By Ian Lavis on behalf of Praxity
The war of words between the US and China over Intellectual Property Rights (IPR) masks a shift in policy that could make China more attractive to international businesses.
US and European companies have long complained that their international property is not adequately protected in China.
According to Reuters, US businesses say they lose “hundreds of billions of dollars in technology and millions of jobs to Chinese firms” which are alleged to have “stolen ideas and software or forced US businesses to turn over intellectual property as part of the price of doing business in China”.
Now US President Donald Trump has directed his US Trade Representative to look into allegations against China of IP and technology theft and its impact on American business. China foreign ministry spokesman Lu Kang has responded claiming there are no laws in China to force foreign investors to transfer technology but acknowledged such things may happen as part of “market behaviour” between companies working with each other, Reuters reports.
The US and China spat hides the fact that China has actually made significant progress in the protection of IPR, according to a leading IP specialist in Asia. William Weightman, who researches intellectual property law, IP enforcement and technology innovation policy at Chengdu, China, argues “foreign firms have been slow to realise the substantial changes in China’s protection of IP rights”.
In an article published on the Asia-Pacific news site The Diploma in January 2018, William Weightman says significant progress has been made on China IPR over the past decade, adding: “China has become increasingly innovative and has demonstrated a serious resolve to enforce an effective IPR regime. Indeed, as Chinese firms focus on global expansion abroad and high-tech innovation at home, they have increasingly demanded effective IP protections from the government. In fact, many of the concerns raised by foreign companies operating in China have been addressed by legal reforms and new enforcement mechanisms.”
This is unlikely to convince the likes of Apple, Samsung, Sony, and Dell but it does indicate a shift in policy which could encourage more companies based outside China to invest in the country’s growing economy without losing their IPR.
Why is IP so important?
The reason why IP is such a hot potato is because it lies at the heart of domestic and international business growth. IP refers to “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce,” according to the World Intellectual Property Organisation, a self-funding agency of the United Nations set up to promote IP.
This means if an individual or company comes up with a new idea or product, or a process that offers a new way of doing something, they can be granted an exclusive right over the use of their creation for a certain period of time via, for example, patents, copyright and trademarks.
China has every reason to want to address the IP concerns of businesses. China’s domestic firms are becoming more open to foreign companies supplying them with high-value goods and services so they can tap into the rapidly growing Chinese middleclass. At the same time, China’s state-owned enterprises (SOEs) are investing outside China as part of the new Belt and Road Initiative (BRI) which is opening the door for international companies to participate in massive capital projects in Asia, Africa and Europe.
Change in focus
David Haigh, founder and CEO of Brand Finance, which participates in Praxity, the largest alliance of independent accountancy and consultancy firms in the world, says IP protection is key to the growth of China’s domestic businesses.
He explains: “China is being instructed by the President Xi Jinping to make China a world leader by investing in IP and for China to become a place where quality products and brands originate from, not simply being a production centre for foreign brands.”
And it’s not just China. India is also making IP a priority. “It is clear that China and India are investing huge amounts in research and other IP to get ahead of western companies. They both also buy IP rich companies in the west to get hold of their current and past technological IP and brands,” David Haigh says.
This demonstrates the huge importance of IP to both domestic and international business, and the marked shift in policy in the East.
There is a long way to go to deter IP theft and violation on a global scale but progress to reform IPR in China suggests the tide is turning. This could have a significant impact on China’s growth, the expansion of international companies into China, and the development of cross-border partnerships.
World Intellectual Property Organisation
IAM (IP business information provider) summits
China Intellectual Property Summit