IP in China

How many times have you heard the following two linked statements?

(1) "We cannot afford to ignore China with its population of 1.3 billion people"
Followed by
(2) ".. but we cannot avoid being ripped off because they have no respect for intellectual property".

Both stereotypes are wrong. They serve as an excuse for bad business and bad management.

The population question

On a trivial level, the first part is incorrect. Official population figures are 1.3 billion but the reality is probably nearer 1.5 billion. Of those, approximately 200million have disposable incomes.

Being "ripped off"?

However this blog is about IP, so my main gripe is about the second stereotype. I want to challenge the image of all companies getting ripped off in China.

Of course you see the knock-off DVD copies and Gucci bags. While this is a serious issue, it distracts from the overall picture.

Intellectual property law has come a long way in China. In the 25 years since China acceded to the Paris convention in 1985, the laws have evolved almost as much as they did over 220 years in the USA. That is not to trivialize the USA development - it is just that China has learned from it.

Reasons for increased interest in IP in China

What has caused this improvement in attitude towards IP in China?

I see two driving factors:

1. There is a large increase in Chinese research and development, including from Western-educated Chinese researchers. As more intellectual property becomes generated from Chinese R&D activity, China will find it more important to protect IP.
2. As China becomes a global economic power, its reputation will also become more important. This is not merely theoretical. The Swiss pharmaceutical giant Novartis just announced that it has decided to locate its new $1 billion R&D operation in China rather than India, because "China has made tremendous progress in IP".

In my experience, it is possible to have extremely successful IP business with Chinese partners. Many of the horror stories are based on lack of knowledge or simply poor management.

In a future article, I will outline how to increase the probability of success in China using systematic IP management.