Intellectual Property Rights Study - Mayer Brown · 2 Intellectual Property Rights Study ... each participating in a 10-minute questionnaire ... Hong Kong buy ready-made-clothing

Intellectual Property Rights Study

2 Intellectual Property Rights Study

© The European Chamber of Commerce in Hong Kong. 2013. All Rights Reserved.© 2013 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.© 2013 The Mayer Brown Practices. All rights reserved. © 2013 TNS, a Kantar Group Company - All rights reserved

ContentsIntroduction

Consumer Education is Crucial

The Supply Chain

Clear Economic Benefits for Hong Kong

Conclusion

About Us

Contact Us

Contributor viewpoints

European Chamber of Commerce in Hong Kong

KPMG China

Mayer Brown JSM

European Commission

Louis Vuitton and LVMH Fashion Group

TNS

World Customs Organisation

International Design House

University of Hong Kong

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6

15

18

33

35

37

20

21

23

25

26

27

28

30

31

About the survey:The survey was conducted by market research firm TNS during early September 2013, and consists of 802 online interviews in Hong Kong. Respondents were from a range of income-levels and ages, each participating in a 10-minute questionnaire consisting of closed-ended questions in both Chinese and English.

Intellectual Property Rights Study 3




IntroductionThrough the combined efforts of government and industry, Hong Kong’s protection and enforcement of intellectual property rights (IPR) has improved materially in the past decade, on a par with other developed countries.

Hong Kong’s Customs and Excise Department (C&ED) and the Intellectual Property Department (IPD) have won international plaudits for their enactment and enforcement of tough IPR legislation since the late 1990s; the C&ED hosts regional conferences on IPR protection and enforcement, bringing government and industry together to exchange views; the IPD’s education programs aimed at school children and shoppers have created a new awareness of the importance of IPR protection.

“We are impressed with Hong Kong’s attitude towards fake goods. The IPR conference held by Hong Kong Customs in September 2012 was a very strong reminder how much Hong Kong customs is on the ball,” says Jens Erik Olsen, Chairman of the European Chamber of Commerce in Hong Kong.

The economic benefits to Hong Kong are also clear with the city visited by over 48 million tourists annually, over two-thirds from mainland China. Today, Hong Kong has earned a reputation as a place to buy genuine goods through its “Hong Kong - The Real Experience” and “No Fakes Pledge” campaigns. Indeed, half of those visiting Hong Kong buy ready-made-clothing and almost a quarter buy shoes and bags, their purchases injecting billions into the economy.

But the challenge is not over. In spite of these efforts, counterfeit goods are still available in Hong Kong and Macau through a variety of channels. The problem lies in demand for fake goods, as much as supply. Consumer attitudes in Hong Kong and Macau towards counterfeit goods might have changed in the past decade. But for some, buying a fake watch or bag is still popular, especially in these challenging times, meaning further work on part of all is needed.

It is for this reason that the European Chamber of Commerce, KPMG, Mayer Brown JSM, TNS, and Silk Road Associates teamed up to produce a timely survey and review on consumer attitudes in Hong Kong and Macau towards counterfeit goods. Consumer education on the importance of brand protection must evolve constantly in response to changing attitudes, and the survey is intended to help government and industry alike adapt to today’s challenges.

As the European Chamber’s Olsen notes, “The new Chief Executive is already actively engaging the chamber,” a demonstration of the collaboration between the public and private sectors that will only strengthen Hong Kong’s status as a business hub.

The survey was conducted by TNS, a leading market research company, during early September 2013, and consists of 802 online interviews in Hong Kong. Respondents were from a range of income-levels and ages, each participating in a 10-minute questionnaire consisting of closed-ended questions in both Chinese and English.



Our survey shows that 73 percent of respondents in Hong Kong and Macau have at some point purchased a counterfeit good. The figure might appear disappointingly high. However, the details are more encouraging.

Consumer education is crucial

Ever purchased a copy product

Never purchased

Have you ever purchased a counterfeit product?

73%

27%



For a start, the share of respondents who ‘have ever’ purchased counterfeit branded consumer goods is far lower than the headline figure: handbags & wallets (18 percent); sportswear fashion (17 percent) non-sportswear fashion (11 percent). Moreover, the share of respondents who would consider purchasing counterfeit branded consumer goods ‘in the future’ is lower across all segments to suggest consumer attitudes continue to improve.

Purchased at some point

Over the last 12 months

34%

28%

27%11%

17%6%

18%9%

17%9%

15%13%13%

9%11%

7%

9%4%

9%6%

4%2%2%2%

1%0%

14%

14%Movies CDs / DVDs

Music CDs / DVDs

Computer softwear CDs / DVDs

Computer games CDs / DVDs

Handbags & wallets

Clothes and shoes (Sportswear)

Electronics

Fashion and mobile accessories

Clothes and shoes (non-sportswear)

Watches

Toys

Cosmetics and other beauty products

Paintings

Alcohol

Types of counterfeit products purchased



17%

13%

15%11%

18%11%

11%9%9%

6%

9%5%

4%3%

2%3%

1%0%

11%

12%Clothes and shoes (Sportswear)

Fashion and mobile accessories

Electronics

Handbags & wallets

Clothes and shoes (non-sportswear)

Toys

Watches

Cosmetics and other beauty products

Paintings

Alcohol

Would you consider buying counterfeit products in the future?

Ever purchased

Would consider purchasing in the future



79%

72%

24%

21%

21%

21%

13%

10%

10%

7%

2%

3%

30%

35%

Cheaper

Easier access

Good imitation and quality

Not aware that they are copy products when people buy them

Recommended by friends and family

Difficult to get genuine products

Re-sell in order to make profit

Cheaper

Good imitation and quality

Not aware that they are copy products when people buy them

Easier access

Recommended by friends and family

Difficult to get genuine products

Re-sell in order to make profit

Reasons for buying counterfeit products

computer related products

consumer products

So why do consumers buy counterfeit goods? Our survey indicates that 72 percent buy counterfeit branded goods because they are cheaper, also a popular reason for those who buy computer related products. Another 35 percent of respondents buy counterfeit goods because they are a good imitation. Today’s fakes look like the real thing but the quality of the material and content is not.



I agree that counterfeit products have the following negative aspects

“The watch industry is a good example,” says KPMG’s Grant Jamieson, responsible for the firm’s forensic activities. “A number of overseas watch makers have tried to protect their IPR by diversifying their suppliers in China. But some of the suppliers know each other and have teamed up to assemble counterfeit copies that look no different to the real thing. One client only spotted the difference after going swimming—the fake wasn’t waterproof.”

It helps that the large majority of people value genuine branded fashion products more than they do films, music, or computer related products software: according to the survey, 69 percent of respondents consider buying a branded watch as ‘important’ or ‘very important’, and another 61 percent felt the same about handbags and wallets. By contrast, only 40 percent consider buying genuine films, music, or computer related products as important.

Indeed, there is a growing trend where people choose to buy genuine branded products to avoid the social embarrassment of being caught with a copy. Some 53 percent of respondents stated they would stop buying copy products because it gives a bad self-image. Whereas it might once have been acceptable to have carried a fake, such attitudes are changing partly as a result of rising purchasing power and ongoing consumer education.

