Baltimore #1991898-v3-commerce environmental-ip_protection_webinar

U.S. Department of Commerce,Office of China and Mongolia

Intellectual Property Rights in China Webinar Series

IPR Strategies for the EnvironmentalTechnology Industry

March 13, 2012Alexander [email protected]

+202.262.1197 (U.S. mobile)

of 81Alexander [email protected] Rights Reserved

Outline

� Part I: The U.S. - China Relationship

� Part II: The Rise of Environmental and CleanTechnologies

� Part III: Chinese Imports and U.S. Options

� Part IV: Protecting your IP in China

� Part V: Conclusion

2


Part I: The U.S. - China Relationship

� 1. History: Many China issues not new

� 2. Selected Issues: Sinophobia today

� 3. Economy: Jobs #1 focus

� 4. Assessment and Recommendations

Presidential Election (November 2012)

3


History

© Saul Steinberg and The New Yorker

1976: There’s China-waay over there….

4

To fullyunderstandwhere we’regoing, you haveto know wherewe’ve been…


China History –Congress

/US

� “On trading anddistribution rights, ontransparency, andabove all on intellectualproperty rights – weshould not be hesitant toenforce our rights.”

� “Services industries likecomputer programmingor call centers also facecompetition from Chinaand elsewhere, butservices workers are noteligible for TAA over80 percent of the U.S.economy [is] comprisedof service sectorindustries ”

Note: 19 U.S.C. §2272 now includes services workers thanks to Subtitle I of the American Recoveryand Reinvestment Act of 2009 (P.L. 111-5). (See "Subpart A—Trade Adjustment Assistance for ServiceSector Workers. SEC. 1801. EXTENSION OF TRADE ADJUSTMENT ASSISTANCE TO SERVICESECTOR AND PUBLIC AGENCY WORKERS; SHIFTS IN PRODUCTION.”)

5


China History –Trade Deficit

/US

� Sens. Dorgan, Clinton Introduce Measure to Cap Trade Deficit at 5 Percent of GDP

� Bill S.355 – imposes requirements on USTR “to take steps, in cooperation withCongress, aimed at keeping the deficit in check”

� Would require USTR to monitor the trade deficit and total U.S. foreign debt everyquarter and to convene an emergency meeting of the TPSC within 15 days to draw upa “plan of action” to reduce the trade deficit if the deficit has reached more than 5percent of GDP or the foreign debt has reached 25 percent of GDP

� Require USTR to submit the plan to Congress for its consideration within 45 days

� “A companion bill is expected to be introduced in the House by Rep. Benjamin L.Cardin (D-Md.), ranking Democrat on the House Ways and Means TradeSubcommittee” [Cardin introduced H.R. 746]

� “Clinton said that she does not support repealing permanent normal trade relationsstatus for China, which currently accounts for more than 25 percent of the currenttrade deficit.”

Source: BNA Daily Report for Executives,February 11, 2005 6


RecallCNOOC

7


U.S. – ChinaRelations

� http://www.foreignaffairs.org/

� Renewing American Leadership (Jul/Aug 2007) (by Obama)

� Changing China (Jan/Feb 2008)� Can the West Handle Chinese Power?� The Misguided Row Over China’s Currency

� China and India Go To Africa (Mar/Apr 2008)

� Is America in Decline? (May/Jun 2008)

� Handling the Economic Challenge From China (Jul /Aug 2008)

8


Obama & TradePolicy

/US

� NAFTA is not China

� Understand historyand past positions

� New CommerceSecretary and USTRappointments

� How CongressProposed Dealingwith Past Troubles

9


ProtectionistSentiments� “U.S. Steelmakers are

preparing a raft ofcomplaints againstforeign steel imports, amove that could result intariff increases later thisyear and escalate tradetensions with China ”

� “Formal complaints areweeks away Themoves echoprotectionist effortsgathering speed incountries around theglobe as industriesbrace for a protractedeconomic slump.”

Wall Street Journal.U.S. Steelmakers Seek More Tariffs to Fight Imports

10


ProtectionistSentiments

Source: Wall Street Journal, Feb 20, 2009 11


Protectionism –Buy America

� Current Economic Conditions�Antidumping, Section 421, and other “Unfair

Trade” Measures�Non-tariff Barriers

� CFIUS� Buy America�Stimulus Bill�Statute

� Impact on China-U.S. Relations�Multilateral Negotiations – WTO Doha Round�Bilateral/Regional Agreements

12


China CurrencyPractice

/US

� “The Schumer-Graham bill allowsfor a 180-day negotiation periodbetween the U.S. and China torevalue its currency ”

� “[I]f negotiations are not successful,a temporary across the board tariffof 27.5% will be applied to allChinese products entering theUnited States – a penalty thatcorresponds to their estimatedcurrency advantage.”

