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3 Knocking out China's
knock-offs By Daniel Allen
BEIJING - Resourceful and resilient,
China's armies of merchants and middlemen have
long been infamous for the counterfeiting of
brand-name products.
Today, blatant
breaches of intellectual property rights (IPR)
continue to sour the country's trade relations
with the developed world and deter overseas
companies from operating in the Chinese market.
Conditions in this land of economic
opportunity are experiencing a rapid sea-change,
however, and in the intensifying IPR battle
China's pirates are now
starting to see more than a few symbolic shots
fired across their bow.
In producing its
2006 White Paper, the American Chamber of Commerce
in China surveyed 76 US companies operating in the
Chinese market. Over half of those questioned
reported that their business was being damaged by
inadequate IPR protection, and over a third said
that the number of counterfeit copies of their
products had increased since 2005. Unsurprisingly,
98% said that they selectively introduced products
in China to mitigate potential losses.
In
October 2006, Nancy Pelosi, the recently elected
Democratic Speaker of the US House of
Representatives, forwarded a letter to President
George W Bush calling for immediate action to
promote and safeguard American intellectual
property around the world.
Signed by many
leading US politicians, the letter in part states
that "no country in the world has done more to
undermine American IP than China ... we call on
the administration to immediately file a
broad-based challenge in the World Trade
Organization [WTO]. The United States should use
the WTO Agreement on Trade Related Aspects of
Intellectual Property Rights [TRIPs] to challenge
China's flagrant abuse of international rules
governing intellectual property rights."
China has slowly but surely gained ground
in its effort to control IPR infringement. Since
joining the WTO in 2001, legal frameworks have
been strengthened with updates to IPR-related laws
and new regulations forged in compliance with the
WTO agreement on TRIPs. Despite these measures,
China remains a hotbed of counterfeiting and
piracy. If a product manufactured by a Western or
Chinese company sells well, it is likely that
illegal copies will hit the market in double-quick
time.
Industry observers estimate that 15%
to 20% of global brand-name products marketed in
China are counterfeit, and that losses to
legitimate manufacturers now run in the tens of
billions of dollars annually.
The
International Intellectual Property Alliance
(IIPA), which represents the movie, music and
entertainment software industries, estimates that
about 90% of DVDs, CDs and digital games hawked by
Chinese street vendors and sold in Chinese shops
are still pirated, despite recent attempted
crackdowns. "The vast majority of copyright
holders are not making money in China, or are
making a fraction of what they ought to be making
or are making in neighboring countries," says IIPA
president Eric Smith.
Employing millions,
the black market in China is a significant segment
of the economy. Illicit manufacturers operate
factories across the country, producing cheap
knock-offs so cleverly packaged that they are hard
to distinguish from the genuine article. Many of
these counterfeit goods end up on the global
market, and often it is impossible for
distributors to tell whether they are receiving
bootleg or bona fide products.
International invective After
years of delicate and ultimately fruitless
diplomacy aimed at halting the widespread piracy
of American brands in China, the US abandoned its
softly-softly approach in 2004 by appointing a
full-time intellectual property attache to its
Beijing Embassy.
Despite this move, and
work by other foreign individuals and
organizations, one Beijing-based American IPR
expert paints a disheartening picture. He says:
"We have still not reached a turning point in the
war on counterfeiting. Generally speaking, we
cannot say that individuals and companies in China
today recognize that there are clear, predictable,
deterrent risks to engaging in infringement
activity, and that they should structure their
activities to avoid any willful commercial-scale
infringement.
"There is physical evidence
of continued willingness to infringe all around us
- in Beijing and other major cities in markets and
businesses, including in the online environment.
Seizures of counterfeit goods by foreign customs
authorities, such as US Customs and Border
Protection, continue to rise. To truly reduce
local protectionism, it would be useful to pay
officials nationally, rather than locally. This
would include judges, prosecutors and police and
administrative enforcement officials. China also
needs
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