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China Intellectual Property Law. A Radio Interview For World Intellectual Property Rights Day

Posted in China Business, Legal News

I have to admit that one of the things I love about both China and Russia is that they take various international days seriously, that nobody even knows about in the United States.  I suspect that is due to communism and/or its remnants.  Anyway, as part of today’s World Intellectual Property Rights Day (how many of you knew there was such a thing and how many of you knew it was today?) I was interviewed about the past, present and future of China intellectual property law and intellectual property protections in China.  Here is that interview between Zheng Chenguang (ZC) and me (DH).

 

ZC: First, from the international scene we speak to Dan Harris, founding member of Asia-focused commercial law firm, Harris & Moure, based in Seattle, in the US Mr. Harris, welcome to the program.

DH: Thank you.

 

ZC: Friday marks World Intellectual Property Rights Day.  How do you look at the level of IPR protection today, how better are we compared with the situation, say like five years ago, and do you see IPR protection as mainly a challenge facing the developing countries, rather than the developed countries.

DH: No, I do not. I see it as a challenge for any company that does business anywhere in the world.

 

ZC: Why would you say that?

DH: Because certainly developing countries tend to have a poorer record at IP protection than developed countries, but at the same time, developed countries have all sorts of issues as well.  You’re not going to find a company with more than 100 employees in the United States that hasn’t had a problem with an employee leaving with trade secrets or an employee leaving to compete when they shouldn’t have or with a rival using their design. It goes on everywhere.

 

ZC: In your mind, what is the key to protecting IP rights?  Is it more important to make more or stronger laws, or is it more important to solve the problems related to implementation of the existing laws?

DH: Well are you asking about China or are you asking about anywhere?

 

ZC: How about the situation in China?

DH: China’s laws are actually just fine.  It’s not a question of the laws. It’s really a question of implementation. And a lot of times it’s a question of implementation not even so much by the Chinese government, but by companies that are doing business in China.  Meaning, a lot of times foreign companies complain about IP in China, when in reality it was the foreign company that made the mistake when it went into China of not sufficiently protecting its IP. But one thing I want to clarify, and that is when I talk about IP, I always like to divide it up into three, sometimes even four areas: trademarks, copyrights, patents, and you can throw in trade secrets as the fourth item. And the reason I like to divide this up is because in some of those areas, China is actually quite good, while in other of those areas it’s quite poor, and so it’s really unfair to talk about China IP in general without breaking it up.

 

ZC: You’ve divided IP intro three categories. In what category do you think China has done the best job, and which leaves a lot to be desired?

DH: Trade secrets—China’s excellent. They borrowed the laws from the United States and they tend to enforce them. Trademarks—China’s fine. Their laws are very similar to France, to Sweden, to much of the world, and enforcement is pretty good as well. When it comes to patents, China’s patent laws are not as tough as those in the United States, but those in the United States are tougher than those in Europe, and that’s just the way China wants it … its enforcement isn’t bad. Where China does poorly is in copyrights. And that hurts China’s reputation because so many people ascribe China’s handling of IP based entirely on China’s handling of copyrights. And copyrights involve, generally speaking, content—books, movies, software.   Everybody knows you can buy a DVD of just about any movie on the street in China for about two dollars. That’s a problem.

 

ZC: Chinese Intellectual Property laws, there are origins in Deng Xiaoping’s 1978 reform and opening up policy. During the past decade or so, especially after China’s accession into the World Trade Organization, IP protection has been brought to the fore, since China wants to dock with international standard and adopt international practices. How did China’s accession into the World Trade Organization influence intellectual property rights in China? And how better are we compared to with, say, ten years ago?

DH: China is a lot better compared to ten years ago. I think very little of that has to do with the WTO. I think that China is better because China is getting wealthier, and because Chinese companies are starting to care more about IP. I am of the view that countries start doing well with IP when its own powerful companies really start caring about it. And I’ve seen this progression happen in Japan, I’ve seen this progression happen in Korea, I’ve read about how this progression happened in the United States. The reality is nobody is going to be able to force China to improve its IP from the outside, but big companies within China like Haier, like Huawei, like Lenovo — companies that care about their own IP — are going to be able to force China to improve. That’s what’s happening. And as more big companies come to the fore in China, China’s IP is going to continue to improve. And there’s not much that can be done to rush it. In fact, if anything China’s IP is improving nicely. Meaning, it’s improving at least as fast as Korea’s did, at least as fast as Japan’s did, and probably as fast as the US’s did, but the US was a long time ago.

