IPR Strategies for the Environmental Technology Industry

[ Silence ] >> Barbara: Welcome and thank you for standing by At this time all participants are in listen only mode During the question and answer session please press star, 1 on your touchtone phone Today’s call is being recorded If you have any objections you may disconnect at this time I would not like to turn the meeting over to Mr. Matthew Sullivan from International Trade Administration You may begin >> Matthew: Thank you Barbara I just want to thank everyone for staying on the line We apologize for some of the delays We just had some technical difficulties but thank you for joining us this afternoon for the Department of Commerce China Webinar Series Our speaker today will be Alex Koff a Partner and a Chair of International Practice at Whiteford/Taylor/Preston in Baltimore Alex will speak today about the state of our protection for environmental technologies, the companies in China and strategies companies in that industry can take to protect their IPR With that I’ll turn it over to Alex and thank him for joining today Thank you >> Alex Koff: All right, thanks Matt This is Alex Koff As Matt said I’m a partner and Attorney at Whiteford/Taylor/Preston We have 8 offices in the United States and some alliances worldwide My email [email protected] and my U.S. mobile is (202) 262-1197 Thanks for staying online despite the technical difficulties What we will do is we have a number of slides here We’re going to break up the presentation into 4 discreet parts The first part is an overview of the U.S /China relationship and I’m going to flip this slide so you can see the outline Part 2 is a discussion of the rise of environmental and clean technologies Part 3 is a discussion of Chinese imports into the United States and options to protect your business So it’s a flow from China to the United States And the third is protecting your IP in China If you decided to make the jump into the Chinese market, what can you do to protect yourself and what are some ideas in advance, as well as when you’re there And then I’ll conclude with a couple of suggestions And in general, slides zero to 24 are dealing with the China overall U.S. China relationship, 24 to 40 are talking about the rise in environmental clean tech, 41 to 50 are dealing with trade remedies and 51 to 63 are dealing with some direct IP considerations so, in total 41 to 63 is that part 3 Part 4 is 65-80 and conclusions are on page 81, contact information is the last slide on page 82 I’m going to also watch the time, if you have questions please, by all means, send them through and we can try and stop then and get them The slide that you’re now looking at, slide 3 the U.S /China Relationship, many of these issues are not new Sinophobia a fear of China is a big issue The theme, I’m going to move quickly through a lot of these slides as background for you The economy really is number 1 in jobs focus, and assessment and recommendations are what we’re going to look at but the idea is really the Presidential Elections coming up in November 2012 is really going to shape our entire U.S /China relationship I think And to understand where we’re going to go forward in U.S. policy, I think we need to know where we’ve been and what we’re going to do now is look at some particular slides that I wanted to point out to you the key focus For instance, I don’t have a pointer so I don’t think you can see what I’m looking at, but on the Committee On Finance page on this slide, Max Baucus is the ranking member on the Committee On Finance and here he was talking about trading rights, distribution rights, services, these things are quite important to him and later he was quite effective at instituting a change to trade adjustment systems if you can see at the bottom the note, 19USC2272 There’s an issue that’s of importance to a particular, powerful member in a finance committee like Max Baucus’ is, it’s something that will be reoccurring, likely will be going forward successful U.S. policy I would suspect China trade history deficit, if you look at this slide, I’m going back here to the history 2005, Senator Dorgan and Senator Clinton at the time was introducing measures to cap the trade deficit at 5% The third bullet on there, talks about the Companion Bill introduced by at that time, House Representative Benjamin Cardin from Maryland Benjamin Cardin is now a U.S. Senator and Senator Clinton is now Secretary of State They were both interested in the trade deficit issue and I think they are watching it closely I think U.S. policy is also something to watch on trade deficit issues The next slide deals with CNOOC, China’s National Offshore Oil Corporation

For those who remember there was a big off keyhole in the South Swell against China buying U.S. ports There is something called CFIUS review which is the Committee on Foreign Investment in the United States and even President Clinton was involved in looking at the CNOOC issues, energy, oil, clean tech, hot button issues when it comes to China at least historically And the next slide deals with U.S /China relations and it’s a slide that lists Foreign Affairs Magazine and some of the titles in the runoff to election when President Obama was running in 2007/2008, he wrote an article called “Renewing American Leadership” in July and August of 2007 It had nothing to do with economics it was mostly the war in Iraq and in the Middle East but the titles in 2008 and the actual year of the election, I took some of those titles, they are Changing China, China, and is America in Decline and then Handling the Economic Challenge From China So the issues all dealt with China and where China is going to India and Africa and nestled within there, there’s a question is America in decline? He was at the forefront, I think back then and even more so in this election today Obama and Trade Policy, he gets elected One of the first visits he makes is to Canada and he had a conversation there in Canada with Prime Minister Steven Harper and this was in February of 2009 He talked about NAFTA and NAFTA being different than China and saying that the NAFTA relationship has to be important But again, China was put off to a different category Next slide here is Protectionist Sentiments and so again, 4 years ago and it’s looking at steel issues and the steelmakers And if you look at the slide from the Wall Street Journal, it talks about there’s a rafter of steel trade remedy cases which are coming in and there’s a lot of China bashing going on at that time Protectionism Buy America issues, China Currency Practice if you remember in February of 2005 Senator Schumer, again a very strong, important Senator, he was very key and very on the democratic side for the Senatorial Campaign Committee for the Democrats He adjures the bill, a bipartisan bill with Senator Graham allowing for U.S /China currency re-evaluation in position of 27.5% tariffs This was in February 2005 because the Bush Administration had not gone forward to try and change Chinese policies as it dealt with those issues And all of this will be quite relevant when [inaudible] of the IP focus and I know that those companies that are here will wonder why am I getting this education on China? I think it’s going to be important background to understand if you’re there, how your business may be affected Some other major issues which we’ve touched on Consumer Product Safety, if you remember Mattel had a big problem with toys and a massive recall And then I wanted to talk a little bit about the State of the Union Address and Jobs