Greater China

Jan 15, 2005 US lashes out at Chinese piracy

SEOUL - US Commerce Secretary Donald Evans touched a few raw nerves in China on Thursday when he accused Chinese auto maker Chery of using stolen design information from GM Daewoo Auto & Technology Co, South Korea's third-largest auto maker.

While avoiding direct accusation of theft by Chery, Evans said the auto maker is using pirated proprietary information to produce its QQ minicar, the Asian Wall Street Journal reported. The comment came amid a dispute between Chery and GM Daewoo - controlled by US auto giant General Motors - over intellectual-property-rights violations. Last month GM Daewoo filed a lawsuit against Chery in China, accusing the Chinese auto maker of illegally copying one of its car models. GM Daewoo alleges "extreme similarities" between Chery QQ and Chevrolet Spark, which is based on its Daewoo Matiz minicar. The South Korean auto maker claims that Chery produced the QQ through copying and unauthorized use of GM Daewoo's trade secrets. Chery denies the allegations.

Evans said mathematical formulas and other design information to build the Chery QQ "were simply stolen from GM Daewoo ... This is an incident that defies any kind of innocent explanation." He said studies by several professional organizations have found that the two models had identical body structures and exterior and interior designs and that many parts were interchangeable, the report said.

The United States has stepped up efforts to curb piracy in China, which has come under frequent criticism by its trading partners for its loose protection of intellectual property rights. The US incurs losses of nearly US$24 billion annually from piracy in China, US assistant commerce secretary William Lash said during his visit to Seoul last month. According to the latest figures available, the number of cases filed with the Korean Intellectual Property Office for violation of intellectual property rights in China nearly doubled to 33 in 2002 from 18 in the previous year. The number could be much higher, considering that many firms fail to report cases of intellectual-property-rights violations, the Korea Trade-Investment Promotion Agency said.

Evans, who served as commerce chief during President George W Bush's first term and steps down this month, told Chinese officials and American business people in Beijing that China is not doing enough to stamp out the unlicensed reproduction of trademarks, software, industrial designs, drugs and other patented products. The issue is "straining our trading relationship", Evans said. "It's time for China's leaders to forcefully confront the problem posed by intellectual-property-rights theft."

Evans urged more action from Chinese authorities. Wrapping up his fourth and final visit to Beijing as commerce secretary on Thursday, he said: "The most important thing for China is to stay focused on enforcement. The recent reinterpretation of China's criminal law, lowering thresholds for jail time, is a very constructive step. But the key is results. Let's start putting people in jail."

According to US government calculations, its companies lose more than $25 billion a year from copyright offenses. The US Trade Office claims that trademark and patent theft contributes to the surging trade deficit with China that totaled nearly $150 billion last year. Estimates vary widely as to how much of China's industrial production involves unlawful copies of patents, trademarks and copyright. China's Development Research Center, a government policy research institute, estimated in 2003 that the value of pirated goods made in China was $19 billion to $24 billion a year.

Evans' chiding on piracy along with his sermon on the need to revalue the yuan and remove Chinese trade barriers met with a nuanced snub from the Chinese side. Chinese Commerce Minister Bo Xilai, in front of television cameras, jocularly said Evans' tenure was 70% successful. "Judging from the view of friends and judging from the achievements of your work, I should say that 70% of what you have done has been pretty good," Bo said. A visibly uncomfortable Evans responded with surprise, "Oh, hey, that's almost flunking." Bo then made clear his disappointment that the US had refused to recognize China formally as a market economy.

But that Evans' sermon did not fall on deaf ears was evident as three men were sentenced to prison for contracting companies to make fake copies of Microsoft software, as part of a crackdown on piracy. Xinhua reported that the three had been sentenced to between six months and one year in prison for "illegal business operations". The three had commissioned two companies to make 59,000 illegal copies of a Microsoft program that restores operating systems, the report said. The companies - Beijing Zhongxinlian Co and Tianjin Minzu Disc Co - were fined 90,000 yuan ($11,000) and their profits from the project - 11,000 yuan - were confiscated.

Last week Chinese officials shut down Beijing's famed Silk Market that specialized in selling phony Western brand-name goods, as proof that they are seriously cracking down on piracy. But as Evans' trip showed, the US isn't convinced. In April, Chinese Vice Premier Wu Yi promised aggressive new anti-piracy steps. Last month, China's top court followed it up by making it easier for prosecutors to file criminal cases against suspected pirates and jail those convicted for up to seven years. US officials welcomed the step but maintained this wasn't enough. The consensus in US trade circles is that laws are fine, but what China lacks is enforcement.

Some 95% of the digital video discs (DVDs) sold in China are illegal copies, says the International Intellectual Property Alliance in Washington. Latest Hollywood releases can be had on any Chinese street for as low as 96 cents. And the sellers generally don't even try to do hide their trade, openly flaunting their wares in well-stocked storefronts.

(Asia Pulse/Yonhap)

-- (Sau Bi Da @ Sai Gon.Net), January 17, 2005