Coercion will not protect trademark owners in China, but an understanding of China's culture will: a lesson the United States has to learn.

• Author: Hoover, Dalila

ABSTRACT INTRODUCTION I. CHINA RESPONDS TO FOREIGN PRESSURE AND OVERHAULS ITS NATIONAL LEGAL SYSTEM TO PROTECT TRADEMARK RIGHTS A. Trademark Rights Protection in China: Awareness of the Risk B. Trademark Law Enforcement in China: Myth or Reality? II. WHEN CHINESE CULTURE IS AN IMPEDIMENT TO TRADEMARK ENFORCEMENT III. ANALYSIS A. From Coercion to Understanding: The United States Should Adopt the China-E.U. Model B. China- EU Relationship: A Model Approach CONCLUSION INTRODUCTION

Business entities and individuals have a legitimate interest in protecting their trademarks abroad. (2) However, when it comes to protecting their trademark(s) in China, the international community has voiced some deep concern about China's dedication and ability to provide protection. (3) Indeed, China is viewed as the single largest producer of pirated and counterfeit goods in the world. (4) This harsh critique of China's inability to protect trademark and intellectual property rights ("IPR") in general is widely spread in the West. (5) While China is undertaking a historic and unprecedented advancement in the legal protection of trademarks, ongoing debates have raged on between the West and China. (6) The West, led by the United States, continues to assert that China has done poorly in protecting foreign trademarks. (7) Trademark piracy in China is still rampant and continues to cost foreign trademark owners billions of dollars in lost sales and jobs. (8) Consequently, the United States' constant frustration with China's failure to protect and enforce trademark and IPR in general in China has led the U.S. Trade Representative ("USTR") to place China on the Priority Foreign Country Watch List for epidemic infringements of IPR more than once. (9) Each year on the last day of April, the USTR's Office issues the Special 301 Report that places countries on a priority foreign country list. (10) Many American businesses that recommended that China be put on the priority watch list in the next Special 301 Report on April, 30 2010, (11) have been heard as China remains on the priority watch list in 2010. (12) As of today, China continues to be the most notorious and singled-out country for piracy and counterfeiting practices. (13)

Conversely, China justifiably claims that it has made substantial strides in establishing a modern trademark system within a short period of time. Such action demonstrates China's commitment to fight intellectual property piracy and counterfeiting within its borders. To further demonstrate its commitment, China actively engaged on the international platform, signed several international treaties and conventions, and acceded to the World Trade Organization ("WTO") in 2001. (14) Following its accession to the WTO, China has complied with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). (15) Thus, China leaves no doubt as to its commitment to becoming a competitive, "innovation-oriented" country that should command international respect regarding IPR protection. (16)

Yet, China's efforts in adhering to its domestic and international duties have not substantially reduced the problem of IPR piracy and trademark infringement in China. (17) At the national level, despite adequately implemented resources, including anti-piracy campaigns and an increasing number of IPR cases brought before Chinese courts, overall levels of piracy, counterfeiting, and trademark infringement remained unacceptably high in 2007. (18) Similarly, at the international level, although China's legislation has been in accordance with international standards, enforcement under the TRIPs Agreement remains mediocre. (19) TRIPS is viewed as the "benchmark" for gauging the adequacy of China's trademark laws because it sets the standard for international IPR protection. (20) According to the 2008 USTR Report, inadequate IPR enforcement is a key factor contributing to these shortcomings. (21) Thus, the West, especially the United States, continues to claim that legislation without enforcement in China is "elusive and deceptive, as are rights without remedy." (22)

Trademark enforcement in China remains poor. However, critics of the Chinese trademark regime and its enforcement seem to disregard the influence of culture on China's current efforts to enforce trademark infringement within its borders. (23) Indeed, Confucianism, and later on Communism, did not ratify the idea of providing property-like protection to products of the individual intellect. (24) This explains why protection of trademarks in China depends not only on the study of existing laws but on an understanding of China's history and culture. As China is gradually changing its economic system into a market-based model, (25) new concepts of private property and individual rights have emerged. China has realized that the recognition of private rights has become a requisite to attract and protect foreign investments.