and Exports The President in January 2010 when he was announcing the NEI, the National Export Initiative which is now about 2 years into it, said, “Jobs must be our number one focus in 2010” And he said we need to double our exports over the next five years And then he also mentioned clean energy a number of times in that same speech He said, “We can put Americans to work today building infrastructure of tomorrow, there’s no reason Europe or China should have the fastest trains and new factories for clean energy products.” He said China is not waiting to revamp its economy They’re making serious investments in clean energy because they want those jobs and he was looking clearly to try and put American’s to work building clean energy facilities And he said it’s time to finally slash the tax breaks for companies that ship our jobs overseas and give those breaks instead to those that create jobs right here in America This was from January 27, 2010, two years ago And if you look and understand the way Washington works and the way the power-players are working, again, this is Max Baucus that Chairman of the Finance Committee, he held a hearing and he said our most– this was on March 3rd said, “Our most urgent economic goal must be to create jobs.” Echoing what the President said “We must do everything possible to open markets and promote our exports.” And he proposed a 5 step plan First was export promotion, trade agreements, key markets, and he wanted and expects more calls on access in China, and so forth The trade balance is something that I think people are looking at as well, and if you look at the trade balance on this particular slide for those who aren’t on audio only, there’s a trade balance here that shows China versus the overall U.S. trade balance And I’ve just inserted a line which shows that generally the U.S. trade balance with China not being seasonally adjusted is flat

But the overall U.S. Trade balance has decreased since July of 2008 compared to today And a lawyer or someone looking at this from a policy perspective may say, well the U.S. trade balance with China has become a larger proportion of the overall trade balance and they say that the U.S. needs to fix that when it comes to China Jobs and Trade is squarely on everyone’s mind, and it’s hard to exaggerate how bad the job market is I gave a couple quotes, once in the Wall Street Journal that says 1 out of every 5 men, 25-54 isn’t working and this is across all the major papers Washington Post said well who is going to double their imports It’s just not clear and the New York Times said at that time many of the jobs lost during the recession are just not coming back Well what are the jobs right now? In May of 2011, a year after this, we still had 9% unemployment and this was looking at the U.S. Jobs Rate coming out from the Bureau of Labor Statistics And one year later, you guessed it, that’s still squarely and centered unemployment rate unchanged one year after that at 9.2% No U.S. President has won re-election with over 9% unemployment So that’s a big magic number that people are looking at Brought forward to just this past week, March 9th, the unemployment rate remained unchanged from February, but it had dipped and now it’s at a historically high 8.3% but with more than 12.8 million people out of work But it’s lower and it’s dipped below that 9% so things are improving but it’s still squarely in front of where people are supposed to be The slide, for those on audio, has a picture of a large horse, and a small horse and the slide says Global Economy, then and now And at the top is says, “Different Beds, Same Dream” That’s a play on a Chinese phrase that says, “Different Dream, Same Bed” Between a husband and wife who may be together but have different ideas on the world Here, what the slide is meant to show is that we’re all in it together and China and the United States really need each other to move forward, and then we’re going to talk a little bit about the rise in environmental technology now that you have a background to the U.S. overall China relationship In The Rise to U.S Relationship in Clean Tech, when Senator Clinton, who then became Secretary of State Clinton went to China for the first time, she said in February of ’09, President Obama hopes to make climate change the centerpiece of a broader, more vigorous engagement with China and she said the opportunities in China are unmatched anywhere in the world And she invited China to join the United States as she toured energy efficient power plants in Beijing and gas powered fire plants that sold GE turbines which she said were nearly twice as efficient as coal-fired plants Now take this, and what I wanted to do is show you how the U.S. Policy perspective works directly with how your business can flourish I’ll have some slides and I’ll run through them quickly given the time on Smart Grid Technology Smart Grid in the place called the Tres Amigas project for those who may not know about it is the electricity transmission project that a powerful substation connecting the eastern/western Texas grids in the United States, and there was a discussion about whether cold cables that are produced by American superconductor could help in that transmission line There was a bill introduced by House Majority Leader Steny Hoyer, who is also from Maryland, that we can authorize federal government funding to cover half the cost of high-voltage transmission projects Cold Cables move large amounts of electricity in a small space They do it with low-resistance wire through pipes that are chilled with liquid nitrogen that brings the temperature down to minus 321 degrees Fahrenheit So it provides more slippery medium for moving electricity than conventional copper or aluminum wire whose efficiency degrades as they heat up But the problem is it’s quite expensive to move it and as the liquefied gas cools, it requires pumps and refrigeration units every some miles to keep them efficient Well, if you look at who produces this American Semiconductor, they also have the international locations Korea, India, and Beijing as well as some other places And now if you look at it over time, overlaying what we said in the first section to what we have here today, you have a timeline from February 1, 2009 Secretary Clinton goes to China and says that climate change is going to be centerpiece of more vigorous engagement with China On the 12th of May, 2009 Steny Hoyer introduces the clean energy bill, on the 13th of October, 2009 there’s a number of arsenals that come out in the popular press talking about the Tres Amigas Project and asking is this the future of clean energy? In January of 2010, the President issues his State