� “[E]conomists estimate that Chinaundervalues its currency between15 percent and 40 percent ”

Source: Schumer Press Release,February 14, 2005

13


Consumer ProductSafety

/US

Mattel CEO: 'Rigorous standards' aftermassive toy recallupdated 1:44 p.m. EST, Thu November 15, 2007

� “Mattel Inc. apologized as thecompany was forced torecall millions of toys forthe second time in twoweeks. ”

� “The toys weremanufactured in China.”

� “It is the largest inrecent months involvingChinese products, whichhave come underscrutiny worldwide forcontaining potentiallydangerous high levels ofchemicals and toxins “

14


State of the Union:Jobs & Exports

Source: http://www.whitehouse.gov/the-press-office/remarks-president-state-union-address

“jobs must be our number-one focus in 2010”

“we need to exportmore of our goods We will double ourexports over the nextfive years, anincrease that willsupport two millionjobs in America. Tohelp meet this goal,we’re launching aNational ExportInitiative that will helpfarmers and smallbusinesses increasetheir export, andreform export controlsconsistent withnational security”

15


State of the Union:Jobs & Clean Energy

Source: http://www.whitehouse.gov/the-press-office/remarks-president-state-union-address

“we can put Americansto work today buildingthe infrastructure oftomorrow. There'sno reason Europe orChina should have thefastest trains, or thenew factories thatmanufacture cleanenergy products.”

“China is not waiting to revamp itseconomy. They're makingserious investments in cleanenergy because they want thosejobs.”

“We should put more Americans to work building cleanenergy facilities it is time to finally slash the tax breaksfor companies that ship our jobs overseas, and givethose tax breaks to companies that create jobs right herein the United States of America.”

16


Obama’s Trade Agenda:Jobs

“Our most urgent economic goal must be tocreate jobs. Job creation must be at thecenter of our trade agenda.”

Proposes 5 Steps:• Export promotion• Approve pending trade

agreements• Focus on key markets,

e.g., Trans-PacificPartnership (and expectcalls for “more marketaccess” in China)

• Enforce tradeagreements

• Basic labor rights andenvironmentalprotections (to avoid“unfair advantage”)

Source:http://finance.senate.gov/imo/media/doc/030310mb.pdf

“We must doeverything possible toopen markets andpromote our exports”

17


U.S. TradeBalance

Source: Commerce Department. Census Bureau's ForeignTrade Division | The Washington Post - May 14, 2010 18


Jobs & Trade: OnEveryone’s Mind

� “Who is going to double their imports? It’s not clear”– Ravid Menon (Permanent Secretary at Singapore’s Ministry of Trade and Industry) quoted in “Asia NowChanging Dynamics of Trade,” Washington Post (May 14, 2010)

� “Many of the jobs lost during the recession are not coming back.Period.”– Catherine Rampell, “In Job Market Shift, Some Workers Are Left Behind,” New York Times (May 12, 2010)

� “It's hard to exaggerate how bad the job market is. Here's onearresting fact: One of every five men 25 to 54 isn't working.”– David Wessel, “Meet the Unemployable Man,” Wall Street Journal (May 6, 2010)

19


Jobs & Trade: Still OnEveryone’s Mind

Sourcehttp://www.npr.org/blogs/thetwo-way/2011/05/06/136049915/unemployment-rate-bumps-up-to-9-percent-244-000-jobs-added

Year later

9 percentunemployment

Released 6 May 2011

20


Jobs & Trade: YouGuessed It …

Source: http://www.bls.gov/news.release/empsit.nr0.htm

Released 7 July 2011

“Unemploymentrate was littlechanged at 9.2percent”

21


Jobs & Trade: SlightImprovement

Source:http://www.bls.gov/news.release/empsit.nr0.htm

Unemployment rateremainedunchanged inFebruary

Released 9 March 2012

But …

It remainshistorically high at8.3 percent, withmore than 12.8million people out ofwork (and only 1.7percent below theOctober 2010 high)

22


Different Beds,Same Dream

Source: http://www.dailymail.co.uk/news/article-409317/Meet-Thumbelina-worlds-smallest-horse.html

�Global Economy

�Then

�Now

23


Outline

24

� Part I: The U.S. - China Relationship� Part II: The Rise of Environmental and Clean

Technologies� Part III: Chinese Imports and U.S. Options




Part II: The Rise of Environmental and Clean Technologies

Collaboration Example: Climate Change

� Obama “hopes tomake climate changethe centerpiece of abroader, morevigorous engagementwith China.”

