China\'s Intellectual Property Rights Current Issues Strategic Considerations and Problem Solving

China's Intellectual Property Rights: Current Issues, Strategic Considerations And Problem Solving

In this paper, the focus is primarily on the Intellectual Property Rights (IPR) that are given to individuals within the Republic of China. The paper starts off by defining IPR and the different ways that IPR is provided like copyright infringement. The paper them moves on to define IPR and its progression in China through the imperialistic years, the era after World War II and the modern structure of China's government and society. The paper's main aim was to discuss three aspects of IPR: current issues, strategic considerations and problem solving tactics within China. Some of the current issues discussed include: stopping abuse and attaining redress, involvement of appropriate IPR authorities, data collection, criminal enforcement, cultural differences, recognition and safeguard of IPRs, corruption, and language and trademark issues. The paper then moves on to discuss strategic considerations and highlights various exploitation issues present and strategies that help maintain consistency of contractual factors, building your own network and thorough risk analysis. The paper highlight problem solving strategies which focus on employee satisfaction, customer satisfaction/retention, intelligence network and partnerships, the use of supply chain, increasing public awareness and the use of technology and its design. The paper then concludes the paper with an overview of everything that was discussed.

Introduction

Intellectual Property Rights (IPR): Defined

Intellectual Property (IP) is simply a claim put on a valuable yet intangible creation. Normally, the standards set for all Intellectual Properties are set by individuals with a high intellectual capability like inventors. Every individual has the right to protect a valuable creation and Intellectual Property Rights (IPR) has now become an established global standard through which this right of protection can exercised. Intellectual property rights (IPR) also offer the individuals a chance to manage and expand their IP based on their status as the 'rights owner' of any IP[footnoteRef:1]. [1: Buckley, C., Lynn, J. And Nebehay, S. (2009). China, U.S. trade barbs over WTO piracy case. Reuters. 2009-03-20. Accessed August 27th, 2011 from: http://www.reuters.com/article/2009/03/20/us-china-usa. Also see: Shi, W. (2006). Cultural Perplexity in Intellectual Property: Is Stealing a Book an Elegant Offense? 32 N.C.J. Int'l L. & Com. Reg. 1, 35.-wto-idUSTRE52J3T920090320]

The next question is defining the kind of creations that will be accounted as part of the IPs of individuals. All creations that are believed to be completely new inventions or an extension of a creation that is innovative -- plus any aspect of a creation that is believed to further the process of development are considered as IPs. The categories of IPs also differ based on the field or domain in which an individual chose to create something. For instance, a new creation in the field of art or literature will be protected by the IPR known as copyright. Similarly, in the department of technology, a new creation will be given the IPR of a patent that will protect their rights as well as the rights of what was created. The IPR known as trademark is usually assigned for the protection of a signature or logo that is believed to distinguish a product or service or business from the rest in the industry. Similarly, the design rights highlighted as part of the IPRs are structured for the protection of the appearance, shape, colour and structure of a product. All these categories provide the same set of rights based on the criteria that anything created in these fields is not generic but unique, novel and not previously owned by someone else. All creations must also in one way or another be designed for progression or as a representation of progression[footnoteRef:2]. [2: Feng, Peter (2003). Intellectual Property in China (2 ed.). Sweet & Maxwell Asia.]

All rights, with the exception of the copyrights that are automatically registered, have to be formally registration and approved by the government. All rights follow a specified structure of application based on the domain or department that the right belongs to. This registration will ensure that the rights to the creation are your own and will not be exploited by anyone else. The important thing to note here is those projects that an individual completes for a company or while employed at a company will be the copyrights of the company as opposed to the individual[footnoteRef:3]. [3: China, Russia Top U.S. Piracy List. Reuters. 2007-04-30 Accessed August 27th, 2011 from: http://www.reuters.com/article/idUSN3041927620070430. It is also important to mention here that The Office of the U.S. Trade Representative (USTR) placed China on its intellectual property rights (IPR) priority watch list on April 29. USTR released a report that found that China had not fulfilled commitments made last year to reduce IPR infringement, saying that China's steps to improve enforcement have been "seriously inadequate" and that "criminal enforcement in China has not demonstrated any deterrent effect on infringers."The administration will use World Trade Organization (WTO) instruments "whenever appropriate," the report states. But USTR stopped short of labeling China a "priority foreign country" -- a move that would have likely triggered a Section 301 investigation (the section of the 1974 Trade Act that empowers the U.S. government to retaliate against unfair trade practices) and eventually a dispute-resolution case in the WTO. The USTR report demands that China comply with transparency requirements and release data on IPR enforcement activities. This data could be a step toward developing a case over time.In the report, USTR also presents China with a six-item list of needed "Tangible Results," which are similar to previous, general calls for more criminal investigations and greater transparency. USTR has indicated that it will seek to establish clear benchmarks to measure China's progress in reducing piracy. Discussions on these benchmarks will apparently be part of the Joint Commission on Commerce and Trade (JCCT) process. The JCCT -- chaired on the U.S. side by Commerce Secretary Carlos Gutierrez and USTR Rob Portman, and on the Chinese side by Vice Premier Wu Yi -- is due to take place in Beijing in July.]

