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Office of the Intellectual Property Enforcement Coordinator<br />

CHINA IN FOCUS: A SNAPSHOT VIEW OF IPR POLICIES AND PRACTICES<br />

“Effective IPR enforcement remains a serious problem throughout China. IPR enforcement is hampered by lack<br />

of coordination among Chinese government ministries and agencies, lack of training, resource constraints, lack of<br />

transparency in the enforcement process and its outcomes, procedural obstacles to civil enforcement, and local<br />

protectionism and corruption.”<br />

USTR Report to Congress on China’s WTO Compliance (Dec. 2015), p. 120<br />

As detailed by the U.S. Government in annual<br />

IPR-related reporting, China’s weak protection of<br />

intellectual property presents serious implications for<br />

global commerce. Between FY 2005 and FY 2015, the<br />

Department of Homeland Security seizures related to<br />

intellectual property right (IPR) violations leapt from<br />

8,022 to 28,865, with products originating in China<br />

and Hong Kong (often used as a transit point from<br />

goods originating from the mainland) accounting for<br />

83% of all IPR seizures in 2015. These violations of<br />

intellectual property rights cause significant business<br />

losses, undermine U.S. competitiveness in the world<br />

marketplace, undermine the rule of law, and in many<br />

cases, threaten public health and safety, among other<br />

attendant harms.<br />

China has undertaken a wide-ranging revision of its<br />

framework of laws and regulations aimed at protecting<br />

the intellectual property rights of domestic and foreign<br />

right holders. However, inadequacies in China’s IPR<br />

protection and enforcement regime continue to present<br />

serious barriers to U.S. exports and investment and to<br />

affect our markets at home. 27 The U.S. Government<br />

again placed China on the ‘Priority Watch List’ in<br />

USTR’s Special 301 report, and several Chinese markets<br />

were among those included in USTR’s 2015 Notorious<br />

Markets List, which identifies online and physical<br />

markets that exemplify key challenges in the global<br />

struggle against piracy and counterfeiting.<br />

China continues to present a complex and<br />

contradictory environment for protection and enforcement<br />

of IPR. Welcome developments include repeated<br />

affirmation of the importance of intellectual property<br />

by China’s leadership, an ongoing intellectual property<br />

legal and regulatory reform effort, and encouraging<br />

developments in individual cases in China’s courts.<br />

At the same time, progress toward effective<br />

protection and enforcement of IPR in China is<br />

undermined by unchecked trade secret theft, market<br />

access obstacles to ICT products raised in the name<br />

of security, measures favoring domestically owned<br />

intellectual property in the name of promoting<br />

innovation in China, rampant piracy and counterfeiting<br />

in China’s massive online and physical markets, extensive<br />

use of unlicensed software, and the supply of counterfeit<br />

goods to foreign markets.<br />

Additional challenges arise in the form of obstacles<br />

that restrict foreign firms’ ability to fully participate<br />

in standards setting, the unnecessary introduction of<br />

inapposite competition concepts into intellectual property<br />

laws, and acute challenges in protecting and incentivizing<br />

the creation of pharmaceutical inventions and test data.<br />

As a result, surveys continue to show that the uncertain<br />

intellectual property environment is a leading concern for<br />

businesses operating in China, as intellectual property<br />

infringements are difficult to prevent and remediate, and<br />

may cause businesses to choose not to invest in China or<br />

offer their technology, goods, or services there.<br />

As the USTR reports indicate, China’s IPR-related<br />

policies and practices cause particular concern for<br />

the United States and U.S. stakeholders across a wide<br />

variety of areas, including, but not limited to trade<br />

secrets, ICT policies, technology transfer requirements<br />

and incentives, widespread piracy and counterfeiting<br />

in China’s e-commerce markets, software legalization,<br />

counterfeit goods, technical standards involving IPR,<br />

anti-monopoly law enforcement, and IPR protection for<br />

pharmaceutical innovations.<br />

At the same time there have been some positive<br />

developments. In the context of Chinese President Xi<br />

Jinping’s September 2015 visit to Washington, D.C.,<br />

the United States and China made a seires of cyber<br />

commitments, including that neither state would engage<br />

in the cyber-enabled theft of intellectual property for<br />

commercial gain. Since that commitment, we have seen<br />

SECTION 4<br />

133

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