Intellectual property protection: Problems and prospects for China

Research Paper (postgraduate) from the year 2007 in the subject Economics - Case Scenarios, grade: A+, London Business School, course: Global Business Environment, language: English, abstract: China position as the world leader in economic growth has been accompanied by the disregard of existing intellectual property rights (IPR) observed by most of the developed western countries. In this paper, we will discuss the value of strong IPR enforcement to mature economies vs. developing nations and where China lies on the economic maturity scale. While the legal frameworks are improving with China's entry into the WTO, effective enforcement is far from satisfactory. The challenges focus around protectionism, corruption and cultural issues amongst others. The evidence shows an economy in transition that currently has little domestic motivation to enforce IPR rigorously. China faces significant international pressure to reform its practices surrounding IPR. The differing perspectives on IPR reflect the relative maturity of a nation's economy. Developed countries rely heavily upon individuals, educational systems and commercial enterprises to continuously innovate. It is therefore natural for these nations to seek protection, preserving their competitive advantage and maximizing the value they can extract from the resulting innovation. China is a vast country trying to balance the prosperity and relative wealth of its 500 million coastal dwellers against the poverty of the 800 million living in the interior. This represents a great challenge for the government in balancing their long-term objective of transforming the economy vs. the short-term priorities of social equality, employment and the avoidance of civil un-rest. The rate of reform exhibited on IPR issues will be directly tied to the speed of emergence of Chinese firms capable of patentable innovation. A new generation of technology companies, entrepreneurs and designers will increasingly demand protection for their own IPR. We explore IPR issues in China across two broad industry groupings: "Research oriented" and "Design oriented". Research oriented industries require high level of skills and tend to be capital intensive. Design oriented industries while requiring high skills, are not capital intensive and reveal rampant counterfeiting & piracy. Foreign firms try to protect their goods through security, quality & bundling service components with products, making them hard to replicate. Success is varied and in these sectors it appears as if counterfeiting and piracy is a price for market access and a low cost manufacturing base.