 

ZC: As the founding member of an international law firm which has operations both in US and in China, what kind of advice do you want to give to say, Chinese investors, who want to do business in the US, and vice versa, what kind of advice do you want to give to US companies making a foray into the Chinese market?

DH: Okay, I’ll start with the US first, US companies doing business with China, because that’s easier for me because I talk about that every day with our clients. The advice I always give is twofold: number one, know what your IP is and know how to protect it yourself. And what I mean by that is look at your own IP and figure out how you can protect it outside of the law. One of the ways you can protect it is don’t bring it over to China, or just bring over part of it.  Or have a good partner in China — one who is not going to steal your IP. These are things called structural IP protection; it’s what companies can do outside of the law. The second thing, register your IP in China. Don’t complain if your IP is taken in China and you haven’t registered it, because if you haven’t registered it in China, it’s not your IP. On the flip side for Chinese companies coming to the United States, our IP system is different from China’s and you better recognize that and you better take it seriously. Interestingly enough, in my experience, Chinese companies that come to the United States take IP protection more seriously than American companies that go over to China. I think a lot of the reason for that is because in the United States certain IP protections are automatic without even needing to file for them. So when Chinese come over here they’re prepared to file, whereas when Americans go over to China, oftentimes they neglect filing.

 

ZC: We understand that China is now trying to effect a transition in its growth model, focusing more on the quality of the growth side, commercial and technological innovation and a so-called knowledge economy would be important factors for China’s economic growth. To what extent will technological innovation play in China’s economic future? Will the roles of intellectual property laws increase their influence in the future?

DH: Yes. And that goes to what I said earlier, that as domestic companies view intellectual property protection as becoming more important, then the country will as well. And so, as China develops more companies with their own intellectual property, China’s intellectual property laws will improve. More importantly, enforcement will improve as well. China is developing sophisticated pharmaceutical companies, sophisticated technology companies. Those companies are not going to let China fall behind in terms of intellectual property protection. They’re going to be fighting for it. So yes, as China’s economy goes more and more towards the high end, I’m virtually certain its intellectual property enforcement will follow right along with it. It has to. And if it doesn’t, that will temper innovation and a knowledge-based economy in China. The two have to go together.

 

ZC: Lastly, Mr. Harris, one of the most controversial and polarizing debates regarding intellectual property law in the modern world seems to be IP law as it applies to the pharmaceutical industries in the developing world. And this year the Indian Supreme Court came down with a ruling against the patent claims by Swiss pharmaceutical company Novartis. Speaking from a broad perspective, what do you think about the debate of availability versus innovation regarding pharmaceuticals and the developing world?

DH: It’s a tough debate. It’s a really tough debate. I think that China has played that hand better than India. When India makes a ruling like it did, all sorts of companies say “I’m not going to India, I’m too afraid.” Yes, India is going to get some medication because of the that ruling, but, in the end, my guess is dollar-wise they probably hurt themselves a lot more than they help themselves. Because companies see — or I should say hear — about rulings like that, and it really scares them. And that’s not what India should be wanting right now. And not just pharmaceutical companies. People hear about a ruling like that and, non-lawyers, by the time it reaches them, they don’t understand that it’s a complicated patent issue/accessibility issue.  All they hear is, “Wow, India doesn’t protect western intellectual property rights. I’m not going to take my widget factory there.”

 

ZC: Right. That was Dan Harris, founding member of the Asia-focused commercial law firm, Harris & Moure, talking about intellectual property rights protection in China. Mr. Harris, thank you very much indeed for your insights.

DH: Thank you very much for having me.

  • Ben

    This was a very insightful discussion of the IP situation in China, certainly a welcome change from the bias often presented in the media

  • bystander

    “Trade secrets—China’s excellent. They borrowed the laws from the United States and they tend to enforce them.”

    Um. Mr. Zheng should pick up a newspaper sometime. (Not the People’s Daily.)

    Here’s a snippet from a recent NYT article:


    “Twenty-six percent of the members who responded to an annual survey said that their proprietary data or trade secrets had been compromised or stolen at their China operations, according to the report from the business lobby, the American Chamber of Commerce in China.

    “This poses a substantial obstacle for business in China, especially when considered alongside the concerns over I.P.R. enforcement and de facto technology transfer requirements,” the chamber said, referring to weak enforcement of intellectual property rights.

    Mandiant, a U.S. computer security company, said in February that a secretive Chinese military unit was likely behind a series of hacking attacks that targeted the United States and stole data from more than 100 companies.”

    I don’t understand how China can be excellent at enforcing trade secret laws while at the same time directing its military to violate them.