reported significant progress in online licensing agreements involving audiovisual products, particularly movies and TV series. As noted above, Baidu signed contracts with three international record companies - Universal Music, Warner Music, and Sony Music - that, through Baidu's joint venture online music portal, One Stop China, authorized Baidu to upload an entire catalogue of music available for paid user legal downloads and streaming.
Chinese authorities also targeted online sales of counterfeit hard goods during the Special Campaign, focusing on audio-visual products, electronic appliances, apparel, cosmetics, foods, fake or adulterated medicines, and mother and baby products. Numerous enforcement raids and other activities were carried out in key areas of Zhejiang, Shanghai, Guangdong, and Beijing. The State Administration for Industry and Commerce (SAIC) also issued Order 49, which addresses some of the enforcement issues that pertain to online counterfeit offerings and sales/payment platforms, but its implementing regulations are still being developed. Numerous websites and online stores were closed down, and notable sales sites including Taobao, eBay, and Paipai worked with authorities in an apparent effort to improve their IPR enforcement practices.
In summary, U.S. rights holders in the trademark and copyright sectors have reported that enforcement agencies in China were markedly more active in conducting raids, seizures and arrests during the Special Campaign. It also appears that during the Special Campaign the Chinese Government focused its efforts with respect to infringement that occurs online in a manner that was meant to ensure that online entities were more responsive to requests from rights holders to remove infringing materials. At least one industry submission commented positively that the Chinese Government's efforts during the Special Campaign "generated goodwill" among rights holders and sparked some cautious optimism that a recognition of the need for IPR protection and enforcement in China may finally be starting to take root.
Given the results of the Special Campaign, the United States welcomes the creation of the National Intellectual Property Enforcement Office, which is led by Vice Premier Wang Qishan and staffed by the Ministry of Commerce (MOFCOM) and its division on Market Order and Supervision. The office was established in November 2011 under State Council Order 37 to provide a permanent mechanism under senior leadership for IPR enforcement and investigation. The United States looks forward to engaging with the office and working to ensure that the good progress made on these issues during the Special Campaign continues unabated.
Software legalization
Another key component of the Special Campaign was a software legalization initiative designed to ensure that government agencies use only legitimate, licensed copies of software. Central authorities announced they had completed software legalization in central-level government offices in May 2011 and would continue provincial-level legalization through October 2011. Because the legalization efforts were not completed at the provincial-level, the government extended the process into 2012. As a result of these efforts, U.S. software companies have seen a modest increase in sales to the government. However, much work remains to be done with respect to the state-owned enterprise (SOEs) sector, which reportedly continues to suffer from high piracy rates and which, according to the World Bank, accounts for 27 percent of China's industrial output. Software piracy by SOEs is particularly pernicious, because it not only results
28