In this paper, we will be focusing on the Intellectual Property Rights that are exercised in China. The paper will start off by discussing the history and evolution of IPR in China followed by the current issues that hamper the exercise or demand better implementation of IPR in China. The majority of the paper deals with the strategic considerations that might be important to implement in the short and long run in order to improve the IPR practice in the region followed by some of the problem-solving techniques that are already in place. The paper ends with a summarized overview of the paper.

IPR in China

Intellectual property rights first surfaced and penetrated into the People's Republic of China over three decades ago when the Chinese economy first took shape and found a structure in the global society. This was the primary reason why many of the foreign states and governments took an interest in the Chinese economy and worked towards standardizing and implementing the IP protection policies within the region at the beginning of the twenty-first centuries. It must be noted here though that despite the progression of IPR being prominent in China, it has had its fair share of ups and downs and hurdles primarily due to its rigid and established social structure. China's social structure, political administrations, economic structures and historical stances have not been open to change or the idea of intellectual property primarily due to the drastic changes that led to antagonistic environments. Despite these difficulties, the IPRs in China cannot be sidelined as they are an integral part of the boom that the Chinese economy has been experiencing in the past three to four decades. Furthermore, if and when China strengthens its IPR, the foreign investors would have increased interest in the economy hence simultaneously increasing the growth rate of the country. This section of the paper will present an outline of the significant improvements of IPRs in China over the different political and economic phases of the region[footnoteRef:4]. [4: Gulbransen, D. (2009). The Evolution of Intellectual Property Rights in China: Moving Beyond Legislative Reform to the Challenges of the New Millennium. Accessed August 27th, 2011 from: http://www.gulbransen.net/resume/David-Gulbransen-Paper.pdf Given the cultural and historical role of intellectual property rights in China, the progress China has made in effecting intellectual property rights protections in the past thirty years is nothing short of phenomenal. In the race to protect their own interests, developed nations are sometimes reluctant to admit the great strides China has made in opening doors to foreign trade and becoming a productive member of the international community. Also see: Shi, W. (2006). Cultural Perplexity in Intellectual Property: Is Stealing a Book an Elegant Offense? 32 N.C.J. Int'l L. & Com. Reg. 1, 35.]

The two primary forms of government structure that have dominated the ancient Chinese political philosophies are that of Legalism and Confucian. The primary foundation of all Chinese Legalist philosophies is that it is based around the standardized principles, rules, laws and codes that are implemented from the government level. On the other hand, The Chinese Confucian philosophies are revolved around the rules of human norms and social structures. The one aspect that has been dominant in Chinese societies is the preference of fulfilling all societal obligations in harmony with personal obligations. The latter always takes preference over the former so much so that history has shown the Chinese abandoning personal interests for the fulfilment social and political of ones. This is hence where IPR comes in as one of the important phenomena[footnoteRef:5]. [5: Ibid However, China's progress in the IPR arena is not complete. China faces a number of issues regarding enforcement of the IPR laws it has enacted, and balancing those enforcement issues with economic growth and development presents many unique challenges. China must address issues of localization and enact significant judicial reform in order to bring the IPR reality in line with the text of the Chinese Laws. Until China does so, it will continue to face criticism from developed nations regarding its IPR climate. Also see: Li, Y. (2002). The Wolf Has Come: Are China's Intellectual Property Industries Prepared for the WTO? 20 UCLA Pac. Basin L.J. 77, 103.]

When we talk about the importance of IPR, we can see that the state and government of China has played a pivotal role over the years in its development. The very first record of the use of trademarks is dated back to 2698 BC when the earliest form of pottery surfaced in the region. The first official records of the trademarks were also present during the Han Dynasty era that expanded from 206 BC to AD220 and were primarily used to offer the customers a form of protection on their purchases and investments. The first form of copyright was also found in this era when certain writings and copying of these writings were restricted by the state primarily because the wanted to manage the impact and perceptions of the literate individuals in the region but also to protect the authenticity and precision of the writings. Even though, these earlier standards in Chinese history do not accurately depict what IPRs stand for today, but provide a good insight and proof of the recognition of intellectual rights. The difference here was that most of the value for these rights was placed on the society as opposed to the individual. Copying and sharing of all literary and technological works was also disallowed by the state. There is little to no record showing the protection of the rights of inventors though, and throughout the 1800s patent laws were only designed to protect the Chinese traders. It was only a brief period during 1923-28 that Americans were also granted patents but the rule of Guomingdang party in 1928 saw the establishment of new copyright, patent and trademark rights that were restricted only to the locals[footnoteRef:6]. [6: Ibid The reforms China is facing, ultimately, will benefit both the Chinese people and foreign entities who want access to the Chinese market. As IPR enforcement is strengthened in China, China's domestic enterprises will begin to be able to develop technology and compete on a global scale, while foreign companies will be able to enter the Chinese markets with more certainty regarding the protection of their intellectual property. In the end, intellectual property protection, once seen as antithetical to China's Confucian legacy, may prove the very means through which China achieves harmony in the global community. Also see: Li, Y. (2002). The Wolf Has Come: Are China's Intellectual Property Industries Prepared for the WTO? 20 UCLA Pac. Basin L.J. 77, 103.]