of the Union Speech saying that he’s not going to seed the clean energy sector to these other nations and then in March of 2010, you have Senator Max Baucus talking about the Senate Hearings Regarding the Presidents Trade Agenda What I’m trying to say here is there’s a number of ways to read the tea leaves and you can understand what’s going to happen in the future by looking at what happened in the past So March 3rd of 2010, at the same time that Senator Max Baucus talked about his trade agenda, mirroring what the President said there was a bill introduced by Senator Schumer, that strong, powerful democrat talking about the limiting of ARRA Funds, the American Recovery and Reinvestment Act of 2009 funds because he said that reportedly of the 80% of the 2 billion are stimulus and renewable energy grants, they were all awarded for companies they presented that stimulus rewards for companies And he singled out the U.S. Consortium with Chinese Consortium to build a 648megawatt wind farm in Texas for half a billion dollars This is participation of China’s Shenyang Power Group with highlighted on Capitol Hill where you have the folks on Capitol Hill saying, “If we have energy projects, why aren’t we really giving you stimulus funds to American companies as opposed to Chinese companies Well, let’s go forward Today, in March 6th of the particular year CNOOC gives back and Sinopec is back Remember CNOOC had created a lot of luster in 2005, and their deal was turned away, well just this past week in the Wall Street Journal it was reported that since 2010, Chinese companies have invested more than 17 billion with a B, into oil and gas deals in the U.S. and Canada And recent investments have been positioned intentionally as “non-threatening” to get back into America And this is one of the CEO of Chesapeake Energy How? The Chinese have sought minority states, played a passive role and in a nod to U.S. regulators, kept Chinese personnel at arm’s length from the advancement of technology which moves into the IP States Fu Chengyu has been leading this push and he was the chairman of CNOOC and learned his lessons and stuff in 5 and now he’s the chairman of CNOOC at another large state-owned energy related company You also have other Chinese companies like BYD which is a name that now people sort of call Build Your Dreams; they want to be the largest Chinese automaker by 2015, and the world’s largest automaker by 2025 They were able to jumpstart their production and the company never existed, I think, before 19 maybe 96, they got their start making cellphone batteries for Motorola Cellphones in Cheng Yen, China And from there they got their jumpstart because they made batteries for cars and a new way to go forward with electric cars So this is a new way that China’s moving forward and flash forward to our own State of the Union Address with President Obama saying, I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here And he’s tried to back that up, it seems like things like ARPA-E ARPA-E is the Advanced Research Project Agency dealing with Energy, the House within the Department of Energy and a fund development of transformational and disruptive energy technologies and systems They want to find the new thing and focus us on a high-risk concept with high rewards and by law ARPA-E is required to stand at least 5% of its appropriated funds and technology transfer and outreach activities It’s looking like clean energy is becoming a national security issue and as things are heightening with the U.S /China overall relationship and clean tech being that next focus, and really where America has its drive It’s looking like energy is maybe that next real strong focus There was publication of the Federal Register that came out today, March 13th, that talked a Federal Interest in Environmental Technologies that the U.S. is pushing trade in environmental technologies and the notice set forth the schedule and proposed agenda for meeting of the Environmental Technologies Trade Advisory Committee called the ETTAC and that’s going to be scheduled on Thursday, April 27th, 2012, 9 a. m. Eastern Time in Washington They’re going to talk about globalizing environmental relations, issue related innovation, trade liberalization negotiations and it’s something to be aware of if you’re trying to take advantage of clean tech and United States technologies But the United States isn’t the only one to deal with this I’ve put together a list of certain technologies that at least our law firm has been involved with just

to give you a sampling U.S. Technologies that have gone from here to the world, Sludge to Oil Technologies in Brazil, Floating Wetland Technologies in Canada, Technologies coming from the World to the United States, we’ve been involved with Ocean Wave to Air Technology that came over from Ireland and Scotland and have been employed here, in Maryland and along the eastern sea border, and there has also been Chinese Technologies that have gone out to the world like Vacuum Tube Solar Technology which is actually a joint effort between the Germans and the Chinese, and the Germans have since divested of it and this deals primarily with hot water heaters and so forth and it appeared on top of the Olympic Village at the Beijing Olympics So this isn’t just only a U.S push as you probably know As well, the next slide talks about the International Energy Agency said that countries are spending $17 billion on renewable energy and energy efficiency research in the next 10 years Fifty-six billion was spent on nuclear energy research and $22 billion on fossil fuel research during the same period So there is more that needs to be spent on Clean Tech, but if you looked at Global Conferences, just a small sampling, Singapore has International Energy Week, and International Water Week, Copenhagen has the International Clean Energy Fair and there are a number of different technologies out there The U.S. isn’t alone in trying to promote the Clean Tech wagon So now we’re going to look at Chinese Imports coming into the United States and this where after 24 minutes, we’re going to move quite quickly to issues where you, your company can move forward and protect yourselves and what are the issues that you have First, if there’s Chinese Technologies coming to the United States, Chinese Clean Tech that’s coming to the United States and flooding the market at below cost sales or Chinese companies are using your own IP against you to enter the U.S Market, what do you do about? So, first is the trade remedy issue which is Chinese products are coming into the United States What do we do? Well this slide here is an overview that shows for those on the audio, the date from the timeline, from filing a petition in an antidumping or countervailing duty case, to issuance of an order and release The total time is somewhere between 10 to 14 months depending on whether extensions are granted or not There has been a recent case that was filed about photovoltaic cells in the United States and in 2010 the imports of solar cells from China were valued at $1.5 U.S. billion and there was a preliminary finding in December that the case should move forward and not be considered by the Department of Commerce We’re going to move from that and move straight into something called Section 421 If China is playing by all the right rules, there’s something called Section 421, filing the petition, until you get relief, 5 1/2 months Half the time in an antidumping case so it gives effective relief very quickly, but there are some tradeoffs compared to the antidumping The 421 Cases are unique It’s based off of the Global Safeguard Action but it was a type of deal that was negotiated as part of China’s WTO Accession Package part of joining the World Trade Organization This clause will expire in December of 2016, so it’s something that will go away and this slide talks about all of the cases that have been filed to date dealing with section 421 There 6 cases that were filed under President Bush, 1 case under President Obama President Bush did not give any relief in the 6 cases that were filed under his tenure I was actually Council and represented some of the Chinese respondents in 3 out of those 6 There is only 1 case filed under President Obama and the President did grant relief and it dealt with the tire industry The petition was filed exactly 3 months after President Obama’s inauguration and relief was granted in about September 2009, 5 months later In the 421 Tires Case, the next slide talks about the scope of what it includes and the relief that was imposed was 35% duties added at the border then it dropped to 30% in the second year, and this year, the last year, it’s 25% and it will end in September of this year just before the U.S. election Politically the USTR Ron Kirk, the Officer of the U.S Trade Representative, he said when China came into the WTO, the U.S. negotiated the ability to pose remedies in situations just like this and the administration did was necessary to keep American jobs, and the USW President said, “Well for far too long,

