Newsletter

Intellectual Property Rights and China – Part 1: Trademark Registration

• USTR: China’s enforcement of IPR remains weak

• Counterfeiting and organized crime

Page 2

• Counterfeit Swiss watch crackdown

• Next generation counterfeit handbags – “Superfake”

Page 3

• RCMP and test Canada Goose counterfeit

• ACSG Bits & Pieces

Issue 14-01A

To combat the growing threat of Intellectual Property (IP) crime the Chinese government has shifted emphasis away from the development of legislation towards effectively enforcing the laws. They have also put a stronger emphasis on bringing together the various governmental bodies by harmonizing and developing their practices to help prevent and disrupt IP crime.

The authorities themselves feel they have made real progress and that enforcement continues to improve - citing many successes as a result of their drive for better collaboration (although the USTR wants more – see article on page 2).

Enforcing ones rights can still be confusing to outsiders, as the jurisdiction over acts of infringement is spread across a number of state and provincial agencies.

Unfortunately, too many overseas brand owners still hold the attitude that registering their intellectual property rights in China does little to protect their creativity and innovation.

However, China has a well-developed intellectual property system that allows you to protect your IP as you would your physical property. This said, if you fail to make use of the system at the outset of your venture you could find real difficulties in enforcing your rights at a later date. More specifically, even if an ACSG investigation successfully identifies a counterfeiter and locates the factory in China, we will not receive support from local authorities to carry out enforcement actions if the brand owner has not completed trademark registration basics.

Trademark Registration: Trademarks guarantee the origin of goods and services. If you intend to use your trademark in China you must begin your protection by registering the mark with the Chinese Trademark Office.

Under the State Administration on Industry and Commerce (SAIC) the Trademark Office maintains authority over trademark registration.

Trademarks are registered in relation to particular goods or services and the Chinese classification system for goods and services is harmonized to the International Classification of Goods and Services administered by WIPO (World Intellectual Property Organization, Geneva).

Registration of a trademark takes approximately eight months and a mark is initially protected for 10 years. This can be extended in consecutive 10-year periods.

Importantly, you must use your mark; if you do not use it for three consecutive years, it can be cancelled from the China National Register.

As a final note, using an expensive IP law firm (local or Chinese) is not necessary – there are a few ‘watch-outs’ and ACSG can recommend the appropriate classes for registration and handle all trademark filing activities – but don’t wait…

In the next newsletter, we’ll take a closer look at Chinese authorities and enforcement. Source: UK Intellectual Property Office

Page 4

;

ACSG Newsletter Issue 14-01A

2

January 14: China has revised many of its intellectual property rights (IPR) laws but is still struggling to enforce the rights of brand owners, according to the Office of the US Trade Representative (USTR).

In its latest report on China's compliance with World Trade Organisation (WTO) commitments, including those relating to IPR protection, since it acceded to the group 12 years ago. China is a critical market for US industry, with exports running at $110bn in 2012, almost five times the level shipped in 2001.

IP issues have long been a point of contention between the two nations, although the USTR report acknowledges China's "wide-ranging" efforts to revise laws and regulations governing the protection of IPR in recent years. The USTR would like to see further revisions to bring online copyright protection into line with World Intellectual Property Organization (WIPO) Internet treaties, an update to laws on trade secrets and "correction of continuing deficiencies in China's criminal IPR enforcement measures." "Despite repeated anti-piracy campaigns in China and an increasing number of civil IPR cases in Chinese courts, counterfeiting and piracy remain at unacceptably high levels and continue to cause serious harm to US businesses across many sectors of the economy," concludes the report, which puts those losses at around $48bn in 2011.

The US has China on its Priority Watch list for IPR, although it says progress has been made on some issues such as the use of pirated software. Meanwhile, the report suggests some trademark rights holders are starting to report a noticeable reduction in the visibility of counterfeit goods for sale in certain major retail and wholesale markets in China, which it attributes to "intensified administrative and criminal enforcement in certain areas."