� Clinton: “Theopportunities to worktogether areunmatched anywherein the world ”

Clinton Paints China Policy With a Green Hue

Source: NY Times, Feb 21, 2009 25


Climate Changecont’d

� “Secretary of State Hillary Rodham Clinton invitedChina to join the United States as she toured anenergy-efficient power plant in Beijing on Saturday.”

� “The gas-fired power plant, which uses sophisticatedturbines made by General Electric, is nearly twice asefficient as the coal-fired plants that supply much ofChina’s electricity and that helped vault China pastthe United States as the world’s leading emitter ofcarbon dioxide.”

Source: NY Times, Feb 21, 2009 26


Smart GridTech

Source: WSJ, October 13, 2009

� “Clovis, New Mexico, might just be the cornerstone of a clean-energy revolution.It might also be the epicenter of a political battle over how America embracesgreen energy.”

� “Clovis is the site chosen for the Tres Amigas electricity-transmission project The idea is to build a powerful substation in New Mexico using advancedsuperconductors [sic] that could physically connect the three otherwise isolatedpower grids—the Eastern, the Western, and Texas grids.”

27


Smart GridTech (cont’d)

Source: WSJ, May 13, 2009

Cold Cables(American Superconductor Inc.)

� House Majority Leader Steny Hoyer’sintroduced two bills (HR 2347 and HR2348) that authorize the federal governmentto cover half the cost of high-voltagetransmission projects, at least 300 miles inlength, that employ advanced cabletechnology.

� “[Cold Cables] move large amounts ofenergy in a small space and more efficientlybecause bundles of special, low-resistancewire run through pipes chilled with liquidnitrogen which brings the temperature downto minus 321 degrees Fahrenheit. In effect, itprovides a more slippery medium for movingelectricity than conventional copper oraluminum wire whose efficiency degrades asthey heat up.

28



Source: WSJ, May 13, 2009

Cold Cables(American Superconductor Inc.)

� “American Superconductor says it figures itssystems would cost $8 million per mile for asingle superconducting cable capable ofcarrying 5,000 megawatts of electricity and$13 million per mile for two pipes able tomove 10,000 megawatts.”

Update:� “[T]he liquefied gas used as coolant requires

pumps and refrigeration units every mile orso. That adds to the cost and maintenancechallenge.”

� “The most logical use for superconductingcable would be for short distances indense urban settings where space is at apremium, such as between substations.”

29



� “American Superconductor Corp. (AMSC), a maker of productsused in electric-power infrastructure to reduce costs andconserve resources It is also a play on wind energy, licensingits turbine technology to China for wind-power generation.”Chicago Tribune, “Green companies grow into hot investments,”Jan. 6, 2008

� International Locations:AMSC Windtec GmbH (Austria)AMSC KoreaAMSC IndiaAMSC BeijingAMSC Suzhou (Jiangsu Province)American Superconductor Europe GmbH (Germany)

30


Protectionism MeetsClean Energy?

� 21 Feb 2009 Secretary of State Clinton says Obama“hopes to make climate change the centerpiece of abroader, more vigorous engagement with China.”

� 12 May 2009 Hoyer Introduces Clean Energy Bills

� 13 Oct 2009 Tres Amigas Future of Clean Energy?

� 27 Jan 2010 President’s State of the Union

� 3 March 2010 Senate Hearings Regarding thePresident’s 2010 Trade Agenda

31


Protectionism MeetsClean Energy (cont’d)?

� Reportedly 80percent of $2 billionin stimulusrenewable energygrants awarded toforeign companies

� U.S.-Chinaconsortium to builda 648-megawattwind farm in Texasfor half a billiondollars

� Participation ofChina’s ShenyangPower Grouphighlighted onCapitol Hill

� Would limit ARRA Funds to U.S. companies only forspecific energy projects.

� The Bill died in Committee.

32


CNOOC (and Sinopec) –We’re baaack

� “Since 2010, Chinese companies have invested more than $17billion into oil and gas deals in the U.S. and Canada .”

� Recent investments have been positioned as a “nonthreateningway” to get back into America, according to the CEO ofChesapeake Energy Corp.