workers across the country have been victimized by bad trade policies.” And Obama made clear he’s going to enforce American trade laws and help people like us, and that was followed up in April saying business is improving, production has increased, but employment has not always been maintained The workers have been recalled to work, these positive results would not have been possible without 421 Relief If you look at what’s coming up next, in the State of the Union Address President Obama specifically cited the tires case and said over 1,000 Americans are working today because we stopped a surge in Chinese tires My question is understanding the huge political issues between the United States and China, understanding that there’s going to be a ramp-up in tensions as the elections draw nearer and also understanding that there’s 5 1/2 month window until this hits the President’s desk and is actually a decision that goes all the way up to the President to decide whether or not to grant relief will an environmental case, because that’s the next foreground I think in the battle ground between the U.S. and China policy Will one, be coming in roughly May 1 because if so, if you calculate 5 to 5 1/2 months later, it’s going to be hitting in mid-October, the President’s desk, just prior to the election So if you’re someone out there who is looking to deal with Clean Tech and you’re having some trouble either with IP or other issues, the 421 maybe an effective remedy for you, understanding the political environment, and I wouldn’t be surprised if one of these cases came in The word on the street, at least from those who understand the Washington scene and what’s going on there is that President Obama imposed relief here, but there was an informal message that went out and said, you know, I’ve given you this relief but I don’t want to see any other cases I mean, there’s no other way, it seems to me, to explain why more 421 cases have not been filed And I would be surprised if one did not come in the next couple of months Now we’re moving straight to the IP issues Overtime, from 1975 80% of a company was made up of hard goods and 20% of a company was made up with intellectual property or intangible assets In 2005, that percentage has been turned directly upside down so that 20% of a company is made up of tangible assets, brick and mortar, and about 80% of intangible assets That leads us to what’s called Section 337 and if you’re a company who has your IP stolen, and it’s used against you to import goods into the United States, 337 could be a great remedy for you It’s extremely fast from the filing of the complaint until the remedy, you’ve got about 12 to 15 months Compare that to Patent Litigation or other things in Rocket Dockets like the Eastern District of Virginia, or in Texas and Section 337 is much, much faster Section 337 cases are argued before what’s called The U.S International Trade Commission which is a Quasi-judicial Federal Agency with fraud investigative responsibilities in matters of trade The ITC remedy is different than in a district court, in a U.S. District Court before a Judge, you get money judgments You actually have to show how much– first you have to show that your patent was infringed and then you have to show to what extent your damages were, and in the ITC they don’t have that Instead what they do is they can exclude your competitors products from the United States and they setup a barrier the ITC has jurisdiction throughout the United States, nationwide, what we call in-rem jurisdiction which deals over the product that’s being imported and they send a note directly to customs service and then customs service will exclude the product from coming in at all This has become the new Rocket Docket for cases Apple, HP, Glaxo SmithKline Beecham, even in biological suits Zippo lighters for trademark disputes and even individuals, there’s a guy named Geoffrey Lee McCabe who made fulcrum tremolos on stringed musical instruments, he brought his own case as well to the ITC And the one thing to note is the ITC cases are argued before knowledgeable administrative law judges, people who deal exclusively with IP issues and I think the figure is that 1 every 6 years, 1 U.S. Judge, 1 U.S. Federal Judge will hear an IP case every 6 years, but the ITC Administrative Law Judges hear those cases routinely every day and I think that they’re hearing perhaps upwards of 25% of all the cases that do appeal intellectual property that defy the United States each year In the legal issues, I’m looking at the time and I want

to keep moving but there are three cases here that affect 337 cases and actually will push and funnel more cases to this particular jurisdiction The first is eBay where it was before the U.S. Supreme Court in 2006, and the decision in that case made it more difficult to obtain an injunction in District Court and there you look at Justice Kennedy’s concurrent In Kyocera, another key case in 2008 it overturned a longstanding ITC practice of downstream product relief and it’s giving more attention to limited and general exclusion orders which are type of orders issued in the case What that generally means is there has been a slight change in practice at the ITC and people are actually being forced to name more defendants and more respondents at the same time, or more selectively pick who they’re bringing cases against, and the last case, which is quite recent at the end of last year was the Tianrui case which dealt with trade secret violators and the ITC said that, the Federal Circuit said that the ITC may impose relief when a trade secret violation occurs completely outside the United States but the goods are imported into the U.S and they applied what they called uniform federal common law For those who are listening on audio only, I’m showing a set of slides here which gives you a sense of the trends for ITC cases I compiled data dealing with cases which are filed at the ITC through 2008 and 2009 and this shows that there’s been a peak of cases in ’84, it went down into a trough in the mid ’90s and it’s certainly on the rise now at the late 2000 and early 2010-2012 The next slide shows maybe the top 6 or 7 top 6 countries who have filed cases and then what I do is isolate to show you the number of cases that were actually filed against China, and as you can see there were, for those who are on the video, in the late 80’s and early 90’s there were very little cases Starting in about ’95, ’96 the cases started to trickle in and by 2008 it had ramped up like a jet engine It just immediately took off and China is now dominated in 57 cases that are being filed at the ITC And what I did, I took a look at the cases in China and I tried to make a comparison to where China is going to be with IP cases to where Korea was in the same point in their own development years ago I looked at cases in Korea from ’77 to 2007 and found that there were 60 cases related to Korea