2013

Babes Bolyai University

Faculty of European Studies

[Intellectual Property Rights]

EU-China economic cooperation

Student: Kinga Gyorfi Student no.: 202RE Specialty: RISE 3 ENG Subject: Europe and China (seminar)

1. Introduction

China's economic development is an unparalleled success story in the economic history. China is the third largest economic power in the world after the European Union and the United States, running large surpluses in the field of trade. In a very short time, China has emerged as a power center in the global economy.1 The European Union is facing a challenge from China's emergence on the world trade scene. It is clear that the EU-China relations exist at many different levels and that they evolve in a changing global context. This paper aims to analyze the emerging model of relations between the EU and China. China's accession to the WTO in December 2001 was probably one of the most important international economic developments.2 The evolution of economic relations between the EU and China is remarkable not only because it has established one of the largest economic partnerships in a few years, but also because economic prosperity is possible due to the liberalization of trade and to the economic development. As China has used its WTO membership as a vehicle for economic reform; the EU has emerged as the most opened and largest world economy, through its domestic market and the EU enlargement. The relations between the EU and China have become increasingly regularized, institutionalized and mutually beneficial, including a series of extensions in the political, economic, military, scientific, technological, educational and cultural domain. There are striking similarities between the economic, social and welfare aspects of China and the European Union. From some perspectives, there are also similarities in the diversity of economic and social conditions that characterize the two economies, although it should be mentioned certain considerations due to the different political, domestic and international context. Such similarities emphasize the potential purpose for collaboration and mutual commitment. The main issues that are deteriorating the bilateral cooperation are: the bilateral trade deficit visa-vis China; the undervaluation of the Chinese currency; the protection of the intellectual property rights and the presence of the non-tariff barriers in the way of commerce.
1

Kenneth Pomeranz, Marea divergenta. China, Europa si nasterea economiei mondiale modern, Bucuresti: Polirom, 2012 2 Virginia Cmpeanu, Sarmiza Pencea, CHINA - Un elefant care nu mai poate fi ignorant, Bucuresti: Ed. Universala, 2012

As strategic partners, the EU and China seeks to face actively the global challenges and to strive for a peaceful, sustainable and prosperous world; an objective that cannot be achieved without the joint efforts and the close cooperation between the two economic actors that are so valuable in the international arena.

2. Intellectual Property Rights Project

The Intellectual Property Rights 2 (IPR2) is an initiative of cooperation between the two economic partners, jointly funded under a grant agreement between the European Commission and the Ministry of Commerce of China, worth for a total of 16.425 million euros. The EU contribution is 10.85 million and the Republic of China has provided 4.425 million.3 IPR2 was launched to replace IPR1, the latter being carried out from 1999 to 2004, in order to promote international standards for the protection of the intellectual property rights in the Chinese law. IPR2 is the successor of this cooperation project. It aims to consolidate the enforcement of intellectual property rights by the effective and accessible orientation of the system of intellectual property protection in China. On the Union side, IPR2 is implemented by the European Patent Office (EPO) and the Office for Harmonization in the Internal Market (OHIM) with regard to trademark and design. On the Chinese side, the project is implemented by the Department of Treaty and Law of the Ministry of Commerce of China.4 A Project Steering Committee oversees the implementation of the project and approves the annual and the overall work plans of the activities. It is composed by the representatives of the Ministry of Commerce, of the European Commission, Chinese beneficiaries, technical support team and other stakeholders. The implementation time of the project is 4 years, between 29th September 2007 and 30th September 2011. It included an initiation phase for the first six months and a final stage in the last six months. The team behind IPR2 is located in Beijing, with an European support unit in Munich. In general, the project activities are implemented in 70% -80% in China, and the remaining 20% within the EU. In the first two years of the implementation, the project activities took place not
3 4

