China and IPR, part IV-Innovating Chinese IPR Improvements

This is the last in a four-part series that has looked inter alia at debates surrounding China’s protection of foreign intellectual property (IP) rights (IPR), detailed China’s problematic fulfillment of its IPR commitments, and examined various factors potentially driving China’s poor compliance with its IPR obligations. The focus of this blog is on enumerating a variety of measures that governments and businesses, particularly the former, should embrace to deal with the China challenge to foreign IPR.

Starting with businesses, they need to identify their IP and create formal IP protection policies and processes that are appropriate given the nature of their IP, the risks to it, and Chinese laws and regulations relating to conventional IP protection measures such as non-disclosure language. Companies need to think carefully about what IP they will transfer into China physically (e.g., equipment) as well as through agreements with other Chinese individuals or organizations and must register their IP in China. Businesses also need to educate and train their employees, contractors, and business partners about the importance of protecting IP and limiting IP theft, restrict access to IP by avoiding “concentration” in knowledge, production, and distribution, and increase the difficulty of copying IP. Firms further must monitor and document IP theft. In terms of political steps, firms should maintain sustained communication with Chinese government entities, their industrial associations, and their home governments, develop mechanisms to use Chinese enforcement bodies and political channels, and leverage Chinese business partners.[1] In light of the diffuse nature of China’s IPR regime, it is critical for firms to pursue the above horizontally and vertically and to support lower level entities, public and private, with technical assistance, training, and funding. Given the fact Chinese IP-creators/holders as well as government entities may profit from a flawed IPR system, businesses should pursue ways to shape their cost/benefit calculus to encourage compliance or enforcement when there is non-compliance and to empower those favoring compliance and/or enforcement.[2]

Turning to governments, the United States (US), European Union (EU), Japan, and others, should exploit, above all collectively, the World Trade Organization (WTO). While the WTO is far from a panacea, external pressure is critical to improving China’s treatment of foreign IP and joint action magnifies this pressure. Regardless of whether or not they are collective, WTO cases shed light on China’s failure to fulfill its IPR obligations and consequently have “shaming” value. They also increases the economic pressure on China if the parties bringing the cases win. Furthermore, victorious WTO cases legitimate concurrent or subsequent political pressure. In addition to the WTO, governments should explore multilateral trade agreements to increase the likelihood that China will improve its protection of foreign IPR.[3] As with companies, governments, in tandem with other governments and relevant industry associations, must utilize diverse ways to work with diverse Chinese government bodies in Beijing as well as Chinese agencies at lower-levels such as provinces and municipalities. They should use measures such as dialogues and technical assistance and even provide financial resources to support higher quality Chinese IPR protection.[4] As well, they should work to educate Chinese subnational actors how compliance may benefit them and their firms while non-compliance will increase their and their firms’ costs.[5]