The Senate Judiciary Committee has reported out a purportedly improved version of S. 623, the Sunshine in Litigation Act, but the legislation could still cast a cloud over the handling of business documents in federal court proceedings.

The original bill would permit plaintiffs’ lawyers to pry open sealed settlement agreements and documents closed under a judge’s order by asserting they could affect public safety or health. Trial lawyers have lobbied for the bill because it would make easier for them to acquire materials to use in alarmist campaigns against a company’s reputation. The legislation would make the discovery process even more expensive, useful leverage against a company to force a settlement.

In its new version (text of substitute amedment), the Sunshine in Litigation Act does the same thing, just with a few exemptions built in. Sen. Herb Kohl (D-WI) outlined the changes in his committee statement (which we’ve transcribed here): (continue reading…)

The average consumer probably associates Chinese counterfeiting with fake luxury watches, high fashion, purses, luggage and maybe DVDs, but the attacks against U.S. goods, company reputations and intellectual property go far beyond that.

Today’s Wall Street Journal has an excellent article on the threat posed to Zippo, the U.S. manufacturer of the iconic lighters, by “rippos,” the bogus lighters produced in China. Zippo’s single factory in Bradford, Penn., produces 12 million lighters a year — about the same number as the fake ones churned out by Chinese companies.

And with Zippo providing a lifetime guarantee to repair the lighters it produced, the counterfeits represent a burning problem.

From “The Lighter Side of Counterfeiting Puts Zippo in a Fix” [subscription]:

BRADFORD, Pa.—”Always works—or we fix it” has, with minor tinkering, been a Zippo lighter slogan since 1937. “It is a profound statement of quality,” says Greg Booth, Zippo Manufacturing Co.’s chief executive. It also means Zippo has to fix a lot of lighters.

The task falls to three “clinics”—two abroad and one here in Zippo’s hometown—that fix more than 100,000 lighters a year. Quite a few Zippos get mangled when they slip out of pockets into the mechanism of recliners. One was ingested (but not digested) by a pig. Usually, a new screw or spring will put it back in working order.

Fulfilling the forever guarantee would pose little challenge, in fact, if a huge number of Zippos didn’t happen to be rippos.

The Journal highlights the work of one Zippo veteran whose job it is to spot the counterfeits, an increasingly difficult task as the quality of the fakes improves.

Despite the article’s amusing observations, the problem is not funny. Neither is it a new one. The local paper, The Bradford Era, reported on the Chinese counterfeiting in August, 2004, “Counterfeiting of Zippo lighters in China affecting Bradford,” tied to a company visit by a Commerce Department official. The Bush Administration worked hard on the issue, and the Obama Administration is as well. (continue reading…)

The U.S. Trade Representative is holding a special 301 Review public hearing today at the USITC to examine trade and the protection of intellectual property rights. (Agenda) The National Association of Manufacturers submitted comments. Excerpt:

The NAM emphasizes to the Special 301 Sub-committee that IPR protection and enforcement is an issue for virtually all our members. Manufacturing, yes manufacturing, is as dependent on intellectual property like patents, trademarks, trade secrets, trade dress and copyright as copyright-based industries that receive considerably more attention. Counterfeiting and piracy are existential threats to manufacturers, the people they employ, and the consumers who come in contact with their products and services.

Theft is theft no matter if it is called three-syllable words like “counterfeit” or “piracy”. The trade in fake products supplants legitimate markets, steals our workers’ jobs and puts American and other consumers needlessly at risk as counterfeit pharmaceuticals, unsafe products and even hazardous materials are put into the stream of commerce on a daily basis.

It is simply amazing what products and trademarks counterfeiters and pirates are so willing to steal. While most people are familiar with the counterfeiting of luxury brands because of the cachet that can command premium prices, counterfeiters are willing to engage in criminal activities by selling everyday items such as circuit breakers, extension cords, batteries, fireplace tools, golf clubs, kitchenware, toothpaste, cigarettes windshields – the list can go on and on. Even semiconductor chips that can be used in guidance systems for America’s defense have been counterfeited and found in the United States.

As this nation looks to our economic recovery, it is important to note that IPR theft is an impediment to that recovery. Markets once lost through counterfeiting and/or damaged brands are not readily and easily recovered.

As the two largest economies in the world, the relationship between the United States and China is of great importance to global growth and prosperity. This week’s visit of Chinese President Hu affords the opportunity for direct high-level attention to the imbalances in that relationship and lays the basis for a new direction. 

It is critical that the relationship be characterized by both mutual respect and benefit through adherence to international trade rules.  It is also vital that the relationship be a balanced one in terms of trade and commercial opportunity.  When the final trade data for 2010 come in, the U.S. deficit in manufactured goods with China is likely to have set a new record of about $290 billion, exceeding the 2008 record of $277 billion.

