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The China Connection [GW Magazine]

by Hope Katz Gibbs
GW Magazine
May 1996

IN ANY GIVEN MONTH, CHINA is making headlines. The issue may be human rights, trade sanctions or conflict over elections in Taiwan. In recent weeks, rampant copying of American music, videos and software has once again touched off talk of sanctions.

Several GW law school professors are taking action of another sort. They are trying to help the Chinese strengthen their commitment to intellectual property rights.

“We are continuing to work to get a program started,” says Andy Sun, associate director of the taw school’s Dean Dinwoody Center for Intellectual Property Studies. “No matter what happens, we will not give up trying to bridge the gap and improve China’s protection of intellectual property.”

The U.S. protects original invention and authorship. Patents, trademarks and copyrights shield from illegal use items ranging from integrated circuits to novels. But in China, the enforcement of such safeguards is difficult. Chinese manufacturers regularly “pirate” original goods, producing and selling them, at home and abroad, without compensation to their owners. Over the last 10 years, this practice has cost American companies billions of dollars in lost revenue.

To help expedite the China Project- as GWs venture is known- Sun has joined forces with the Asian law program at the University of Washington in Seattle. Together the two schools formed a nonprofit organization called the Asia-Pacific Legal Institute. The institute’s goals are to establish sound relationships with key people in China. The group also works to train Asian lawyers, judges and faculty members in intellectual property and trade law.

Since the spring of 1994, Sun has organized three trips to China to participate in conferences at universities. He has also organized several major conferences in the U.S., where top Chinese officials, lawyers and judges come to learn ways to crack down on piracy. The conferences are very popular with the Chinese.

“Although there are some laws protecting high-tech commodities in China, enforcement is very uneven at best,” Sun says. “They realize if they don’t do something, they can’t foster their own industries.”

20TH-CENTURY PIRATES

The U.S. Trade Representative’s Office estimates that last year our country’s industries lost roughly $2 billion due to exports of goods illegally manufactured in China-bootlegged CDs and software, audio and video cassettes, books and much more.

The problem has personally touched Harry Harding, dean of GWs Elliott School of International Affairs. Am expert on China, he wrote a book in 1993—called “A Fragile Relationship.” Within months of the book’s U.S. release, a Chinese publisher had produced a counterfeit version.

“China is probably the world’s worst violator of international intellectual property law,” says Harding. “You try to persuade them that this is a violation of the rules, but they don’t care. Nothing seems to be off limits when it comes to counterfeiting in China. Everything from my book to Kellogg’s Corn Flakes to a Boeing 707 has been taken apart, altered slightly, and then reproduced for purchase at a much lower cost. Let’s face it. It is easier to make a copy than to pay for copyright and patent permission.”

Bootlegging of intellectual property is so rampant because China’s “socialist revolution” of the 1960s, 1970s and 1980s wiped out most of the major infrastructures in the country, including the law profession.

According to experts, any lawyer trained before 1982 has no real understanding of intellectual property law. While the Chinese were steeped in their revolution, the rest of the world was plugging in, booting up and transforming.

Eventually, China started open itself somewhat to the West. Consumers there began to realize what was available, and they wanted the latest CDs, videos and semi-conductor chips. Only they didn’t think they should pay for them.

Efforts have been made to meet international standards governing property rights. In 1984, China started adopting a series of intellectual property laws, with many of them adapted from German statutes. These are even stronger than some of the U.S. patent, trademark and copyright laws. Also, infringements on patent laws now carry a strict criminal penalty in China.

In the U.S., a patent infringement is a civil dispute. Unfortunately, most of the improvements have been made on paper only. “On the books, the intellectual property laws took very good,” Andy Sun says. “But enforcement continues to be a big problem.”

SIZE MATTERS

“The rules aren’t being enforced because the Chinese culture does not believe that property belongs to the inventor or owner,” Sun explains. “Also, the Chinese government thinks some of the international regulations are unfair, or sometimes they don’t understand the rules. So, they break the laws.”

Consider the counterfeiting of one of Walt Disney’s videos, “The Lion King.”

“You could walk into a warehouse in China and see tons of copies of The Lion King lined up along the walls,” Sun says. “Within minutes, someone will ask you if you want to place an order. He’ll grab an invoice and type it up with his firm’s name, address, phone number, fax number, everything. You point out that this is a blatant violation of international law and ask him how he can dare to put all his company information on the invoice. He will just turn to you and
laugh, responding, ‘Do you want a deal or not?’

The price is very simple in terms
of local currency, Sun explains.

“If you legally bought a copy of The Lion King in China, it would cost you about 100 Yuan [roughly $121.] A pirated copy would cost less than 10 Yuan
[$1.20 or so]. From a consumer’s point of view, why bother paying the higher price? A videocassette is a videocassette. It is pure capitalism at work.”