The quality is not as good as the genuine article

Can potentially contain virus

I am concerned about the legal consequence

It is more difficult to find copy products nowadays

I feel bad about having bought a copy product/gives me a bad self-image

Others will have a negative perception of me

65%

66%

53%

35%

34%

31%

Importance of using counterfeit products

Very Important Important

68% 15% 13% 2%2%65% 15% 14% 4% 2%

55% 18% 16% 5% 6%49% 20% 20% 6%5%

41% 20% 24% 9% 6%41% 21% 21% 9% 6%

35% 20% 26% 11% 8%33% 17% 33% 6% 10%32% 20% 25% 13% 10%30% 20% 30% 10% 9%28% 19% 28% 14% 11%24% 17% 31% 15% 13%23% 19% 29% 15% 14%22% 17% 31% 14% 18%

AlcoholCosmetics and other beauty products

ElectronicsWatches

Handbags & wallletsClothes and shoes (Sportswear)

Clothes and shoes (Non sportswear)Paintings

Fashion and mobile accessoriesToys

Computer software CDs/DVDsComputer games CDs/DVDs

Music CDs/DVDsMovies CDs/DVDs



I would stop buying copy products for this reason

Importantly, only 21 percent of respondents claimed to buy counterfeit fashion goods because of easy access to counterfeits, whereas the figure was a higher 30 percent for computer related products. The fact the main fashion brands have opened multiple stores across Hong Kong and Macau means shoppers are less likely to buy a counterfeit product when they can easily buy the genuine product.

Indeed, the survey indicates that 41 percent of respondents would prefer to pay for online music, but noting that it is difficult to do so in Hong Kong and so they instead download music without paying for it, further underscoring the importance of ease of access in the battle against counterfeits. To this end, the opening of authorised platforms for downloading music in Hong Kong might curb the number of people who buy pirated music:

Can potentially contain virus

The quality is not as good as the genuine article

I am concerned about the legal consequence

It is more difficult to find copy products nowadays

I feel bad about having bought a copy product/gives me a bad self-image

Others will have a negative perception of me

87%

85%

81%

62%

53%

52%

Agree with the following attitudes

I would prefer to pay for online music, but it is difficult to do so in Hong Kong,

so I sometimes download music ...

Computer software, movie, music, and luxury goods companies overcharge for

their produts, so it is ok to buy copy ...

There is no real difference between a genuine branded product and a copy

product, so I don’t see why I should ...

I don’t think I will be caught by sharing and downloading music, movies and

software online

41%

36%

27%

26%

22%

Everyone uses copy products, so it is ok to buy or use it

I would stop buying counterfeit products for these reasons





Spending on counterfeit products

For those who do buy counterfeit branded products, 87 percent spent less than HKD500 on non-sportswear fashion in the past year; 80 percent spent less than HKD500 on handbags and wallets; and, some 79 percent of respondents spent less than HKD500 on sportswear fashion. Among these groups, the large majority of people spent between HKD100-HKD500 a year and only a small minority spent more than HKD1,000.

Fiona Chan, Project Director at TNS notes that: “This difference across income levels demonstrates that aspiration may still be a reason driving counterfeit purchases in the luxury segment. There is a lower-income group that isn’t able to afford the real thing and so decides to purchase the counterfeit product instead. But for music and films the relative price difference is much smaller and so we don’t see such a large drop off towards the higher-income classes.”

Hong Kong’s robust efforts to educate consumers about the importance of intellectual property rights have clearly helped. The Intellectual Property Department organizes school visits, often alongside brand owners, and educational programs. The department even publishes a series of comics aimed at raising brand awareness among young school children. Publicity campaigns through print and TV media, such as the “I Pledge” campaign, also target older generations.

Mayer Brown JSM’s Alan Chiu notes that “the C&ED has since 2004 in collaboration with the IPR industry initiated the establishment of the Intellectual Property Rights Protection Alliance (IPRPA) with a view to promoting a strategic partnership with different sectors, industries and brand owners for better protection of IPRs.”

21% 21% 33% 16% 8%Electronics

8% 5% 29% 31% 28%Computer software CDs / DVDs

7% 15% 46% 27% 6%Clothes and Shoes (Sportswear)

7% 13% 49% 24% 7%Handbags & wallets

7% 7% 54% 28% 5%Clothes and Shoes (Non sportswear)

6% 21% 21% 49% 18%Toys

6%2% 30% 30% 32%Fashion and mobile accessories

5%5% 26% 24% 40%Music CDs/DVDs

4%8% 29% 26% 33%Movies CDs/DVDs

8% 14% 42% 19% 22%Computer games CDs/DVDs

More than HKD1000 HKD501-HKD1000HKD101-HKD500 HKD51-HKD100HKD50 or below



How else might governments and brand owners tackle counterfeiting? The survey shows that a striking 81 percent of respondents are concerned about the legal consequences and would stop buying for this reason. Consumer education is also playing a critical role with some 61 percent of respondents recognizing that intellectual property rights represents the hard word of others , so buying copies is unethical.

Agree with the following attitudes

Intellectual property rights represents the hard work of others, so buying copy

products is unethical

Shopping for luxury products is part of the experience, so I would prefer to buy

a genuine product in the real shop

I feel guilty if I buy copy products

I feel guilty if I share or download music, movies or software online

61%

37%

26%

20%



Nonetheless, while demand is important, so is supply. Our survey indicates that 70 percent of respondents purchase counterfeits on the street or through shops in Hong Kong, whereas another 42 percent buy in Shenzhen, and just 33 percent online.

The Supply Chain

15%

8%

9%

5%

3%

2%

42%

33%

70%Street/shop in HK

Shenzhen

Online

Other mainland cities

Korea

Thailand

Other Asian countries

Europe

Americas

Respondents purchased counterfeit products through a variety of channels



Indeed, the battle against counterfeiters evolves constantly. Most recently, the rise of the internet has resulted in the online downloading of films and music, but it has equally opened up new channels for counterfeits to sell and distribute goods.

Encouragingly Hong Kong’s government has responded to the change in counterfeiters’ behaviour. Benjamin Choi, Partner at Mayer Brown JSM, notes that: “HK Customs has collaborated with IPR holders and two local auction sites—Yahoo! HK and e-Bay—to implement a scheme called “E-auctioning with Integrity” intended to prevent counterfeit items being auctioned” with auction sites and IPR owners more carefully screening goods for sale.”

The growth in online commerce nonetheless creates challenges for Hong Kong Customs and brand owners, as the incidence of higher volumes of counterfeits shipped in smaller quantities has grown exponentially. To this end, intelligence sharing among Customs administrations, air express companies, and brand owners globally has helped to identify common patterns in the location and methods of counterfeiters and so formulate blacklists.

Alan Chiu further says that “Evidence preservation is the key to success in tackling online piracy.” Hong Kong Customs has recently set up its own Computer Forensic Laboratory which offers professional assistance in collecting, preserving, analysing and presenting digital evidence to law courts in piracy cases.