However, China's problems in enforcing the rights of trademark owners will not be remedied by the recourse to coercion that the United States exercises against it. Instead, coercion will merely exacerbate China's reluctance to respond to the United States' pressure. Thus, it is imperative for the United States to understand China's cultural and socio-economic powers. Such understanding will help the United States comprehend the problems China faces in enforcing trademarks within its borders. Well aware that it was in its best interest to pursue the "understanding" approach rather than the "coercive" approach, the European Union ("EU") has managed to establish a relationship with China that is mainly based on trust and harmony. Thus, while the United States has yet to learn the lesson that coercion will not resolve issues of trademark enforcement in China, it should exercise the "understanding" approach by adopting the EU-China model, which rests upon harmony, understanding, and cooperation.

The purpose of this article is to explore the different factors that have impeded effective trademark protection throughout Chinese history. In particular, this article analyzes the cultural barriers between the United States and China, and in doing so, helps one understand the climate of hostility between the two nations when it comes to trademark enforcement. This article further analyzes the constant pressure exercised by the United States against China that has led to the adoption of trademark laws by the Chinese government but has proven to be ineffective on the short-run.

Part I of this article addresses the development of intellectual property in China and the implementation of trademark laws, as well as China's accession to various international treaties and convention in response to the overwhelming pressure from the United States.

Part II of this article provides an overview of Chinese history and culture to establish the foundation upon which the present trademark legal system was built, and to explain how these cultural mores are inconsistent with intellectual property rights as perceived by Western culture.

Finally, Part III of this article explores an alternative to the coercive approach adopted by the United States to protect trademark owners in China. It is based upon the EU-China model that promotes leniency, understanding, and cooperation in the long-run.

1. CHINA RESPONDS TO FOREIGN PRESSURE AND OVERHAULS ITS NATIONAL LEGAL SYSTEM TO PROTECT TRADEMARK RIGHTS

   Despite its worldwide reputation for trademark infringement, China has made considerable strides in entering and gaining acceptance from the international intellectual property community. (26) Now that China is gradually changing its economic system into a competitive market-based model, it has come to realize that it is crucial to protect the exclusive rights of domestic and foreign trademark owners. (27)

   The 1982 Constitution of the People's Republic of China (28) does not specifically provide protection for trademarks. (29) The Chinese government implemented the Trademark Law in 1982. (30) Current laws within the People's Republic of China have been promulgated to protect intellectual property rights. (31) In addition, bilateral treaties and international trade agreements currently afford trademark protection. (32) Together, they form the legal foundation upon which trademark owners may be protected in China. (33)

   1. Trademark Rights Protection in China: Awareness of the Risk

      Several attempts to promulgate regulations governing trademark rights were made in the 1950s and 1960s. (34) However, the old trademark system played a very limited role in the protection of trademark holders' rights. (35) Indeed, there was virtually no incentive to infringe trademarks in the centralized planning economy because Chinese producers were not concerned as to whether their products could be sold; their only concern was to follow government planning. (36)

      China has been experiencing an unprecedented transformation of its trademark and legal systems to protect trademarks. (37) To respond to a rapid economic development that started to attract foreign businesses, and partly because of pressure exercised by the U.s., China has taken major steps to provide trademark protection. First, China realized that its economy had to modernize by embracing market-based principles already in place in the West. (38) Otherwise, China knew it would face the risk of an economic "dysfunction" of disastrous magnitude. (39) Second, the Chinese government implemented a body of law for the creation of a market economy, both as an end in itself and as an attraction for additional foreign investments. (40) Third and lastly, China began major initiatives to improve its overall system of higher education, with greater emphasis on education in science, technology, and law. (41) As a result, in 1977 China launched an economic reform that mainly overhauled its national legal system, including intellectual property law. (42) This...