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USITC Says China Infringement Harms American Companies

Issued: December 01 2010
A new US International Trade Commission says that infringement of intellectual property rights in China reduces market opportunities and undermines the profitability of US firms when sales of their products and technologies are undercut by competition from illegal, lower-cost imitations. The USITC also expressed concern that the Chinese government’s indigenous innovation policies, which promote the development, commercialization, and purchase of Chinese products and technologies, may create new barriers to US foreign direct investment (FDI) and exports to China.
The USITC, an independent, nonpartisan, fact-finding federal agency, conducted the study at the request of the US Senate Committee on Finance and published its finding in a report called China: Intellectual Property Infringement, Indigenous Innovation Policies, and Frameworks for Measuring the Effects on the US Economy. The report describes the principal types of reported IPR infringement in China and Chinese indigenous innovation policies. It also outlines an analytical framework for determining the effects of IPR infringement and indigenous innovation policies on the U.S. economy and jobs.
Highlights of the report include:
• Enforcement of IPR laws remains a serious problem in China. Significant structural and institutional impediments undermine effective enforcement, including the protection of IPR infringing industries by local Chinese officials, a lack of coordination among government agencies, insufficient enforcement resources and training, and non-deterrent civil and criminal penalties. However, there are some signs of improvement in IPR enforcement, particularly in courts in major cities in China.
• Ineffective IPR enforcement contributes to the widespread infringement of US firms’ copyrights, trademarks, patents, and trade secrets in China. Intellectual property is often the most valuable asset that a company holds, but many companies, particularly small ones, lack the resources and expertise necessary to protect their intellectual property in China.
• Intellectual property creation and technological innovation drive US economic growth through the creation of new and improved products and processes, greater efficiencies, and enhanced returns on investments. IPsensitive industries reportedly pay their employees more and have higher output and sales per employee than those of non-IP sensitive industries.
• China is implementing indigenous innovation policies that may reduce business opportunities for US firms in China’s fast-growing economy. This “web of policies” often embedded in government procurement, technical standards, anti-monopoly, and tax regulations may make it difficult for foreign companies to compete on a level playing field in China.
Meanwhile, the State Administration of Industry and Commerce has announced that in 2009, the national industry and commerce departments dealt with 51,044 cases of trademark infringement, including 7,448 general trademark infringement cases and 43,596 cases of trademark infringement involving counterfeit products. There were 10,461 investigations involving foreign trademarks. More than 13,534,000 products bearing infringing marks were seized and destroyed.
For the first half of 2010, 21,323 trademark infringement cases were handled by the national industry and commerce departments, including 2,732 general trademark infringement cases, and 18,591 cases of trademark infringement involving counterfeit products. There were 4,457 investigations involving foreign trademarks. More than 4,080,000 products bearing infringing marks were seized and destroyed.
The State Council has reportedly launched a national campaign to discourage the violation of intellectual property rights and the production and distribution of fake goods. The campaign launched in October and is expected to last for six months, targeting violations at production and distribution levels.


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