The improvement in quality also makes enforcement challenging. “Sometimes, the infringers would mix the high-quality imitations together with factory overruns and parallel-imported items, making the life of the brand owner’s examiner more difficult in the course of seizure identification,” adds Alan Chiu.

Technology might provide one answer. KPMG’s Dutch office, for instance, recently assisted a European-beer company to introduce anti-counterfeit measures, enabling consumers to scan specially designed labels with their phones and so determine whether the product was genuine. Such schemes might even be expanded in the future, such as by offering cash-coupons or other benefits to customers and so encouraging them to play a role in the detection of counterfeit goods.



“Governance of the supply chain is also critical,” says Anthony Crampton, KPMG’s Director for Risk Consulting. “The more suppliers there are for a single item, the harder it is to conduct surveillance. An increase in the number of suppliers may also increase the risk that components will go missing and end up in counterfeit goods. Brand owners must also devise ways of segregating their supply chain participants so it is not possible for a single supplier to gain control over key components and so more easily produce counterfeit goods.”

Peter Liddell, Head of KPMG’s Supply Chain Management, adds: “For its own longevity, the industry needs to invest in making the validation of pedigree and traceability of product an industry standard. There is already well proven and low cost technology available that allows manufacturers to validate a product’s integrity and pedigree. This is actually done in a number of commodities, such as beef, but with some basic planning and technology it can easily be applied across any branded consumer good.”



Hong Kong’s dramatic shift from a manufacturing to service-based economy over the past twenty years has made it crucial for the government to nurture the territory’s innovative and creative talent.

Brand awareness and enforcement is central to these efforts. Better protection of foreign brands in Hong Kong, for instance, has spillover effects to the local industry: the more shoppers value buying genuine products, the more likely they are to have similar attitudes towards locally-designed products. Hong Kong may not rank alongside London or Milan as a global design powerhouse, but the city still boasts many creative and innovative emerging brands.

The government has recognised this fact through the creation of such departments as CreateHK (Create Hong Kong), a dedicated government agency that helps to coordinate government policy towards the creative industries as well as providing HKD300 million worth of funding in support. Neither is the agency Hong Kong’s only initiative. The government is funding, for example, the renovation of the former Police Married Quarters in Central and installing 130 studios for designers and artists.

Public recognition is also growing with 83 percent of respondents of the Hong Kong Intellectual Property Department’s 2010 survey expressing the view that stronger protection of intellectual property rights is quite or very helpful to development of Hong Kong’s creative industries, a rise of 7 percentage points from the previous survey in 2008. Further, a high 71 percent respondents stated that such protection was quite or very helpful to the economy’s overall development, recognition of recent economic gains, especially in the tourism industry.

Clear economic benefits for Hong Kong



The rise in tourism is partly the result of a relaxation on visits by mainland tourists. However, Hong Kong has also successfully sold itself as a place to buy genuine products through a series of government initiatives, such as the “Hong Kong - The Real Experience” publicity campaign and the “No Fakes Pledge” stickers. And both foreign and Chinese visitors highly value the opportunity to buy genuine products in Hong Kong, especially those with health implications, but also branded goods.

The Hong Kong Tourism Board’s data underscores Hong Kong’s success: 46 percent of all visitors to Hong Kong in 2010 purchased ready-made wear. Another 21 percent and 17 percent purchased shoes and bags, respectively. The importance to branded goods firms to Hong Kong’s economy cannot be understated with sales of clothes and jewellery to tourists worth an estimated USD2.5 billion and USD2.7 billion, respectively, in 2010. And as Chinese tourists account for 67 percent of tourist arrivals, they account for much of this spending.

The overall economic benefits are material; since 2000, the number of mainland tourists has risen from 4 to 28 million even as the tourism sector has added an average one percentage point to GDP growth annually during the period. The incentives then for Hong Kong’s government to protect brands is thus clear, especially at a time of global economic crisis and the government’s continued focus on generating more domestic jobs and value-added activities.



Jens-Erik OlsenChairmanEuropean Chamber of Commerce in Hong Kong

What is the European Brands Protection Council’s view on Hong Kong’s protection and enforcement of IPR

Hong Kong has a very robust IPR and protection regime. The Intellectual Property Department together with the Hong Kong Customs have done an excellent job in securing and protecting the IP rights of European Brands in Hong Kong. As per EU Customs’ 2011 report on enforcement of IPRs, Hong Kong exports of counterfeits detected on the EU borders amount to 7.67 percent in articles terms and 12.65 percent in value terms. In 2010 it was 2.95 percent and 7.87 percent, respectively. Hong Kong is an important transhipment port and we believe that we could enhance transhipment enforcement through co-operation with the HK Customs.

What is needed from government and industry to build on the successes already achieved?

Sharing information and best practices is key. Active channels of communication and quickly processing the information shared would be critical for building on successes. Working closely with law enforcement agencies of other countries like the Mainland and EU authorities through joint operations against infringers.

Ultimately, if Hong Kong wants to promote itself as an international city, it must protect its brands, both local and foreign. Otherwise Hong Kong will lose that shine, and multinationals are unlikely to headquarter themselves in the city.

What was the spark for the establishment of the European Brands Protection Council?

It came on the back of the European Union Business Information Programme, through which Brussels provided 4-years of funding to the chamber’s efforts in coordinating critical issues, such as those related to brands or the environment. With that funding we were able to attract the national chambers in order to

promote and sponsor a number of IPR-related events and inviting European companies that had IPR problems. I think it was an instant success. They started meetings immediately and had a full-house. If we had to give credit, then the credit goes to the European Union.

Does the brands council include some smaller members?

We do have some smaller members and are looking to create a bridge between our brands council and SME committee. There are many small SMEs and we want to provide them with a greater opportunity to make their voice known. Typically, they are small design companies and electronics companies both designing their own goods and producing on behalf of the larger companies. These SMEs need more help than the larger companies, and Hong Kong must be more supportive of their interests if the city wants to grow as a regional design centre.

What is the advantage of European Chamber lobbying on behalf of European companies?

The Hong Kong administration has recognized instantly that the voice of the European Chamber carries a lot of weight, and that is because the European Chamber was introduced at the International Business Council level (IBC) and sits as at the same level as a single-member country. We speak directly with the Chief Executive and have an input into policy. Over time we have had great interaction with the Hong Kong government and are regularly invited to speak on policy.

Jens-Erik Olsen is Chairman of the European Chamber of Commerce in Hong Kong and a professional shipowner. His shipping career dates back to 1974 as an apprentice with A.P. Møller-MAERSK. Based in Hong Kong since 1992, he started Eight Ships Limited in 1998. Jens-Erik has been active on Chambers of Commerce boards since 2001 and has been a member of Hong Kong’s International Business Committee since 2002.



Grant JamiesonHead of Forensic Asia PacificKPMG

Anthony CramptonDirector, Risk ConsultingKPMGHong Kong

How serious is the problem of overproduction?