Let's fast forward to the era of disorder that the world knew as World War II. This era was heavily influenced by various Japanese occupations and the elevated tension and clashes between the Nationalist Chinese governments and the Chinese Communists. In this era, in the reign of Mao Zedong, the Communists (who eventually drove out the Nationalists) abolished the established IPRs at the time and implemented what is known as the Provisional Regulations on the Protection of Invention Rights and Patent Right of 1950. Here, the rights of the inventors were recognized in the form of official certificates and financial reimbursement. The use and copying of inventions as well as writings was still controlled by the government however. The foreign investors and traders could also be granted patent law in this time based on the assessment decisions made by the Commission of Finance and Economics. This did not grant more than a dozen patents to foreigners on that era however[footnoteRef:7]. [7: Xue Hong; Zheng Chengsi (2002). Chinese Intellectual Property Law: In the 21st Century. Sweet & Maxwell Asia. Also see: Bird, R.C. (2006). Defending Intellectual Property Rights in the BRIC Economies, 43 Am. Bus. L.J. 317, 318.]

The darkest and slowest growth of IPRs in China was observed during the Great Leap Forward in 1958 as well as the 1966-67 Cultural Revolution in the region. All previously established IPRs were completely abolished and the prior patent regulations were replaced by the 'Regulations to Encourage Inventions' and 'the Regulations to Encourage Improvements in Technology'. The state owned the rights for all inventions in both. The Cultural Revolution was perhaps the biggest drawback for the intellectuals in China. This is where the 1963 IPRs and set of laws were abolished and the likes of scientists, inventors and even law enforcement officers/lawyers/judiciary were damned for not following the ideals and standards of the Communist philosophy. The Cultural Revolution ended with the arrest and destroyed influence of the "Gang of Four" in 1976. It was form here onwards, especially since 1978, which the Chinese were able to implement drastic alternatives in their economic laws, IPR laws and foreign relations form the era of Deng Xiaoping. China soon started to partake in the IPR ventures with international organizations and have led to three decades of complete revolutionizing of the IPRs implemented within the region from the legal and social perspective (Gulbransen,). These last three decades will be the background upon which the next section for current issues will be based[footnoteRef:8]. [8: Ibid 4 Also see: Slate, R. (2006). Judicial Copyright Enforcement in China: Shaping World Opinion on TRIPS Compliance, 31 N.C.J. Int'l L. & Com. Reg. 665, 686.]

Current Issues

Stopping Abuse and Attaining Redress

Taking Legal Action

There have been growing incidents in recent years reporting the claim from foreign investors that many local Chinese companies have purposely registered similar trademarks and other IPRs in order to bargain a profitable transfer cost. The most troubling claim by these locals has been that the original product or service infringes or breaches the prior-registered IPRs, which has also proven to be an effective way of blocking foreign investments in the industry. The problem for foreign entities thus becomes that they are ultimately engaged in pricey and prolonged registration and cancelation activities. Hence, for all foreign entities, the current line of action if to first formerly register and protect an IPR with China before initiating new brands or services in the region. One of the most popular and important protection mechanisms for foreign investors is the use of licence agreements that list the results when a case of cessation surfaces. The important aspect of these agreements is that they are designed based on foreign laws with definite considerations for some obligatory pre-requisites of Chinese law like apt cross-border royalties payments made. Another aspect that the Chinese state has adopted to stop abuse has been to send warning notes to the local infringers even though these are not foolproof as possible raid activities can be implemented by the infringers as a consequence[footnoteRef:9]. [9: Moynihan, M., Stephanie Mitchell, S., Pavin, D., Koppitz, R. Zhang, T., Cheetham, S. And Simon Rodwell (Ed.). (2004). Intellectual Property Rights in China: Risk Assessment, Avoidance Strategy and Problem Solving ('The China IPR Guidelines'). The UK China IPR Forum, China-Britain Business Council.]

The involvement of appropriate IPR Abuse Authorities

Counterfeiting is one of the infringements that quite a few private and state-owned authorities in China are designed to fight against[footnoteRef:10]. This particular aspect of encompassing input from the private sector, the judicial sector and the state has grown to be a trait for all IPR rulings in China which is an encouraging contrast to the region's historical treatment of IPRs. Some of the state-owned or government-supported authorities operating successfully in China include the following: [10: Slate, R. (2006). Judicial Copyright Enforcement in China: Shaping World Opinion on TRIPS Compliance, 31 N.C.J. Int'l L. & Com. Reg. 665, 686.]

