Every year for the past 13 years, in an American Chamber of Commerce survey examining the shifting business climate in China, one finding has remained constant. A large majority of respondents – 70 per cent, in the 2011 survey – report that China’s enforcement of intellectual property rights (IPR) is “ineffective” or “totally ineffective.”
It is not that China is not trying. Courts handed out final rulings on more than 48,000 cases of IPR infringement in 2010, up a third from 2009. This month’s National People’s Congress contained more rousing rhetoric on cracking down on violations. Yet the shanghai(knock-off) culture is so deeply rooted that it is hard to know where to start. Last October’s six-month campaign to root out “fake and shoddy” products began unpromisingly: with a directive to government offices at all levels to use non-pirated versions of software. In December, a senior government minister warned that it was important to “protect” the “innovative elements in knock-offs”. A few weeks before the campaign was due to end, fines totalled just Rmb191m.
Investors have long recognised that the development of China’s legal and governance infrastructure has not kept pace with that of its airports, roads and bridges. Twenty-eight years on from its first trademark law, IPR enforcement in the world’s second-largest economy remains distinctly emerging-market: low copyright damage awards; low incidences of injunctive relief for trademarks; frivolous assertion of low-quality patents, forcing foreigners to cross-license. Chinese companies are increasingly asserting their IPR overseas: international patent applications to the World Intellectual Property Organisation more than tripled between 2006 and 2010, easily the fastest rate among major economies. But if the likes of ZTE and Huawei want fairer hearings abroad, China urgently needs to shape up back home.