China's firms need robust response to IPR accusations

By Shen Guobing Source:Global Times Published: 2018/4/15 22:58:39

Illustration: Xia Qing/GT


On the issue of intellectual property rights, the US has excessively demonized China's image. On March 22, 2018, US President Donald Trump signed a memorandum accusing China of intellectual property infringement and taking the lead in provoking trade disputes between the two countries. In recent days, as trade frictions have increased, the debate on protecting intellectual property has become fiercer. 

In reality, unlike continuous accusations made by the US, the world has seen China's efforts and achievements in strengthening intellectual property protection over the years. Since China's reform and opening-up in 1978, China has passed a Patent Law, a Trademark Law and a Copyright Law that meet most international standards. In 1980, China formally joined the World Intellectual Property Organization (WIPO) and became one of the member states of WIPO. By the end of 2007, China had joined almost all major international intellectual property conventions and agreements.

Nowadays, the protection of intellectual property in the US has been dissimilated as an international competition strategy with the priority being the protection of US interests. The process of strengthening the protection of intellectual property in the US was also not an overnight process, but a time-consuming project.

Whether it was the 19th century policy of discriminating against foreigners to protect the interests of domestic inventors, the lenient protection strategy after the Great Depression of the 1930s or the current efforts to strengthen intellectual property protection globally to enhance their competitiveness, the changes in tactics served US national interests first and foremost.

In fact, after years of economic growth and huge changes in the industrial structure, China's demand for advanced technology, brand recognition, quality reputation and product innovation is increasing. Under this situation, Western and East Asian companies have transferred some mature industrial technologies to China to establish joint ventures and then took advantage of China's lower production costs to export to the US, the EU and other markets, which forms the illusion that China is massively exporting technical products. Actually, the majority is just processed and assembled in China.

The US puts its advanced technology under strict export controls, and therefore it cannot be used in joint ventures in the Chinese market. China is also unable to "steal" the core technologies of companies such as Intel and Boeing.

Meanwhile, in the process of technological development in China, disputes over intellectual property protection will show an inverted U-shaped development trend, which means that infringement of patent rights will likely happen to both sides in the future. There will be more and more frictions in patent rights, and China must use proper methods for further protection.

First, Chinese companies need to develop stronger awareness of intellectual property protection and resort to the law if there is a dispute. For example, Huawei sued Samsung and other companies over patent infringement. Huawei could prove that there had been infringements by Samsung and other companies, and Samsung had been maliciously delaying negotiations and made obvious errors. After the case eventually went to court, in January 2018 Huawei won the suit.

Second, since the legal mechanisms for intellectual property protection vary in different countries, when faced with problems, Chinese companies need to adopt a flexible strategy to resolve disputes.

On January 23, 2003, Cisco Systems sued Huawei for infringing its intellectual property rights. Huawei quickly issued a statement that there was no infringement, still halted sales of the affected products in the US, forming an alliance with American company 3Com. 3Com testified in the Huawei-Cisco lawsuit that Huawei had not infringed patent law, and implied that Cisco's litigation was anti-competitive.

After 18 months, in recognition that it could not lose the US market, Huawei agreed to an out-of-court settlement, which is a common way to resolve court cases in the US. Without a complete victory, Huawei chose out-of-court reconciliation.

It is worth noting that in the future, Chinese companies will not only need to be familiar with other countries' intellectual property laws and regulations, but also need to be flexible under the internationally recognized TRIPS deal (The Agreement on Trade-Related Aspects of Intellectual Property Rights). 

The establishment of an international investigation of intellectual property rights infringement and overseas rights protection mechanisms is also important.

As China expands its opening-up, it can be predicted that the normal technical exchanges and cooperation between Chinese and foreign companies will increase significantly, and China's efforts to protect intellectual property rights will be strengthened. 

The author is a professor of World Economy and International Finance, Deputy Director of Institute of World Economy, School of Economics, Fudan University.


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