The National Association of Manufacturers (NAM) has long pressed for efforts that would result in a more open and balanced economic relationship.  A key aspect is a bilateral and multilateral effort to address China’s greatly undervalued currency.  We strongly support the Administration’s engagement with Chinese leadership on this issue.  But we also call for much greater attention to China’s distortion of commercial opportunities for U.S. firms – particularly China’s set of policies designed to encourage “indigenous innovation.” 

China’s leadership has set itself a broad strategic objective of making the Chinese domestic economy more innovation-oriented and decreasing China’s reliance on foreign technology.  The leadership considers these policy imperatives as critical to China’s long-term economic development, national security and global competitiveness.  

There is nothing wrong with seeking to spur innovation and technology.  Just about every major country, including the United States, pursues that objective.  But the United States and other countries follow the global rules they have adopted and seek to promote development within those rules.  China’s policies, however, bend and break the rules.  Its policies come at the specific expense of foreign companies and competitors, essentially forcing the transfer of foreign technology to China.  (continue reading…)

Just in time for the opening of the annual U.S.-China Joint Commission on Commerce and Trade (JCCT) today in Washington, the U.S. International Trade Commission (USITC), an independent U.S. government agency, has released an important study on the theft of U.S. intellectual property in China, “China: Intellectual Property Infringement, Indigenous Innovation Policies.” (News release.)

To no one’s surprise, the Commission found that massive Intellectual Property Rights (IPR) infringement harms market opportunities in China and significantly diminishes the income for U.S. companies whose products are counterfeited and pirated in China (as well as other markets, including the United States).

Further, China is engaged in a concerted effort to promote so-called “indigenous innovation” policies designed with the sole intent of keeping U.S. and other foreign firms out of the huge Chinese government procurement market by requiring the development and purchase of Chinese products and technologies, sometimes through the forced transfer of technology as a prerequisite for foreign participation.

The National Association of Manufacturers expects that the U.S. government will use this study when U.S. trade negotiators meet with their Chinese government counterparts. This threat to American innovation must stop.
(continue reading…)

Ed Silverstein, TMCNet, “Manufacturers Meet with U.S. Officials on Intellectual Property Theft Problem“:

Representatives from the National Association of Manufacturers (NAM) met in person with U.S. Intellectual Property Enforcement Coordinator Victoria Espinel in Illinois to discuss the growing problem of intellectual property theft.

Manufacturers talked with Espinel on Oct. 8, about the challenges and solutions for protecting intellectual property rights.

Associated Press, “Administration Delays China Currency Report“:

U.S. manufacturers believe China’s currency is undervalued by as much as 40 percent, making U.S. goods more expensive in China and Chinese goods cheaper and thus more competitive in the U.S. market.

Frank Vargo, vice president for international affairs at the National Association of Manufacturers, said his group would like to see a much more rapid appreciation of China’s currency than 1 percent per month. He said one of the dangers is that after the upcoming meetings, China could revert to little or no further currency appreciation.

“The heat is on until the meetings, but the question is what will China do after the meetings,” Vargo said.

Morton Kondrake, “Infrastructure pushed by Obama, but too late,” citing the Brookings Institution’s Bill Galston, a former domestic policy advisor it the Clinton White House: (continue reading…)

The National Association of Manufacturers’ Doug Goudie has been reporting from a business and trade mission to South Korea.

Our delegation had a long day of back-to-back high level meetings with a variety of senior officials today, as well as a tour of a GM-Daewoo auto assembly facility. Many of the meetings are off-the-record and I won’t abuse the trust. I will say we served American beef at all our meals with senior Korean officials.

Suffice to say, the U.S. business community is still sounding our strong support and outlining the strong benefits manufacturers in America will see from the market-opening provisions in this agreement (as I outlined in my initial post for Monday).

Rather than end there, we’ve seen and done a lot here so far, and I thought I’d look at a few specific examples and thoughts that have come up so far.

Intellectual Property Rights:  The NAM takes a strong stand on robust protection of intellectual property rights (IPR). IPR protection extends far beyond counterfeiting or piracy, of course – innovation is one of America’s greatest competitive advantages and is our key to remaining the cutting-edge manufacturing center in the world.

In discussions with Korean officials this week, we’ve heard them express the same fears about Chinese IPR violations that we hear in America. In the 1980s, Korea had a reputation for lax IPR protections, particularly in counterfeiting and piracy. This is no longer the case – China and some other Asian nations are the offenders now- but if anyone is still concerned, the Korean-U.S. Free Trade Agreement (KORUS FTA) has extremely strong IPR language written into it. (Chapter 18)

I went shopping first day into some of the markets, looking for counterfeit consumer goods. Not to buy, mind you!  Knock-offs still abound in handbags and luggage at the market I visited — I won’t deny that fact — but they are obvious knockoffs that wouldn’t fool my 3 year old daughter, let alone a Real Housewife. For example, “Conch” bags bear a resemblance to “Coach”.

