China policy guru Benjamin Shobert has written an excellent article for the Asia Times on IP in China. The article is entitled, “China’s IPR thorn still needles West,” and it says what we have been saying: IP protection in China is getting better, but it is not there yet.

Shobert quotes from a recently released US-China Business Council report [link no longer exists] to back up this position:

Perhaps with this question in mind, the US-China Business Council (USCBC) released a report in mid-February on the question of IPR enforcement in China. The report acknowledged that China deserves to be recognized for the advancements it has made in this area: “The IPR legal framework … has become less of an issue over time … because of China’s efforts to build an increasingly comprehensive regulatory framework for IPR … many – but not all – companies report that the overall IPR picture has shown steady improvement, though at a slow pace.”

He also quotes me:

Not only does the USCBC see positive adjustments in this realm, but so do American lawyers who specialize in these matters. Dan Harris, a partner at Harris Bricken and blogger at the award winning China Law Blog, agrees: “IP protection in China is very slowly improving and that has been true over the last 18-24 months as well.”

What I really like about the article though is how Shobert distinguishes between the effectiveness of IP enforcement by region and by industry. He notes that IP enforcement remains “highly uneven across cities and provinces” and how IP protection for software, movies, and music, is particularly problematic.

Shobert concludes the article with advice from Mike Bellamy and from me that foreign companies doing business in China must consider non-legal methods of protecting their IP:

For Mike Bellamy, China operations director at PassageMaker, the answer is to compartmentalize key technologies from one another, and utilize a third party for final assembly.

According to Bellamy, “We call this our ‘black box’. Put simply, the black box concept is designed to protect the intellectual property of our clients by having semi-finished or finished products delivered to our facility and then, behind closed doors … do the final branding, final assembly, packaging and inspection.” But even this model has its limitations, which Bellamy is quick to point out: “Once the product is in the market place then it is much harder to control who sees the product. But forcing your competition to reverse engineer and wait for your product launch is much better than having your ideas floating around among suppliers and competitors from day one.”

Harris, no stranger to IP issues in China, echoes this advice: “As a lawyer, we always do what we can to protect our clients on the legal front, but there is always more that can be done to add IP protection to the operations side.”

What are you seeing out there? Is IP protection really getting better in China?

UPDATE: Michael Lin of Marks & Clerk in Hong Kong has written a very good piece on China IP protection, entitled, “Intellectual Property Protection in China is NOT an Oxymoron,” with the theme that IP protection in China is improving.