Table Of Contents: Mar-apr 2009 China Business Review

March–April 2009

China Business Review The

Protect Your Ideas: Outsmarting IPR Infringers Patent Law Revisions Enforcement Routes Licensing Your IPR

Taking Advantage of the Downturn Luxury Goods Transfer Pricing Customs Compliance US$22/HK$220

Vo l u m e 3 6 N u m b e r 2

China Foto Press

March–April 2009

China Business Review The

Focus: Intellectual Property Tackling Intellectual Property Infringement in China

17

Companies can combat intellectual property rights (IPR) infringement through administrative or judicial channels, both of which have pros and cons. Ryan Ong

Interview: Mark Cohen on Intellectual Property

22

The former senior intellectual property attaché at the US Embassy in Beijing discusses key issues facing companies in China.

A New Era of Intellectual Property Rights Licensing

26

Companies should be aware of recent changes to China’s IPR enforcement regime, especially those related to troubling compulsory licensing provisions, patent pools, and package licenses. Esther H. Lim and Srikala P. Atluri

Changes to China’s Patent Law and Practice

30

China’s revised Patent Law adopts some common international standards but leaves room for improvement. Thomas T. Moga

China Data: Patents, Enforcement, and Seizures

34 chinabusinessreview.com March–April 2009 3

Features LU X U RY G O O D S

Still Strong Sellers

36

China’s luxury goods sales may perform well despite bear-market conditions. Ben Cavender and Shaun Rein

17

TA X

China’s Special Tax Adjustment Regulations: An Action Plan

44

New measures change the global transfer pricing landscape significantly. Glenn DeSouza CUSTOMS

Ramping Up Customs Compliance Reviews

22

48

PRC Customs is stepping up enforcement, and companies must ensure that they fully comply with the law. Tony Kerr

Departments

26

Letter from the Editor Short Takes China Conference Calendar China Market Intelligence

7 8 10 12

China Tackles Economic Crisis with Fiscal Stimulus, Consumption Plans

USCBC Bulletin Letter from Beijing

14 16

Transitions Robert Poole

Commentary

30

40

Converting the Downturn to Advantage Francis Bassolino, Michael Deering, and Lyuba Tovbina

China Deals Opportunities

52 55

News of China-related educational, cultural, and charitable projects

Online Exclusive How Microsoft handles its IP in China

48 Cover design by Jason Pym

The exchange rate used throughout this issue is the People’s Bank of China rate from January 15, 2009: ¥6.8392 = $1.

The China Business Review welcomes articles from outside contributors. Manuscripts submitted for consideration should be sent to the editor at [email protected]. The US-China Business Council obtains licenses for all rights to articles and artwork published in the CBR. Articles or artwork published in the CBR may be reprinted or reproduced only with the written permission of the US-China Business Council. Articles in the CBR do not reflect US-China Business Council policy, unless indicated. The China Business Review (ISSN 0163-7169) is published bimonthly by the US-China Business Council, 1818 N Street NW, Suite 200, Washington DC 20036-2470, USA (Tel: 202-429-0340), a nonprofit organization incorporated under the laws of the District

4 March–April 2009 chinabusinessreview.com

of Columbia. Periodicals postage paid at Washington, DC, and additional mailing offices. Postmaster, please send address changes to the China Business Review, 1818 N Street NW, Suite 200, Washington DC 20036-2470, USA.(c)The US-China Business Council, 2009. All rights reserved. Annual Subscription Rates: $135 US/Canada and $177 international, print only; $156 US/Canada and $208 international, print and online; $105 online only. Single copy issues: $22, $35 airmail; issues over 1 yr: $15, $20 airmail. DC residents add 5.75% sales tax. Subscriptions to the China Business Review are not deductible as charitable contributions for Federal income tax purposes.

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China Business Review The

Editor Virginia A. Hulme Associate Editor Paula M. Miller Assistant Editors Arie Eernisse, Daniel Strouhal Business Manager Jesse Marth Administrative Assistant Mattie Steward Art Direction & Production Jon Howard/JHDesign, Inc. Research Assistant Nicholas Chu Inquiries and Subscriptions: [email protected] Web: www.chinabusinessreview.com Reprints: For bulk custom reprints (min. 100), call 1-800-960-1195 Online store: www.uschina.org/store

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6 March–April 2009 chinabusinessreview.com

Letter from the Editor

T

his year, the China Business Review’s (CBR) 35th anniversary, we are looking back at the magazine’s first year. The March–April 1974 issue featured articles on Sino-Japanese cooperation, the Fourth Five-Year Plan (1971–75), dispute resolution, agriculture, and negotiating for bristles, as well as a table of top US imports and exports from China. (In case you were wondering “why bristles?”, “materials of animal origin [primarily bristles]” was the number-two import from China in 1973.) The issue also carried practical information, such as postage rates to China, rail and airline schedules, and Englishlanguage broadcasts received in Hong Kong and Guangzhou. Most relevant to this issue are the concerns about intellectual property (IP) raised in the article on Sino-Japanese cooperation: There is also the question of patent rights. China is not party to the Paris Convention to protect industrial properties. Nevertheless, Peking has indicated readiness to negotiate a separate agreement on trademarks alone with Japan. But little progress has so far been made.... ...There have been cases...in which the Chinese were discovered to have copied machinery imported from Japan.... [S]ome Japanese manufacturers are afraid the industrial techniques they supply to China may be exported to third countries contrary to original agreements. China has a law which encourages inventions and research. But under this law, most of the benefits of these inventions and profitable research go to society. Incentives for individuals are very limited. However, China appears to be prepared to pay for the research and development efforts achieved by foreign corporations and for patented industrial techniques. Between 10 percent and 20 percent of payments for nine petrochemical plants sold by Japan to China last year represented compensation for patent rights. Japanese businessmen have discovered it is possible to obtain payment for patent rights involved in each plant built in China or to conclude long-term royalty agreements of five to seven years for use of patent rights. Such arrangements usually contain provisions that technological secrets must not be disclosed to third parties. However, Japan and other advanced industrial countries would like China to join international arrangements for protection of industrial property rights. In the intervening years, the protection of IP in China has improved immensely, but some concerns remain. China has signed the Paris Convention and many other international IP agreements. It has also built a legal framework to protect IP. On the other hand, enforcement remains weak, and companies still worry about bringing their proprietary technologies to China. In this issue, we look at the current state of IP rights in China with articles on the various options for dealing with IP violations, recent revisions to the Patent Law, provisions in the Antimonopoly Law that touch on IP, and an interview with the former IP attaché at the US Embassy in Beijing.

Virginia Hulme chinabusinessreview.com March–April 2009 7