Global multinational companies (MNCs) normally provide a factory with a license to use the MNC’s intellectual property to produce a product; for example, a Global Technology Company licensing a factory to use its optical technologies to produce DVD players. Our job is to find out whether the factory is producing the same number as they are paying royalties on. In most cases we have found miscalculations and/or overproduction although a lot of the time this can be accidental. Whether it is in China, Taiwan or Korea, it is normally the same result.

How can you determine whether a firm has in fact overproduced?

You have to understand what raw materials are used in production of the final product, such as the rare earths used in certain electronics production. From this you can usually demonstrate if a factory has in fact overproduced. The other method is to judge how long the production line was in operation, such as through electricity usage, hours worked, cartons purchased, or shipping documents.

You have to tackle it from a number of different angles, and then ask the factory managers to explain the discrepancies. Usually the principal (or MNC) will then sit down with the managers and negotiate a new royalty amount calculated on what is a realistic amount of production. This is the preferred approach.

How do the challenges differ for electronics and fashion?

Fashion is possibly easier as there are fewer component parts and so fewer parts suppliers. It allows the MNC better oversight over production, often reviewing just a single factory. The big problem though is wastage. Ultimately, control over the production process is critical and the MNC needs to ask how much of the raw material is being diverted as wastage and destined for counterfeit products.

How do the challenges for production and supply differ?

Governance of the supply chain is equally critical. MNCs have to ask how well do they know their supply chain? And, importantly, how can they segregate their supply chain participants? It’s worth considering the benefits of segregating your supply chain participants, especially suppliers of key components. Could these key components be diverted and subsequently assembled elsewhere? Would these components find themselves part of a competing or counterfeit product?

And it’s not only supply of components, but also packaging. It’s important to ask the question ‘what happens to excess packaging?’ Could genuine packaging materials be used to support a counterfeit product? What controls are in place to limit the risk of this happening?

Grant JamiesonPartner, KPMG ChinaGrant has over 25 years experience conducting financial investigations and reviews within both the Forensic and Corporate Recovery teams, of which the last 22 years have been based in Hong Kong.

Anthony Crampton Director, KPMG ChinaAnthony leads the Internal Audit, Risk and Compliance practice for KPMG in Hong Kong. He has over 16 years of professional experience in corporate governance, assurance and financial reporting, operational improvement, business integration projects and transaction advisory.



Counterfeiting is a risk you need to mitigateImagine, products with your brand name brought on to the market and sold to customers without your involvement. This is a classic and widespread form of counterfeiting.

Industry sectors most under threat, due to the high price and relatively small size of the products, are:

• Pharmaceuticals

• Luxury goods

• Food and beverages

• Equipment and machinery

Backdoor

production

Additional volumes

of products

produced at

production

facilities without

permission

Tampering

The use of

genuine products

and packaging

to disguise

counterfeits

Reuse of

packaging

Filling delete original

packaging

with

fake

products

Brand

extension

Non-existent

products of

existing

brands

Grey

market

Illegal parallel

trade

Fake & imitation

products

Copies of

original products

produced

to sell

as originals

Forms of counterfeiting

PreventAwareness

Strategy concept development Implementation

Pilot project

ResponseExtensive and reliable information

quickly available in response to:Lawsuits Police/customs actions

Public relations and communicationSupply chain cleaning

DetectMonitoring Field control

ReportingContract compliance

Vendor audit

• Retail and consumer markets

• Automotive

• Aerospace and aircraft

With a successfully implemented counterfeit risk strategy, the difference between authentic and counterfeit products in the supply chain can be easily determined, making counterfeit products more difficult to sell in the marketplace.

KPMG continues to assist many brands with implementing their counterfeit risk strategy covering ‘prevent’, ‘detect’ and ‘response’ actions.



Alan ChiuPartnerMayer Brown JSMHong Kong

Benjamin ChoiPartnerMayer Brown JSMHong Kong

How critical is a coordinated approach among IPR stakeholders?

Coordinated efforts among IPR stakeholders are important. When counterfeit goods are found, they sometimes come in assorted batches involving different brands. Smooth and effective liaison between Customs and different brand owners and their respective lawyers is required to take the matter forward efficiently. For example, if one of the brand owners subsequently refuses to give evidence at the witness box (in court) or to cooperate further with Customs, this would put Customs in a difficult position and delay the entire prosecution process. Another example: if the evidence of one of the brand owners’ examiners is not credible and creates doubts as to whether the relevant seized goods are counterfeit or not, this may not only affect the credibility of that particular witness, but may also raise similar doubts to the cases of other brand owners involved in the prosecution cases tried together at the same hearing.

How is Hong Kong better at protecting brand owners?

Nowadays, Hong Kong Customs is best known for its high efficiency and easy accessibility and is widely recognised as one of the best IPR enforcement authorities in Asia – an assessment with which we unhesitatingly agree. In the early 90s, Customs was generally less accessible and sometimes declined to initiate investigations or to take action in borderline cases, e.g., when the goods in question were not 100 percent (or close) imitations, without clear explanation. Today, Customs is readily willing to meet brand owners face-to-face and is highly responsive to brand owners’ complaints and concerns. Customs officials will explain candidly the practical difficulties they have and explore options and solutions together with the brand owners and their lawyers. Customs is also proactive in deploying new investigation, surveillance and prosecution strategies to combat counterfeits in the market. For example, the ladies’ market at Tung Choi Street, which was a notorious counterfeit hot spot, has largely been “cleaned up” by Hong Kong Customs in recent years.

Our survey showed that most consumers would stop buying counterfeits if it were illegal to do so. Why is it not illegal to buy such goods in Hong Kong?

Buying a fake item for personal use is not penalised in most countries or regions (including Hong Kong). It might be considered immoral to buy such an item, but it is not in itself illegal. There are two key reasons for this: First, the idea behind IPR protection is to financially reward the IP owner for its intellectual creation for a certain period of time and to prevent someone from copying its IP without authorisation during the protection period. (The paramount objective is to protect the IP owner against unauthorised manufacturers who take unfair advantage, but not against consumers who may buy a counterfeit product by mistake.) Second, unless there are suspicious circumstances (e.g., an unreasonably low purchase price) that should cause consumers to have doubts as to whether a product is genuine or not, it would be very difficult to prove whether the buyer has actual knowledge that he or she is buying a counterfeit.

What changes would brand owners like to see from China in terms of improving IPR protection?

Brand owners generally expect more transparency and certainty in the China trademark regime. Besides, the amount of damages awarded by Chinese courts in trademark infringement actions is relatively low when compared to the levels in developed countries like Germany and the US, and in most lawsuits in China, the winning party will not be awarded costs – most brand owners naturally expect that the Chinese judiciary can higher damages in trademark infringement cases.

In fact, the new PRC Trademark Law, which was passed on 30 August 2013, has addressed this concern by increasing the statutory damages cap from RMB500,000 under the current law to RMB3 million. Further, so far as infringement is concerned, the new law also introduces a new infringing act for knowingly facilitating or assisting infringement; imposes heavier fines in serious cases to create a greater deterrent effect; and empowers

Alan Chiu is a Partner at Mayer Brown JSM. He is a Hong Kong qualified solicitor who advises on a diversified range of contentious and non-contentious IP matters in both Hong Kong and China.