� How? “Seek minority stakes, play a passive role and, in a nod toU.S. regulators, keep Chinese personnel at arm's length fromadvanced U.S. technology.”

� Fu Chengyu has been leading the push, first as chairman ofCNOOC, then as chairman of Sinopec.

Source: China Foothold in U.S. Energy, Ryan Dezember, The Wall Street Journal, March 6, 2012.

33


BYD –Electric Cars

34


State of the Union:Jobs & Clean Energy

“I will not cede the wind or solar or battery industry to China orGermany because we refuse to make the same commitment here.”

35


U.S. Initiative to Fund Innovationin Energy Projects “ARPA-E”

� Founded in 2009, the Advanced Research Projects Agency –Energy is a DOE agency that funds the development anddeployment of “transformational and disruptive energytechnologies and systems”

� Focuses on “high-risk concepts with potentially high rewards.”� It’s statutory mission is to “enhance our nation’s economic and

energy security through reductions in imports of energy fromforeign sources .”

� By law, ARPA-E is required to spend at least 5 percent of itsappropriated funds on technology transfer and outreachactivities.

Clean energy has become a national security issue.

36Source: ARPA-E FOA No. DE-FOA-0000475,June 30, 2011.


Federal Interest in Environmental Technologies

The U.S. is Pushing Trade in Environmental Technologies,but with an eye towards:

� Harmonizing global environmental regulations;� Issues related to innovation in the environmental technology

sector (i.e., read ‘IP’); and� trade liberalization negotiations.

37

DEPARTMENT OF COMMERCEInternational Trade Administration

Environmental Technologies Trade Advisory Committee Public Meeting

SUMMARY: This notice sets forth the schedule and proposed agenda of a meeting ofthe Environmental Technologies Trade Advisory Committee (ETTAC).DATE: The meeting is scheduled for Thursday, April 27, 2012, at 9:00 a.m. EasternDaylight Time (EDT).

Source: 77 Fed. Reg. 14734 (March 13, 2012)


Select Examples of Environmental Technologies inthe International Marketplace

� U.S. Technologies to the World�Sludge to Oil Technologies (Brazil)� Floating Wetlands (Canada)

� World Technologies to the U.S.�Ocean Wave to Air Energy (Ireland & Scotland)

� Chinese Technologies to the World�Vacuum Tube Solar Technology (Beijing)

38


Global Attention Being Paidto Clean Tech Issues

� International Energy Agency:� Countries spent $17 billion on renewable energy and energy

efficiency research in the last 10 years (2009 highest levelfor public sector investment primarily through stimulusfunds).

� $56 billion on nuclear energy research and $22 billion onfossil fuel research during same period.

Source: IEA Clean Energy Progress Report 2011 (released ahead of Abu Dhabi meeting in April 2011)

� Selected Global Conferences �Singapore International Energy Week�Singapore International Water Week�Copenhagen International Clean Energy Fair

39


Outline

40






Part III: Chinese Imports and U.S. Options

1. Trade Remediesa. AD/CVDb. Safeguards (Section 421)

2. IP Specific Remediesa. U.S. District Courts & State Courtsb. Section 337 (U.S. International Trade Commission)

41


AD/CVDTimeline

Event Allotted Time Total Case

Filing of Petition n/a n/a

Commerce Determination to Initiate anInvestigation Based on the Petition

20 days 20

ITC Affirmative PreliminaryDetermination

25 days 45

Commerce Affirmative PreliminaryDetermination

115 days 160

Commerce Affirmative FinalDetermination

75 days 2353

3 May be extended by 60 additionaldays

ITC Affirmative Final Determination Approximately 45 days 280

Commerce Issues Antidumping DutyOrder

7 days 287

Total Time 10-14 months

42


Photovoltaic Cell AD/CVD CasesInv. Nos. 701-TA-481 & 731-TA-1190

� Antidumping Duty and Countervailing DutyInvestigations of cyrstalline silicon photovoltaic cellimports from the PRC was filed on October 19, 2011.

� “In 2010, imports of solar cells from China werevalued at $1.5 billion.”

� The U.S. International Trade Commission releasedits affirmative preliminary finding on December 16,2011 (reasonable indication an industry in the UnitedStates is materially injured by Chinese imports), andthe case is being considered now by the U.S.Department of Commerce.