The two most important things to take away from this is that there was a sharp rise in cases in the last five years, and there’s a sharp rise in Foreign Complaints and I’ll show you what I mean The first is that in the case filings on the slide in period 2002 to 2007 were double the number that in the previous two five-year periods combined So cases started to really increase in the last five-year period for the Koreans, and you can also see the one thing that was quite interesting was in that same last five-year period from 2002 to 2005, a large number of cases for the first time were actually filed by Foreign Complainants and the conclusion seems to be that the Korean’s themselves are starting to bring the cases, they started to see that they don’t need to be the defendants all of the time, they can also be the complainants themselves And, I took knowledge and that basis because Korea has moved from developing to developed country has joined the OECD and asked when will China make the same move to High Tech production and will they be making the same, sophisticated choices that the Korean’s had been making? The cases have been filed against Chinese companies had been mainly in the low tech areas like Ground Fault Circuit Interrupters, Nitrile Rubber Gloves, Sweeteners, DVD Players and Recorders, there have been some exceptions with Semiconductor companies like the TSMC versus the SMIC, those are the very large semiconductor manufacturers; one is from Taiwan and one that’s from China And there is a move to higher tech products I wrote an article that was published in Managing IP Magazine; Will China Follow Korea to the ITC? And I looked at about 6 different factors I said the first is innovation, second is a long-term strategy, third are what lessons have they learned from litigation, fourth is how do the Chinese companies value intellectual property, fifth is where, within the company is IP being treated? Are the folks in charge of intellectual property and R and D having direct reports up to the leaders of the corporations and the CEO level and the C-Band? What are they relegated to outside non-reporting positions

and third is how is technology being treated? And in Korea they have taken these models to heart which is what you see often times in U.S. companies and they’re employing in their own companies China hasn’t happened yet, but I expect that it probably will, the question is how long it will take? The last point for you is that even if you’re here in the United States and this is an article from March 10, just three days ago, in the Wall Street Journal front page, you need to understand that the Chinese companies will try and come after trade secrets Many other companies are dealing with trade secrets, I don’t mean to just think about China, but that’s what the press is reporting right now And this particular case which is filed by the FBI marks the first time that U.S. Officials have filed criminal espionage charges against a State owned foreign company And those charges allege that the Chinese Government and company officials asked U.S. citizens to compile DuPont proprietary information used for the manufacturing of something called titanium dioxide and it was a long-term wide-spread effort to collect older information It’s hardly cutting edge stuff, but if you’re here in the United States, you still must be vigilant to try and protect trade secrets and try and protect your intellectual property even if you haven’t set foot in China, but you may be interested in the future So if you do decide to go to China, I haven’t seen any questions If there are any, of course feel free to email them and I will try to look at the Q & A slide, but it looks like we’re on time The last thing is how do you protect your IP if you’re going to China into our part four? The first is you’ve got to understand that the United States, way back when, was a hotbed; the world’s premier, legal sanctuary for industrial pirates Pat Choate who is Ross Perot’s running mate for President in, I think, the late ’80s, early ’90s This is after not Admiral Stockdale, but was somebody else, he actually wrote a book called “Hot Property: The Stealing of Ideas in an Age of Globalization” and in that book he did something which I think is relevant to those who are thinking about entering China He said, in this he’s talking about the United States at the beginning of our nation-building, he said, [inaudible] Congress wanted to rapidly industrialize the United States and to do so by whatever means necessary A practice we now call nation-building America thus became a national policy and legislative act, the world’s premier legal sanctuary for industrial pirates.” And he was talking, and I won’t take the time to read the highlighted portions that I have from his book “Hot Property” but I commend page 30 to 31 to you What he’s saying here, and he gives an example of how the United States and there was someone called Francis Cabot Lowell who is an author and entrepreneur, he went and he stole the plan for weaving cloth and as Pat Choate says, he became a hero for bringing England the most valuable industrial secret to the United States and at that point in time he was welcomed in Well, many view Chinese companies in the same way to try and deal, try and take any of the IP, and certainly in the Clean Tech field, the United States innovates These slides for those who are not on audio are the typical slides you might see in psychology studies For those on the video, what is it that you see here? Often times, people will look at this slide and they’ll say well, I see vase and I see a face very clearly The next slide is the one that looks like your IP Many people will immediately see the vase and they see the face as well, the vase and the face, but they do not necessarily see the two Spanish looking people, one on either side of the vase and on the right hand of the picture seeing someone come out of a doorway and on the left handed face, the earrings actually a bottle, tequila bottle next to them The issue here is do you know what you have and often times you may not recognize the intellectual property that you, your own company has, your own crown jewels and it may make sense to try and go to someone who is an attorney or go to somebody who is well versed in understanding the intellectual property that you don’t inadvertently give away something that you didn’t recognize was gold So the first thing is, understand what it is that you have The second is, today, the stealing of ideas is trying to not become a new premier legal sanctuary for industrial pirates Again, this is in February, in the New York Times, Ken Lieberthal, I studied with him at the University of Michigan 20 years ago, he has since gone to the White House, he’s now at Brookings, his routine, and this is straight from the New York Times article, “Seems straight from a spy film.” When he travels to China and he is a key China scholar, the article said that he leaves his cellphone and laptop at home

