Investors are taking heart from China's determination to fight counterfeiters A wealth of legislation has been enacted on the mainland in the past few years in an attempt to clamp down on the kind of intellectual property (IP) infringement that has made the country almost synonymous with piracy. The central government appears to be keenly aware of the damage done to its reputation by the proliferation of fake goods easily available in shopping centres throughout the mainland. But despite the raft of new laws, which cover everything from copyright to trademarks and patents, IP violations are still seen as a serious problem. Tan Loke Khoon, an IP partner at Baker & McKenzie, believes it is still too early to gauge any effect the new laws may be having on piracy levels. 'Piracy activities continue to be a serious problem in China despite the new post-World Trade Organisation/TRIPs-[trade-related intellectual property rights]-compliant IP laws and regulations,' Mr Tan says. 'Like all new post-WTO laws in China, it is still early days, and the knowledge and application of these laws need time to trickle down to the local levels, where they can be digested and implemented efficiently.' Others see the very enactment of the laws as proof that China is serious about combating piracy. Kenny Wong, a partner in IP practice at Johnson Stokes & Master in Hong Kong, notes the trend at all stages in the legislative and enforcement chain. 'IP rights owners appreciate the [mainland's] demonstration of the determination to follow international trends and expectations about IP protection,' Mr Wong says. 'Enforcement officials at all levels are ever more helpful in implementing the spirit of the improved legislation to curb counterfeiting and infringement activities.' Deacons managing partner Lindsay Esler, meanwhile, notes a marked increase in anti-piracy efforts since laws were tightened. 'We have a large China IP practice, and we have noticed an increase in enforcement activities,' Mr Esler says. 'We believe the Chinese government has taken the right steps to improve legislation in this area.' Mr Tan believes there has been a genuine change in attitude towards IP in the mainland. As China continues to open up, however, piracy levels may in fact rise further before they fall, he says. 'What has clearly changed is that China is no longer in denial of its piracy record, so to speak, and IP rights owners should feel no fear in aggressively pursuing their rights to their rightful conclusion,' Mr Tan says. 'We expect to see a rise in piracy activities as China continues to open its markets. The period of stability will hopefully come once these new laws are strongly and consistently enforced in the near future.' Legislation, of course, is not the key issue. Rather, it is China's enforcement record that must improve if the country is to shed its image as a safe haven for pirates. 'Enforcement has always been an issue, given that China is such a big country,' Mr Wong says. 'Infringement can be very small scale and localised, making it difficult to trace or to take action.' He says there is still a limit on the resources, money and manpower the government has put into the enforcement of IP regulations. Meanwhile, local politics can also be an obstacle to effective enforcement, Mr Tan points out. 'The question is not the nature of the laws but the patchy enforcement of these laws, which is a major problem for many foreign investors,' he says. 'There is still strong protectionism in some black-spot cities and counties, where it is important to work out the guanxi or relationship factor among enforcement officials and local communities. There are some turf issues among the myriad of IP rights governmental enforcement bureaucracies, who are in constant competition with each other.' China's labyrinthine legal system can also cause headaches for investors looking to enforce their IP rights. Mr Tan believes a long-term strategy will ultimately see rewards. 'It is not easy to navigate through the IP rights system, and one can easily give up when faced with each new hurdle. There is really no quick fix. One has to stay focused to achieve results.' Meanwhile, Mr Esler says knowledge and mainland lawyers are essential for the effective use of court systems to protect IP rights. China represents a significant opportunity for Hong Kong law firms with dedicated IP practices, especially with the steady increase in the number of foreign clients investing in the mainland. Every successful industry in China can expect to face IP issues, Mr Tan says. 'The flavour of the month seems to be the proliferation of high-quality, encrypted DVD movies which you can purchase for 5 yuan [HK$4.70] or less. With each new Hollywood blockbuster, there is a pirate industry ready to boom,' he says. Mr Esler says 'substantial IP work in relation to the [mainland] in luxury goods, pharmaceuticals and electronics and increasingly in consumer goods' are an indication of those industries suffering the most from IP piracy. Mr Wong says: 'Where there is a demand, and such demand cannot be reasonably satisfied, an opportunity is created for counterfeits to pass as a substitute.'