43

Source:http://ia.ita.doc.gov/download/factsheets/factsheet_prc-solar-cells-ad-cvd-init.pdf


Section 421 –Timeline

Event

16515 Days From Presidential DecisionEffective Date of Relief 1

1 In the case of criticalcircumstances, provisional relief isprovided within 45 days, althoughthe date for any final determinationis delayed up to 30 days.

n/an/aFiling of Petition

6060 Days From Filing of PetitionITC Determination

8020 Days From ITC DeterminationITC Report to USTR

13555 Days From ITC Report to USTRUSTR Recommendation to the President

15015 Days From USTRRecommendation

Presidential Decision

Approx. 5 ½ MonthsTotal Time

Total CaseAllotted Time

44


� Unique�Global Safeguard Action (201)�Non-Market Economy Safeguard Action (406)�Country-Specific Safeguard Action for China (421)

� Transitional Measure: Part of China’s WTOAccession Package� China’s ‘non-market economy status’ established

under the WTO Accession Protocol is set to expirein December 2016.

Section 421 – The ChinaSpecific Safeguard

45


� Pedestal Actuators� ITC: affirmative� President: no relief

� Garment Hangers9� ITC: affirmative� President: no relief

� Brake Drums and Rotors 9� ITC: no market disruption

� DIWFs 9� ITC: affirmative� President: no relief

� Innersprings� ITC: no market disruption

� Steel Pipe� ITC: affirmative� President: no relief

Section 421 –7 Cases

� Tires� ITC: affirmative� President: relief

(September 2009)

Note: petition filed onApril 20, 2009 (exactly3 months after Obama’sinauguration)

9 = cases I served as counsel for Chinese respondents

46

President Bush

President Obama


� USITC defined “certainpassenger vehicle and lighttruck tires from China” as “newpneumatic tires, of rubber, fromChina, of a kind used on motorcars (except racing cars) andon-the-highway light trucks,vans, and sport utility vehicles,provided for in subheadings4011.10.10, 4011.10.50,4011.20.10, and 4011.20.50 ofthe Harmonized Tariff Scheduleof the United States (HTS)”

Section 421 –Tires Case

� Imposes import relief for 3 years

� X% ad valorem above column 1duty rate, as follows:� Year 1: 35 percent� Year 2: 30 percent� Year 3: 25 percent

� Effective September 2009,ends September 2012.

47



� "When China came in to the WTO, the U.S. negotiated the ability to imposeremedies in situations just like this one," said Kirk. "This Administration isdoing what is necessary to enforce trade agreements on behalf ofAmerican workers and manufacturers. Enforcing trade laws is key tomaintaining an open and free trading system."

– Ron Kirk, USTR (Press Release 11 Sept 2009)

� “For far too long, workers across this country have been victimized by badtrade policies and government inaction. Today, President Obama madeclear that he will enforce America’s trade laws and stand with Americanworkers”

– USW International President Leo W. Gerard (Press Release 11 Sept 2009)

48



April 8, 2010VIA FAXThe Honorable Barack ObamaPresident of the United StatesThe White House1600 Pennsylvania Ave., N.W.Washington, D.C. 20500

Dear Mr. President:

I am writing in follow-up to my letter of December 1, 2009, whichreported the initial success of your decision to provide relief to the domesticconsumer tire industry under Section 421 of the nation’s trade laws. While

“business is improving,production has

increased and utilizationrates are moving higherand anticipated to reachfull capacity during early2010. Most important isthat employment has not

only been maintained,but that workers havebeen recalled to work.These positive resultssimply would not be

possible without the 421relief.”

– USW International President Leo W. Gerard (8 April 2010)

Source: http://assets.usw.org/china-trade-tires/s-421-gerard-ltr-to-obama-tire-relief-update-04-08-10.pdf49


State of the Union/~May 1 New 421 Case?

“I will not stand by when our competitors don’t play by the rules. We’ve broughttrade cases against China at nearly twice the rate as the last administration –- andit’s made a difference. Over a thousand Americans are working today becausewe stopped a surge in Chinese tires. But we need to do more. It’s not right whenanother country lets our movies, music, and software be pirated. It’s not fair whenforeign manufacturers have a leg up on ours only because they’re heavilysubsidized.”

50

Source: http://www.whitehouse.gov/the-press-office/2012/01/24/remarks-president-state-union-address

ÆEnviron case coming ~May 1 (for mid-Oct decision, just before election)?