and instead brings loaner devices which he erases before he leaves the United States and he wipes clean the minute he returns In China he disables Bluetooth and Wi-Fi, never lets his phone out of his sight and in meetings, not only turns off his phone but removes the battery for fear his microphone could be turned on remotely He can exit the internet only through an encrypted password protected channel, and copies and pastes his password from a USB Thumb drive He never types in a password directly because he said the Chinese are very good at installing key logging software on your laptop and he’s not alone Folks have said only the top counter intelligence official at the Officer of the Director of National Intelligence has said if a company has a significant IP that the Chinese and Russians are interested in, you go over there with a mobile device, your device will get penetrated So consider, whether or not if you’re leaving the United States to go to China, you should have a company policy cleaned devices that are sent over and certainly if you’re in areas that deal with export control and ITAR related controls, you’re aware of non-export related issues and you can’t bring a laptop with you, but that’s something to be aware of Question: China and IP is it time to believe? I wrote an article for the Washington Legal Foundation called The Legal Pulse Tian Lipu who was the Commissioner of China’s IP office declared in December 2010, the Wall Street Journal an opinion article that China is serious about protecting IP rights, and the Commerce Secretary at the time, Gary Lock who is now the U.S. Ambassador to China, the next month publically lamented China’s lax IP protection and enforcement and the question is it really time to believe that China’s doing better? Well Commissioner of Lipu’s declaration was nothing new In 2006 he told China’s state-run website that more IP protection helps Chinese companies and promotes innovation But within a few short years of that there was lax enforcement and that escalated to a trade dispute that both U.S and China claimed victory in January 2009 This slide gives the front page from the report of the panel It was not appealed to the [inaudible] and it was left as it is Issues are heating up with the coming Presidential Election Remember where we were in the future and I think you’re going to see a lot certainly in the realm of Clean Tech, as well as in the sources for Clean Tech Again this is cutting edge as of yesterday and today March 12th the U.S., Japan, and the European Union filed a request for consultations with China at the WTO concerning rare earth metals and other issues that are going to probably receive attention in the coming months are auto parts, cars and other issues that deal with Clean Tech and also on March 13th the President signed a retroactively to revise the trade laws to allow for filing of anti-subsidy cases There are some improvements that do need to be noted For instance in March of 2011 the Wall Street Journal reported that there were software makers Microsoft, Adobe, and Autodesk, they settled some copyright infringement suits against a midsize Chinese steel structure engineering company but while it’s good on its face, it’s also important to put that into perspective, the settlement was just shy of U.S. $200,000 and that was split three ways So, although supposedly this does not include undisclosed financial damages that weren’t reported in the paper the use of pirated software is still widely reported and is still pretty rampant That’s something to take into account when you’re going over So the question is, is your company going over? If you haven’t made the decision yet, should you establish operations in China? Is that the question for you? Some of the things you should think about are well, many companies decide to establish commercial presence in China despite the idea of theft for various company-specific reasons It could be the size of the relevant market or the cost advantages associated with opening a factory in that location Some [inaudible] prove cheaper employment, less environmental restrictions, cost of raw materials and so forth For them the issue is not whether to manufacture, but rather how to do so in a manner that adequately protects IPR For others, this balancing weighs against going into China There’s a company in Gaithersburg, Maryland that operates in perhaps 50 countries around the world Bobby Patton of Patton Electronics’ has chosen not to go into China In fact he has removed his product from China because he receives as an example, a device for a warranty replacement that was not his parts It was in his outside container from Patten Electronics for the inside guts weren’t his and things were getting ripped off too rapidly for him But for some industries, for instance mining, econometric modeling shows that there’s no positive association between IPR protection and enforcement and that, if you think about it, that seems to make sense because whether to open a copper mine should not be bases on whether a country has strong IPR rules or enforcement but more on global demand for copper and location

of those deposits, and you go where those deposits are So I think your industry will affect and your particular company will affect whether you want to source from there There are other places that can also be just as affective I’m not promoting Singapore or Hong Kong or other regions, but there are places that I wrote a report that was co-sponsored, jointly funded by the U.S. Patent Trademark Conference and the International-Intellectual Properties too which is a think-tank in Washington and this paper was presented on the first day of the annual public form of the World Trade Organization in Geneva in September of 2010 and it looked at a number of things It asked, how do you stimulate innovation among other things? It looked at tax incentives, grants, research centering’s, clustering, IP resources, a strong Intellectual Property Office, ready financing and effective rule of law And we had termed it the Singapore Model because how Singapore tried to structure everything around it to attract IP Centers and Hong Kong and Singapore have been quite effective in doing that So if China gives you some concerns, there are other areas that could be a regional hub just as easily The other thing which is now a new trend is be sure to register and protect your IP in China because even if you don’t go to China now, a plan to in the near future, you need to register and protect your rights because others in China will squat on those rights China is a first-to-file system, you’re also seeing this in some other countries like in Korea for instance and it could be costly for you later if you then need to negotiate with the person who’s taken your company logo and you have to negotiate for that back Registering in the United States also helps with what we call statutory remedies which means you don’t have to prove that there’s been a certain amount of damage to you in each case Instead, by law, if you’ve registered you’re entitled to a certain amount or fixed sum for every day or for every violation and that could help to a great extent in certainly leverage for negotiations and certainly collecting as well, and proving your damages If you do go and you are already there, you should consider segmenting your production process What this means is that if you’re manufacturing in China, you can produce only elements of a product in the weak IPR environment and if– the example is for instance there was Firestone Tire, the General Council and I sat on a panel in Chicago in October 2006 and he was talking about how Firestone maintained their secret sauce for their tire production back in the United States and they had separate factories in different locations in China Each which produced a discreet segment of tire and those super factories had no idea that the other one existed So they would produce part A of the tire for instance Shenzhen and then they would produce part B of the tire in say Shanghai and both of those would be sent down to be assembled in the United States and added with