Re­flec­tions on in­tel­lec­tual prop­erty

The Pak Banker - - Editorial5 - Xu Li

The pro­tec­tion of in­tel­lec­tual prop­erty rights (IPR) has been on the com­plaints list of for­eign com­pa­nies in­vest­ing in China for a long time. But their re­cent crit­i­cism of the in­vest­ment en­vi­ron­ment and fake prod­ucts in China has prompted the Chi­nese govern­ment to take mea­sures to fur­ther curb IPR in­fringe­ments.

Technology in­no­va­tion is an en­gine for in­dus­trial devel­op­ment. An IPR holder can re­coup its re­search cost through the sale of its IPR prod­ucts, and with le­gal pro­tec­tion will have ex­clu­sive pos­ses­sion of the IPR prod­uct mar­ket.

Over the years, China has made great ef­forts and achieved con­sid­er­able progress in im­prov­ing the le­gal en­vi­ron­ment for IPR pro­tec­tion.

An ex­am­ple of China's progress is the Patent Law of 1985, which has been amended three times in line with in­ter­na­tional IPR rules. The amend­ments have made the re­quire­ments for patent ap­pli­ca­tions stricter, granted pa­tents bet­ter pro­tec­tion and in­creased penal­ties for patent vi­o­la­tions.

Ac­cord­ing to the law, com­pa­nies and peo­ple can be pe­nal­ized for dis­play­ing fake prod­ucts in shop win­dows or trade shows. This to a large ex­tent has al­le­vi­ated the con­cerns of for­eign­ers who ex­hibit their patented prod­ucts in China.

How­ever, China's progress on IPR does not nec­es­sar­ily mean it has man­aged the IPR le­gal en­vi­ron­ment well. The govern­ment's re­cent de­ci­sion to im­ple­ment a six-month IPR pro­tec­tion ac­tion through co­op­er­a­tion among sev­eral min­istries shows China's po­lit­i­cal will to solve the prob­lem.

But at the same time, it also shows the rel­a­tive in­ef­fi­ciency of the present le­gal frame­work. Though the Chi­nese govern­ment's ad hoc af­fir­ma­tive ac­tions can ad­dress the cur­rent con­cerns of for­eign patent hold­ers, IPR in­fringe­ments can only be prop­erly han­dled if the le­gal frame­work is well de­vel­oped.

While the well-de­fined leg­is­la­tion and en­force­ment pro­hibits il­le­gal ac­tions, pub­lic knowl­edge of IPR pro­tec­tion de­cides whether the le­gal thresh­olds will be crossed or not. When China is sin­gled out as a coun­try where IPR vi­o­la­tions are preva­lent, it is ob­vi­ous that China also suf­fers when the for­eign com­peti­tors take ad­van­tage of its peo­ple's weak knowl­edge of IPR pro­tec­tion. Some Chi­nese com­pa­nies have been sued for sell­ing their well-known trade­mark prod­ucts abroad be­cause for­eign spec­u­la­tors or com­peti­tors had al­ready reg­is­tered their trade­marks. If for­eign com­pa­nies and in­di­vid­u­als suc­ceed in their at­tempts to get pa­tents on the genes of some food­stuffs, they can pre­vent oth­ers from re­search­ing and plant­ing Chi­nese beans, for ex­am­ple.

Need­less to say, the ef­forts in fos­ter­ing the sense of IPR pro­tec­tion among Chi­nese peo­ple will help them re­spect for­eign IPR and pro­tect their own rights as well. The IPR is­sue is con­nected with the eco­nomic devel­op­ment stage of a coun­try and the pur­chas­ing power of its con­sumers.

Since China is at a devel­op­ment stage where its En­gel co­ef­fi­cient is high, price plays the de­ci­sive role in Chi­nese con­sumers' buy­ing habits, es­pe­cially the less priv­i­leged. This means a prod­uct that is a lot cheaper than the orig­i­nal can have a profitable mar­ket in China and ex­plains the rea­son why even harsh en­force­ment mea­sures have not stopped IPR vi­o­la­tions in the coun­try. That is why it is im­por­tant for com­pa­nies to re­con­sider their pric­ing or mar­ket­ing strat­egy.

IPR in­fringe­ments are not unique to China; even de­vel­oped coun­tries suf­fered this ex­pe­ri­ence dur­ing their eco­nomic devel­op­ment. In fact, some de­vel­oped coun­tries still face IPR prob­lems.

When China launches its new devel­op­ment strat­egy of in­dige­nous in­no­va­tion it will in­di­cate a shift from fast-paced and quan­tity-ori­ented devel­op­ment to a higher stage of qual­ity ori­en­ta­tion and re­place its technology-for­mar­ket ap­proach with an in­de­pen­dent in­no­va­tion pol­icy.

When for­eign in­vestors com­plain about the end of the su­per­na­tional treat­ment pe­riod for them in China, they do not count the op­por­tu­ni­ties that the coun­try's technology-dom­i­nated pol­icy can cre­ate for them in low-car­bon and high-tech fields and the ac­com­pa­ny­ing mea­sures that will re­sult in a bet­ter le­gal en­vi­ron­ment for in­no­va­tion and IPR pro­tec­tion.

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