Benjamin Choi is a Partner at Mayer Brown JSM. He is a Hong Kong qualified solicitor who focuses on local and foreign trademark prosecution and is experienced in conducting IP due diligence for merger and acquisition projects involving the transaction of IP assets.



the court to order an infringer to disclose account books for damages assessment, failing which the amount of damages may be determined with reference to the assessment proposed by the trademark owner. The new PRC Trademark Law will come into force on 1 May 2014.

What changes have you noticed in China in terms of brand awareness?

Local manufacturers in Mainland China have now become more sophisticated and have developed a high level of brand awareness. Usually when local OEM factories contract with foreign brand owners to produce certain goods under foreign brands, they will ask for proofs of trademark, design or copyright registrations in respect of the designs and logos to be used on the products before production. The local factories are concerned that if they are not manufacturing for the rightful owner, then their goods will be stopped from being exported and seized by customs at the border, and they will suffer losses. In fact, many local enterprises in Mainland China realise that the OEM or ODM model is no longer competitive and have already developed or started building up their own brands.

What is the challenge for brand owners looking to manufacture in China?

Many brand owners have encountered trademark squatting issues in China – their marks are registered pre-emptively by third parties without authorisation, hence manufacturing, selling and exporting goods bearing a mark registered in the squatter’s name carries a substantive infringement risk. China adopts the “first-to-file” principle and this makes it difficult for the genuine brand owner to take the trademark squatter to court unless there is clear evidence of bad faith. Even if the brand owner has a foreign trademark registration and only manufactures goods and exports them out of China (without local sales), such acts may still constitute an infringement. Courts in different cities in China have come up with different and sometimes contradictory decisions, and whether OEM constitutes a trademark infringement in China remains unsettled as of today. It is rumoured that the Beijing Supreme People’s Court is now considering to issue a judicial interpretation to clarify the legal position in this relation.

What is the best enforcement approach against counterfeits sold over the Internet?

It is difficult to say for sure what approach is the best but we usually help clients devise the most cost-effective online enforcement strategy to meet their brand protection needs by taking into account a number of factors including but not limited to the nature of IPRs involved, the client’s core objectives, the scale of infringement, the level of similarity between the genuine and the fake items; the evidence available, the infringer’s identity and location as well as the timeline, cost, practical feasibility and pros and cons of different enforcement options.

Generally speaking, for small and straightforward cases, the notice and take-down procedure or cease & desist approach, or a combination of both, is commonly deployed. If the volume of counterfeits is alleged to be substantial, a brand owner may wish to seek assistance from Hong Kong Customs who would help dig out the wrongdoer(s). If a civil lawsuit is desired, the brand owner would need to apply to the court for a Norwich Pharmacal order against the relevant ISP for disclosure of the identity and particulars of the online counterfeit seller, before commencing the proceedings. In most circumstances, due to privacy concerns, an ISP will refuse to disclose its user’ information to third parties in the absence of a court order.



Anders JessenHead of Unit, Intellectual Property and Public ProcurementEuropean CommissionBrussels

What are the biggest challenges for European brands?

One of the affects of the internet is that consumers now directly interact with suppliers. Shipments increasingly take the form of postal packages. So whereas in the past customs could have chased down a container with 20,000 T-shirts, they now have to chase down 20,000 postal packages. You can imagine the challenge that presents for our customs officials. As for Hong Kong it is part of our statistics and for 2012 seizures by customs authorities appears in third place in terms of total number of articles seized (about 7.8 percent) and second place in terms of value of shipments(near 10 percent).

How does the European Commission engage with China on IP issues?

We have engaged in close cooperation with our Chinese partners since 2004 through an IPR dialogue and a working group. In fact, I just recently I attended our twelfth working group in Beijing. We also have a lot of technical co-operation as well as a customs IPR action plan that ran from 2009 to 2012. We are currently extending the plan and are hopeful that the extension will be concluded shortly. We are also engaging with local officials outside Beijing, as while we have seen progress in a number of areas, enforcement remains a challenge, especially at the provincial and local level.

How can the European Commission protect European brands in China?

We have to rely primarily on our dialogues and cooperation mechanisms, as, as problems derive more from the enforcement side than from the absence of legislation. But cooperation mechanisms do not achieve quick results. It has taken some time to get to a level where there is sufficient mutual trust to get a discussion going, especially as the twelfth working group meeting was the first time there were industry people present in the room. This was relatively new for China. Then there are the normal diplomatic tools. We also try to address this as part of Free Trade Agreements and other international mechanisms, such as the World Trade Organisation.

Is there room for improvement in Hong Kong’s protection of IP?

We already enjoy good relations with our Hong Kong colleagues. There are also no major intellectual property issues as such in Hong Kong. However, our rights holders are concerned about the growing role of Hong Kong as a transshipment centre for fake goods. We recognize that most of these products do not originate in Hong Kong’s territory. However, Hong Kong is still a key link in the chain. And we have to deal with every part of the supply chain of such goods.

We will also continue to work with our HK colleagues and search for ideas on to make improvements, in particular: reducing the burden and costly procedures necessary to record trademarks; reducing the evidentiary burdens of having to verify each item; and, also the fact that right holders tend to be notified very late in the process and provided only limited time to provide the necessary information.

Anders Jessen is in charge of the office in DG TRADE responsible for trade related IPR matters in relation to all third countries and leads a team of 17 professionals. The office for example represents the EU in WTO/TRIPS Council as well as in the G8 and OECD for IPR relevant files. He has a total of 28 years of working experience in both the public and private sectors, including more than 20 years at the European Commission.



Valerie SonnierGlobal Intellectual Property DirectorLouis Vuitton and LVMH Fashion GroupFrance

What is Louis Vuitton’s philosophy regarding the fight against counterfeiting?

Louis Vuitton has a zero-tolerance approach to counterfeiting, which we have always strongly fought against. The fight against counterfeiting is a duty that we owe to our customers who trust us across the world and recognise our craftsmanship, quality and creativity.

The fight against counterfeiting is also an integral part of Louis Vuitton’s international sustainable development strategy. Protecting creativity and defending the rights of designers, artists and brands is important today and in the future.

Counterfeiting is an attack on the talent and know-how of the craftsmen and the creativity of the artists to whom Louis Vuitton owes its success. It also puts at risk those who are affected by the counterfeit industry.

Louis Vuitton strongly believes that in both the online and off-line world, opportunities and responsibilities should be shared along the value chain, based on the principle that each actor should be under a duty of care to take all reasonable steps to protect consumers from misleading practices.

What do you believe is the best way to fight counterfeiting?

We believe that counterfeiting is best fought in a number of ways.

We are continuously working to reassure our clients that Louis Vuitton products can be bought only in Louis Vuitton stores or at www.louisvuitton.com, our exclusive official website.

We are closely collaborating with all the actors involved in the global fight against counterfeiting, including authorities whose collaboration is invaluable to us, in order to prevent the manufacture, transport and sale of counterfeit goods, on line as off line. Louis Vuitton is very thankful for this efficient and continuous collaboration.

