SEPTEMBER 29TH 2015
ALTHOUGH CHINA STARTS TO INNOVATE FOR THE WORLD, IPR PROBLEMS STILL REMAIN A CONCERN
When conducting business in China, intellectual property protection (IPR) is one of the essentials one needs to pay attention to. In the 1990s and early 2000s, when China was trying to boost its economy and become more important global player, IPR infringements were an important part of that stage. In one of his books, market analyst Shaun Rein describes this as the copycat stage – when the easiest way to get ahead and please the was to simply copy (or get inspired) by successful business models, technology, fashion items, etc. Rein in fact claims the copycat phase to be over now as now is the era of ambitious start-ups and companies catering the increasingly demanding Chinese customer. Stage when the foreign models don’t suffice anymore.
Although this is true and in some case we are seeing start of the next phase where domestic companies cater to global markets (e.g. smartphone maker Xiaomi is not only successful in southeast Asia but has also entered the market in Brazil), China is still a source of cheap manufacturing labor and it is still a popular sourcing destination.
Whether it is sourcing of production of an entire product or its component, there have been notorious case of companies having their product copied and subsequently the knock-of version would be offered on the market for a notably lower price. Alibaba, operator of major e-commerce platform in China, has been forced to take measures to help protect original manufacturers’ IPR rights. Alibaba now in place Aliprotect – a system allowing anyone to file a complaint relating to specific goods offered in the store. If all requirements are met, the IPR infringing product is then taken down. Only in 2014, Alibaba Group spent over RMB 1,000,000 to fight counterfeit goods.
Global pop-star Taylor Swift has been facing similar problems with her merchandise offered in China. As her popularity was rising in China, so has a huge market of unauthorized (pirated) Taylor Swift merchandise. In order to fight the sales of her counterfit merchandise, Taylor Swift opened her official stores with JD.com and Alibaba to use her star status as a means to do it.
In a recent interview, co-owner of Czech pencil manufacturer shared a story of how he was amazed that a meeting with potential suppliers in China, he was presented with identical copy of one of this product. Not always are the foreign companies as lucky and they only get to see copy of their product when it’s on sale. While Chinese government is making slow progress in this field, it is best to take your own precautions by protecting IPR through contractual provisions, holding on to your IPR and business secrets and especially using due diligence in the process of selecting the supplier.
Laurie Burkitt and Alyssa Abkowitz, “Taylor Swift Counters Knockoffs in China” Wall Street Journal http://www.wsj.com/articles/taylor-swift-counters-knockoffs-in-china-1437492360
Merritt R. Blakeslee, “Sourcing Your Products From China, Your Intellectual Property” Speciality Equipment Market Association
Shaun Rein, “End of Copycat China”, Wiley
Speech By Jonathan Lu, CEO of Alibaba Group, “2014 Counterfeit Report Press Conference”
Annex Asia Publishing
Image: NY Times