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software. It appealed to the copyright office to conduct a raid. But local authorities in Kunshun City foiled the plan when they insisted on notifying the companies beforehand.
Fake Viagra, and other drug deals
Pfizer's experience highlights the difficulties that the big pharma companies face in China, which has some 6,000 drugmakers of its own, most of them manufacturing generic medicines. Pfizer needs to press ahead in China, which already ranks among the 10 biggest global drug markets. But since the Viagra patent was invalidated in July 2004, the going has gotten tougher.
Responding to Chinese drugmakers who had challenged the patent, the state agency invoked guidelines laid down after the patent had been issued and claimed the pharmaceutical firm didn't disclose enough information in its filing. Pfizer, which says the patent approval process involved seven years of evaluation and two years of review, has appealed the ruling. In the wake of the Pfizer case, GlaxoSmithKline, facing a similar challenge from Chinese rivals, gave up efforts to protect its patent on Avandia, a diabetes drug.
Besides worrying about patent protections, drugmakers in China must contend with a sizable counterfeit problem. The threat of copycat products has particular urgency: Already, thousands of Chinese are reported to have died from the ill effects of fake medicine. One source suggests that 10 percent to 15 percent of medicine in China is counterfeit, primarily in rural areas beyond the reach of central government authorities. AmCham-China argues that local enforcement authorities pay more attention to rooting out fake drugs of substandard quality than to shutting down counterfeit drugs altogether.
Now counterfeit medicine made in China has begun showing up in the U.S., too. Pfizer, which taps China as the world's leading supplier of counterfeit drugs, says one major China-based distribution network sent counterfeit Viagra to as many as 30 brokers worldwide, including some in the U.S. A formula for counterfeit Viagra that was found in Shanghai was also discovered in tablets seized in the U.S. and 17 other countries.
In response, Pfizer is starting to use radio frequency identification tags to help pharmacies authenticate Viagra sold within the U.S. and introducing security packaging with a special logo that changes colors from purple to blue. Separately, in a bid to help shut down pirate drug factories, Pfizer has begun training intellectual property rights enforcement officers in Shanghai to identify fakes and authenticate genuine drugs.
Pfizer's experience also shows the political challenges involved in asserting IP rights in China. The issue is a sensitive one with the government--and overt public criticism can backfire. Following a May 2005 talk at a Beijing business conference in which he asserted that two-thirds of global counterfeit drugs come from China, a prominent Pfizer executive made a public apology.
Avast, software pirates!
The software industry, which has also been hard-hit by piracy, has employed a combination of punishment and cajolery to deal with counterfeits. China ranks among the world's worst offenders: About 90 percent of the software installed on PCs in the country is pirated, compared with an average of 35 percent worldwide and only 21 percent in the U.S.
The Business Software Alliance estimates that in 2004, software piracy in China cost its members $3.5 billion in lost revenue--the second-highest rate of dollar losses in the world, after the United States' $6.6 billion in piracy-related losses.
To deter offenders, the BSA runs radio and Internet ads in China with a hotline number offering rewards of up to $3,600 for tips about companies using unlicensed software on the sly (the industry considers unlicensed corporate use of software a far greater business threat than individual acts of software piracy). Armed with a promising lead, the BSA can press the local copyright administration office to conduct a raid.
Last year the BSA held a handful of software asset management seminars in major cities explaining how companies and government agencies could derive the greatest financial benefit from legally purchased software. Three hundred fifteen companies showed up, and the BSA expects to expand the number of seminars to be held in 2005.
There is one bright spot within the software industry: computer game makers. Only a few years ago, when they were still struggling to get established in China, they mostly sold retail games for home use. But business was plagued by piracy rates as high as 98 percent. Then the game makers shifted from retail distribution to secure servers in Internet cafes.
"You can now make an investment and expect a return. That's key to investing in new IP," says Erick Hachenburg, general manager of China operations for Electronic Arts. "Until the online gaming model emerged, there was no way for us to justify a major investment in China." Electronic Arts, which has begun staffing an office in Shanghai, plans to make its first online games available in China by next March.
But examples like the gaming industry are exceedingly rare. With few alternatives for dealing with counterfeiters,
3. without any evidence and generate the conclusion that 90% of chinese are using pirated software! the comment itself shows incredulity of the article.
They need to be firmly reminded about the "...comes around" adage..and inevitability. INNOV8R
- "What goes around, comes around."
- by September 19, 2005 8:53 AM PDT
- It won't be too long before China and other "patent pirates" start developing their own breakthrough inventions, processes, and technologies. Then they will desperately want protection worldwide for THEIR OWN innovations.
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(4 Comments)They need to be firmly reminded about the "...comes around" adage..and inevitability. INNOV8R