We affect a lot of resources, both financial and human with a large dedicated team worldwide. Louis Vuitton has one of the largest anti-counterfeiting teams in the World. It employs a fully-dedicated team with multicultural yet complementary profiles such as lawyers and former law enforcement agents.

Our headquarter is in Paris and we have offices in Tokyo, Hong-Kong, Shanghai, Beijing, Seoul, Singapore, New-York, Dubai, Milan, Athens, Istanbul and Buenos Aires.

We fully support the need to share responsibilities along the value chain, according to the principle that everyone involved in the sale of counterfeits should conduct their business with due diligence to protect consumers from the harm of fake products.

We fully support awareness campaigns to help authorities sensibilize and educate the consumers.

What is your feeling for the future in Asia?

In 2012, Louis Vuitton, has conducted 9 000 raids and launched 4 700 legal actions with the support of the Asian local authorities.

We are very grateful to all the efforts made in many Asian countries tackling counterfeiting and we recognize the challenge and complexity of this task.

Accordingly we are confident, due to our strong collaboration with the local authorities on all levels, that we will continue strengthening our battle against counterfeit.

At Louis Vuitton, we consider it our duty to our customers to protect the image and value of our brand, preserving the creativity and the rights of designers, artists, and brands is vital.

Following its respect for creativity, savoir-faire, and protection of intellectual property, Louis Vuitton has zero tolerance policy to counterfeiting.

Valerie Sonnier is Global Intellectual Property at Louis Vuitton and seven of the LMVH’s portfolio companies. Based in Paris, she heads up Intellectual Property for these companies worldwide. Her previous work experience includes Director of Trademark and Internet Department for the group Decathlon, Intellectual Property Director for the group Bic.



Anita WongManaging DirectorTNSHong Kong

What do you see as the main finding from the survey TNS has conducted?

There are several, but I think the top finding is a positive one: across almost all categories less consumers plan to purchase counterfeit goods in the future as compared to the past. This indicates that on a macro level the problem at least is becoming smaller. On the other hand, the remaining percentages are not minor: those planning to download pirated films, music and/or software are in the high teens and low twenty percentages. And those planning to purchase pirated clothing, shoes, bags and wallets are in the low teen percentages.

What do you think explains the difference between these two categories—branded and electronic goods?

A key difference is the perceived difference in quality between the pirated and original product. There is usually a discernable difference in the clothing/shoes/bags/wallets category. But there is hardly any difference at all between the perceived music quality of an illegally downloaded copy and a legal one downloaded from say iTunes. Absurdly—sometimes the illegal copy can have a better quality.

A second very important difference is particular to Hong Kong; in the films/music/software category it is not actually that straightforward to download what you want in a legalized and easily accessible manner. We can say that the piracy percentages are high in that sector due to the absence of easily accessible legal alternatives.

What do you think the entertainment industry could do to change this?

We also know from our survey that 41% of Hong Kong consumers would prefer to pay for online music, but they don’t as they find it difficult to do so in Hong Kong. This is a huge missed opportunity that can be leveraged by opening up portals that offer a range of digital content catering to Hong Kong consumers that is easily accessible. Even iTunes has been late to

the Hong Kong market as they opened up their Hong Kong store only halfway 2012—while having been around many years prior.

Another thing the industry can do is already happening: introducing subscription services. These are services such as Spotify that allow you to listen to as much music as you like for a monthly fee. Also, Microsoft has started selling Office 2013 as a subscription service. For the consumer these are good models as you get the latest software / music at a price level that is acceptable on a month to month basis.

And what can the luxury branded categories do to further reduce demand for counterfeits?

Of course a lot of good work has already been done as the survey has indicated. And the collaboration between brands and the government are a strong case for Hong Kong.

I believe some of the luxury brands are or were late to have an integrated eCommerce strategy. From a brand strategy perspective an organization may decide not to have its own eChannel. However it still needs a policy or strategy around the eChannel. When a brand decides not to have its own eChannel other businesses will jump in on that opportunity. These businesses may offer genuine parallel import goods or—in the worst case—they may offer pirated goods. The original brand owner must participate and be involved in this eChannel and the supply chain behind it to protect its own brand.

What else caught your eye?

The survey also has another very interesting finding: over 80% of consumers are saying that the potential legal consequence of buying copy products would deter them from further purchase. In other words, legislation can be effective in alleviating the current counterfeits situation.

Anita Wong is a very experienced researcher bringing over 16 years of knowledge. Her area of expertise covers across market landscaping, segmentation, product development, concept evaluation to customer satisfaction. Anita is also a specialist in the consumer sector. She is known of her extensive experience in working with client on various marketing issues as a trusted partner / advisor. Prior to joining TNS, Anita was the general manager for Ipsos Hong Kong. Anita attained her BS degree in Statistical Science from University of Toronto and her Post-graduate degree on Statistics from Sheffield Hallam University, UK.



Sophie MolleIPM Project ManagerWorld Customs OrganisationBrussels

Is IPR enforcement or consumer education more important when tackling the problems of counterfeit goods?

Both are equally important. Respect for IP needs is to be fostered and consumers need to be empowered and possess adequate information to inform their purchasing decisions. Sole enforcement will not alone deliver results.

We need to adopt a holistic approach that would encompass education initiatives, enforcement operations; actions towards local media houses and editors; involving consumer activists; identifying state-specific issues; and collecting data to assess the magnitude of the problem and to quantify the grey market percentage across industry sectors and its economic impact on industries and government. Likewise, the media and the judiciary as well as intermediaries and legal practitioners need to be fully aware of the issue.

How important is a coordinated regional approach to stronger IPR enforcement?

Coordination is needed at all levels: global, regional and national.

Today, a very common type of cross-border transaction often involves what appears to be an erratic criss-crossing of consignments, enabling the true origins to be obscured and new documents, including fake, certificates of origin to be issued.

Counterfeiters think global and act global. They analyse interceptions, understand how their shipment was targeted and change patterns. They will use another company to transport their goods, declare the goods in a different way, mix genuine and fake products, send the fake marks in one shipment and the fake components or ingredients in another, and move the goods differently.

Counterfeiters also exploit the differences in border control from port to port and may divert the arrival point of their goods to neighbouring countries with the intention of moving the goods by other transport means into another country. In this context, regional cooperation strikes a particular chord.

We have identified many good practices in this domain. In Nigeria for example, there is a strong cooperation between the Customs administration and the Nigerian Copyright Commission at the national level. The former notifies the latter of any consignments coming into Nigerian seaports with copyright

material. The Commission now wants to extend this cooperation with Customs offices in neighbouring countries and is hoping to generate timely intelligence reports on the movement of such goods in the entire region.

How important is a coordinated approach among IPR stakeholders?

Customs administrations have, with the support of the WCO, developed risk analysis techniques for targeting and selection, thus enhancing the effectiveness of border controls. However, Customs services can only fine-tune their risk indicators with information from the business community. Progress could and should be made on this front in order to expand co-operation.

Right holders are often in possession of vital data which they are anxious about sharing with Customs administrations. This “squandering” of information is a stumbling block to achieving results, and efforts must be made to build an atmosphere of mutual trust. Developing information sharing mechanisms on, for example, the origin of seized products and the names of companies and individuals that have committed offences, as well as sharing experiences with Customs can go a long way towards remedying this problem.

