  Conviction standards for legal entities:  3 times those for individuals under the new interpretations  5 times those for individuals under the old interpretations

Coudert Brothers LLP 11 III.The Latest Legislative Developments in PRC IPR Enforcement B.Newly Issued Judicial Interpretations on the Handling of IPR Criminal Cases (cont’d.)  Key terms specified and technical issues resolved  “Illegal business volume”/“illegal amount of sales”  “Identical marks”/“use of marks”/“clearly know”  “For the purpose of making profit”/“without authorization of copyright owner”/network copyright infringement  Accomplices and cumulative punishment Case study: The first IP criminal case in Shanghai City under the new interpretations – two infringers sentenced to 5 and 7 years’ fixed-term imprisonment respectively

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