Intellectual Property Rights in China. Zhenqing Zhang

      Introduction

       A Tale of Two Intellectual Property Rights Enforcement Cases

      Intellectual property rights (IPR) are highly controversial in China’s rapidly expanding foreign economic relations. As such, I encountered enormous difficulty when requesting interviews from IPR professionals in China. Nevertheless, I also encountered some pleasant surprises. In early March 2008, my interview request received a warm response from Mr. Wu, a legal adviser with the IPR office of the branch office of The China No. 1 Pencil Company in Bilin City in East China’s N Province.¹ When I entered Mr. Wu’s office, I was immediately attracted to a plaque bearing the title of “Model Unit of IPR Work” (Zhishichanquan Gongzuo Xianjin Danwei) hanging on the wall. Mr. Wu proudly told me, “We won this plaque with our hard work.” He further added, “Maybe some good luck, too.”²

      As one of the leading pencil producers in the country, Mr. Wu’s company has survived and thrived on the enormous market need for double black pencils used for China’s standardized tests. Standardized tests are important components of China’s talent selection system. Indeed, the tradition can be dated back centuries. It has been estimated that the annual sale of pencils in China can reach as many as 100 million a year. The huge business opportunity has been very tempting for legal pencil producers and counterfeiters.³

      In May 2005, The China No. 1 Pencil Company identified a large amount of counterfeit double black pencils on the market in Bilin City. This discovery came only forty days before June 7, the day on which the Chinese National College Entrance Exam would take place. This was a very important day for millions of Chinese high school students and their families. If the knockoff counterfeit pencils were used in the exam, there was a very good chance that the scanner would not be able to read the answer sheet because the pencil lead would not be black enough, and thereby, the exam results of millions of high school students would be compromised. Mr. Wu and his colleagues reported this to the Economic Case Investigation Team of the Bilin Public Security Bureau immediately. He told the police, “It is not only our company’s business interests that are at stake. That was absolutely unacceptable for the families of those affected high school students, either.” The police had no reason to delay in taking action on this case. After a thorough investigation, the police identified an important suspect for the counterfeit activities: Shi Jiatao, a former employee of one of the branch factories of The China No. 1 Pencil Company.⁴

      With enough evidence to make a case, the police arrested Shi and his accomplices. According to the interrogation record, after resigning from his previous job, Shi, his wife, and their three friends discovered that producing and selling counterfeit pencils could be a highly lucrative business. Starting in February 2004, Shi purchased semi-finished pencils from East China’s Shandong Province and produced a fake trademark. In only one year, Shi and his “team” had produced as many as nine million counterfeit pencils. With a factory based in N Province, the marketing network reached Shangdong, Zhejiang, Jiangxi, and Hebei. Altogether, the Bilin City police destroyed ten underground factories, confiscated three million counterfeit pencils, and arrested ten suspects during the investigation. In October 2005, the case was transferred to the Bilin City People’s Court for criminal litigation. In June 2006, Shi Jiatao and his accomplices were sentenced to imprisonment ranging from three to five years.

      The IPR enforcement case was one of the most important achievements in the history of the Economic Case Investigation team in Bilin City. The case was rated as one of the “top ten representative IPR enforcement cases” of the year, and the head of the team won a national-level prize. The case also left the Bilin police with a very positive reputation among the public, particularly the high school students and their families. Of course, Mr. Wu and his team won praise from the headquarters of The China No. 1 Pencil Company for their swift action to protect the company’s business interests.

      Although it has been several years since the successful enforcement, Mr. Wu is still very proud of the case. Toward the end of the interview, he told me, “This case was so successful because it was enforced under the right circumstances. It happened at the initiation of the right complainant, against the right counterfeiter, and, most importantly, at the right time. What do I mean by saying ‘the right counterfeiter’? Think about it. If those stupid counterfeiters had infringed on a trivial company rather than ours, would our complaint have been so compelling? Moreover, if the case was not enforced before the National College Entrance Exam, would our company have won so much sympathy from the public?”⁵

      I did not ask Mr. Wu if he had reported any unsuccessful cases, although I was pretty sure that he did not have good outcomes every time. Another real-world example I encountered earlier indicated that the successful IPR enforcement case that Mr. Wu took pride in was an exception, rather than the norm, in China.

      The