Cooperation between the US and China has already led to successful enforcement actions against infringements in areas such as media, high-tech industries such as automobile components and medicines, as well as agriculture. Source: http://www.securingindustry.com/ (Phil Taylor)

Counterfeiting Feeds Organized Crime, Says UNODC

January 15: The United Nations Office on Drugs and Crime (UNODC) has launched a public awareness campaign on counterfeit goods, saying they line the pockets of organised criminals with around $250bn a year in illicit gains. The campaign - which goes by the strapline Don't Buy into Organised Crime - is centred around a public service announcement that started airing on television stations yesterday (see below) and strives to show the serious repercussions of trafficking in fake goods.

"The illicit trafficking and sale of counterfeit goods provides criminals with a significant source of income and facilitates the laundering of other illicit proceeds," UNODC said in a statement. Added to that, revenues support the manufacture of more counterfeit products and other forms of criminal activity, such as narcotics, and the goods produced can in some cases place the public at risk of injury or death. Around 16 per cent of counterfeits are goods such as medicines, food and drink, cosmetics and toys that could pose a health risk, says a UNODC fact sheet, which notes that "the sale of fraudulent medicines from East Asia and the Pacific to South-East Asia and Africa alone amounts to some $5bn per year." Criminal groups use similar routes and modi operandi to move counterfeit goods as they do to smuggle illicit drugs, firearms and people, says the UNODC, citing 2013 data that showed counterfeit medicines were identified in around a third of seized containers in a programme designed to intercept drugs. The campaign also highlights ethical issues associated with counterfeiting, including labour exploitation, migrant smuggling and environmental impact from the use of harmful chemicals in the manufacture of fake goods. "In comparison to other crimes such as drug trafficking, the production and distribution of counterfeit goods present a low-risk/high-profit opportunity for criminals," commented UNODC’s executive director Yury Fedotov. Source: http://www.securingindustry.com/ (Phil Taylor)

China's Enforcement Of IPR "Remains Weak", Says USTR

;

ACSG Newsletter Issue 14-01A

3

December 28: Swiss watch manufacturers chalked up a number of successes in 2013, with 120,000 counterfeits intercepted in collaboration with the authorities, according to the Swiss News Agency. The Federation of the Swiss Watch Industry (FH) said the bulk of the seizures - around 90,000 items between January and November - took place in operations within Dubai, a primary hub for the counterfeit watch trade, with other raids taking place in Italy and Russia. In addition, around 700,000 counterfeit watch components were also intercepted during 2013.

In February, two Dubai warehouses were visited by police and 33,000 fake watches were seized in a single operation, "preventing serious economic loss to wholesalers," notes the FH. Prior operations have resulted in six convictions, with defendants ordered to serve prison sentences and authorisation given to destroy all confiscated items, it adds. Counterfeiters are becoming increasingly sophisticated in their ability to mimic even the most intricate of Swiss designs, with copies of watches sporting the prestigious tourbillon movement increasingly being found. Meanwhile, the criminals involved in the trade are also starting to sell their knock-offs at or near the price of an original, making it harder to identify fakes and increasing financial losses for customers and the industry. The FH said earlier this month that watch exports declined 0.5 per cent year-on-year in November to CHF 2.1bn ($2.35bn), a decline of 120,000 units in volume terms over the same period of 2012.

Source: http://www.securingindustry.com/

The Crackdown On Fake Swiss Watches Bears Fruit

December 23: You don’t just find any old fake these days on New York City’s gritty Canal Street. The next-generation counterfeit handbag is popping up.

It’s called the superfake.

“A superfake comes from a factory, either at midnight with it vanished when no one’s looking. It was supposed to be damaged and someone can slip it in their bag and take it home,” Mark Ellwood, author of “Bargain Fever,” said.

The term “superfake” was coined because essentially this fake is better than you could believe, Ellwood said. Hand a fake handbag to an expert in bags and say, ‘Is this real or not?’ They might not be able to tell.”

In rare cases, experts say some fakes are made with handcrafted leather, genuine handles and hardware. Some may even be produced in the same factories by moonlighting workers.

