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other multinationals have resorted to warning consumers of the dangers of fake goods--including GM, which estimates that upwards of 30 percent of auto parts sold in China are fakes. "Counterfeits made of low quality materials may imperil the lives of you and your loved ones," counsels a message on GM's Chinese Web site. "Imagine the results if a brake pad made of sawdust was installed in your car. This actually happened."
Pirated auto parts may be the least of GM's IP problems in China, though. In May its GM Daewoo unit filed suit against a local rival that allegedly filched an entire car design. According to GM Daewoo, Chinese automaker Chery Automobile's QQ model has a body structure, exterior and interior design, and components all identical to its own Spark model. In his January speech in Beijing, then-U.S. Secretary of Commerce Donald Evans said the incident "defies an innocent explanation," and was "especially troubling" because Chery Automobile is partially owned by the local government.
Counterattacking via the courts
When prevention fails--as it usually does in China--companies are increasingly resorting to the courts. "This is becoming a trend in China--that companies would rather go straight to court to create more publicity and make the point that they're serious," says Autodesk's Ngai. He adds that Autodesk, which has been in China since 1994, was the first foreign software company to sue a domestic user for copyright infringement and win. In 2002, it won a landmark case after proving that a Chinese TV production company was using an unlicensed version of a highly specialized, $200,000 software product. Including that case, Autodesk has since received favorable settlements in about half a dozen cases, according to Ngai.
But no one would argue this is a simple process. An initial investigation can cost tens of thousands of dollars, and that's just the first step. Next a company must decide whether to pursue a case on a criminal or civil track. Typically, if an investigation has uncovered pirated goods worth at least $6,000, the injured party can press the government agency known as the Public Security Bureau to take a criminal case to court. But counterfeit goods are difficult to value, and it's the company that suffered the loss--not the government agency--that shoulders the burden of proof.
Many companies opt instead to file an administrative complaint, though this can be complicated due to China's decentralized enforcement system. Standards vary in different cities and provinces over what constitutes a copyright infringement.
When it comes to litigation, multinationals also must be prepared to navigate China's "first to file" system. Though the U.S. is considering moving to such a standard (from its current "first to invent" system), first-to-file can pose problems for foreigners in China.
Xiang Wang, a Shanghai-based intellectual property lawyer at the firm of Jones Day, says he's dealt with a number of lawsuits involving local companies that either copied a Western patent or publication or slightly modified it, then filed for and obtained a patent in China. They might even use their Chinese patent to sue the legitimate Western patent-holder.
Some of the more hopeful China watchers point out that economic development tends to usher in greater respect for intellectual property rights. With continued growth, they say, China's stratospheric piracy rates might drop a little. Market research firm IDC found in a study that, of the 57 countries that buy most of the world's information technology, nearly two-thirds had managed to reduce software piracy rates by 10 points since 1996.
Autodesk's Ngai says he's already seen a change in mentality, at least in the more developed regions. "In the '90s when you talked to these companies, they'd admit (to piracy). The idea you have to pay for the software was at that time alien. They'd laugh at you if you paid for it." In what counts as progress, he says, "Now, none of them will admit they're using illegal software. They know it's not the right thing to do."
Adds Jeff Hardee, the BSA's vice president for Asia: "If the (Chinese) government wants to grow the IT sector, it pays to invest in bringing down piracy levels. Software piracy affects all software publishers, Chinese included."
While that's true, it will probably take years for China to develop many of the kinds of companies that require IP protection. In the meantime, multinationals will no doubt keep coping with piracy as best they can. Given that they probably can't prevent it, some may even think of it as a backhanded compliment. "If you're successful in China, you may very well have problems," points out AmCham-China's Haynes. "If you're not successful, then no one will want to counterfeit you."
© 2005 The Deal.com. All rights reserved.
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.
- Like this Reply to this comment
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(4 Comments)They need to be firmly reminded about the "...comes around" adage..and inevitability. INNOV8R