Commercializationof IP

51


Section 337 –Timeline

Event Allotted Time Total Case

Filing of Complaint n/a n/a

Determination by the ITC to Institute anInvestigation Based on the Complaint

Typically Within 30 days1 0 days

Responses Date 20 days 20 days

ALJ sets Target Date for Completion ofInvestigation (perhaps 15 months)

45 days 45 days

Initial Determination by ALJ of Violationof Section 337

9-12 months5

5 Assumes 12-15 month Target Date.275-365 days

ALJ Remedy Recommendation 14 days 289-379 days

Initial Determination of ViolationBecomes Final Automatically if ITCDoes Not Review

45 days7

7 Runs from Date of InitialDetermination.

320-410 days

ITC Review and DeterminationRegarding Remedy

Est. 45 days 365-455 days

Total Time 12-15 months

52


337 Cases –The ITC

� Independent, quasi-judicial federal agency with broad investigativeresponsibilities on matters of trade

� ITC remedy: excludes infringing products from U.S. market� Often better than money judgment from federal court� U.S. government enforces remedy for complainant

� Cases argued before knowledgeable adminstrative law judges – docketsexclusively intellectual property

� Rocket docket – cases are fast & forum of choice for big and small� Apple: mobile communications and computer devices

(337-TA-704)

� HP: inkjet ink supplies from China (337-TA-691)

� GlaxoSmithKline: Augmentin (antibiotic) (337-TA-479)

� Zippo: trademark protection for lighters (337-TA-575)

� Geoffrey Lee McCabe: fulcrum tremolos on stringedmusical instruments (337-TA-708)

53


337 Cases –Legal Issues

� Ebay, Inc. v. MercExchange, 547 U.S. 388 (2006)� More difficult to obtain injunction in district court post-Ebay?� Kennedy’s concurrence directed at “firm’s [who] use patents not as basis

for producing and selling goods but, instead, primarily for obtaininglicensing fees” – a nice way of saying a “patent troll”

� Kyocera Wireless Corp. v. Int’l Trade Comm’n, 545 F.3d 1340 (Fed.Cir. 2008)� Overturned longstanding ITC practice of downstream relief� More attention to limited and general exclusion orders

� Tianrui Group et al. v. Int’l Trade Comm’n, Slip Op. 661 F.3d 1322(Fed. Cir. 2011)� ITC may impose relief when trade secret violation occurs wholly outside

the United States but goods imported into the United States� Uniform federal common law applies

54


337 Investigations –Trends

As of December 1, 2008

0

5

10

15

20

25

30

35

40

45

50

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Year

NumberofCases

55


337 Investigations –Top Six Countries

As of December 1, 2008

0

2

4

6

8

10

12

14

16

18

1 2 3 4 5 6 7 8 9 10111213 1415161718192021222324 25262728293031323334 353637

Year

NumberofInvestigations Canada

ChinaGermanyHong KongJapanKoreaTaiwan

56


337 Investigations –China

0

2

4

6

8

10

12

14

16

18

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

NumbreofInvestigations

As of December 1, 2008 57


Increased IP Protection:China

� Korea Cases at ITC – 1977 to 2007� Trends Show Increasing Importance of IP in Korea� Suggests Increase in Industrialization Results in

Increase Value Accorded to IP� Increase in IP Value Encourages Additional R&D and

Resources Devoted to Innovation� 60 cases related to Korea� Sharp rise in last five years� Sharp rise in Foreign Complaints

(Soft) Data: A Lawyer’s View

58


ITC & Korea: CaseFilings

Case Filings Involving Korea

0

2

4

6

8

10

12

14

Year

NumberofCases

Cases CompletedCases Pending

Cases Completed 8 12 9 6 5 10

Cases Pending 0 0 0 0 0 10

77-81 82-86 87-91 92-96 97-01 02-07

59


ITC & Korea: Increase inForeign Complainants

Complainant Trends

0

2

4

6

8

10

12

14

77-81 82-86 87-91 92-96 97-01 02-07

Years

NumberofCases

U.S. ComplainantsForeign ComplainantsU.S. and Foreign Complainant

60


China Prediction:Move to Hi-Tech

� 337 Cases – Many Low Tech, such as:

� Ground Fault Circuit Interrupters

� Nitrile Rubber Gloves

� Sucralose Sweeteners

� DVD Players & Recorders

� Exceptions: TSMC v. SMIC but Zippo Lighter TM

� Move to Higher Tech Products and IP Protection

61


Will China FollowKorea to the ITC?

� Innovation

� Long-term strategy

� Litigation Lessons

� Value IP

� Direct Reports

� New Technology

62


A full court press .…

63Source: The Wall Street Journal, March 10, 2012

• Case marks the first time U.S.officials have filed criminalespionage charges against astate-owned foreign company.

