(Recording Academy Trustee Ruby Marchand is among the delegates participating in A2IM's Trade Mission to Asia. The mission originated from an A2IM/Recording Academy Indie Day on Capitol Hill in 2010 that resulted in a government grant for the trade initiative. Her blog will document her experiences representing The Recording Academy as the mission travels from Seoul to Hong Kong in an effort to increase exports by small- and medium-sized independent music businesses based in New York and Tennessee.)
Monday, Sept. 10:
We awoke to an early breakfast treat: three Department of Commerce specialists from the U.S. Consulate General in Shanghai came to our hotel to brief us on China's economy and the current situation regarding intellectual property rights. Paul Taylor, deputy principal commercial officer) led the discussion, accompanied by his colleagues, Jared Ragland, consul, intellectual property rights officer, and Lan Shi, intellectual property rights specialist.
Here's the gist of what they shared with us:
- Shanghai is the richest part of China and has a large number of affluent consumers who buy cars and some luxury brands and often send their kids overseas for higher education. The wealth in Shanghai disappears if you travel just a few hundred miles to the west. The growing disparity of income is a developing issue in China.
- A consumer economy is now beginning to spread to other regions of the country. The days when China was viewed as a low-cost manufacturer are disappearing. Provinces that were geared towards manufacturing are now being transformed into consumer markets.
- Shanghai is leading the way in this transformation. The Chinese government is focused on innovation and continues to invest in Shanghai as it continues its 15-year-old mission to lead the way in creating infrastructure, logistics and a legal system for consumers.
- This is an excellent time for the music industry to champion intellectual property rights and music in China as this new consumer market emerges. The government is keenly aware of the need to innovate and transform.
- China is the largest office in the world for the U.S. Department of Commerce. They focus on all aspects of export such as finding the right distribution for U.S. products, the right local customers, and liaising with Chinese officials.
- The Chinese legal system is flexible and relies on the interpretation of the law, rather than rule of law, which frustrates U.S. companies. We can't assume that our investments will be protected by law. This situation is starting to change as the U.S. government is fully engaged on this topic. Specialists from the United States Patent and Trademark Office are working closely now with the Chinese government.
- The U.S. government is strongly represented in China in the area of intellectual property rights. There are three IP attachés in China alone, compared to one attaché per region elsewhere in the world.
- Copyright and trademark IP rights are related. Technically, China provides for willful copyright infringement remedies on both criminal and civil levels. There are similarities between copyright and trademark laws, and improvements are on the horizon for both. At the most senior government level, China wants to improve in this area due to the lack of effectiveness in enforcing existing laws. Of course, any conflict between IPR and growing the local economy is going to be a sensitive issue. However, it is agreed that the reputation for good intellectual property rights enforcement is critical to maintain growth as China transforms from a manufacturing to a consumer economy.
- A key point is that trademarks must be registered in China. They are not enforceable through use, as they are in America. Whether a company does business in China currently or not, they should proactively register their trademark (domain name, etc.). Otherwise, anyone else can do it. To get a list of reputable local counsel to help with trademark registration, and to find out what the spectrum of protectable IP rights are, please contact export.gov/china, mention that you are a Recording Academy member following up on the Trade Mission, and ask for their assistance.
- Copyright registration is different: There is no requirement to register locally in China, as there is for trademarks, if you can prove that you own the copyright.
- Copyright infringement via the Internet is sky-high in China. With 1.4 billion consumers, this is a huge problem. The good news is that the central government is genuinely focused on the issue and the situation is going to improve over time. New legislation is coming which should help with self-policing because current civil and criminal enforcement is ineffective. There are copyright amendments in the works which will provide for the right of remuneration for artists as well as producers if the law passes.
- Another major issue is the absence of performing rights organizations in China. Due to government control, the collecting societies are limited in scope and there is little choice on whom to deal with. The consulate will continue to address this problem.
- The final word of advice from the commerce experts was to do as much due diligence as you can before you do business in China. There are cultural roadblocks, censorship concerns and other limits that will impact the way you can function. Find out who your customers will be and where they are located. Take your time before signing any contracts. Don't rush into anything; build relationships and find people you can trust to do business with first.
Please keep in mind that Dawn Bruno, the New York office Department of Commerce representative accompanying us on the Trade Mission, is dedicated to assisting Academy members throughout the Asian region and can liaise with local Department of Commerce offices on your behalf.