ChinaMarket Insights

What Will Happen to Chinese IPR Protection?

By 5 December, 2018June 30th, 2023No Comments

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Foreign firms often complain that enforcing their intellectual property rights in China is quasi-impossible. The problems are rooted in government driven protectionism, difficulties in finding evidence, disproportionally small damage awards – if any, and a perceived bias against foreigners. This perception is justified to some degree, but in many cases the hardship results from deficiencies in establishing the right strategies, too quick-jumps into partnerships with unknown companies, a low understanding of the local market dynamics, and a generally blue-eyed attitude.

The US, as a young developing nation, once refused to respect international intellectual property rights on the grounds that it was entitled to use foreign works for the purpose of furthering its social and economic development. Examining the current level of IPR protection in the US, one may conclude that the country has moved from one extreme to another.

The China-focused scholar Frederick Abbott has claimed that infringement of intellectual property will be used to fuel the economic development in China until the country reaches a point where intellectual property right protection becomes economically more advantageous due to a sufficiently strong set of domestically vested interests. Over the past decade, China has become increasingly innovative and has demonstrated a serious will to enforce an effective IPR regime. As more Chinese firms focus on global expansion abroad and high-tech innovation at home, the demand for effective IP protection increases.  In fact, many of the concerns previously raised by foreign companies in China have now been duly addressed by legal reforms and new enforcement mechanisms. This is not to say that the current situation is satisfactory, but the legal landscape is certainly developing in the right direction.

China is likely to soon transition into a role as an intellectual property leader. The problem is that, unlike Japan, China is not only an economic competitor, but also an ideological competitor. This increases the importance of understanding China´s cultural framework and business environment. Companies cannot solely rely on the almighty power of legal actions to protect their IPRs.

Sometimes local protectionism may dilute the strength of central legislation or the power of law enforcement. For example, local governments might be reluctant to genuinely support the work of copyright protection supervisors. This can create obstacles during IPR investigations and assist local infringers by letting them hide evidence and production lines. When counterfeiters are well connected to local governments or law enforcement officials, they may use that as an umbrella for their illegal activities.

ARC Consulting has advised numerous foreign companies in establishing more efficient IPR protection in China. In addition to proper legal homework, this work also comprises sufficient identification of local stakeholders, adoption of appropriate market entry channels, understanding of the competitive landscape and competitor pricing, decentralizing manufacturing operations, and vigilance. ARC Consulting has also supported clients in successfully gathering information and evidence on IPR infringements and suspected violators in cases where infringements have already occurred.

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