enforcement environment in which administrative fines lack deterrent effect and are viewed merely as a cost of doing business. The United States urges the Chinese government to make the manufacturing of counterfeit goods a crime regardless of value. However, if China maintains these thresholds, it could mitigate the effects of doing so by valuing the counterfeit goods based on the retail price of those goods, and by including the costs of components sold together with the product, such as bottles and packaging, in the determination of whether the threshold is met.
While the counterfeit goods are seized in the course of raids, that is not typically the case with equipment used to produce those goods. To ensure that such enforcement actions are truly effective in stopping the manufacturing of counterfeit goods, the equipment used to manufacture those goods must also be seized and destroyed. If such equipment is not seized and destroyed, counterfeiters can resume their operations as soon as law enforcement officers have left their premises. It is also important to permit direct acceptance of serious IPR cases by the Public Security Bureau (PSB). While administrative agencies such as the local AICs can seize counterfeits, only the PSB has the power to search and arrest. A follow-on action to the Special Campaign would be to grant the PSB authority to accept all manufacturing cases directly. Lastly, since Guangdong Province is the source of most counterfeits, a coordinated, province-wide effort should be undertaken to address this problem. It should be noted that when the Asian Games were held in Guangzhou in November 2010, officials not only conducted robust enforcement of IPR with respect to that event, but also undertook additional crackdowns on counterfeit goods and optical disk outlets. This same political will should be continued and expanded throughout the whole province.
Patents Used in Chinese National Standards
In recent years, concerns have arisen regarding China's proposed treatment of patented technology in connection with domestic standards development processes. First, in late 2004, concerns arose after the Standardization Commission of China (SAC) issued draft Provisional Regulations for National Standards Relating to Patents (Provisional Regulations) and key Chinese government officials made public statements that appeared to contemplate compulsory licensing of patented technologies that are used in national standards in China.
In November 2009, SAC circulated a new draft of the Provisional Regulations for public comment. This draft measure would implement China's vision for a standards development process and establish the general principle that mandatory national standards should not incorporate patented technologies. However, the draft measures provide that when mandatory national standards incorporate patented technologies, there is the possibility of a compulsory license if a patent holder does not grant a royalty-free license. This differs from the typical practice of accredited standards developing organizations in other countries, which require disclosure of intellectual property in the standards development process and support 'reasonable and nondiscriminatory" (RAND) licensing policies with respect to intellectual property that is incorporated into a standard. RAND policies require concerned patent rights holders to make any intellectual property incorporated into the standards that these bodies develop available to all interested parties on RAND terms. Within the standards development process, licensing terms are typically negotiated between the right holder and parties interested in implementing the standards.
Second, in 2006, China's Electronic Standardization Institute (CESI), released draft intellectual property policy rules for standards-setting organizations (SSOs). These draft rules envisage Chinese
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