Public Security Bureau (PSB): criminal enforcement

General Administration of Customs: cross border protection

National Copyright Administration (NCA): copyrights

State Intellectual Property Office (SIPO): patents

State Food & Drug Administration (SFDA): pharmaceuticals

State Administration for Industry and Commerce (SAIC): trademarks, anti-unfair competition, anti-counterfeiting

Ministry of Information Industry (MII): layout designs of integrated circuits

Ministry of Agriculture and State Administration of Forestry: plant varieties

Ministry of Commerce (MofCom): a useful source of IPR advice in its own right and for guidance on which other authorities to contact

Administration for Quality Supervision Inspection & Quarantine (AQSIQ): product quality and anti-counterfeiting

A majority of the managerial enforcement is typically tackled by the designated national organizations that are either directed listed with the government or are listed with one of the central authorities listed above[footnoteRef:11]. [11: Ibid 9]

Courts:

"The significant legislative reforms after China's accession to the WTO have brought increasing powers to China's Courts. The Supreme People's Court has also issued detailed opinions designating specialised IPR courts and their competencies. The courts are expressly permitted to order interim injunctions and preservation measures against counterfeiters, which can be obtained in the absence of the counterfeiter"[footnoteRef:12]. [12: Ibid 9 Also see: Slate, R. (2006). Judicial Copyright Enforcement in China: Shaping World Opinion on TRIPS Compliance, 31 N.C.J. Int'l L. & Com. Reg. 665, 686.]

The courts are a good option for most foreign investors as the results attained are definite and long-term. On the other hand, in practical application, most foreigners still choose to work with the executive or state-owned establishments like those aforementioned because the procedures here are far quicker and cost-effective than the court proceedings. The court involvement is more commonly found in cases that are revolved around patent infringements as there is a need for legal and guaranteed reimbursement needed from the infringers which can be forced by the state. Usually the executive establishments rule in the favour of short-term fines which don't dent the infringers financially, hence, leaving them still capable of carrying out further infringements. Furthermore, the executive establishments recognized the infringers at the state-level tarnishing whatever credibility and reputation they were enjoying before[footnoteRef:13]. [13: Buckley, C., Lynn, J. And Nebehay, S. (2009). China, U.S. trade barbs over WTO piracy case. Reuters. 2009-03-20. Accessed August 27th, 2011 from: http://www.reuters.com/article/2009/03/20/us-china-usa-wto-idUSTRE52J3T920090320 ]

Executive Establishments:

Executive establishments are a necessary and popular body of structure for the foreigners to attain IPRs in China. However, in explaining the responsibilities of the executive establishments, Moynihan and colleagues in a recent study (2004) assert that "the burden of collecting evidence prior to a successful raid application is usually with the IPR owner. The authorities often lack the manpower to carry out investigations on their own initiative. If sufficient evidence is available and the authority cooperates, a raid action can be planned and carried out in days or sometimes within hours. As stated in Section 5.3 below, one of the key issues is the sufficient prior preparation of evidence (including carrying out relevant investigations of the target entities). The protection of IPR at trade fairs, such as the biannual Canton Fair, requires prior coordination with the relevant authorities and the establishment of contacts. Such contacts, or 'guanxi', are a pre-requisite for raising official awareness and permitting speedy action once an infringing product is discovered during a trade fair. It may sometimes be necessary for evidence to be collected by or in the presence of a Chinese notary, which must also be arranged beforehand"[footnoteRef:14]. [14: Ibid 11. Also see: Slate, R. (2006). Judicial Copyright Enforcement in China: Shaping World Opinion on TRIPS Compliance, 31 N.C.J. Int'l L. & Com. Reg. 665, 686.]

The different and varying executive and administrative authorities present and working successfully in China that have been listed above all function for specific IPR policies and the related factors. This allows the foreigners to have options if and when working with one company does not go in their favour; they can always take a different approach and work with another agency or authority to attain an IPR in the region. There are also times when the chosen authority will not provide the IPR protection due to the heightened level of local protectionism in the area -- in such cases, the array of choices can also come in handy. Furthermore, there will be some agencies that will be more appropriate to handle certain cases that require peripheral laws as well like for instance when a patent case showcases evident quality deficiencies in the counterfeits, then peripheral laws on consumer protection can also be incorporated in the case[footnoteRef:15]. Furthermore, the variety of authorities available to solve patent cases must not deter foreigners from choosing the right format of protection they need i.e. while having choices is appreciated, the right form of IPR protection will need to be recognized by the IP owners before they choose an authority in order to get the optimum result. For instance, when fighting for a right in software, it might be more suitable for a company to fight for copyright infringement as opposed to a trademark right. All IP owners will not only need to vigilant but also creative. This is perhaps why the attention for IPR protection in China is dependent upon a number of appropriate actions prior to the actual filing of the case[footnoteRef:16]. [15: Lin, C.X. (2003). A Quiet Revolution: An Overview of China's Judicial Reform4 Asian-Pac. L. & Pol'y J. 256, 291292, available at http://www.hawaii.edu/aplpj / (last visited September. 21, 2011).] [16: Heath, Christopher (Ed.) (2005). Intellectual Property Law in China. Kluwer Law International. Accessed August 27th, 2011 from: http://books.google.com/books?id=VIE1feDHAyUC&lpg=PP1&ots=ImqmSl-SLz&dq=Intellectual%20Property%20Law%20in%20ChinA&Pg=PP1#v=onepage&q=&f=false]

Another issue with a majority of the executive establishments is that there might be a lot of political coordination involved i.e. some agencies might coordinate on projects and some might not. Hence, if and when a foreigner does choose to work with an executive establishment, he will also need to make sure that the chosen establishment is on good terms will all relevant authorities needed to solve the case. Also, it has to be noted that the infringement mechanisms and counterfeit products are not destroyed after the case is closed so authority over them must also be attained[footnoteRef:17]. [17: Ibid]