As the old saying goes, “united we stand, divided we fall”. With this in mind, the establishment of a right holders association on a national basis or by industrial sector is also a first-rate means of increasing cooperation. A great many problems can be solved through dialogue and by holding regular meetings. Customs administrations and right holders or their representative associations could additionally consider concluding Memoranda of Understanding which could lay the basis for a stable partnership with built in mechanisms for sharing information and working more closely together.

It is imperative for the private sector to work with Customs administrations and offer training sessions that will improve skills of officials in identifying “real” products. For Customs, further to familiarising themselves with these products, meetings with right holders enables both parties to find out more about each other and as a result work together more effectively. There is absolutely no doubt that such workshops would be of benefit to both Customs officials and right holders. This form of partnership is the basic starting point for co-operation at the national level and will certainly enhance the Customs-business dialogue.



The WCO has been actively promoting this dialogue. We invite right holders to provide dedicated training in product identification techniques every time we organize an IPR enforcement operation. We have also developed a tool called IPM which serves as an interface between field Customs officers and the private sector. It contains specific information on products, such as the routing and packaging of genuine goods and gives direct access to right holders and their representatives. We strongly encourage right holders to join IPM.

Compared with national IPR databases, IPM is a global tool, available to all WCO Members that request it. New functionalities enable officers to use IPM from mobile devices and to access product data by scanning barcodes. To make this last option possible, the WCO has been working hand-in-hand with GS1, the international not-for-profit association dedicated to the design and implementation of global standards and solutions to improve the efficiency and visibility of the supply chain.

GS1 standards, which enable unique and unambiguous identification of items, are used by millions of companies in dozens of sectors, including the retail supply chain, healthcare, transportation and logistics, aeronautics, defence, chemicals and high-tech industries. By scanning the GS1 barcodes found on a product, Customs officers are able to retrieve the unique product identifier embedded in the barcode, and thereby access multiple databases that provide trusted sources of product information. IPM is opening up the world of product data to Customs officers, and the WCO hopes that this will improve the identification of counterfeit and fake goods at borders.

Sophie Molle is Project Manager at the World Customs Organization (WCO) based in Brussels since 2010. Sophie is responsible for the promotion of the IPM tool amongst the private sector. She also supports and participates in the organization of the interception operations conducted by M. Christophe Zimmermann all around the world.



Tavs Jensen VagnbyOwnerInternational Design HouseHong Kong

What challenges have you faced with fake products?

You can fake in many ways. You can copy products or you can fake the materials. I had a case where I tested my products in China and everything was in good order. But the manufacturer had provided genuine products for testing, and then used fake materials in the actual shipment. We had to destroy them and the whole shipment was lost. The Denmark authorities contacted the Hong Kong authorities who later visited my company. They found we had done everything right and were not to blame. It was the supplier who was to blame.

We also have problems with suppliers who steal our designs. When you ask for a quotation, you have to give the supplier detailed designs. If they like your product, but don’t want your business, then they simply copy the product’s design. Some times it takes one to two years to develop a design, only for the manufacturer to simply take it. If the function is simple but smart, then you cannot protect it by patent. The manufacturer just has to change a few angles or use a different material and you can’t protect it.

I have also had problems with designers in Hong Kong. The first thing they ask me to do is to sign a non-disclosure contract before I see anything. So I sign and take a look. But I find there is nothing for me. If they have skills, then I give them tips on the types of products I am looking for and they go away to rethink their initial proposal. But then they come back to me with a design that is almost identical to the one I initially discussed. Now, the problem is that I have signed a contract with them and our ideas get stolen.

What types of measures can you use to prevent fake products?

We have seen a lot of surplus production purchased by parallel importers who sell it onto Europe. What we do is to make sure we don’t put the whole production order into the hands of a single supplier. I use a separate company that provides the printed packaging. If you let the manufacturer take care of the packaging, then it is easier for them to have surplus production.

We also put a batch number under the flap of the boxes and then glue the flap down. If we have a suspicion the watch is a parallel good, then we can simply check under the flap and see if there is a correct batch-number.

Do you find that smaller firms have few problems with fake goods?

Sometimes it helps to be smaller. I have some products that sell one million copies. But the copy-cats simply do not see me, as I’m not a major global brand. That is a very good thing. But the bad thing is if they do decide to copy my products, then it is very difficult to fight them, as I simply don’t have the same legal resources as a big global brand.

How important is IPR protection for Hong Kong’s economy?

A lot of companies sitting in Hong Kong are thinking of moving back to Europe because of troubles protecting for designs. Maybe it’s the fault of copy-cats in the mainland. But that’s still not good for Hong Kong or China.

Tavs Jensen Vagnby is founder and owner of International Design House Limited, a Hong Kong-based company designing, developing, and producing high-end Danish products. His company works with most of the big Scandinavian design companies, such as Nuance, Eve Sola, Jacob



Haochen SunProfessor of LawDeputy Director, Law and Technology CentreUniversity of Hong KongHong Kong

How can the luxury goods sector change consumer attitudes towards counterfeit goods?

In my opinion, appropriate public education about intellectual property is very important. Often time, people buy counterfeit goods without the awareness of the potential infringements of intellectual property rights.

Luxury companies do need to take cultural considerations seriously when they enforce intellectual property rights in Asia. For example, the traditional cultural backgrounds of many countries in Asia may not necessarily lead strong support to intellectual property protection that has existed in western societies for a long time.

Has the rise of online piracy changed consumer attitudes towards counterfeit goods, including luxury goods?

It is a very complex issue. The rise of online piracy has made much easier for the public to have free access to entertainment products. Many consumers have found it easier to obtain counterfeit luxury goods from online stores.

But on the other hand, social media like YouTube has helped artists and entertainment companies popularize their works and thereby obtain revenues from other channels (e.g. advertisements). Recent research has also revealed counterfeit goods have the gateway effect. They may arouse the desire of users of counterfeits to buy and own genuine luxury goods, after users experience the poor quality of counterfeits and the benefits of using luxury brands.

Moreover, the success in countering online piracy has made it easier for luxury companies to take full advantage of social media to advertise their products to the larger public.

Are the challenges of counterfeit goods different for the luxury goods industry as compared to the entertainment industry?

In general, counterfeit goods have led less number of consumers to buy genuine entertainment products. Therefore, the major challenge to the entertainment industry is the direct loss of consumers. However, that should not be the major concern for luxury companies, because regular luxury consumers are generally not willing to buy counterfeit goods. What they want is genuine goods and they are willing to buy luxury goods at high prices.

Core to the luxury industry is brand exclusivity. Counterfeit goods will negatively affect brand exclusivity, because they allow people who are not able afford genuine luxury goods to own unauthorized “replicas” of luxury goods. Moreover, counterfeit goods may tarnish the quality reputation of luxury companies.

Haochen Sun is currently an Assistant Professor of Law at the University of Hong Kong and Deputy Director of the Law and Technology Centre at HKU. Haochen teaches and writes in the areas of intellectual property and property. His most recent research includes intellectual property protection of luxury goods.