a protective sealant for instance that was a trade secret that the company did not want to disclose By segmenting your production you can still take advantage of cost of production and other things that are important to you and at the same time maintain your intellectual property which could be a big deal You should also keep apprised of developing trends which Chinese companies are using against United States companies and other companies in general, and often times it’s used in retaliation if you’re a consumer products company or a company that sells to big-box [inaudible] killers Wal-Mart or Sam’s Club or something like that You should understand one of these trends For instance, in China many are downloading patent applications filed in the United States and elsewhere, literally copying them and then filing for Chinese patent based on the blatantly copied prior art and what they’re doing is this is in retaliation for U.S. suits that are brought under Section 337 that we talked about or for some other things, for instance The U.S. firms will be able to invalidate the patent often times and they’re going to get the rights back, but they have to file for them and they have to engage council abroad and understand what the process is And the problem here is if you’re trying to seek production to get into a Wal-Mart on a Black Friday in November, you have to understand that the orders are going to come in and you need to start your own production and you’re in shipping lines as far back as perhaps March or February in order to fulfill those orders in time If there’s a cloud on your intellectual property right and your competitor has filed and actually obtained a patent and you hadn’t been watching for that abroad and they essentially can forestall you until you can unwind what has been done, they will essentially be able to prevent you

from actually producing that product in that buying season even though you will be able to successfully complete your rights in future And this is something that I understand has been happening to folks overseas and [inaudible] with people So you need to keep apprised of what’s going on and also it ties into I think knowledgeable council who can help to forestall that and be proactive in policies for you So key considerations when engaging China; Number 1, make the decision Give serious thought about whether you want to make the leap eastward and go there I think cultural dynamics are going to matter If you are going to go spend time learning the unique characteristics of doing business in China, such as understanding that, whom you know, is going to be critical The 3rd issue is, proceed with caution Build relationships of potential partners, conduct your due diligence, identify those who know China and can help you achieve your goals And the 4th is; protect yourself Of course protect your IP, but understand that managing relationships based strictly on legal documents could be a mistake While getting it in writing helps, personal relationships are going to matter So think about what can go wrong, as well, and consider your exit strategy before you go to China Arbitration may not always be possible for all disputes because arbitration means that the parties must agree to arbitrate the dispute and when you’re enforcing IP rights against people who are counterfeiting or trademarking violators, where there is no contract, often you have to the local courts and arbitration won’t be an option for you and that could be expensive Or you could be before a local court that is less receptive to a foreign body China is getting better on that, but it’s not yet where it entirely needs to be according to many of the business contacts I speak with So how do you deal with them? Sometimes you need to be creative First, dealing with counterfeiters, the Technical Supervision Bureau in China has the authority and ability to examine documents, conduct investigations, and they can also conduct raid and do so quickly For instance the Shanghai TSB, The Technical Supervision Bureau make a wage decision in several days as opposed to 3 to 6 months to navigate a system to a formal decision And raids can shut down the competitors and be quite helpful for you You could also do that through the U.S. [inaudible] in Shanghai, the U.S. AMJAM and some of your other sources of knowledge base supply You can also deal with trademark violations through the State Administration of Industry of Commerce or the AIC that has many of the same powers in the trademark concept that TSB has against counterfeits in order of seizing products but also be creative and there was an article that I saw in the American Bar Association publication that said look, why don’t you call the fire department? You can look at child labor, safety, fire codes, and although these departments may not have the power to seize the counterfeit products, there may be an advantage to you in having them conduct a surprise inspection which disrupts the production line at the factory and could also result in penalties for non-IP issues So if counterfeits are also found during the surprise visit, they trademark or copyright an owner may be in a better position to lodge a complaint with relevant administrative body that does have control So that’s another suggestion when you’re actually in China So the final conclusions, is 4 Number 1, read the tea leaves; larger political dynamics do affect the U.S /China relationship and it will impact your business You should take advantage of those If you spot where people have been you can identify, I think, where the next cases are going to be, where the next funding programs will be from the United States and where the best pressure points will be for your business Second is, protect your IP and R&D Think about travel abroad policies, departmentalize your production, be proactive in patent enforcement, register your trademarks and copyrights with Global Watch services in whether your own council or others I’m more than happy to help Execute your NDAs, your licensing requests and so forth The third is, understand that you’re in China Negotiation is key, politics are important particularly if you can call on a powerful trade association, embassy official whether it’s U.S. or Chinese, local government contact to act as a pressure point for what is right That’s going to be important And the fourth is legal proceedings including arbitration to help your negotiation, sometimes, but they may not be a total fix You need to be prepared to compromise and you also need proactive to actively seek to avoid disputes That’s the presentation Our contact information is here Again, my mobile number is (202) 262-1197 My email is [email protected] and we’re also on the web and www.wtplaw.com I’m happy to take any questions that you may have and thank you for letting me present I apologize that we got started a little bit late due