• Alleges that Chinese governmentand company officials asked U.S.citizens to compile DuPontproprietary information used forthe manufacturing of titaniumdioxide.

• Involved long-term andwidespread efforts to collect thisolder information- “hardly cuttingedge.”


Outline

64






“The AmericanExperience?”

�“Hot Property: The Stealing of Ideas In AnAge of Globalization” by Pat Choate

� Nation Building – U.S. as “the world’s premierlegal sanctuary for industrial pirates” (page30)

65


Do You Know WhatYou Have?

66


Do You Know WhatYou Have?

67


Stealing of Ideas – the new premierlegal sanctuary for industrial pirates?� Kenneth G. Lieberthal’s routine seems straight from a spy film. ‘He leaves his

cellphone and laptop at home and instead brings “loaner” devices, which heerases before he leaves the United States and wipes clean the minute hereturns. In China, he disables Bluetooth and Wi-Fi, never lets his phone out ofhis sight and, in meetings, not only turns off his phone but also removes thebattery, for fear his microphone could be turned on remotely. He connects to theInternet only through an encrypted, password-protected channel, and copiesand pastes his password from a USB thumb drive. He never types in apassword directly, because, he said, “the Chinese are very good at installingkey-logging software on your laptop.”’

� He’s not alone: “If a company has significant intellectual property that theChinese and Russians are interested in, and you go over there with mobiledevices, your devices will get penetrated,” Joel F. Brenner, formerly the topcounterintelligence official in the office of the director of national intelligence.

Source: Traveling Light in a Time of Digital Thievery, Nicole Perlroth, The New York Times,February 10, 2012.

68


China & IP –Is It Time to Believe?

� Tian Lipu, Commissioner of China’s IP office declared in aDecember 2010 Wall Street Journal opinion article that Chinawas serious about protecting IP rights.

� However, Commerce Secretary Gary Locke the next monthpublicly lamented China’s “lax intellectual property protectionand enforcement.”

� Commissioner Lipu’s declaration was nothing new- in 2006 hetold China’s state-run website that more IP protection helpsChinese companies and promotes innovation.

� But within a few short years lax enforcement escalated to atrade dispute with both sides claiming victory in January 2009.

Source: http://wlflegalpulse.com/2011/01/18/intellectual-property-rights-protection-in-china-is-it-time-to-believe/

69


Intellectual PropertyRights

70


Issues heat up with the coming Presidentialelection .

71

• March 12, 2012: U.S.Government, with Japanand E.U., file “request forconsultations” with Chinaat WTO.

• Concerns restrictions onrare earth metals; otherissues likely to receiveattention in coming monthsare auto parts, cars.

• March 13, 2012: Presidentsigns law retroactivelyrevising trade laws to allowfiling of anti-subsidy cases

Source: The New York Times, March 12, 2012


Example of IP win,but

� In March 2011, The Wall Street Journal reported that softwaremakers Microsoft, Adobe, and Autodesk settled copyrightinfringement suits against a midsize Chinese steel structureengineering company.

� Good on its face- but the settlement was reportedly just shy of$US200,000 and split three ways.

� Although supposedly this does not include “undisclosed financialdamages,” the use of pirated software is widely reported to berampant.

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Should We EstablishOperations In China?

� Many companies decide establish commercial presence inChina despite IPR-theft for various company-specific reasons:� the of the size of the relevant market or� the cost advantages associated with opening a factory in that

location, e.g., cheaper employment, less environmental restrictions,cost of raw materials, etc.

� For them, the issue is not whether to manufacture but ratherhow to do so in a manner that adequately protects their IPR.� For others, the balancing weighs against China (Patton Electronics)� For discrete industries, (e.g., mining) econometric modeling show

no positive association between IPR protection and enforcement.This makes sense – whether to open a copper mine should not bebased on whether a country has strong IPR rules or enforcementbut on global copper demand and location of copper deposits.

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Stimulating Innovation(the Singapore Model)

� Tax Incentives

� Grants

� Research Centers

� Clustering

� Strong IPOS

� Ready Financing

� Rule of Law

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Be Sure To Register AndProtect Your IP

� Even if you do not go to China or plan to inthe near future, register and protect yourrights now� Squatters will register in first to file system� Could be costly for you later

� Registering in the United States also helpswith statutory remedies for infringement –such as in the copyright context.

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If You Do Go, Consider SegmentingYour Production Process

� If you decide to manufacture in China, you may wish tocompartmentalize the production process, i.e., produce onlyelements of the product in the weak IPR-environment that do notcontain the trade secrets at issue.

