Taiwan and Mainland China: Problems and Prospects in Cross-border IP Issues
February 29, 2004 | BY
clpstaff &clp articles &Undertaking a coordinated effort in a cross-border IP enforcement campaign is a legal challenge. A look at the main issues in tackling IP infringement across the Taiwan Straits.
By John Eastwood Wenger Vieli Belser, Taipei
IP rights holders looking at Asia-Pacific enforcement budgets often have to make hard decisions about where to take action. Although Taiwan's population is small (about 23 million), it is known to play a major role in financing massive overseas infringement in China and Southeast Asia. Taiwan is still a major manufacturer of fake optical-media products (CDs, DVDs, CD-ROMs), auto parts and high-tech products involving infringement of patents and misappropriation of trade secrets.
Following on the heels of general economic trends, many Taiwan manufacturing operations have packed up and gone across the Taiwan Straits, or to Thailand, Vietnam and Indonesia. For a variety of business and cultural reasons, Taiwanese investment has been increasingly focused on China. In 1999, according to official figures, investment into China amounted to only 27.65% of Taiwanese total overseas investment; by 2002, the figure had increased to 66.6%. Depending on the source of the figures, an estimated 500,000 (official) to one million (unofficial) Taiwanese now live and work in China. Most Taiwanese run manufacturing facilities in Shenzhen, Dongguan and Xiamen; another major centre of the Taiwan community is the greater Shanghai region, where an estimated 300,000 Taiwanese now live.
While many of these companies likely operate legitimately, anti-counterfeiting investigations and seizures in China have been increasingly turning up Taiwanese managers, quality control and technical experts, investors or other personnel behind the infringements. For several years, international anti-piracy groups have been urging rights holders to attack the financing of fakes at their sources. There are many obstacles to this, however, including the lack of official cross-straits relations and the often-complex company relationships at the heart of many infringement networks.
Untangling the Webs
In an effort to find the Taiwanese investors, investigations into China-based manufacturing operations have often turned up Hong Kong trading companies, and tangled networks of offshore holding companies. Unravelling these webs is a necessary part of taking effective action.
Fortunately, many of the quasi-legitimate companies (i.e., those that once had a legitimate business, still have legitimate aspects of their business, or which pretend to be legitimate) often leave a fairly easy trail to follow. Offshore obfuscation in some cases may be intended to discourage tax authorities rather than to lead anti-piracy investigations into dead ends. But, after all, why should they bother covering their tracks? Most of those financing cross-border infringement feel they have little to fear. We can identify four main reasons for this. First, most PRC enforcement efforts to date have focused on administrative actions that have little deterrent effect, so Taiwan companies and staff caught red-handed running infringing factories don't have much to worry about from PRC authorities. Second, PRC and Taiwan officials do not interact regularly to coordinate their enforcement efforts. Third, PRC and Taiwan authorities periodically have communication or other difficulties in maintaining what links exist between the two. Fourth, rights holders have (for a variety of reasons) generally held back from coordinated cross-border efforts.
Quasi-legitimate companies tend to be the result of discrete successes. A company's growth may be so successful that it takes on the manufacturing facilities, sales offices, internet presence, etc. that grew up as it expanded. Others, particularly those that maintain remnants of their original offices or manufacturing facilities while having moved their actual operations across the straits, seem to exist rather for psychological reasons
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