to some technical difficulties >> Matthew: Well thank you very much Alex for your presentation, and with that, Barbara if we could probably open up for about 10 minutes of questions or so if anybody would like to ask a question to Alex >> Barbara: Thank you Once again to ask a question press star, then 1 [ Silence ] >> Barbara: Glenn Roberts, you may ask your question >> Glenn: Hey Alex, great presentation and I’m with a commercial service out here in California and of course, you know, China is just across the waters from us and, you know we have quite a few potential buyers coming through and one of the strategies I’ve seen to effectively kind of control you touched on a little bit today I’d like to find out from you how effective is the strategy in regard to trademark and branding? Is it like the first line of defense to protect your IP as a strong brand and a trademark? >> Alex: Did you have more of the question or was that [inaudible] for that one? >> Glenn: Not much more to the question, a little bit of the background You know somebody IP Technology is well over the head of the people who are enforcing such technologies and I think it’s kind of easier for our companies to develop a strong branding strategy and if you can elaborate on that and let me know if that’s a good strategy and a good first line of defense for protecting IP >> Alex: It’s a great question I also serve as a Vice Chair of the Maryland DEC, District Expo Council, the Maryland DEC, so I appreciate all the great work Commercial Service is doing and under Secretary Sanchez, was in Maryland yesterday at a White House briefing and gave a strong presentation, and we had a number of discussion on these and other issues Ambassador, Chuck Ford, also came to Maryland I think about three weeks ago entered our DEC meeting and it was great to see the support of the Commercial Service I think you guys do phenomenal work for companies out there If companies are not taking advantage; who are listening to this, the Gold Key Services that the Commercial Service offers or the bedding processes, you should be To answer your question Glenn, I was in Korea and this will relate to China, in February and I was with Commercial Service and I was talking with people in that office and they said please, please, please insure that companies will go forward and protect their trademarks, and protect their branding, protect their rights because Korea, like China, the first-to-file system and what’s interesting in Korea is the government officials, it was reported to us and I was doing this through a study as well that was sponsored by the U.S. Patent and Trademark Office to look at U.S. [inaudible] assistance and how that helps U.S Exporters sell their goods overseas What was important to us is that it’s interesting, the strong tactical assistance programs that were employed in Korea in the ’60s and ’70s and throughout, as well as through the UNDP have educated the Koreans and they’re full onboard, the Koreans are now proselytizing to the Chinese and what the Koreans reported back to those meetings which were at the Embassy, is that although in many first file systems, people can go in and register rights and squat on those rights In China, they’re actually doing uniformity and as a practice So in Korea, before someone has entered the market there may be less of a risk to actually setup your branding strategy and to register your trademark and to register you intellectual property rights in those foreign markets until you actually go in In China the reports are coming in is that the Chinese are actively going outside their borders, identifying some unique companies that have no intention of going to China for another 5 to 10 years and actually registering those rights today because they know that the folks will be coming to China in the future So I think it’s extremely important for a trademark and branding as a first-line defense to immediately register those rights in China as abroad because it’s such a huge market, and although it may be an expensive process in the class of service, if you identify what could be your most profitable in the future, that would really be quite helpful Another example is Under Armor which is based here out of Baltimore When they had limited budget, instead of pursuing patent protection or some other intellectual property rights protection versus to try and protect their wicking technology and other things for their clothing, they said grow all of the revenue and early development

into the trademarking and global brand building and recognition, and I think that’s paid off quite well for them It depends, I think on the market It depends on the company, but for many companies I think it would be square front-and-center, consumer goods really being that front-and-center one Does that answer your question? >> Glenn: It certainly does and it’s a great confirmation and then what is the average cost? I mean maybe a high ballpark side to register your trademark? >> Alex: It’s not a huge cost in general There are two components to it and I have the figures, our firm has standard flat rates Other firms do as well, I’m sure I don’t have them in front of me but, there are two things, the response comes in two components The first is you’re going to want to do U.S. Trademark Registration, as well as what we call Third Party Watch Services I can’t talk about other firms, but I can tell you from our experience, we monitor so many trademarks that the Watch Services, the Third Party Services give us a discount, like a 6% discount which gets passed on and I think it’s in the realm of less than $1,000 or maybe $350-$500 for multiple Watch Services So your company would then say, could you please look at our trademark as in this class of service for this internet extension and domain name and they will go out and monitor and produce reports that get sent to your lawyer or directly to you on a weekly basis to say, this particular trademark has been filed in this other country, in this other jurisdiction, this web address has been filed which is confusingly similar with yours So that you’re out there, actively monitoring and trying to protect you mark which I think is important That’s the first component which relatively nominal I think in the grand scheme The second, which is more dicey and I won’t give you a great answer for that, I apologize is how expensive will it be? That depends on where you’re going to decide your Key Markets are and that’s a very company specific issue If you say that I need to protect myself in Korea, in China, in the following Asian countries, or if I want to go to some of the Brit countries, wherever it may be, each one will have their own separate national fee because there’s no general international wide trademark that you apply for You actually have to go into each country and specifically reserve your rights and you have to do it by class of service, meaning I’m going to do something like a T-shirt as opposed to a software technology and you can register in each of those classes and there you need to decide carefully and cost effectively where am I going to get the biggest bang for my buck in terms of protection? Again, it’s not very expensive in the grand scheme if you’re going to try and do a development rollout and you’re going to enter another foreign market and you have a number of different things at your disposal that the [inaudible] can assist you with, as well as [inaudible] bank financing Many people who enter those foreign markets are scared by it but if you actually do some export control, if you do some export work and you focus on how you’re going to deal with exports the benefits driven to your bottom line will far exceed, or should far exceed the cost of registering your trademark >> Glenn: Correct and thank you so much >> Matthew: Okay, thank you very much I think that’s about all the time we have for questions today but thank you again to Alex and thank you for everyone for listening, and just to let you know of course feel free to follow-up with Alex if you think of any questions And a copy of this webinar will be posted on our website www.stopdates.gov if you want to listen to it or review any other parts of the webinar later Thank you again and have a good day