On Canal Street, one salesman carries a showroom on a smartphone.

“There’s no stores. Everything is in the back,” he told ABC News. “It’s hidden because it’s illegal to sell it.”

A real Chanel bag goes for nearly $5,000. A run-of-the-mill fake might cost $30 or $40, but a superfake can go for around $600.

It may seem like a bargain until you learn where your money is going.

“Certainly we have evidence that it’s gone to fund organized crime, that it’s gone to fund terrorism,” Susan Scafidi, a professor at Fordham University, said. “If you put your name on the label, you are going to be more concerned about your factory standards than if you are putting somebody else’s name on the label and faking it. And that does lead to all kinds of labor abuses, including child labor.”

That’s a lot of bad karma to carry around with your brand new fake handbag. Source (including video): http://abcnews.go.com/blogs/business/2013/12/the-next-generation-counterfeit-handbag-the-superfake/ (Bianna Golodryga and Brinda Adhikari)

The Next Generation Counterfeit Handbag: The Superfake

;

ACSG Newsletter Issue 14-01A

4

Other Interesting Recent Headlines (please cut and paste link) 1. HSI operation nets $700,000 in fake NHL goods

www.ice.gov/news/releases/1401/140102detroit.htm

2. U.S. Secretary of Commerce Penny Pritzker Names Michelle K. Lee as Next Deputy Director of the U.S. Patent and Trademark Office www.uspto.gov/news/pr/2013/13-39.jsp

3. Patricia Kelly Named as New Director General of IP Australia www.ipaustralia.gov.au/about-us/news-and-media/latest-news-listing/patricia-kelly-dg

ACSG Bits & Pieces

Australia – Canada – Hong Kong – New Zealand – USA

www.ac-strategygroup.com

USA/Canada: 727.235.6466 or NZ/Australia: +64.21.520.466

Also follow us on twitter at: ACSG_Evans

We’ve been busy in China and Hong Kong working on a number of client projects over the Christmas and New Years period, however, with Chinese New Year now upon us – activities in that part of the world are now slowing down considerably and won’t pick up again until mid-February.

Fortunately, this frees up some time to focus on driving new business. If we’ve had the pleasure of speaking with you in the past but not done anything together yet – let’s talk again! As a reminder, the ACSG model is ‘hands-on’ and focuses on the source of the problem (China) as opposed to the two-decade old law firm ‘whack-a-mole’ approach…

December 19: Police have issued an advisory about the hazards posed by counterfeit goods.

“I have seen counterfeit children’s clothes that have no fire retardant; pharmaceuticals that have no active ingredients; electrical devices, such as cell phones, that have caught fire; and the list goes on,” said Const. Toni Zoledowski of the Royal Canadian Mounted Police’s (RCMP) federal serious and organized crime unit.

RCMP said one recent case of a counterfeit product putting consumers at risk was found when officers seized a counterfeit Canada Goose coat.

The real coats are made with down to insulate the body and North American coyote fur for the trim, said RCMP.

Tests by the Assiniboine Park Zoo in Winnipeg determined the coat used pieces of Chinese domestic duck feathers and raccoon dog fur, a creature native to Asia (image courtesy RCMP).

“The seized coat was not filled with down. The wearer of this coat could venture outdoors with the belief this coat provided protection against extreme winter temperatures. There would be virtually no insulation against the extreme cold and the wearer would be at risk of serious injury or even death,” said RCMP.

People should look for the following to help weed out counterfeit goods:

RCMP: Counterfeit Coats Could Put Buyers At Risk

1. "Package: Examine the packaging. Look for spelling variants, shoddy appearance, safety certifications or small differences from the authentic logo 2. Price: If it seems too good to be true, it probably is 3. Place: Buy from reputable retailers and use extra diligence when purchasing items through the Internet 4. Product: Examine the quality and appearance of the product" Source (including video): http://winnipeg.ctvnews.ca/rcmp-say-counterfeit-coats-could-put-buyers-at-risk-1.1600770