Page 3 of
3 Knocking out China's
knock-offs By Daniel Allen
(alleviating the symptom) rather
than the zhiben type (eradicating the
disease).
Raids on fake software markets
are sporadic, and penalties for infringers usually
minimal, meaning that vendors simply relocate and
set up shop again once attention is focused
elsewhere. Controlling the illegal downloading of
software, music and movies via the Internet is
also hugely problematic. Hazy laws and myriad
bureaucratic obstacles mean
that even if companies know that their products
are being illegally copied and sold, it is
extremely difficult to prosecute perpetrators.
Enforcement emphasis Most
attorneys and industry executives agree that the
current IPR problem in China is as much about
infrastructure as experience. Improving China's
enforcement of its IPR laws will clearly require
further substantial changes to the country's legal
system.
Official statistics reveal that
Chinese courts handled a total of 3,567 cases
concerning the manufacture of fake products and
illegal sales of pirated products in 2005, a rise
of 28% over the previous year. While this is
encouraging, the Chinese government still faces a
tough challenge in establishing a watertight and
enforceable legal framework that will discourage
streetwise Chinese citizens from becoming involved
in counterfeiting.
Despite the figures and
circumstantial evidence to the contrary, there are
numerous signs that the Chinese government is
taking the issue of IPR protection seriously. To
showcase China's efforts to safeguard IPR and
heighten public awareness, China's first IPR
protection web site was launched in April 2006
(www.ipr.gov.cn).
Under a new State
Council program also introduced last year, aimed
at "bringing IPR infringement activities under
effective control", government officials who do
not enforce IPR protection will be severely
punished. And, in an attempt to crack down on
software piracy, the government has ordered all
computers manufactured in China to be
pre-installed with authorized operating systems
before they leave the factory.
In December
2006, China's legislature, the National People's
Congress, deliberated on a bill that will pave the
way for China to join two World Intellectual
Property Organization copyright agreements. These
agreements will update rules related to digital
technology, and also grant rights to producers of
sound recordings.
Long Xinmin, director of
China's National Copyright Association, explains:
"Joining the treaties will improve China's
copyright protection campaign and improve the
country's image." The Chinese government also
signed a memorandum with four British and US trade
associations related to software licensing in the
same month.
Future focus Piracy
is a global problem that will never be completely
eliminated. However, the bottom-line impact can be
lessened. Just as music companies, rightly or
wrongly, made peace with MP3 file-sharing services
like Napster, so manufacturers from America and
Europe must implement strategies for dealing with
counterfeiting by developing new revenue models
that emphasize service offerings based on IP.
Such models may include lower prices for
developing markets such as China, universal
licensing schemes to sell music, films, games and
software on a subscription basis, and the
emphasizing of revenues that flow from service and
support rather solely relying on product sales.
China's $200 billion plus trade surplus
with the US (nearly $160 per capita) makes it hard
for anybody to justify the Chinese counterfeiting
of US products, but there is also an increasingly
compelling national case for stronger IP
protection. Some of the people facing the greatest
problems are in fact China's own companies
struggling to capitalize on their innovations and
creativity; film director Zhang Yimou and others
in the Chinese motion picture industry are very
active in anti-piracy and anti-counterfeiting
work.
As Chinese incomes continue to grow,
and as more and more Chinese companies seek to
protect their own brands, counterfeiting will
undoubtedly decrease. This was the case in Japan
and Korea, both notorious for counterfeiting in
their time. Chinese companies are innovating in
ever larger numbers and want to see their products
effectively protected. As James Haynes, chairman
of the American Chamber of Commerce in China's IP
forum comments: "Without adequate IP protection
China will be unable to develop IP itself, and
will not be capable of becoming an innovative
society."
Another major motivator for
house cleaning is China's goal to supplant India
as Asia's top software outsourcing center. The
nation's leaders and CEOs are fully aware that to
realize this long-cherished dream far more
rigorous IPR protection is essential. Furthermore,
the growing number of overseas companies looking
to establish research and development centers in
China need to be reassured that their carefully
guarded products and processes will not be
counterfeited with impunity as soon as they begin
operations.
International pressure,
cooperation and guidance and continued monitoring
and lobbying by law firms all have their place in
ensuring that the Chinese market is an
increasingly secure environment for overseas
companies. However, the major drivers for change
in China's IPR environment are, and will surely
continue to be, self-interest, economic prosperity
and a rising standard of living for the average
Chinese citizen.
Daniel Allen is
a freelance writer and photographer from London
who has lived in China for the past three
years.
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