Data and Evidence Collection

Any and all legal action taken in a booming economy like China must first be corroborated and proven to be viable. This can be done through the collection of all relevant data, history of the specific IPR protection sector, the relevant proof of success or failure as well as the costs and risks involved in the undertaking of a specific IPR protection venture. This is especially necessary in today's era when the counterfeiters are more advanced and the advent in technology allows them to create more sophisticated copies. The most important thing to note here that in China, most of the counterfeiters are now no longer using the same image as the original manufacturer, so to trace these counterfeiters will be important and the most likely IPR protection sought would be copyright protection. Furthermore, copyright infringement complemented with a "concerted action against as many parts of the manufacturing and distribution chain as possible will lead to long-term success"[footnoteRef:18]. [18: (Moynihan et al., 2004). The researchers further write in their study that manufacturing may sometimes intentionally be split up in smaller units - or even small facilities in individual households spread out over a larger area - to avoid detection and the triggering of criminal prosecution. Comprehensive investigations can be time-consuming, costly and also dangerous. Various private investigation firms and local agents offer relevant services, which are often coordinated by the lawyer or agent later handling the raid action. Notarization (the involvement of a public notary to certify valid existence) of certain evidence can be mandatory - such as in trade mark cancellation cases - or at least recommended (for example, to certify the content of an infringing internet website on a certain date) when taking action in the courts. In administrative enforcement cases, evidence does not usually need to be notarized.]

The local authorities' pre-requisite involvement

Another current issue that many foreigners have to be prepared for is the fact that many of the IPR protection cases require that the foreigners employ an established local legal counsel in the form of an agency or a lawyer. This is mostly a legal regulation and the fact of the matter is that most foreigners don't necessarily disagree with this particular aspect. The reason behind that is hiring a local counsel can give them the necessary insight to solve the IPR case without hiccups. Rendering the help of a local counsel is mostly helpful as it can serve as the buffer between the foreigner and other local agencies. Hence, this will result in an easier and lucid flow of communication as hiring a local counsel eliminates the issue of language barriers. The important issue here thus is primarily hiring the 'right' or 'appropriate' local counsel. Hence, meeting with these agencies beforehand and understanding their services, costs and understanding of your requirements will ensure a premium result for your future ventures in the region. It is also important to note here that like the executive establishments present in the region, there is also a wide variety of local counsels available for the foreigners to choose from[footnoteRef:19]. [19: Hunter Rodwell Consulting and Rouse Co. & International (2009). Intellectual Property Rights Primer for China -- A Guide for UK Companies. UK Trade & Investment and UK Intellectual Property Office. Accessed August 27th, 2011 from: http://www.ipo.gov.uk/ipr-guide-china.pdf. Many companies are finding the loss of control over their products to counterfeiting and other forms of intellectual property rights (IPR) abuse originating in China is having a serious impact on their business in China and in other markets. In a recent study 40 per cent of smaller companies in the EU said they believed China was the major source of IPR infringement. However, to put this in perspective, the second highest category they mentioned was other companies in their own home markets.]

Criminal Enforcement

The aspect of criminal prosecution is one of the most integral mechanisms to fight against counterfeit practices. It deters counterfeiters to engage in infringements if the state takes strong action with regards to the penalties given. The biggest issue with the current criminal prosecution tactics is that there is no clear definition or explanation of how the value of the counterfeited products that are traded will be assessed. This assessment is necessary so that the attainment of standards and product quality can be determined in order to justify the legal rights and claims. Furthermore, this is a big disadvantage for the reason that there is no record of the counterfeit products which cannot be provided as evidence and hence when the value of the counterfeited products is not assessed, accurate reimbursements cannot be made[footnoteRef:20]. [20: Ibid. Also see: Cornish, J. (2006). Cracks in the Wall: Why China;s Copyright Law Has Failed to Prevent Piracy of American Movies Within its Borders, 9 Vand. J. Ent. & Tech. L. 405, 430.]

Cultural and Societal Issues

Cultural Differences and IPR Perception

Perhaps the most significant difference that China has in comparison to the rest of the world when dealing with IPR is in their mental approach to manufacturing. The Chinese primarily look to see what others are doing and whether they can do the same thing with lowered costs and more penetrative sales. The Chinese don't look for ways to attain IPR with the original manufacturer as that would lead to additional costs. This is one of the major reasons why the Chinese economy has experienced such a fantastic boom in the past three decades. Their manufacturing thought-process is not a dependent one but a self-sufficient one. A good example of this expansion technique is the penetration that the DVD industry from China has experienced where the manufacturers have become viable for foreign patents after initially expanding their industry locally. It is important to note here that this approach takes years of internal investments before it can lead to foreign trade but the Chinese have proven that the hard work can reap profitable rewards. No other foreign entity adopts the same manufacturing thought-process[footnoteRef:21]. [21: Mertha, Andrew C. (2005). The Politics of Piracy: Intellectual Property in Contemporary China. Ithaca, New York: Cornell University Press. Also see: Pfizer Wins Key China Court Ruling, Forbes.com, available at http://www.forbes.com/business/2006/06/03/pfizer-china-patent-cx_pm_0603drug.html (last modified Jun. 3, 2006).]

