Foreign executives fighting rampant piracy of intellectual property say China remains the world's worst offender, but a string of court victories and legal changes offer hope Beijing may finally be getting serious.
It took only a couple of days for mainland pirates to get bootleg DVDs of "The Da Vinci Code" onto the streets after the movie premiered last month, and US software and entertainment firms alone say such piracy costs them $2.5 billion a year.
But last week's decision by a Chinese court to uphold Pfizer Inc's patent for its blockbuster drug Viagra follows another successful lawsuit by Starbucks Corp, which accused a Chinese rival of copyright infringement.
Moreover, China has drafted hundreds of copyright, patent and trademark laws in order to meet its commitments to join the World Trade Organisation in 2001, and foreign law firms are hiring staff in China to handle the surge in legal challenges.
Of course, foreign executives have heard it all before and prefer concrete evidence over more promises. But even some sceptical corporate lawyers see signs of progress.
"We are happy with this Viagra ruling," said Elisabeth Haselhorst, a patent attorney for the German drugs and chemical group Bayer in China.
"Things are moving in the right direction, but more needs to be done."
Despite the successes, lawyers say Beijing needs to close loopholes and increase punishment for Chinese firms that file local patents based on other companies' innovations.
European Union Trade Commissioner Peter Mandelson, visiting China this week, praised an agreement aimed at stamping out the sale of counterfeit goods in Beijing's Silk Street market, but he said the problem remains widespread.
"Probably the most important issue in Europe's relations with China is the protection and enforcement of intellectual property rights. It is as serious and as big as that," Mandelson said in a speech to business executives and lawyers.
"The situation still remains problematic on the ground."
Even so, initial court victories are proving a boon to law firms, as companies seek to test China's new legal protections.
"We are adding people because we have a lot of work dealing with IP disputes," said Wang Xiang, the co-head of Jones Day's intellectual property unit.
Wang's group had one person a year ago but now has 15 lawyers and could add another two this month.
"But it will still take time before the legal structure is in place," Wang cautions.
Patent applications in China have grown by over 20 percent in each of the past five years, according to state media, with foreign firms claiming the top 10 places in 2005.
South Korea's Samsung Electronics Ltd topped the list with 3,508 applications, while China's top telecoms gear maker, Huawei Technologies, was the most active local company with 3,409 patent applications.
CHINESE PATENTS KEY:
Some foreign executives say Chinese companies such as Huawei and Lenovo Group Ltd, the world's third-largest PC maker, are the key to helping change attitudes about piracy in China as they seek government support to protect their own products from local rivals.
"We are always happy to see government efforts to protect intellectual property rights," said Fu Jun, Huawei's spokesman. "It is the only way to encourage innovation," he said.
Meanwhile, Lenovo and three other leading Chinese manufacturers agreed earlier this year to pre-load licensed Microsoft Corp's operating system onto their products - a move aimed at discouraging consumers from loading cheaper, pirated versions by themselves.
The percentage of foreigners involved in intellectual property cases filed in China last year increased 77 percent over 2004, which Jones Day's Wang says is a sign that foreign executives are gaining confidence in China's courts.
Despite the rise, foreigners are involved in only about 2 percent of the intellectual property cases that are filed in Chinese courts.
"We have established a very positive dialogue with the government, which is very aware of the problems," said Bayer's Haselhorst.
Last month, Chinese President Hu Jintao again called for stronger protection of intellectual property rights, saying the steps were needed to foster innovation and boost the country's international competitiveness, state media reported.
Foreign firms will watch whether lawmakers at next year's National People's Congress follow through on Hu's stated priority. Drafts or revisions of 17 laws and regulations relating to trademarks, copyrights, patents and customs could be considered by the congress, according to law firm Paul Weiss.
With some courts beginning to recognise legal protections, more foreigners have begun filing for patents.
"Foreign companies are monitoring the progress in the courts and have seen several champion cases that indicate that the courts are capable and willing to provide an effective remedy," said James Zimmerman, a Beijing-based lawyer with Squire, Sanders & Dempsey LLP.
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