To make matters worse, many of the infractions are allegedly linked to officials from the central government. For example, when the trade office took satellite photographs of the worst piracy operations, they found the largest to be the Shen Fei Factory—run by the son of a general who was a martyr of Chinese Communism and managed by the nephew of the prime minister. The trade office also found that the local military police were involved in running the business to earn extra money.

THE WHEELS OF CHANGE

Copies of U.S. products account for only about one-tenth of the Chinese market in counterfeits. A very small percentage consists of pirated European merchandise. The rest of the illegal replicas are knock-offs of Chinese goods. Small Chinese companies are losing money due to the lack of protection, so Chinese officials have been open to solutions to the problem.

In May 1994, a small delegation from OW and the University of Washington traveled to China to discuss intellectual property law with experts there. The following
May, a larger group made the trip. Led by Andy Sun, the group included GW Law School Dean Jack Friedenthal, Dinwoody Center Director Harold Wegner, and Federal Circuit Court judge Randall Rader, JD’78.

Nancy Linck, Solicitor of the U.S. Patent and Trademark Office and a GW adjunct professor, was also part of the delegation, as was Professor Paul Liu from the University of Washington.

The Americans traveled in China for three weeks. Four conferences were held: in Xian, the ancient capital of China for 1300 years, at Peking University, at the University of Shanghai and in Taiwan. Smaller meetings were also held with officials from China’s copyright and trademark offices and with judges, professors, lawyers and students.

U.S. Solicitor Nancy Linck says that after several meetings, she felt sure U.S. law has a great potential to make an impact on China. “There doesn’t seem to be much respect for the present court system,” Linck says. “All the judges are incredibly young, in their 30s and 40s, and are anxious to rebuild the system using our judicial system as a model.
“My biggest observation was that the Chinese interest in economic growth was serious,” she says. “I consider this the first seed of capitalism and the first step toward the downfall of their present system.”

She knows it will be a slow process.

“I was fascinated to find how different our roles are,” Rader says. “Chinese judges are government officials rather than articulators and implementers of the law. They are more like policemen or administrators. They have a job of settling disputes, but are not viewed as the oracles of the law as we view our judges.

“They are fighting a difficult battle,” Rader notes. “Until recently, Chinese courts were very much controlled by the government and subject to government influence. It seems they are anxious to achieve the same kind of independence as American judges. Only, they still don’t have a concept of individual rights as being more important than what the government has to say.”

Rader believes that Chinese judges may be acquiring greater status. While the Americans were in Shanghai, they visited a Karaoke studio built for judges only. At first, Rader was surprised that so much money had been invested in an apparently frivolous enterprise, when the Chinese judicial system is so needy.

As Rader thought about it he realized that the studio gave the judges great pride. “In the long run,” he says, “this is the first step in giving the judges more independence.”

Professor Harold Wegner, director of the Dinwoody Center, believes the trip was a success. “Due to the connections we made on the trip, we have become a bridge between China and the U.S.,” he says. “When we were there, we met with 150 of their key people who are influential in terms of intellectual property law, and we formed as many direct links as possible. Since then, we have been able to link our judges with their judges, our professors with their professors, and our students with their students.”

HITTING THE BOOKS

One student who has directly benefited from the China Project is Catherine Sun (no relation to Andy Sun). A 1992 graduate of the law school at Peking University, she is on an exchange program at the Dinwoody Center.

“It is wonderful to be at GW,” says Catherine, 25. “1 enjoy it because it so different from schools in China, where professors are too busy to meet with students. Here, the professors are close with the students.”

Catherine says she is also happy about the format of classes at GW. “Professors in China are the only ones to speak during lectures. There is no discussion. Here, you must participate or your grade will suffer. I like this way better.”

When Catherine graduates, she will have earned an LLM in intellectual property law. She will then return to China to practice and share her knowledge with other lawyers.

“China is so far behind the U.S. in this area of the law and this causes a lot of problems when it comes to enforcing statutes,” she says. “When I return to China, I will work to show my fellow Chinese the importance of intellectual property protection.”

Catherine is the first Chinese student to take advantage of the program. If Andy Sun gets his way, GW’s Dinwoody Center wilt educate dozens more Chinese legal scholars in the coming years.

The Chinese are rooting for the project’s success, too. Officials in China estimate that by the year 2000, their country needs to have 500,000 to 750,000 lawyers to help with economic reform. Right now, China has only 100,000 lawyers, most of whom do not have sufficient legal knowledge about intellectual property rights.

Chinese officials already in power—including some of the country’s top judges—also study at GW So far, nearly two-dozen have taken a semester’s worth of classes.

Training first-class lawyers is exactly what GW does best, says Dean Friedenthal.

“Our goal is to work with the cream of the crop of young attorneys so they can be placed in leadership positions,” he says. “The Chinese are anxious to learn as much as they can about the international system and about bringing themselves up to a higher level of understanding of our intellectual property laws.”

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Contact HOPE KATZ GIBBS by phone [703-346-6975] or email.

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