Furthermore, when you assess the Chinese approach to valuing growth, the greatest response that you'll find is the pride that the Chinese feel towards the attainment of the 'Four Great Inventions' that they were able to create and successfully implement over the past centuries. These four inventions are: the compass, the structure of paper-making, the progression of gunpowder as well as the portable printing equipment. It has only been the past two centuries when the Chinese economy has lost its top ranking as the leading economy in the world. This was primarily due to the deficiency of technological investments in the Qing dynasty and the population boom. Other countries learned from the manufacturing proficiency of China and experienced industrial growth while China found itself struggling against incidents of war, losses in war and destruction caused by natural disasters. These events severely dented the Chinese growth rate as well as their approach towards development and they have primarily been playing catch-up for most of the twentieth and twenty-first century. This is one of the main reasons why the structure of IPR protection is not as proficient as it can be bearing in mind the Chinese approach in the past towards the phenomenon[footnoteRef:22]. [22: IbidAlso see: Pfizer Wins Key China Court Ruling, Forbes.com, available at http://www.forbes.com/business/2006/06/03/pfizer-china-patent-cx_pm_0603drug.html (last modified Jun. 3, 2006).]

The Chinese, like other manufacturers, opted to go for the shortcut to attaining financial success which was to copy the success of others with minor modifications. These modifications that they adopted were primarily based around increasing the cost-benefit ratios and attaining local penetration. This led to beneficial economic growth rates for the Chinese but also led to increased copyright and IPR infringements in the region. Even though the Chinese were able to attain short-term penetration, the long-term impact of implementing such a short-cut has resulted in massive government reimbursements and a tarnished reputation for the majorities of the businesses and companies in China. These businesses are, it is important to note here, are not just individual contractors of small enterprises, but large Chinese corporations as well[footnoteRef:23]. [23: Ibid 22 Also see: Yu, P.K. (2002). Toward a Nonzero-sum Approach to Resolving Global Intellectual Property Disputes: What We Can Learn From Mediators, Business Strategists, and International Relationsh Theorists. 70 U. Cin. L. Rev. 569, 646647.]

The upside to this long-term drawback has been that the Chinese have invested time and resources into joining international organizations like WTO. This has led to an innovative and improved level of educational efforts in the country. These efforts have resulted in an increased awareness of the concept of IPR However there is encouraging news. With China joined the impact ignoring them might have on the corporate profile. Furthermore, it has also showcased how the protection of one's IPRs in a foreign setting can bring around economic profitability as well. When looking at some of the current trends that the Chinese manufacturers have been involved in, the increased degree of patent registrations of Chinese corporations, entrepreneurs and proprietors with organizations like SIPO is the first thing that pops up. Furthermore, there are many legal records of cases on IPR in the region that have highlighted the increased interest of the state in the recognition and safeguard of the IP and the IP of foreign investors in the region[footnoteRef:24]. [24: Ibid 22 Also see: Hung, V.M. (2004). China's WTO Commitment on Independent Judicial Review: Impact on Legal and Political Reform, 52 Am. J. Comp. L. 77, 94.]

The reason why there is still hope for China to bounce back from this hurdle is that "the high-profile DVD patent royalty disputes have taught Chinese electronics manufacturers a hard lesson, so that a growing number of Chinese companies are coming to regard IPR as a key consideration before launching or designing products"[footnoteRef:25]. [25: (Moynihan et al., 2004)]

The consequences of recognition and safeguard of IPRs

When it comes to the choice between negotiation and taking a legal route, The Chinese always prefer to negotiate on friendly terms and keep the legal engagements as the last resort. Even though, the current trends have shown an increased level of legal fights but there are still many instances where the Chinese companies do engage in lengthy negotiations to avoid legal court calls. Usually, the negotiations are also done through the executive establishments who act as the buffer between the two involved parties. The overall perception and concept of 'face' within China has been completely obliterated to the astonishment of many Western enterprises. The reason for this is that now the Chinese businesses are aware of their legal rights and the confidence that they have in their own laws and judiciary to attain results. Hence, having a big foreign reputation does not deter the Chinese from the recognition and demand of their IPRs[footnoteRef:26]. [26: Mills, E. (2010). U.S. law firm behind China piracy suit targeted in attacks. CNET. 2010-01-13. Accessed August 27th, 2011 from: http://news.cnet.com/8301-27080_3-10434551-245.html Also see: Reid, A.S. (2003). Enforcement of Intellectual Property Rights in Developing Countries: China as a Case Study, 13 DePaul-LCA J. Art & Ent. L. 63, 86-87.]

