E3G

Intellectual Property Rights in China: Myths versus Reality

By Ian Harvey and Jennifer Morgan

How big a problem is the issue of Intellectual Property Rights?

It is clear that the Chinese market is simply too important to be overlooked by Western firms. As China’s economy continues to grow rapidly the IPR system is experiencing some problems. Firms therefore need to have an understanding of the Chinese market and the ability to respond with flexibility and patience. These attributes are essential to doing business in China as companies as varied as Philips, Microsoft, Zwilling-Henckels and HP have demonstrated.

Many of the “complaints” about the IP system in China are made by senior executives who actually do not understand the complexities of IP, nor the mistakes their own companies may have made in creating the problems.  For example, filing a weak patent application or failing to register their IP at all (an all-too-common mistake).

The “IPR in China” debate must also be set in context. All too often, fair concerns about the ability of Western companies to compete with Chinese ones, or fears about the outsourcing of production to take advantage of cheap labour are miscategorised as IPR issues.

Certain difficulties encountered by companies from common law jurisdictions (such as the US or UK) are due to the fact that the IP laws in China are based on a civil law model (such as in most of Europe). These difficulties are therefore not particular to China.

Myths versus Reality

This paper will discuss four common myths about IPR in China:

1. Chinese IP laws are unsophisticated.

2. The IP rights in China are of poor quality.

3. IP Laws and poor enforcement favour domestic interests.

4. Foreign parties cannot access the enforcement system.