Advertisement
Advertisement

Foreign companies must do their bit to combat piracy

Along with currency manipulation, the naked theft of intellectual property has emerged as the favourite complaint of foreign businesspeople criticising China.

But although the two gripes are often aired in the same breath, there are crucial differences between them. Firstly, there is the attitude of the central government. Mainland officials have consistently rejected foreign accusations that they are unfairly under-valuing the yuan, insisting the currency's exchange rate is dictated by market forces. In contrast, Beijing acknowledges the inadequacy of intellectual property protection in China, and - at a senior level at least - appears willing to move towards adopting international standards of practice.

Secondly, whereas foreign businesses can do little themselves about the exchange rate, they are in a position to advance intellectual property rights in China. They just have to be prepared to spend money to do so. Although counterfeiting and copyright theft are widespread in China, intellectual property protection has nevertheless improved substantially in recent years. In fact, considering that physical property rights are still shaky at best, progress on establishing the altogether more nebulous notion of intellectual property looks rather impressive.

China rewrote its intellectual property laws after joining the World Trade Organisation at the end of 2001 and today boasts a set of statutes that, in theory, match up to international requirements.

Enforcement is another matter. Unlike other countries, China has no specialist patent courts and judges tend to have little technical expertise. Counterfeiting and copyright infringements are mostly dealt with as administrative offences, rather than through the courts. Investigating agencies are woefully under-resourced, the guidelines for pursuing offenders are sketchy and the penalties levied are slight.

Things are improving. According to Gordon Gao, at lawyers Paul Hastings Janofsky & Walker in Beijing, the number of prosecutions for intellectual property offences in China rose to 18,000 last year from 10,600 in 2004.

In the past few months, a string of court verdicts have decided in favour of foreign companies against local offenders. Italian chocolate-maker Ferrero Rocher won a lawsuit against a local company for imitating its sweets. US coffee-shop chain Starbucks won its case against a Shanghai competitor sporting the same Chinese name and a similar logo. And a Beijing court ordered the landlord and shopkeepers at the capital's infamous Silk Market to pay compensation to a clutch of European luxury goods firms for selling counterfeit copies of their products.

Even more encouraging was the government's move earlier this month to require China's leading computer manufacturers to ship their machines with legal software already installed, a rule which should badly hurt pirates.

Just how effectively these decisions can be applied and policed remains to be seen. Li Weishi, an intellectual property lawyer at the Shanghai practice of O'Melveny & Myers, points out that China has no contempt of court provisions that can be wielded against guilty parties who promptly re-offend.

Nevertheless, foreign companies could do more to protect their own intellectual property rights in China. The vast majority of lawsuits last year were launched not by multinational corporations but by local plaintiffs. Despite the recent high profile findings, the perception of rampant abuse coupled with a weak legal system has tended to deter foreign businesses from launching suits. It is not surprising then that offenders go unpunished.

Given the favourable attitude of the government, there are also opportunities for foreign companies to bolster intellectual property rights through constructive engagement. They could sponsor educational programmes, for example, or offer technical assistance.

They should continue to complain as well. Pressure applied through overseas governments has an important role to play in achieving progress. But alongside the criticisms, the foreign business community might well find it worthwhile to put a little more money where its mouth is.

Post