There is a contrast however when the Westerners are looking to demand their IPRs in China. Moynihan and colleagues concur with this statement in their study (2004) writing that "while the overall perception of a foreign company launching a legal suit with Chinese companies can be mixed ('too aggressive', 'not flexible', 'not to be messed with'), foreign companies should not worry too much about their reputation being blighted. In fact, publicizing successful cases can serve as a deterrent to potential IPR infringers. On the other hand, it is probably not a good idea to sound off about past legal successes of this sort when establishing relationships with new Chinese customers"[footnoteRef:27]. [27: (Moynihan et al., 2004)]

Corruption

Corruption is a part of almost all thriving economies in the world and China is no exception. Even though how the Chinese define corruption may be different might be different. For instance, over the years, the Chinese were known to exchange gifts and 'buy' a corporate position from their bosses. This was acceptable as a socially friendly trade. Even aspect like the buying and selling of the right to give taxes was accepted and blood money or financial reimbursements for crimes were allowed. None of these were considered corruption even after they were officially criticized. However in the current structure of the country, drastic changes to the perception of corruption can be seen. The Nationalists were believed to be the most corrupted and taking them out of the reign was the primary reason why corruption as a consequence was redefined. Despite the redefinitions of the corruption, a social and political structure plagued with years of a certain application is why China still is rated to be one of the most corrupted countries in the world in many of the recent studies. While the segregation of the business sector and the government sector, the corruption rates have somewhat declined although foreigners must still be wary as China is still very much plagued with corrupt activities even if they are not as accurately recorded as they should be. This is one of the main reasons why the IPR protection structure in China has also been thoroughly tarnished in recent years as many foreign investors find it hard to first identify counterfeiters and then on top of that to find accurate evidence that will not hold legal relevance but also social relevance. This is why we see a higher inclination of the foreign IP owners to enhance their relationships with higher ranked administrative bodies in the government as they are less corrupted than those of the lower ranks. This is also one of the primary reasons we see foreigners resorting to hiring executive establishments to fight their cases as opposed to the courts which are highly influenced by their local representative authorities i.e. lower ranked government bodies[footnoteRef:28]. [28: Ibid 24. Pang, Laikwan (2006). Cultural control and globalization in Asia: copyright, piracy, and cinema. Routledge.Also see: Reid, A.S. (2003). Enforcement of Intellectual Property Rights in Developing Countries: China as a Case Study, 13 DePaul-LCA J. Art & Ent. L. 63, 86-87.]

Moynihan and colleagues (2004) write with regards to corruption in China that "sometimes there is felt to be a fine line between 'guanxi' (relationships) and corruption. Some Chinese would even question whether getting to know the judge or other powerful people involved in the legal system in order to improve one's likelihood of success in court -- and investing considerable time, not to mention money, in the process -- is in fact a form of corruption. 'Conflict of interest' is still a new concept to many Chinese officials and business people. There might be a situation where the head of a local Administration for Industry and Commerce with which you are launching an administrative complaint against an infringer of your IPR has a relative working for the infringing company. You would not know about this conflict of interest, as it would most likely not be declared; you would merely wonder why your case was not being handled expeditiously"[footnoteRef:29]. [29: (Moynihan et al., 2004)]

Trademarks in China -- Language Issues

Application and registration of trademarks in China augments a cluster of issues that are not necessarily raised in numerous other countries primarily of the language differences. China is a large country and has numerous cultures and dialects like Mandarin and Cantonese that are mostly structured in the same way and hence end up sounding the same. For instance, the word 'hu' while pronounced the same can have several very distinct meanings ('to', 'too', and 'two') based on the context of the sentence. Hence, you can't really get away with learning basic syllables in Chinese, you have to know the entire language or at least a good portion of it in order to understand the context of the sentence and hence the meanings of the words used in the sentence. This causes tremendous amounts of difficulties in the registration and application process of the trademarks[footnoteRef:30]. [30: Suttmeier, Richard P. And Xiangkui Yao, China's IP Transition: Rethinking Intellectual Property Rights in a Rising China (NBR Special Report, July 2011)Also see Yu, P.K. (2005). U.S.-China Trade: Opportunities and Challenges: Still Dissatisfied After All These Years: Intellectual Property, Post-WTO China, and the Avoidable Cycle of Futility. 34 Ga. J. Int'l & Comp. L. 143, 146.]

In response to this Moynihan and colleagues (2004) further add that "foreign words can be written in Chinese in several ways. One common way is to simply 'transliterate' the sounds: thus, 'Smith' could become 'Si-mi-si', written with characters that have no particular meaning other than to represent these sounds, or whose meaning is clearly irrelevant in this context. It is also possible to translate directly the meaning of a foreign name or word. If blessed with a good translator or advertising representative, you may be fortunate enough to derive a brand name or company name in Chinese that both echoes the English word(s) and conveys a relevant meaning. Coca-cola came up with the classic brand name 'ke-kou-ke-le', which is about as close as a Chinese speaker could come to the pronunciation of the soft drink's name and also conveys the approximate meaning 'tasty and fun' when the characters are read"[footnoteRef:31]. [31: (Moynihan et al., 2004)]

