12 January 2008

The Financial Times reports on a Chinese executive skipping bail and returning to his home in Hunan province:

The City of Westminster magistrates’ court said it had issued a warrant for the arrest of Yuan Hongwei, chairman of Chinese glue-maker MagPow Adhesive Industries, and seized his £100,000 ($196,000, €133,000) bail after he failed to appear for his extradition hearing.

MagPow (also known as Hunan Magic in a different translation of 湖南神力公司) has been fighting an international legal battle with American ABRO Industries for a few years now. MagPow has allegedly been selling counterfeit ABRO products, down to identical packaging and design, in various countries. According to the Wall Street Journal in 2004:

The Chinese company, based in the city of Liuyang in Hunan province, now advertises and ships around the world more than 40 “Abro” products, from super glue to silicon sealant, in exact replicas of Abro’s packaging. Hunan Magic’s owner, Yuan Hongwei, has Abro’s logo on his business card. He touts his firm as the real Abro, and warns customers away from impostors.

Abro Industries, with just 24 employees and no U.S. sales, has shown more mettle than many other U.S. companies that have railed about piracy in China. It has hired dozens of lawyers and investigators, sued Hunan Magic, and gotten raids conducted in the United Arab Emirates and other countries, at a cost to Abro so far this year of more than $600,000, Mr. Baranay says. The U.S. Trade Representative’s office has been championing Abro’s cause in Beijing. Yet its Chinese nemesis keeps on selling Abro products.

In October 2003, Mr. Maranais flew to China to poke around the Canton Trade Fair. “So I walk up to Hunan Magic’s booth and my eyes bug out,” he recalls. There was a huge sign overhead that said “Abro,” and stacks of catalogs filled with Abro products. Dozens of buyers crowded around, “including many of my own customers,” he says.

Mr. Maranais complained to the fair’s trademark police. A group of local officials, several in uniform, charged up to Hunan Magic’s booth, led by Mr. Maranais. “I went right up and said, ‘The party’s over – meet Mr. Abro,’ “ he says.

Undaunted, a Hunan Magic salesman produced a catalog displaying Abro products he said the company had a right to sell. One was an epoxy whose packaging for years had featured a photo of Mr. Maranais’s wife fixing a bicycle. Hunan Magic’s version was identical. “There I was staring at my wife’s face,” Mr. Maranais says. “And this guy claimed to own her.”

In the following couple of years, though, ABRO felt it was well treated in China. In February of 2007, Mr. Baranay testified:

ABRO has received fair hearings in China at the Trademark Office, and on the Federal level we are prevailing in China. We have conducted a series of raids against Hunan Magic’s manufacturing operations, during which ABRO’s counterfeit products were seized. We aggressively pursued Hunan Magic within China’s legal system, and the case was ultimately decided in our favor in December of 2006 with damages of $64,000 awarded to ABRO, a small fraction, of course, but a start.

Again, at the Federal level, ABRO registered the ABRO mark with Chinese customs, and a significant number of export containers from Hunan Magic and others have been seized, with the goods ultimately destroyed and fines levied against the exporters and Hunan Magic. We have been extremely satisfied with the cooperation we received from Chinese customs.

Regrettably, business is ultimately local in nature, and Hunan Magic operates openly within Hunan Province as they employ individuals and pay taxes.

In China, most people know the words to that song: “but local officials arrest people in other places/openly beat people/otherwise defy the law and behave like petty warlords”. Seems like ABRO might find Chinese courtrooms a bit chillier after this, though.

But this case gets kinda weird. First off, the nature of Yuan’s arrest makes me want to consult a lawyer on exactly what constitutes entrapment:

CARPENTER: “From what I gather, the majority of the stuff he was selling overseas was sold on the overseas market and through undercover methods we were able to get him to ship stuff here to us, trying to expand his market to come into the United States and not just being in the European market or other places around the world.”

RODGERS: “So in effect you conducted a sting?”

CARPENTER: “Yes, sir, basically so. That’s pretty much what it was. It was something to get him to send his product over here, because he was trying to get into the U.S. market.”

Carpenter said the case was referred to the U.S. Justice Department to seek Yuan’s extradition. He said when U.S. federal authorities learned Yuan was traveling to London, they asked British authorities to arrest him.

OK, maybe that’s an above the board move. I’m no lawyer. But consider this:

Brad Huther, who handles intellectual property issues at the U.S. Chamber of Commerce, says extraditing Yuan would be significant. “The fact that you can manufacture, export and distribute to countries everywhere, and now face the risk that you won’t be treated within your own system of law but rather in more advanced systems that really apply the rule of law, I think could very well have at least a near term, not a chilling, but certainly a dampening effect on counterfeiters’ bravado.”

Ooookay… just out of curiosity, what would happen if the roles were reversed? Let’s say Uzbek officials arrest a Chinese dissident with a foreign passport for extradition back to China based on a warrant issued in Kashgar? Oh wait, that’s been done. It seems to me that once you open the door to saying “we’re gonna arrest your guy in any country we can, cuz our legal system is more just than yours”, you’re asking for a fight. It’s also interesting in light of the World Customs Organizations recent announcement that they will press charges against any Olympic tourists returning to their home nations with counterfeit Olympics goods.

And then there’s the little tidbits the FT throws in, namely that “Although the court confiscated two passports from him, Chinese media quoted Mr Yuan as saying he had escaped from Britain using another passport. Yuan Suzhen, his sister and an executive at MagPow, told the FT the Chinese government was very helpful in getting him out of the country.”

FT says Yuan is being hailed as a hero in state media. I found an article headline that says he was “ensnared” by British authorities, but not much in the way of fanfare. Interestingly enough, in the open letter reputedly released by Yuan just days before his flight back to China, he argues that the British warrant was issued for a “Yaun Hongwei”. I wonder if FT asked about that.

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