The EU-China IPR2 Project, [www.ipr2.org], retrieved at 26 May 2013 th The EU-China Project Ends, [http://www.epo.org/news-issues/news/2011/20110913.html], retrieved at 26 May 2013

th

only in Beijing and Shanghai, but also in other smaller cities like Changzhou, Chengdu, Guangzhou, Hangzhou, Jiangyin, Nanjing, Shenzhen, Urumqi, Xian and Yinchuan. In addition, the organized activities of IPR2 were deployed in several European cities. Being present in the provinces mentioned above, IPR2 highlights one of the key objectives of the project, namely to facilitate the construction of a sustainable network between the Chinese and EU stakeholders, emerging beyond the central level within the provinces and municipalities. The aim is to provide technical assistance within the Chinese legal system, in order to improve the protection of intellectual property rights in China. Technical assistance involves an exchange of technical expertise, know-how and experience. IPR2 provide technical assistance as a means to support the commitment made by China. This commitment abides the development of a sustainable environment for the effective protection of the intellectual property rights. In addition, the technical assistance and the exchange of international experience improves the multilateral trading system, that leads to the legal, political and institutional progress of reforms, that are associated with an effective system of intellectual property. Trade-related technical assistance is a major theme of the Doha Declaration (2001)5, which underlined the commitment of developed countries to prioritize the initiation of a new round of trade liberalization and help all countries to participate effectively in the new round of negotiations. The World Summit on Sustainable Development in Johannesburg emphasized also the need of policies for mutual trade support, for development and environment. Although the protection of intellectual property rights is a serious problem in many countries, not only in the Peoples Republic of China, however, both the European Union as well as the Chinese partner contemplated it as a key issue on the agenda of trade.6 They participated in an active dialogue with regard to intellectual property, addressing the main issues of national and global interest. In practical terms, IPR2 through a continuous exchange of experience facilitated an open transfer of information and experience that refined the intellectual property law.

Peter K. Yu, Intellectual Property and Information Wealth: Issues and practices in the Digital Age, Vol. 4, Praeger perspectives, 2007 6 Andrew C. Mertha, The Politics of Piracy: Intellectual Property in Contemporary China , Cornell University Press; 1 edition, 2007

The dialogue has allowed both parties to exchange information concerning bilateral and multilateral issues of intellectual property, its legislation and practices, and to identify deficiencies and suggestions for improvement. Within IPR2 meetings, both sides debated and analyzed a number of issues relating to intellectual property rights, including: brands, inclusively the new legislation draft on Trademark; design protection and the protection of intellectual property rights in trade fairs; copyright, including the dissemination of copyrighted works, the manufacture of pirated optical discs and the examination of the content of online music; geographical indications7; patents; patents in terms of low carbon technology and the licensing agreements in the ICT sector; innovation and standardization, including the data protection of pharmaceuticals and agrochemicals products; IT security certificates, and intellectual property rights concerning indigenous innovation products. 8 The EU has introduced its list of priorities, namely the issue of licensing in the field of ITC, the abolition of criminal thresholds, the emergence of supplementary protection certificates for pharmaceutical products, the adoption of guidelines and actions against internet piracy. These problems have been a major source of concern, and therefore, the EU underlined the need to find urgent solutions. For the protection of intellectual property its essential the technical assistance in order to maintain and develop the competitiveness and to support a sustainable economic growth. The European Union recognizes within the Lisbon Agenda the challenges of a new economy based on knowledge and establishing an ambitious goal of becoming the most competitive and dynamic knowledge-based economy in the world.9 Therefore, the protection of intellectual property has become a fundamental problem for the Community. The aim to be a leader in key technology areas and to ensure that innovation is rewarded properly is increasingly prominent. China, in turn, is facing a very rapid development, with many problems regarding intellectual property protection, and its strong links in a highly inter-connected economy,

Geographical Indication (GI), together with trademark, it is an industrial property right, governed by the law 84/1998 of trademarks and geographical indications. Unlike the trademark, its registration with OSIM it is not conferring an exclusive right. But similar to the trademark, the term of protection of geographical indications is unlimited; the right to use the geographical indication is given to the applicant for a period of 10 years, and its subject to renewal for an unlimited period, if the conditions under which this right was acquired are kept 8 th EU-China IPR2 Project [http://ipr2.org/document-centre/index.php], retrieved at 27 May 2013 9 Kenneth Pomeranz, op. cit.