Hence, from the above passage, one can clearly see that attaining a unique trademark is a very difficult task when dealing with the Chinese Language. The problem is that while many words sound the same to the ear, they are defined differently. However, when marketing or penetration a product, one is most likely to rely on the sound of the name of the product as opposed to its meaning as the product name is not always necessarily going to be used within the context of a statement. So what a Chinese counterfeiter can do is use a similar name that shares the same Chinese syllables as the English name of foreign product, which when translated will become the exact same name. The result will be a very lengthy, costly and mostly futile legal case to gain copyrights or trademarks. Same is the case with software programs and literary works where writings can be rewritten using similar syllables and contextual meanings and claimed to be original[footnoteRef:32]. So what is the solution, researchers have over the years highlighted the following steps that not fully eradicate the possibly of trademark infringement but decrease its probability: [32: Priest, Eric (2006). "The Future of Music and Film Piracy in China." Berkeley Technology Law Journal. 795 21: 796 -- 870. Accessed August 27th, 2011 from: http://www.btlj.org/data/articles/21_02_03.pdf]

Develop a name in the Chinese language first as opposed to translating it from English

Make sure that the name is unique in writing and in sound

Make sure that the logo and design correspond to what the name 'means' or stands for in order to establish immediate brand recognition

Create a musical theme to go with the brand and name so as to distinct it from others in the market

When registering the trademark with the government, list all possible similar trademarks that can be created by others so as to restrict the penetration of infringement (note: this will not eradicate the possibility of infringement, only control the obvious potential infringements it to an extent)

Consistently hire and confer with the Chinese advisors in ways that will make your product more unique for the Chinese market

Registering extra trademarks might be costly but if they are done efficiently and intelligently the overall risk of costly legal fights can be sufficiently decreased in the short and long run[footnoteRef:33] [33: IbidAlso see: Yu, P.K. (2005). U.S.-China Trade: Opportunities and Challenges: Still Dissatisfied After All These Years: Intellectual Property, Post-WTO China, and the Avoidable Cycle of Futility. 34 Ga. J. Int'l & Comp. L. 143, 146.]

Strategic Considerations

The fact is that with all the possibilities of intelligent and complicated infringement techniques still present in the Chinese industry, many foreigners still want to invest in the region, due to the potential of growth they can experience in the economy. The increase of IPR issues and the global economic strength of China have been simultaneous. It was till the 1980s that the IP owners were given apt rights under strict and rigid controlling factors; and China in recognition of these IPs might have been ahead of quite a few other countries who only allowed patents to the IP owners while China gave them patents, social recognition and financial reimbursements. However despite all of that, the IPR laws were still perhaps the most restrictive and concise in the region when compared to other countries due to the rigid control that the government exercised over the implementation of the IPR laws. While the copying infringements (piracy) increase in China, one still does not see a lack of successful foreign investment in the country which, according to numerous researchers, shows that if the counterfeiters are finding intelligent ways to conduct piracy, many manufacturers are also finding ways to intelligently and pre-emptively use trademark, copyright and patent laws to counter the probability of infringements[footnoteRef:34]. [34: Suttmeier, Richard P. And Xiangkui Yao, China's IP Transition: Rethinking Intellectual Property Rights in a Rising China (NBR Special Report, July 2011)Also see: Yu, P.K. (2005). U.S.-China Trade: Opportunities and Challenges: Still Dissatisfied After All These Years: Intellectual Property, Post-WTO China, and the Avoidable Cycle of Futility. 34 Ga. J. Int'l & Comp. L. 143, 146.]

IPR Protection and Exploitation Issues

Some of the established global standards of IPR laws apply to the culture and structure of China as well. Even though, IPR laws like copyright can prove to be very difficult for many foreigners to fight for on a legal level. The overall costs of registration for any IPR law is not different from the costs imposed from other countries. Although, with the counterfeit expansion in China, it will be hard to pursue legal actions if prior research is not done on a domain name or proper registration is not done. The current patterns when registering in China for most foreigners is that they will usually apply and fill all relevant and peripheral IPR protection forms for their most profitable products and services (as well as potentially profitable products) with extra trademark and copyright similarities so as to significantly reduce the infringement possibilities. Before registration is completed, not only should the following steps be given due attention when registering in China but research should also be done on the possible existence of a copyright or trademark in the market. This will probably be the most time-consuming and costly phase of the entire process as there will be quite a few genuine businesses to research as well as a number of counterfeit businesses to scan for possible similarities. Care however must be taken that the registration process is not prolonged for too long and that the registration process is completed at the most optimal time of launch for the product as failing to register at all will leave all the efforts in vain and will incur increased costs[footnoteRef:35]. [35: U.S. says China's Baidu is notorious pirated goods market. BBC News. 1 March 2011. Accessed August 27th, 2011 from: http://www.bbc.co.uk/news/business-12605067 ]

Moynihan and colleagues (2004) on the important of timely registration write that "failing to register may make it very difficult, if not impossible, to seek effective administrative or judicial assistance at a later date should problems arise. This is invariably a case where a pennyworth of prevention is worth a pound of cure. In China, as in the West, there are trademark and patent agents who can help with the necessary investigations and registrations. These may be purely Chinese firms or affiliated to various Western law firms and practitioners"[footnoteRef:36]. [36: (Moynihan et al., 2004)Also see: Heiberg, C.E. (2006). American Fims in China: An Analysis of China's Intellectual Property Record and Reconsideration of Cultural Trade Expectaions Amidst Rampant Piracy, 15 Minn. J. Int'l L. 219, 244.]