(continue reading…)

Reuters, “US business beseiges panel with China complaints“:

WASHINGTON (Reuters) – U.S. business groups Tuesday besieged the U.S. International Trade
Commission with complaints about billions of dollars of lost sales due to Chinese counterfeit goods and government policies that threaten to shut American companies out of the market.

“Unfortunately, the stark reality is that China remains ‘ground zero’ for international product counterfeiting and piracy,” Shaun Donelly, senior director for international business policy at the National Association of Manufacturers, told the commission.

The hearing reflects the growing concern in Congress about Chinese trade practices.

The prepared statement from the NAM’s Donnelly is available here.

• National Journal, Tech Daily Dose blog, “Trade Commission, Congress Examining Chinese Policies“
• PC World, “US Panel Looks at Intellectual Property Violations in China“

The National Association of Manufacturers’ Frank Vargo, vice president for international economic affairs, testified before the Trade Subcommittee of House Ways and Means last Thursday at a hearing, “Customs Trade Facilitation and Enforcement in a Secure Environment.” Vargo was also speaking as a member of the Customs and Border Coalition (CBC)—a broad based industry group representing all interests in global supply chains from manufacturers and retailers to customs brokers and carriers.

His testimony delves into highly technical areas of trade enforcement, so we’ll just cite the overview:

This hearing is a significant step in recognizing:
* the role of economic security;
* the need to implement balanced, vetted, and effective policies to advance the twin goals of CBP [Customs and Border Protection];
* the importance of public-private partnerships and providing benefits for importers who have taken extensive efforts to secure their supply chains; and
* the need to improve commercial enforcement to prevent the circumvention of intellectual property rights (IPR) and to implement anti-dumping (AD) and countervailing duty (CVD) orders.

We believe customs reauthorization legislation should seek to prioritize trade facilitation within CBP; improve interagency and Congressional coordination; recognize importers with strong compliance records; increase government and industry collaboration; strengthen intellectual property protections, trade enforcement and import safety programs; and expedite the completion of the many still outstanding modernizations needed within the agency. This is no small task, and we appreciate the ambition of this subcommittee to draft legislation to accomplish those ends. 

Note the emphasis on IPR, also highlighted in Doug Goudie’s post this morning on U.S.-Brazil trade.

The Wall Street Journal editorial Friday (“The Madness of Cotton“) on resolution of the U.S.-Brazil Cotton dispute overlooks completely the most salient and important point – that the U.S. deal with Brazil forestalled the imposition of ruinous retaliatory duties not only on American manufactured products and agricultural goods, but on the key currency of America’s best hopes for 21^st century economic growth and innovation – intellectual property rights (IPR).

The United States was found to be in violation of subsidies on cotton by the World Trade Organization, and Brazil was authorized to retaliate against American products because those subsidies still exist. However, in a precedent-setting decision that should send chills down the spine of every advanced manufacturing nation on earth, Brazil was also given the right to retaliate against our IPR. Break patents, steal licenses, refuse payment of royalties – this is far from the standard practice of tariff retaliation that follows some WTO dispute settlement decisions.

Can you imagine the economic devastation to American companies that would have resulted from a billion dollars worth of retaliation against American IPR by Brazil? The ability to generate new ideas and new products, new processes and innovations is at the heart of America’s manufacturing competitiveness. Facing a very real threat to this key element of our economy, the Office of the U.S. Trade Representative and the U.S. Department of Agriculture should be commended for reaching a deal with Brazil.

Keep in mind, this is a stop-gap deal. If we could prevail upon Congress to immediately make changes to this particular subsidy, Brazil would lose its rights to retaliate. However, that won’t happen, and the best place for alterations is the next Farm Bill. Until we can get the necessary changes made, we’d be facing enormous retaliation on manufactured goods AND IPR by Brazil. Rather than have more than a billion dollars worth of U.S. goods and IPR face retaliation, USTR and Agriculture signed this shorter-term agreement. It’s the right move, it’s the smart move, and the business community strongly supported it.

In that deal, the United States agreed to provide funding for agricultural research in Brazil for a short time period while we reform the underlying cotton subsidy practices in the 2012 Farm Bill that resulted in the WTO judgment against us. That’s how the WTO works – an unfair trading practice is identified and most often immediately or quickly modified. The U.S. Congress will need to examine these subsidy programs and modify them to prevent future trade disputes.

But this is a far less onerous task than to watch the innovations, inventions and uniqueness of our manufacturers’ intellectual property rights be taken and used against us. Retaliation against our goods and farm products would have been bad enough – we’ve been watching it happen in the Mexico trucking dispute for over 14 months. But to have IPR targeted would have been a terrible precedent that, in the future, would have emboldened China, India and other nations to action as well.