IP Protection in China on the Increase -- Confirmation by Leading Economists

IP enforcement in China is obviously not as good as in places like the United States, Japan, or the EU, but it is much better than widely believed, and it is certainly much better than the Western media presents it.  On top of that, we are seeing constant improvement and we have noted some of that here, here, and here.  We also contend that much of what the Western press describes as China's IP problems (particularly in the area of trademarks) frequently stem from IP mistakes made by foreign companies, rather than from unfair or lax enforcement by Chinese courts. 

A reader from New York City alerted us to an interesting press release from Nera Economic Consulting's website.  Nera has twenty offices worldwide and is a leading international economist firm.  It is a part of Marsh & McLennon, a financial conglomerate which, at one time, had its Seattle office in my building.   

Nera's press release touts a recently published article by Nera economists on intellectual property rights in China that concurs with our view that Chinese IP enforcement is rapidly improving:

Dr. Alan Cox and Kristina Sepetys cite the growing Chinese economy, more sophisticated laws, and greater attention to enforcement as reasons for the increase in Chinese intellectual property rights infringement cases. Their article, "Intellectual Property Rights Protection in China: Litigation, Economic Damages, and Case Strategies," appears in the new book, Economic Approaches to Intellectual Property: Policy, Litigation, and Management, edited by NERA economists Gregory K. Leonard and Lauren J. Stiroh.

The number of IP rights infringement cases being brought before Chinese authorities is still relatively small, and the fines and damages awarded are low compared to those in the US and other industrialized countries. But Cox and Sepetys write that these conditions are steadily changing. "In addition to the international concerns, there is more intellectual property being generated in China and with it a greater domestic interest in the protection of intellectual property rights and enforcement of IP laws. The combined effect is to increase the number of people being arrested and fined for IP violations," Alan Cox said.

As part of this trend, Chinese and foreign companies are increasingly using the Chinese IP laws to their advantage. For example, in July 2004, the State Intellectual Property Office of the People's Republic of China (SIPO) invalidated Pfizer's Chinese patent for Viagra -- the first time Chinese companies pursued legal remedies challenging a Chinese patent owned by a foreign company. A Chinese peripheral maker, Netac Technology Co., also recently sued Sony Electronics for USB flash memory disk patent infringement.

In sum, there is a very real basis for believing the Chinese courts will protect your IP rights, but to secure even that protection, you must properly register your IP with the appropriate Chinese authorities.