Intellectual Property Rights (IPR) in China

A former Chinese colleague of mine often quipped, “In China we don’t need copyright laws. We already know how to copy.”

And they do. If you have a successful new product the chances are that there will be virtual copies in the market seemingly overnight. Often, in fact, it happens quite literally overnight.

Contrary to what you might assume or have heard, however, there are laws on the books to protect intellectual property. And they are sometimes enforced. But the problem is not the laws themselves; it’s the courts, which often operate under the influence of local politicians who don’t want to hurt local taxpayers and employers.

A lot of the problem comes back to worldview, however, and the form of reasoning that defines it. The Chinese, as I have often noted, seldom accept absolutes. Their culture is built on a holistic, inductive worldview that emphasizes results over process.

It’s a culture that turns on relationships, of course, and all relationships are personal. Ideas, like institutions, are just too intangible. There can be no sense of mutual obligation with an idea.

Even among Western democracies the legal system struggles to sort out who can and does own what ideas. Virtually any idea can, in reality, come to two different people at the same time.

So the wheel was a great invention.  But is it plausible that no one else would have come up with the idea?
So the wheel was a great invention. But is it plausible that no one else would have come up with the idea?

Often it’s just a matter of time, which is why pharmaceutical companies, for example, face time limits on the patents they are granted. As time marches on once creative or obscure ideas seem more and more obvious.

Some companies take the extreme step of not bringing their most advanced technology to China to begin with. That doesn’t mean, however, that the technology doesn’t end up here anyway, while the company has given up a potentially lucrative market in the meantime. Even if the company comes without its latest technology it won’t be competitive.

We all copy, when you get right down to it. We copy from our parents, our teachers, and our friends. We just call it learning, or imitation.

Even the Western legal systems recognize the limitations of intellectual property laws. You can’t copyright a book title, for example, and anyone can perform any song they want live, even in front of a paying audience.

And individual patents, of course, are often easy to circumvent. It often takes what IP lawyers call a ‘forest of patents’ to protect a truly original idea.

But do the Chinese really not feel any sense of shame when they blatantly copy someone else’s work? Frankly, that’s not the relevant question.

Shame is an ideal; or, more accurately, the absence of an ideal – honesty, fair play, virtue, etc. And ideals, often called values, have value for one simple reason – cause and effect. Westerners believe that if we all play fair then society will enjoy a better outcome. We believe that if we conduct ourselves in a virtuous way we will enjoy a better life – more friends, admiration, and success.

The Chinese, of course, have ideals as well. The difference is that virtually all of their ideals are personal, not abstract. Values like filial piety and mutual obligation turn on tangible relationships, not intangible codes of conduct.

So when they look at a successful product in the marketplace they don’t see it as someone’s property. What they see is that this is a product that people want to buy. And isn’t the goal of business to sell products and services that people actually want?

The fashion industry has the toughest challenge due to "bangmingpai" which roughly translates into "close, but no cigar."
The fashion industry has the toughest challenge due to “bangmingpai”, which roughly translates into “close, but no cigar.”

To them, therefore, business is less a game of ideas and more a game of execution. They play business like the Oregon Ducks play football – their famous spread offense – with an emphasis on speed and execution.

And they are very good at it. Most Chinese companies can bring a new product to market in a fraction of the time it takes their Western counterparts. And they can produce it a fraction of the price, the reason being that while Western companies are installing energy-efficient hot water heaters in their washrooms in an effort to save costs, their Chinese competitors are not putting any hot water in their washrooms.

So what can Western companies do to protect their technology? I won’t get into all of the details here – they’re all pretty obvious – but I will say this. Most companies, in my experience, are too focused on the technology itself. The real asset is the person who knows how to apply the technology. If you want to protect your technology, you should protect your people first. Create a work culture that people don’t want to give up and you probably have little to worry about if your competitors get their hands on your data or drawings. You might even set them back a few steps.

Having said all of that the Chinese government does recognize that intellectual property rights and the rule of law are essential to a modern economy. And I think they took a big step in that direction at the 4th plenary session of the 18th Communist Party Central Committee recently when they greatly reduced the potential influence of local governments on the judiciary. That will greatly enhance the objectivity of the courts and create a more level playing field for all.

Just this past week, moreover, an executive meeting of the State Council chaired by Premier Li Keqiang issued a statement committing to create a stronger “legal, market, and cultural environment for IPR protection.” And the government has, in fact, pursued 14,000 criminal cases involving intellectual property rights so far this year, according to the Ministry of Public Security. In August, moreover, the Standing Committee of the National People’s Congress adopted a resolution to establish special courts in Beijing, Shanghai, and Guangzhou to focus specifically on IPR issues.

But it will take time. In the meantime, if you’re really worried about your intellectual property I have a foolproof method for protecting it. Keep creating it. The faster you innovate the more difficult it will be for your competitors to use your intellectual property against you. They will be in a constant game of catch up and that, in any economy, is the kiss of death for any business.

You won’t beat the Chinese at their own game. But innovation trumps execution every time, because innovation sets the pace of the game. And it is pace, more than anything else, which determines the ultimate outcome. As in sports, you don’t have to execute better than your opponent; you merely have to score more points.

If you really want to protect your intellectual property give your employees a reason to stay.
If you really want to protect your intellectual property give your employees a reason to stay.

Copyright © 2014 Glassmaker in China

Notice:  The views expressed in this post are strictly those of the writer acting in a personal capacity.  They are not in any way endorsed or sanctioned by his employer or any other individual with which he may be personally or professionally affiliated.