Wednesday, December 12, 2012

Is the Counterfeit Croc Sentence a Forward Step in the Chinese IP Market?

As WWD reports the Chinese Croc counterfeiters were sentenced to more than 46 years in prison this past weekend for selling 128,752 knockoff pairs of Crocs. “Seventeen individuals were convicted of counterfeiting, three individuals were convicted of offering bribes,” WWD says. The seized plastic clogs and flip-flops were estimated at a value of 60 million renminibi or $9.6 million dollars. In addition to the jail sentence, the counterfeiters face fines totaling 2,832,500 RMB or almost $450,896. Mr. Dan Hart, the chief legal and administrative officer for Crocs, said that the company would take definitive action to protect any infringing production or selling of its intellectual property.

This sentencing is a major move forward for the PRC because many in the intellectual property world know of the difficulties of enforcing protection of intellectual property rights in China. As the U.S. International Trade office (USITC) reports in the publication “China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy”, many U.S. companies have reported that China’s infringement on IPR rights have undermined their competitive positions. So naturally U.S. firms reported losses in sales, profits, and license and royalty fees, stolen trade secrets, as well as damage to brand names and product reputation. Even worse, these firms’ products and technologies are forced to compete against sales of illegal, lower cost imitations. The publication also states that China has the largest number of Internet Users in the world and makes online infringement in China a significant concern for U.S. IP-intensive firms.

To realize the impact that Chinese IP infringement has on U.S. firms, let alone the global IP community, the USITC estimates that U.S. firms’ reported losses from IPR infringement in China amounted to about $48 billion in 2009. A wide range surrounds this estimate, as many firms were unable to calculate such losses. Furthermore, the economic markets that experience Chinese infringement hit are: information and other services; high-tech and heavy manufacturing; chemical manufacturing; consumer goods manufacturing; and transportation manufacturing.

So many businesses spend a fortune to protect their intellectual property; including registering IP rights in every country where it conducts business. In 2009, almost $4.8 billion was spent to address possible Chinese IPR infringement alone. As a result from the Chinese hit, many firms reported lower revenues because they lowered their prices in the China market or reduced the number of products they sold in that market. After all Avon Exits 2 Asian Markets

But just maybe this Chinese ruling and sentencing in the Crocs case is a step forward to more pro-action by Chinese courts to uphold and protect IP rights. After all, the cases were tried in district courts located in Shanghai Yangpu and Dongguan City. Lastly Dan Hart said, “The lengthy prison terms and heavy fines handed down in these cases show that Chinese authorities are very serious about assisting us to eradicate the production of counterfeit Crocs products in China, and so are we.”

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