ConclusionThe results of our survey point to Hong Kong’s success in protecting brands and promoting brand awareness. This is due to the strong collaboration between government and private industry.

Indeed, the sponsors of this report are fortunate to have developed a close working relationship with Hong Kong Customs over the years, and the department has always actively supported initiatives towards the improvement of IPR awareness and enforcement in Hong Kong, such as through the Intellectual Property Rights Protection Alliance (IPRPA) and the E-Auctioning with Integrity program. The council and all the participants in this report are deeply appreciative of Hong Kong Customs crucial role.

However, the report also indicates that efforts by private industry and Hong Kong Customs must be sustained, especially given the speed at which counterfeiters are evolving.

To this end, the European Brands Protection Council’s members see room for further gains, specifically: to more effectively tackle the growing number of counterfeit goods transhipped through Hong Kong; to more actively share intelligence with rights holders in Hong Kong and with other customs agencies; to increase co-operation with Hong Kong postal services; to simplify procedures of product examination; and to protect the traceability information on products.

Tackling these issues would only consolidate Kong Kong’s leading commercial role in the region, supporting the growth of the local economy, encouraging further foreign investment, and providing a model for what government and private industry can achieve together though collaboration and ongoing dialogue.





About KPMGKPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 156 countries and have more than 152,000 people working in memberfirms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

In 1992, KPMG became the first international accounting network to be granted a joint venture license in Mainland China. It is also the first big four accounting firm in Mainland China to convert from a joint venture to a special general partnership, as of August 1, 2012. The firm’s Hong Kong operations have additionally been established for over 60 years. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the firm’s appointment by some of China’s most prestigious companies.

Today, KPMG China has around 9,000 professionals working in 14 offices; Beijing, Shanghai, Shenyang, Nanjing, Hangzhou, Fuzhou, Xiamen, Qingdao, Guangzhou, Shenzhen, Chengdu, Chongqing, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently and rapidly, wherever our client is located.

About the European Brands Protection CouncilThe European Brands Protection Council (EBPC) is an initiative by the European Chamber of Commerce (ECC) in Hong Kong with focus on IPR and wider trade related issues in Hong Kong and Macau. It was founded on 15th May 2012 by representatives from European companies from various business sectors. It is a member driven, non-profit and free membership group.

The EBPC’s aims are to bring together experts in the IPR field in Hong Kong and Macao on a regular basis, brainstorm on policy, regulatory, and market access issues in order to disseminate information on changes in the EU regulatory systems on matters of concern in the field of IPR and wider trade related issues.

The EBPC’s purpose is to aggregate the interests of the EU Industry and EU Business Associations in dealing with government departments, public authorities and other organizations in the EU, Hong Kong, Macao and the Mainland and provide the European Chamber of Commerce and the European Union Office with timely market access information as well as input for bilateral policy formulation and talks with the governments of Hong Kong and Macao.

The EBPC is currently chaired by Mayank Vaid, one of the founding members of the council. Mayank is the Intellectual Property Director - Asia Pacific for LVMH Fashion Group Pacific Limited and is based in Hong Kong.

About Mayer Brown JSMMayer Brown JSM is part of Mayer Brown, a global legal services organisation advising clients across the Americas, Asia and Europe. Our presence in the world’s leading markets enables us to offer clients access to local market knowledge combined with global reach.

We are noted for our commitment to client service and our ability to assist clients with their most complex and demanding legal and business challenges worldwide. We serve many of the world’s largest companies, including a significant proportion of the Fortune 100, FTSE 100, DAX and Hang Seng Index companies and more than half of the world’s largest banks. We provide legal services in areas such as banking and finance; corporate and securities; litigation and dispute resolution; antitrust and competition; employment and benefits; environmental; financial services regulatory & enforcement; government and global trade; intellectual property; real estate; tax; restructuring, bankruptcy and insolvency; and wealth management.

Please visit www.mayerbrownjsm.com for comprehensive contact information for all our offices.



About TNSTNS advises clients on specific growth strategies around new market entry, innovation, brand switching and stakeholder management, based on long-established expertise and market-leading solutions. With a presence in over 80 countries, TNS has more conversations with the world’s consumers than anyone else and understands individual human behaviours and attitudes across every cultural, economic and political region of the world.

TNS is part of Kantar, one of the world’s largest insight, information and consultancy groups.

Please visit www.tnsglobal.com for more information.

About KantarKantar is the data investment management division of WPP and one of the world’s largest insight, information and consultancy groups. By connecting the diverse talents of its 13 specialist companies, the group aims to become the pre-eminent provider of compelling and inspirational insights for the global business community. Its 28,500 employees work across 100 countries and across the whole spectrum of research and consultancy disciplines, enabling the group to offer clients business insights at every point of the consumer cycle. The group’s services are employed by over half of the Fortune Top 500 companies.

For further information, please visit us at www.kantar.com.

About Silk Road Associates Silk Road Associates is a strategy consultancy and economic advisory helping clients grow their commercial footprint across the fast growing Silk Road economies with a specific focus on China, Southeast Asia and the Middle East.

We provide a range of services from business strategy to market studies to operational support. Our directors include experienced consultants, business strategists, economists, and operational specialists. Our clients are present in a variety of industries and include multinationals, mid-sized companies, and financial institutions.

Led by Ben Simpfendorfer, a former chief China economist and specialist in ties between Asia and the Middle East, we understand the challenges of operating across multiple countries and within an increasingly interconnected region. With offices in Hong Kong, Beijing, and Melbourne, we also provide insightful and independent local knowledge on the region’s fast changing markets.

We would like to thank our editor, Ben Simpfendorfer for his assistance with this report.

Ben SimpfendorferManaging Director+852 2293 [email protected]



Contact usKPMG

Grant JamiesonHead of Forensic Asia Pacific+852 2140 [email protected]

Katy WongPartner, Forensic+852 2140 [email protected]

Anthony CramptonDirector, Risk Consulting+852 2847 [email protected]

Anson BaileyPartner, Business Development+852 2978 [email protected]

European Chamber of Commerce

Jens-Erik Olsen Chairman +852 2511 [email protected]

Mayank VaidChairman of the European Brands Protection Council +852 2511 5133 [email protected]

Alfred TsangAssistant Manager+852 2511 [email protected]

Mayer Brown JSM

Rosita LiPartner+852 2843 [email protected]

Benjamin ChoiPartner+852 2843 [email protected]

Alan ChiuPartner+852 2843 [email protected]

Connie S.Y. Yu Director of Business Development and Marketing +852 2843 [email protected]

TNS

Anita WongManaging Director+852 2328 [email protected]

Piotr JJ SzymanskiPractice Lead - Customer Experience+852 2328 [email protected]

Fiona ChanProject Director+852 2328 [email protected]



© The European Chamber of Commerce in Hong Kong. 2013. All Rights Reserved.

© 2013 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

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Publication date: September 2013

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Intellectual Property Rights Study - Mayer Brown · 2 Intellectual Property Rights Study ... each participating in a 10-minute questionnaire ... Hong Kong buy ready-made-clothing