Opinion: China's IPR woes

Are violations of intellectual property rights (IPR) a threat to China's future? Some people would argue they are the most pressing business problem the country faces.

"IPR is the defining issue of the next five years," says Micah Truman, CEO of Beijing marketing company MadeforChina. "The US and Western governments easily get sidetracked when discussing IPR with China, to their detriment. The West's ability to protect its IPR in China is the foundation upon which businesses can be successfully grown on the mainland.

"Until IPR protection gains widespread acceptance here in China, it will be the single largest barrier to Western corporate growth on the mainland."

Many people who are familiar with China's IPR situation have come to it through Microsoft's campaigns to highlight how it is losing revenue through piracy of its operating system, Windows.

Earlier this year Hu Jintao, president of the People's Republic of China, went to Bill Gates' house to talk about piracy, among other things, and said that China would take steps to deal with the problem.

But is piracy really a problem for China? Or is it actually helping the country to develop faster?

Some musicians I met in Beijing said they longed for their work to be pirated because it gives them more exposure to their audiences.

And walking down the streets of Shenzhen, I was offered numerous rogue copies of Microsoft Windows and Office. A colleague who bought a copy was even given a receipt for his purchase as that "is a legal requirement for tax", he was told. Piracy seems to be a cheap way of getting the tools that are driving developed economies.

If you look outside the technology industry, copied products are everywhere in China. In Beijing's Yashou market you can haggle for almost any fake brand of clothing. The police happily patrol the doors to the indoor market, while street sellers outside hassle tourists to buy pirated DVDs.

But some companies are fighting back to keep their ideas. In its work for Microsoft, Beijing software outsourcing company WorkSoft said it installed a dedicated data line to Redmond to prevent its code being intercepted. That was at Microsoft's request.

Nokia's Beijing factory is also trying to stop piracy - workers are continuously watched on CCTV and banned from carrying bags, mobile phones or cameras into the factory, to stop the latest designs finding their way out to other manufacturers.

China's homegrown networking giant Huawei, for example, admits China has had sticking points with IPR but now sees the value of doing business on international values.

A spokesman told silicon.com: "China's IPR situation has been continuously improving, especially in recent years, as the Chinese government and people have come to realise the immense importance of intellectual property rights and IPR protection.

"Huawei strongly supports IPR, fully respects the IPR of others and endeavours to protect its own intellectual property. For the past few consecutive years, Huawei has been the number one patent applicant in China."

Companies have also realised that prototypes can only be released a few weeks before they become old news. This is to give pirates less time to copy goods.

And the government has set up agencies to combat IPR violations. But it is still a slow process and one that requires patience and paperwork, I am told.

On my travels, one observer told me that the Chinese way of doing business is foucused on short-term gain - "If you can take 50 now or 100 in the long term, here you would take 50". If you attribute this idea to IPR - that is, people can have fake goods now or wait for foreign investment and the real thing - it's pretty obvious what's going to happen.

This comes down to balancing short-term and long-term gain. Ripping off products will boost manufacturing and the domestic economy, and get people up to expect certain standards of their technology. But it can also drive away foriegn investors.

The government has realised this but it is also tasked with developing infrastructure, the wider economy and educating 1.3 billion people as fast as possible to raise the the quality of life. And that's a tough balancing act.

Photos of China's street pirates here.