� This is known commonly also as “segmenting production.”� In effect, best practices require segmenting the manufacturing

process:� Make the “low-level” parts of production in the weak-IPR

environment and finish production using trade secret technology ina country with stronger IPR controls (to safeguard the companies’IPR crown-jewels).

� Another option is to produce one component in a factory inShenzhen, another in a different location outside of Shanghai, andassemble both in a third factory unrelated to the other two.

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Keep Apprised of DevelopingTrends Used Against You

� There is a growing trend in China to download patentapplications filed in the U.S. and elsewhere, copy them, andthen file for a Chinese patent based on the blatantly copiedprior art.

� U.S. firms sometimes need fight to invalidate a patent grantedto a Chinese entity that copies their own patent application.

� Patents are meant to encourage innovation. The quid pro quois a limited monopoly in exchange for sharing the newinvention with the world. Abusing that process needs to beaddressed, and companies need to be aware that this practiceis happening, particularly if future fights are going to be inChina as U.S. companies try to export in the coming years.

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Key Considerations WhenEngaging China

� “Make the decision. Give serious thought about whether tomake the leap eastward.

� Cultural dynamics matter. If you do decide to go, spend timelearning the unique characteristics of doing business in China,such as understanding that whom you know is critical.

� Proceed with caution. Build relationships with potential partners,conduct due diligence, and identify those who know China andcan help you achieve your goals.

� Protect yourself. Of course protect your IP, but understand thatmanaging a relationship based strictly on legal documents maybe a mistake. While getting it in writing helps, personalrelationships matter.”

Source: Engaging China, ASAE, December 2004.

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Think about what can go wrong - consider your exitstrategy before going into China� Remember that arbitration is not possible for all

disputes.� Because parties must agree to arbitrate disputes,

enforcing IP rights against counterfeiters andtrademark violators (i.e., those with whom there is nocontract) often requires using the local courts orresorting to administrative remedies.

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Dealing with counterfeiters:� The Technical Supervision Bureau (TSB) has the authority and ability to examine

documents and conduct investigations. It may also conduct raids quickly. Reportedly, theShanghai TSB office can make a raid decision could be made in "several days" (as opposedto the three to six months it takes to navigate the system to a formal decision).

Dealing with trademark violations:� The State Administration of Industry and Commerce (AIC) has much of the same power in

the trademark context that the TSB has against counterfeits, reportedly to seize products.

Be creative:� “Call the fire department. Look at child labor, safety, health, and fire code laws. Such

“departments may not have the power to seize counterfeit products, [but there may be ]some advantage in having them conduct a surprise inspection, which would disruptproduction at the factory and may result in penalties for non-IP issues. [I]f counterfeits arefound during the surprise visit, the trademark owner will be in a better position to lodge acomplaint with the [relevant] administrative bodies."

Source: American Bar Association, Section of Intellectual Property Law Newsletter, Spring 2007, pp. 10-12.

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Conclusions

� 1. Read the tea leaves - larger political dynamics do affect theU.S.-China relationship and will impact your business. Takeadvantage of them.

� 2. Protect Your IP and R&D – institute travel abroad policies,compartmentalize production, be proactive in patentenforcement, register trademarks and copyrights (with globalwatch services), execute NDAs, vet licensing requests, etc.

� 3. Understand that in China, negotiation is key and politics areimportant (particularly if you can call on a powerful tradeassociation, embassy official, or local government contact to actas a pressure point for what is right).

� 4. Legal proceedings (including arbitration) help yournegotiation, sometimes, but often are not a total fix. Beprepared to compromise and actively seek to avoid disputes.

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Alexander W. Koff +410 347 8745Chair, Global Practice +410 223 3730 faxWhiteford, Taylor & Preston, LLP +202 262 1197 mobile7 St. Paul Street, Suite 1500 [email protected], MD 21202-1636 www.wtplaw.com

Dana O. Lynch +410 347 8703Partner, Intellectual Property Law +410 223 3483 faxWhiteford, Taylor & Preston, LLP [email protected] St. Paul Street, Suite 1500 www.wtplaw.comBaltimore, MD 21202-1636

M. Trent Zivkovich +410 347 8778Counsel, Environmental Law +410 223 3730 faxWhiteford, Taylor & Preston, LLP +443 668 6598 mobile7 St. Paul Street, Suite 1500 [email protected], MD 21202-1636 www.wtplaw.com

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