especially on a global scale. The 2008 Outline of the National Intellectual Property Strategy determined the importance of its protection.10 China confirmed that intellectual property is increasingly becoming a strategic resource for national development and an essential element in international competitiveness, an important supporting force in building an innovative country and the pathway towards development. Related to trade, the Chinese side presented its latest developments regarding the review of the respective law and expressed its appreciation for the comments made by the EU at SAIC. Both partners discussed the revised draft Trademark Law of China, the EU expressing their concern for some aspects regarding the revision. The Chinese side explained the planned measures to resolve the contentious issues; particularly by the computerized processing of trademark applications. It was also discussed the cleaning of the retail and wholesale markets, that are suspected for selling pirated and counterfeit goods in China, including the commissioning of the memorandum of understanding11 between the owners of retail markets in Beijing and the rightful owners. The European Union urged China to engage in solving the problems that were encountered in the implementation of the MoU12. In order to cope with the false applications to obtain a trademark, both economic actors agreed to address this issue farther by joint activities within the framework of IPR2 and / or under the umbrella of MoU, estabilished by SAIC and the Office for Harmonisation in the Internal Market (OHIM).13 The Chinese side also expressed the desire to know in which specific fairs or more precisely in which profiles of trade fairs would European companies encounter problems. They sustained a better promotion of the fair complaints offices and the pursuit of a specific project in accordance with IPR2, with regard to the modalities of enhancement of the public awareness towards the existence of claims offices in these fairs. The EU also advised China to step up its efforts against copyright infringement on the Internet, and has expressed its concern about the banning of the foreign ownership of digital music services and of censorship requirements.

10

Katherine Linton, China: Intellectual Property Infringement, Indigenous Innovation Policies and Frameworks for Measuring the Effects on the U.S. Economy, Diane Publishing, 2010 11 Memorandum of Understanding 1992 th [http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005362.asp], retrieved at 27 May 2013 12 Memorandum of Understanding 13 Chengwei Liu, Chinese Company And Securities Law, Ed. Wolters Kluwer, 2008

Both sides have exchanged information about the establishments that produce pirated optical discs. China has already taken action and requested specific information on locations suspected of producing illegal discs. IPR2 also included topics such as radio broadcasting and public performance rights for producers of audio visual and sound recordings. The adoption of the fees for broadcasting rights of authors in the EU was performed at the end of 2007. EU introduced the Recommendation no. 2005/737/EC14 on collective cross-border management of copyright and related rights for legitimate online music services. In addition, China has mentioned the issue related to the availability of pirated copies of movies and music that were produced in China, in retail outlets within Europe. EU delegates raised the possibility of introducing radio broadcasting and public performance rights for producers of sound recordings and performers, meanwhile the Chinese Delegates agreed to cooperate in combating illegal manufacture of optical discs. The two sides exchanged views on the ongoing negotiations on geographical indications. China has confirmed it is working on a complex system of GI protection. Within the IPR2 it was proposed a GI platform that is enabling European and Chinese government bodies and manufacturers to obtain information on issues of geographical indications in China and the EU.

With regard to patents, it was debated a third revision of the Chinese Patent Law. EU noted some positive changes, but expressed concern about a number of provisions, such as those related to: The obligation to obtain approval from the Chinese Patent Office before submitting an application in a foreign country; Inventions that are created within a scientific research project are mainly funded by public investments; Regulation on compulsory licensing; Limits on the rights of the patent owner; Lack of supplementary protection certificates for pharmaceutical products.

14

EU Law [http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32005H0737:EN:NOT], retrieved at 28 May 2013

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Within the IPR2 meetings, it was noted the important contribution of intellectual property for the promotion of low-carbon technologies. The Chinese side has highlighted the ongoing consultation on the revised draft regulations concerning intellectual property rights abuse in the context of the Anti-Monopoly Law. The Chinese side reiterated that the government does not intervene or engage in negotiations among enterprises with regards to IPR licensing agreements. The Chinese government encourages Chinese enterprises to participate in discussions and practices of the international patent licensing models and to address relevant issues through negotiations in accordance with the law and the market situation. European companies are the main holders of essential patents for numerous specific technologies, but just a few license agreements were signed with Chinese companies. EU strongly recommended to China to take a commitment to encourage Chinese companies to go public in negotiating license agreements with European companies. China in turn, argued that companies should try to solve these problems alone, on their own initiative by expressing their reticence towards this recommendation. The EU also expressed their serious concern about the disclosure of confidential information (trade secrets) and abuses in the context of patent certification and of the authorization process. The European Community has encouraged China to issue a regulation specifying the documents required for licensing / certification and to establish some clear rules of procedure. China called on the EU to provide more detailed information on the concerned industrial sectors and on the specific institutions, in order to identify and address the concerns expressed by the EU. In protecting innovation, consideration was given to the problem of protection against the misuse of undisclosed data submitted to public authorities in order to obtain marketing authorization, including the issue of distrust in the concerned authority, by suggesting changes in the Chinese law, in order to meet the needs of data exclusivity. China said that adequate arrangements have been made to protect the confidentiality of IT security. In conclusion, it was required that the Chinese authorities intensify the efforts to improve IPR enforcement in wholesale and retail markets, especially in the silk market, and the continued support of courts and administrative bodies towards the co-operative approach of the rightful

