China IP Enforcement is the Sixth Trend.

International IP lawyer

Damn.
I just knew it.
I knew there would be no way I (nor any lawyer on any subject) would be willing to be confined to just five.

Let me explain.

As 2009 was drawing to its close, I wrote a post for Shanghaiist, entitled, Dan Harris: China’s top 5 business law trends of 2010 [link no longer exists]. In it I talked about China visas, China company formations, China’s employment laws, its monopoly enforcement, and taxes. I did not say a word about intellectual property enforcement getting better in China, and mostly that was because such enforcement has been steadily getting better for years.

Way back in 2006, we talked about how “the more the Chinese courts and officials come to realize IP enforcement is in China’s long term business interests, the greater the enforcement.”

Over the last few months, there has been an increasing drumbeat of comments from Chinese government officials on the need for innovation within China and for the need for protection of innovation. That drumbeat became a shout (I know I am mixing metaphors) last month when President Hu Jintao stressed the value of intellectual property rights for Chinese companies:

Nowadays, the competition in information technology is extremely fierce. I hope you, as a software company, will treasure technological innovation as your life. You need to own intellectual property rights for your products. I hope you will be pioneers in the development of our country’s software industry.

On a somewhat related front, I wrote a few weeks ago how the international IP lawyers at my firm had been seeing an increasing number of matters involving American and European companies seeking to license technology to Chinese companies. The Chinese government is very explicitly telling Chinese companies to step up their technology and to improve their quality and to secure foreign technologies. This has led Chinese companies to technology licensing agreements with Western companies in much greater numbers than in the past.

The Chinese government knows that for technology licensing agreements to have premium value to Chinese companies that enter into them, there must be adequate enforcement of intellectual property rights in China. Everything I have seen over the last six months or so tells me that IP enforcement in China is rapidly improving and will continue to do so. We can expect still be able to buy fake DVDs and software on the street, but I expect enforcement of patent and trademark rights to continue stiffening.

This is the sixth trend and I should have caught it. What are you seeing out there?

9 responses to “China IP Enforcement is the Sixth Trend.”

  1. Nevertheless…YouKu (as a trademark),and Baidu MP3 (Baidu holds greater market share than Google) continue on their merry way. The Chinese writers suing Google Books over copyright? JOKE.

  2. As things are going, this is a natural progression. Overtime, it will just become the norm, right?
    J.W. – Wow , that does sound disturbing

  3. I see perseverance and committment by authorities like MOFCOM, although gargantic problems remain.
    But as you say, it is in the long term business plan and they will get there. Right now, however, they have many other rocks in their shoes (climate, Africa, foreign dying markets acquisitions and lately, more diplomacy than in the last 5 years, reviews of the civil procedure law, etc).
    Finally, the higher efforts on patents and trademarks is justifiable becuse PATs are strategic and TMs are not! But TMs determine daily intense capital movements.
    Copyright is just not so attractive right now and there is just too much labour and under-the-table payouts involved, for serious takings of action.
    I am stopping here because I could become dangerously lenghty and start with TRIPs concerns on compulsory licensing of PATs or strategic tresholds of TM-infringing goods, notarization and legalization of evidence etc, but I want to leave my desk right now and go for dinner.

  4. to J.W. :
    nice movie you got yourself, great acting!
    A propos of acting, I don’t think there is enough room for suing anyone around you for that inconvenient event that happened to you: when you bought the DVD, the seller was lying and you were cheating. Now can you expect the seller to care about your language skills?
    cheers.

  5. Even the DVD’s and software may be becoming more of a marginalized phenomenon. I have found that the number of fake disc stores in Beijing has fallen dramatically in recent times, and that ironically, the largest concentration is in the Sanlitun area, catering for foreigners. Apparently, downloading is eating away at hard-disc profits. This is not to say that the fake discs will completely disappear, but it does seem interesting that for-profit piracy is increasingly being replaced by not-for-profit piracy. This is also much harder to enforce, especially since the Criminal Law has a for-profit test on the provisions on IPR infringement.

  6. “President Hu Jintao stressed the value of intellectual property rights for Chinese companies”
    It’s a pity he doesn’t attach the same importance to the IP rights of foreign companies.

  7. Protection should increase, inasmuch as that means cracking down on mindless and unregulated copycat behavior, but I think the new national intellectual property strategy, and the amended Patent Law in particular, actually weakens a company’s autonomous control over its IP rights with regard to administrative bodies and the courts. The laws have been revised, according to Chinese officials, with China’s national interests in mind for the first time (as opposed to WTO obligations, foreign pressure, etc.). Their purpose is to jump-start China’s indigenous innovation vis-a-vis international competitors, and to reduce companies’ (especially foreign companies’) ability to corner important markets through “abuse” of IP rights. Compulsory licensing may become a serious concern, especially if the regulations are ultimately promulgated as drafted. Same with the ability of foreign partners to protect their IP rights in joint venture arrangements in the absence of very clear contract terms covering IP transfer and licensing rights. Especially in strategic industries like alt. energy, autos, etc. With regard to IP rights, the government wants to use the laws to “protect, create, utilize, and manage.” Thus, more protection, less control. Watch your back if you make solar panels, superconductors, or catalytic converters!

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