Lego blocks latest battleground for China's fight against fakes

Wednesday, January 22, 2003

BEIJING -- As it opens to the world, China has vowed repeatedly to eliminate counterfeit and pirated products. The latest test of its commitment appears to build on that promise -- brick by colorful plastic brick.

Lego, the Danish toy manufacturer that makes one of the Western world's most recognizable toys, has won a case in the Beijing High People's Court, which agreed that a Chinese company copied characteristics of its snap-together plastic building blocks.

The Denmark-based Lego Company lauded the court's action, made public this week, as a watershed, asserting on its Web site that the decision "confirms copyright protection of industrial design."

$979 million price tag

From children's toys to Hollywood movies, China is a battleground for companies fighting fakery and intellectual-property theft. But since Beijing joined the World Trade Organization in 2001, the pressure has become even more intense.

Foreign businesses have complained that China is failing to fully enforce the laws, forcing them to spend extra money on anti-piracy technology and tactics while worrying about seeing customers snatched away by unscrupulous competitors.

The International Intellectual Property Alliance, a trade group, estimates China's piracy of entertainment and computer goods cost businesses $979 million in lost sales in 2000.

Movies are high on that list. On Tuesday, the state-controlled China Daily newspaper said the government was taking "tough measures" to eliminate illegal copies of the martial-arts epic "Hero," China's highest-grossing domestic film.

Since the movie's premiere in December, cities across China have been flooded with illegal copies, the newspaper said. "Even unprecedented copyright protection measures put in place at the first screening failed to safeguard the film," the report said.

China often takes high-profile, sweeping measures to crack down on fakes.

Progress being made

Last summer, 27.5 million illegal audio and video discs were destroyed in 31 provinces, part of the 43.5 million pirated discs authorities seized from January to June 2002, state media reported. Some were chipped into slivers at public rallies.

But trying to eliminate fakes can pose unusual challenges.

Li Shunde, a professor and researcher at the Intellectual Property Rights Center of the China Academy of Social Sciences, said violations remain rampant nationwide because of a backward legal system and local protectionism.

Even so, he said, China has made progress over the past two years.

"Today you will think of the Chinese government and courts to protect your rights and there is hope for a win," Li said Tuesday. "Even chances of getting an official reply were difficult in the past."

Lego filed suit in 1999 against a Chinese company, alleging it had copied 53 characteristics of Lego toys, the statement said. It did not identify the Chinese company. Some of the fake Lego blocks in China appear identical to the real thing, right down to the logo.

The court ruled the Chinese company's design violated Lego's copyright on 33 of those elements, Lego said. It said the court ordered the company to stop production of the look alikes and turn over toy molds to the court to be destroyed.

Additionally, the company has been ordered to print an official apology in the Beijing Daily newspaper and to compensate Lego financially, the statement said. It didn't say how much the company would pay.

"This is a remarkable ruling," said Henrik G. Jacobsen, Lego's corporate lawyer. He said it was "sure to play an important role in the future as more and more companies ... watch copies of their products being made and sold in China."

A man who answered the telephone Tuesday at the Beijing High People's Court media department said a case against a toy maker sounded familiar but he "wasn't clear" which company was involved or what the details were.

The Lego decision suggests China is moving to protect the foreign companies it needs to keep its economy moving, experts say.

"I think it's a positive response," said To-Hai Liou, director of the Center for WTO Studies at National Chengchi University in Taiwan. "The violations will still exist for a while. But within a few years, the cases will decrease because of these kinds of verdicts."

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