It’s no secret that China does not have the best reputation when it comes to protecting intellectual property. In fact, outside of currency issues, IPR could well be the most prevalent issue facing foreign companies and their representative governments when working with China.
At the end of the day, nothing will replace due diligence when it comes to putting in the firewalls necessary to deter IP theft, from registering trademarks and patents, to vetting partners and employees and hiding or breaking up source code. Without these deterrents, companies effectively have no recourse if their IP is ultimately stolen. That said, as the saying goes, “a good offence is the best defense” and while companies may go above and beyond what could be considered effective deterrents, having to litigate in China against a competing Chinese company is rarely going to result in a fair, let alone transparent ruling.
So if the situation is still this dire, why the rosy title, what is changing to that could improve the situation? Put simply: Chinese companies. Almost counter intuitively, as many Chinese companies begin investing in their own IP in a bid to rise up the value chain, fulfilling the goal of the Chinese government to go from “Made in China” to “Designed in China”, they are facing the same issues as foreign companies protecting their R&D investments.
While one might expect local companies to have an easier time protecting their own IP against local competitors, this has not been the case, often seeing local judges side with offending companies based on their influence in the local economy, necessitating a trip to China’s Supreme Court, where rulings will not be based on local influence.
So, while this has yet to come full circle, despite new Patent enforcement laws, there are clear signs that the market is changing for the better, both organically and via the Chinese government in response to calls from local businesses intent on protecting their investments. This doesn’t mean that foreign companies should reduce their IP theft prevention strategies, these will remain very important for the foreseeable future, however, as with many aspects of a changing China, reform, especially where enforcing the rule of law is concerned can only serve to benefit foreign businesses navigating what is too often an opaque and heavily biased system.