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Exposing counterfeits, pirated goods and fakes

The attention to detail on the throwback Edmonton Oilers jersey for sale amid a maze of stalls at the fake market on Nanjing Road in Shanghai is stunning.

From the raised orange number 99s on the back and the sleeves, to the Gretzky nameplate and a label claiming "Made In Canada" by CCM - it is a brazen and skilled work of counterfeit.

The forgery is so meticulous, in fact, that the attached cardboard tag is in two languages - English and French.

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"900 yuan," says the shopkeeper when asked how much he wants for it. With some hard-nosed bargaining, he is soon willing to reduce the price to 150 yuan ($23 Cdn.).

Amid the barrage of bogus goods that are brazenly hawked here, intellectual property protection in China can seem a lost cause. From Louis Vuitton bags, to Rolex watches, to Canada Goose Parkas, to Arc'Teryx outdoor gear, fake merchandise - called shanzhai - is everywhere in China.

It's not just clothing. An estimated 90 per cent of the copies of Microsoft's Windows operating system in use in China are believed to be pirated. Counterfeit Canadian ice wine can be found in China and Research In Motion's Blackberry has a competitor in the form of a Chinese-made device dubbed the Blueberry.

The term shanzhai literally translates as "mountain fortress," and in popular Chinese culture, some counterfeit goods are now being celebrated. This summer, a 22-year-old computer programmer in Shenzhen unveiled a shanzhai product called the Apple Peel 520 which received attention around the world. The Apple Peel is a skin that wraps around an iPod Touch and transforms it into an iPhone.

When asked why he created the unlicensed product in an interview with CNN conducted via text messaging, the Apple Peel's creator said it boiled down to economics. "Because I love the iPhone, but it's too expensive in China," he explained.

China's booming fake goods sector doesn't just sell into the domestic market. Bogus shoes and handbags manufactured in China can be easily found in Europe and North America.

Still, despite the pervasiveness of counterfeiting, progress in protecting and enforcing intellectual property rights is being made in China, according to legal experts and Canadian companies who operate there.

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When China was admitted to the World Trade Organization in 2001, it overhauled its IP laws to comply with international standards. China's patent protections, for example, are now considered relatively strong.

"China's IP laws regarding patents are as every bit as modern as North American standards. The intellectual property office in China is staffed with competent examiners and they do a pretty good job of examining foreign and domestic applicants," said Brian Lee, an IP specialist at Gowling Lafleur Henderson LLP based in Vancouver.

The major issue, however, remains enforcement, particularly for foreign companies.

Just like the massive but still evolving Chinese economy, China's ability to impose its economic protection laws is still very much a work in progress. Government bodies have dual roles of enforcement and granting of IP rights as do the courts and the police.

"It is quite confusing. Add to that the fact that, until recently, the damages awarded for infringement were quite low so it didn't make a lot of economic sense to try to get a judgment when it amounted to a slap on the wrist," Mr. Lee said.

Penalties for IP infringement have been increasing in recent years and more cases are being filed against infringers.

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Gucci, the Italy-based luxury goods maker, won its first intellectual property case in mainland China earlier this year. It successfully sued Ningbo Outlets Co. Ltd. for trademark infringement after the Chinese retailer used Gucci's logo in one of its shops and in its online advertising.

The damages awarded to Gucci, however, which first registered its trademark in China in the 1980s, were miniscule. It had been seeking 500,000 yuan in damages but the Intermediate People's Court of Ningbo, a coastal city in Zhejian province, ruled that Ningbo Outlets should pay just 50,000 yuan or about $7,500 (Cdn.).

Canada's Neo Material Technologies Inc., which produces powders and other products used by the high-tech and automotive industries, has had more positive experiences protecting its intellectual property in China. In 2002, several laptops were stolen from a Neo office in a case of corporate espionage. Chinese authorities soon apprehended the culprits, however, and one was sentenced to several years in prison.

More recently, Chinese authorities went after a company that had copied and built an exact replica of one of Neo's patented machines. Neo officials were able to watch as Chinese authorities destroyed the machine.

"It looked just like ours right down to the smallest details," one of Neo's executives said. "When the Chinese copy something, they tend to do it very well."

IP lawyers advise Canadian clients operating in China to take all available precautions against IP theft by registering trademarks and patents with the relevant authorities.

"When Canadian companies want to seek IP protection in China, they have to think beyond today," Mr. Lee said.

"China has made phenomenal developments and improvements in its legal structure and you would be a fool to think that won't continue."

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About the Author
Asia-Pacific Reporter

An award-winning journalist, Andy Hoffman is the Asia-Pacific Reporter for Canada's national newspaper, The Globe and Mail. More

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