owners. It was also established a further cooperation on the issue of counterfeit goods that are sold on the Internet, by involving all relevant agencies. The Chinese side expressed their interest in receiving further information on EU expertise and good practices in this matter. It was considered the Action Plan regarding EU-China customs cooperation from 2009 as a positive implementation, aiming IPR and further development of the action plans, such as customs network ports and airports within the EU and China.15 To sum up, meetings were held within IPR2 both in China and Europe. Were formed individualized and practical workshops on specific practical issues, being debated and proposed optimal solutions. These seminars were essential, as were resolved major malfunctions pursuing IPR protection. IPR2 has organized information sessions for businesses, offering real-time support for Chinese and European economic undertakings.

3. Conclusion
The relation between the EU and China intensifies, expands and deepens the impact of the existing complex economic interdependence and the very acute level of globalization in recent years. This paper has treated a set of problems from a restricted area, namely the issues related to IPR, within trade policy; that are keeping China aside from its further development. The economic transformation of China into a socialist market economy and the consistent economic growth were the premises of the currently existing strategic partnership with the EU. China and the EU have become inextricably linked. While the EU has trade deficits with China in respect of goods, particularly in the machinery and textiles sector; the Community is running significant surpluses in the domain of trade services and remains an essential investor in China, registering a large number of foreign direct investment from China. A future scenario of economic relations could be based on the concept of a "true partnership" in which the two sides would evolve beyond their current relationship in order to develop the substantial cooperation to a level where they could address the problems that this relationship is
15

EC, Taxation and Customs Union [http://ec.europa.eu/taxation_customs/customs/policy_issues/international_customs_agreements/china/index_e th n.htm], retrieved at 28 May 2013

currently facing. Regarding the different EU-China bilateral economic issues, a significant longterm progress would involve compromises. Both partners need a global agreement to establish the common principles and objectives in accordance with mutual benefits, in order to materialize the long term strategies through a variety of programs and projects at national and sectorial level.

4. Bibliography

1. Linton, K. (2010) China: Intellectual Property Infringement, Indigenous Innovation Policies

and Frameworks for Measuring the Effects on the U.S. Economy, Diane Publishing 2. Chengwei, Liu (2008) Chinese Company And Securities Law, Ed. Wolters Kluwer 3. Mertha, A. C. (2007) The Politics of Piracy: Intellectual Property in Contemporary China, Cornell University Press; 1 edition 4. Yu, K. Peter, (2007) Intellectual Property and Information Wealth: Issues and practices in the Digital Age, Vol. 4, Praeger perspectives 5. Cmpeanu, V.; Pencea, S. (2012) CHINA - Un elefant care nu mai poate fi ignorant, Bucuresti: Ed. Universala 6. Pomeranz, K. (2012) Marea divergenta. China, Europa si nasterea economiei mondiale modern, Bucuresti: Polirom 7. Vogt, R. (2012) Europe and China: Strategic Partners Or Rivals?, Hong Kong university press

Electronic Sources:
8. EC, Taxation and Customs Union [http://ec.europa.eu/taxation_customs/customs/policy_issues/international_customs_agreements/ china/index_en.htm], retrieved at 28th May 2013 9. EU Law [http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32005H0737:EN:NOT], retrieved at 28th May 2013 10. Memorandum of Understanding 1992 [http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005362.asp], retrieved at 27th May 2013 11. EU-China IPR2 Project [http://ipr2.org/document-centre/index.php], retrieved at 27th May 2013

12. The EU-China Project Ends, [http://www.epo.org/news-issues/news/2011/20110913.html], retrieved at 26th May 2013 13. The EU-China IPR2 Project, [www.ipr2.org], retrieved at 26th May 2013 14. Forbes Magazine [http://www.forbes.com/sites/jackperkowski/2012/04/18/protectingintellectual-property-rights-in-china/] retrieved at 27th May 2013