Experts say overseas companies still reluctant to go to court When a South Korean software company went to the Shanghai police to complain that its source code had been stolen by Chinese hackers who were demanding money for its return, the authorities acted swiftly - they put a dozen detectives on the case and arrested two of the suspects. 'We said that if they did not protect intellectual property rights [IPR], no-one would invest in Shanghai,' said Anthony Chen, a lawyer with Jones Day who advised the Korean firm. 'A robust software industry in Shanghai needs strong intellectual property rights protection. When the firm went to see the FBI in the US about a similar problem, officials said that they were too busy and they should solve the problem on their own.' That was an IPR story with a happy ending. Many other firms, Chinese and foreign, are not as lucky. According to official figures, Chinese courts last year handled 16,538 IPR cases of which 89 per cent dealt with infringements, compared with about 10,000 in the United States. Only 449 or 3.35 per cent involved overseas firms. Intellectual property rights are one of the main issues of President Hu Jintao's US tour this week. On Tuesday, on his first stop, Mr Hu visited the headquarters of Microsoft Corp in Redmond, Washington, and had dinner at the home of company chairman Bill Gates. Mr Hu promised to improve intellectual property rights protection, saying this was 'necessary not only for China's expanding openness to the outside world and to improve our investment environment but also to strengthen our own domestic innovation abilities'. Mr Chen and his colleague Peter Wang, who leads the litigation practice in the Shanghai office of Jones Day, said intellectual property rights in China presented a mixed picture. 'The IPR laws in China are close to international standards and do not need much change,' said Mr Wang. 'But the effectiveness of the suit is different [to that in the US]. The damages will be lower if you win and it is much harder to get a preliminary injunction to stop production [of allegedly counterfeit goods] pending a trial. 'The court procedures and mechanisms are still daunting, especially outside the big cities and concerning small counterfeiters who are not subject to the jurisdiction of the court.' Mr Chen said foreign firms were reticent about using Chinese courts. 'Western companies own over 50 per cent of the invention patents in China but account for about only 2 per cent of the cases. They should file at least 10 times more. The chief judge of the IPR chamber has said that he would like to see more lawsuits by western companies, so the court can address their complaints. 'The process is faster than in the US. A case in China takes 12-18 months to come to court, against twice as long as in the US. In the meantime, the competitor will continue to sell his goods.' Many foreign firms believe they will not receive a fair hearing, that the courts give preference to domestic companies, especially those owned by the state, and prefer to take their complaints through political channels. 'Lawsuits here cost a fraction of what they do in the US,' Mr Chen said. 'If you look at the budgets [of foreign companies] for IPR enforcement in China, it is too small.' He urged foreign firms, particularly those in the pharmaceutical and biotechnology sectors, to be more pro-active in protecting their intellectual property in China, such as by having their products duly registered, 'even if they are not investing here'.